Gulf oil spill creates political slick for Obama 28 May 2010 BP's deep sea leak forced the U.S. president to hold his first press conference in 300 days. Voters disapprove of his handling of the disaster. After messy healthcare and financial reform processes, that could hamper the Democrats legislative ambitions in energy and beyond.
American Idol creator gambles on an encore 28 May 2010 Pop impresario Simon Fuller wants the hit TV show back, and has another deep pocket to join his own. The empire is bigger, with Elvis and Ali image rights. But Idol s ratings are in decline and the star of the show just left. Fuller may come to regret a return to the same stage.
Bank ratings should come with a health warning 28 May 2010 Laws to tackle the toobigtofail problem are supposed to force Bank of America, Citigroup and others to stand on their own feet. But at least for a while, U.S. bank credit ratings will continue to factor in government backing. That kind of assumption should be better flagged.
Shell will need patience after $4.7 bln shale swoop 28 May 2010 Shale gas is an investment for tortoises rather than hares. With gas prices moribund Shell cannot expect a quick buck from East Resources. But the travails of U.S. deepwater drilling underscore the increasing difficulty Big Oil faces in replacing energy reserves.
Pru may struggle to push down AIA price 28 May 2010 The UK life insurer has to cut its offer for AIG's Asian arm to around $30 bln to win over its shareholders. But the U.S. group may be able to get the same valuation though not as much cash from an IPO. Pru will need to be creative to get AIG to accept less.
Guarantees may be better than bond-buying for ECB 28 May 2010 Citigroup has a plan to unblock euro zone bond markets. Rather than buying government bonds, the U.S. bank thinks the ECB should guarantee their value. The proposal won't solve the euro zone's debt problem. But it looks a cleaner way for the central bank to prop up markets.
Bank of Spain tries to speed bank restructuring 27 May 2010 Troubled savings banks are reluctant to merge, despite offers of government cash. The cajas' reasoning is more political than economic. But the central bank's new and more stringent provisioning rules may bring high enough losses to force weak cajas to accept the dismal reality.
U.S. bank stocks should double – eventually 27 May 2010 Hedge fund managers like David Tepper and John Paulson are adding to last year's profitable bets. With many banks at or below book value and loan losses falling, that sounds reasonable. But regulatory uncertainty, euro zone woes and doubledip fears could postpone more gains.
China can’t easily break Faustian pact with euro 27 May 2010 The single currency may be joining the dollar on Beijing's list of doubtful assets. But without China's financial backing, Europe would have struggled to sustain last year's 90bln euro bilateral trade gap. Such vendor financing is risky, but change requires painful adjustments.
BP’s Gulf fiasco makes it vulnerable to a takeover 27 May 2010 Even if the bumbling oil giant plugs the leak, its management, board, safety record and culture have been tarnished, along with its valuation. If Shell and Exxon aren t running the numbers on a deal they should be. Governments should be considering their strategy, too.
Are you sophisticated? 27 May 2010 Banks often say that clients who lost money with the firm were sophisticated investors look at Goldman Sachs rebuttal of the SEC s subprime charges. But the word inverted into a badge of idiocy in the credit boom. The smart money exploited the twist with devastating effect.
Geithner lectures likely to leave Europeans cold 27 May 2010 The US treasury secretary will tell European leaders to stresstest their banks and keep stimulating their economies. They will listen politely. The advice sounds unrealistic for an EU with vastly different economies, no centralised government and a tradition of making do.
EU has to choose its model: Italy or Yugoslavia 27 May 2010 Italy became a nation about 150 years ago, in the face of severe doubts. Extensive regional transfers have helped it survive and prosper. In contrast, the southern Slav national project was undermined by old rivalries. The European project could go either way, too.
Pequot settlement puts hedge fund royalty on alert 27 May 2010 Art Samberg and his firm are paying $28 mln to resolve SEC allegations of insider trading on Microsoft stock in 2001. Times have changed since then. But the fate of Pequot, where John Mack once ran the board, is a blunt reminder that watchdogs are eyeing even elite investors.
Price cut may be only hope for Pru’s Asian buy 27 May 2010 The UK insurer wants to renegotiate its $35.5 bln takeover of AIG s Asian unit. Cutting the price to around $30 bln could win over Pru shareholders, while still giving AIG more cash than the alternative of an IPO. If Pru can t secure a better deal, investors should vote it down.
Borrowers innovate to attract savers’ interest 27 May 2010 How do you pull in cash with interest rates close to zero? The UK's Nationwide Building Society has a bond which will pay a higher rate if England wins soccer's World Cup, while Hotel Chocolat is offering a bond paying interest in chocolate. Expect more interesting innovations.
Canadian securities regulation should stay local 26 May 2010 The government wants a national securities regulator. But the recent failings of the U.S. SEC and UK FSA are not encouraging. Watchdogs should talk to each other, but securities regulation tailored to local economies and markets can work better than the centralized alternative.
Watchdogs shouldn’t try to abolish volatility 26 May 2010 Eliminating the stub quotes that may have distorted U.S. stock trading on May 6 sounds sensible. But U.S. regulators will hopefully keep in mind that their goal should be to keep markets functional not, as German counterparts seem to think, to inhibit legitimate selling.
China’s asset price mania gets spicy 26 May 2010 A pungent version of tulip mania is on display in China. Garlic was possibly the country's top performing asset in 2009, up more than 500 percent. Prices have softened a bit after Beijing threatened to intervene. But if liquidity keeps flowing, there will be all sorts of bubbles.
U.S. budget cut ideas still too partisan 26 May 2010 Neither party is yet ready to make necessary cuts in America s huge social insurance programs. But that doesn't mean other spending can't be pruned. Republicans think they've found some candidates. But their list would be more credible if it didn't target just Democrat favorites.
Facebook’s strength may be its greatest weakness 26 May 2010 The network effect created by the site s 400 million pals is what has made it such a compelling business. It also amplifies defects, particularly in the area of privacy. Fresh changes may quell the latest uproar but shaky management decisions will keep costing it friends.
BP’s Gulf bungling puts deepwater in hot water 26 May 2010 With its top hats and golf balls, BP's tragicomic efforts to plug its gusher erode the credibility of deepwater drilling. Each dead pelican increases the risk of a government clampdown. But oilmen and taxpayers must hope Uncle Sam doesn't stamp too hard on offshore exploration.
Geithner presents timely challenge for EU banks 26 May 2010 The U.S. Treasury boss plans to urge a generalised EU stresstest. That could help ease the current crisis, if governments could credibly promise to close any capital gaps. Arranging tests is tricky, but they are more urgently needed than bank taxes, the EU's current obsession.
Russian privatisation renaissance could go further 26 May 2010 After a fallow period, Russia is preparing to restart privatisations. That could raise billions to plug a budget hole, and deliver bumper fees to investment banks. But the state is set to retain control of what it floats, so the full benefits of privatisation will prove elusive.
Man bites Man over GLG deal 26 May 2010 Shareholders often suspect that management will do better from a takeover than they will. But outside shareholders in GLG are already being offered 50 percent more than insiders. So why launch a class action suit against the terms of the fund manager's takeover by Man Group?
UK bank probe will be all or nothing 26 May 2010 Antitrust watchdogs are doing a muchneeded review of the UK banking sector. The outcomes seem binary: escalation to a proper investigation lasting two years, or a hasty and unconvincing acquittal enabling the new government to sell its inherited bank stakes.
Kraft’s Cadbury victory turns Pyrrhic for Lazard 26 May 2010 The boutique helped secure the takeover of the UK chocolatier. But the UK M&A regulator has criticized the conduct of Kraft and its adviser during the bid, costing a Lazard banker his mooted job as the watchdog s chief. It s a blow to a firm whose main product is judgment.
S&P getting little credit in parent’s valuation 26 May 2010 The credit rater belongs to McGrawHill. But that s far from obvious tally the likely values of the company s other units, and there s under $1 billion left for ratings. Sure, rating firms are rightly under fire. But Moody s is still worth $6 billion. Something is offkilter.
Microsoft needs to be smarter about smart phones 26 May 2010 The software giant is shaking up its games, music and gadget unit after a disappointing fiveyear run. Microsoft has to kick its troubled handset effort into gear and decide soon if it can realistically compete with Android and the iPhone. If not, bigger changes may be in order.
History offers little guide for Pru investors 26 May 2010 The UK insurer's investors must decide whether to back its offer for AIG's Asian unit. But past deals offer little guidance as to the consequences of saying no, as bids rarely get voted down. History suggests Pru boss Tidjane Thiam's back me or sack me tactic will win the day.