UK government should make up mind on Lloyds 27 Jan 2009 The standoff over the cost of the bank s statefunded preference shares should be easy to settle, since there are myriad ways to restructure the capital injection. But some compromises look nastier than others. It s time the government decided how tough it wants to appear.
Can Netflix sustain its torrid growth rate? 27 Jan 2009 The DVD rental service just announced big revenue growth amid a banner quarter. Cashstrapped consumers seem to be trading in movie tickets and cable extras for monthly subscriptions. But Netflix will need to make a bigger digital push to make this a lasting trend.
Tough times threaten US mobile operators 27 Jan 2009 US telcos have long relied on torrid cell phone growth to offset their dying fixedline businesses. Now, market saturation is approaching. Worse, margins look set to compress as tapped consumers switch to cutrate services.
Yale Model may not work in deep recessions 26 Jan 2009 David Swensen's Yale model of broad assetclass diversification, with a preference for illiquid assets, is untested in a big downturn. If illiquid assets become unsaleable, Yale model investors may be stuck with obsolete assets, underperforming more flexible strategies.
Fed shouldn’t prop up US Treasury market 26 Jan 2009 The central bank is mulling the purchase of government bonds. With prices falling, the Treasury boss angering buyers and $78bn of issuance this week alone, that might seem sensible. But it would be better to let some air out of the Treasury bubble not reinflate it.
UK bank bondholders have nationalisation safeguards 26 Jan 2009 Doubts have emerged about the prospects for bondholders in any further bank nationalisations. But even a nationalised bank would have to come out of public ownership at some point. The government will need to avoid upsetting bondholders on whom it might rely in future.
EU must ease crunch from Baltic to Balkans 26 Jan 2009 Calls from western banks for eastern Europe to receive help are selfinterested yet worth heeding. The banks helped get the east into trouble. But now western institutions should help with funds and advice, argues Ian Campbell.
Downturn polarises telco techies 26 Jan 2009 The end of 2008 was grim for the telecoms technology sector. But the pain has been spread differently to the dotcom bust. Networkequipment groups are in decent shape, despite Nortel's collapse. But handset makers have hit the downturn with existing strategic problems unresolved.
Is Tarp working? 26 Jan 2009 Not if failure is defined as any fall in bank lending. But the 1.4% drop since October in one report is less than in past recessions. And this time the bond and securitisation markets the financial system relied on have seized up. Factor that in and Tarp looks a partial success.
Apollo, Cerberus get sweet deal in Lyondell 26 Jan 2009 The bankrupt chemicals giant's $8bn of DIP financing always looked a lot. But some of it is rebadged prebankruptcy debt, not new money. That's a plus for the two investment firms and other lenders involved. And it has understandably riled those who weren't so lucky.
UBS looks stuck in tax-case stand-off 26 Jan 2009 The Swiss group says it s eager to settle charges of US tax evasion for wealthy customers. But prosecutors seem to want client names, while Swiss authorities appear unwilling to abandon secrecy for smaller private banks. Until one government blinks, UBS will continue suffering.
Chemical union may not be so easily dissolved 26 Jan 2009 Dow won t close its $19bn acquisition of Rohm and Haas at least not yet. Having now got cold feet, Dow may be trying a few private equitylike moves. But with different legal and market circumstances, Rohm and Haas may have more options than the typical jilted buyout target.
Schaeffler’s Conti deal proves too clever by half 26 Jan 2009 The familyowned German firm borrowed E6bn to sneak control of carparts maker Conti last year. Now the value of both groups is plunging, and it s not clear how Schaeffler will meet its borrowings. It should have stuck to what it knew.
Pfizer’s $68bn Wyeth deal shows irony of Fed bailout 26 Jan 2009 The takeover is being greased by $22.5bn in loans from a bank consortium that looks like a Who s Who of Tarp recipients. Using taxpayer money to fund Pfizer s corporate bloodletting will raise uncomfortable questions in Washington.
The euro will almost certainly hold 23 Jan 2009 It's easy to see why there's increasing chitchat about the single currency being blown apart by the economic crisis. Spain, Ireland, Italy, Portugal and Greece are really hurting. But quitting the euro would probably lead to an even worse fate: bankruptcy.
Spanish savings banks should be privatised 23 Jan 2009 That may go against the trend to increasing state involvement in the banking sector. But the squabbling over Caja Madrid is a reminder of why political involvement in banks is to be avoided. Calls for politicians to reduce their holdings in the Spanish lender deserve backing.
Shareholders are getting GE Capital for free 23 Jan 2009 The finance arm has dragged down the industrial conglomerate's stock so precipitously that the market values this asset with $53bn of shareholders equity at zero. Chief Jeff Immelt should get cracking on a separation of the core business from GE Capital.
US-China war of words could leave both sides losers 23 Jan 2009 After Treasury secretary Geithner branded China a currency manipulator , premier Wen Jiabao used his Davos platform to hit back at the West s excessive consumption and lax regulation. Both are right but admitting their own mistakes would be a better solution than namecalling.
Obama must fight to keep muscle in flabby stimulus 23 Jan 2009 The health conscious new US president is watching Democratic legislators lard the package with fat. But it still retains some muscle introduced in part to please Republicans who have since snubbed it. He should use his influence to retain that while limiting fiscal junk food.
Recessionary M&A stages its comeback 23 Jan 2009 A Pfizer deal with Wyeth would illustrate the merits of merging when economies are slowing or shrinking. A deal done mostly in stock, slicing out padding in costs and R&D, would benefit both sets of shareholders. This looks like a taste of deals to come.
State aid for industrials shouldn’t flow freely 23 Jan 2009 Ideally, governments would let the recession and the banks decide which companies survive. But with lending still constrained, troubled companies are going straight to the trough for official support. They should be fed, but only carefully and with stringent conditions.
Santander should pay off its Madoff victims 23 Jan 2009 The Spanish bank s clients could lose E2.3bn from the fraud. Some are clubbing together to sue Santander for getting them into the scheme. Compensation could be expensive. But it may be less costly than toughing it out in a public, drawnout legal battle.
Jaguar and Land Rover don’t merit state loans 23 Jan 2009 Tata, the owner of the auto brands, says they don t need a bailout , just loans from the UK government. But Tata should be the first port of call for cash. The UK s responsibility is to ensure that JLR gets funding from the nation s banks, rather than directly from taxpayers.
Google/Starbucks: unlikely exemplars for option resets 23 Jan 2009 Both are rescuing underwater workers. Starbucks plan is more palatable to shareholders. Google s is better for employees. Both seem surprisingly sensible given West Coast companies shoddy history with the issue.
Barclays’ Gulf deal could get worse for minorities 22 Jan 2009 The UK bank sparked fury when it got Middle East investors to fund a dilutive £7.15bn capital hike in October. An antidilution clause could further hit traditional shareholders if Barclays has to raise equity from the UK government.
Microsoft is no longer an unstoppable force 22 Jan 2009 The software maker surprised the market with results below expectations. And it s laying off 5,000 employees the first mass cuts in its history. The miss underlines its vulnerabilities. CEO Ballmer needs to stop playing video games and focus on his core business.
US housing starts plunge has a silver lining 22 Jan 2009 New home construction dropped to a 50year low. That's not as bad as it sounds if it means housing inventory will be worked off, allowing prices to find a floor. Both processes may be nearing completion by yearend, which will stabilise mortgage values and end the banking crisis.
Ken Lewis’s problems not over yet 22 Jan 2009 The BofA boss has offered shareholders John Thain as the sacrificial lamb for the increasingly disastrouslooking Merrill takeover. But that doesn t exonerate Lewis of his own mistakes. And the exodus from the investment bank may yet continue.
Insider buying by bankers only half bullish sign 22 Jan 2009 Bosses Jamie Dimon and Ken Lewis snaffled up millions of dollars of shares in JPMorgan and BofA respectively. It s great that they see value. But bankers have historically timed the dumping of stock better than predicting the upturn.
Modest Morrisons takes on classy rivals and wins 22 Jan 2009 The supercheap UK grocer is taking no prisoners in the downturn, gobbling market share from all the big players at Christmas even premium food merchants like M&S and Waitrose. As Morrisons advances from its regional heartlands, the competitive threat it poses will intensify.