U.S. energy debate has little to do with economics 27 Mar 2012 President Obama’s call to end big oil’s tax credits is mere political theater. Another $4 bln in tariffs for the industry won’t cure the deficit - and these firms do pay a fair whack already. But the counterargument that scrapping them will drive up gas prices is just as dubious.
Ally’s mortgage misery needs a clean ending 27 Mar 2012 The home loan mess still ails GM’s ex-finance unit and is still hampering its ability to repay $14 bln of taxpayer aid. Bankruptcy should be the ideal solution. But as an activist investor points out, that could get messy. Without greater clarity, Ally may want to hold fire.
California advances on golden goose with machete 27 Mar 2012 Governor Brown is proposing the highest state taxes in the nation to plug a looming budget gap - a shortfall caused mostly by increased spending. The tax hike may work on paper, but if it prompts an exodus of footloose millionaires, Brown may end up with egg on his face.
Inflation risks rise as recovery follows QE 27 Mar 2012 Quantitative easing helped head off disaster. But now the U.S. and the global economy are recovering - despite continuing euro trouble - the danger is inflation. Oil and some other commodities are already up. Consumer prices will be a problem if policymakers fail to get a grip.
Spanish bank take-under reveals real estate mess 27 Mar 2012 Caixabank is buying smaller rival Banca Civica and its dud property loans at a discount to market value. Caixa reaps savings from cutting costs, including its own network, and avoids being pushed into a deal with larger Bankia. Without state support, though, it’s still a risk.
Icahn gives Breakingviews a window into his method 27 Mar 2012 The billionaire’s reaction to a recent column echoed his approach to corporate boards. A demanding phone call, a written riposte and a form of greenmail all came into play. It’s easier now to empathize with Icahn’s targets, but also showed our interests somewhat align with his.
Icahn on Icahn: a Q-and-A with an investing icon 27 Mar 2012 For over four decades, he has been needling companies like no one else. After Breakingviews needled him, he offered his own views in his own words. Golfing CEOs, the “totalitarian state” of corporate America and Alexander the Great were all part of the conversation.
Pricey exploration means dear oil is here to stay 27 Mar 2012 Handouts to restive citizens during the Arab Spring pushed up the break-even oil price for Middle Eastern states. Oil producers face a similar problem. The fact that the cost of extracting oil has tripled over the decade for private explorers is bad news for gas guzzlers.
Diamonds are simply too small for Rio and BHP 27 Mar 2012 While Anglo America has just dropped $5.1 bln bulking up in diamonds, Rio Tinto and BHP Billiton are running for the exits. The industry is just too small for the biggest miners, despite solid fundamentals. That clears the way for niche players or even private-equity firms.
Global asset values may find new zest from China 27 Mar 2012 Slower growth and doubts about accounting are leading international investors to rethink China. That’s precisely what the Chinese themselves are doing. As they diversify beyond the borders of the Middle Kingdom, the value of global property assets could benefit.
India’s policy paralysis sours outlook for stocks 27 Mar 2012 Foreign investors have poured $8.9 bln into the country’s shares so far this year, helping push up the index. But with heavy debts reining in Delhi’s spending and high commodity prices preventing the central bank from cutting rates, growth prospects don’t justify the optimism.
Bitterness could twist India’s $211 bln coal saga 27 Mar 2012 Simmering worries about India’s cheapo sell-off of its coal assets could yet explode. The economic consequences may well be worse than those which followed the telecoms mess up. Consumers eventually benefited from the 2G mobile licences scandal. Coal could prove murkier.
Volcker Rule remedy a decent compromise 26 Mar 2012 A bipartisan group of lawmakers wants to give regulators more time to figure out the complexities of banning prop trading. Their genuinely practical one-page fix is a rare treat from chambers famous for partisan bickering - assuming the senators can get it passed.
Brazilian billionaire buys time from Gulf 26 Mar 2012 Eike Batista may be the richest man in Latin America’s biggest economy, but he runs a cash-hungry empire. His sprawling oil and mining group is in its infancy. The $2 bln infusion of patient Abu Dhabi money should help Batista try to make good on his promise.
Monopolies thrive when politicians go short-term 26 Mar 2012 How else to explain the likely approval of a $17.5 bln New England power merger? Northeast Utilities’ incompetence is proven, but dangling a few politically expedient goodies seems to have won authorities over to its NSTAR takeover. Captive customers may lose, but investors win.
How to solve Dublin’s IOU problem 26 Mar 2012 Ireland is trying to restructure the fearfully complex promissory notes it issued to bail out its banks. Ideally, it would like to hang onto 31 billion euros of cheap Eurosystem money for 30 years. While that’s too much to expect, there should be scope for compromise.
Botched BATS IPO at least good test of markets 26 Mar 2012 Scrapping a public debut is embarrassing for any company. But it’s a potential killer for an upstart stock exchange already being investigated over high-frequency trading. The relief for investors is that the failure by BATS wasn’t the catalyst for a broader meltdown.
Wall Street can relate to Hollywood underdog tale 26 Mar 2012 A smash debut for “The Hunger Games” makes Lions Gate the studio equivalent of a boutique bank landing the year’s biggest deal. And Disney’s $200 mln loss on “John Carter” raises questions about Tinseltown’s bulge bracket. Indies in both industries are fighting for the spotlight.
Europe needs to ease on firewall obsession 26 Mar 2012 Euro zone members may agree this week on beefing up their rescue fund. But throwing money at the crisis won’t solve it. A bailout of Italy and Spain would be tricky, however big a firewall. And Italy’s crisis last year shows that market forces may be more efficient than bailouts.
Donor row saps UK government’s austerity authority 26 Mar 2012 After a pro-business budget, the “Cash for Cameron” affair has raised concrete concerns that the Conservative-led coalition can be bought by anyone with a fat chequebook. The government’s ability to get the country to swallow ongoing deficit reduction can only be undermined.
Hugo Dixon: After the Robin Hood tax 26 Mar 2012 The European Union’s plan for a tax on financial transactions is dying. This is a golden opportunity to devise better taxes for banks. A levy on hot money and a Value Added Tax for finance would be a good start. So would removing the tax distortion in favour of debt.
Rajoy’s poll loss no ground for wavering on reform 26 Mar 2012 The ruling PP party failed to get a majority in Andalucia, eroding the Spanish PM’s mandate. It’s a setback more than a disaster. With yields back under pressure, the real battles begin now. To meet the deficit goal, the government must wield the axe in the upcoming budget.
Top U.S. judges may drown out healthcare debate 23 Mar 2012 The most verbose Supreme Court on record will next week hear a hefty three days of oral argument on President Obama’s landmark reform. If past patterns hold, the justices will spend more time testing each other than listening to lawyers. It’s the legal system at its hammiest.
Obama doesn’t even name banker to run World Bank 23 Mar 2012 Nor is Jim Yong Kim a seasoned diplomat. He’s a disease fighter and president of Dartmouth, where his tenure was marked by budget struggles. Kim’s medical background and Korean birth may mollify critics of America’s monopoly on the top job. But he’s got his work cut out for him.
Bank bailout views skewer GOP star’s credibility 23 Mar 2012 Paul Ryan’s new budget takes bold steps to shrink U.S. debt, but makes a troubling error. He suggests that Dodd-Frank’s new mechanism to wind down big banks will cost taxpayers and spur bailouts. This misstep casts doubt on his ability to favor practical solutions over politics.
Watchdogs could change Vivendi’s EMI tune 23 Mar 2012 The French group’s Universal music arm feels so good about its chances of success that it agreed to pay the full $1.9 bln price even if trustbusters block the deal. But it’s actually a third possibility - being forced to sell pieces - that could be the costliest for Universal.
UK’s bubble-prickers seek iron grip on banks 23 Mar 2012 The new Financial Policy Committee wants mega powers to prevent future excess, including controlling capital ratios and reining in insurers and fund managers. It’s clear the FPC will have muscle. The snag is that it has few ideas for solving the current problem: risk aversion.
BT gets better side of deal with its pension fund 23 Mar 2012 The UK telco’s stock rose 6 pct after it said its pension deficit had more than halved to 4 bln stg and unveiled a plan to shrink the liability further by 2021. The market reaction is understandable. The pension scheme’s trustees could have demanded a faster fix to the problem.
Nikkei’s dip is chance to catch Japanese wave 23 Mar 2012 Valuations are weighed down by long-term fears, like Japan’s high debts and ageing population. But the short-term story looks brighter. Japanese companies may be due a boost from post-earthquake rebuilding, and a likely weakening of the yen. Now could be a good time to dip in.
Repsol shares betray leveraged Latam risks 23 Mar 2012 Shares in the Spanish oil major have lost more than 10 pct since troubles began in Argentina with its listed subsidiary, YPF. This looks overdone compared to YPF’s own market fall. But Repsol’s exposure to Argentina is bigger than it looks.