Brokerage stocks may have further to fall 7 Sep 2007 Wall Street s top five firms might look cheap they have lost a combined $74bn in value since hitting their highs earlier this year. But what if markets don t improve? To match their lows in previous crises, most brokerage stocks have to plummet by another fifth or more.
The wonky world of credit ratings needs a shake-up 7 Sep 2007 Credit ratings are sanctified by US laws and international bank capital rules. So investors rely on ratings, often more than they should. Rating agencies probably take more flak than they deserve. Breakingviews offers a few wacky ideas to shield them from blame.
Radian faces uphill struggle 7 Sep 2007 The housing crisis ought to play to the mortgage insurer s strengths. Instead, Radian is being punished for its boomtime expansion. Its merger with MGIC is off, and any more ratings downgrades could scare off customers and hit earnings.
US credit card debt might be next big problem 7 Sep 2007 Americans owe $900bn on plastic, a subprimesized debt load. With house prices no longer rising, they ll have trouble paying it back. Losses could be large for loans without collateral. But a meltdown might have a good effect: rethinking this highrate highloss business.
Jobs data worsen Bernanke’s dilemma 7 Sep 2007 The dramatic fall in nonfarm payrolls makes cutting rates look like a nobrainer. The markets are certain the Fed will ease. It probably has to cut rates. But the Fed needs to staunch expectations of further cuts, or inflationary pressures may build.
Goldman may profit from hung LBO debt 6 Sep 2007 The bank may set up investment vehicles to buy the debt it committed to underwrite but can t sell now without steep discounts. It got the idea from clients seeking to buy the debt. The approach may actually turn a profit or make a further shakeout more painful.
Air France unlikely to lose head over Alitalia 6 Sep 2007 The FrenchDutch airline says it would listen if approached for a takeover of the Italian company. Markets aren t amused. But Air France has worries of its own. It would likely set stringent conditions before it buys into a bankrupt competitor.
Russia’s IMF pick chips away at Western club 6 Sep 2007 The nomination of Josef Tosovsky, a former Czech prime minister, as IMF head won t be successful, but it makes an important point. Russia, China, India and other developing countries are playing a growing role in the world economy and want a place in its institutions.
ECB tries to walk delicate line 6 Sep 2007 The eurozone central bank is responding well to credit market turmoil. It didn t increase rates and will provide threemonth funding. But the bank s main watch is the real, not the financial, economy. After recent excesses, some financial pain is good for economic health.
Sunday shouldn’t be so special at UK newspapers 5 Sep 2007 The Barclay Brothers seem to agree. Their Sunday Telegraph has lost its editor, reportedly because she didn t want to merge with the daily. In an age of declining profitability, it doesn t make sense for newspapers to duplicate staff. If the Telegraph acts, others will follow.
Feldstein’s big cut would repeat Alan’s big error 5 Sep 2007 Eminent US economist Martin Feldstein is right to point to the negative impact falling house prices will have on US economic growth. But his suggestion that the Fed slash interest rates now would repeat Greenspan s disastrous 1998 response to a credit crunch.
Sellers in M&A right to ask buyers tough questions 5 Sep 2007 The Qataris money may be as good as anyone else s. But issues such as accountability matter too and are less clearcut. At least when the buyer is a statebacked fund. Take J Sainsbury, which is weighing up a £12bn bid from a Qatari investment vehicle.
Funds of hedge funds fueled volatility 5 Sep 2007 The role of hedge funds selling as they deleveraged their portfolios has rightly been seen as central to much of the recent market turmoil. But as well as intermediating the bulk of hedge fund investments, fundsoffunds also borrow. They could have stoked volatility, too.
Repsol’s ouster from Algeria looks political 5 Sep 2007 Algeria s booting of its Spanish partners from a major natural gas project looks to be more about politics than performance. With its coffers full, the Algerians see little value in partnering with foreigners, especially ones that curb it marketing its own energy.
Bank of England tests tough love 5 Sep 2007 None of the big central banks have managed to get liquidity flowing, but the UK s is hardly even trying. The result so far: wider spreads and more moaning bankers. That s appropriate. But the experiment is risky, even for a minor central bank.
Why pay less? US mortgage trade costs homebuyers 5 Sep 2007 So decades of increasingly sophisticated securitisations haven t saved buyers money. But the finance industry has done very well. In the simple old days, mortgage rates were one percent higher than government bonds. Before the current crunch, the gap was 50% higher.
KKR’s publicly-listed fund could be ready to bounce 5 Sep 2007 The Amsterdamlisted stock traded at a whopping 30% discount to NAV after the credit crunch triggered a selloff. Investors were right to mark the stock down given the less benign outlook. But the recent fall might just be enough.
Fear keeps short-term markets tied up in knots 5 Sep 2007 Overnight funds are now available, but borrowers are still paying very high rates to borrow for three months. The trend is still upward. Banks are short of cash and everyone is worried about spreading defaults. These deleveraging pains won t end in a hurry.
KKR should hold banks to their debt commitments 5 Sep 2007 The buyout firm s bankers are trying to renegotiate the terms of aggressive debt deals like First Data. KKR shouldn t cut them any slack. Banks reaped billions issuing debt for buyouts when markets were easy. Now they should be held to their commitments.
Tube strike teaches credit crunch lessons 4 Sep 2007 The London transport system and the short term money markets are both gummed up. There are strikes by tube workers and by lenders. Despite adverse conditions, the two markets clear. But there is a shortterm cost and longterm risks, whichever way the authorities turn.
Bondholders still fear LBO risk 4 Sep 2007 The stalled leveraged buyout market hasn t stymied demand for poison put protection on highgrade bonds. In fact, it seems to be growing. And it might not just be a delay in investors reaction to the slump. Some borrowers will be punished if they pile on debt without an LBO.
RBS can’t easily escape pricey ABN bid 4 Sep 2007 The premium the UK bank and its partners are offering for the Dutch bank has ballooned to 65%. That might tempt them to seek better terms. But wriggling out of their current bid looks tricky unless markets get worse or ABN blows up. RBS might have to swallow an expensive deal.
State Street fears look overblown 4 Sep 2007 Shareholders have wiped billions off the Boston bank s value amid fears over its commercial paper conduits. But its subprime exposure is minimal. And State Street has enough firepower to cover most scenarios without tanking earnings.
Suez water won’t be the sizzling type 4 Sep 2007 The FrenchBelgian utility has to spin off its environment assets in order to merge with GdF. Markets aren t wild about the plan. No wonder. The new company will be almost bidproof, with 47% of the shares tied up in a pact. And political influence could stunt profitable growth.
Dubai not about to take over the world 4 Sep 2007 The Emirate is on the prowl. A $4bn bid for Nordic exchange OMX is just a start. It is evaluating 20 other possible targets. That may sound ominous to governments afraid of an Arab takeover. But Dubai isn t all that rich. It has to choose carefully.
MetroPCS may need to boost its $5.5bn bid for Leap 4 Sep 2007 The cutprice cell operator s offer for Leap Wireless, a rival nofrills carrier, looks savvy. Joining the two should generate $2.5bn of value, or close to 20% of their combined market cap. But the 7% premium on offer looks stingy.
Bike-rental scheme could ease London’s transport woes 4 Sep 2007 Paris new bikeforhire system has been a fantastic success. Both Ken Livingstone and Boris Johnson are considering adopting it for London. They should. Not only would the next tube strike be less painful. The population would also get healthier and the city would make money.
Spain faces pain at home 3 Sep 2007 The Spanish government is claiming immunity to the US subprime crisis. But a housing crisis of its own is looming. Too many homes have been built. Construction activity and house prices are set to slump. Growth will fall and lenders will be hit.
Russians close in on UK football’s last gem 3 Sep 2007 But the Gunners might have a stronger takeover defence than their rivals. Arsenal already has a good business model and a brand new stadium. Arsenal is the last of the English Elite not yet owned by rich foreigners. Alisher Usmanov is 15% of the way to changing that.
HSBC stops waiting for a Korean bargain 3 Sep 2007 The global bank s $6.3bn Korea Exchange Bank deal fills an important gap. But the price is higher than it hoped to pay. At 1.8 times book, HSBC is paying the same multiple it could have paid for a whole bank two years ago. This time it only gets a 51% stake.