Mexico has the crisis without the growth 28 Oct 2008 Mexican foreign exchange reserves are falling fast and its credit spreads are widening. In spite of its stable budget and payments positions, it is suffering a meltdown without having first enjoyed a boom. Its unfree markets hinder growth but do little to avert periodic chaos.
Volkswagen becomes a laughing stock 28 Oct 2008 VW became the biggest company in the world on Tuesday all because of a creeping takeover by rival carmaker Porsche. The surreal distortions in VW s shares make a mockery not just of Germany s governance and takeover rules, but its very stock market.
Bear case on Santander is too bearish 28 Oct 2008 It is all too easy to construct a gloomanddoom scenario for the Spanish bank. The bank will suffer with the economy in Europe and Latin America. But Santander has good reserves and relatively strong positions in Spain, the UK and Brazil. Investors are too fearful.
Russian energy sector gets $20bn Chinese lifeline 28 Oct 2008 The Chinese government is helping stateowned Rosneft with a multibillion line of credit, in exchange for a longterm supply contract. Russia s cashstarved energy majors might prefer to rely on their own government. But they need outside help to repay $70bn of foreign debt.
Ackman won’t boost Target with corporate finance 28 Oct 2008 The uppity investor will announce his ideas to increase value at the US retailer, in which he owns 10%. That s great. But Target is facing strong consumer headwinds. As his old nemesis at Sears, Eddie Lampert, can attest, financial engineering won t make people buy more clothes.
US markets stampede upwards 28 Oct 2008 Minor signs of a credit thaw set off a running of the bulls. Short covering, programme trading and rumours of Japanese currency intervention egged it on. With the herd so skittish, expect more thundering reversals to be sparked by portents both real and imagined.
Crisis ratchets up a dangerous notch 27 Oct 2008 Currencies markets have gone wonky, as squeezed traders unwind positions. The yen is way up, the euro and pound way down, and global stock markets are plunging. Forex woes present new challenges for governments: global coordination and, for some, guiding down standards of living.
Tesco announces squeeze at just the wrong moment 27 Oct 2008 The UKlisted retail giant plans to make general merchandise suppliers wait 30 more days for payment. The credit crisis isn t a worry for financially strong Tesco. And the affected companies are mostly solid. But in tough times, the industry leader should set a better example.
Carry trade unwind proves vicious 27 Oct 2008 The expansion of the crisis to foreign exchange markets has exposed the dangers of some types of speculation. The reversal of currency carry trade is not simply teaching practitioners a painful but healthy lesson. It is raising the already high level of global financial stress.
Treasury must explain capital injection decisions 27 Oct 2008 The US government has bought stakes in fourteeen more banks. Which other firms will enjoy its largesse is a mystery. The government has not issued official criteria aside from saying only healthy institutions need apply. Clarity is needed over who is making decisions and why.
IMF’s Strauss-Kahn should use new mojo wisely 27 Oct 2008 The IMF has deals in progress with Hungary and Ukraine. Now it s rightly planning emergency loans perhaps up to $100bn to eastern Europe alone with few strings attached. But the loans should be shortterm. If countries need longerterm money, as many will, they must reform.
Porsche drives VW shorts into a tailspin 27 Oct 2008 The luxury sportscar maker revealed that it has, using options, effectively more than doubled its stake in its larger German rival to 74%. The murky workings of German corporate finance appear to have helped VW s shareholders, but put shortsellers on the spot.
European banks haven’t slaked thirst for capital 27 Oct 2008 The Belgian KBC, the German Postbank and the Swedish Swedbank raised a combined E6bn of fresh capital on Monday. Some of it came from governments, some from the markets. Many banks still need financial assistance. At least they can get it some the oldfashioned way.
US banks rush for Treasury seal of approval 27 Oct 2008 Treasury secretary Hank Paulson might want Tarp s capital purchase programme to spur lending. But it has morphed into a de facto vote of confidence in the ability of banks to survive the crisis. That s why more than a dozen have hurried to sign on since the start of the weekend.
Kuwait bank won’t be last victim of currency woes 27 Oct 2008 Gulf Bank, the nation's largest commercial lender, got a government lifeline after corporate clients defaulted on eurodollar currency bets. Kuwait may be special. But with supposedly stable currencies now plunging as fast as stock markets, other solvent banks could also suffer.
US legacy telco deal just forestalls the inevitable 27 Oct 2008 Landline phone companies are racing to cut costs faster than customers flee. Buying a competitor, as in CenturyTel s $5.8bn purchase of Embarq, may shore up their combined finances, but it doesn t hold back the technological tides.
Berlusconi was wrong about Italian banks 27 Oct 2008 The prime minister s bid to separate Italy from the rest of the financial world hasn t worked. Banks shares have plunged. True, Italian lending was more conservative but it was still integrated with global markets. Rome s failure to act now risks making the country a loser.
Spooked bank bosses conjured houses of horror 27 Oct 2008 Merrill sought a deal with Morgan Stanley, breakingviews has learnt. Goldman reportedly was ready to be bought by Citi. These and others would have created Bankenstein monsters. Such nightmarish scenarios still could come back to haunt investors if the crisis worsens.
No investment ideas? Try wood, gut, metal and glue 24 Oct 2008 That is, as assembled by Stradivari. Stocks, bonds, oil and even paintings are proving unreliable investments. Fine violins, violas and cellos could be worth a look. Illiquidity is a problem, but returns go well beyond the financial. And there's an opportunity to start now.
UK shrinks as financial froth evaporates 24 Oct 2008 The UK economy contracted by 0.5% in the third quarter and has much further to fall as the financial sector has only just begun to contract. Its uncertain future, negative wealth effects, manufacturing s frailty and the government s burst budget make recovery distant.
Oil prices will cause pain – whatever they do 24 Oct 2008 Rapid global and looming recessions mean even Opec s announced cuts may not stop crude from falling. Even if the cartel holds the line on prices, tottering consumption in importing countries could fall further. But cheaper oil would add to financial market strains.
PNC’s Tarp-assisted deal brings both hope and fear 24 Oct 2008 The Pennsylvania bank is using US taxpayer's money for a smartlooking $5.6bn takeover of struggling National City. But writedown discrepancies and the looming deadline for tapping the US Treasury's Tarp cash could leave some other regional banks looking exposed.
Russia pays top price for lost confidence 24 Oct 2008 S&P is downgrading the country s debt and corporate bonds defaults are rising. Falling oil prices, tumbling stock markets and capital flight form the perfect storm over Russia s economy. But investors don t believe the government can lead the economy in the right direction.
Sotheby’s looks like a vanity purchase 24 Oct 2008 The auctioneer s stock has fallen 70% since July and hit the $8 mark at which it historically bounces. With just a $580m market cap it might also look like a bid target. But buyer beware: it has made some very robust guarantees in a faltering art market.
Iceland’s creditors looking at $40bn hit 24 Oct 2008 That s what foreign lenders could lose after the collapse of the tiny country s outsized banking sector. Some of their positions will be hedged, and the IMF s presence should ensure everyone gets something. But with the debt trading at 10% of fair value, it won t be much.
Should Citadel have put its head over the parapet? 24 Oct 2008 The Chicago hedge fund held a surprise call with lenders to assure them about its finances. That was risky in the wake of Lehman s and Bear's disastrous attempts to tamp down market rumours, lenders might not have bought Ken Griffin's story.
Merger of US watchdogs would add bark and bite 24 Oct 2008 SEC boss Christopher Cox backs a combination with the US futures regulator. That would fill in gaps in current regulation and give overseers more information and clout. It should also make policing both markets easier, too assuming the new watchdog is given adequate teeth.
NY Times clan could face Bancroft-like pressure 23 Oct 2008 Members of chairman Arthur Sulzberger Jr. s family could be facing a big dividend cut. Similar pressure drove the Bancrofts to accept Rupert Murdoch s cash for Dow Jones. Even the closerknit Times clan might eventually have to think about relinquishing control.
Investors right to doubt industrials’ optimism 23 Oct 2008 Large orders are falling and expansion plans under review. Yet Swiss engineer ABB and French electrical group Schneider are clinging to their optimistic forecasts. Rapid share price declines show shareholders don t believe them. They know what global recessions do to profits.
How to build a better stimulus package 23 Oct 2008 Proponents of a US stimulus spending package believe it would provide a Keynesian economic boost. Past stimulus packages have been disappointing; this one could prove harmful. However there are ways to optimize the stimulus s economic effect.