Tech loves the falling dollar, pharma doesn’t notice 22 Apr 2008 The tech sector is humming as the dollar falls. US drugs companies are just as global, but the benefit is much smaller. Foreigners may buy more iPhones if the price drops, but they won t pop many more pills.
Democratic stalemate bad for US economy 22 Apr 2008 Clinton s Pennsylvania win keeps the contest for the Democratic nomination alive. As the prepresidential race continues, the two candidates populist and economically counterproductive promises get more frantic. For the US economy, the sooner the contest is over, the better.
Barclays should reveal subprime marks 22 Apr 2008 A crude read across from rival RBS suggests that Barclays is in line for a £6bn subprime hit and should raise £9bn in capital. There are reasons to think these numbers may be too high. But Barclays will remain under pressure until it gives the same kind of detail as its UK rival.
Oil price bubble keeps on expanding 22 Apr 2008 Oil isn t in shorter supply now than a month ago, but it s 18% more expensive. As always in bull markets, optimists can find semigood reasons for higher prices. But the main propellant is monetary. The credit squeeze hasn t hit commodity buyers and speculators, yet.
BAA break-up wouldn’t necessarily help 22 Apr 2008 The UK Competition Commission is wary of the airport operator s London nearmonopoly. It thinks a split in ownership might help. But Heathrow and Gatwick are both already full, and will be for the foreseeable future. An overhaul of regulation might make more sense.
GLG star’s defection leaves few winners 22 Apr 2008 Coffey will stay six more months at the UKbased hedge fund group before he sets out on his own. He loses $200m but has won concessions over his noncompete clauses. The bigger losers are GLG investors and shareholders and any hedge fund that ever contemplated going public.
HBOS needs a big rights issue 21 Apr 2008 It will be hard for the UK bank to write down less of its dodgy US exposure than RBS, or to aim at a lower Tier One capital ratio. By that standard, the bank needs £4.8bn more equity. And that s before taking much pain from the deteriorating UK real estate market.
Should Bank of America cut its fat dividend? 21 Apr 2008 Ken Lewis is right to focus on steering Bank of America s domestic businesses through the credit malaise. Selling shares in China Construction Bank could also reduce distractions and boost BofA's capital. But with risks remaining, it could be prudent to trim the bank s payout.
Are big hedge funds better? 21 Apr 2008 The industry's total assets stayed flat in the first quarter, despite pulling in almost no new money. That suggests an overall return near zero but the typical fund was down 3%. So bigger funds must have performed better than average. Size appears to matter at least for now.
Pennsylvania primary offers poor choice in housing bailouts 21 Apr 2008 Both Democratic presidential candidates favour risky housing bailouts. McCain favours a more limited one. Housing bailouts that support asset prices at unsustainable levels prevent the market from clearing. That can turn an economic downturn into a rout.
UBS admits it was out of control 21 Apr 2008 That s effectively the bottom line of the catalogue of errors revealed by the Swiss bank s probe, at the behest of the regulator, into its $37bn of subprime losses. UBS s report reinforces calls for tougher controls not just at UBS but throughout the industry.
Corsair takes the booty in National City deal 21 Apr 2008 The buyout firm whose name means pirate is leading a $7bn investment in the troubled US bank. The news sent the stock down 25%. As with WaMu, the chosen few are getting a big discount at the expense of regular shareholders. The latter should prepare their grappling hooks.
Berlusconi’s Putin mania is really worrying 21 Apr 2008 The new Italian PM s meeting with the new Russian premier underscored their longstanding chumminess and included a sick joke about shooting a journalist. As expected, Berlusconi s Russianleaning diplomacy threatens to take him away from European commitments.
UK Tories guilty of serious misjudgement 21 Apr 2008 Shadow Chancellor George Osborne decision to endorse the government's bailout of UK banks without even waiting to hear the details was daft. He has handed the government a blank cheque. Bankers will no doubt be grateful, but taxpayers may end up footing the bill.
UK bank £50bn bail-out not as bad as feared 21 Apr 2008 There are enough safeguards in the Bank of England s bailout operation to ensure taxpayers aren t too badly exposed and that the banks don t get an entirely free lunch. But the scheme still looks misguided and there are a few questions of detail that need to be answered.
Alitalia funk gets worse under Berlusconi 21 Apr 2008 The Italian premier is suggesting that Aeroflot could be a suitable partner for the bankrupt airline, after suggesting that Air France could be back in the running. Meanwhile any public subsidies for the carrier would be illegal. And Alitalia is running out of flying time.
Merrill Lynch takes second bite from RBS 21 Apr 2008 Merrill Lynch will be one of the underwriters for Royal Bank of Scotland s rights issue. Merrill was sole advisor to RBS on the takeover of ABN Amro which has driven the Scottish bank into raising more capital. The spirit of investment banking lives on.
Proposed UK £50bn bank bail-out is wrong 20 Apr 2008 The UK government is to allow banks to swap dodgy mortgage assets for government bonds. Make no mistake, this is a nakedly political attempt to bail out imprudent banks and prop up the housing market. Not only is this a bad policy, it is also likely to prove ineffective.
Citi shareholders suspend disbelief 18 Apr 2008 They sent the stock soaring after the megabank reported a whopping $5bn loss. Their enthusiasm would make sense if that really marked the end of Citi s woes. But restructuring, deleveraging and continuing consumer problems could bedevil the bank for a year or more.
Carphone learns cost of currency speculation 18 Apr 2008 Almost half of the UK telecoms retailer s debt is in Swiss francs. The company says it s a hedge, but it has almost no earning assets in Switzerland. So when the pound fell, Carphone s debt ballooned. It should admit this is a speculation gone awry.
UK bailout is huge yet may not work 18 Apr 2008 The Bank of England s £50 billion in special liquidity aims to avert a downward spiral of falling house prices and recession. It might not be enough to do that, yet the bailout will leave the government cashstrapped as the UK slides.
Apollo may need Black’s workout skills after Pik plays 18 Apr 2008 Apollo portfolio companies Berry Plastics and Realogy have stopped paying cash interest on their Piktoggle bonds. That looks ominous. Leon Black may need all his turnaround skills to keep them from slipping into death spirals.
Auction-rate mess threatens private bank cash cow 18 Apr 2008 A big advantage of private banking is its stickiness. Banks like UBS, JPMorgan and Merrill snare ultrarich clients in a web of trust, brokerage and estateplanning services. But the blowup in the $330bn auctionrate market has the carriage trade reaching for its buggy whips.
New SocGen chief has free hand for sweeping review 18 Apr 2008 Frédéric Oudéa will take over as CEO of the fraudplagued French bank as current chief Daniel Bouton retires to a nonexecutive role. Other key people could go. Oudéa is free to review thoroughly the bank s options including a tieup with a competitor.
Banks fight for each others’ rights 18 Apr 2008 Jumbo rights issues by banks such as HBOS, UBS, RBS and SocGen are a nice earner for underwriters. Goldman, JP Morgan and Morgan Stanley have all landed plum roles. For the winners, there s more at stake than just fees.
Should Fred be shredded? 18 Apr 2008 The RBS boss has lost credibility with his rightsissue Uturn and his overpriced acquisition of ABN Amro. If the board wants to hang onto Fred Goodwin, it will have to offer other scalps.
RBS needs to raise at least £9bn 18 Apr 2008 That would get its equity capital ratios up to a more comfortable level. Given such a mega rights issue, there would have to be a deep discount. As a result, the market is likely to be flooded with perhaps 50% more new shares.
Other UK bank rights issues set to follow 18 Apr 2008 HBOS and Barclays head the list of banks likely to follow RBS s lead with rights issues. This is the price of an informal quid pro quo with the authorities, which are expected to agree emergency support next week. Together, these moves should settle nerves.
Google presses for world domination 17 Apr 2008 Google s sparkling results overseas dimmed concerns of a US slowdown. It s using this strength to try and knock out competitors. In the past three months, it invested $800m in its business and added more than 2,300 employees.
Bank safety net should be woven more tightly 17 Apr 2008 The Basel Committee reaffirmed its Basel II rules that allow large banks to rely on their own risk modeling. That's got it the wrong way around. Banks deemed to be too big to fail should be tightly regulated, with innovation left to smaller houses that can do less damage.