Month: January 2007

Can pay for failure be stopped?

5 Jan 2007

The $210m payment to Home Depot s Nardelli has some governance activists hoping so and lawmakers itching to try. But that would undermine the fundamental principle of corporate governance. A better idea is to approve nonbinding votes on pay in the US. The $210m payment to Home Depot s Nardelli has some governance activists hoping so and US lawmakers itching to try. But that would undermine the fundamental principle of corporate governance. A better idea is to approve nonbinding votes on pay.

Handset makers face Razr thin margins

5 Jan 2007

Despite selling 6m more mobile phones than expected, Motorola says it will miss its already lowered fourth quarter sales target by $250m. Handset markets are saturated in rich countries. Once demand slows in poor ones, mobile makers apple carts will tip this could be near.

Tumbling oil price challenges Opec

5 Jan 2007

A few weeks ago, it looked like the cartel would be able to keep oil above $60 a barrel. After a twoday drop of 9%, the price is now $56. Speculative excess is a likely explanation. But to prevent further falls, Opec needs to persuade market players that it is in control.

Companies should take credit derivatives seriously

5 Jan 2007

When companies get geared up in a takeover, dealing with these secondary instruments isn t usually a high priority. But it should be. After all, credit derivatives can help reduce the cost of capital. Their holders have a legitimate claim for attention.

Akzo Nobel shouldn’t rule out selling drugs

4 Jan 2007

The Dutch conglomerate is pushing on with a float of the pharma business. That means investors have to take a punt on the drug pipeline. But the operation s health has deteriorated. At the right price, a bid could prove the more attractive option for shareholders.

Activists take a lesson from Archimedes

4 Jan 2007

Activist investor Ralph Whitworth didn t need a big stake in Home Depot to influence change a letter was enough to move the $84bn giant. Whitworth can t take full credit for Nardelli s sudden departure, but his campaign may have spooked the board enough to seal his fate.

Copper still looks pricey after 32% fall

4 Jan 2007

At $5880 a tonne, the red metal remains hugely profitable for miners. The marginal cost of production is more like $3300. Further falls are possible, if novice metals investors lose heart. But it is much too early to call an end to the era of high asset prices.

Democrats must show free enterprise bona fides

4 Jan 2007

To win Congress, Democrats blamed cheap foreign imports for the plight of the displaced American worker. But to govern wisely, they need to embrace free markets, eschew protectionism, and avoid overplaying their populist hand.

Small print may work for Vodafone in India

4 Jan 2007

It looks like the global mobile phone operator can get Hutch Essar s reins without minority partner Essar Group having a say. It s a quirk of the shareholder agreement. Since Essar is playing hardball, the limits on its rights are a welcome luxury to Vodafone.

Grain rally result of bad energy policy

4 Jan 2007

The US subsidises domestic production of biofuels. It has to, since the products couldn t survive in a free market. The boondoggle has helped farmers with higher corn and soybean prices. But the country would be better off with imported ethanol.

Alpha is overestimated

4 Jan 2007

A positive riskadjusted return alpha is the holy grail of modern investing. It should be hard to find. Many investors think they ve captured lots of the stuff. But they aren t considering the risks that come with the current liquidity flood.

Private equity threatens $2trn dollar exit tsunami

4 Jan 2007

The buyout firms last year raised enough capital to buy companies worth $1.6trn. Even with modest returns, they may look for $2trn of exits. This won't be easy. Last year, there were only $250bn of exits. The temptation will be to rely heavily on IPOs. But that may lead to a glut.

Home Depot not yet out of LBO sights

4 Jan 2007

The building supplier s ouster of CEO Nardelli might quell buyout chatter for now, but it won t fend off private equity shops for good. So long as the company sports an inefficient balance sheet, the buyout swarm will find it an appealing target.

Emerging market stocks are more attractive than bonds

4 Jan 2007

Spreads on emerging market debt have narrowed to a record low, yet equity valuations remain moderate. Equity investors have a greater exposure to Asia, while emerging market bond investors are stuffed with Latin American debt.

Regulators inspect hedge fund hotels

3 Jan 2007

Massachusetts is probing UBS to determine whether its hedge fund support activities constitute a conflict of interest. These arrangements are legitimate, but there s room for abuse. Hedge fund hotels deserve greater scrutiny by investors.

Memo to Jobs from Governor Spitzer

3 Jan 2007

I normally wouldn t pause from my inauguration festivities to give unsolicited advice. But I m a real fan and you re in a spot of trouble. This options fiasco could turn into a disaster. Get ahead of it now with a generous gesture of goodwill and give some money away.

Energy investing trickier in 2007

3 Jan 2007

Investors will need to sift through the industry for laggards that may be poised to narrow the gap this coming year. Oil prices are not forecast to rally the way they did in early 2006. This could tempt investors to turn away from energy stocks.

Why is GLG appealing its E1.2m AMF fine?

3 Jan 2007

The UK hedge fund is once again in trouble over the activities of Philippe Jabre, its former star trader, this time with French regulators. But this time, GLG is fighting back. That may be because it fears prejudicing another tricky French probe and one it can t blame on Jabre.

Essar makes life tricky for Sarin

3 Jan 2007

The aggressive Indian group, which owns 33% of Hutch Essar, has asserted right of first refusal over the stake that Vodafone wants to buy. It isn't clear if it really has that right. But if it does, it would make it harder for Vodafone to get control of Hutch Essar.

Home Depot board fails even in its cleanup

3 Jan 2007

A $210m payoff to to its underperforming CEO, Nardelli, is an extraordinary payment for failure. The board has a lot to answer for in allowing the DIY giant to lose its way in the first place. Directors should review their positions.

Bulgaria makes more than poisoned umbrellas

3 Jan 2007

The newest EU member has a reputation for crime and corruption. True, by Finnish standards, but not for a poor country. Bulgaria has the cheapest skilled labour in the EU and a thriving tourist trade. It should get rich fast, if politics don t get in the way.

AMF should make Pinault put up or shut up on Suez

3 Jan 2007

The French billionaire doesn't want to say if he will bid for the giant utility. That's because he is still trying to line up the finance. The French regulator should give Pinault time to do so because it may be in the interest of Suez shareholders. But not too long.

Absolut vodka could go like a shot

2 Jan 2007

The Swedish government is set to sell the fastgrowing vodka brand. It could be one of the most hotly contested auctions of 2007. Vodka demand is growing at good clip. And Absolut is the only big brand likely to come to market soon.

Gargantuan gifts reflect billionaires’ peccadilloes

2 Jan 2007

Rising economic inequality has a silver lining as incomes of the rich soar, philanthropy has hitched a ride. Yet the terms of multibillion dollar offerings are as idiosyncratic as their donors. We look several gift horses in the mouth.

Potholed road attracts infrastructure swarm

2 Jan 2007

Four dozen firms are pursuing the Pennsylvania Turnpike. That s 42 more than were interested in an Indiana toll road earlier this year. So far, most infrastructure action has been in Europe. But interest in the Pennsylvania road shows the infatuation has come to the US. Four dozen firms are pursuing the Pennsylvania Turnpike. That s 42 more than were interested in an Indiana toll road last year.

Will private equity suffer conglomerates’ fate?

2 Jan 2007

Buyout bosses hate being compared to the likes of ITT s Harold Geneen just because they are gobbling up everything in sight. But there is a big similarity. Conglomerates fueled their deals with their rising stock prices. The LBO frenzy is driven by cheap financing.

How aggressive is Gazprom?

2 Jan 2007

The Russian gas giant just pushed its way to success in Belarus. But its distribution contracts in Western Europe look almost defensive. Gazprom wants the profits. But it is probably more worried about ensuring that its expensive pipelines find customers.