U.S. cost-cut fight merits the effort 24 Feb 2011 The battle in Congress will affect maybe a sixth of spending, with bigticket items like defense and Social Security getting a bipartisan pass for now. But tackling even that slice would save money and reassure markets. It might even be worth a temporary government shutdown.
Qataris should curb their enthusiasm for RBS 24 Feb 2011 The Gulf state has expressed interest in the UK's statedominated banks. Annual results show RBS's postcrisis cleanup is on track. But government charges will weigh on earnings, while regulatory uncertainty persists. It's hard to see much upside for the shares.
Commerzbank could repay half its state aid in 2011 23 Feb 2011 The German bank wants to pay back at least 10 pct of its 16 bln euros of state capital this year. But helpful government stances on capital could see it beat its target. And a new restructuring law might enable shareholders to recapitalise the lender more than previously thought.
China’s new Internet darlings face old problems 23 Feb 2011 Renren.com is set to be one of the first social networking sites to go public in New York. With Facebook banned in China, others have a chance to grow. Yet investors in hot new media stocks must beware of oldschool risks, such as competition and state meddling.
Investor concerns over Libya’s SWF are justified 23 Feb 2011 There's no knowing what would happen to Libya's $70 bln sovereign fund if the regime falls. A rapid liquidation of investments, including stakes in UniCredit and Fiat, is the worstcase scenario. That wouldn't be in anyone's interest. Investors can only hope rationality prevails.
Why Wisconsin matters to global financial markets 23 Feb 2011 The Midwestern state best known for its cheese is ground zero for a pitched battle between public sector unions and cashstrapped governments over collective bargaining. If the governor can end the practice he will set a precedent for fiscal reform that will spread nationally.
Oil shock hits risk and troubles policymakers 23 Feb 2011 An oil price shock creates very difficult decisions for investors and policymakers. Higher oil hurts consumers and growth and fans inflation. Risk assets, stocks especially, are vulnerable; gold and silver seem unreliable ports in the storm. Safehaven bonds may regain ground.
Fiscal generals beat new path to U.S. presidency 23 Feb 2011 Six members of the Civil War top brass got elected to the White House. But a new kind of union battle of the labor variety provides the latest crucible. How governors fare in this war and making peace within their parties could produce a future national leader.
Wall Street lawyers owe their lucre to Joe Flom 23 Feb 2011 The last named partner at law firm Skadden Arps, who has died at 87, is credited with pioneering the U.S. hostile takeover. Arguably for his profession, however, his more tangible legacy may have been negotiating bankerlike fees for legal advisers.
Arab unrest will be a test for OPEC 23 Feb 2011 The oil cartel has enough spare capacity to cope with disruption in Libya and beyond. However, the quality of crude differs, and supply could be squeezed if other members are threatened. Producers can't afford to turn off the taps for long. But the shortterm ride will be bumpy.
Game theory at play in UK interest rate puzzle 23 Feb 2011 Would the Bank of England's chief economist have favoured a rate increase this month if his vote had been decisive? Former members of the UK's interest ratesetting committee suggest game theory influences their decisions. Feints may help achieve individual and collective goals.
Banks’ deferred bonuses leave Empire State short 23 Feb 2011 It's not just financiers feeling squeezed now they have to wait longer for some of their pay. The shift hits New York's tax revenue, too. Even without the delay, tax from Wall Street wouldn't much dent the state's likely $10 bln deficit this year. But it still adds to the pain.
Chesapeake maps better course with activist guide 23 Feb 2011 Promises from the gas giant it will keep selling assets even after a $4.75 bln disposal to BHP should cheer investors. Chesapeake has a long way to go to be rated investment grade. But the burst of thrift since billionaire Carl Icahn stepped in finally makes the goal viable.
Alpha should examine alternatives to NBG bid 23 Feb 2011 Greece's thirdlargest bank has rejected a 3 billion euro bid from its larger rival. Merging with another peer, EFG, would allow Alpha to extract similar savings without ceding control. The combination has drawbacks. But exploring a deal could help Alpha squeeze more out of NBG.
FDIC offers hope for the anti-too big to fail crew 23 Feb 2011 The biggest U.S. banking institutions are still benefiting from the perception that the government will always come to their rescue. But a slight narrowing in the gap between what megabanks and others in the industry pay for deposits may suggest a hint of progress.
HCA provides cure for what ails mega-buyouts 22 Feb 2011 The hospital operator, possibly worth $43 bln, pared its IPO size by a fifth. But by virtue of HCA's valuation and dividends, private equity backers should still triple their 2006 investment. It's a healthy sign for the era's giant LBOs though many others still need nursing.
Obama’s new focus on primary deficit is a fudge 22 Feb 2011 It would be a start for the U.S. government to get revenue and noninterest spending balanced. But while eliminating the socalled primary deficit is a helpful goal, it's a measure that ultimately misleads as to the true scope of America's debt problem.
IMF tarnished by praise of ousted despots 22 Feb 2011 In recent months the International Monetary Fund has applauded the likes of Libya, Egypt and Tunisia for their reforms and economic policies. As protests spread and regimes topple, the IMF's reports don't look so good. Next time around, it should check the democracy indicator.
Dynegy activist’s risky wish comes true 22 Feb 2011 Seneca Capital, with a 12 pct stake, led a revolt against managers eager to sell the U.S. power company, first to Blackstone then to Carl Icahn. Now the CEO and CFO are quitting and the board is going too. The hedge fund must now fill the void and effectively run the company.
Vulture funds can still find tasty morsels 22 Feb 2011 Credit markets, once the damsel in distress, are no longer hollering for help. Low interest rates and fatter earnings have helped companies clean up their balance sheets. But that doesn't mean distressed debt investors are out of luck. Opportunity calls, just not as loudly.
BHP swings for shale home run after deal strikeouts 22 Feb 2011 America's gas freeforall looks welcoming for the mining giant after its failed Potash bid. And the $4.75 bln purchase of reserves from Chesapeake is a financial drop in the bucket for BHP. But claims it can make decent returns amid the undisciplined frenzy need a grain of salt.
Arab revolutions test China’s economic bargain 22 Feb 2011 Chinese protests inspired by Libya and Egypt were limp, but worrying. The Communist Party has created wealth, health and opportunity for 30 years while restricting political freedoms. But as people become richer, their demands will be increasingly hard to gratify.
Glencore partners eye Goldman-style bonanza 22 Feb 2011 When the Wall St bank went public in 1999, 221 partners shared $16 bln. The Swiss commodity group's 500 partners could share $60 bln an average of $120 mln when it floats. As with Goldman back then, the current Glencore generation will scoop up the entire franchise value.
Bahrain tumult could destabilise Gulf region 22 Feb 2011 The tiny island is poor but strategically crucial to its oil rich neighbours, most importantly Saudi Arabia. It is also a key U.S. ally. Bahrain was the first Gulf country to discover oil and build a financial centre. It could become a template for how tensions unfold elsewhere.
Hot coal puts risky Mongolia back on the map 22 Feb 2011 The windswept nation may raise $5 bln by floating a piece of its hottest coal deposit in London or Hong Kong. It's a smart time to cash in on high prices, without selling big stakes to the megaminers. Investors should demand a decent discount given the peculiar political risks.
EU needs imaginative approach to North Africa 22 Feb 2011 Europeans want to police the frontiers to stop a flood of immigrants from countries in turmoil. But the ideal response, in line with the EU's longterm interests, would be free trade in goods, services and even labour as with Eastern Europe after the Berlin Wall.
Libya unrest punishes too-concentrated oil majors 22 Feb 2011 Italy's Eni has been less queasy than peers about cosying up to Libya, and has the most to lose from instability. Libya needs Western oil majors, but the terms of business could eventually change. If the industry can't avoid exposure to unsavoury regimes, diversification is key.
Oil above $100 makes Arab protests Asia’s problem 22 Feb 2011 Asian markets are sending out clear distress signals following oil's surge into triple digits. Investor anxiety is justified. Asia still relies heavily on Arab oil for its energyintensive growth and higher prices will worsen the region's already troubling inflation.
Aborted deals not always bad for target holders 21 Feb 2011 Take Potash Corp. Canada's blocking of BHP's $39 bln bid in November made the company takeoverproof. Normally that would cost shareholders. Yet it now trades 42 pct above BHP's bid price. The offer was low but the politicians also helped save investors from themselves.
Ugly Bank of Moscow sale belies Russia’s promises 21 Feb 2011 Russia touts privatisation abroad, beginning with stateowned VTB Bank. But at home, the equally massive sale of the Bank of Moscow is mired in scandal and conflict. The murky tale suggests that Russia is scarcely becoming cleaner.