HSBC looks like best of a bad bunch 27 Feb 2012 Scale, diversification and good management helped HSBC only so much in 2011. There were bright spots in Asia and parts of the investment bank. But the impact of the euro zone crisis was more powerful. While HSBC is bigger and better, it is, after all, still a bank.
Alibaba.com minorities should hold out for more 27 Feb 2012 The Chinese e-commerce provider wants to buy out public shareholders at a third of the valuation at which it sold shares in 2007. Yet Alibaba.com’s potential has arguably grown since then. The China opportunity remains barely tapped. Founder Jack Ma is getting too big a bargain.
Flashy insider trading suits pale before gray one 24 Feb 2012 Prosecuting the likes of Raj Rajaratnam and, now, analyst John Kinnucan grabs headlines, but an obscure Chicago case could finally draw the line between ill-gotten data and savvy research. That would be a landmark for investors understandably wondering what is and isn’t allowed.
AIG’s $20 bln quarter can’t hide slow recovery 24 Feb 2012 Strip out the huge tax gain and annual return on equity for the core business was a meager 2.3 pct. The one-off may have nudged Treasury’s 77 pct stake into the black. But that’s like robbing Peter to pay, well, Peter. A hurting insurance sector means an AIG upturn is a ways off.
Drilling alone won’t fulfil cheap U.S. oil dreams 24 Feb 2012 By expanding offshore drilling, GOP presidential contenders claim they can bring gasoline prices back to earth. With the US pumping only 9 pct of global oil, its leverage on supply is modest. But the biggest consumer can affect demand. That requires frank talk about conservation.
Crisis fiction doesn’t measure up to strange truth 24 Feb 2012 “The Darlings,” by a former Goldman analyst and corporate lawyer, is one of the first novels set amid the upheaval of 2008. The glossy thriller delves beyond the greed engulfing a rich Wall Street family in scandal. But it fails to top the era’s many real tales of sorrow.
Shadow bank rush leaves periphery behind 24 Feb 2012 European banks are lending less to smaller companies, creating a big opportunity for credit funds, particularly in Europe’s core. But this is still a niche product and growth is being held back in the periphery by hostile laws, high costs and lenders’ economic worries.
Beware of distorted markets 24 Feb 2012 The recent rise in some asset prices might be a sign of economic strength, but it may be the almost mechanical effect of monetary aid from central banks. In a world of huge deficits, negative real rates and too much leverage, financial markets no longer give clear signals.
Lloyds’ return to form will be worth the wait 24 Feb 2012 The UK bank failed to say when dividends may resume, warning instead of a weak operating environment. But its restructuring is going well and the core bank earns high returns. If the UK economy recovers, the investment case is much clearer than at rival state-backed RBS.
Japan’s yen yearning takes dismal corporate turn 24 Feb 2012 Toshiba and Sony are tapping $2.4 billion in loans from a government fund designed to promote M&A abroad and weaken the yen. But companies are spending the money on the kind of foreign forays Japanese firms use to avoid reform at home. Japan can’t afford such misadventures.
Too-coy India prompts Citi’s HDFC retreat 24 Feb 2012 New Delhi has long worried about hot money and fair-weather friends. But the protectionism deployed actually increases the dangers. Give foreign banks more skin in the game and they are less likely to retreat. Citi’s exit from India’s top housing lender tells that tale.
India would gain from letting the lawyers in 24 Feb 2012 Foreign lawyers can now practice from their suitcases, but can’t set up shop. That’s self-defeating. Curbs don’t help native firms - they stunt them. India is missing a chance to capitalise on its best assets: democracy, rule of law and a low-cost, high-skilled services sector.
A Goldman governance fix could serve Blankfein 23 Feb 2012 The bank has resisted separating the chairman and CEO roles for years, but there may now be a convenient reason to do so. Becoming chairman only would allow Lloyd Blankfein to gracefully move on and put the onus on his presumptive successor, Gary Cohn, to carve his own path.
Twitter revolt could march next on proxy season 23 Feb 2012 Social media enabled uprisings in the Middle East, Occupy protests and even blowback against banking fees. A logical next step would be to give a stronger voice to shareholders. And lighting a fire under complacent institutional investors would be a real coup.
Feel-good laws should put practicality before hope 23 Feb 2012 California has struck the right balance making firms like Apple police labor practices at foreign suppliers. But expecting companies to starve African thugs of mining profits is a stretch. Such edicts may have good intentions but are impractical and often counterproductive.
Greek banks head for supranationalisation 23 Feb 2012 The country’s lenders will get a 50 billion euro capital injection as part of the latest bailout. Normally this would mean nationalisation. But Athens’ saviours are putting in place buffers to stop Greek politicians meddling. While sensible, this could cause friction.
Europe picks up as Commission predicts recession 23 Feb 2012 The European Commission is belatedly forecasting recession – but data may now be improving outside the euro periphery. Germany’s Ifo survey has risen for a fourth month and UK export orders have leapt. Global growth and inflation could be firmer than expected.
New US finance sheriff carves out shadowy domain 23 Feb 2012 The Consumer Financial Protection Bureau under Richard Cordray is throwing a regulatory lasso around a motley crew of cash checkers, credit bureaus, money wirers and debt collectors. As our new ’Cordray Index’ shows, they’ve had a wonderful financial crisis. That may change.
RBS’s unsustainable situation needs a bold plan 23 Feb 2012 The state-backed UK lender remains a financial and political embarrassment. The question is how to turbo-charge the shares and engineer a clean exit back to the market. Here’s an idea: get Brussels to ease curbs on dividends imposed with RBS’s rescue in 2008, and sell its U.S. arm.
Gold’s bull run is tired but maybe not over 23 Feb 2012 The yellow metal’s price is up recently, but remains 8 percent below the September peak. A decade-long bull run is looking weary – ultra-high prices are depressing jewellery demand. But investment demand will stay strong as long as finance looks abnormal. Gold could go higher.
RBS pulls off tricky bonus balancing act 23 Feb 2012 The bonus pool in the investment bank is sharply down. That’s politically convenient. But the comp ratio has shot back up to 41 pct, making RBS look like a competitive payer. Adjust for some quirks in the numbers and in reality not much has changed overall from last year.
Politicians’ pleading on Volcker rule looks foolish 23 Feb 2012 The finance ministers of Japan and the UK are making a big deal about new U.S. rules against proprietary trading. They want to keep American banks trading foreign sovereign debt. But if there is a problem, it’s a minor one. Politicians must have better things to worry about.
Veolia board coup attempt just a bad French farce 23 Feb 2012 Nicolas Sarkozy and Henri Proglio, the former chief of Veolia, are reported to be pressuring the water company’s board to oust current CEO Antoine Frerot. Whatever the latter’s merits, the episode looks to exemplify some of France’s worst political and business habits.
UPS could be bidding against itself for TNT 22 Feb 2012 The huge available synergies mean the $73 bln U.S. parcel giant could sweeten its takeover offer for its Dutch rival. TNT shareholders are for now expecting at least 9 pct more. But with rivals FedEx and DHL inhibited in varying ways, they may not get the bidding war they’d like.
GM’s former finance arm better suited for IPO 22 Feb 2012 The business now known as Ally is now considering a sale - and it would fit well with some banks or even its previous owner. But the ResCap unit remains troubled. And at $25 bln, it’s no easy deal in this environment. Waiting for an opening in public markets is a better option.
Troubled princeling poses test for new China 22 Feb 2012 Bo Xilai, one of China’s most colourful politicians, has fallen under a cloud, sparking an unconfirmed report he may have resigned. Outsiders should care, because what happens to Bo may give an insight into how much - or how little - Chinese politics have changed.
Christie imperils reformist mojo and state coffers 22 Feb 2012 The governor’s budget paints a rosy picture of the Garden State, but overlooks thorny issues like underfunded pensions. A politician planning ahead for an election is no surprise, yet leaves Chris Christie putting New Jersey’s future - and a tough-talking reputation - at risk.
Obama’s corporate tax plan is a good start 22 Feb 2012 The president’s proposal to reduce the rate paid by companies to 28 pct and eliminate many loopholes gets the debate moving in the right direction. But there’s plenty of room to improve the plan, too. For one thing, it would make global competition tougher for domestic firms.
AT&T board lets CEO off hook for bad call 22 Feb 2012 Randall Stephenson’s total pay fell to $22 mln last year from $27 mln in 2010. That’s a light slap given the $4 bln break fee for the badly botched bid for T-Mobile USA. Investors can show their displeasure with directors for failing to hold the boss accountable – and should.
Ethical economy: Don’t obsess about GDP measures 22 Feb 2012 The official statistics show the average American was 103 pct richer in 2011 than in 1971. Wealth has increased, but this sort of precision is spurious. It is a mistake to obsess about the numbers and, worse, for rich countries to steer economic policy according to them.