Boeing highlights pension rollercoaster 27 Jan 2011 Higher pension expenses knocked the aircraft maker's earnings outlook. That's partly because the Fed's low interest rates make retirement obligations look bigger for many industrial firms. When the economy and rates pick up, Boeing and its peer group should get a double boost.
Japan downgrade has global resonance 27 Jan 2011 S&P's cutting of Japan's credit rating is fanning fears about excess deficits and debt everywhere. The warning is needed. Global recovery and inflation may make borrowing more costly. Japan and other governments must rein debt in. But the yen's weakening in response is helpful.
Supercycle triumph may raise inflation and rates 27 Jan 2011 The supercycle is a reality. China and other emerging economies will grow fast over long periods, albeit with hiccups. But the new economies will want resources and capital and that could drive up global rates and inflation. Fast growth is good but the West can't be complacent.
Ho feud says more about families than finance 27 Jan 2011 As the Hong Kong gambling tycoon's relatives brawl for control of his empire, it's easy but wrong to conclude investing alongside powerful families is foolish. In fact, investors priced in SJM Holdings' quirks long ago, and have done rather well in spite of them.
Russia’s Fridman in high-stakes game with Kremlin 27 Jan 2011 Mikhail Fridman's Alfa Group empire is crying foul over deals in energy and banking benefiting statebacked companies, at the risk of getting on the wrong side of the government. But by shaking two trees at once, the cheeky oligarch may calculate that he will pick up some fruit.
Lloyds’ defence against surgery doesn’t convince 27 Jan 2011 The bank has submitted a hefty tome to the UK banks commission arguing its dominant position isn't anticompetitive. A fullblown unravelling of the HBOS merger is not the only solution. But there's a case for a forced shedding of the market share it acquired in the deal.
UK lets off banks for sky-high share issue fees 27 Jan 2011 Regulators have found that UK equity underwriting is uncompetitive. No shock there. The oddity is that there won't be a full competition probe. It's true that issuers and their shareholders should be demanding a better deal. Still, the brokers have got off lightly.
Nord Gold shoots high with valuation hopes 27 Jan 2011 Russia's Severstal hopes its gold mining business will be worth as much as $5.1 billion in a London IPO. Nord Gold's diversification and production growth look good relative to UKlisted rivals. But the value of a large subsidiary suggests the price tag is punchy.
Greenhill pays price of M&A boutique land-grab 27 Jan 2011 Smaller merger shops have snatched bankers and market share from bigger rivals. But Greenhill's new mouths are proving costly to feed. The top brass won't take cash bonuses after the firm's comp ratio surged to 57 pct. M&A minnows may struggle to keep up the pace much longer.
Time to avoid Uncle Sam’s debt, buy U.S. states’? 27 Jan 2011 State budget shortfalls have rattled municipal bond markets. Yet even with unfunded pensions added in, the federal government's burden dwarfs those of the states. There are big structural differences, but maybe investors should worry less about munis and more about Treasuries.
West can learn from Asia’s moves to rein in banks 26 Jan 2011 Investment flows into emerging markets are back at precrisis levels, hindering the inflation fighters. Upping interest rates might make bubbles bigger. Capital controls offer a drastic option, but Asia is also dusting off macroprudential policies to control hot money flows.
Obama’s tax reforms could get waylaid by business 26 Jan 2011 The president delivered on an idea he's been telegraphing for weeks: corporate tax reform. And there are hints he wants major changes. But some companies will lobby hard against losing tax breaks to pay for a rate cut. Even turning a smart proposal into law is no sure thing.
Lower UK bank tax could sugar reform pill 26 Jan 2011 UK lenders face calls to ringfence their retail and investment banking activities. Doing so would help shield taxpayers from future crises, but increase banks' funding costs. Those that play ball should receive a quid pro quo like a cut in the UK's new balancesheet tax.
U.S. president moves debt reduction to backburner 26 Jan 2011 Obama's Sputnik moment may not leave as lasting a mark as axis of evil or the era of big government is over. More important was what the president didn't say, notably about his own debt panel's budgetcutting plans. Apparently the era of big government deficits is not over.
Lax money to blame for Russia’s inflation surge 26 Jan 2011 Russia's chronic inflation problem currently 8.8 pct and rising shows no signs of abating. Temporary factors such as drought haven't helped, but the underlying causes are fiscal and monetary policies. A stronger rouble and a tighter budget are needed to kick the habit.
Demand Media kicks off Web bubble 2.0 26 Jan 2011 Investors can't get enough of the cheap Internet content factory. The company upsized its offering, raised the sale price and the shares still popped 38 pct in early trading. Yet Demand is littered with red flags. Just imagine how higher quality Web firms will be received.
Nielsen clover no sure sign of more mega-LBO green 26 Jan 2011 Private equity firms will be encouraged by the TV rating giant's $1.6 bln IPO. But the idea it will unleash a kraken of credit bubble buyouts looks a stretch. Nielsen at least had the makings of a decent investment story. Others from the great leveraged era aren't so appealing.
Fed is nearing a withdrawal symptoms problem 26 Jan 2011 The FOMC kept rates low and stuck to its plan to buy $75 bln of Tbonds each month until June. But an alarming new $1.5 trln forecast for the 2011 U.S. deficit lifts the chances that the end of Fed purchases could rattle the market. The monetary policy challenges are multiplying.
Euro rise is unlikely to hit growth – for now 26 Jan 2011 The euro is up more than 2 percent this year against the dollar on better news about the debt crisis. But it's still way off its historical peak, and it hasn't risen as strongly against other currencies. The impact on the euro zone's growth, so far, is likely to be limited.
U.S. oil independence no longer a joke 26 Jan 2011 America imports 10 mln barrels of crude daily. Presidents have paid lip service to reducing this dependence since the 1970s. But as drivers shun gas guzzlers and U.S. production rises, imports could be cut in half this decade. Oil selfsufficiency could even be within reach.
Bond sale success shows EFSF can be more generous 25 Jan 2011 The first bond issue of the euro zone's 440 billion euro bailout fund was a hit. It is borrowing at below 3 percent, while lending to Ireland at 6 percent. That looks like a racket. Lowering the rate would both give Ireland a breather, and display political unity.
HSBC boss gives London a much-needed tonic 25 Jan 2011 Hong Kong investors, who liked having the bank chief based on their doorstep, will be disappointed at a change of heart. A London home for Stuart Gulliver means little in mainland China, where the bank is seen as foreign. But it provides a fillip for the UK's financial centre.
Taiwan shows hot money flows aren’t all bad 25 Jan 2011 Hot money is flowing out of Asia's emerging markets, yet into Taiwan. Rising tech exports, an appreciating currency and low inflation all serve as a lure. The inflows are a vote of confidence in Taiwan's policy and prospects. Policymakers can afford to let them roll.
Global economy not as healthy as it looks 25 Jan 2011 The IMF predicts 4.4 percent growth for 2011. But inflation has reared its ugly head in many parts of the world, suggesting economies are growing faster than can be sustained without structural changes. Spurring on reform should be the main focus of the annual Davos shindig.
UK bonus tax shouldn’t be resurrected 25 Jan 2011 With the banks showing no sign of restraint, the government faces opposition calls for a rerun of last year's bonus tax. But that would make the supposedly oneoff charge look permanent, with damaging consequences for London. Taxing balance sheets is a better way to curb excess.
News Corp inches closer to BSkyB victory 25 Jan 2011 The UK culture minister's deferral of a full probe into the media giant's bid opens the possibility of a restructured offer getting cleared outright. The government may say it's just playing by the book. But other than perhaps extending the timetable, it's all good for News Corp.
Spanish bank recap looks underwhelming 25 Jan 2011 The government wants savings banks to raise more capital or face nationalisation. This is welcome, but may not be enough to dispel doubts. Madrid estimates the bill will come to a maximum of 20 bln euros on the low side of analyst estimates. It may eventually have to do more.
State budgets hide real U.S. muni market woes 25 Jan 2011 Huge state shortfalls make for easy headlines on the $3 trln U.S. municipal bond market. But old woes, such as abysmal disclosure, and more recent wounds like damage to the traditional insurance safety net should worry the sector's taxsensitive investors more.
U.S. housing prices likely to keep on dropping 25 Jan 2011 Even though they're down 31 pct from their peak, home values may not yet be near the bottom. The CaseShiller 10city index's 1993 low was in real terms 27 pct below current levels. Lenders better hope that inflation outpaces rising interest rates, lessening future declines.
UK’s shock contraction hurts government and pound 25 Jan 2011 Snow and ice were factors but the 0.5 pct contraction in the size of the UK economy brings on the serious risk of a double dip recession. The government will come under fire. The Bank of England's inflation stance is vindicated. The pound will weaken further.