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Wednesday, 22 May 2013

Breakingviews
Oct 2011

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  • 99 Cents Only shows the way to handle an MBO

    11 October 2011

    Instead of cozying up to the first buyout firm that came along, the discount retailer appointed independent directors to run an auction. They found a new buyer and 15 pct extra for shareholders, including the family owners. After the J Crew debacle, a fresh example is welcome.

  • A manifesto for Occupy Wall Street

    05 October 2011

    The wannabe protest movement has only vague complaints. “A feeling of mass injustice” may be understandable, but it doesn’t bring crunchy soundbites to match the Tea Party’s “taxed enough already.” Breakingviews offers a more sharply defined, if partial, set of objectives.

  • Abbott prescribes a dose of financial engineering

    19 October 2011

    The runaway success of blockbuster drug Humira has been a mixed blessing. It larded the healthcare group’s attractive nutrition and generic drug businesses with a pedestrian Big Pharma multiple. Splitting off its research drug arm should rectify the valuation mismatch.

  • Abu Dhabi's airline strategy lacks coherence

    19 October 2011

    Etihad, the UAE’s official national carrier, wants tie-ups with Virgin Atlantic and Aer Lingus via minority stakes. Its ambition is to catch up with Dubai rival Emirates. Such deals may deliver tactical gains. But they won’t replicate Emirates’ impressive organic success.

  • Air France-KLM will struggle to gain altitude

    18 October 2011

    The Franco-Dutch carrier is being squeezed on all sides. It has high costs, stiff competition and large debts. Market conditions are poor, too. Changes to the boardroom crew will help if they approach restructuring seriously. But investors are right to be sceptical.

  • Alcoa's miss could belie better earnings surprises

    11 October 2011

    Equity investors are braced for terrible Q3 earnings. On that basis, aluminum giant Alcoa lived up to expectations with the season’s results debut. But there may yet be bigger potential for shares on the upside. Investors appear to have already priced in much of the global gloom.

  • Amazon keeps digging costly moat around business

    25 October 2011

    The Internet retailer shocked Wall Street with low profitability due to heavy investment. This expenditure may eventually pay off - that’s why the stock trades at 100 times estimated earnings. But it’s a timely warning that even Amazon must keep girding the barriers to entry.

  • Ambani's challenges don't end with 2G saga

    04 October 2011

    Anil Ambani will be relieved that investigators haven’t uncovered any evidence implicating him in one aspect of the 2G telecoms scandal. But he shouldn’t be complacent. His telecoms firm is struggling to keep pace with its rivals. It would be better if it was taken over.

  • American Airlines feels market’s Darwinian wrath

    03 October 2011

    In volatile markets, the weak are hunted. The U.S. airline’s struggling parent, AMR, fell prey on Monday, with its stock diving 41 pct on bankruptcy talk. Kodak and Morgan Stanley have been in the crosshairs, too. Hoards of cash may be the only way to survive.

  • Apax misses with HIT disposal

    24 October 2011

    The private equity firm’s ownership of HIT Entertainment, the company behind kids’ character Bob the Builder, makes for sad reading. Mattel may enjoy the $680 million company more. But fixing Bob up with Barbie does not necessarily mean they’ll live happily ever after.

  • Apple effect far greater than $350 bln market cap

    06 October 2011

    The company changed the world several times. It introduced the spreadsheet, made computers into consumer goods and its phones helped make the Cloud realistic. Jobs’ genius for design and user-helpfulness turned IT from nerdish to uber-cool. Apple has been tech’s good Pied Piper.

  • Apple's rare letdown looks more form than function

    18 October 2011

    The firm known for perfectly marrying technology with design usually manages the same élan with its finances. Under Steve Jobs, Apple blew by forecasts. The latest results, without him, missed. But there’s still plenty of value substance beyond issues of Wall Street style.

  • ArcelorMittal chickens out to hoard its cash

    25 October 2011

    The world’s largest steelmaker abruptly bailed on a joint takeover of Australia’s Macarthur Coal, selling out to partner Peabody, as investors tendered their shares with unexpected alacrity. It may be a sensible move, but it certainly makes the billionaire Mittals look a nervy bunch.

  • Argentina's lucky Fernandez may share Peron fate

    24 October 2011

    World War Two gave Argentina huge forex reserves and afforded Peron 10 years of glory. Easy money, globalization and a commodities bubble have done the same for newly victorious Fernandez. But Peron left Argentina divided and poor. Fernandez ought to be wary of a similar fate.

  • BAA sale removes yoke from Ferrovial's neck

    10 October 2011

    The Spanish construction firm has sold a small stake in airport group BAA at a big price. The value put on BAA by the 325 mln euro deal is more than double consensus. And giving up majority ownership will deconsolidate 14 bln euros of debt. At last, BAA is no longer a drag.

  • Back to first principles for BSkyB chairman

    13 October 2011

    One of the broadcaster’s major investors has called for James Murdoch to step aside as chairman, because scandal at News Corp has highlighted the need for unconflicted leadership. Murdoch deserves a seat on the board. But either way, an independent chairman is always preferable.

  • Bail-ins can't always be postponed to next crisis

    10 October 2011

    After the 2008 crisis, regulators promised that bondholders would suffer haircuts when banks next needed recaps. But governments are so scared of contagion that EU taxpayers will have to pick up the tab again, witness Dexia, unless some key protections are put in place rapidly.

  • Bailout-free banking may be unattainable goal

    18 October 2011

    Policymakers want to stop taxpayers rescuing banks. That is the aim of the UK’s Vickers report. But regulators will still fret about letting lenders fail in a future crisis. Meanwhile, Vickers’ plan could perversely increase pressure on the state to direct lending.

  • Bank debt confusion makes an unwelcome comeback

    05 October 2011

    Widening spreads on banks’ own bonds are set to flatter earnings this quarter, just as in the 2008 meltdown. The gain is ignored by regulators, and will reverse when yields tighten. But inconsistent and selective reporting makes it harder for investors to filter out the noise.

  • Bank of America suffers worst of both worlds

    18 October 2011

    Forget the reported $6.2 bln profit. Both the commercial bank and the Wall Street operations fared worse than rivals in the third quarter. Even a very low tax rate couldn’t help. Strip out the accounting funnies and the CCB sale gain and BofA lost money again.

  • Banking boutiques aim to rise above puny moniker

    27 October 2011

    Lazard has long hated being grouped with its smaller brethren. Now, after another quarterly earnings record, Evercore’s bristling at the label, too. Their rise in M&A makes them much stronger rivals to the bulge bracket. But their niche nature means the boutique shoe still fits.

  • Banks have two aces in Greek default poker

    25 October 2011

    The euro zone wants private creditors to take a 60 percent haircut on Greek debt. But this negotiating position is undermined by an irrational fear of triggering CDS, and reluctance to take a loss on governments’ Greek exposure. Banks may use this to go for a sweeter deal.

  • Banks may be underestimating the fury of consumers

    04 October 2011

    Barack Obama’s criticism of BofA’s debit card fee has understandably irked a sector weary of Washington’s meddling. But Jamie Dimon’s rants, Wall Street protests and the financials sell-off are all feeding into resurgent anti-bank sentiment. The industry should watch its step.

  • Banks say sorry for crisis

    24 October 2011

    At least, they do in this imaginary letter to G20 leaders. They also promise no bonuses for top executives for two years or more. It’s part of an attempt to repair relations with an enraged public and prevent the anti-banker backlash from sweeping away what’s good in capitalism.

  • Barclays sets bar high and low for peers

    31 October 2011

    The UK lender’s flagship investment bank performed well in the maelstrom of the third quarter. But while BarCap’s top-line income was relatively strong, job cuts across the group have also ticked up. It shows that even stronger players are on the defensive.

  • Berezovsky-Abramovich duel not just about the past

    13 October 2011

    The London court battle between the oligarchs is lifting the lid on Russia’s business methods in the anarchic 1990s. But it is also a telling tale about the country’s business climate today. Property rights will be shaky as long as Russia’s legal system fails to protect them.

  • Berlusconi opts for risky ECB row with Paris

    21 October 2011

    Ignazio Visco is highly qualified for the job as head of the Bank of Italy. But choosing Lorenzo Bini Smaghi, a member of the European Central Bank’s board, would have allowed France to nominate its candidate to the ECB’s top body. Berlusconi doesn’t need a fight with Paris now.

  • BNY Mellon lawsuits more Spitzer than slam-dunk

    05 October 2011

    The current New York AG’s $2 bln suit against the biggest custodian bank may boost him politically. But BNY’s clients had a decade to take forex business elsewhere if they didn’t like the terms. The state and federal claims smack of settlement-seeking rather than legal certitude.

  • Boardroom rejig still leaves Olympus adrift

    26 October 2011

    The Japanese camera-maker, racked by accusations from its ousted CEO, has sidelined its 70-year-old chairman. But Kikukawa will stay on the board, along with 13 other former Olympus managers. Shareholders need to call for new blood to put the rudderless company back on course.

  • BoE's QE2 is uncertain lifeboat in euro storm

    06 October 2011

    The Bank of England’s second round of quantitative easing comes sooner and in greater size than expected. The pre-emptive move is brave but may not save the UK from the euro’s turbulence. Gilt yields and sterling will fall but fiscal policy may ultimately need to shift too.

  • BP's spill woes start to clear, but not disappear

    17 October 2011

    The $4 bln settlement with Anadarko is good news for the UK-based oil major. It may be a fraction of the $41 billion estimated cost of the spill. But with the co-owners of the infamous Gulf of Mexico well on side, BP can focus on the big-picture damages claims.

  • BP's turnaround still work in progress

    25 October 2011

    The UK oil major says it has reached a turning point in its operations. It plans to grow cash flow by 50 pct in the next three years and make more divestments. The strategy is right. But a real recovery would require more clarity about Russia and the Gulf of Mexico litigation.

  • Brazil is right to resist demands of strikers

    12 October 2011

    The first wave of work stoppages under President Dilma Rousseff has disrupted mail and banking services as unions demand wage hikes above inflation. Workers at oil giant Petrobras want some, too. Rousseff is right to stand firm, and has made a good start.

  • Brazil’s role in steel deal hints of protectionism

    03 October 2011

    Tycoon Benjamin Steinbruch has put Brasilia and rivals in a pickle by trying to take control of steelmaker Usiminas. That might give him power to up-end policies that curb imports and force Brazilians to pay excessively for steel. Unfortunately, Steinbruch’s chances are slim.

  • Brazil's corruption best tackled on soccer field

    27 October 2011

    Losing the minister of sport to scandal seems the least of President Dilma Rousseff’s worries amid an increasingly troubled coalition. But it may be a symbolically significant opportunity. Restoring broader trust could start with soccer, Brazil’s epicenter of national pride.

  • Can Microsoft be trusted not to buy Yahoo?

    05 October 2011

    The Internet group is gently looking for buyers for bits of its business or the whole shebang. Microsoft boss Ballmer would be remiss not to run the ruler over his strategic partner. But shareholders may justifiably wonder if he can refrain from another overpriced acquisition.

  • Carlyle gets slice of stale bread-and-butter deals

    03 October 2011

    The $3.9 bln buyout of drug developer PPD is one of the year’s biggest. The by-the-book takeover provides a nice premium to shareholders and leveraged upside for buyers Carlyle and H&F. But the seemingly simple deal was a slog and is a reminder of how few there are to go around.

  • Celluloid hopes mean more to Tesla than earnings

    21 October 2011

    The $2.8 bln firm makes pure electric cars, but it’s valued as a hybrid. Sure, quarterly numbers hint at its ability to hit manufacturing targets. But Silicon Valley-style growth is central to the story. Tesla will be hoping a new documentary helps electric cars catch on.

  • China best to keep cool head over yuan bill

    21 October 2011

    Beijing has hit out over a mooted U.S. currency bill that could lead to tariffs. China is getting more assertive, and can no longer rely on U.S. firms to fight its corner. But starting a war of words may alienate its remaining supporters, and make the bill more likely to pass.

  • China joins ranks of the credibility-impaired

    12 October 2011

    Investors were unmoved by a pledge from Beijing to buy bank shares. In 2008, a similar statement pushed equities up 10 percent in a day. The long global crisis has shown the limited ability of governments to deal with financial tensions. China no longer looks like an exception.

  • China Mobile's cash pile is a $50 bln dilemma

    06 October 2011

    The Chinese telecom has more cash than Apple, but few ways to spend it. There are no logical acquisition targets, and state ownership makes it tricky to buy back shares. The best bet may be to invest in growth. Future profits may suffer as competition from the Internet heats up.

  • China's bank intervention is a Band-Aid at best

    10 October 2011

    Buying shares of ICBC and its peers in the market sends a signal the government will stand behind its lenders. Cracks in the property market and non-bank lending suggest it may be necessary. The move should reassure depositors, but won’t spare banks from the trouble that looms.

  • China's biggest insider has poor market timing

    14 October 2011

    Huijin, the state fund that has been buying up bank stocks, isn’t a great role model for investors. It sold in the past when shares were cheap, and has made poor returns on previous dips into the market. No wonder investors don’t seem to be following its lead.

  • China's irate homebuyers foretell mess to come

    26 October 2011

    Property developer Longfor drew an angry mob after it seemed to cut prices on new Shanghai apartments by 25 percent. Though prices aren’t yet plunging across the country, it’s looking increasingly likely that they will. Angry scenes will become more common.

  • China's regulatory reshuffle avoids real change

    31 October 2011

    Three retiring top financial regulators have been swapped with former bank heads, trained for life in the system. Overlapping roles mean their powers will be constrained. It suggests China’s banks won’t get the sweeping reforms they need.

  • Chinese censorship runs on greed more than fear

    27 October 2011

    After a series of PR fumbles and web-inspired protests, the authorities are stepping up Internet controls. Rumour-mongers are even being arrested. Yet many of these curbs depend on companies and investors playing along. While growth is rapid, greed motivates more than fear.

  • Cisco stops descent, stuck in purgatory for now

    20 October 2011

    After years of chasing growth - and seeing its stock crumble - the company is now focusing on profit. This should buy CEO John Chambers enough time from investors to retire gracefully. But outsized gains for shareholders look elusive, if rival big tech valuations are any guide.

  • Citi gets the jitters in emerging markets

    17 October 2011

    Fears of another recession already have hammered the bank’s shares. Now, Citi is slowing lending in developing countries, one of its fastest-growing businesses. With reserve releases slowing and Citi’s ROE just 3 pct after one-offs, it’s another obstacle to a banking recovery.

  • Citi's CDO payout is ripe for the Rakoff treatment

    19 October 2011

    The bank’s $285 mln settlement with the SEC is about half what Goldman paid on Abacus. And yet Citi allegedly picked the assets in the CDO itself while keeping buyers in the dark. Judge Jed upbraided the watchdog for its light touch on BofA. This case warrants a similar hearing.

  • Closed-door justice will leave dealmakers in dark

    19 October 2011

    A spat between Skyworks and takeover target Advanced Analogic will play out in private instead of open court under Delaware’s new arbitration system. That may save the parties time and money. But it cheats the M&A world - and investors - of valuable legal guidance.

  • Credible EU bank tests need a higher pass mark

    06 October 2011

    Regulators are looking at ways to recapitalise Europe’s lenders. One quick fix is to re-run July’s stress tests with tougher assumptions. But imposing haircuts on sovereign debt will not be enough. Authorities should also raise the capital hurdle banks need to clear.

  • Credit Suisse has awkward role in Nat's coal deal

    14 October 2011

    The bank is broker to Nat Rothschild’s mining vehicle, Bumi Plc, and lender and sometime adviser to his partners, Indonesia’s powerful Bakrie family. That’s a tricky position now the Bakries are scrambling to meet a margin call on a $1.3 bln loan - arranged by Credit Suisse.

  • Crop of shock CEO exits reinforces need to plan

    25 October 2011

    Judging by First Solar’s 25 pct stock price drop, you’d think it erred in ousting its chief. Or that Quest’s 11 pct jump meant it should’ve dumped its boss sooner. And no reaction must make IBM’s new CEO a snooze. The real lesson is that boards must carefully plan successions.

  • Del Monte settlement quantifies cost of conflicts

    06 October 2011

    Barclays will surrender a big slug of fees from the $5.3 bln buyout, where it advised the seller and financed the buyer, KKR. Wall Street read the writing on the wall after a judge’s slap. But when banks get spanked on the bottom line, the message resonates loud and clear.

  • Delhi has home-grown options to tackle slowdown

    20 October 2011

    India’s finance minister says that economic growth will fall below 8 percent this year. He blamed global turbulence. External factors do hurt, but India can reinvigorate itself with domestic structural reform. The key is to spur business investment.

  • Deutsche holds firm in turbulent markets

    25 October 2011

    The German lender made a pre-tax return on equity of just 7.2 pct in its third quarter. This reflects poor trading in the investment bank. But that part of the business is gaining share. And it may now avoid having to raise fresh equity.

  • Deutsche may not escape state grip in forced recap

    14 October 2011

    The German lender could need 9 bln euros to pass Europe’s latest stress test. If the government puts up the cash, it could own a large chunk of the bank. But even if Deutsche sells businesses, places shares and cuts its dividend, it will struggle to raise the capital privately.

  • Deutsche poorly handles predicted profit warning

    04 October 2011

    The German bank has ditched the 10 bln euro 2011 pre-tax profit target the market long discounted. Unsurprisingly, it blames depressed investment bank revenue. But it also cites a mysterious tax hit. Such opacity is unhelpful at a time of intense investor scepticism toward banks.

  • Dexia rescue riskier than it looks for Belgium

    10 October 2011

    After a weekend of wrangling, Belgium is to nationalise the domestic arm of the Franco-Belgian bank. The direct cost will only be about 1 pct of GDP. But lots of loose ends remain around Dexia’s funding guarantees and solvency. The true cost may end up being a lot higher.

  • Dexia rescue would need more than just capital

    03 October 2011

    The Franco-Belgian bank’s shares have slumped amid fears it needs a second bailout in three years. Helping Dexia cope with a big haircut to its Greek debt is the first challenge. But any package also needs to tackle its reliance on short-term funding, and its unwieldy structure.

  • Dexia's rescuers need to answer five questions

    06 October 2011

    The Franco-Belgian bank is facing dismemberment. Its French and Belgian state shareholders want to largely keep those operations in their own countries, sell non-core assets and wind down everything else. But to do so they will need to find answers to five thorny problems.

  • Dow Jones doesn't need scandal-by-association

    13 October 2011

    The Wall Street Journal Europe’s publisher quit just before a report of controversial deals to boost circulation. The full facts aren’t clear, and such practices could happen anywhere. But when the parent is scandal-prone News Corp, it’s harder to avoid coming under suspicion.

  • Dubai forced to re-embrace the suitcase banker

    17 October 2011

    Bankers are leaving the Gulf as foreign institutions return to pre-boom business models, flying in top advisers only when they are needed. With Middle East investment banking fees below 2005 levels, it’s a necessary shift. But for some banks, it may also be a sign of retreat.

  • ECB tries to wriggle out of euro vortex

    06 October 2011

    Modest help for banks and stable rates will not free the central bank from the forces buffeting it: euro zone government inadequacies, market excesses and legal pressure. But the ECB is doing what it can in the group effort to muddle through the crisis. It might even work.

  • Economic stress adds to Turkey's quake woes

    24 October 2011

    The human cost of the Ercis disaster comes as Turkey fights to keep its once-booming economy on track. Ankara is playing a high-risk game by intervening in markets. It needs higher interest rates to shore up the lira, but the cost may be recession.

  • EFSF II haircut SPIV BRIC plan can't fail

    27 October 2011

    What might Europe’s comprehensive solution to its crisis look like? Breakingviews offers a tongue-in-cheek draft of a possible communique.

  • EFSF's rising costs a warning sign for Europe

    11 October 2011

    Politicians are pinning their hopes on the European Financial Stability Facility to help recapitalise banks and support Italy. However, investors are already demanding wider spreads to buy the bailout fund’s debt. This could make the euro zone’s rescue plan harder to pull off.

  • Egyptian economy hangs on smooth, timely elections

    31 October 2011

    Aid pledged by Gulf countries will help bring Egypt’s finances back from the brink. But a rapid transition to democracy is needed to allow a gradual fall in the pound and to lure risk-averse foreign investors back to help Egypt finance its ballooning fiscal deficit.

  • Embattled Wall Street should prepare for worse

    11 October 2011

    Bankers are already on the defensive. Third-quarter earnings look set to be shoddy. Another 10,000 job cuts may be in the offing. And protesters are ready to camp outside Jamie Dimon’s house. Yet financials have grown as a share of GDP since 2006, suggesting more pain is to come.

  • Enron's worst legacy: auditors too big to fail

    27 October 2011

    Arthur Andersen sealed its fate when it shredded Enron documents 10 years ago. But prosecutorial zeal may have created a moral hazard monster. Concerns that the world can’t afford to lose another green eyeshade run the risk of diluting standards in the industry.

  • Ermotti faces few credible rivals for UBS job

    04 October 2011

    The ex-UniCredit banker is interim CEO while the Swiss lender conducts a broader search. Hands-on experience, risk management, private banking charm and leadership are all required skills. Ermotti may not tick all boxes, but a bias for locals means there are few alternatives.

  • Essar's better prepared for a second UK IPO

    06 October 2011

    India’s Essar is considering a UK listing for its infrastructure assets. With one London IPO under its belt, and lessons on governance from that experience still fresh, it should be better prepared this time around. Now there’s the small issue of timing.

  • Ethical economy: Debt is a moral matter

    26 October 2011

    Aristotle said interest-bearing loans are unfair to borrowers. Many Greeks these days feel the same way. But some Germans – and Chinese – worry that it’s the lenders who get an unjust deal. In a debt crisis, rights and wrongs can make all the difference.

  • EU bank recap may be smaller than feared and hoped

    18 October 2011

    Europe’s banks have avoided another stress test. Instead, regulators may set a minimum 9 pct capital ratio, plus a buffer for troubled sovereign debt. The bill of about 100 bln euros would be easier for governments to meet. But investors may also decide it’s not as credible.

  • EU bank recap too blunt an instrument for Spain

    26 October 2011

    Europe wants lenders to reach a 9 percent core Tier 1 capital ratio and take haircuts on sovereign debt. But the problem with Spanish banks is their exposure to real estate, not government debt. Forcing only big groups to raise capital also misses the point.

  • EU banks mustn't shrink their way out of recaps

    13 October 2011

    Some lenders may argue that they can boost their capital ratios by cutting lending or selling assets, and so don’t need to be stuffed with government cash. But this could trigger an even more severe downturn. Governments shouldn’t allow it.

  • Euro zone bank funding backstop might need UK help

    24 October 2011

    As well as fresh capital, EU banks need term funding. But guaranteeing bank debt is beyond the remit and current firepower of Europe’s bailout fund. The European Investment Bank could help out. But that would involve putting non-euro zone states like Britain on the hook too.

  • Europe tempted to save Greek trauma for later

    13 October 2011

    Euro zone leaders may be tweaking the Greek debt swap to impose only marginally deeper losses than agreed in July. That won’t secure the country’s solvency, and defers the pain for both banks and Greece’s public creditors. But it keeps the pressure on Athens to reform.

  • Europe's bailout fund: a guide for the perplexed

    21 October 2011

    Getting more mileage out of the 440 bln euro European Financial Stability Facility is key to easing the euro zone’s debt woes. But the ECB and governments disagree about how to best stretch the fund’s finite resources. Breakingviews offers a road map through the confusion.

  • Europe's bank recap won't need much state help

    27 October 2011

    EU lenders need 106 billion euros to maintain a 9 percent core capital ratio after sovereign haircuts. Greek and Portuguese banks aside, most can plug the shortfall on their own. But while equity investors may be relieved, the exercise does little to reopen funding markets.

  • Europe's banks suffer collective action headache

    11 October 2011

    EU lenders are resisting calls to boost their capital ratios. While all banks would benefit from a stronger financial system, none want to bear the cost. Decisive European governments could overcome this problem. However, they are affected by the same dilemma.

  • Europe's financial alchemy starts to look SPIVvy

    24 October 2011

    The euro zone is considering subsidising leveraged funds to help fund bailouts and bond interventions. Such a scheme could support demand for sovereign debt. But Europe may need to get comfortable with using taxpayer funds to subsidise hedge-fund level returns.

  • Euro-recession, not rebellion, is what boxes UK in

    25 October 2011

    An EU protest vote by members of his own party has knocked the UK prime minister. But David Cameron has a bigger and more immediate European problem. An already-weak UK economy is likely to be dragged into recession by the euro zone. Fiscal policy revisions may be necessary.

  • Even at the premium, quality stocks look nifty

    20 October 2011

    Though downtrodden world indexes point to deep disquiet among equity investors, valuations of individual stocks vary widely. Fishing the bottom for low-rated bargains is one way forward. Shareholders may be better served by forking out for higher class equities.

  • France and Belgium can't assume Dexia is a one-off

    04 October 2011

    State shareholders have pledged to ease the stricken bank’s liquidity problems by guaranteeing its debt. But shaky sovereigns have less firepower than they did in 2008, and other lenders may need similar help. Euro zone banks need a more comprehensive funding solution.

  • France can't afford major euro split with Germany

    21 October 2011

    Divisions over the euro zone’s bailout fund have delayed the much-ballyhooed Franco-German “grand plan”. Nicolas Sarkozy seems ready to compromise yet again to keep Angela Merkel on board. He knows the euro zone wouldn’t survive a major split between Paris and Berlin.

  • Free trade unlikely to help end U.S. jobs crisis

    18 October 2011

    The Obama administration is on a free trade roll; it’s pushing for new deals with Vietnam and Malaysia. But for rich America, freer trade with poor countries creates few new jobs. It may also exacerbate something its citizens are growing to hate: inequality.

  • French socialists tempted to move backwards

    10 October 2011

    Voters in the first round primary of France’s main opposition party gave former labour minister Martine Aubry a surprising strong second place behind centrist Francois Hollande. The party faithful may be tempted by her old-style ideology. That’s exactly what France doesn’t need.

  • Gaddafi death could add momentum to Arab Spring

    20 October 2011

    The end of the former dictator allows Libya to move towards elections alongside Tunisia and Egypt. Oil wealth and a lack of compromised institutions arguably give Tripoli an easier start. Arab dictators had little love for Gaddafi, but his demise ratchets up the pressure.

  • Gassier Exxon's brave new world isn't here yet

    27 October 2011

    Alongside a 41 pct profit surge, the $400 bln energy group’s third quarter showed a further rise in gas output relative to oil. That may set Exxon up for the future. But for now, with crude pricier than gas, it could help explain its shrinking valuation premium to oilier Chevron.

  • Glencore resilience brings Xstrata deal closer

    11 October 2011

    Mining M&A’s clearest fantasy deal has inched closer to reality. A Glencore takeover of its $43 bln mining affiliate looks easier after the commodity trader’s shares held up better in the recent rout. But Xstrata investors are unlikely to roll over without a substantial premium.

  • Goldman bankers may need to sacrifice more spoils

    06 October 2011

    A rare loss possibly looms after the market’s tumultuous Q3. But that assumes Goldman keeps socking away 44 pct of revenue for compensation. Cutting the pool, perhaps by a lot, would keep returns above water and shareholders sweet. And this solution may not be a short-term one.

  • Goldman Sachs's exceptionalism takes another knock

    14 October 2011

    Shares of the Wall Street firm briefly traded at a bigger discount to book value than JPMorgan. That rarely happens and is a worrisome sign that investors fear the firm’s franchise, not just trading but serving clients, has been irrevocably damaged. Goldman is now just ordinary.

  • Goldman's loss far less worrying than it appears

    18 October 2011

    Diving into the red is rare for the Wall Street firm and confirms Goldman is losing some luster. But despite these challenges, its investment banking and trading ops held up relatively well. The pain was in private equity. Yet even that reassures the firm takes its lumps quickly.

  • Good aim needed for ECB's covered bond sortie

    07 October 2011

    The euro zone central bank will buy another 40 bln euros of covered bonds. The amount looks pitiful, far from enough to relieve the sovereign crisis or banks’ dire funding problems. But if the ECB focuses on Spanish and Italian banks, the programme may not be a total waste of time.

  • Google investors "like" mobile and social results

    14 October 2011

    The Internet giant’s dazzling earnings report, showing adjusted sales up 37 pct, brought an after-hours share price jump. In mobile search, Google is making inroads the numbers don’t yet show, and its social network is gathering steam. But grappling with Facebook will be tough.

  • Greece can escape death spiral

    03 October 2011

    Athens will miss this year’s budget deficit targets, thanks to global weakness and domestic austerity. Foreign creditors will call for harsher reforms. That makes economic sense, but Greek politics are tough. A larger debt restructuring may be required to turn the country around.

  • Greek bonds should suffer real haircut, not trim

    05 October 2011

    Greek private bondholders are facing a bigger loss than the 21 percent agreed in July. Recent market turmoil alone could take it to near 40 percent. But if the euro zone wants to push through a more serious haircut, it must have its contagion fire hoses ready.

  • Greek creditor losses could top 50 percent

    31 October 2011

    Banks have provisionally agreed to haircut their bond holdings by half, but the coupon on the new bonds they will get is still being negotiated. If the euro zone plays hardball, losses could reach 60 percent, Breakingviews latest calculator shows.

  • Greek haircut only resets crisis clock to 2009

    27 October 2011

    Banks have agreed to a 50 pct haircut on Greek government bonds, clearing the way for further euro zone support. But Greece’s debt burden remains higher than when the crisis began, and the country faces years of challenging austerity. Another restructuring may still be necessary.

  • Greek privatisation could produce double bonus

    31 October 2011

    Flogging the country’s state-owned businesses and land is mainly viewed as a way of reducing its crippling debt. But if properly handled, the process could also be a spur for broader economic reform. Dag Detter, who led the restructuring of Sweden’s public assets, explains.

  • Greenhill scrapes itself from bottom of the barrel

    20 October 2011

    Until unveiling bumper Q3 results, the advisory firm boasted Wall Street’s worst performing stock - even BofA fared better. After staff losses elicited a panic, a change was welcome. Challenges remain, but with M&A share solid and CEO Bok sounding upbeat, the worst may be over.

  • Groupon's "first mover advantage" probably isn't

    21 October 2011

    Burning huge sums of cash to get ahead of rivals can work - look at Amazon. Groupon thinks a bit more capital can cement its position atop the Internet coupon heap. But this strategy works when it creates costly barriers to entry - which Groupon shows little evidence of doing.

  • Gupta arrest puts Corporate America on notice

    26 October 2011

    Prosecutors have nailed dozens of insider traders, including Galleon founder Rajaratnam. Those now look to be mere prologue to the case against former McKinsey boss and Goldman director Gupta. The charges will be tough to prove, but a conviction would be the ultimate deterrent.

  • HK banks' yuan strategy looks bad for earnings

    11 October 2011

    Taking deposits in the Chinese currency isn’t the opportunity it first seemed for Hong Kong’s lenders. The business is barely profitable, and migration of savings into yuan has exacerbated a HK dollar shortage, pushing up the cost of deposits and threatening to hurt margins.

  • Hot speech tech firm's story is too complicated

    26 October 2011

    Nuance Communications has built an $8 bln market cap by getting machines to understand talk. Its technology may even be behind speech recognition in the new iPhone. But its sky-high valuation multiple requires too much trust considering its complex finances and acquisitive ways.

  • How a pan-European bank recap scheme could work

    05 October 2011

    Boosting the capital of euro zone banks is necessary to rebuilding confidence. A U.S.-style plan, where all lenders are forced to accept some equity, is probably the best approach. But given the lack of a central authority, political commitment to act together is more important.

  • How Italy could cut its yields to 3.7 percent

    06 October 2011

    First-loss insurance from the euro zone’s bailout fund should do the trick, according to Breakingviews calculations. Even after adding an insurance fee, Rome’s all-in cost would be around 5 percent.

  • HP would make lucrative Oracle target

    03 October 2011

    A selloff has left HP vulnerable, possibly even to Larry Ellison’s firm. HP is cheap, despite its pricey deal for Autonomy. Even paying a 40 percent premium, Oracle could reap a hefty 16 percent return on investment, a Breakingviews analysis suggests. And that’s before any cost savings.

  • Hulu owners destined to be regretful refuseniks

    17 October 2011

    Disney, News Corp and Providence pulled the plug on the video streaming service’s auction after bids were too cheap and conditional. But the media giants have struggled with their own digital transitions. Hulu is likely to become a distracting headache they’ll wish they’d exited.

  • Hungary needs fair way to share mortgage pain

    06 October 2011

    A new law gives relief to Hungarian borrowers who took out mortgages in foreign currencies. The banks are outraged, but they should suffer for their reckless selling. Still, more burden-sharing is called for. After all, regulators were negligent and borrowers unwise.

  • Hungry watchdog could curb websites' data appetite

    24 October 2011

    Suits accuse Facebook and others of violating privacy with “cookies” tracking users online. But reluctant judges and dusty statutes mean the cases are toast. The better recipe is to require clearer consent before a poke into people’s lives. That’s a task for regulators to tackle.

  • Icahn's American truck merger pitch has wheels

    24 October 2011

    The billionaire investor often has loopy ideas for M&A among his holdings (remember Lions Gate-MGM?) But a $5 bln-plus combination of Navistar and Oshkosh makes some strategic sense. The net present value of cost synergies could be worth more than their combined market cap.

  • Imagine if Merrill had been smart like Goldman

    13 October 2011

    That’s the basic conceit behind the latest film to emerge in the financial crisis genre, “Margin Call.” Kevin Spacey stars as the head of a desk overloaded with MBS about to blow that his boss forces him to unload to unwitting buyers. It’s simplistic, but eerily familiar.

  • IMF bond-buying a potential euro game-changer

    05 October 2011

    The International Monetary Fund says it might buy sovereign bonds to help the euro zone fight the contagion effects of the Greek crisis on Italy and Spain. This could work if both countries continue to reform, and once the region’s weaker banks have been shored up.

  • IMF joins euro zone in gaffe hell

    06 October 2011

    The head of the International Monetary Fund’s European department had to retract a suggestion that the IMF could participate in euro zone bond buying programmes. After divided governments and a split ECB, markets may have to get used to a bumbling IMF.

  • India telecoms policy mixed bag for operators

    10 October 2011

    The scandal-ridden sector is crying out for consolidation. Delhi’s new policy will allow spectrum trading and, theoretically, free up M&A too. But costs will rise and takeovers are unlikely until the corruption investigations are complete.

  • India-Pakistan trade deal just a first step

    18 October 2011

    Likely trade liberalisation between the two traditionally hostile nations has been rightly called historic. It’s part of India’s attempt at more economic engagement with its neighbours. The whole region will benefit, but current trade is so meagre that progress will take years.

  • India's anti-graft movement has life after Anna

    28 October 2011

    Anna Hazare’s anti-corruption campaign is imploding. There are differences between the group’s leaders, and allegations of financial irregularities. But whatever happens to Team Anna, there are signs that the movement he has come to embody will have a life of its own.

  • India's inflation fight lacks credibility

    25 October 2011

    The central bank’s latest rate hike won’t tame stubborn inflation of over 9 percent. The urgent task now is to reduce expectations of more price increases with a more explicit inflation target. It might mean GDP slows a bit, but that’s an acceptable price to pay.

  • Inflation may join jobs in 2012 presidential race

    19 October 2011

    On its own, a 3.9 pct annual rise in U.S. CPI won’t raise big inflation fears. But M2 data suggests price rises will accelerate further. If so, by next summer CPI increases could potentially hit red-zone levels. That would inject inflation, and Fed policy, into the electoral mix.

  • Internal devaluation: it's worth a try

    24 October 2011

    Big wage cuts should be almost as good as currency devaluation at reducing large trade deficits – in theory. In Europe, no one knows if practice will follow conjecture. But Latvia is trying and Greece is likely to follow. It’s not nice, but it might be a least bad alternative.

  • iPhone 4S unleashes more creative destruction

    04 October 2011

    The latest version of the smartphone offers faster data processing and downloads, as well as voice-powered software. Apple investors and gadget fans might have wanted more. But companies ranging from Research In Motion to American Greetings probably hoped for less.

  • IPO shut-down allows strategic bidder to clean up

    17 October 2011

    Private equity is offloading Danish outsourcer ISS to London-listed rival G4S for $8.2 bln – the same value it sought in March’s aborted IPO. So far, so good. But with the IPO market now shut, G4S has got away with paying partly in stock, and has avoided paying a massive premium.

  • It's Italy, stupid

    24 October 2011

    The big issue dwarfing all others now in the euro crisis is how to save Italy. Financial engineering of the sort discussed at the weekend summit will, at best, buy time. Ultimately, Rome needs to save itself. With political will, it can.

  • It's still Italy, stupid

    28 October 2011

    Amidst the post-euro summit euphoria, it’s easy to ignore that the cracks have only been papered over in Rome. Not only do Berlusconi’s reform promises not go far enough; there’s a risk that his government will limp on until January, and then collapse having achieved nothing.

  • Jamie Dimon puts brave face on tough quarter

    13 October 2011

    JPMorgan’s boss confronted a triple whammy of falling revenue, lower reserve releases and fallout from his incendiary comments. Dimon made a good stab outlining the benefits of banking. And there are signs of a middling, not reeling, economy. But investors may be less reassured.

  • Japan acts alone in global financial mess

    31 October 2011

    Monday’s unilateral effort to keep the yen from rising will probably work as well as the last one – not very much. Tokyo can’t easily resist the pressure from foreigners fleeing troubled currencies. The G20 could move the world towards financial balance, but won’t try hard soon.

  • Jobs bio sequences his DNA but doesn't unravel it

    31 October 2011

    It could be that’s what biographer Walter Isaacson intended. His book provides plenty of new material from the Apple co-founder and those around him. But this early, authorized tome leaves to others any serious verdict on the man or the sustainability of his business legacy.

  • Jobs, no ordinary CEO, leaves no ordinary company

    06 October 2011

    The force behind the iPod, iPhone and iPad not only created and then rescued Apple, building it into the most valuable tech company on the planet. He also changed the way people live. It’s a rare entrepreneur who leaves that legacy – and a company that can thrive without him.

  • Jon Corzine gets déjà vu moment at MF Global

    26 October 2011

    Dealing with rising costs, prop trading pain and capital concerns helped elevate Corzine to the top job at Goldman in 1994. Now he’s facing similar issues running MF Global. His experience should help, but the brokerage’s turnaround story is a tougher sell than Goldman’s was.

  • Keynesian consensus may win by default in 2012

    05 October 2011

    With Chris Christie out, Mitt Romney looks more likely to win the GOP nomination. He professes a wish to change policy, but his history shows him swayed by the big-government consensus. The Tea Party’s Austrian, hard-money views seem destined to fade from view in the election.

  • Kinder pays top dollar to enter energy big league

    17 October 2011

    If regulators give the nod, a new $94 bln pipeline titan will be born, becoming among the biggest U.S. energy firms. Kinder is paying more than is justified by the synergies for El Paso. But Kinder’s chief has done investors proud in the past and is not to be underestimated.

  • Latest MAC attack hints at bigger M&A trouble spot

    14 October 2011

    After crying “material adverse change,” buyout firm Cerberus is close to landing Innkeepers for less than first agreed. The broad MAC in this bankruptcy deal may not reflect market reality. But sellers still have work to do ensuring buyers know the price of trying to walk.

  • Latest U.S. tax on rich would be counterproductive

    07 October 2011

    A 5.6 percent millionaire’s surtax is being pushed by Senate Democrats. Unlike Obama’s original scheme to limit deductions, which would help fix part of the tax code, this one doesn’t. The high marginal rates would encourage avoidance and risks dinging the already ailing economy.

  • Losing Luster: Goldman Sachs Under Lloyd Blankfein

    05 October 2011

    No firm has attracted more envy within the financial industry or scorn from outside it. The latest e-book from Breakingviews chronicles Goldman’s ups and downs over the five years Blankfein has been in charge - and the challenges it now faces at a pivotal moment for Wall Street.

  • Man, products and company: a Steve Jobs e-book

    06 October 2011

    Apple’s visionary leader gave Breakingviews much to comment upon over the past decade. As these stories show, he did more than create transformative gadgets and stunning wealth. Jobs was among the most fascinating business leaders in history.

  • Market sends CEOs harsh message on M&A

    17 October 2011

    Investors have blown a raspberry at G4S’s $8 bln bid for ISS and related $3 bln rights issue. Europe’s first big corporate transaction since the summer was never going to be easy, and the cash-call is massive. If G4S stock doesn’t recover, opportunistic M&A will be cowed.

  • Markets' "euro bazooka" rally can't be trusted

    17 October 2011

    Stocks, commodities and the euro have rebounded from the brink of a bear market. The fundamental hope is for a comprehensive solution to the euro zone’s problems. Investors have added to the bounce by covering short positions. But the risk of European disappointment remains high.

  • Markets can cope if euro zone bazooka fires blanks

    19 October 2011

    There has been talk of a full solution to the euro zone debt crisis emerging from this weekend’s EU summit. Politicians are trying to lower expectations. Europe is more like a tortoise than a hare. Investors would like more, but they won’t panic as long they see clear progress.

  • Markets put Brazil SA on better governance path

    20 October 2011

    Listed firms have been relinquishing antiquated ownership structures even though official rules don’t require it. Better disclosure and one-share, one-vote are becoming de rigueur. But Brazil could expedite the process by setting a better example with companies like Petrobras.

  • MF Global's failure vindicates Volcker Rule

    31 October 2011

    Adding the complex proposal to sweeping financial regulation looked like overkill to some at the time. But the bankruptcy of the brokerage run by Jon Corzine suggests otherwise. MF Global reinforces the idea that prop trading belongs where its damage to the system can be limited.

  • Morgan Stanley makes best of turbulent time

    19 October 2011

    The bank’s $100 mln Q3 profit after accounting funnies might not look like much. But it beats Goldman. Also, Morgan Stanley’s traders outperformed rivals, the brokerage held its own and more details on European risks should calm nerves. CEO Gorman’s plan may be starting to gel.

  • Myanmar unprepared for life without sanctions

    18 October 2011

    The military is lifting its boot to get curbs removed, but flinging the doors open to foreign trade and finance would be a disaster. Institutions have atrophied during nearly 50 years of isolation. A gradual phase-out of sanctions seems the best way to foster sustainable growth.

  • Nabors’ $100 mln payout to CEO offers warning

    31 October 2011

    To hand Eugene Isenberg that much just to give up one of two titles seems absurd. But the board was stuck with a 1987 contract and did reduce his golden parachute. Even so, Nabors has underperformed for a decade. It shows the danger of companies binding themselves too far ahead.

  • Netflix’s melting core spells value disaster

    25 October 2011

    Up till now, the company has been cagey about the respective profitability of the two units it was planning to separate. New figures show Netflix makes about 10 times more from a DVD customer than an online streaming subscriber. Trouble is, the wrong arm is shrinking - and fast.

  • Neutral is best gear for U.S. automakers' cash

    26 October 2011

    Ford’s ninth quarterly profit in a row has investors wondering about a dividend. GM’s cash pile has raised hopes it might buy back the U.S. Treasury’s holdings. But growth is sluggish and Europe’s still a profit hole. Keeping balance sheets strong is the better option for now.

  • New ECB chief must shake off the Italian curse

    31 October 2011

    The incoming president of the European Central Bank inherits a strong currency in a weak monetary union. As Mario Draghi steers the bank through a series of crucial decisions, he needs to tackle Italy’s problems without worrying too much about what the Germans will say.

  • New Freddie Mac boss needs low pay expectations

    27 October 2011

    The outgoing chief executive of the U.S. mortgage finance behemoth stood to make up to $6 mln a year. But times are, or at least should be, a lot tougher now. A new CEO needs administrative skills, a thick skin and little to no ambition. Breakingviews suggests a help wanted ad.

  • New Morgan Stanley woe is a drama lacking a crisis

    03 October 2011

    The Wall Street firm was facing skepticism about its turnaround even before the third quarter turned crummy. Its latest misery, though, is driven not by substance but by numerical confusion. It should pass – unless the fear driving the herd mentality turns into outright panic.

  • New U.S. trade deals are political, economic wins

    13 October 2011

    After an overlong hiatus, the passage of laws fostering commerce with Korea, Colombia and Panama is a welcome boon for free trade. While bilateral deals are only modest job-creators, they deepen economic links, enhance efficiency and build friendships. Next up? Indonesia.

  • No easy fix for Telenor's India joint-venture spat

    17 October 2011

    Uninor, a joint venture between Telenor and Unitech, needs cash. Telenor wants to raise $1.8 billion of equity but its partner has resisted, instead taking the case to court. Whether Unitech wins or not, it’s hard to see how Uninor can avoid having to bring down its heavy debts.

  • No going back on Britain's ill-judged Big Bang

    27 October 2011

    Changes imposed on the City of London 25 years ago intensified conflicts of interest and sparked takeovers by global behemoths. The crisis makes a return to a less greedy era appealing. Some steps may be retraced, but rebuilding prestigious merchant banks would take decades.

  • Nobel rewards irrational economic thinking

    10 October 2011

    After four years of global financial crisis, it would be nice to see a Nobel economics prize for studies of the dangers of irrational behaviour. But the 2011 winners, Sims and especially Sargent, have assumed that rationality rules. That helps with equations, but not with policy.

  • Obama is handing too much gold to ivory towers

    26 October 2011

    The $1 trln U.S. student loan market fuels soaring tuition fees and leaves taxpayers on the hook for default. The president’s move to lighten the burden on graduates will only increase defaults. And taxpayers are already getting scant return for rising college subsidies.

  • Obama's jobs council promotes distorted reality

    11 October 2011

    Its report includes some good ideas, especially on deregulation. But it ignores the role of domestic savings; its ideas on infrastructure investments would be unproductive; and its support of immigration would worsen unemployment. You can tell GE’s Jeff Immelt chaired the panel.

  • Occupy themes won't easily dazzle like Tea Party's

    31 October 2011

    The movement that started in lower Manhattan has rightly put attention onto America’s wealthy. And though the Tea Party started out just as ragtag, it’s hard to see Occupy Wall Street catching on the same way politically. Deficits are an easier pitch than inequality. 

  • Occupy Wall Street is poor vessel for discontent

    19 October 2011

    The protesters may be channelling justified public anger against high finance, but they are too intellectually incoherent to start any sort of revolution. Edward Hadas suggests the mourning over Apple’s Steve Jobs is a better cultural indicator than the Wall Street movement.

  • Occupy Wall Street may share fate of Coxey's Army

    12 October 2011

    Like today’s demonstrators, Coxey’s 1894 march on Washington followed a period of deflation that increased inequality and a financial crash. Coxey failed, but his demands for stimulus spending and printing money became the standard response to recession. OWS should be so lucky.

  • Oil trader, stock investor variance is opportunity

    10 October 2011

    Economic fear has taken a heavier toll on U.S. oil company shares than on crude itself. Either there are bargains among the stocks of oil explorers, or commodity investors are too bullish. The difference of opinion ought to mean there’s room to make money.

  • Olympus fiasco strengthens case for Japan reform

    17 October 2011

    Naming foreigner Michael Woodford to run the company was part of a grudging shuffle toward accountability. Firing him six months later suggests an allergic reaction. It’s a setback for Olympus, whose shares have plunged, but will only increase the heat on Japan’s conservative boards.

  • Olympus investors need urgent answers

    19 October 2011

    Accusations by its ousted CEO have them wondering: why did the Japanese company pay two M&A advisers a 35 percent commission in 2008? The fear is that Olympus could be forced to take big writedowns, or even delist. Until the air is cleared, its shares will continue to founder.

  • Olympus scandal wakens Japan's sleeping investors

    21 October 2011

    Nippon Life has joined foreign investors asking the company to clear up accusations by its ousted CEO. Growing outlays for Japan’s aging society are turning once passive insurers into activist shareholders. If only its banks, who are even bigger investors, would get on board.

  • Olympus's M&A moves went from unorthodox to mad

    21 October 2011

    The Japanese firm’s merger misadventure started oddly and went downhill. Deals don’t always require big banks or cash fees. But Olympus seemingly ceded most of a UK target’s future profits to a mystery adviser, resulting in the biggest M&A fee in history. At best, that’s crazy.

  • Opportunity knocks for U.S. gas exporters

    13 October 2011

    With natural gas four times dearer in Asia than America, U.S. producers will be tempted to export. But the price difference must endure to justify the infrastructure investments needed. Still, rising global demand and booming U.S. drilling mean the numbers might now stack up.

  • Orderly euro exit virtually impossible

    26 October 2011

    A UK businessman has promised a 250,000 pound prize for the best explanation for how a country could quit the single currency in an orderly fashion. Hugo Dixon gives his best shot, but still concludes there would be mayhem.

  • Overbearing Brasilia at fault in ethanol shortage

    04 October 2011

    Lack of investment and squeezed margins mean Brazil’s biofuel production is not keeping up with demand. Government efforts to change that are now affecting oil giant Petrobras. It’s the kind of tangle of unintended consequences that follows excessive government meddling.

  • Patent litigation becoming a vicious circle

    11 October 2011

    Motorola, which Google is buying, is the target of Intellectual Ventures, a patent-holding firm backed by Google. Such tail-chasing is a bad sign for the business of acquiring invention rights and suing for dollars. Innovative pursuits might yield better returns than lawsuits.

  • Pfizer milk bid could fortify China's M&A hopes

    25 October 2011

    Mengniu Dairy’s bid for the U.S. pharma giant’s $10 bln nutrition unit would make strategic sense. China can gain from deals pegged on rising consumer demand rather than cheap labour. Buying foreign brands may also help address food safety problems, if bidders tread carefully.

  • Pitching in on Europe is in China's best interest

    27 October 2011

    China has suggested a contribution to Europe’s bailout would come with strings. But as a beneficiary of global trade, the world’s number two economy has good reason to do whatever it takes to secure a stable euro zone. That would also spare China a rapid and painful adjustment.

  • Plan B for UK bank lending might just work

    04 October 2011

    George Osborne has so far resisted calls to soften his programme of spending cuts. But the UK chancellor’s so-called “credit easing” signals a major shift in his efforts to get banks to lend. As ever, though, success will hinge on whether demand for new loans actually exists.

  • Poland must cut now to cope with Crisis II

    10 October 2011

    The government’s re-election reflects Poland’s success in handling the 2008 crisis. But the euro zone sequel will be harder. Poland got by last time by letting its deficit and debt rise. Now it must cut them. The zloty, Swiss mortgages and foreign-owned banks are vulnerabilities.

  • Political star puts Mexican oil reform in reach

    19 October 2011

    Mexico’s presidential frontrunner Peña Nieto wants “audacious” changes to revive the nation’s ailing state-run energy giant. Ebbing output makes an overhaul crucial. Others have made similar promises, but with Mexico’s political tide slowly changing, Peña Nieto might just succeed.

  • Portugal hangs in the balance

    14 October 2011

    After years of lax management and slow growth, the debt and deficit numbers are intimidating for any government in Lisbon, but the current one is determined to avoid a restructuring. With a bit of economic luck - and some patience from investors - it might manage to pull through.

  • Postponing Greek pain will be costly for taxpayers

    20 October 2011

    To get Greece’s debt under control, the private sector and EU governments have to take a haircut. If a restructuring happened now, private bondholders would bear most of the losses, according to a Breakingviews calculation. But if the euro zone delays, taxpayers will suffer more.

  • Prisa investors take one for the team

    07 October 2011

    The Spanish media group’s core shareholders have injected 150 million euros of capital after exercising warrants at a loss. Even this act of charity doesn’t solve Prisa’s debt problem. But it might sway Prisa’s lenders to be more flexible on the repayment of 3.2 bln euros of borrowings.

  • Private bondholders won't make the IMF better

    11 October 2011

    Proposals to let the IMF tap private investors by issuing bonds look desperate. It could use extra cash to aid the euro crisis, but new funding might delay restructuring. It could also give the fund too much firepower and risk leaving it beholden to fickle market sentiment.

  • Qatar steals $1 bln march on European Goldfields

    03 October 2011

    The Gulf country is hungry for exposure to gold. Its offer to finance a Greek mining project will secure it at least 27 pct of the Canadian group at a snip of its mooted July valuation. But in current markets, investors will have to think hard before turning away the Qataris.

  • Qatar still hasn't found gold in Credit Suisse

    12 October 2011

    Credit Suisse’s preferred advisor status to the Gulf country is a source of envy, as Qatar prowls for assets in a period of M&A dearth. So far the relationship doesn’t seem to have suffered from Qatar’s 2008 investment in the bank, which proved to be a mixed blessing.

  • Rajaratnam sentence shows value of court process

    13 October 2011

    The 11-year term handed to the Galleon fraudster may seem excessive to those who think insider-trading penalties are overdone. But it looks about right in context - and it has unusual credibility. Not only was there no shortcut deal, the legal battle was also fully engaged.

  • RBS's Scrooge act: more optics than management

    14 October 2011

    The lender controlled by the British government is axing investment bank Christmas parties. Combined with other cost savings, this may head off political rancour ahead of a capital hike. Investment bankers may have few options now, but the hit to morale may have a long-run cost.

  • Republican frontrunner's glory should be fleeting

    14 October 2011

    The buzz around Herman Cain’s tax plan helped move him to the top of some polls. But on closer inspection, his 9-9-9 scheme is highly regressive and unattractive to nearly all. Cain’s questionable political and business credentials also imply this heyday will be short-lived.

  • Richard Li's financial alchemy fails to wow

    12 October 2011

    The HK tycoon’s plan to spin off his telecoms business into an innovative trust structure is designed to unwind PCCW’s huge conglomerate discount, while preserving his control. The cost is unnecessary complexity, and potential dilution of minority shareholders.

  • Rick Perry's simple tax plan spoiled by complexity

    25 October 2011

    The Republican presidential contender’s 20 pct flat tax is a sensible plan with some nice new features and structured to avoid being too regressive. But the capital gains exemption is a silly loophole and making it optional wrecks Uncle Sam’s yield. It’s a missed opportunity.

  • Rio Tinto takes bold step into aluminium rehab

    17 October 2011

    The miner’s $38 billion purchase of Alcan in 2007 was a financial disaster, and aluminium’s prospects still look poor. Rio is making some amends with a plan to sell off a third of the business. The strategy is sensible and now looks as good a time as ever to sell.

  • Rock'n'roll becomes form of economic stimulus

    31 October 2011

    That, at least, is the message from the Moogfest, which took place in Asheville, North Carolina, this past weekend. Aside from giving synthesizer geeks an outlet, Rob Cox found the three-day festival making good use of Asheville’s facilities and boosting local businesses.

  • Roman politics could gum Europe up

    31 October 2011

    The euro’s future hangs on Italy – and Italy’s future hangs on its politics. The best way forward would be a grand coalition replacing Berlusconi’s discredited government. But after the PM’s latest Houdini act, that doesn’t seem likely and other scenarios aren’t as attractive.

  • Run of economic bad news could be about to pause

    03 October 2011

    If Friday’s U.S. jobs report follows a recent mini-trend, it will be time to revise economic expectations upwards, once more. But a downward turn will follow soon, unless global financial tensions ease durably. For rich countries, this “lesser depression” may have years to run.

  • Rupert Murdoch's sham governance on full display

    25 October 2011

    A majority of stockholders who don’t share the media mogul’s last name snubbed his sons, James and Lachlan, along with three other News Corp directors. The emphatic vote may be only symbolic. But even a board so entrenched as this one can’t ignore the angry mob.

  • Russia and China close but not yet allies

    12 October 2011

    Putin’s visit to Beijing highlights the deepening co-operation between the two giants. But they remain worlds apart on big issues, and trade between them is small. Apparent agreement on issues like U.S. policy and Syria shouldn’t worry the world just yet.

  • Russian delay adds to Polyus UK listing concerns

    28 October 2011

    A regulatory delay to the gold miner’s London listing may have political motives. The timing is suggestive, coming after public outbursts by owner Mikhail Prokhorov. The setback underlines risks that make it unwise for London to waive its rules for Russian companies.

  • Russian infrastructure dreams sink in Sochi slush

    04 October 2011

    The spiralling cost of the 2014 Winter Olympics in the Black Sea resort illustrates the chaos endemic to Russia’s much-hyped sporting and infrastructure projects. Far from being a boon to the economy and investors, these opaque free-for-alls are a recipe for financial disaster.

  • SAB's $1.9 bln Turkish tie-up has double benefit

    19 October 2011

    The UK-listed brewer is swapping its Russian unit for a 24 percent stake in Turkey’s Efes. Though Russia is challenging for brewers, the combined business will have a broader base. And SAB is now in pole position if the families behind Turkey’s dominant beer-maker ever sell up.

  • Sahara's $5 bln savings spat is India's loss

    28 October 2011

    The Indian savings house has been ordered to return a whopping $4.9 bln raised from nearly 30 million mostly rural investors. The episode is unlikely to help confidence among small savers. Yet accessing their capital is vital to help India’s development.

  • Sarkozy's euro warning smacks of desperation

    19 October 2011

    As Moody’s says it might change its view on France’s triple-A ratings, the French leader warns gravely about the euro ahead of next week’s EU summit. But seven months before the presidential election, it’s his future he’s really talking about.

  • Sarkozy's short-termism driven by triple-A fears

    10 October 2011

    The French president’s stances on restructuring Dexia and recapitalising euro zone banks are driven by the obsessive fear of losing the nation’s top rating. The risk is that this might precipitate short-term fixes, which would make a downgrade even more likely.

  • SEC may deter more cheats by lowering sights

    05 October 2011

    The U.S. regulator faces criticism over its record nailing financial rogues. Ponzi-schemers aren’t the only ones who should pay for wrongdoing. Suing for negligence rather than harder-to-prove fraud could make a difference. Penalties would be smaller but punishment more certain.

  • Shanda's opportunistic MBO may start a trend

    18 October 2011

    Its founder looks to be exploiting the plunging share prices of China’s U.S.-listed dotcoms. Shanda’s cash pile will cut the amount he has to put in. Delisting from the United States paves the way for a relisting in China. Others frustrated by rising U.S. scrutiny may follow suit.

  • Sinopec shows quirks of Chinese resource M&A

    10 October 2011

    The Chinese energy group has offered a massive 120 pct premium for Canadian producer Daylight. Like similar Chinese deals, the $2.2 bln offer works because of strategic necessity, still-high commodity prices, cheap capital and a shareholder none too fussed about value creation.

  • Slower Chinese GDP growth adds to financial risk

    18 October 2011

    In the past, strong growth has helped Beijing smooth over problems with bad loans. But 9.1 percent may not be fast enough to deal with excesses in non-bank lending and real estate. It sounds like U.S. subprime – the financing that supported growth now threatens to undermine it.

  • Sovereign funds could win big with M&A lending

    06 October 2011

    Abu Dhabi has money and appears willing to use it to grease the wheels of big deals - first Hynix Semiconductor and now EMI. As Warren Buffett has shown, it can be very profitable to lend when other won’t - as long as there are generous rewards for risk-taking in fearful markets.

  • Spain hasn't seen the end of its pain

    21 October 2011

    Profligate regions may push the country’s budget deficit above the 6 percent-of-GDP target. The electoral cycle isn’t helping. A minor slippage doesn’t matter much, but in the current slump, anything more than a percentage point will make next year’s goals particularly challenging.

  • Spain isn't as uncompetitive as you think

    31 October 2011

    The country’s unemployment rate scales new heights even as Spain’s exporters seem surprisingly resilient. The snag is that there aren’t enough of them to get the country growing again.

  • Spain's next leader keeps investors guessing

    07 October 2011

    The country’s probable next PM talks the right talk in focusing on jobs and the economy. His party, which may wield unprecedented power, seems to understand how serious the crisis is. But it’s still unclear whether they will opt for a swift and radical reform agenda once in power.

  • Spanish bank mergers off to inauspicious start

    11 October 2011

    Banco Popular is paying a steep price for rival Banco Pastor. The 1.3 bln euro deal doesn’t lift the mid-sized lender into the big league and does little to strengthen its balance sheet. It’s a reminder that while more consolidation is inevitable, not all investors will benefit.

  • Sprint's antitrust pitch hedges against DoJ miss

    25 October 2011

    The third-largest U.S. mobile operator says it just wants to help Justice kill AT&T’s takeover of T-Mobile USA. But its separate lawsuit suggests unease with Uncle Sam’s arguments. Such private cases rarely succeed. But this one looks like insurance against a government stumble.

  • Sprint's splat opens up U.S. wireless dance floor

    10 October 2011

    Bodies are piling up in the industry’s increasingly complicated waltz. Cash concerns tripped up Sprint and partner Clearwire, after AT&T and Phil Falcone’s LightSquared stumbled earlier. That makes space for a possibly jilted T-Mobile and a surprisingly dexterous Dish.

  • Subprime CDO case tests Deutsche public relations

    20 October 2011

    A defunct lender which was bailed out by the state is suing Germany’s biggest bank over subprime losses. Deutsche disputes the suit. But claims the lender cost taxpayers $440m won’t help CEO Josef Ackermann’s already frosty relationship with German Chancellor Angel Merkel.

  • Temasek's StanChart bond looks too clever by half

    19 October 2011

    The Singaporean fund issued a zero-yield bond exchangeable into shares of the emerging market lender. If they rise less than 27 pct, Temasek will have borrowed $512 mln for free. But the ensuing fall in the shares means the gains from this wheeze have already been wiped out.

  • The Avon lady needs to look in the mirror

    28 October 2011

    Andrea Jung may be a powerful figure in U.S. business, but as CEO of the $8 bln cosmetics company she has twice failed to turn it around. Never mind the federal probe into possible wrongdoing, Avon’s dismal performance is reason enough for Jung to give someone else a chance.

  • The dangerous power of negative thinking

    13 October 2011

    In his new weekly column, The Ethical Economy, Edward Hadas argues that the recent recession should not be described in cataclysmic terms. The rich suffered only a little and the poor kept getting richer. But excessive fear of GDP decline leads to excessively dangerous policies.

  • The euro zone has a deal. Now for the hard part

    27 October 2011

    Leaders of the monetary union have agreed to force large losses on Greece’s creditor banks; to recapitalise banks; and to increase the capacity of the EFSF bailout fund. But before celebrating, crucial details need to be filled in. And implementation must be airtight.

  • Through adversity, Goldman still plays all angles

    17 October 2011

    The $38 bln Kinder Morgan deal epitomizes what the bank does best. It owns a stake in the pipeline operator, underwrote its IPO and worked with its takeover target, El Paso. Such finesse is what sets Goldman apart. It’s just not clear it’s a gift that will keep on giving.

  • Trade war remains a distant prospect

    05 October 2011

    The U.S. and China are once again raising the spectre of mutually destructive protectionism. But globalisation has gone so far that trade restrictions would have painful and immediate consequences in every country. That’s why the threats won’t go far beyond angry skirmishes.

  • Trouble knocks for Korea's indebted households

    07 October 2011

    Seoul has resumed crisis meetings over Europe’s debt drama. Banks and the government itself look sturdy enough, but households are deep in debt, and the foreign inflows that kept loans cheap are fleeing. Korea still has strong finances, but it may need them if defaults spike.

  • Tunisian economic recovery is reason for optimism

    24 October 2011

    Barring a violent backlash against the likely Islamist party victory, Tunisia can hope for a strong rebound following the country’s first ever democratic elections. Libya’s liberation might also help. For now, that outweighs the looming risks posed by the European slowdown.

  • Turkish banks still shine despite musical chairs

    25 October 2011

    Dexia has joined the foreign lenders looking to exit the country after just a few years. But Turkey’s banks are well capitalised in an underpenetrated market, and valuations are near historic lows. Even with an economic slowdown looming, they offer a potential bargain for buyers.

  • U.S debt jubilee would not rev up growth

    04 October 2011

    A one-time massive loan write-off might give consumers confidence, but would reward bad behavior and kill market trust. Besides, the Fed would end up printing money to rescue lenders. High inflation is a less pernicious way to erode debts, but just taking losses is best of all.

  • U.S. currency slap looms as China least deserves it

    03 October 2011

    A bill enabling sanctions on Chinese goods may pass the Senate this week, even though the yuan has appreciated strongly on a trade-weighted basis. China’s central bank has been guiding the currency stronger despite falling markets. For the U.S. to lash out now looks a mistake.

  • U.S. GDP is good news by today's low standards

    27 October 2011

    The first estimate of third-quarter GDP puts it a scant 0.2 pct above the previous peak, in 2007. But 2.5 pct growth is high enough to calm fears of a double-dip. Even though consumers remain squeezed - real disposable personal income fell - Obama’s 2012 prospects look brighter.

  • U.S. housing has added problem: mortgage insurance

    28 October 2011

    Many legislators want the government out of housing. Fair enough. But a look at the private business of mortgage insurance serves as a reminder that the private sector also needs an overhaul. Former highflier PMI’s takeover by regulators last week is a case in point.

  • U.S. housing policy tilts further to richest 1 pct

    21 October 2011

    Legislators seem hell-bent on defending the millionaire property market. Raising the limit on government-backed loans and giving home-linked visas to rich foreigners won’t help the worst-hit low end. Tea Partiers and OWS protesters can find common cause in opposing these turkeys.

  • U.S. jobs data confirm economy is muddling along

    07 October 2011

    The six-figure increase in employment in September beat expectations but wasn’t enough to cut long-term unemployment, which increased. Still, alongside positive manufacturing data, it suggests the outlook is for slow, patchy growth rather than a relapse into recession.

  • U.S. pipeline bottlenecks favor Chevron

    28 October 2011

    Third-quarter profit more than doubled at the $220 bln energy giant, justifying the strength of its shares. Its U.S. operations are relatively free of infrastructure constraints that have hit crude prices for others. The advantage will fade, but Chevron is milking it for now.

  • U.S. refuge for equities comes at quite a price

    03 October 2011

    In stock markets, correlations are about the only thing going up. But while U.S. and EU equity indexes are moving in the same direction on more trading days, European shares have also slumped to a 20 pct discount to U.S. peers. That may overstate the security offered stateside.

  • UK bank default swaps anticipate bail-in too soon

    26 October 2011

    The cost of insuring UK bank debt has rocketed. Investors are fretting that ring-fencing reforms make senior debt more risky. It’s good that bondholders are no longer betting on a bailout. But they’re ignoring phase-ins designed to delay the pain until the crisis abates.

  • UK inflation belies central bank's claim to care

    18 October 2011

    If the Bank of England thought controlling inflationary psychology was priority number one, it would not be printing money when prices are rising at a 5.2 pct rate. But the BoE is more worried about slow growth and financial tension. Inflation is, at worst, a tolerable evil.

  • UK listing hands credit to Russia's steely Evraz

    17 October 2011

    Another Russian minerals company is heading for the UK’s FTSE 100. Commodity worries and the involvement of Roman Abramovich means investors will approach with caution. But the company’s size, diversity and exposure to infrastructure spending tempers doubts about Evraz.

  • UK reaches for wrong levers on growth

    03 October 2011

    George Osborne is under pressure to bolster UK growth by amending deficit-cutting Plan A. But the finance minister’s idea of further “credit easing” sees him cross the line into monetary territory. He would do better to adjust fiscal policy without compromising austerity.

  • UK should participate in EU bank recap exercise

    07 October 2011

    Britain may wish to wriggle out of bolstering its lenders, on the grounds that the euro crisis is on the other side of the English Channel. But there are good reasons for it to play ball. RBS is top of the list for a mega injection. Barclays may need one too.

  • Vatican's monetary ideals suit practical reforms

    24 October 2011

    The spirit of new Roman proposals, including a central world bank and taxing financial transactions, makes sense. Global finance needs better governance than can be provided by today’s system of strong, would-be isolated states. Nice, but such noble virtue won’t catch on easily.

  • Vietnam could use capitalist pep talk from Merkel

    12 October 2011

    The German chancellor’s trip to Hanoi may bring tough questions on the capitalist model. Vietnam grew rapidly by opening to trade 25 years ago, but Europe’s woes are causing pressure on reserves and capital flight. It shows how the euro crisis is a developing world problem, too.

  • Volcker Rule draft still leaves many gray areas

    07 October 2011

    U.S. regulators have made a good stab at trying to minimize the prop-trading ban’s impact on market-making. But their 200-page draft still raises many questions. It confirms that the former Fed chairman’s know-it-when-you-see-it mantra was too simplistic for this complex task.

  • Wall Street dealmakers get trampled by PIIGS

    10 October 2011

    The fear and uncertainty over Europe has sent the cost of U.S. credit skyward. By one closely watched gauge, junk bonds are yielding almost five percentage points more than they reasonably should. Given the bureaucratic dithering, bankers and buyout barons may be idle for a while.

  • Welcome to the euro zone finish

    05 October 2011

    Switzerland’s banks are subject to a “Swiss finish” because they tower over the country. Euro zone banks should require extra capital too, because the region’s lender of last resort mechanisms are dysfunctional. Think of that as justification for the next round of capital hikes.

  • Wells Fargo's premium suffers justifiable hit

    17 October 2011

    Its record $4.1 bln Q3 earnings barely missed estimates. But revenue slipped, too. Returns just beat the cost of capital and a struggling American economy won’t help the U.S.-centric bank. That makes it harder to rationalize Wells trading much above rivals, or its own book value.

  • Will Wells Fargo get hooked on Wall Street crack?

    10 October 2011

    The California-based lender has mostly resisted lower Manhattan’s siren call. New rules would make it even costlier. But Wells kept Wachovia’s investment bank and is hiring. Ailing Morgan Stanley could even be a good fit. But such temptation can become a debilitating addiction.

  • Yahoo could find closure by way of Chinese bid

    03 October 2011

    Talk that Alibaba founder Jack Ma might buy Yahoo outright sounds like overkill: what he really wants is the 40 pct of his company Yahoo owns. But if U.S. regulators can stomach it, a Ma-led buyout and break-up of the search engine would be a neat solution to Yahoo’s woes.