Warning: emerging economies can go backwards, too 3 May 2012 Bolivia has followed Argentina in the pointless nationalisation of Spanish-owned assets. Argentina is fiddling with its central bank, as Hungary tried to. The obstacles to growth in emerging economies can be large. Investors should beware. Emerging economies can go down as well as up.
Earnings surge only superficial relief for Pemex 3 May 2012 A 20-fold jump in Q1 paper profit obscures the fact that little has changed at Mexico’s oil monopoly. Production continues to slide and its profit potential is crushed by the government’s tax take. Only election season talk of oil industry openness offers a glimmer of hope.
Apple’s valuation isn’t at risk any time soon 3 May 2012 Its $550 bln market cap is mind-boggling, but the fast-growing iPhone maker nevertheless trades at an absurdly low 12 times earnings. A new Breakingviews calculator shows how even if growth and margins decline improbably fast, Apple should still be worth far more in 2016.
Shareholder spring takes aim at exec pay black box 3 May 2012 UBS and Aviva are the latest firms to feel the executive pay backlash. As the stream of votes against boards’ remuneration swells, shareholders have a golden opportunity to secure meaningful reforms. Moves that clarify performance targets will be top of the agenda.
Bright Food swallows Weetabix at palatable price 3 May 2012 The Shanghai firm is buying 60 pct of Britain’s no.2 cereal maker. An implied $1.9 bln enterprise value is in line with breakfast-table rivals, even if the private-equity seller is making a packet. The deal also underscores a shift towards brand-driven Chinese M&A.
Carlyle’s wan IPO affirms private equity thesis 3 May 2012 The firm’s underwhelming $6.7 bln value shows carried interest isn’t prized by markets the way it is by co-founder David Rubenstein and his partners. Carlyle and its ilk may have selfish reasons to float, but their model clearly still diverges from the public investor mindset.
Spare a thought for GM boss Dan Akerson 3 May 2012 The U.S. automaker delivered another decent quarter under his leadership. But on the same day, Akerson’s former employer Carlyle went public. The IPO wasn’t great, but he still surrendered some $100 mln to work for GM. It’s a 1 pct problem, but his loss has been taxpayers’ gain.
Mervyn King’s mini mea culpa is missed opportunity 3 May 2012 The Bank of England governor did admit to not shouting loudly enough about financial risks. Yet his retrospective largely ignored the many critics of central bank policy, after as well as before the crisis. Demands to make King’s successor more accountable are bound to increase.
"Scream" now a symbol of easy money and easy life 3 May 2012 Munch’s pastel has long been an icon of the modern age’s dark side. Now this image of isolation, fear and madness has become emblematic of post-modern financial excess. Its sale for a record $120 mln betrays lax monetary policy and a mood of insouciance among the new hyper-rich.
Hollande opts for non-dangerous euro policy 3 May 2012 In his TV debate with Nicolas Sarkozy, the French socialist and presidential favourite presented a moderate version of what he wants to “renegotiate” in the euro fiscal compact. He wants the EU to agree on some limited reforms - most of which are already in the pipeline.
BG investors right to be nervous about cost creep 3 May 2012 Profits are up, production is the envy of peers and a $5 bln disposal plan is on track with the $1.8 bln sale of Comgas. But the dip in BG’s shares after the gas giant raised capex guidance shows that even the best aren’t immune to the spiraling cost of big petroleum projects.
Qatar’s cash cow can ride out a global gas glut 3 May 2012 The emirate’s grip on gas markets will weaken by the second half of the decade due to oversupply. That might knock some of the swagger out of the energy-dependent state. But Qatar’s low production cost, long-term contracts and significant market share should limit the fallout.
China’s stock reforms should benefit brokers most 3 May 2012 New rules like lower trading fees are designed to boost China’s stock market, which trades at a discount versus its Asian peers. New kinds of trading and higher underwriting volumes should help struggling securities firms, but may disappoint investors hoping for higher stock prices.
Even Predators’ Ball saves a dance for 99 pct 2 May 2012 The annual Beverly Hills gathering of Mike Milken’s 3,000 closest friends retains some vestiges of its racier past. But there’s an emerging consensus among this elite demimonde that rising wealth inequality is a problem. The solutions, however, are fundamentally polarizing.
Nerds may get revenge on Woodstock of Capitalism 2 May 2012 Spreadsheet-wielding analysts have been invited for the first time to ask questions at Warren Buffett’s annual powwow. That should at least subtly tilt the discussion more to financial nitty-gritty from folksy wisdom. It’s the latest sign that Berkshire’s times may be a-changin’.
Bolivia shows funny way of wooing investors 2 May 2012 President Evo Morales’ seizure of the biggest local power grid operator from Spain’s Red Electrica pales next to Argentina’s move on YPF. But for a nation preparing its first global bond sale since the 1920s, Bolivia’s decision sends a strong warning signal to prospective buyers.
Let News Corp keep BSkyB 2 May 2012 Rupert Murdoch isn’t fit to run News Corp in the interests of all shareholders. And News Corp turned a blind eye to criminal wrongdoing in its UK newspaper business. But if Ofcom elbows the group out of UK broadcasting, that would be the wrong punishment from the wrong enforcer.
Dissident solution bodes well for China and U.S. 2 May 2012 The blind activist is safe and still in China. Beijing and Washington avoid a diplomatic incident and can each claim victory. The U.S. comes out as a defender of human rights and China can uphold the rule of law while complaining about interference.
Ethical economy: What companies are good for 2 May 2012 The debate on executive pay is often just a shouting match, in part because there’s no agreement on what bosses are actually paid to do. The “shareholder value” approach provides a simple answer, but one that it is both practically and morally wrong. Aristotle had better ideas.
Analysts fiddle while CEO burns Chesapeake 2 May 2012 Wall Street’s finest barely acknowledged the stunning governance lapses surrounding the U.S. energy firm’s boss, Aubrey McClendon - or his contradictory answers. With shares falling, debt and costs rising and oil production forecasts dropping, investors should cut their losses.
U.S. Treasury starts thinking like a company 2 May 2012 The nation’s borrower may sell floating-rate debt. That’s a smart idea. It could provide medium-term funding security without adding much interest-rate risk. But Treasury needs to tread carefully. And without Congress slashing the deficit, it leaves credit risk unaddressed.
UBS offers glance at stabler, less exciting future 2 May 2012 The Swiss group turned in a respectable Q1, ignoring accounting quirks. The private bank is attracting clients, the investment bank is steadying, and the balance sheet is shrinking. UBS has more to do on capital and costs. But its rejig is further advanced than many rivals.
BC Partners faces wrong kind of gym workout 2 May 2012 Just months ago Fitness First was set to IPO. Now distressed investors are taking control of the gym chain. Excess leverage and lean rivals left it out of shape. The restructuring will burn off most of private-equity owner BC Partners’ roughly 400-million-pound equity investment.
Don’t expect miracles from Europe’s growth kitty 2 May 2012 Some hope that the EU’s unused structural funds could help boost the euro zone’s sickly economy. That’s more than 200 bln euros of cash. But it would take time to trickle through, and the fund’s record is patchy. The immediate benefit will be more symbolic than economic.
Australia’s rate policy dragged in two directions 2 May 2012 The central bank’s rate cut looks like a response to a slowing China, which will weigh on Australia’s commodity exports. Yet that exposes it to new risks. Australia has built up a reliance on foreign investors to fund its current account deficit. Lower rates could scare them away.
India’s bullish consumers need investors to match 2 May 2012 Buyers seem fairly oblivious to India’s economic woes. See Hindustan Unilever’s strong showing. And India’s consumer is the most optimistic in the world, says Nielsen. But booming consumption needs investment that can keep up, otherwise the result will be more inflation.
U.S. legal profession makes case for its critics 1 May 2012 Lawyers have pleaded guilty to insider trading. Law schools are fudging data on student job prospects. And embattled Dewey & LeBoeuf’s revenue figures are drawing prosecutors’ scrutiny. Attorneys tired of being the butt of jokes should stress practicing law over chasing lucre.
New Avon CEO gets thrown in the deep end 1 May 2012 Sheri McCoy has inherited an even worse company than thought. The cosmetics company’s collapsing margins led to dismal Q1 results that question the value of the franchise and play right into the hands of suitors like Coty. McCoy needs to prove she can swim, and fast.
Oil majors can only admire Colombia’s titan 1 May 2012 Ecopetrol may not be well known outside Latin America. But the state-controlled company just posted an enviable 50 pct EBITDA margin. At $135 bln, it’s now worth as much as BP. Replacing reserves won’t be easy. But such a well-run firm looks like the best oil play in the region.
UK’s phone-hacking report sounds worse than it is 1 May 2012 A probe has concluded Rupert Murdoch isn’t “fit” to run News Corp - but its authors are far from agreed on that. Moreover, the media mogul and his son were cleared of misleading parliament. News Corp has got a deserved drubbing, but the Murdochs won’t be feeling too sore.