AIA gets first taste of freedom in $31 bln IPO 22 Oct 2010 The insurer priced at the top of the range, giving parent AIG the chance to pay back bailout debts, while retaining a 33 pct stake offering possible upside. AIG, AIA's new boss and lead manager Goldman Sachs all had something to prove. Their relief will be palpable.
Schlumberger vindicates Obama’s drilling freeze 22 Oct 2010 The president s Gulf moratorium appears to have inflicted barely a pinprick on Schlumberger shaving about 3.5 percent off profit. Warnings that the ban would be as damaging as BP s spill look increasingly absurd. A pause to confirm deep sea safety was worth the modest cost.
G20 will hopefully knock sense into leaders 22 Oct 2010 With the recovery threatened by protectionism, competitive devaluation and excessive budget deficits, this forum could be pivotal. Mature and growing economies need to smooth frictions now more than ever. With any luck, peer pressure will curb destructive economic habits.
Europe’s default option is risky, but worth trying 22 Oct 2010 Germany's ideas for a crisis resolution regime, on which it may rally the EU, could force losses on private creditors of rescued countries. The scheme eliminates moral hazard. But it risks destabilising markets and making monetary policy more difficult. Still, it's worth trying.
Geithner talks to the G20 but aims at China 22 Oct 2010 Tim Geithner, the U.S. Treasury Secretary, urges G20 countries not to bet on currency wars to gain competitive advantage. But his fiscal, monetary and exchange rate prescriptions are mostly aimed at the yuan. It would be good if China heeds the sermon.
U.S. tax plus easy money equals odd borrowing 21 Oct 2010 Cashrich companies like Microsoft and Cisco should hardly need to borrow. But a tax hit on bringing overseas balances to the U.S. coupled with ultralow interest rates at home make raising debt a cheap way to get cash at HQ. It s a policy artifact that needs a fresh look.
Britain’s bank levy may be lighter than feared 21 Oct 2010 The government has set out details of how its balance sheet tax will work, but is still tinkering with the exact rate. That s because the mooted charge would raise more than the 2.5 bln stg limit. As long as ministers stick to that cap, banks face a lower rate than anticipated.
Beijing’s keep-’em-guessing approach has flaws 21 Oct 2010 Strong inflation figures help explain this week's surprise rate hike but the central bank remains mute. An air of mystery may stop investors thinking China's monetary policy is a oneway bet. But in fighting inflation, a clear, wellexplained plan looks more effective.
Elections show how different Brazil is from Chile 21 Oct 2010 Workers Party candidate Dilma Rousseff pays lipservice to cutting Brazil s debt. But both she and the opposition s José Serra have expensive public spending plans, though the economy is booming and commodity prices are high. Chile s example shows there is a better way to wealth.
Trichet’s gloom drills hole in EU budget deal 21 Oct 2010 The ECB president thinks the FrancoGerman deal on budget discipline doesn't go far enough on imposing sanctions for wayward euro zone members. Still, agreement on the principle of setting up a resolution scheme to deal with future crises could open the way for meaningful reform.
Norilsk Nickel EGM unlikely to end oligarchs row 21 Oct 2010 Oleg Deripaska and Vladimir Potanin, the Russian metals billionaires, are taking their fight to an EGM of Norilsk Nickel. The owner of RUSAL faces an uphill struggle in trying to regain some influence on the company's board. A standoff would test the patience of minority owners.
Netflix clangs death knell for the lowly DVD 21 Oct 2010 The video rental service says its customers will watch more content through online streaming than from mailed DVDs by the end of the year. While the disk is dying rapidly, Netflix has made the tricky switch and is thriving. Now it just has to see off a whole new slew of rivals.
U.S. campaign gives scant hope of fiscal restraint 21 Oct 2010 The UK s example notwithstanding, Washington isn t ready to slash spending. Democrats want to offer seniors a $250 Social Security bonus, while Republicans are criticizing healthcare cost cuts. The election pandering makes it harder for the next Congress to wield the blade.
UK’s new M&A code gets it about right 21 Oct 2010 Britain's takeover watchdog has rejected bad ideas like imposing higher acceptance hurdles and disenfranchising hedgies in bid battles. But it is rightly making it harder for suitors to lay siege without launching a formal offer. Greater disclosure of fees also can't do any harm.
Long-term greed may win more Wall Street disciples 21 Oct 2010 Sure, a slow year and ongoing public scrutiny has pushed bonus accruals down. But bank shares have tumbled, too. With stock a larger portion of compensation, even if the rest of 2010 disappoints, investment bankers stand to benefit financially from a longerterm market recovery.
Sluggish equities let Credit Suisse down 21 Oct 2010 The Swiss bank s Q3 earnings dropped 62 pct on the previous quarter. That was partly down to accounting quirks such as the revaluation of its own debt. But revenue dropped 25 pct, largely due to lower equity volumes. With pay remaining stubbornly high, profit is getting squeezed.
U.S. airlines can soar higher with reverse thrust 21 Oct 2010 Southwest s bumper profit caps a heady week for the industry. The glum economic backdrop makes the rebound even more impressive. Rising fuel prices remain a threat. But U.S. carriers can keep momentum by resisting the selfdestructive surge in plane orders happening in Europe.
BBVA must secure Garanti influence – or walk 21 Oct 2010 The Spanish bank is in talks to acquire General Electric's 21 pct stake in the Turkish lender. But the deal is more expensive than in the spring, and new bank regulations won't help. It is only worth considering if BBVA has more management control than the U.S. conglomerate had.
Gas Natural to pay dearly for $2 bln supply row 20 Oct 2010 The Spanish energy giant was recently ordered by an international court to pay more for gas from Algeria's Sonatrach, with the rise backdated to 2007. Madrid is lobbying Algiers over the matter. But it doesn't have much leverage. Gas Natural's chunky dividend may have to be cut.
Goldman should buy back Buffett’s preferred stock 20 Oct 2010 The Sage of Omaha s $5 bln investment bolstered the Wall Street firm during the crisis. But the 10 pct dividend is pricey, and the prefs soon won t count as core capital. Repaying Buffett would be a smarter use of Goldman s spare cash than share buybacks or a bigger dividend.
Britain’s unkind cuts may help growth sprout 20 Oct 2010 The government has delivered the promised bloodbath, slashing spending by 81 billion pounds over five years. State employees and welfare dependents will be hit hard. The big risk is that private growth fails to take up the slack. But at least ministers have been decisive.
BHP should make virtue of Saskatchewan disapproval 20 Oct 2010 The miner is ready to make concessions to win support for its $39 bln bid for Potash Corp from the fertiliser giant's home province. It won't want to pay the C$3 bln Saskatchewan seeks to cover lost tax income. But BHP can use the obstacle to justify not raising its bid too far.
Stimulated markets twitch at slightest tightening 20 Oct 2010 China s unexpected rate rise has unsettled markets wanting more stimulus, not less. Yet the modest move reflects stirring inflation in fastgrowing Asia. In the slowgrowing West, markets are counting heavily on more stimulus from the Fed. But that s not an absolute certainty.
FrontPoint separation from MS reflects reality 20 Oct 2010 The hedge fund firm and the bank cohabited for four years. But FrontPoint s return to independence underlines how crossselling can be overegged and the constraints imposed by a big and regulated parent underestimated. With the odd exception, hedge funds are better off alone.
With Wall Street friends, enemies aren’t needed 20 Oct 2010 Guy Hands has taken his hunting mate and banker David Wormsley s firm to court, while Teddy Forstmann calls a tennis buddy suing him a scumbag lowlife. Personal ties often go only so far in finance, where there can be billions of reasons to put a price on friendship.
The game has changed but Geithner can keep playing 20 Oct 2010 With much of Obama's original economic team gone, Washington insiders keep buzzing about the Treasury secretary's fate. The position's evolving mandate has changed from saving the banks to fixing the budget and boosting trade. But Geithner may still be the best man for the job.
Morgan Stanley momentum throttled by a nasty bump 20 Oct 2010 Accounting nags tripped up Q3 fixedincome trading but it was still worst among peers. A surprise writedown caused a loss, and the firm leaned on investments and a tax break to keep it from being worse. The setback is disappointing but shouldn t derail CEO Gorman s strategy.
Hedgies should be relieved with final EU directive 20 Oct 2010 It took almost two years but Europe at last seems ready to regulate hedge funds. The industry can breathe a sign of relief that the original project has been toned down. And it can let the advocates of heavy regulation claim political victory.
China will find culture tricky to manufacture 19 Oct 2010 The Communist Party has named culture as a pillar industry in its fiveyear plan. Unlike former pillars such as properties and autos, that might actually help the economy rebalance provided problems over intellectual property and freedom of speech don't get in the way.
Goldman flirts with uncharacteristic mediocrity 19 Oct 2010 Beating estimates after talk of a summer slowdown is good news. But the firm s results usually lead the pack. For Q3, though, its 10 pct return on equity was humdrum, and the slide in trading revenue makes it a laggard. For once, Goldman s bankers are looking like mere mortals.