GDP-linked debt could make finance safer 6 Jan 2012 Ordinary fixed-interest securities are prone to default. Inflation-linked debt gives investors few of the benefits of economic expansion. Equities bring exposure to growth but are much more risky. Bonds with payments that vary with GDP could give investors a happier medium.
For a contrarian bet, try China’s Las Vegas 6 Jan 2012 Macau was a winner in 2011. Gaming revenue grew 42 percent. As China gets richer, so will the garish, casino-filled enclave. An economic slowdown will hit casual gamblers, but high-rollers matter more. Macau will thrive as long China’s inequality and corruption go uncurbed.
Anything but Treasuries 5 Jan 2012 Uncle Sam’s bonds were big winners in 2011. Yet safe-haven manias have squeezed just about all the juice from Treasuries. In 2012, investors would be wise to peek outside the bunker. They’ll see plenty more fruitful ways to stay safe.
China’s lead in patents masks lag in innovation 5 Jan 2012 The rising economic giant probably topped the world as a place to file applications in 2011. But the dodgy quality of many patents and foreign activity contradict the idea of a surge in homegrown ingenuity. As it has in manufacturing, China will catch up - but it’s not there yet.
Fiat may find Chrysler deal is ticket out of Italy 5 Jan 2012 The Turin carmaker will spend 2012 working out how to acquire the rest of the Detroit firm after raising its stake to 58.5 pct. Depending on the structure, Fiat may become Italy’s first truly global multinational - but only if the Agnelli family puts pragmatism over sentimentality.
Spain is still struggling with its deficit maths 5 Jan 2012 The new conservative government is scrambling to cut the deficit from more than 8 pct of GDP last year to 4.4 pct in 2012. The adjustment will be more difficult if the economy worsens. Madrid is taking the right steps, but there is no room for complacency.
Kodak can seek solace in Barnes & Noble’s plight 5 Jan 2012 The iconic film company is headed toward bankruptcy, ostensibly because it didn’t keep up with the digital times. But the bookseller’s popular, fast-growing e-reader couldn’t prevent a huge profit warning either. Even surfing the creative destruction wave can end in wipeouts.
Even the Fed is giving up on Fan/Fred reform 5 Jan 2012 Its suggestions to help U.S. housing include turning tarnished mortgage giants Fannie Mae and Freddie Mac into huge landlords and making them go easy on underwater borrowers and banks. Ben Bernanke once said reform was urgent. With ideas like this he must have changed his mind.
2012: another year of living euro-dangerously 5 Jan 2012 Europe will keep the world on edge in 2012. More will be needed to shore up Italy and keep the single currency more or less intact. But the U.S. should keep recovering. And China and emerging markets may cut rates and help their consumers – and global rebalancing.
Currency deals put Swiss central bank on the spot 5 Jan 2012 SNB chairman Philipp Hildebrand’s wife swapped 400,000 Swiss francs for dollars weeks before the currency was pegged to the euro at a lower rate. The bank doesn’t see anything wrong with this. But the affair leaves a bad taste, and will embolden the SNB’s critics.
Short-selling could give China long-term boost 5 Jan 2012 China may bolster short-selling by setting up a new securities lending exchange. More shorts would help curb excessive speculation and rekindle interest in the market. However, since Beijing is likely to remain firmly in control, expect things to move slowly.
Campaign fever to drive Asian economies in 2012 5 Jan 2012 It’s not just the United States: leadership change looms in most of Asia this year, encompassing a third of both the planet’s population and its GDP. Income inequality set the agenda in 2011. Now pro-growth populism is likely to rule instead.
Bankers lack leverage this bonus season 4 Jan 2012 A few at Jefferies seem to have got their way. But sluggish revenue and new regulation mean virtually all of Wall Street needs to cut costs. With no banks in major hiring mode, only the biggest rainmakers can talk their way into healthy payouts. Most don’t have a leg to stand on.
Exxon’s Japan sale may not show downstream doubts 4 Jan 2012 With rivals like Conoco splitting off refining, investors are on the lookout for signs the Texas titan will join the trend. Exxon’s likely $5 bln exit in Japan isn’t a clear one. The group recently sank $25 bln into downstream projects. It may merely be ditching a weak asset.
Obama’s recess appointment endangers recovery 4 Jan 2012 The president is bypassing Congress to install the first chief of the new consumer financial watchdog. The move shatters Obama’s already fragile relationship with Republicans. A full extension of the payroll tax cut is now unlikely, which imperils the economy’s shaky progress.
For Obama’s 2012 hopes, it really is the economy 4 Jan 2012 A reasonably reliable forecasting model puts the U.S. president with just over half the two-party vote in November. The Intrade electronic market gives him a 52 pct chance of re-election. A Breakingviews calculator shows how economic growth in 2012 could tip the result.
Romney’s Iowa win gives markets reason to exhale 4 Jan 2012 Dark horse Rick Santorum nearly edged out Mitt Romney in the first U.S. Republican presidential caucus. Though the vote was tight, it leaves Romney, with his conventional and predictable economic policies, an even clearer front-runner for the eventual nomination.
UniCredit cash call scariest for other euro banks 4 Jan 2012 The Italian lender’s shares slumped after pricing its 7.5 bln euro rights issue at a predictably steep discount. But UniCredit will get its cash. If the selloff persists, those sweating will be the underwriters who are on the hook – and rival banks planning similar cash calls.
Anglo American risks reaping a Chilean whirlwind 4 Jan 2012 The London-listed miner may think it can win a $2 bln dispute with state-owned Codelco over a prized mine. Still, the stakes are high and the case would be heard in Chile. Defeat would be a big blow for Anglo and CEO Cynthia Carroll. But a face-saving compromise looks possible.
Yahoo’s gain is eBay holders’ pain 4 Jan 2012 The Internet company has nabbed the head of eBay’s PayPal as its new CEO. That’s good for Yahoo, but less so for eBay’s shareholders. The auctioneer’s payments business is a gem that could grow faster on its own. Thompson’s walk suggests such a split isn’t coming any time soon.
China’s M&A dragon will blow hot in 2012 4 Jan 2012 Falling prices and tight credit mean state-backed buyers can play to their strengths. Two newly minted oil deals, and Three Gorges’ Portuguese swoop, show Beijing’s burgeoning appetite. Big name bids may follow, while China’s savers and consumers unwittingly foot the bill.
France is heading for a major spring crisis 4 Jan 2012 Socialist presidential favourite François Hollande seems ill-equipped to deal with the financial crisis. And if re-elected, Nicolas Sarkozy might face a hostile parliament. Add recession and some scandals, and France could look like Berlusconi’s Italy, without the bunga-bunga.
Korean spending spree sets right tone 4 Jan 2012 Seoul plans to blow most of its budget in the first half and is likely to end the year in deficit. It might seem an election-year stunt. But promoting domestic jobs instead of using a weak currency to boost exports is a path the rest of Asia should follow.
EU can’t afford to be soft on Hungary 4 Jan 2012 Too much is at stake to go easy on Budapest. Hungary’s current authoritarian policies would disqualify it for EU membership. The country needs an IMF-EU bailout. The rescuers should keep the pressure on populist Prime Minister Viktor Orban, even at the risk of a major clash.
Fat cats have little to fear from Cameron curbs 4 Jan 2012 The UK prime minister wants the rich to feel the nation’s pain. Good luck to him. No one can fully explain why bosses’ rewards started to rise in the 1980s, or why they fell after the Second World War. Cameron’s half-hearted nudging is unlikely to turn the social tide.
Federal Reserve sets itself up for a messy exit 3 Jan 2012 The U.S. central bank’s decision to forecast overnight interest rates has little downside in the short term. An implicit target should keep rates low and dependable. But it will tie the Fed’s hands tightly, something it could regret when the economy forces a change in course.
RIM needs more than third hand on steering wheel 3 Jan 2012 The BlackBerry maker is hurtling in the wrong direction. Joint bosses Jim Balsillie and Mike Lazaridis haven’t been able to change course. But inserting a chairman while leaving both men as co-CEOs seems more likely to bring further bickering than a successful new direction.
Investment banking dreams may die in 2012 3 Jan 2012 Many firms cut jobs and slashed pay in 2011. But they’ll have to do more in the coming year to have any hope of boosting returns in the face of regulatory pressure and market headwinds. Smaller players like RBS, SocGen and Nomura may even conclude they’re better off quitting.
U.S. shale exuberance may need to be tempered 3 Jan 2012 France’s Total and China’s Sinopec kicked off 2012 with $4.5 bln of deals to drill for U.S. oil and gas. Vast resources and technology should keep attracting foreign buyers. But the reaction by Ohio officials after several earthquakes suggests political risks will intensify.
Uncle Sam’s gas exports could sink global prices 3 Jan 2012 If energy firms win official approval, the U.S. may one day export up to a fifth of its gas – enough to shift the balance of energy power elsewhere in the world. But exporters risk undercutting the buoyant global prices that justify the huge capital cost of LNG projects.