Debt-tax hybrid could be Europe’s least-bad option 8 May 2012 Should euro zone taxpayers be compelled to buy their own government’s debt? Two leading economists are in favour. If the Keynesian analysis that countries lack demand is right, they have a point. This variety of financial repression could also help tame reckless markets.
Spain finally owns up to its banking mess 8 May 2012 Madrid has dropped its resistance to bailouts and is preparing to inject 7-10 bln euros into Bankia. Propping up the big former savings bank is necessary, but it’s only the first step in what is hopefully a definitive cleanup. Spain cannot afford any more half-baked reforms.
Shareholder spring claims first scalp at Aviva 8 May 2012 The UK insurer’s CEO is stepping down following a big protest vote over pay. Strategic doubts and underperforming shares had already put Andrew Moss’s future in doubt. But his departure raises the stakes for future shareholder uprisings - for both bosses and investors.
Carlos Slim pays up for foothold in Europe 8 May 2012 The Mexican tycoon wants to boost his stake in KPN to 28 pct and offers a 23.5 percent premium in a $3 bln-plus deal. Investors in the ailing Dutch telecoms operator haven’t had such good news in a while. But Slim’s move is hard to read: KPN stock is cheap for good reasons.
Markets give HSBC a first-quarter reprieve 8 May 2012 The bank’s pre-tax profit rose by a third, quarter-on-quarter, fueled by a rebound in fixed income trading. HSBC is getting closer to the cost targets CEO Stuart Gulliver set a year ago. But with markets far from normalised, he can’t count on a prevailing tailwind.
India offers only half-hearted tax retreat 8 May 2012 Fund managers have welcomed an announcement by India’s finance minister of a delay in the introduction of punitive new tax rules. But retrospective changes remain intact and a year’s postponement of implementation will ultimately increase investor anxiety.
"Cabbage in formaldehyde" is toxic dish for China 8 May 2012 After tainted milk and glowing pork, a new scandal will hurt China’s small but growing food export trade. A bigger effect will be felt at home. Food scares are inflationary, hurt the poor and erode confidence. Long-delayed agricultural reform should be top of the policy menu.
Wall Street bigwigs show good side of greed 7 May 2012 Lloyd Blankfein, CEO of long-term greedy Goldman Sachs, and hedgie Steven Cohen are among those aboard the Intrepid in New York discussing how to help U.S. veterans. Though it’s occasionally just PR, even away from the spotlight many among the 1 pct do try to spread the wealth.
Outside backers could tame U.S. law firm excesses 7 May 2012 Big shops like Dewey & LeBoeuf run on an eat-what-you-kill basis, rewarding self-interest over loyalty. Investors prefer more stability and financial discipline. Giving non-lawyers stakes in firms would require new ethics rules, but might help avert Dewey-like train wrecks.
When shareholder democracy trumps the real thing 7 May 2012 Motions on the ballots at BofA and 3M this week give investors an opportunity to rectify the Supreme Court’s flawed Citizens United decision. Moreover, voting to restrict the use of corporate money in political campaigns isn’t just morally right, it’s also good business.
Chesapeake and partner wobble together 7 May 2012 The troubled gas firm needs cash. But its woes make it harder to tap one of its favorite sources, Chesapeake Midstream, a partnership it controls. Last year it bought $900 mln of its parent’s assets. Chesapeake’s governance and liquidity concerns may limit its ability to help.
Hollande won’t have much time to learn on the job 7 May 2012 François Hollande, the new French president, faces the difficult task of translating his calls for more growth and less austerity into market-friendly policy. As Greece teeters on the brink of political chaos, his first international trial by fire will come quickly.
Greece down but not yet out of euro 7 May 2012 The voters don’t want austerity-cum-reform. But they don’t want euro exit either. Out of the electoral mess, the best hope is that new compromises can be forged. Otherwise, Greece is heading for chaos and the rest of the zone for renewed crisis.
Hugo Dixon: What a euro growth pact should contain 7 May 2012 Europe’s leaders are increasingly talking about the need for a “growth compact” to take the edge off the austerity-heavy “fiscal compact”. Such a pact should match reform of banks, labour and welfare with less short-term austerity and accommodative monetary policy.
China joins Europe as weak link in Asian trade 7 May 2012 Asia’s exports to the U.S. are rebounding, offsetting a sharp slide in shipments to Europe. Recovering American demand normally means more exports to China’s factories. But as Beijing reins in the economy, it needs fewer raw materials, parts and machinery from its neighbours.
India and U.S. try for uneasy alliance over Iran 7 May 2012 A visit from Hillary Clinton on the same day as a trade mission from Tehran highlights the diplomatic tightrope that New Delhi is on. While good U.S. relations are important, India’s trade deficit makes Iran’s cheap oil too attractive to pass up. A compromise looks likely.
Qatar brokers nifty exit for Egypt’s EFG Hermes 7 May 2012 State-backed QInvest is cherry-picking the assets of one of the Mideast’s top investment banks. The new JV will give EFG shareholders a payout worth one third of the bank’s market cap. It’s an elegant way to salvage value from a troubled Egyptian bank.
Buffett Rule divides Berkshire Hathaway faithful 6 May 2012 Ideological squabbling marred the annual Omaha love-fest this year. Ice-cream bars and newspaper tosses weren’t enough to distract shareholders angry about the politically charged tax plan with Warren Buffett’s name on it. It may even be an unplanned liability to Berkshire.
M&A spin doctors take a thumping on the record 6 May 2012 Judge Leo Strine has called them out for blabbing confidential data in Martin Marietta’s hostile $5.3 bln offer for rival Vulcan. The sand and gravel outfit will pay the price of an order blocking the bid. But the reputation of deal flacks may also take a lasting hit.
Obama’s job creation hopes look fragile 4 May 2012 The U.S. president can at last say he has overseen increased employment in the private sector. But the slowing pace of jobs growth and declining labor force participation could make for a tough sell in November’s elections. Obama will be hoping it’s a soft patch.
Review: Exxon’s shareholder fetish, good and bad 4 May 2012 A single-minded devotion to shareholders has helped the oil giant earn high returns. But Steve Coll’s “Private Empire” shows how this obsession also made it easy to make some bad decisions: cozying up to nasty regimes and a crusade against global warming science.
Too much transparency could muddy trading waters 4 May 2012 Wall Street critics tout more disclosure as a universal good. Often, they’re right. But new rules for the $700 trln derivatives market could prove the exception. These risk handing savvy traders some easy profits while pushing up costs for others. That loophole needs plugging.
State stranglehold on RBS now only slightly looser 4 May 2012 The UK bank is close to repaying emergency funding from 2008, and met expectations in Q1 despite revamping its investment bank. But government insurance, a block on paying dividends and a huge public shareholding remain. RBS’s main task is to start unpicking this triple lock.
China throws a juicy bone to foreign brokers 4 May 2012 The likes of Goldman Sachs and Morgan Stanley will be able to own 49 percent of their China securities ventures, from 33 percent. It still doesn’t match the heavy lifting they do, but is progress. Given the securities market’s potential, the extra investment should be worth it.
French banks hope to end balance-sheet shrinking 4 May 2012 BNP and SocGen’s results showed the strains of aggressive deleveraging in the first quarter. BNP should reach its Basel III capital target this year, 18 months ahead of its smaller rival. But it’s also more vulnerable to a possible worsening on the euro front.
Repsol still not a tempting takeover target 4 May 2012 The YPF fiasco has knocked a third off the Spanish oil major’s shares, sparking bid speculation. But even if rivals felt acquisitive, refining exposure and lingering YPF risks are deterrents to an offer. The new Repsol isn’t without prospects. But it’s cheap for a reason.
U.S. gains leverage from Chen Guangcheng fight 4 May 2012 Chinese leaders may be irritated at the American willingness to protect the blind lawyer, and Beijing doesn’t want the U.S. embassy to become a refuge for dissidents. But fear of global shaming on human rights will make Beijing more pliable in economic and political conflicts.
Resumé lies have longer shelf lives than degrees 3 May 2012 Yahoo’s CEO embellished his accounting sheepskin with a computer science major. It’s easy to see the temptation in Silicon Valley’s engineering culture, even if tech degrees are quickly outdated. But the lesson to learn here isn’t a new one: dishonesty has a stubborn longevity.
Dependence on Facebook spreads beyond its users 3 May 2012 It’s not just social networking junkies that have grown reliant on Mark Zuckerberg’s firm. Businesses such as Zynga have been created on its back. Bankers are pegging their careers on floating the firm. And California needs the impending IPO to help close its yawning budget gap.
Investors risk missing emerging market sweet spot 3 May 2012 As developing nations mature, investors will want to harness consumers’ economic power. But the widely followed developing-market equity indexes are dominated by big beasts of finance and resources. The juiciest consumer-led returns may come via sector bets and smaller companies.