Taxing the rich makes economic sense 25 Aug 2011 Western governments want the rich to contribute more to their austerity drives. Financially, it won’t do much to cut deficits and debts. But after three years of economic tension, it is a crucial part of making new rounds of tightening politically acceptable. Pain must be shared.
Now investors can focus on just how good Apple is 25 Aug 2011 No CEO is as indelibly linked to a company as Steve Jobs. But his unfortunate health issues have been a distraction for yearsll-seeded orchard. Handing over day-to-day operations is still a blow. After the initial shock, though, investors should see more clearly the powerhouse Jobs built.
Finnish bolshiness follows Berlin’s bank coddling 25 Aug 2011 Finland has demanded collateral for its part of Greece’s second bailout. The attitude is divisive, but it highlights the disparity between the treatment of private and public creditors in the July deal. Finland is only asking for what Berlin gave bankers.
Diving bond yields mask investor ambivalence 25 Aug 2011 Fear still trumps greed in the minds of most investors. It allowed the German government to sell 10-year bunds at super-punchy prices on Aug. 24. There may well be enough buyers to push real yields negative. But the investment appetite is far from overwhelming.
Glencore share price recovery depends on M&A 25 Aug 2011 The commodity trader’s performance sagged slightly between Q1 and Q2. The business is coasting along, and the latest numbers were free of nasty surprises. But without an opportunistic acquisition, a recovery in the shares - still 25 pct below their issue price - will be a slog.
UK/Swiss deal good for taxpayers, banks and crooks 25 Aug 2011 Two years ago UK investors with untaxed assets in Swiss bank accounts looked like they would lose their anonymity. Instead, they will now pay almost the full tax rate to the UK, helping it cut its deficit. The Swiss banking model is protected - but dodgy money will remain shielded.
Bernanke should leave any new stimulus to Congress 24 Aug 2011 The anti-deflation rationale for the Fed’s last bout of bond-buying won’t wash this time. Anyway, its effectiveness was questionable. And the U.S. central bank is already in uncomfortably deep. Fiscal action might be equally unhelpful, but at least it’s easier to reverse.
BofA blues is bottling up U.S. credit 24 Aug 2011 The Fed still wants to keep credit as easy as it can. But worries, rational or not, over Bank of America’s stability are getting in the way. If credit investors continue to fear for the nation’s largest bank by assets, that will outweigh any policy options Ben Bernanke might try.
CBO deficit slash reveals DC financial wonderland 24 Aug 2011 Congress may have done a deal to cut costs, but the new, relatively upbeat 10-year prediction for U.S. finances also relies on some rosy long-term assumptions. Budget experts know next year’s numbers matter most. Washington policymakers need more focus on the here and now.
Aging population another headwind for U.S. stocks 24 Aug 2011 Meager economic growth is one thing. But share valuations could also suffer for a decade or more as retiring baby boomers sell off their equities. It’s one more reason for pension funds, younger savers and investors at large to make sure they aren’t expecting too much.
Man U’s mooted IPO valuation in league of its own 24 Aug 2011 The Glazers bought the soccer club for a hefty 16 times EBITDA in 2005. Now a $1 bln Asian IPO could raise the bar again. Man Utd boasts global cachet and wage discipline by soccer’s crazy standards. But it looks like buyers will have to be fans first and investors second.
Big oil faces big unknowns in Libya 24 Aug 2011 With Brent crude at more than $100 per barrel, foreign entities have a strong incentive to restart production as soon as security is ensured. But Libya’s new rulers may want to reshuffle the cards. Even once the fighting stops, oil companies should expect a bumpy ride.
Four challenges for a common euro bond 24 Aug 2011 Can a debt union save the euro zone? With overall debt at 85 percent of GDP, the region still has the financial capacity to underwrite peripheral economies. But issuing common bonds requires time and political change. Here are the four obstacles to overcome.
America’s too big to fail just keep getting bigger 23 Aug 2011 The FDIC’s latest quarterly roundup suggests, in aggregate, that the U.S. banking industry is recovering. But dig into the details, and it’s pretty clear that massive institutions are continuing to thrive at the expense of the small fry. That’s not necessarily healthy.
BofA shareholders resigned to life on skid row 23 Aug 2011 Fears of a dilutive capital hike may prove overblown. Even so, BofA’s long-running mortgage saga has moved a seemingly endless list of litigants ahead of equity investors in the pecking order. Until the claims are resolved, the stock price looks set to stay in the gutter.
Private equity yellow-bellies make sorry return 23 Aug 2011 Cerberus and a partner reneged on an agreed buyout of hotelier Innkeepers, citing a material adverse change after markets burped. It may be just a wimpy negotiating ploy. But investors got burnt by similar tactics in the crisis. This is a good reminder to remain wary.
Companies should resist buyback temptation 23 Aug 2011 Share repurchases are creeping back into fashion, and are easier to like when markets are on their knees. But boards have often sanctioned buying programmes that have destroyed value. Share buybacks make more sense in a bear market, but the investment case remains unconvincing.
Foster’s comeback to SAB bid just a sharpener 23 Aug 2011 The Aussie brewer promised shareholders an A$500 million payout. That was enough to nudge its shares past SAB’s hostile offer, but is less than it can afford. With SAB yet to make a formal bid, Foster’s has left itself plenty of room for something stronger later.
UBS’s 3,500 job cuts point to two big shifts 23 Aug 2011 The Swiss bank’s axe-wielding is part of a secular shift across the investment banking industry, which needs to shed staff to adjust to tough new realities. But UBS also seems to be undergoing a more pronounced transition away from investment banking towards wealth management.
EU bank funding backstop may need fine tuning 23 Aug 2011 As euro zone liquidity becomes more strained, the European Central Bank’s ability to cover any gaps with an unlimited supply of euros and dollars is vital. Yet that support can backfire if investors spot which banks are getting help. Lessons from the UK could be helpful here.
Next wave of patent rulings could ease tech wars 23 Aug 2011 Google, Apple and others are spending billions on invention rights. But they’re really buying legal protection. That’s because federal judges have approved broadly defined patents, exposing firms to infringement claims. The courts need to sync up the law with the real world.
Private sector drag sheds harsh light on stimulus 23 Aug 2011 Because it’s included at cost, government spending increases GDP by definition. But as Washington wrote more checks in 2007-11, private sector output slowed down, suggesting a possible crowding-out effect. When the U.S. economy is sick, bigger government looks like bad medicine.
No easy fix for Spain’s housing market 22 Aug 2011 The government hopes to jump start the housing market by temporarily cutting the VAT rate on purchases as part of a package to shrink the country’s deficit. The move might help a bit. But buyers won’t return until job creation resumes, and banks recognise more property losses.
Regulators have the ideal tool to boost banks 22 Aug 2011 Given the bitter fight to impose new rules, it might seem odd to go easy on banks now. But as markets tumble and economies stutter, the sector must be encouraged to lend. Setting the new “counter-cyclical” capital buffer at a low level could be a clever way to get credit flowing
End game in Libya could herald oil slump 22 Aug 2011 The rebel push into Tripoli came sooner than expected. Libyan oil exports should follow suit. The possibility of regional unrest remains. But global growth concerns, and IEA and Saudi moves to make up for the disruption, could turn tight markets into oversupplied ones.
HP stock sell-off looks like overkill 19 Aug 2011 The tech giant has seen about a quarter of its market value, almost $16 bln, vaporized in two days. Shareholders have fled following another profit warning, a huge and pricey acquisition deal, and a strategic U-turn. That makes for plenty of warts - but HP now looks too cheap.
Texas governor unlikely small government champion 19 Aug 2011 Rick Perry likes to boast of the jobs created on his watch. Yet while he wants to make the federal government “inconsequential,” he has presided over more new government jobs per head than Washington. If nothing else, it’s a reminder that economics can’t be reduced to soundbites.
Mexico needs to open door to its oil wider 19 Aug 2011 Bringing foreign firms into a few wells is a positive, if overdue, development. But more radical action is needed if the country is to make the most of its reserves. Only juicier deals for outsiders and better management of its state monopoly Pemex will revive ailing output.
Rivals unlikely to crash HP’s punchy Autonomy deal 19 Aug 2011 Autonomy would be a nice-to-have for Oracle or IBM. But Hewlett-Packard’s $11.7 bln offer for the UK software group is already rich, and rivals don’t need Autonomy quite so badly. Add in falling markets and the ugly reaction of HP shares, and a bidding war doesn’t compute.
Downgrade of U.S. debt upgrades risk to raters 19 Aug 2011 Credit rating firms have somehow alienated both parties in Congress. And government investigations of S&P may spur legislative efforts. On partisan lines, these range from tightening Uncle Sam’s grip to removing his helpful imprimatur. Either result could change the rating game.