GMAC is staring nationalisation in the face 6 May 2009 The government has told the finance company it needs $11.5bn more equity. That may be almost double what GMAC is worth. Chief owners General Motors and Cerberus can't help. That means Washington will probably have to assume full control and pay over the odds for it.
What does BofA’s $34bn capital shortage really mean? 6 May 2009 The dearth of specifics makes it tough to tell. But if the infusion of common equity is just to keep its capital ratios where they are now, then a backoftheenvelope calculation implies that under a worstcase scenario, BofA could lose up to $100bn by the end of next year.
Opel doesn’t need Oleg 6 May 2009 Russian oligarch Oleg Deripaska might join Canadian carparts maker Magna in bidding for GM s European subsidiary. Deripaska already controls one nearbankrupt company, Russia s Gaz. It s hard to see what he could bring to Opel.
Rising confidence turns vicious circles virtuous 6 May 2009 Debtladen companies like Dow Chemical recently found themselves trapped in a downward spiral as fears of insolvency sent their equity values plummeting, making it difficult to deleverage. Dow s $1.6bn stock sale shows this spiral may now be beginning to reverse.
Overpriced European clearing demands regulation 6 May 2009 An inefficient market for clearing is inflating the cost of European securities trading. A single mutually owned clearer is one solution, but looks hard to achieve. Better to drive competition by forcing exchanges to use the cheapest clearer even if they don't own it.
France can’t maintain hard line on hedge funds 6 May 2009 The French finance minister is calling for maximalist EU regulation of those wicked things. That might play well to the home crowd ahead of European Parliament elections in June. But she d better calm down afterwards. Otherwise, she ll end up with no regulation at all.
Are stocks a better guide to stress test results? 5 May 2009 The market should be the ideal place to digest all the analysis, guesstimates, rumours and leaks on which banks may be short of capital. Pricetobook value multiples imply that seven firms may need more. But with test parameters still unknown, even this measure could be off.
US insider trading case could weaken CDS critics 5 May 2009 Regulators charged two people with fraudulently reaping $1.2m in the credit default swap market. It s the first US insider trading case involving these instruments, and if prosecuted successfully, it would demonstrate that the CDS market isn t entirely lawless.
Mexico’s malaise goes deeper than the flu 5 May 2009 The global downturn and the H1N1 flu outbreak will give Mexico its worst year since the 1995 Tequila Crisis. But when the flu passes, Mexico will still lose out to Asia. It is developing badly: education languishes, oil production falls and political challenges are ducked.
US government bond bubble may soon deflate rapidly 5 May 2009 Seasonal funding needs, huge government borrowing requirements, green shoots of economic stabilisation or recovery and the inflationary effect of Fed liquidity creation are combining to send Treasury bond yields upward. They may go a lot higher, quite quickly.
Newspapers learn from mobile phone operators 5 May 2009 With the launch of Amazon's new electronic reader, the New York Times and rivals are borrowing a trick from the mobile phone world: cheap hardware in return for signing longterm subscription contracts. The Grey Lady and others might even be able to give the gadget away.
Obama’s rhetoric prejudges Chrysler creditors 5 May 2009 The identities of the bankrupt car company s nonTarp creditors are still under wraps. Their lawyers wanted to keep it that way. The US president s rhetoric has made the group wary of going public even to ask for their legal rights. It s a bad precedent for Obama to set.
Google/Apple antitrust probe is warning shot 5 May 2009 The US is investigating whether it s anticompetitive for the two technology leaders to share board members. It s easy enough to end the overlap. But that probably wouldn t be the end of it for Google. The new administration looks ready to take a tougher line on competition.
Fiat’s dealing will change Italian capitalism 5 May 2009 The probable dilution of the Agnelli family Fiat s controlling shareholders who are as iconic as its 500 car will mark a gear shift for the country. Italy s traditional way to do business is waning. But not necessarily an improvement. Berlusconism would be a deterioration.
UBS will struggle to shake laggard status 5 May 2009 The Swiss bank s gloomy Q1 results and outlook contrast with hopeful tones from perkier rivals. Not only did UBS miss out on the fixedincome trading bonanza but its supposed strength wealth management remains troubled. The UBS strategy still looks right, but the slog long.
How will StanChart exploit its credibility? 5 May 2009 The emergingmarkets lender is the latest bank to shine in Q1. Its strong showing in Asia looks more sustainable than the bumper trading profits that boosted US banks. The performance puts it in a strong position to raise equity for opportunistic deals like RBS Asia.
John Malone avoids trouncing DirecTV’s shareholders 4 May 2009 True, Liberty shareholders are getting a slight premium in their $13bn merger with the US satellite broadcaster. And DirecTV gets some content assets that Liberty shareholders weren t ascribing much value to. But at least the deal offers clarity on DirecTV s ownership.
Crack in US tech’s IPO glacier not the same as thaw 4 May 2009 Software firm SolarWinds wants to be the first venturebacked tech company to debut since last August. Its success would show that investors have regained some risk appetite, a boon for backedup venture firms and underwriters. But it s unlikely the floodgates will fly open.
US corporate tax crackdown is only a start 4 May 2009 President Obama's plan may raise the effective corporate tax rate above 20% still below the 1994 level. If profits revert to trend, the extra revenue won t lower US deficits much. But combining fewer loopholes with a reduction in the 35% headline tax rate would be helpful.
How much does Buffett’s successor matter? 4 May 2009 The Sage of Omaha says the undisclosed candidates to succeed him as Berkshire Hathaway s investing supremo didn t do too well in 2008. That s perhaps forgivable. But their skill may not be the only key to Berkshire s future. The company s insurance bosses may be as important.
China pays Taiwan geopolitical dividend 4 May 2009 Financial turmoil has brought the two closer. Taiwan, its economy slammed by a 30% fall in exports, will gain from opening up to Chinese capital and tourists. Investors will welcome the reduced political risk. China may yet win with finance what threats of force didn t get.
Bottlers could squeeze just a bit more from Pepsi 4 May 2009 Pepsi Bottling snubbed PepsiCo s $4.2bn offer for the remaining twothirds of the company. It has a point: the offer values it at a big discount to other bottling deals and there could be more synergies. But its fortunes are tied to Pepsi, so it doesn t have much leverage.
Marchionne’s jumbo carmaker project is fraught with risks 4 May 2009 The Fiat chief's vision for building a major transcontinental car group on the rubble of GM's Opel and Chrysler simultaneously has theoretical attractions. But multiple hurdles will have to be jumped to pull off this extremely complex operation successfully.
Telecom equipment makers move to razor-blade model 4 May 2009 Mobile phone saturation is leading to increasing pressure on network operators. For equipment makers, this is both a threat and an opportunity. Prices are falling, but new businesses are opening up. Operators are looking for suppliers like Ericsson to manage their networks.
Three cheers for obstreperous investors 1 May 2009 Bondholders in Chrysler are being vilified by President Obama, while the German government is laying into Chris Flowers for resisting being squeezed out of Hypo Real Estate. Whatever the merits of individual cases, it is good that investors are willing to test their rights.
US pension insurer minor sinkhole in bailout world 1 May 2009 Chrysler s bankruptcy may add to its deficit, but only by $2bn because of payout limits. Even so, it remains insolvent however diligently it tries to hide it. But its freeze on benefits and the decline of definedbenefit pensions limit the hole US taxpayers must fill.
Logic favours Jain as next Deutsche Bank CEO 1 May 2009 A lot can happen before Ackermann s new extension ends in 2013. But as it stands, Deutsche will want an insider with investment banking knowhow. Division cohead Anshu Jain looked to have an edge on counterpart Michael Cohrs before the crisis hit. It may be his job to lose.
Why hasn’t the crisis incited more violence? 1 May 2009 May Day is traditionally when workers unite against oppression. But this year s protests seem strangely weak against a backdrop of the worst recession in decades. The reason: the pain of rising unemployment is so well cushioned. It s one of the bonuses of prosperity.
Bank stress tests shouldn’t be open to debate 1 May 2009 The spectacle of US regulators arguing over the results strains the tests tenuous credibility. Watchdogs run these tests all the time. This cynical public exercise shows regulators need justification for telling banks what to do. That means banks have grown too powerful.