Rio Tinto price-cut chatter is embarrassing 8 Apr 2009 Reports the mining group offered Asian customers a 20% temporary price cut look bad just when Rio is schmoozing China for $20bn of new capital. The reality is probably more benign but it shows the minefield Rio faces in cozying up to its biggest customer.
Private equity can’t escape fat cat label 8 Apr 2009 The European Commission is mulling proposals to regulate alternative assets together. Private equity argues it should be treated separately, and more kindly. But the industry was happy enough to be called alternative when the going was good. It s too late to change spots.
Politics of short-selling tests US watchdog 8 Apr 2009 Lawmakers and pundits are calling for reinstatement of the uptick rule or some variant. The SEC has now floated new proposals. Its board is aware of the dangers but it caved to pressure to temporarily ban shorting last year. It needs to stiffen its resolve this time around.
Irish government bows to inevitable on banks 8 Apr 2009 The state has spent over six months trying to avoid nationalising its stricken banks. Now it will take up to E90bn face value of assets in a new bad bank . That should get banks back in business. But the process is almost certain to lead to the state taking majority stakes.
Merkin kicks three-headed dog while it’s down 7 Apr 2009 Cerberus s entire $7bn investment in Chrysler looks lost, and GMAC is hardly a model of health either. To cap it all, Ezra Merkin the investor accused of Madoffrelated fraud had more than $700m with Cerberus. It's one more potential headache for the buyout firm.
Japan’s stimulus risks worsening its recession 7 Apr 2009 For believers in fiscal boosts, Japan is a paradox. With no bursting bubble and relatively larger stimulus plans than the US, it still has a deeper recession. It could be that public debt at 175% of GDP is suffocating private investment that might otherwise restore growth.
Some Russian companies are more equal than others 7 Apr 2009 Gazprom, for example. The debtladen Russian giant has agreed to buy out Eni's 20% stake in Gazprom Neft for $4.2bn. The Italian oil major bought in two years ago when former oil major Yukos was broken up, under state pressure. Where will Gazprom get the money? From the state.
Is Lloyd Blankfein the new J.P. Morgan? 7 Apr 2009 That s a stretch. But the Goldman CEO s latest speech and his defence of fair value accounting could yet see him reluctantly stepping out of his firm's shadow to join a few credible leaders into something like the role Morgan played in steadying the Panic of 1907.
Tchenguiz’s gloomy milestone in pub securitisation 7 Apr 2009 Securitising UK pubs was de rigueur in the boom. But declining interest in oldstyle boozers has accelerated in the credit crunch. Supposedly secure cashflows are now anything but. Globe, run by tycoon Robert Tchenguiz, is the first to break covenants. It won t be the last.
A window briefly opens for equity issuance 6 Apr 2009 HSBC s $18bn rights issue was a success. Two Chinese IPOs have prospered, and even defiant Rio Tinto is mulling a share issue. Instead of draining capacity, HBSC may have inspired confidence. The recent market bounce could create a slim opportunity for other issuers to follow.
Banks face painful end to liquidity life-support 6 Apr 2009 Central banks can t provide emergency liquidity to the banking sector forever. But liquidity regulation is needed as the life support ends. A framework is due by 2010. Expect it to force banks to raise deposits and tie up assets in lowyield, liquid securities, says Chris Hughes.
Canary Wharf debt buyback could buy Songbird time 6 Apr 2009 The UK property group is buying back some of its debt at a discount. The accounting treatment could help Songbird, its highly indebted majority owner, avoid a covenant breach. It sounds like a neat plan for everyone. But Canary Wharf s minority shareholders might think otherwise.
Merkin should have listened to old fox Teicher 6 Apr 2009 Ezra Merkin, whose funds invested heavily with Bernie Madoff, is facing allegations of fraud. If only he d listened to excon Victor Teicher. Teicher long ago served his time, but he was alert enough to dodgy dealing that he seems to have warned his former associate off Madoff.
UK seems close to fiscal U-turn 6 Apr 2009 Only a few weeks ago Brown was telling other governments to spend more. But that was before he realised his own budget deficit would be a scary 11% of GDP. Austerity comes next. That s no fun, whether it comes as higher taxes or lower spending. Inflation may be more tempting.
Speculators likely to face tougher regulation 6 Apr 2009 Buried in one of the papers published as part of this month's G20 summit is a suggestion that certain investors access to credit should be more tightly controlled. That could hit hedge funds, prop traders and the next generation of oligarchs during the next upswing.
Eurozone doesn’t need new member troubles 6 Apr 2009 The IMF suggests that Eastern Europe would benefit from a speedy adhesion to the euro. That s doubtful, especially with eurozone authorities already struggling to keep fiscally troubled members in line. Expanding in a hurry would weaken the euro, but not help Eastern Europe.
Countercyclical capital risks becoming a ratchet 6 Apr 2009 It s all very well to jack up bank capital ratios in good times. But how easy will it be to lower them when the next crisis hits? Countercyclical capital is one of the G20 s big ideas for preventing future bubbles. But it could cause damage unless it is presented well.
Merckles will take pain of HeidelbergCement’s mistake 6 Apr 2009 The German cement group overpaid for UK rival Hanson at the top of the cycle. Now Heidelberg is straining under E12bn of debt. The controlling shareholder, the Merckle family, has its own debt woes. Banks may be lenient, but the family look set to lose control.
G20 gives China what it wants, not what it needs 6 Apr 2009 The world's top nations have started to acknowledge Chinese policy. And China will welcome the G20sponsored boost to world trade, even if it could encourage too much reliance on exports. But the G20 made no progress on a key issue for China: unwinding the global trade imbalance.
History offers BofA-Merrill some crumbs of comfort 6 Apr 2009 The bank's beset by merger strife, losing star talent with more to come and in hock to the US government. The good news is that previous messy mergers, like CSFBDLJ and JPMorganChase, found their feet. But it took a while, destroyed value and their architects had to go.
Italy stands to gain from end of tax haven secrecy 6 Apr 2009 Offshore accounts are thought to be worth a third of Italy s GDP. The government has lost out big time on taxes, but it could get some back now, as pressure on tax havens mounts. A criminal amnesty and a modest tax on repatriated funds could cover two thirds of the 2009 deficit.
Inefficient Market: Animal spirits and the crisis 6 Apr 2009 The credit crisis didn t come about because animal spirits took flight, argues Edward Chancellor. Rather, the progress of events supports the view that animal spirits reflect underlying credit conditions.
Twitter: is it a fad or the future? 6 Apr 2009 The online instant update service has become a media sensation and a supposed target for the likes of Google and Facebook. Jeff Segal investigates whether the moneylosing operation is an overhyped flash in the pan or a real business opportunity.
Not all sellers are adjusting to the new M&A 6 Apr 2009 Dealmakers like the US lawyers and bankers gathered in New Orleans last week were hopeful that the expectations of buyers and sellers are aligning. But deals like IBMSun Micro s, now on the rocks, suggest such optimism is premature.
US curbs on egregious CEO pay still fragile 6 Apr 2009 Boards are cutting executive compensation slightly while referendums on pay are multiplying. Yet progress in giving investors more say could slip once the economy recovers. Changing broker voting rules in the US now would guard against that.
G20 learns the awful truth about tax havens 3 Apr 2009 No, it s not that these pesky principalities and primitive jurisdictions have been effective. Everyone knew that. The sad fact is that it s so easy to close these tax harbours. Just threaten to make them pariah states. So why did it take so long? And will the resolve stick?
G20 to bail out bank bondholders 3 Apr 2009 Although it isn't spelt out, that s the implication of one of their papers and confirmed by knowledgable people. Regulators are too afraid of the knockon effects of even subordinate debt defaults. The quid pro quo is that such debt will, in future, not count as capital.
US jobless rise portends drop in real wages 3 Apr 2009 Job losses now total 5.1m and the increase in unemployment is now topped by only one postwar recession. Only the over55s are adding jobs, forced to work by the hit to their savings. Real wages are still rising, but they are likely to drop, probably through resurgent inflation.
Rothschild’s sixth arrow lost over the Pacific 3 Apr 2009 The royal family of finance was once known for its five arrows, or commercial centres. Beijing won t be the sixth. Regulators stopped Bank of China from taking 20% of a Rothschild bank. Wicked whispers abound, but Beijing has probably done both sides a favour.
TCI exits Deutsche Börse with mixed legacy 3 Apr 2009 The hedge fund is selling out of the German exchange four years after blocking the group s bid for the LSE. TCI scored a win for activism. But its aggressive tactics tarnished hedge funds, and European shareholders are still reluctant to attack underperforming companies.