Will corporate credit be the next shoe to drop? 8 Aug 2007 Recent market turmoil might just be an aversion to dodgy mortgages and overly cheap LBO debt. If so, it ought to be manageable. But it could get worse. Moody s predicts a near tripling of defaults by junkrated companies in the next year. That would prolong the pain.
Australia’s rate hike shows Asia’s impact 8 Aug 2007 The overnight rate down under is now 6.5%. But that may still not be high enough to curb resurgent inflationary pressures. Australia s boom, driven by China and India, mirrors the global picture. It might not only be Australia that needs to push rates up further.
E.on goes windy in Spain 8 Aug 2007 The German energy company will spend E1.3bn to buy and invest in wind power farm operator Energi E2 Renovables. It s part of a strategy. Like other European utilities, E.on hopes to gain from rising renewables valuations by listing its division. Investors should be careful.
Novartis growth depends on BRICs 8 Aug 2007 The company abandoned its Indian patent fight over a cancer drug. This may seem irrelevant it gives the drug away 99% of the time there. But its future depends on sales in a handful of developing countries. They could account for up to half its growth in the next five years.
Will China drop $800bn bomb on world markets? 8 Aug 2007 A few officials are talking about the nuclear option . Massive sales of US bonds would crater the dollar and punish pesky US politicians. But it would also hurt Chinese exports and cut into growth. In a few years, though, a dollar dump may serve China s interests.
Hedge funds looking at an Indian summer 8 Aug 2007 Like the Brits, hedge funds have survived the July storms and are now cautiously optimistic that the worst is behind them. Sure, no one expects a return to the conditions earlier this year. But for many strategies, the best part of the year could lie ahead.
Should fund managers finance investor redemptions? 7 Aug 2007 News of a hedge fund restricting its investors redemptions is often its death knell. So managers are eager to avoid taking that step. Some are even said to be digging deep into their own wallets to inject more capital. That might tide the fund over or sink the manager.
Fed should resist Wall Street’s siren songs 7 Aug 2007 Debt market problems are bringing pain to many Wall Street titans. So they re calling for the Fed to cut rates. Inflationary pressures domestic and international are worsening. There s a case for raising rates, but not for lowering them.
Standard Chartered acquisition hopes let down by Korea 7 Aug 2007 The emerging markets bank s Korean business, its last big acquisition, stumbled in the first half. Profits fell 18%. That wasn t enough to deny Standard Chartered strong growth. But it may make investors reluctant to back further acquisitions.
Saint-Gobain pays Maxit price for strategic re-focus 7 Aug 2007 This is pricey. But after good results in the first half, the new CEO can show what he means by his new stronggrowth strategy. The French building materials company is spending more than E2bn to acquire HeidelbergCement s industrial mortar division Maxit.
Deripaska’s $900m GM investment not just financial 7 Aug 2007 The Kremlinapproved oligarch has taken a 5% stake in the US car giant. His holding company already owns Russia s secondbiggest car maker. Deripaska s investments are blessed by the Kremlin. He is so close to Putin that he should be treated like Putin.
Mining super-cycle could be peaking 7 Aug 2007 The big miners now all believe that Asian demand will keep prices high for years and are acting accordingly. But easy money has played a big role in keeping this cycle super . Tighter credit may make the next leg of the cycle less profitable.
Wynn shareholders should cash in some chips 7 Aug 2007 Las Vegas high rollers are on a hot streak. Casino like Wynn Resorts have delivered spectacular earnings, and shares have risen accordingly. Wynn s business looks good but its valuation is nearly as opulent as its resorts. Investors might consider taking a few chips off the table.
Fortis win doesn’t make ABN takeover a slam dunk 6 Aug 2007 The BelgoDutch bank scored big in the battle for its Dutch rival by getting approval for a E13bn rights issue. But it doesn t seal victory. Fortis has yet to raise the cash or, with bidding partners RBS, get regulatory backing. There s still a large margin for failure.
Goldman’s Yankees deal will be tough to copy 6 Aug 2007 The bank and its private equity partners scored a home run with Yes, the cable sports channel they launched five years ago. But the deal s pretty unique. Other buyout shops will probably fail if they suddenly start trying to build businesses from scratch.
UK industry walks while money talks 6 Aug 2007 UK manufacturing has had its best run since 1999. But as China s industrial output sprints and Germany gallops, the UK is merely walking. Germany makes cars but Britain s brains are making financial vehicles. Could that be a problem if the wheels come off financial markets?
Cheap money leads to expensive logistics 6 Aug 2007 Shipping costs are at record levels, as global growth outruns capacity. That will soon feed through to inflation if unchecked. However tempting the Fed may find it to print more money and bail out the markets, the resulting inflation could take a decade to sort out.
ICI finds Akzo’s 670p hard to resist 6 Aug 2007 The latest offer 12% above the first approach was high enough to get the UK chemical company to open its books to its Dutch rival. Akzo s shareholders still have to be persuaded. The addition of Henkel, which will pay 34% of the price, should help.
Will Nardelli’s style stall Chrysler? 6 Aug 2007 The US carmaker's new private equity owners won't be bothered by the exHome Depot boss's reputation for highhanded treatment of investors. But Cerberus should be more worried that Nardelli's penchant for GEstyle management fads like Six Sigma could slow Chrysler down.
Is Bear Stearns a Lehman, Salomon – or Drexel? 6 Aug 2007 Lehman nearly failed in 1998 due to rumours of big losses. Salomon became acquisition fodder after its Treasury manipulation debacle. And Drexel couldn't be saved. Now Bear has ousted its markets chief. But it must show it's a Lehman, or at worse a Solly and not a Drexel.
Bernanke should abolish Greenspan put 3 Aug 2007 But Greenspan s readiness to placate markets created a moral hazard: asset bubbles. Bernanke should cut to help the economy not investors. The market now expects the Fed chairman to cut US interest rates by yearend. That s what his predecessor would have done.
China can no longer ignore business ethics 3 Aug 2007 The recent series of product recalls demonstrates that Chinese companies still can t be trusted not to cheat foreign buyers. That would be fine if China were still poor. But as it gets richer, it needs more legal and ethical infrastructure.
Where are the subprime vultures? 3 Aug 2007 Still circling, evidently. Rapid price declines haven t attracted the same carrioneaters that pounce on troubled corporate bonds. A few, like Marathon and Prudential, are dipping a beak in. But with the bottom nowhere in sight, most remain hugging the sidelines.
IKB may not be sole victim of moral hazard 3 Aug 2007 Poor regulation and apparently easy profits lured the German bank into investments it did not understand. Now it is paying for its naiveté. If credit stays tight, others will join the hall of shame. Such stupidity should be rewarded with bankruptcy, but generally isn t.
Debt tremors hit property deals’ weak foundations 3 Aug 2007 Consider Mitchells & Butlers shelved joint venture. What s surprising isn t that it was pulled, but how finely balanced it was. In such highly geared deals, a nudge upwards in the cost of debt or downwards in the performance of the business can decimate returns.
RBS and Barclays flex trading muscle 3 Aug 2007 The UK banks investment banks thrived in H1. Both look good homes for their parts of ABN Amro, the Dutch bank they are squabbling over. The trouble is the future. With markets jittery, now may not be the moment to buy a new investment bank.
Mattel’s headaches may have just begun 2 Aug 2007 But while the immediate financial damage appears limited, the longerterm fallout could be no fun for the toymaker's shareholders. Discovery of lead paint on toys it manufactured in China prompted a massive recall of some popular Mattel products.
ECB forced to show its hand early – by itself 2 Aug 2007 The eurozone central bank has created a tradition of advance notice of rate hikes. So a no comment on Thursday would be big news. But with markets in turmoil, the obligation to plan ahead is counterproductive. The ECB has a bad case of the central banker s quandary.
Credit Suisse’s traders extend their winning streak 2 Aug 2007 The Swiss bank s investment banking unit flourished for a fourth consecutive quarter, and is shaking off a reputation for inconsistency. But that strength is a mixed blessing. The bank may need to beef up its other units to hold onto its rerating.
Private equity’s US tax defence is flawed. 2 Aug 2007 Buyout shops are trying to woo Democrats by arguing that a tax hike would force them to raise fees on vulnerable investors like pensions. That makes no sense. If buyout funds could charge more, they already would. And, in fact, fees have been coming down.