Journalists
Richard Beales joined Breakingviews.com in 2007 from the Financial Times, where he was US markets editor and a Lex columnist. Prior to the FT, he spent more than 10 years as an investment banker, based largely in Hong Kong. He was a director in Citigroup’s mergers team, and before that head of Schroders’ regional project finance group. He has also lived briefly in Sydney, Australia, and began his working life in London at Mars & Co, a management consultancy, in 1989. Richard holds a masters in business journalism from New York University and a degree in biochemistry from St John’s College, Cambridge. He won the best deadline or breaking news story category at the 2009 Business Journalist of the Year Awards.
Its $500m plan to support 10,000 US small businesses alongside Warren Buffett is praiseworthy. But $16.7bn in accrued pay and continuing rumblings of bailout favouritism risk making it look nothing but a PR gesture. Public opprobrium will fade; Goldman just has to tough it out.
It’s what happens if a government props up a private company, makes a show of keeping it running like one, and then interferes. CEO Benmosche’s threat to quit may be a bluff. But the lesson is that if there’s no clear turnaround plan firms should be wound down, not bailed out.
To buy Burlington Northern, he is paying a full price, issuing precious Berkshire Hathaway stock, and splitting each of the company’s “baby” B shares into 50 pieces, taking their price down from $3,000-plus into the double-digit realm of normal stocks. Whatever next – a dividend?
The US value investor has a name for buying dollar bills for 50 cents. His deal to buy the Burlington Northern railway group doesn’t appear to fall into that category. True, Buffett is going big in a company and industry he likes. But it is a bet on growth rather than on value.
Or other investors, for that matter. Most of them are looking for that extra insight. There’s no excuse for crossing legal lines, as Galleon founder Rajaratnam is alleged to have done. That aside, getting an edge is their job – and their clients check up on them the same way.
The genealogy website wants to raise $100m in an IPO valuing its current subscribers at about $555 a head - and its shares well above recent internal estimates. While retiring baby boomers searching for their ancestors may flock to the site, the valuation seems too high.
Not just because administrators at the hedge fund founded by Raj Rajaratnam, now accused of insider trading, may have missed a trick or two. But also because fund investors shouldn't tolerate the kind of dominant role Rajaratnam seems to have played at Galleon.
Ex-employees of Steven Cohen’s $12bn hedge fund outfit are cropping up in the Galleon insider trading scandal. Cohen’s firm isn’t implicated. However, his aggressive style helps make him a target.
It rejected the mortgage zombie’s plan to sell nearly $3bn of tax credits it can’t use to Goldman. It had its reasons, but with Fannie already calling for another $15bn of aid, any sort of market mechanism that reduces the need for government handouts ought to be embraced.
He’s paying a big premium to swallow Burlington Northern Santa Fe, a US railroad operator. It’s not necessarily a signal to buy the sector in a hurry. But the Berkshire Hathaway chairman does seem to think rail transport could be building a bit of a head of steam.
The profitable Wall Street firm might relieve the US government’s zombie housing lender of tax credits it can’t use. Both ought to profit from such a deal. The government’s problem is that handing Goldman any benefit is politically fraught – even if it helps taxpayers.
Some critics of huge bank bonuses suggest authorities should consider going easier on recipients who give a chunk of their payout to charity. That’s muddying the issue. Sure, charitable giving should be encouraged – but it has no place in the bonus debate.
Unlike their bailed-out brethren in the banking world, hedge funds live and die on their performance and reputation. Founder Raj Rajaratnam’s indictment on insider-trading charges is an extreme case. But at least Galleon isn’t too big to fail, and investors can move on.
The release of documents relating to the bank’s purchase of Merrill will include the legal advice BofA says it followed. Hindsight has endowed some legal eagles, as well as the bank’s bosses, with tin ears – at best. Things could get uncomfortable for counsel.