Reform bill could make "incoherent" SEC irrelevant 4 Aug 2011 From Madoff to mortgages, the U.S. regulator has had its misses. But a Republican bid to reshape it seems designed to hinder, not help. There’s room for improvement, but with its duties growing the self-funding watchdog needs more staff, more money and a buffer against Congress.
Investors in Motown see nothing but recession 4 Aug 2011 GM posted its best earnings in years and Ford’s looking solid even with subdued U.S. sales. Both are sitting on piles of cash. Yet shareholders have wiped a combined $49 bln off their value since January amid economic worries. They’re right to be cautious. But it looks overdone.
Lloyds’ battering may have silver lining 4 Aug 2011 Huge one-off charges, higher funding costs and moribund markets made a mess of the UK lender’s first half. But Lloyds is weaning itself off state funding. And its depressed share price may prompt politicians to back away from plans to force the bank to sell more branches.
Rio shareholders get an extra thank you 4 Aug 2011 The miner needed a $15 bln cash call in the crisis. Now it’s raised its share buyback target by $2 bln to $7 bln. Given slightly disappointing H1 numbers and a global slowdown, that may seem imprudent. But the numbers add up. Rio can afford to repay investors their 2009 favour.
Hitachi and Mitsubishi should seek to seal merger 4 Aug 2011 Consolidation is a dirty word in Japan, where jobs are valued above profits. But Hitachi and Mitsubishi Heavy are sprawling conglomerates which, together, can be more efficient and productive. There will be short-term pain. But corporate Japan must grasp its nettles.
Euro zone isn’t ready for true euro bonds 4 Aug 2011 Could a common bond solve Europe’s sovereign crisis? The region’s bailout fund is already functioning like a joint debt issuer. But for now the zone lacks the political unity needed for a proper debt union. Euro bonds can’t be a quick fix.
Japan stems yen’s rise but only buys time 4 Aug 2011 Selling the currency saw the central bank push its price down. But with the EU, U.S. and China looking frail, global investors still want yen. Slowly, companies are adjusting to a stronger yen. That’s wise. Intervention can bring some relief but Japan needs deeper reform.
Trichet is right to make Italy sweat 4 Aug 2011 The ECB is turning a deaf ear to the Italian finance minister’s suggestion that it buy the country’s bonds. In a further snub, the central bank resumed its bond-buying programme - for Irish and Portuguese securities. Italy must reform before it asks for help.
Berlusconi makes nice sounds but misses the point 4 Aug 2011 The Italian prime minister tried to reassure nervous markets by pledging to implement his cabinet’s fiscal programme and announcing broader reforms. But investors are more worried by his government’s lack of authority than the plan itself.
StanChart investors should not get carried away 3 Aug 2011 The lender’s income is growing at a double-digit clip and it is hiring, not firing. Even better, costs are under control. But StanChart’s premium valuation leaves little room for error. A first-half hiccup in India is a reminder that emerging market growth is seldom linear.
SocGen back to earth with profit warning shocker 3 Aug 2011 The French bank has admitted it probably won’t make its optimistic 6 bln euro net profit target next year. This may reflect slowing revenue rather than its exposure to euro zone contagion. But with markets already jittery, the warning could hardly have come at a worse time.
Petrobras’ bargain barrels pricier than they look 3 Aug 2011 The boss of the $210 bln Brazilian energy giant reckons its shares are the cheapest way to bet on oil. With production growth expected to leave multinational rivals in the dust, Petrobras shares might seem low-priced. But Brasilia’s grip on the firm justifies a big discount.
Voting equality could bring big payoff for Murdoch 3 Aug 2011 Change is needed at News Corp. Scrapping the dual share structure would signal a fresh start and could create a big slug of value. Reform could also reward the Murdochs handsomely for ceding control. A rejig would dilute today’s non-voters, but even they might end up ahead.
Global fear could force Fed’s hand on QE3 3 Aug 2011 Markets are panicking. Safe-haven assets reflect extreme risk aversion, pushing Switzerland and possibly Japan to intervene. Asia fears a weak U.S. and worsening euro zone. Macro worries look overdone; more money printing would be regrettable. But the Fed may feel it has to act.
Italy draws banks into dangerous embrace 3 Aug 2011 As investors shy away from sovereign debt, Italy will rely on banks and insurers to help it through the turmoil. The country’s lenders are well-funded and can always borrow more from the European Central Bank. But until Rome restores confidence, banks will only get weaker.
Corzine covenant smacks more of PR than protection 3 Aug 2011 Bondholder activism is a good thing. But investors in MF Global’s $300 mln offering have only $3 mln a year to gain and little to obviously lose if the former Goldman Sachs boss and New Jersey governor heads to Washington. This key-man clause benefits Corzine more than creditors.
China’s train crash sets new tests for freedoms 3 Aug 2011 Authorities’ attempt to censor coverage of China’s rail tragedy has backfired. Even official media defied orders or found ways to circumvent the ban. If Beijing now clamps down harder, the impact will be economic as much as social.
Debt deal suggests ideal successor for Geithner 2 Aug 2011 The U.S Treasury boss may go now that Congress has reached agreement. But the conclusions of last year’s deficit commission, jointly led by Erskine Bowles, are back in focus. Obama snubbed the former Clinton official’s fiscal ideas then - but might see the value of a rethink.
Bank of Moscow’s debacle is profitable for some 2 Aug 2011 Russia’s $14 bln banking fiasco has proved costly for both the Russian state and its major shareholder, VTB Bank. But Vitaly Yusufov, the son of former Kremlin official Igor Yusufov, looks set to profit from the imbroglio. That raises questions about the handling of the affair.
UK should tax the rich more intelligently 2 Aug 2011 Fresh calls for the 50 pct top rate to be abolished ignore political reality. Financially, tax cuts for the poor would do more to stimulate the economy. The real issue is that the tax system is a mess, and a property levy might tax the rich more effectively.
Slim pickings for Slim in $6.5 bln Telmex tender 2 Aug 2011 The Mexican mogul’s America Movil is buying out the remainder of the country’s shrinking fixed-line carrier at a premium valuation relative to its own. That looks like a bad exchange. Without a solid explanation, it’s easy to see why investors sliced $4 bln off Movil’s value.
Pandora ordeal shows IPO charms can wear off fast 2 Aug 2011 The Danish jeweller’s debut avoided several sins investors link with private-equity IPOs. But 10 months later, Pandora has unleashed all manner of horrors on shareholders. Europe’s shaky new-issues market hardly needed reminding how risky it can be to back newly public outfits.
Investors right to shake up S&P parent 2 Aug 2011 An Ontario pension fund and JANA Partners have bought 5 pct of McGraw-Hill and want strategic changes. The $13 bln textbook-to-credit rating group trades at a discount and is already considering its options, but restless investors may force action sooner rather than later.
Kuwait Airways sale may not be a runway success 2 Aug 2011 The state of Kuwait wants to offload a 35 pct stake in its national carrier to a strategic partner. But the airline has been in the red for two decades, the asking price is lofty and bidders risk political pitfalls. Plans for a regional rail link don’t help the business case.
Italy overtakes Spain as euro zone’s main worry 2 Aug 2011 Yields on Italian bonds are soaring as the political vacuum fuels fears the government won’t be able to implement its fiscal plans. Spain is suffering too. But Madrid is tackling its problems, while Rome is stalling. Given the sheer size of Italy’s debt, that’s a major concern.
Loss of bankruptcy card would weaken cities’ hand 2 Aug 2011 In high-stakes talks with unions and bondholders, the threat to file for protection in U.S. court gives local officials leverage. But states are blocking that option, fearing it spooks markets. For teetering local governments, the alternatives may be costly defaults or bailouts.
Kirin pays high price for being late to the party 2 Aug 2011 The Japanese beer group, which like its domestic rivals has belatedly woken up to global M&A, is paying $2.6 billion for 50.45 pct of Brazil’s Schincariol. The brewer, a distant number two, offers a so-so market position - certainly not one worth more than 100 times net income.
Barclays’ targets still look a stretch 2 Aug 2011 Falling bad debts helped the UK bank meet forecasts for H1, and underlying return on equity has jumped to 9 pct. But to achieve its 13 pct goal in 2013, Barclays will need strong top-line growth as well. That’s challenging given euro zone woes and regulatory uncertainty.
Sweeter PR not enough to revitalize M&A deal 1 Aug 2011 U.S. reinsurer Validus may hope that by switching flacks in the heat of battle it can persuade its shareholders to like the bid for $3.2 bln rival Transatlantic they have so far scorned. But messaging doesn’t win deals, numbers do. On that score, Validus isn’t far enough ahead.
Weak U.S. growth could swamp $1 trln deal on cuts 1 Aug 2011 The debt ceiling is set to rise. But Friday’s anemic GDP report casts doubt on the associated deficit reductions. On a simple analysis, if the official 3.25 pct economic growth assumption for 2011-16 falls short by 0.5 percentage point, the expected initial cuts disappear.