Ford’s profit fender-bender not as bad as it looks 27 Jan 2012 Falling a fifth short of Wall Street’s Q4 estimates dinged the automaker’s shares. But Ford’s balance sheet and product line-up are strong. And there are more cost cuts coming. Even allowing for the challenges its overseas operations face, Ford’s stock should be shiny again soon.
Year’s biggest M&A deal shines light on spinoffs 27 Jan 2012 Eastman Chemical, once part of just-bankrupt Kodak, is spending $4.7 bln on Solutia, a rival that went bust in 2003 after splitting from Monsanto. With spinoffs so popular these days, the deal is a timely reminder for investors that not all carve-up progeny are created equal.
Chevron still safest oil bet despite profit miss 27 Jan 2012 Knocking $6 bln off Chevron’s market value looks like an over-reaction. The hit makes the second-largest U.S. oil company even cheaper compared to rivals. The recent weakness in refining will pass, and the firm has strong finances and the sector’s lowest exposure to cheap gas.
How ECB could help solve Greek deadlock – for now 27 Jan 2012 The European Central Bank is under pressure to join private creditors in taking a loss on its Greek bonds. But if the ECB merely agreed not to make a profit, Athens could save up to 15 bln euros. That would clear the way for Greece’s next bailout – and buy politicians some time.
De-globalisation of finance looks here to stay 27 Jan 2012 The crisis has reversed a decades-old trend of increasingly international finance. Shrinking banks are shedding foreign businesses, while regulators and governments are encouraging a more national identity. The splintering so far isn’t hugely harmful, but protectionism is a risk.
Hollande’s plan points France in wrong direction 27 Jan 2012 The socialist presidential candidate does endorse worthy fiscal targets, but his plan to meet them is long on tax hikes and short on spending cuts. His policies would not tackle France’s biggest economic problem, a lack of competitiveness. They might make it worse.
Japan’s trade deficit is not merely unlucky 27 Jan 2012 Japan’s 2011 catalogue of disasters drove up fuel imports and put trade in deficit for the first time in 31 years. But the deficit still matters. With Europe weakening and the yen strong, Japan can’t afford to rely on exports. The debt-ridden economy must do more to help itself.
Private equity energy herd has ample room to graze 26 Jan 2012 Successes like KKR’s five-bagger on East Resources have sped up the sheep-like migration to the sector. That will make such returns hard to replicate. And it’s not obvious how the buyout playbook applies. But hot shale and distressed gas should keep energy pastures green.
AOL pinned down by girly startup on a shoestring 26 Jan 2012 The fading online firm hopes to regain its shine by focusing on the female demographic - an audience often ignored in male-dominated Silicon Valley. The plan has yet to pan out. Yet startup Pinterest is using the same strategy to grow rapidly - and at a fraction of the cost.
EU’s latest bank recap may help 2008 victims 26 Jan 2012 Euro zone lenders have to raise 115 billion euros in extra capital, if necessary from governments. The European Commission may help by relaxing penalties for receiving state aid. That could give banks bailed out in the last crisis scope to tweak painful restructuring plans.
Britain is ducking the key question on high pay 26 Jan 2012 There are two reasons to cut bosses’ pay: shareholders suffer and the gap between the top and the middle is too large. In its pay proposals the UK government is focusing on the first issue, but the second is more important – and ministers are dodging it.
Iran’s first move on oil ban would backfire 26 Jan 2012 Oil prices may shoot up if Tehran abruptly cuts off the EU ahead of a full embargo. This would likely trigger a release of emergency stocks, and increased production from Saudi Arabia. But Iran won’t win much from higher prices, and would be the first to lose from a glut.
Dodgy M&A lawsuits are putting useful ones at risk 26 Jan 2012 U.S. companies now face more deal litigation than “stock-drop” cases, making efforts to curb the former tempting. But among many dubious suits, some expose suspect deals like the J Crew buyout. Investors might benefit more from a little lawyer restraint than ham-handed reform.
Uninvited guest, Mr 99 Percent, crashes Davos 26 Jan 2012 The rich and the powerful at the World Economic Forum are haunted by the shadow of the unemployed and disenfranchised. The specter is in the panels, hallway conversations and political speeches. What’s less clear is whether the gathered plutocrats can deal with income inequality.
Who will pay for the euro firewall? 26 Jan 2012 Berlin is still against increasing the size of the euro zone’s warchest. But the rest of the world doesn’t want to raise the IMF’s firepower unless the zone beefs up its own. If a deal is done, it seems likely that the Europeans will pick up 70-80 pct of the tab.
Ireland’s bond swap shows how self help can work 26 Jan 2012 Greece is defaulting, Portugal may follow, but Ireland is raising funds. Dublin’s 3.5 bln euro bond swap eases fears of a liquidity crunch and will help the country return to markets during its IMF programme. It’s a step closer to normality for Ireland, and Europe.
Greenhill proves stronger than 2011 knocks suggest 26 Jan 2012 The boutique’s year was marred by people quitting, a panicked response and the tragic death of two senior bankers. But its Q4 results were solid and annual advisory revenue grew as much as at bigger rivals. That should give comfort that Greenhill is well placed to compete.
Iraq should cut down telco listing ambitions 26 Jan 2012 The country’s three big telecom operators must list to meet their licence agreements. But the $5 bln move would overwhelm Iraq’s tiny exchange. With little need for cash, the companies are stalling. If Iraq wants to see action, it should at least cut the offer size.
Fed doubles risk of being whipsawed by market 25 Jan 2012 By extending its zero-rate commitment from about 18 months to three years the U.S. central bank has doubled the risk that markets may surprise it. Job creation, Bernanke’s departure or inflation could force a damaging reversal - or lead the Fed to drag its feet to avoid one.
Einhorn case strikes mild blow against cronyism 25 Jan 2012 The UK’s FSA has fined Greenlight hedge fund boss David Einhorn, though the rationale is fuzzy. He declined to hear inside information - but still spoke with Punch Taverns and its broker, then sold the stock. If nothing else, the case exposes cozy practices in financial circles.
Banks gain unlikely allies in Volcker rule battle 25 Jan 2012 Canada and Japan are worried the U.S. crackdown on prop trading will undermine their government bond markets. It’s another example of the unintended consequences of regulation. But it’s also hard to see why U.S. taxpayers should subsidize borrowing rates for foreign states.
Obama offers more anti-fraud bark with little bite 25 Jan 2012 In his State of the Union speech, the president called for a new financial-crimes unit and harsher penalties. But a similar task force already exists, and punishment is plenty tough. What’s needed is resources for complex cases against Wall Street, not more laws and bureaucracy.
Even unity can’t solve U.S. foreclosure problem 25 Jan 2012 Banks, as well as Fannie, Freddie and FHA, want to unload an expected 3.2 mln repossessed homes. Investors want to buy them and the regulator wants to help. Despite this rare general accord between Washington and Wall Street, financing and competition are proving tough obstacles.
Weaker earnings are a burden equities can handle 25 Jan 2012 Forecasts for corporate earnings growth have proved too bullish, again, and threats posed by the slowing world economies deepen the gloom. But world GDP is expanding and corporates are likely to avoid the kind of earnings meltdown that wreaks lasting damage to share prices.
Roche’s resolve on Illumina will be tested hard 25 Jan 2012 Investors reckon Roche’s $5.7 bln hostile bid for the U.S. gene-sequencer will be improved. That’s sensible: the Swiss drugmaker has sweetened deals before, Illumina is a long-term strategic bet and counter-bidders could emerge. To win, Roche may have to swallow a super premium.
UK’s problem: it’s the best in Europe 25 Jan 2012 British GDP fell in the fourth quarter and will grow only slowly this year. Even that will be stronger than anywhere in Europe, the IMF predicts. UK government cuts hurt but the euro zone crisis is a bigger problem. It deters exports and endangers recovery.
Ethical economy: Stop talking about capitalism 25 Jan 2012 Names matter and capitalism has become a bad one for the modern economy. It’s too narrow to describe the bureaucratic, competitive, regulated, innovative, collaborative and financial system we live in. Better to talk about the social market model.
Conoco must prove tortoise can win oil race 25 Jan 2012 In one of its last quarters as an integrated U.S. major, Conoco delivered 66 pct profit growth. But production fell ahead of a spin-off that will pit its exploration arm against a faster-growing peer set. Though it’s buying more dynamic assets, the valuation will depend on quality.
UniCredit saga shows EU banks’ strange new world 25 Jan 2012 Despite a rocky start, the Italian bank’s 7.5 billion euro rights issue looks to be on course. The European Central Bank has eliminated worries about short-term funding. But a full recovery will come when UniCredit can issue plentiful senior unsecured debt. That’s not close.
Obama’s appeal to 99 pct won’t sway a key minority 25 Jan 2012 In his last State of the Union address before facing voters, the U.S. president outlined a radical agenda. He would tax millionaires more, target big banks and punish outsourcing. The ideas will resonate, but not with Republicans in Congress. They won’t let Obama accomplish much.