Stocks and Funds
Goldman’s elevator annotator failed for a denial of identity. Bitcoin’s fingered father rejects founding the crypto-currency. From this shadowy world, such confusion is expected. Not so among systemically important insurers, where Pimco’s “Bond King” Bill Gross reigns supreme.
The 20 pct slide in the gas giant’s shares during the Kiev-Moscow spat looks like an overreaction. Gazprom has become less reliant on Ukraine as a transit point. Its valuation reflects its status as a Kremlin tool. A chillier investment climate in Russia is a bigger threat.
An uppity investor challenging laggard miner Cliffs rejected an offer of two board seats. Instead, Casablanca Capital is forging ahead with efforts to install six directors and replace the CEO. Companies have been listening more to vocal shareholders, but those times may go by.
A government advisor and the chief of the country’s $1.2 trillion public retirement fund are sparring over asset allocation between debt and equity. While stock market investors have a stake in the turf war, the bigger concern for bond buyers is the surge in pension liabilities.
Bids and Buyouts
Based on the 2007 A&P-Pathmark merger, synergies could be worth more than half the $9.4 bln Cerberus’s Albertsons is paying for its rival U.S. grocer. In theory that leaves room for a higher offer. But competition means cost savings may need to go to shoppers, not investors.
The family-backed group has bid 19 bln euros for SFR, Vivendi’s mobile unit. That’s far more than rival Numericable is said to be offering. Yet Bouygues shares are only pricing in a sixth of the promised benefits. Competition worries and a sweetened counterbid are real risks.
In the Cerberus-led takeover, new equity and debt, cash, a stock distribution, future sales and even a tax break in theory get to $40 a share, or $9.4 bln. But investors marked Safeway shares down. Goes to show getting to knockout prices is tough for private equity these days.
State-backed COFCO is eyeing an agriculture joint venture with Singapore’s Noble, a week after taking control of Dutch grain trader Nidera. COFCO’s mission to ensure China’s food security is finally translating into large overseas acquisitions. Yet targets remain in short supply.
Money and Markets
Friday’s report leaves the U.S. with 666,000 fewer working citizens than in early 2008. Yet the stock market hit a record on Thursday, five years after its nadir. It’s a reminder that America’s recovery has so far benefited Main Street a lot less than it has helped Wall Street.
Matteo Renzi has been forced to amend his electoral reform. The result could mean that Italy will remain ungovernable. The new prime minister’s hand is weaker, even though the risk of early elections has subsided. And serious economic reforms will be harder.
Felix Martin says that money isn’t a commodity, but a system of credits. This insight allows his book to rewrite monetary history in an eye-opening way. It also suggests that the way economists approach finance and recessions is hopelessly wrong.
If Chaori Solar fails to pay interest on March 7, as expected, what then? Investors will be deprived of cash, banks will have to mark down some of their holdings, and new issuers will have to pay more. Though a default is overdue, the aftershocks should not be underestimated.