Lenders to Madoff feeders showed astonishing folly 15 Dec 2008 The likes of BNP, HSBC and RBS are nursing losses after providing supposedly collateralized loans to Madoff feeder funds. The collateral doesn t seem to have existed and, in at least one case, Madoff himself was purportedly the custodian.
Funds of funds look increasingly useless 15 Dec 2008 More than 40% of hedge fund investments come through funds of funds, which usually charge a second layer of steep fees. Their benefits were supposed to include access, due diligence and diversification. The hedge fund meltdown and the Madoff scandal call all these into question.
Emerging markets set for painful divide 15 Dec 2008 The line will be set by capital. Those who have it think China, Malaysia and Brazil should be well placed to invest and grow while the developed world works through recession. But the havenots face extremely unpleasant adjustments. The IMF can do no more than dull the pain.
Norway’s SWF set to join fiscal stimulus crowd 15 Dec 2008 Despite suffering a year of losses, the country s sovereign fund looks set to backstop government spending measures due to be unveiled in the new year. Thanks to sensible management, Norway has the funds. Others will envy its main problem finding good places to spend the money.
Venture capital shakeout will leave few winners 15 Dec 2008 A decade of too much money and dismal performance has caught up with venture capital. Only a few wellconnected firms can now raise new funds. This means higher returns for the survivors. But most investors won't have access and funding for startups will be tight.
Thai political strife could cause long-term damage 15 Dec 2008 Abhisit s parliamentary victory should end ongoing street protests. However, his party s undemocratic tactics may cause continued instability. Clean government and a freemarket economic programme targeted to rural areas are needed, but it's not clear Thailand will get them.
Santander boss spoke too soon 15 Dec 2008 Emilio Botin recently used an awards acceptance speech to preach to the global financial elite about how to run a bank. But since Santander s clients lost E2.3bn in the Madoff affair, he ran his victory lap too early.
Paul Allen faces the music at Charter 15 Dec 2008 The billionaire cofounder of Microsoft has resisted restructuring his overleveraged cable TV group, Charter Communications. But now he s in talks with bondholders on a debt for equity swap. With creditors facing a $6.5bn haircut, Allen's reverse Midas touch remains intact.
Some $50bn losses hurt more than others 15 Dec 2008 Even if Madoff is one of the biggest fraudsters ever, his deception added a trivial 0.2% to the damage done in world stock markets since July. But this isn t just about money. Deception destroys the vital good of trust, especially when the con man once seemed so charming.
BNP may have to sweeten Fortis deal 15 Dec 2008 A Belgian court says shareholders should have been consulted on the planned acquisition of Fortis Belgian operations by the French bank. This is sensible, but throws a serious wrench in the deal. The Belgian state can appeal. But BNP may have to improve its E14.5bn offer.
Premier equity issue will be a tense affair 15 Dec 2008 The food group needs a big cash injection because it has too much debt, a legacy of an overpriced acquistion. But existing shareholders aren t certain to stump up, and banks will be reluctant to take the underwriting risk. A new anchor investor may be the best bet.
Madoff victims will go after deep pockets 13 Dec 2008 With $50bn evaporating, angry investors will demand compensation from those that put them into the Ponzi scheme. Many funds of funds are too flimsy to offer restitution. But there are also deep pockets like Santander, Unicredit, Swiss private banks, Man Group and Nomura.
Madoff allegations raise $50bn worth of questions 12 Dec 2008 The unknowns surrounding what may be the largest Ponzi scheme ever are multiplying faster than the money allegedly disappeared starting with exactly how much Bernard Madoff may have lost. And everyone else involved from investors to regulators faces tough questions, too.
Blackstone takes own medicine but may need more 12 Dec 2008 The buyout firm is cutting 70 jobs, or about 7% of its workforce. For an investment firm that often slims down the companies it buys, that's logical. Not only is the LBO market moribund, but Blackstone has shareholders to consider. Remaining staff shouldn't feel too safe, either.
Facebook adds old-media chaperone as a friend 12 Dec 2008 The social networking wunderkind is putting Washington Post CEO Don Graham on its board. The oldmedia aristocrat is a welcome grownup at Facebook. For Graham, it s also a shot at redemption: he passed on an opportunity to invest in the site before it really took off.
Paulson should be tougher on carmakers than banks 12 Dec 2008 The US Treasury secretary agreed to use Tarp funds to prop up the Big Three after lawmakers didn't act. He should require strict terms certainly tougher than his overfriendly deal with banks to keep pressure on the carmakers and lay the groundwork for the next Congress.
The Bezzle rears its ugly head, and spectacularly 12 Dec 2008 Frauds are easy to commit in boom times no one is looking. But all is revealed when the cycle turns. That s the Galbraith theory. If true, the alleged multibillion dollar swindle by former Nasdaq bigwig, Bernard Madoff, is only a foretaste of what receding markets will expose.
The Dos and Don’ts of bank stimulus plans 12 Dec 2008 The UK is rightly talking about the need for more measures to get its banks lending again. Other countries will probably follow suit. Chris Hughes outlines five ideas governments should consider and one they shouldn t.
Beware the paradox of unemployment 12 Dec 2008 Layoffs are coming thick and fast 76,000 in a day. Decisive action on job cuts may help corporate survival rates. But more unemployed workers mean more defaults, creating pain for banks. And the resulting wage deflation would threaten an already crippled financial system.
Citadel gesture shows value of staying private 12 Dec 2008 Ken Griffin s hedge fund firm is bearing up to $500m of costs that it would usually pass on to investors. That covers only a sliver of this year s near 50% losses on Citadel s flagship fund, but it s a great PR move. It would be much harder to pull off had the firm gone public.
Crashed auto rescue causes economic pile-up 12 Dec 2008 US failure to approve $14bn of aid for its Big Three carmarkers does not make their bankruptcy inevitable, even if it s the least bad option. But political paralysis will have everyone bracing for a traumatic collapse. The knockon effect on consumer confidence will be dreadful.
OPEC membership not in Russia’s interest 12 Dec 2008 President Medvedev has hinted at joining the oil cartel, which is making fresh output cuts. But Russia s oil production is already stagnating. Participation in Opec might have only a limited effect in supporting prices. Worse, it would weaken Russia s complex ties with the West.
Red ink at HBOS, redder faces at Lloyds TSB 12 Dec 2008 HBOS has revealed £3.2bn of new writedowns, accumulated in little over two months. As HBOS s new owner, Lloyds TSB inherits the problem. It says it has already factored in HBOS s weakened position. The market is rightly sceptical.
Pound suffers from crass Keynesianism 11 Dec 2008 Sterling has been falling fast and CDS spreads shooting up as foreigners take fright at the prospect of huge deficits. The German finance minister s complaint about a rapid policy shift has a ring of truth. To avoid a currency meltdown, a credible debtcutting plan is mandatory.
PC makers should lock up emerging markets 11 Dec 2008 Computer sales are falling. Ultracheap notebooks and emerging markets are among the few remaining areas of decent growth. Lenovo s talks with Brazilian PC maker Positivo Informatica could be an effort to cover these bases. Rivals should avoid getting left behind.
Verizon Wireless reveals crack in credit freeze 11 Dec 2008 The mobile phone group has tapped banks for $17bn in loans to complete its purchase of Alltel. True, it s a kind of refinancing rather than new capital. And the debt isn t coming cheap. But it shows there are substantial cracks in the lending freeze at least for good credits.
BCE deal’s collapse shouldn’t mollify investors 11 Dec 2008 The Providenceled group pulled its $42bn bid for BCE, saying KPMG determined the deal would result in an insolvent company. The buyout firms investors benefited from some lucky breaks and should question the firms judgment.
News Corp shareholders celebrate bitter anniversary 11 Dec 2008 Murdoch snapped up Dow Jones a year ago, just as newspapers and finance plunged. Wisely, Murdoch got John Malone off his back before this valuedestructive trophy purchase. But with succession looming and shareholders feeling pain, he may not get away with such shenanigans again.
Long-term costs of easy money exceed its benefits 11 Dec 2008 Spiralling US unemployment claims and widening budget and trade deficits are further evidence of the delayed costs of easymoney bubbles. They are, in part, consequences of overrapid monetary expansion, which distorted value measurements and led to crazy decisions.
UK has pre-crisis air about it 11 Dec 2008 In 1976, the country needed a humiliating rescue from the IMF. Now as then, the country has a soaring fiscal deficit, a collapsing currency, a credit hangover and a loss of confidence. And the cure? It was tough three decades ago, but a new crisis might be even more painful.