U.S. deficit forecast masks true scope of problem 19 Aug 2010 Budget scorekeepers now predict a $1.34 trillion deficit for 2010, a tad less than forecast in March. Still, it's an enormous gap. And the headline number lowballs the shortfall. If America ran its books more like a business, the real state of its finances would be clearer.
Weekly U.S. job data could foretell policy lesson 19 Aug 2010 The uptick to 500,000 in initial jobless claims spooked the market. It could be a blip, since newly redundant census workers will claim benefits. But if market pessimists are right, the sense that unprecedented policy moves have failed to generate jobs would be inescapable.
Soft-speaking investors may be handed bigger stick 19 Aug 2010 The SEC plans to vote next week on giving investors an easier way to challenge corporate boards. Longterm holders with a big enough slug of stock would be able to nominate directors on the company's dime. But instead of sparking battles, it may just help shareholders get heard.
Basel study firms case for higher bank capital 19 Aug 2010 The body that sets global banking rules has concluded the economic impact of new capital targets will be much lower than the industry claims. The findings will not stop some reforms being watered down or delayed. But they strengthen the case for raising banks' capital ratios.
GM needs to double earnings to repay taxpayers 18 Aug 2010 That s if the carmaker, which filed for its IPO on Wednesday, is valued at the same earnings multiple as Ford. GM has advantages, such as far less debt. But operationally it still lags its rival. Until that changes, GM doesn t merit a valuation that would make Uncle Sam whole.
BHP’s diversification case is far from compelling 18 Aug 2010 The miner has the financial firepower to raise its $39 billion bid for Potash Corp. It may also make some improvements to the world s largest fertiliser group. But the deal won t substantially alter the shape of BHP s business just make it look more like a commodities index.
Potash defense may include Chinese wildcard 18 Aug 2010 The Canadian fertilizer group is willing to sell but only at a price well above BHP's $39 bln offer. Getting an auction going is its best bet. Obvious players are hamstrung and short of time, but there are other options and the company s allure could draw out surprise bidders.
Government guarantees won’t die with GSEs 18 Aug 2010 Bond guru Bill Gross warned on Tuesday that without government guarantees, only mortgage bonds backed by supersafe loans would interest him. He frets too much. It may be Fannie and Freddie's funeral, but housing support from D.C. will live on. The key question is how much.
Running out of water in the UK 18 Aug 2010 The sector is unsustainable without changes in policy and the regulatory framework, a report for one of its biggest companies concluded recently. Neil Woodford, whose Invesco funds are big investors in utilities, is threatening to bail out. It's time for some radical thinking.
RSA may struggle to find common ground with Aviva 18 Aug 2010 The UK insurer's 5 bln stg offer for its rival's general insurance assets has been dismissed as too low. Aviva's capital structure means it would need a higher price to justify a sale. But RSA has limited scope to raise its equityfunded deal without undermining its own returns.
Druckenmiller exit suggests fund size may matter 18 Aug 2010 The famed former Soros manager is closing down his 30yearold, $12 bln hedge fund. On one level, it s just a rich guy approaching the age of 60 and wanting to play more golf. But on another, it shows how bigger fund firms can struggle to live up to past glories.
Mining deals show M&A funding market is open again 18 Aug 2010 Banks have lent acquisitive miners more than $50 bln in the past week. With bond markets healthy, lenders may be expecting much of this to be quickly refinanced. Nevertheless, the ready supply of funding for big, risky deals shows the appetite for M&A lending is back.
RBS loan sale shows flicker of life in CLOs 18 Aug 2010 The UK lender is selling 1.4 billion euros of buyout debt to a collateralised loan obligation overseen by Intermediate Capital Group. It's the first such publiclyrated structure in Europe for two years. CLOs may have a role in postcrisis markets but don't expect a surge.
Potash dynamics suggest more upheaval to come 17 Aug 2010 BHP s huge $39 bln offer for Potash Corp highlights a trend. Demand for potash fell off a cliff in 2009. But it will more than recover as growing prosperity leads people to eat more foods that need fertilizer. High barriers to entry favor acquisitions over digging new mines.
BHP puts itself in focus with $39 bln Potash bid 17 Aug 2010 The mining giant's measly allcash offer for the world s largest fertiliser group was firmly rebuffed. Though the commodity is hot, Potash Corp s size makes a bidding war unlikely. Even so, BHP needs to prove a deal is a better use of its cash than returning it to shareholders.
Little sign of pay restraint at Nomura 17 Aug 2010 The Japanese lender s former European head picked up 22 mln pounds when he left. That s a big sum for a secondtier investment bank and shows that, for all the talk of restraint, pay remains high for the top brass. It s not much of an example for less senior employees.
Hedge funds’ European gold rush brings risks 17 Aug 2010 Firms are scrambling to launch funds that comply with UCITS, an EU standard for onshore investments. Managers see the vehicles as a way to tap new sources of cash, while investors like them because they are liquid and regulated. But there is still a risk some funds will blow up.
Russian potash not a fertile ground for foreigners 17 Aug 2010 Suleiman Kerimov seems intent on merging Uralkali and Silvinit, the two potash companies that the Russian billionaire now controls. The combination makes industrial sense. But minority investors risk losing out from Kerimov's manoeuvres.
UBS should resist lure of bailout fund buyback 16 Aug 2010 Switzerland's central bank is benefiting from a recovery in toxic assets it bought from UBS. The Swiss lender has an option to buy them back. A deal would symbolise the end of the UBS bailout, but would also burden its balance sheet. It shouldn't do a deal for the sake of it.
Aviva must justify keeping general insurance arm 16 Aug 2010 The UK insurer has rebuffed a 5 billion stg approach for its subsidiary from rival RSA. The offer looks on the low end, and Aviva claims that its diversified approach brings benefits. But it will need to persuade shareholders these are worth more than a sale.
Expiring U.S. tax cuts may get only brief reprieve 16 Aug 2010 Wall Street wisdom is that markets like political gridlock but not if inaction means hitting a weak economy with a big tax hike. When Congress returns from vacation, it needs to deal with the expiring Bush tax cuts. But Obama s deficit panel adds another political wrinkle.
Too much cash could spoil Cairn Energy 16 Aug 2010 The oil explorer will make up to $8.5 bln from ceding control of its Indian subsidiary. Cairn has an enviable track record, but drilling in Greenland will hardly touch this sum. Unless it returns most of the cash to shareholders, the temptation to waste it may be irresistible.
Goldman needs to mark business model to market 16 Aug 2010 The Wall Street firm is at the vanguard in accepting market realities when it comes to its balance sheet. But on matters relating to its public image Goldman has been stubbornly resistant. It s now on a spiritual journey of introspection. That may lead to some surprising changes.
For-profit colleges get schooled by new reality 16 Aug 2010 The likes of Washington Post s Kaplan and Corinthian Colleges fed happily on federal loans to students many of which default. New data suggested just how tough the future may be for the sector, sending shares down 1020 pct. More regulation and higher costs are coming.
Investors squeezed in Vedanta’s Cairn India deal 16 Aug 2010 The miner and one of its listed subsidiaries are buying up to 61 percent of the Indian oil producer for as much as $9.6 billion. Vedanta has no oil experience and the move will test its credit rating. Meanwhile, minority shareholders on all sides are getting a raw deal.
Friday fatigue shouldn’t let Petrobras off hook 13 Aug 2010 The Brazilian oil giant will hold its first Englishdubbed call later today, as New York financiers dash to the Hamptons. The bad timing shouldn t preclude Petrobras from addressing hard questions on how it will avoid getting bullied by the government in its $85 bln capital hike.
Polish bank auction is summer’s hottest sale 13 Aug 2010 Santander, BNP and PKO are competing to buy Poland's Zachodni bank, put on the block by owner Allied Irish. The need for a quick sale and the Polish government's desire for a domestic deal may prevent an allout bidding war. Still, there's some hope the highest offer will win.
Blackstone scrapes energy bottom again for Dynegy 13 Aug 2010 Don t be fooled by the 62 pct premium. Blackstone is getting the highly geared fallen giant for a bargain at $4.7 bln. The buyout firm has timed this sector well before. Given the high price of coal and the low price of electricity, in time it may deliver a repeat performance.
Europe’s economy grows dependent on Germany 13 Aug 2010 German GDP jumped 2.2 percent in the second quarter. The global recovery helped boost exports, but domestic demand and investment surged as well. Other EU economies will benefit. But it's now even less likely that Angela Merkel will change course on cutting the deficit.
Fannie, Freddie in danger of prolonged survival 13 Aug 2010 Whatever the future of U.S. housing finance, the two discredited institutions need to go. But with a key Aug. 17 conference on their future coming in the runup to November elections, common sense and taxpayers interests may once again lose out to political temptation.