Central banks rush to hold money-market fort 26 Sep 2008 After US politicians failed to agree a $700bn bailout, the Fed and others have piled on the sandbags. With interbank markets virtually closed, central banks are offering more and longerterm funding. One way or another, the authorities will end up paying for the credit mess.
Bargain luxury could fashion new trend for deals 26 Sep 2008 As the catwalk circus climaxes in Paris, the fashion industry is wobbling in its Manolos. Aborted stock market listings and jittery US buyers don t make for a pretty outlook. But the new trend in town lower prices for luxury houses could start a fashion for deals.
Europe still needs a better bank rescue regime 26 Sep 2008 Europe managed to bail out Fortis, Hypo Real Estate and Dexia. But its bank rescue regime remains flawed. National authorities are responsible for bank solvency. The European Central Bank has no mandate to rescue banks. A clearer and stronger regime is needed.
TPG’s short WaMu ride comes to a disastrous end 26 Sep 2008 The private equity firm s $2bn investment in the failed thrift was wiped out a mere five months after it took the plunge. The illfated deal will probably make other investors shy about buying into troubled banks. And it is a considerable black eye for a topnotch buyout shop.
Fortis needs a more radical plan 26 Sep 2008 The BelgoDutch bank's shares won't stop tumbling, its capital base looks shaky, and its CEO choice is lacking. Fortis can keep denying liquidity problems, but that's not enough. It should unload assets or sell itself to a strong player like BNP. And its chairman should go.
UK retailers get another thing to worry about 25 Sep 2008 As if the consumer downturn isn t enough, antitrust authorities seem to be stepping up their probe into alleged price fixing by food retailers and suppliers. There won t be a quick resolution. But potential bad publicity and fines are the last things the industry needs
European banks shouldn’t count on Paulson bailout 25 Sep 2008 Stocks in Barclays, Deutsche, RBS and UBS were buoyed by the prospect that they might share in a $700bn moneypot. But the scheme that comes out of Congress may include less appealing elements like caps on executive pay and equity for the government.
Credit derivatives risk shrinks – or does it? 25 Sep 2008 The face value of the credit default market actually shrank in the first half of the year, to only $55 trillion. That s a good sign in terms of removing unnecessary tangles from the market. But it doesn t mean there s any less risk being taken.
Sacyr garage sale is in full swing 25 Sep 2008 The indebted Spanish company has slapped a for sale sign on several assets, including 20% of Repsol. But selling the holding won t be easy. Buyers look scarce, even if it could be a stepping stone to taking control of the Spanish oil company.
Who should run Treasury’s $700bn bailout fund? 25 Sep 2008 Asset managers like Bill Gross, investment bank honchos and even businessmen like Mike Bloomberg may be too conflicted for the top job. A university endowment figure, like Harvard's Edward Forst or Yale's David Swensen, could be a better choice.
BEA’s scare shows jitters have no borders 25 Sep 2008 Li Kashing, Asia's richest man, did a Warren Buffett when he bought shares after Bank of East Asia suffered a minirun that seems to have been a false alarm. BEA isn't much like Goldman Sachs, but the Hong Kongbased bank ran into echoes of the same worries.
GE Capital’s shrink-back only first step 25 Sep 2008 The conglomerate slashed its earnings forecast by up to $3.5bn this year because of the finance unit s woes. GE is halting buybacks and will bolster the division s capital and reduce leverage. These are the right steps, but should be the prelude to a divorce.
Buffett’s Goldman coup could help financials 24 Sep 2008 In the credit boom, some said Warren Buffett had lost his touch. Now he s collected what looks like a canny $510bn investment in Goldman Sachs. The firm may be the best franchise on Wall Street, but the folksy Nebraskan s endorsement could well boost other financials, too.
Big-government backlash threatens Europe 24 Sep 2008 Nicolas Sarkozy has taken the lead. The French president, emboldened by the US bailout, wants to regulate markets more forcefully. Other EU leaders are sure to follow. But Europe should tread lightly. There s a difference between better regulation and bigger intervention.
Cerberus can’t lose much more by adding to Chrysler bet 24 Sep 2008 The buyout firm may buy the 20% of Chrysler it doesn t own from Daimler. It will probably get the stake for a song given the state of markets and US auto sales. Cerberus is already deep into a binary bet on Detroit, it might as well take the whole shebang.
Will Goldman’s rivals find their own Buffetts? 24 Sep 2008 The Sage of Omaha s $5bn investment in Goldman has given the financial sector a psychological boost. But the newlyminted commercial bank is paying up. Goldman s fellows, mostly lacking its management credibility and relatively clean balance sheet, would have to pay much more.
Pakistan, troubled but perhaps not forsaken 24 Sep 2008 Pakistan s economic situation looked dire before the credit crunch. Now investors are scrabbling for safe havens, Pakistan looks less stable than ever. Default is a possibility, but Pakistan s political distress may actually help it avert that particular disaster.
Dull new world dawns: returns down, regulation up 24 Sep 2008 GIC of Singapore and Guy Hands of London both predict lower investment returns. That makes sense leverage looks less appealing and the hangover from financial excess may last a long while. Regulators will do their part. The pounce on the CDS market won t be the last.
Feds shouldn’t pay above-market prices for assets 24 Sep 2008 Ben Bernanke thinks buying mortgage assets at prices close to holdtomaturity values is a good idea. Doing so, he argues, eliminates irrational price distortions caused by illiquidity and is a way to recapitalise weak banks. The two objectives are best kept separate.
Banks desperately seek funds as danger persists 24 Sep 2008 Huge amounts of money channelled by central banks into shortterm money markets has not calmed them. Extremely high rates show banks gasping for funding. The central banks may have to respond with funds of longer maturity, with or without the US s proposed $700 billion bailout.
Paulson bailout failure wouldn’t be catastrophic 24 Sep 2008 He and Bernanke are selling Tarp as banks last best hope. But the US Congress is resisting. If the scheme isn t approved, it would be a serious blow to confidence. But then markets could get on with sorting out their problems, with the ample government help already available.
Rehypothecation mess exposed by Lehman collapse 24 Sep 2008 Lehman used $22bn of hedge funds collateral for its own purposes. This murky practice rehypothecation provided funds with cheap leverage in good times. But they are now in a long line of creditors. The practice should be changed though doing so will raise hedge fund costs.
Libya has chance to prove itself with Telecom Italia stake 24 Sep 2008 A few years ago, the notion of the former terrorist state taking 10% of a major Western company might have made investors skin crawl. But Libya is reforming itself and even has a $50bn SWF with pretty good governance. This is Qaddafi s opportunity to show he s not a bogeyman.
US bank ownership rules loosened too late 23 Sep 2008 Investors can now take larger stakes in US banks before becoming subject to government regulation. They ve lobbied for these changes for months. The delay may reduce their effectiveness. Early investors in banks have already seen losses. Others may now be leery.
Canary Wharf can ride out the financial storm 23 Sep 2008 The Docklands home of many of London s financial firms looks vulnerable to Lehman s woes and high gearing. But Songbird, the biggest landlord in Canary Wharf, has solid rents and low vacancy rates. The district can sing a happier song than its rival, the City.
Anti-speculation moves don’t work – or work too well 23 Sep 2008 Most antispeculation measures don t work; smart punters figure out ways around them. However, occasionally, as with the 1720 Bubble Act and the 1934 GlassSteagall Act, they work too well, killing off markets altogether. Better for government to be ineffectual than lethal.
Dubai vision looks fragile in credit crunch 23 Sep 2008 A money markets squeeze has prompted the UAE central bank to create a $14bn facility to free up lending. Dubai, which borrows heavily to fund its ambitious projects, will be the primary beneficiary. As sentiment turns, the emirate s days of rapid expansion look set for a rethink.
Bradford & Bingley doesn’t have to be a millstone 23 Sep 2008 Sure, the UK lender doesn t look a very enticing bid target. But if it could lose its dodgy portfolio of acquired mortgages and sell to a consortium, B&B could stop its shares being targeted. Its buyers could gain safety in numbers and brownie points from the FSA.
Google handset cuts Apple’s iPhone lead 23 Sep 2008 Apple s handset was miles ahead of the competition when it was unveiled in 2007. At least at first sight, Google and TMobile s new phone appears to come within spitting distance. Google s more open stance toward software developers could yet close the gap further.
Prokhorov starts bargain-hunting with Renaissance stake 23 Sep 2008 The Russian billionaire is spending $500m to buy a 50% stake in the Moscowbased investment bank that s about a fourth of its previous estimated value. The former Norilsk coowner who went liquid before the bust clearly thinks the Russian market is oversold.