What happens if the bond insurers really tank? 26 Oct 2007 Their Wall Street cheerleaders think MBIA and Ambac are screaming buys. But investors shaved over a quarter off their values this week alone. If shareholders are right and the insurers are in trouble, it means big problems for the credit markets.
EU finally presents united front against Russia. 26 Oct 2007 For too long, many EU states tried to woo Russia, allowing Putin to pick them off one by one. But the EU is starting to change. The snag is so long as oil is priced at $90 a barrel, there s no great incentive for Putin to budge.
Stan O’Neal is living on the edge at Merrill 26 Oct 2007 The fiasco of the brokerage s thirdquarter losses undercut his record. Now he s upset his board with an unauthorized merger approach to Wachovia. He s not the only Wall Street boss investors have nearly had it with, but he s suddenly the most vulnerable.
ICBC invests in rapid African growth 25 Oct 2007 Its purchase of a 20% stake in Standard Bank is an excellent move. For only 14 times earnings, it gets unique access to a wellplaced source of finance for the rapidly increasing trade between China and Africa, which is becoming important economically as well as strategically.
Bank of America needs to fish or cut bait 25 Oct 2007 Tapping a novice to run investment banking and slashing a host of jobs in that group increases doubts about the future of the business. It may show investors that Ken Lewis won t tolerate losses. But if he doesn t show real commitment to the business, it will always be a struggling alsoran.
Greenhill steps down on a high note 25 Oct 2007 Bob Greenhill stepped down as CEO of his boutique. He's appointed Scott Bok and Simon Borrows as coCEOs. This is all good for Greenhill the firm and the person. It's the top of the cycle. He has capable successors. And he might even have more time to focus on deal making.
Microsoft saves face with Facebook deal 25 Oct 2007 The blundering software group won the bidding war for a highly soughtafter piece of Facebook. The price? A mere $240m for a 1.6% stake, valuing the social network at $15bn or a whopping 100 times revenues. Microsoft appears to have one over on Google for a change. But the real victor is Facebook founder Mark Zuckerberg, now worth $3bn.
Personal view: Population growth 25 Oct 2007 A growing population should be considered a sign of economic and social health, argues Edward Hadas. Immigration? It s a compliment paid by the poor to the rich one which should be received graciously.
Generali deserves its activist assault 25 Oct 2007 In attacking the Italian insurance giant, activist investor Algebris has taken on a huge target. Generali is at the centre of the Italian financial world. But it is more vulnerable than it first appears, particularly over its corporate governance.
Bizarre tie-up underscores Japan’s governance flaws 25 Oct 2007 Japan's economy has made an impressive recovery. But its corporate governance landscape still looks bleak. Oddball deals remain far too common. Unless attitudes change, activist investors will be unable to unlock value.
UK credit system looks unsound 25 Oct 2007 In its Financial Stability Report the Bank of England warns the credit crunch may not be over. Let s hope it s wrong. The UK has hardly been tested and yet has failed, almost allowing a bank with apparently sound assets to fail. But what if bank assets fall in value?
Fantasy valuations give Wall Street stocks a reality check 24 Oct 2007 Merrill s writedowns were an embarrassment for the broker. But rivals stocks also suffered. That s because the Merrill debacle reveals how Wall Street s ingenuity in creating complex structured instruments didn t extend to valuing them sensibly.
Legg Mason makeover still needs work 24 Oct 2007 The US fund manager has broadened its reach beyond star stockpicker Bill Miller. But its equity business is still vulnerable to large outflows. Performance at Legg's funds is improving, but the firm needs to do a better job promoting its lesserknown stars or else its own share price will remain under pressure.
Cookie-cutter credit structures mixed blessing for ratings agencies 24 Oct 2007 Moody s thinks the structured credit markets rebound depends on greater standardization. That makes sense. Consistency and familiarity should boost liquidity. But ratings agencies have profited from everincreasing complexity. A return to basics could hurt their profits.
Russia brings back the bread line 24 Oct 2007 New food price controls may suppress inflation before December s Duma election, but are likely to lead to spot food shortages, particularly if prolonged. In the microeconomy of price signals as in the macroeconomy of ownership it appears Russia s reverting to Soviet practice.
Wendel’s passion for Saint-Gobain is puzzling 24 Oct 2007 The French investment firm has built its stake in SaintGobain up to 12%. It may increase it further, using proceeds from the Bureau Veritas IPO. That s a big bet on a company that it doesn t control, and which is well into a turnaround. If Wendel has a plan, it should disclose it.
S&N shows Carlsberg it is up for fight 24 Oct 2007 The UK brewer s claim that its Danish rival has breached the terms of their Russian joint venture raises the stakes in the bid battle. Even if the tactic legally is a long shot, it helps focus attention on the key area of debate the value of 100% control of BBH.
Cablevision no vote sets a good precedent 24 Oct 2007 The Dolan family s cheapo $22bn offer put investors in a pickle. They could reject the deal and see the value of their investment fall or accept it and set a precedent for future trammelling of minority shareholders rights. Investors should appreciate their accepting the latter form of selfflagellation.
Amateur hour at Merrill Lynch 24 Oct 2007 Merrill's $8bn of writedowns after promising $5bn is a major blow to Stan O Neal s credibility. He and his team may not be alone on Wall Street in not understanding the structured finance business, but their blushes should be the deepest.
Eurozone’s reform movement stalls 24 Oct 2007 Workers doing more for less money was never an easy political sell. It s harder now, with unemployment down and growth up. No wonder there s little movement in Europe s Big 3, though Sarkozy's still trying. Further reform may have to wait for worse times.
Credit crunch should affect emerging markets last 23 Oct 2007 Emerging market stocks have outperformed developed markets and produced record IPO volumes. Even if stock markets crumple, emerging market economies are unlikely to. Liquidity is at record levels, their balance of payments is positive, and debt service costs are low.
Fed prepares to cut while ECB holds firm 23 Oct 2007 A second US rate cut is likely next week, while the eurozone authorities are still anxious to get back to rate rises. Weak US housing is only a partial explanation of the difference. The US is more aggressive. That carries inflation risks which bond investors have ignored.
Hellman’s Goodman buyout surprises bond market 23 Oct 2007 Investors ploughed into Goodman s bonds when it said it was eyeing a sale back in July. But when its advisors said they weren t stumping up financing, investors retreated. Too bad Hellman was able to scrape together enough lenders after all. But similar deals may be slow in coming.
BP’s road should get smoother 23 Oct 2007 Tony Hayward warned of a dreadful quarter. It wasn't quite that bad. Still, most things that could go wrong did go wrong. It should be easy for the new chief executive to unveil better numbers going forward. But he'll have to carry through promised changes if BP is to impress.
VW Law falls, but EU’s capital barriers remain 23 Oct 2007 The top EU court invalidated the special cap on voting rights in the carmaker. That clears Porsche s path to full control of the German carmaker. But an era of unfettered shareholder democracy has not arrived. Families and governments see no reason to relinquish their powers.
Apple set to keep on rolling 22 Oct 2007 The iPod maker has unveiled another spotless quarter. And Apple notorious for sandbagging its prospects said Wall Street estimates were too conservative. With a new operating system rolling out and the iPhone just getting started, it has several quarters of growth ahead. Apple s $160bn market cap may not be so batty after all.
Citic deal doesn’t quite turn Bear into a panda 22 Oct 2007 It s not a bad step for the Wall Street firm. While Citic's buyin to Bear looks less expensive than the US firm's reciprocal investment, the alliance brings Bear's paws into greater China, an exposure it sorely lacked. But it isn't enough to give Bear a strong Asian franchise.
Halliburton bloodies Schlumberger’s nose 22 Oct 2007 Investors lopped $20bn off Schlumberger s market value because of project delays. Meanwhile, rival Halliburton has been successful in chipping away at Schlumberger s dominance in the lucrative eastern hemisphere. These slipups will make it easier for Halliburton to take even more.
Microsoft may have met its Waterloo 22 Oct 2007 Microsoft long has frustrated European trustbusters by stonewalling. Now, after losing a resounding European court defeat, the software giant has finally agreed to settle. The war between Brussels and Bill Gates company not to mention other tech giants is far from resolved. But this loss may be critical.
What the G7 could have said 22 Oct 2007 The G7 issued a bland communiqué in Washington last Friday. The finance ministers and central bank governors from the biggest rich countries downplayed financial worries. We have drafted the sort of statement they might have made under a dose of truth serum.