BHP moves to bear hug in $150bn Rio bid 12 Nov 2007 The AngloAustralian miner has taken the fight for rival Rio Tinto straight to shareholders, promising $26bn worth of synergies. Getting Rio's investors to back a tieup looks smart. But BHP's own shareholders could end up paying the price for too much hostility.
Northern Rock attracts another financial hotshot 12 Nov 2007 Luqman Arnold is the latest to offer to help out the stricken UK bank. The former head of Abbey and UBS wants to take charge, in return for buying 10%20% of the shares. To win, Arnold needs to persuade shareholders and the government that his turnaround plan makes sense.
EU tries to turn tough on telecom incumbents 12 Nov 2007 Vivane Reding is on the war path against Deutsche Telekom, France Telecom and the other former monopolists. The telecommunications commissioner wants more central regulation and greater national competition. The goals are worthy, but the political headwinds are strong.
IBM can’t escape conglomerate ills with software push 12 Nov 2007 Big Blue has long had a knack for switching shape to survive technological change. Its latest effort: expanding its software businesses. The company s drive makes sense, as do tactics such as buying rival Cognos for $4.9bn. But IBM s other businesses are likely to keep the stock a perennial underperformer.
Chuck prints much less money than Stan on exit 9 Nov 2007 Prince is leaving Citi with a nestegg worth less than $30m. O Neal left Merrill with $160mplus. Partly that reflects Citi s weaker stock performance. But the bigger bank seems to be less generous at the top, too. Let s hope it can stick to that as it looks for a new CEO.
The worst-timed financial product launch ever? 9 Nov 2007 Bonds backed by reverse mortgages are certainly in the running for that title. After all, they depend on home prices, and on confidence in rating agencies, appraisers and Wall Street. And they ve got mortgage in the name. That s five big nails in the coffin.
China could make best white knight for Rio Tinto 9 Nov 2007 A Chinese foil to BHP Billiton s $140bn bid would cause political tremors. But it has some logic. China is set to be Rio's biggest customer thanks to an insatiable appetite for iron ore. It could recapture those profits, and put some of its $1.4tr reserves to better use.
Russia’s oil-fuelled might troubles near-abroad 8 Nov 2007 Georgia and Ukraine are both feeling pressure from their big neighbour. Oil wealth gives President Putin the confidence to intervene. Joining up with the Russian economy might look like the easy way out now. But when oil prices fall, it will be a different matter.
Subprime inquisition moves up a gear 8 Nov 2007 Fannie Mae and Freddie Mac face questions over their vetting of mortgages bought from Washington Mutual. Meanwhile, as suspected, Merrill is indeed facing an SEC enquiry after its $8bn of writedowns. None of this will help the mortgage market recover any time soon.
BHP Billiton tries for $350bn mining giant 8 Nov 2007 The UK listed miner s allshare offer for rival Rio Tinto was rebuffed as too stingy. But the combination makes too much industrial sense just to go away. It s a deal that would appeal to mining bulls and bears alike. The biggest challenge is to find an acceptable price.
Fed squeeze keeps getting tighter 8 Nov 2007 As the financial troubles in the US deepen, the central bank looks increasingly likely to cut rates again in December. But that would only increase the pressure on the dollar, which is already in near freefall against the euro. And increase the risk of higher US inflation.
Have banks got the joke about SuperSIV? 8 Nov 2007 The belief that the fund s just a way to bail rivals out of a mess seems to have made many reluctant to support it. But a firesale of SIV assets could dump some $150bn of bank debt on the market. That would be painful for everyone.
Santander has last laugh in Antonveneta saga 8 Nov 2007 The Spanish bank has flipped the Italian lender at a E3.2bn profit just a month after buying it in the ABN Amro carveup. Two years ago, Italy used high jinks to try and stop Antonveneta falling into Dutch hands; now MPS is paying a high price to bring it back.
BNP beats SocGen in crunch-weathering derby 8 Nov 2007 Its limited corporate banking exposure in the US and relatively conservative model have helped France s largest bank cope with the credit crunch better than Société Générale. But it still trades at a discount to its arch rival.
Negative convexity magnifies subprime losses 8 Nov 2007 No, it s not a flaw in bankers eyeglasses. It's part of the reason Morgan Stanley says it lost $3.7bn on a mortgage bet despite correctly betting prices would fall. Negative convexity can help turn a modest flaw in a trader's assumptions into a whopping loss.
QXL’s Ebay dreams may yet come true 8 Nov 2007 During the heyday of the dotcom boom, the Britishbased online auction group had ambitions to be the Ebay of Europe. That never quite worked out. Yet, QXL s exposure to emerging markets with high online consumer growth now looks attractive. Ebay is thought to be behind the latest approach.
Mack’s risk-taking comes back to bite 8 Nov 2007 Morgan Stanley s bankers dodged the mortgage problems that beset Citi and Merrill, but its prop traders let the side down when their short positions went wrong. Add that to quant and leveraged loan losses last quarter, and Mack s charge to catch Goldman looks to have backfired.
How is a van Gogh like a stuck buyout loan? 8 Nov 2007 When its sale is underwritten by an auction house but fails to sell at a premium in the secondary market. That happened last night when van Gogh s Wheat Fields failed to sell. Sotheby s and its ilk look like investment banks gorging on LBO commitments, with unsold inventory they need to mark down.
Tech can’t escape slowing US capex 8 Nov 2007 Cisco, like its tech brethren, has had a hot year thanks to a falling dollar, heady sales to developing countries and rising investment in the US. But Cisco s results suggest corporate America's capital expenditure wheel has fallen off and other tech groups could be hit.
How will Wall Street’s laggards keep their talent? 7 Nov 2007 So far this year, compensation is up 21% at Goldman Sachs. At Merrill it s down 15% and plunging at Citi. To retain their stars, the likes of Merrill and Citi will have to create a culture of Haves and Have Nots at bonus time. This creates a big challenge for their incoming CEOs.
Yahoo needs practical plans, not platitudes 7 Nov 2007 The internet portal jettisoned its chief executive in June and brought back founder Jerry Yang, yet still can t explain its turnaround plan. Outside the realm of genius, what can t be explained can t be done is a good motto. We offer Yahoo a suggestion outsource search.
Wall Street pain gives small research shops a shot at fame 7 Nov 2007 Lesser known analysts are coming out with bigger estimates of Wall Street losses. That could be because they re more independent. Their calls vary in quality. But they also attract a lot of useful publicity.
General Motors teaches Wall Street a lesson on write-downs 7 Nov 2007 The Detroit car maker s whopping $39bn deferred tax hit dwarfs banks CDO losses, and is an admission that its beleaguered business won t be roaring back anytime soon. But at least GM s step looks more realistic and honest than the opaque and at times lagging approach Wall Street is using.
TomTom goes for knock-out with Tele Atlas 7 Nov 2007 The Dutch navigation device maker has upped its offer for the digital mapmaker to E2.9bn and snapped up 28% of the shares. Outbid US rival Garmin looks like it has been left in the cold.
Art market isn’t ready for its finale 7 Nov 2007 This has certainly been a year of excess in the art world. From Rothko to Warhol to Hirst, contemporary artists have become luxury brands commanding dizzying values. Last night s auction at Christie s was no different. Wall Street may be hurting, but the art market isn t quite done yet.
Defensive stocks make for an expensive safe haven 7 Nov 2007 Consumer staples stocks have easily outperformed the broader market amid credit worries and the housing slump. But while demand for food, tobacco and beverages may hold steady through a storm, their purveyors' shares are starting to look pricey.
World inflation is going where the money is 7 Nov 2007 Russian inflation of 9.3% over the 10 months to October 31 reflects no universal trend in India and Brazil inflation is currently quiescent. But prices are rising in oil exporting countries and in China, a result of their surplus cash. The disease could spread.
$100 isn’t a nice round number for oil 7 Nov 2007 High prices provide huge profits for exporters. The main effects are slower global growth, worse governments and more financial speculation. The only silver lining high prices deter consumption. But higher domestic taxes would do the same thing, with much less trouble.
The post-US era is coming – with birthing pains 7 Nov 2007 Sarkozy s warning about economic war over the weak dollar is just the latest sign that the US can no longer have its own way in the world. The last great global transition the demise of Communism was all good news. The relative decline of the US is proving more difficult.
Why super senior doesn’t always mean super safe 6 Nov 2007 Citigroup yesterday tried to reassure investors with the disclosure that the bulk of its US mortgage exposures are to super senior tranches of ABS CDOs. On its own, this statement offers no comfort at all. It all depends on what bonds the structures are referencing.