Machines beat humans as Man Group stumbles 28 Sep 2011 The world’s largest listed hedge fund saw its assets shrink 8.5 percent in the current quarter, sending its shares tumbling. While its computer-driven trading fund is recovering, star managers have struggled. It’s a reminder that in volatile markets, fat fees are hard to justify.
Europe’s firefighting still faces ECB hurdle 28 Sep 2011 A comprehensive plan to solve the euro zone’s sovereign debt crisis depends on the ECB’s approval. Any solution, be it leveraging the EFSF or turning it into a bank, will only be partial if the ECB doesn’t back it.
Under Putin’s "stability", Russian uncertainty 28 Sep 2011 Russia’s politics will not become more stable just because Vladimir Putin is running for president again. The abrupt sacking of Finance Minister Kudrin is yet another lesson in Russia’s unpredictability. This reflects deeper factors that won’t simply vanish after the election.
Anna Nicole gives Wall St. a lift from the beyond 27 Sep 2011 The late Playmate’s U.S. Supreme Court case made it easier to shift suits from bankruptcy to federal court. That may help JPMorgan’s case over Lehman’s demise and ding the Madoff trustee’s search for redress. The centerfold may have given as much to the law as to Playboy readers.
ECB must be euro zone’s lender of last resort 27 Sep 2011 The European Central Bank must prevent contagion from the insolvent periphery. It should clearly state its willingness to buy sovereign bonds on the secondary market now and at all future times of crisis. Governments should not rely on the EFSF.
Bank funding tightens noose around Greek necks 27 Sep 2011 As the country nears default, deposits are flowing out of Greek banks again. Worse, collapsing government bond prices are making it harder to borrow from the ECB. That leaves lenders dependent on the Greek central bank – increasing the strain on struggling domestic finances.
Latest tech valuation evokes bad dot-com memories 27 Sep 2011 Tumblr’s funding round values the popular blogging site at $800 mln. The service is growing fast, but there’s precious little revenue. While that makes profitless dot-coms relying on sales multiples look good by comparison, valuing eyeballs again is bad for tech.
UK rebalancing is a generation’s work 27 Sep 2011 Layoffs at Britain’s largest manufacturer sound like “de-balancing”, but BAE’s woes are more a sign of how hard it is to move the economic centre. Finance-bashing may be fun for politicians, but isn’t helpful. Rebalancing economies and societies requires much more than slogans.
Richest Brazilian talks his book on protectionism 27 Sep 2011 Eike Batista thinks the U.S., like Brazil, should shield young industries from overseas competition. But it’s hard to take him very seriously when it’s his wallet talking. Batista’s oil rig-building firm, OSX, is placed to be a big winner from his country’s local content rules.
China’s property market faces crisis of trust 27 Sep 2011 Hangzhou developer Greentown is under scrutiny for using trust structures to funnel debt into its projects. Trusts have spread rapidly to become a critical source of funding for property companies. But a crisis of cash flow, or confidence, could see a messy unravelling.
Commodity meltdown is good stimulus 27 Sep 2011 The fear of bad economic news is the standard explanation for falling raw material prices. But price drops could kindle stronger growth. They are like a tax cut in weak Western economies, and ease inflation in emerging ones. Policymakers shouldn’t undo this healthy stimulus.
Rise of red capitalists need not be bad for China 27 Sep 2011 China’s richest man, Liang Wengen, may get a seat on the Communist Party’s elite central committee. It smells of crony capitalism, but there could be advantages to giving the private sector a bigger role in government. This may even help China nurture entrepreneurship.
Spain should not rush savings bank sales 27 Sep 2011 The country’s bank rescue fund is preparing to offload a bust lender with the help of generous guarantees. But a deal would transfer any upside to buyers, while leaving the state on the hook for most future losses. With more bank nationalisations to come, Spain should hold on.
P&G’s Pringles partner warrants careful taste test 26 Sep 2011 The consumer giant wants investors to swap P&G stock for shares in Diamond Foods as part of a $2.4 bln deal to offload the chips brand. But financial wrinkles and angry walnut growers are among possible concerns. P&G holders may want to check the contents of the package closely.
Global SWAT team needed to close tax loopholes 26 Sep 2011 Tax-based financing deals like those between U.S. and UK banks being targeted by U.S. authorities use legal mismatches to reduce tax bills. They are lucrative, but have no economic value. Such questionable arrangements might be best tackled in a focused multilateral forum.
U.S. courts make death arbitrage a tougher game 26 Sep 2011 Cashing out life insurance can keep a policyholder afloat if he suddenly needs the cash. But an active secondary market tempts some to buy insurance just to sell the policy on. Delaware judges have wisely made such ghoulish bets on life expectancy easier for insurers to kill.
UBS shouldn’t wait to put Weber in the chair 26 Sep 2011 The former Bundesbank chief is not due to take over as chairman until 2013. But the rogue trading loss and departure of chief executive Ossie Gruebel has left the Swiss bank reeling. Provided his former employer agrees, UBS should put Axel Weber in charge as soon as possible.
Pro-cyclical Wall Street protesters missed moment 26 Sep 2011 Those marching against finance have failed to build on the rallying cry that began five years ago. Since the crisis started, shareholders and regulators have already pummeled the banks. These rabble-rousers should have arrived earlier - or waited for greed to truly return.
Berkshire buyback a move best left to Buffett 26 Sep 2011 The Sage’s conglomerate has taken the highly unusual step of repurchasing shares, at up to a 10 percent premium over book value. It doesn’t mean it’s a strategy to be followed, though. If shares of other companies were truly undervalued, Berkshire probably wouldn’t be buying its own.
Economists shouldn’t bask in woes of physicists 26 Sep 2011 Theorists on production and consumption, often jealous of their hard-science counterparts, may be tempted to gloat if neutrinos really do travel faster than light. But ignorance by economists is more harmful. It contributed to the financial crisis and subsequent policy paralysis.
Gates helps put Tobin tax back on G20 agenda 26 Sep 2011 Support for a financial transaction tax from America’s richest man won’t sway opponents like the UK. But it makes it easier for France and Germany to go ahead, even if the funds raised aren’t all used for aid, as Gates hopes. Curbing financial churn may prove just as alluring.
IMF’s dovish turn may be seen as favor to the rich 26 Sep 2011 The fund has long been a tough schoolmaster on fiscal probity. This softened after 2008 and now the IMF is proposing still more stimulus in some nations. This makes economic sense but opens the fund to charges that it pushes Keynesianism for the rich and monetarism for the poor.
Equities’ hot money can draw comfort in cold stats 26 Sep 2011 Investors fear the worst, and may not snap out of their funk until prices touch rock bottom. So stocks could shed another 15-30 percent. But when the world economy eventually recovers, shareholders could kick themselves for not taking advantage of this year’s cheap prices.
Putin’s third term undermined by Kudrin’s exit 26 Sep 2011 Russia’s finance minister has dismayed investors by saying he doesn’t want to serve in the next cabinet. Pique at not getting the premier’s job may be to blame. But Kudrin’s decision also reflects policy tensions. Without him, it will be tougher to keep Russia’s finances steady.
Cash beats commodities as markets panic 26 Sep 2011 Supply and demand don’t matter when investors dive for cover. Commodities were soaring on prospects for Asian growth, a sinking dollar and inflation. But fear that Europe’s crisis will compel investors to liquidate means gold, silver, oil and copper are losing their lustre.
Gulf liberal shift is more than sop to Arab Spring 26 Sep 2011 Saudi is giving women the right to vote. It follows the UAE’s decision to expand the electoral roll for its recent elections. These cautious democratic steps will help insure stability. But they’re also crucial for introducing the taxes required to reduce dependence on oil.
Time to close China’s VIE loophole 26 Sep 2011 No-one benefits from the fuzziness around the VIE, a structure that lets foreigners take quasi-ownership of Chinese companies in restricted sectors like the web. Their usage is spreading. VIEs make regulators look weak, and investors risk losing their shirts. Clarity is needed.
Europe can protect itself against a Greek default 26 Sep 2011 A three-pronged plan is required to fight contagion: 175 bln euros for bank recaps; extra liquidity, again for banks; and a beefed-up bailout fund to help Italy, if needed. Europe looks like it is moving in this direction. But, as always, the fear is that it will be too timid.
Putin’s presidential bid step backward for Russia 24 Sep 2011 The prime minister’s decision to run for president again, in place of his more reformist protégé Dmitry Medvedev, dashes hopes for reinvigorating the country’s economy, society and politics. Russia can look forward to a long period of creeping stagnation and seething discontent.
Gruebel’s principled departure leaves UBS adrift 24 Sep 2011 The man brought in to save the Swiss bank felt the need to take responsibility for the rogue trader. But interim boss Sergio Ermotti only just arrived in April. If an estimable veteran like Gruebel couldn’t rid the deep rot from UBS, the future of the investment bank looks dim.