Shell pays up for a foothold in Mozambique gas 22 Feb 2012 The oil giant has offered $1.6 bln for gas explorer Cove Energy – a 70 pct premium but loose change for Shell. The assets are attractive and Shell has the know-how to exploit them. If Asian gas prices stay high and exploration projects deliver, the toppy price could be worth it.
BP’s Deepwater catharsis finally on the horizon 22 Feb 2012 A minority partner’s deal with the U.S. government is a promising sign ahead of a critical civil trial opening on Feb. 27. Extreme financial penalties look priced into BP stock whatever the verdict. So too is a big management discount. There’s lots of upside if BP isn’t thwacked, and its board restores credibility.
China data show slowdown that Asian markets ignore 22 Feb 2012 Investors are using newly minted euros and yen to buy shares in Asian exporters. But Chinese manufacturing has been slowing for four months, with exports especially weak. Markets look vulnerable to bad news from Europe or the U.S. – or to surprises from Asian central banks.
Alibaba $2.5 bln buyout looks opportunistic 22 Feb 2012 The 46 pct premium founder Jack Ma has offered to take the Chinese e-commerce company private is decent, but the shares are far below former highs. Minority shareholders have few options, but Ma’s wily dealmaking may haunt him if he returns to float his crown jewel, Taobao.
GM tie-up could keep Peugeot family at the wheel 22 Feb 2012 The French carmaker had to do something after burning through 1.5 bln euros of cash in six months. It needs greater scale to take on Volkswagen. Fiat was a potential partner. But a non-equity tie-up with GM is a way to let the Peugeot family to keep control.
Happy stock highs belie bonds teetering on edge 21 Feb 2012 With the Dow Jones industrial average crossing the 13,000 level for the first time since before the crisis and Britain’s FTSE 100 index headed toward 6,000, equity investors are smiling. Many may be wondering if the run can be sustained. But debt buyers may face the real danger.
Deloitte caught in Diamond Foods’ glare 21 Feb 2012 Just a few months ago, the snack food firm’s auditor was publicly shamed by its U.S. regulator for past failings. Diamond’s misstated payments to nut growers call into question other facets of the company’s books. Deloitte could be headed back into the accounting hot seat.
Frannie boss shoots more good ideas into the wind 21 Feb 2012 All credit to the FHFA for keeping reforming the money-losing mortgage agencies on the agenda. The watchdog has some workable goals for reducing Fannie and Freddie’s distorting influence and bringing in more private capital. But without action from Congress, change is a ways off.
Greek rescuers rise haltingly to historic occasion 21 Feb 2012 The latest deal with Athens falls short, like all its predecessors. But the inadequacies should not be seen as a European failure. The world is rising to the most profound challenge of modern finance. The response may be slow, but it is authoritative and just.
IMF strategically withdraws from Greek campaign 21 Feb 2012 The agency played a big role in the first bailout of Athens but will provide just 13 bln euros more for the second, enough to service existing loans. With the EU taking greater responsibility for the Greek mess, the IMF may find it easier to build a broader euro-zone firewall.
Steve Wynn puts favorable house rules to test 21 Feb 2012 The gaming magnate’s feud with his longtime partner just became a casino battle royale. Wynn Resorts accused Kazuo Okada, its largest shareholder, of bribery and forcibly cashed him out at a steep discount. The pachinko king must know rules often get tilted in the house’s favor.
"Coming Apart" diagnoses dystopia but lacks cure 21 Feb 2012 Charles Murray’s latest book traces the division of U.S. society into two distinct classes - the elite and the rest. He persuasively argues the latter group has lost its traditional virtues and sees a European future. That would be a happy, if optimistic, outcome for the economy.
Greek deal makes best of a bad job 21 Feb 2012 It would have been better to have bitten the bullet earlier and Athens is still unlikely to pull through without further economic and political shocks. But the debt restructuring cum bailout keeps the pressure on Greece and has probably defused a wider blow-up.
Apple needs more than a good lawyer in China 21 Feb 2012 A trademark battle is a concern, but more serious are Apple’s falling market share and bad press over factory conditions. A new strategy may be due. Apple needs better distribution, and tighter control of production. Buying a stake in Foxconn, its biggest supplier, might help.
Olympus investors shouldn’t bleat about its banks 21 Feb 2012 Investors are upset that the company’s banks want to appoint a CEO to pursue a break-up. The snag is that Olympus’s banks are also longstanding shareholders, which gives them special rights. New investors who have bought in opportunistically should have done their research.
China’s Ten Kingdoms era has lesson for euro zone 21 Feb 2012 The 10th century division of China into squabbling regimes brought unbalanced trade and rival currency debasements. But then came the unifying Song dynasty, with monetary stability and economic growth. Fragmentation can be more unstable than unity – a lesson for Europe today.
Higher oil price should burn itself out 20 Feb 2012 Robust demand – created by a reviving U.S. economy, loose money and vigorous Asian buying – is pushing Brent above $120 a barrel. Supply fears may keep trading volatile. But absent a serious dust-up with Iran, higher prices should be mostly self-correcting.
Iraq offers investors ultra-high risk-reward bet 20 Feb 2012 When war ends, investment opportunity begins. There has been enough peace in Iraq for the Baghdad bourse to rise 32 pct over two years, outperforming bigger Middle East rivals. The risks are huge, but reconstruction, demographics and oil make this frontier market tempting.
Eircom’s top lenders will soon call the shots 20 Feb 2012 The debt-laden Irish telco’s last owner walked away, and an auction’s unlikely to find a new one. A $2 bln debt bonfire beckons, which would leave top-ranking lenders in control. Depressed valuations across the sector suggest junior creditors will struggle to salvage anything.
Lloyds’ bonus malus is test for clawbacks 20 Feb 2012 Ex-CEO Eric Daniels and others at the UK bank may be forced to forgo previously awarded bonuses. The clawback principle, introduced after the 2008 crisis, is sound and the move looks like justice. But any arbitrary application for pre-crisis sins would be problematic.
China needs bonds more than easier bank lending 20 Feb 2012 Credit is tight but telling banks to lend more won’t fix that. Instead, liberalising China’s bond market could get cash to firms shunned by lenders, and give savers an alternative to property. While Beijing is making progress, it may be loath to make life too hard for its banks.
Why 100 pct FDI could save India’s Kingfisher 20 Feb 2012 Mounting debts and deteriorating service levels are bringing the airline to the brink. The can has been kicked further down the road, but eventually something must give. New investors are in very short supply. A proposal to allow 49 pct FDI does not go far enough.
Hugo Dixon: How to help the Syrians 20 Feb 2012 What started as a non-violent struggle against the Assad regime is descending into sectarian civil war which is drawing in foreign powers. The best way of minimising carnage is to revert to a non-violent campaign. Even if that’s unlikely, outsiders shouldn’t inflame the situation.
UPS love letter validates TNT’s earlier break-up 19 Feb 2012 Long-term suitor UPS made a $6.4 bln proposal to the Dutch courier just before Valentine’s day. For now TNT is being rightly coy. And FedEx may yet disrupt the courtship. But clearly TNT’s break from dowdy domestic mail unit PostNL is achieving the desired effect.
Citi, BofA prove too big to punish harshly 17 Feb 2012 The banks will pay fines - $158 mln and $1 bln respectively - to settle claims they defrauded Uncle Sam through mortgage insurance. Citi even admitted it. Its awful quality control lapses make a ban on government business seem in order. But Washington needs big banks too much.
Rickonomics don’t add up but could win U.S. votes 17 Feb 2012 The GOP’s problem is that free-market capitalism seems to be a minority enthusiasm. Rick Santorum waters it down even further with his approach, emphasizing budget-busting manufacturing and family-oriented tax policies. While his math doesn’t work, it may still prove popular.
ECB Greek loss dodge heralds end of bond buying 17 Feb 2012 The ECB will avoid losses on Greek bonds through a legal manoeuvre. Such special treatment will not please the bondholders asked to take losses on their Greek debt. That’s bad for other countries whose debt the ECB owns. And it will make bond buying difficult in the future.
Political flameout shows risks hidden in China 17 Feb 2012 Rising star Bo Xilai has suffered an embarrassing but mysterious setback. Compare that to Hong Kong would-be leader Henry Tang. His problems are as mundane as Bo’s are opaque. When it comes to political risk and transparency, investors in the PRC are basically flying blind.
Five phases of China hard-landing denial 17 Feb 2012 China watchers have yet to face up to the country’s real estate problems. While politicians fret about too-expensive houses, economists still think 2012’s GDP will grow 8.3 percent. Faith in China’s ability to avert a property-led credit crisis rests on shaky assumptions.
Congress may protect its own insider traders 16 Feb 2012 The SEC could soon have far greater license to pursue insider trading on Capitol Hill. But new research suggests U.S. enforcers go easier on bosses of companies that make political contributions. If even donors are shielded, lawmakers themselves stand to get off lightly.