Fannie Mae’s Augean stables remain a mess 10 Nov 2008 The quasinationalised mortgage giant did away with most of its former sunny assumptions and reported a $29bn thirdquarter loss. That s actually a worthwhile cleanup, but deterioration of its mortgage and guarantee portfolios look likely to cause US taxpayers more pain.
AIG mess is Exhibit A in case for better rules 10 Nov 2008 The insurance giant s new $150bn bailout is bigger and looks easier on AIG. The package is better defined than before, but the increased size is embarrassing for the Fed and the Treasury. It underlines the need for regulation that catches any group that s too big to fail.
Buffett shows way in managing mark-to-market 10 Nov 2008 The Omaha investor has written hefty derivatives on stocks and debt. With markets in a mess, he s taking paper losses. But his investment group has a huge financial cushion. That and Buffett s management of investor expectations offer lessons for other marktomarket sufferers.
Li calls wrong number on PCCW buyout 10 Nov 2008 Chairman Richard Li is offering $3.7bn to take the Hong Kong telecoms group private. That s less than the value implied a month ago by private equity offers for part of the business. The board declined those, and shareholders should only take Li s call if he offers more.
Chinese stimulus risks unintended consequences 10 Nov 2008 The $586bn plan is skewed towards heavy industry and the public sector. Targeted tax breaks would more directly boost and rebalance the economy. Sure, infrastructure spending is needed. But on this scale it will help China s trading partners and could prove destabilising at home.
HBOS shareholders should stick with Lloyds deal 9 Nov 2008 Merging the two banks is not a marriage made in heaven. But by ditching it and reappointing their exchairman, HBOS investors would risk the little they have. They should only consider Sir Peter Burt and Sir George Mathewson if the two can make a properly financed counterbid.
Corporate refinancing could be next domino 7 Nov 2008 Companies worldwide have $4 trillion of debt to repay or finance by end2010. Yet banks in the West alone are cutting back around $10 trillion of lending. Heading off a corporate crunch should be high on world leaders' agenda this weekend in Washington.
Sprint woes show how downturns bite underdogs 7 Nov 2008 In better times, investors lent Sprint and Sirius billions to set up networks to challenge their bigger rivals. But now that money is difficult to find, their customers are fleeing. When the economy slows, these businesses have a tough time staying aloft.
Advertising gloom points to economic misery 7 Nov 2008 Few media groups have dared look into the future, but News Corp s forecast of a sharp profit decline next year confirms bleak times ahead. The speed and severity of the slowdown across all mediums continues to shock. Ad agency valuations suggest the economy is in real trouble.
US job losses pressure Obama’s policymaking 7 Nov 2008 The unemployment surge to the highest level in 14 years puts additional pressure on the presidentelect. It could give him the momentum to push through intelligent but controversial policies. But the need to quell growing economic panic could also tempt him to overreach.
BA-Iberia merger can wait 7 Nov 2008 The two airlines have more than enough to do on their own. They should focus on dealing with the current bleak market. BA will find it hard to fulfil its hope of ending the year in the black. Calculating merger ratios now would be tricky, and a dangerous distraction.
The US can’t avert Detroit’s catastrophe 7 Nov 2008 Ford s and General Motors results show just how dire their situation is. Government cash will just prolong their pain. The only support the US should offer is for a wellplanned restructuring under the cover of bankruptcy. But with GM on the brink time is running short.
Cubs’ latest strike-out bears bad news for baseball 7 Nov 2008 Sam Zell s sale of Chicago's lovable losers has run into trouble. Economic woes will crimp Americans spending on entertainment. And, unlike art or soccer clubs, Russian oligarchs haven t shown much interest in US ball teams. Prices look set to decline.
Commerz bailout much more expensive than it looks 7 Nov 2008 The headline interest rate on the E8.2bn capital injection is only 7%. But when you add in an equity kicker, the effective price is nearly 10%. It still looks a touch less than the 10% minimum demanded by the European Commission but that could easily be fixed.
If Blackstone believes its advice it should go private 6 Nov 2008 After all, Steve Schwarzman s firm is trading at 25% of its IPO price. The buyout shop had negative revenues in the third quarter and may not pay its next dividend. If Schwarzman really believes Blackstone can overcome these problems, he should snap up its shares.
Telenor learns about tough markets 6 Nov 2008 Stiff shareholder backlash appears to have the Norwegian telecom operator rethinking the financing of a $1bn investment in an Indian startup. It wanted a rights issue sensible for a company with debt constraints and a supportive 54% shareholder. But not in these tight times.
Kremlin gets its pound of flesh from Deripaska 6 Nov 2008 The Russian government bailed out Oleg Deripaska, owner of aluminium maker Rusal, so he could keep 25% of Norilsk Nickel, which a rival oligarch controls. In exchange, it will appoint a director and two managers at the world s largest nickel producer and call the shots.
Hollywood may give YouTube path to profit 6 Nov 2008 Even though it draws huge crowds 5bn videos are viewed each month the Google video site has not reaped similarly big advertising revenues from Sarah Palin blunders and pet lovefests. A deal to offer Hollywood films would give YouTube its first shot at Alist money.
Deutsche Telekom turnaround plan stands up 6 Nov 2008 The German telecom operator is distinguishing itself from the crowd by meeting its targets. UK rival BT could learn a thing or two from chief executive Rene Obermann s costcutting drive. Investors just want to be sure DT won t go back to its wild dealmaking past.
Central banks try to ward off Canute syndrome 6 Nov 2008 The ECB and BoE have cut policy rates sharply, with more to come later. They are trying to keep the receding tide of bank funding from leaving the economy high and dry. But as the Viking king knew well, some forces are hard to stop. From here, the best hope is a mild recession.
Barclays should say sorry to shareholders 6 Nov 2008 The board, led by Marcus Agius, made two big mistakes. It didn t raise capital expeditiously early in the year. Then it turned its back on a government rescue only to pay through the nose for capital from the Middle East. If it says sorry, it could start to repair the damage.
Taiwan/China trade defuses political tensions 6 Nov 2008 The new trade pact between the two former enemies ratifies reality. China is Taiwan s largest export destination, and Taiwan supplies 11% of China s imports. Deep and continuing economic relations between the two countries make conflict ever more unlikely.
Whole Foods may find it’s not easy being green 6 Nov 2008 Like Kermit the Frog, the highend grocer s investors may rue life after its $425m lifeline from Leonard Green. The deal is dilutive and allows the company to continue growing just when hardpressed shoppers are being forced to foreswear premiumpriced Goji berries.
Man Group shows that relativity is not enough 6 Nov 2008 The investment manager is doing better than peers in sales and redemptions. But pretax profits fell 24% and funds under management were down 10% in the first half. The market pushed the shares down 33%. Merely outperforming the competition doesn t impress these days.
$7bn loss shows folly of betting on Iceland banks 6 Nov 2008 That s the amount sellers of credit default swaps must fork out after the collapse of the country s three banks. It s about a third of the CDS loss on Lehman. Insuring the unstable sector always looked high risk. But speculating on it was asking for trouble.
Obama should resist bailout mania 6 Nov 2008 After the global banking bailout, pressure is mounting to extend state aid to other industries. This will drain the public purse and distort competition. Both Obama and leaders of other countries should say no.
Fortis cleans house by sweeping out board 5 Nov 2008 The shrunken and shamed company, which is little more than a structured credit portfolio, is parting ways with most of its directors. But appointing a luminary like Etienne Davignon to be chairman suggests the saga isn t over. Fortis still must answer to angry shareholders.
Substantial Obama win points clear new direction 5 Nov 2008 Obama s decisive win as president has been backed by further gains in Congress. He will be well placed to implement his programmes fully. Current economic difficulties however suggest he should proceed with caution in doing so.
Reality threatens to derail Yes we can rally 5 Nov 2008 The prospect of President Obama and ever larger official rescue efforts have pushed up stocks everywhere, 18% in the US. But the financial easing is painfully slow and the world economy is struggling. European stock markets lost that positive spirit on postelection Wednesday.
Richard Li tries rope trick with PCCW 5 Nov 2008 The son of Hong Kong s richest man plans to wangle control of his telecoms empire effectively without paying a penny. His $3.7bn offer to take PCCW private looks clever as well as opportunistic. Not bad given Li's track record of bungling deals.