Europe looks set for needed stimulus package 20 Nov 2008 A coordinated antirecession effort from the EU would be welcome, if it demonstrates unity, resolve and a carefully targeted mix of tax cuts and spending. German reluctance can be overcome if other member countries pledge to restore fiscal discipline when good times return.
US guarantee scepticism slams mortgage debt 20 Nov 2008 Fannie Mae and Freddie Mac bonds should be ideal for investors seeking high returns on lowrisk debt. But they re staying away in droves. That reflects growing uncertainty over whether the US government will make good on its guarantees.
Pre-emption rights get short shrift 20 Nov 2008 The notion that all shareholders can participate in discounted rights issues is central to European capitalism. Or was. Santander is partly ignoring it in the UK and Barclays snubbed current shareholders. The need for speed is a poor excuse for violating a basic principle.
US stock market is finally de-bubbled 20 Nov 2008 It s like 1995 again. The Dow first broke 4,000 in February of that year, exactly when US money supply started growth faster than GDP. The bubble that started then was fully popped this week. But fair value is no stopping point. Fear and deleveraging will push stocks down more.
UK newspapers need more casualties 20 Nov 2008 Job cuts are coming thick and fast a quarter of the staff at The Independent s London titles, another potential 6% at Daily Mail group. But the costsavings barely offset current losses. Print is a declining medium; the industry needs fewer titles to be profitable.
Citi’s troubles won’t sleep 20 Nov 2008 The US banking giant s shares took another bath on Thursday, with big rivals Bank of America and JPMorgan also in the spotlight. The lack of specific bad news isn t soothing investors. They re worried about economic gloom, more losses, and the uncertain outlook.
Bank raises capital, not out of desperation 20 Nov 2008 Rothschild, advisor to the rich and infamous, is taking a slug of capital from Rabobank, and sharing part of its M&A franchise. There are risks to this venture, which gives Rothschild bankers a real balance sheet to play with. But it looks like an act of choice, not necessity.
Lukoil unlikely to pay a fortune for Repsol 20 Nov 2008 Persistent rumours that the Russian oil and gas company is about to buy a 30% stake in its Spanish rival at a huge premium don t add up. Russia is struggling and funding is scarce in the markets. Even if the Russians came up with the cash, they might not be welcome in Madrid.
Sarkozy’s strategic fund is fig leaf 20 Nov 2008 The French president has launched his version of what he calls a sovereign fund. It won t be financed by surpluses as France runs deficits, and will be too small to really matter. It looks like a cover for bigtime meddling. That could help scare away foreign investors.
Zaleski’s winning streak gets crunched 20 Nov 2008 The financier is a skilled bridge player, but it s hard to play against the credit crunch. A group of Italian banks are bailing out Zaleski s investment vehicle, which is sinking under E5.5bn of debt. Zaleski loses control, but some of the banks keep a big shareholder intact.
Inflation at bay while economy falls off cliff 20 Nov 2008 Producer and consumer price indexes declined in October. While that owed much to declining commodity prices, inflation won t return until output bottoms. Thus the Fed can print money until the economy stabilises. Then it must be ready to reverse course quickly.
Shippers can’t jump-start world trade 20 Nov 2008 Too many ships, too little demand and expensive trade credit have pulled the Baltic Dry Index down 93% since May. That s dire, even for a cyclical industry. Netting counterparty risk might help a little, but shippers will remain at the mercy of the sputtering financial system.
Is Paulson the new Buffett? 20 Nov 2008 Not Hank, the US Treasury boss, but John of hedge fund fame. He has been around for 15 years, but has most famously made big money so far through the current financial crisis. Meanwhile shares in Buffett s Berkshire Hathaway are tumbling. But it s risky to write the old guy off.
CMBS woes show economy is growing threat 19 Nov 2008 Interbank lending is thawing, so lack of liquidity no longer appears to be a mortal threat to banks. But they re not out of the woods the commercial real estate mortgage meltdown shows how the US economic downturn is just beginning to take its toll.
Lloyds vote a triumph for fear over prudence 19 Nov 2008 The UK lender's merger with stricken rival HBOS got overwhelming support from Lloyds' shareholders. That may owe more to fear of the unknown and investor crossover than any love of this deal. Shareholders in Barclays, who vote next week, will have a slightly freer hand.
Motown bosses make case for own dismissal 19 Nov 2008 Chrysler, Ford and General Motors are pleading poverty. Yet not only are they running expensivelooking ad campaigns to lobby for a taxpayer bailout, their CEOs each made their way to Capitol Hill by private jet. Such profligacy undermines their suitability to remain in charge.
UBS must prey on egos for new bonus plan to work 19 Nov 2008 The Swiss bank s scheme rightly claws back bonuses on risky bets that tank. Trouble is, its successful bankers and traders could wind up earning less too if rivals don t adopt the identical model. To compete, UBS will have to play on the psychology of Masters of the Universe.
Loan market’s acute pain may also be chronic 19 Nov 2008 Spiralling risk aversion and the collapse of the securitisation machine caused the corporate loan market to seize up. But potential secondary market problems threaten to keep some investors on the sidelines.
Citi slump shows markets still gripped by fear 19 Nov 2008 Buying some SIV assets seems to have prompted a near25% decline in the bank s shares. It shouldn t have. But bad news is oozing out everywhere, from real estate to the Fed to Detroit. That ll put a strain on government efforts to calm the markets. And Citi is at the vanguard.
Ivory Tower trumps Motown on the Hill 19 Nov 2008 The CEOs of the Detroit Three tried to sway US lawmakers with forecasts of doom but gave little detail on how taxpayer money would help. Macroeconomist Peter Morici was more persuasive, arguing that a bankruptcylike restructuring looks the better bet.
LBO firms face tough choice: double down or get out 18 Nov 2008 KKR s Masonite is the latest LBO in trouble. Many others are staring at bankruptcy. Buyout firms must decide whether to inject more cash into companies or let them go belly up. With few opportunities elsewhere, anteing up may be wise, even if it doesn t mint big fees.
Ford’s $540m Mazda sale shows folly of dithering 18 Nov 2008 The car maker has made a better stab at cutting its bloated brands than General Motors. But Ford is getting less than a third of what it might have received for its Mazda stake just four months ago. It s an apposite example of the cost of Detroit s failure to act with alacrity.
Carphone can’t hide behind a possible demerger 18 Nov 2008 The UK telecom retailer was clearly hoping that mulling a split would offset the grim outlook for its electronic retail venture with Best Buy. It hasn t worked. What s more, founder Charles Dunstone doesn t inspire investor confidence by categorically ruling out a telecoms sale.
Ireland prepares to swallow pride over banks 18 Nov 2008 Despite a twoyear guarantee on deposits and liabilities, concerns over lowball capital ratios has helped halve the share prices of top Irish banks in a fortnight. Private backers are needed to avoid the Irish taxpayer funding hefty recapitalizations. They ll be hard to find.
Yahoo gives new meaning to search 18 Nov 2008 The internet group is kicking off a hunt to replace boss Jerry Yang. The founder will return to his Chief Yahoo role, but the company has a less clear destination. Not naming an internal candidate may simply be good governance. But more likely it's a signal of no confidence.
Carrefour goes for boss with marketing nous 18 Nov 2008 The French retail giant has given the top job to a longtime Nestlé executive. These days retailers work like consumer goods producers, so the choice makes sense. But Lars Olofsson will have to deal with a tough economy, lagging performance and a wily major shareholder.
French state tramples two sets of shareholders 18 Nov 2008 Dassault Aviation, the fighter planes maker, will buy the 21% stake Alcatel holds in Thales, the defence electronics company, after the government opposed a combination with Eads. Alcatel won t get the full price for the stake, and Thales shareholders will be robbed of a bid.
HP’s turnaround looks good – for now 18 Nov 2008 Tech demand may have seized up, but HP's quarterly results show the firm chugging along smoothly. Shareholders may want to thank CEO Mark Hurd s stringent costcutting programs. Weak competitors like Dell and Sun don t hurt, either. But the party may not last much longer.
Barclays offers shareholders limp olive branch 18 Nov 2008 The UK bank wants peace with investors angry about the pricey capital raising. They have been invited to participate on lesser terms and directors are waiving 2008 bonuses. By putting the whole board up for election, Barclays is betting it has done enough. It may not have.
Creeping Smoot-Hawleyism may deepen recession 18 Nov 2008 Within three days of promising not to impose further tariffs, Russia and India raised them to protect domestic industries. Russia also tightened import quotas while the EU imposed antidumping duties. Creeping protectionism seriously threatens the global economy.