Turkey’s political crisis could end happily 12 Jan 2009 Investors fear that a showdown with the military will keep the government from completing a critical IMF deal. It s a risk. But for Turkey to prosper, it has to reign in the radical deep state . The current crackdown is untimely, but could mark a breakthrough.
Is Citi’s Pandit finally getting the point? 9 Jan 2009 It has been clear for ages that the bank is too sprawling to be effectively managed. Previous chiefs rejected calls to simplify, break up or hive off some pieces. But talks to merge Smith Barney with Morgan Stanley suggest Vikram Pandit has got the message.
Obama shouldn’t repeat Tarp errors with stimulus 9 Jan 2009 Unemployment is rising fast and the US presidentelect wants to respond in a hurry. But haste can make waste, as the illdefined Tarp plan demonstrates. Congress shouldn t dither, but serious deliberation on means and ends, aside from being democratic, would benefit the economy.
Business kowtows to the new US administration 9 Jan 2009 ExxonMobil is calling for a carbon tax. Citigroup wants to rewrite US bankruptcy law to help mortgage borrowers avoid foreclosure. Such apparently selfless moves aren t surprising a bit of obsequiousness may influence Team Obama more effectively than acting obstreperous.
France turns the screw on its banks 9 Jan 2009 Nicolas Sarkozy wants the country's banks to lend more. His finance minister talks of their failure to assess risk. Another E10bnplus of state capital is in the pipeline but it won t be under the same lenient terms as October s first round.
Bob Rubin leaves Citi with head hung low 9 Jan 2009 Sandy Weill scored a PR coup hiring the former Treasury secretary and Goldman boss as consigliere in 1999. But Rubin s advice didn t prevent Citi lurching from crisis to crisis. And during the credit crunch he has become a lightning rod for criticism of Citi s continuing woes.
Commerz-Dresdner’s rapid fall is a worrying puzzle 9 Jan 2009 It s unclear why the German bank needs as much as E10bn of new capital. Explanations include weak capital ratios amid high market volatility and German economic woes. Of course, CommerzDresdner may just have been slow to write down assets. But if not, the implications are ugly.
Satyam’s $1bn fraud isn’t just an Indian problem 9 Jan 2009 The Indian IT software firm was also supposed to meet US accounting standards. Something clearly went wrong and the excuses are already flowing thick and fast. The history of high profile fraud suggests the accountants, PricewaterhouseCoopers, will find it hard to escape blame.
KKR could take Dollar General public again 9 Jan 2009 Ultradiscount retailer stocks are going gangbusters. That s good news for KKRowned Dollar General. Profits have grown 30% in six months. An IPO could give investors a rare bonus some cash back. But while the returns would be ok, they wouldn t make up for lots of other dogs.
Less to debt revival than meets the eye 8 Jan 2009 It s the best week for selling bonds since May as costs fall and investors return. But most are preearnings deals for defensive companies like drinks and energy firms. They re smart to raise cash early. Yet financials, once the backbone of the market, still need government aid.
Greg Fleming is latest bull to leave the Herd 8 Jan 2009 Merrill s expresident is leaping for the calmer waters of academia. As the engineer of the sale to BofA that saved the firm, this might seem worrying. But like broker chief Bob McCann, he found himself one of many small fish in a vast ocean after his Merrill gig.
SEC catch of Madoff wannabes is small consolation 8 Jan 2009 The US regulator has charged three alleged Ponzi scheme smallfry since Madoff s $50bn whopper missed by the SEC came to light. While it s good to see the watchdog isn t quite comatose, at less than $100m combined the three cases only highlight how the big fish got away.
Mortgage market right to prefer cash to promises 8 Jan 2009 US mortgage bonds have rallied since the Fed said it would buy $500bn of them. That seems odd they re already allbutguaranteed by the government. But with the administration issuing mixed messages about its backing, investors are right to prefer cash on the barrelhead.
Germany bites the Dresdner bullet 8 Jan 2009 The state is making another massive capital injection into the CommerzbankDresdner merger. It is proving a terribly expensive rescue for Germany and for Allianz, Dresdner's parent. But the cost of inaction could have been even higher.
BoE looks reluctant to go nuclear 8 Jan 2009 The Bank of England has cut its policy rate to its lowest level in 314 years. Yet the halfpoint cut seems designed to hold some ammo in reserve. The BoE is probably concerned about extreme fiscal loosening and a weak pound, and may want to avoid unconventional monetary measures.
Careful, Wall Street – block trades are back 8 Jan 2009 That s no surprise given companies need to raise cash quickly. But banks lost packets a few years ago by buying big chunks of stock at a discount and trying to resell them immediately. They'd better hope lessened competition makes it different this time.
Sainsbury’s King deserves kudos for turnaround 8 Jan 2009 The UK supermarket group s focus on the midmarket makes it acutely vulnerable in a downturn. But Sainsbury is proving it can pick up shoppers trading down from upmarket rivals M&S and Waitrose. Boss Justin King could well emerge from the recession with enhanced authority.
RBS has greatest need for Philip Hampton 8 Jan 2009 The City grandee has barely settled in as chairman of the UKFI government agency managing UK bank stakes. Yet he is now a frontrunner to chair RBS. It shows how few real candidates there are for the vacancy, and how much the Treasury needs a credible figure heading the bank.
Chinese banks should benefit from new investors 8 Jan 2009 Western banks have good cause to cash in some of their $25bn of paper profits in Chinese lenders. The exits may be bad for share prices, but China s banks should welcome some fresh strategic investors. Having the likes of UBS or RBS on the register isn t the boon it once was.
Merckle shows liquidity is a slippery concept 7 Jan 2009 The suicide of German billionaire Adolf Merckle, blamed on financial woes, raises a question: how could a man with E7bn of assets run aground over a mere E400m loan? A double bet on company shares may be one reason along with the difficulty of turning assets into cash.
M&A excesses produce impairment reflux 7 Jan 2009 After massive share price falls, auditors are pushing companies to take big impairment charges on assets bought in better times. Time Warner and Intel are early sufferers, making already crummy results look worse. It s not a cash charge, but a sad reminder of past overoptimism.
Financial crisis brings dark days to India 7 Jan 2009 When the chairman of Satyam, India s fourthlargest software exporter, couldn t meet margin calls, he had to admit to fiddling the books for years. It s a dire revelation from a bellwether stock in a flagship industry and a big blow to confidence in Indian capitalism.
Madoff twists knife on old-school hedge fund ways 7 Jan 2009 The habit of doing middle and back office work inhouse, especially prevalent in longestablished US funds, was already looking a bit oldhat. But Bernie Madoff s alleged fabrications, made possible by his selfcontained operation, have accelerated the march towards outsourcing.
Shorts merit same disclosure as longs 7 Jan 2009 The UK regulator is right to consider broadening disclosure of short positions. Investors should know about large shorts, just as they know about big holdings albeit for different reasons. But the FSA should set a reasonable high threshold for disclosure something like 3%.
Sarkozy wrong on state aid for car industry 7 Jan 2009 The French president wants car makers to pledge they will stop exporting jobs to lowerwage countries before they can benefit from state aid. This is the wrong approach. Boosting profitability and productivity creates jobs. In the long run, jobprotection schemes backfire.
M&S restructuring is a mixed bag 7 Jan 2009 The UK retailer's response to the recession is soso. Cutting 1.5% of the workforce and shutting 27 stores looks lacklustre. But capping the finalsalary pension is bold. With gross margins under extreme pressure, more radical steps may yet be needed.
Buzz over Bono’s Palm bet reflects tech’s woes 7 Jan 2009 The talk at this week s tech confab in Vegas focuses on Palm s new smartphone. Its success is crucial to Elevation Partners, the VC fund affiliated with the U2 singer. But more broadly, the tech market s buzz about a bet on a troubled company reflects its own sad state.
Trillion-buck US deficits may not be financeable 7 Jan 2009 Presidentelect Obama warned 13digit deficits could last years. This year s possible $1.6tr hole would be 11% of GDP. In a deep recession, that s financeable. But persistent huge deficits plus Medicare and social security outflows from 2015 risk turning Treasuries to junk.
S&P’s watchdog needs real teeth 7 Jan 2009 The ratings firm has appointed an ombudsman in its latest attempt to rebuild its shredded reputation. Such jobs can devolve into toothless PR exercises. To be useful, the watchdog must be given power to push for necessary but painful reforms, rather than just air complaints.
Enel and Acciona’s divorce is for the best 7 Jan 2009 The Spanish utility and Spanish construction company may tear up their partnership in Endesa sooner than expected. It s an expensive option for Enel, but probably the best alternative. For Acciona, it looks like a good deal all around.