Best Buy management buyout would be hard to swing 27 Jun 2012 The U.S. electronics retailer’s founder is mulling a takeover. Despite his 20 pct stake and the near $7 bln company’s prodigious cash flow, there are roadblocks to a leveraged deal. The firm can’t take on much more debt. And electronics retailing is a dying dog of a business.
Barclays’ Libor penalty goes beyond the financial 27 Jun 2012 The UK bank has been fined $450 mln for trying to rig the interbank borrowing rate and CEO Bob Diamond is waiving his bonus. The reputational damage is bigger than the financial hit. And the full ramifications of the scandal aren’t yet clear - for other banks, or for Diamond.
Xstrata pay compromise saves face but little else 27 Jun 2012 Mick Davis’s tweaked “retention” package may be enough of a sop to put pay on the back burner as the miner tries to save its Glencore merger. But it makes a muddle of incentives. Tying awards to previously unseen cost-cutting potential poses dangers. It’s still a poor scheme.
Ethical economy: Both sides losing austerity fight 27 Jun 2012 As fans of economic stimulus warned, fiscal austerity only slows down recovery. But what used to be considered large doses of stimulus are hardly doing much better. More of one or the other might work, but it increasingly looks like neither approach can end the Lesser Depression.
Brazil’s lending hangover is red flag for banks 27 Jun 2012 Consumer defaults hit record levels in May, despite a decent economy. Lax lending in 2010 to customers not used to borrowing money caused the problem. With President Dilma Rousseff pushing to make credit cheaper, banks need to ensure they don’t make the same mistakes again.
Wall Street defeated by Ivory Tower in Virginia 27 Jun 2012 The U. of Virginia’s president beat back an ouster supported by hedgie Paul Tudor Jones and a former Goldman Sachs exec. But victory may be pyrrhic. For Thomas Jefferson’s school to survive in a bleaker fiscal world, the paradigm shifts Teresa Sullivan resisted look unavoidable.
Glencore-Xstrata deal looks hard to rescue 27 Jun 2012 Qatar’s call for much sweeter merger terms is a big obstacle. Xstrata’s 10 pct shareholder can’t easily retreat from its public demand. And Glencore can’t justify a sizeable raise to its own investors. If the Qataris hold firm, the deal may have to be parked for another day.
Glenstrata wobble another blow for M&A bankers 27 Jun 2012 Global deal-making is already down a quarter on 2011. Now the year’s biggest tie-up, Glencore-Xstrata, is in doubt. Nine banks advising on mining’s most obvious merger always looked rich. In a slow year, they can ill afford to lose $130 million of fees.
Hong Kong, enjoy your peg while it lasts 27 Jun 2012 Hitching the Hong Kong Dollar to the U.S. greenback brought 30 years of something like stability. Now it brings inflation and high property prices. Yet the alternatives are messy, and the peg has a symbolic value. The status quo is best, until China offers a good replacement.
MPS capital plan only solves immediate crisis 27 Jun 2012 An extra 1.5 bln euros of state cash will allow the venerable Italian bank to finally pass EU stress tests. But MPS will need yet another rights issue to help pay it all back in three years’ time. Even after savage job cuts and restructuring, its returns will still be below par.
Coke, IKEA show India story hasn’t gone flat 27 Jun 2012 There’s plenty of pessimism around Delhi’s policy dithering. But growth continues, and the long-term prospects remain robust. Two flagship bets on India’s consumers will help steady nerves, and could serve as a catalyst for foreign direct investment from other sources, too.
Murdoch all but erases discount he inflicted 26 Jun 2012 When the phone-hacking scandal struck News Corp and its shares last year, a Breakingviews calculator found the company trading in the market at about 30 pct less than its sum-of-the-parts value. Plans to spin off the publishing arm may complete an improbable run to close the gap.
SEC finally puts squeeze on Wall Street deadbeats 26 Jun 2012 The U.S. watchdog has won a court order forcing a hedgie to cough up $12 mln in overdue fines. That’s a welcome start, but a drop in the bucket for an agency with a collection rate below 50 pct. More arm-twisting would bring in extra cash and might even deter would-be fraudsters.
China’s U.S. home loan risks being a subprime idea 26 Jun 2012 China Development Bank may lend Lennar $1.7 bln to build two housing projects - one on a polluted man-made island in an earthquake zone. It has all the hallmarks of globally distorted economic incentives forcing yield-starved investors to take risky bets they don’t understand.
Time for Hong Kong to kick colonial property habit 26 Jun 2012 Chinese cash - more and more since 1997 - has helped inflate prices at the high end. And scarce cheaper housing is causing social tensions. The SAR’s new chief executive plans to release more land. An end to over-tight supply control, abetted by property tycoons, is overdue.
Sandberg does neither herself nor women any favors 26 Jun 2012 Becoming the first female director at a prominent company like Facebook should be good for all. But joining a rubber-stamp board the CEO treats haughtily won’t help Sheryl Sandberg’s sterling reputation. Women should fight for representation where they can make a real difference.
Jamie Dimon isn’t the New York Fed’s real problem 26 Jun 2012 Former IMF chief economist Simon Johnson is on a quixotic mission to oust the JPMorgan chief from the regional central bank. But it’ll take something far bigger - an act of Congress - to truly reform the institution and end the perception that it’s too cozy with big banks.
One Great Depression lesson is enough 26 Jun 2012 Economists point to the 1930s to justify current policy prescriptions. Their research may be enjoyable, but it is inconclusive and mostly irrelevant. The main exception is the danger of debt deflation. But that lesson has been learned - and probably too well.
Split wouldn’t fix all News Corp’s shortcomings 26 Jun 2012 Spinning off the scandal-hit publishing arm could make the core movie and broadcasting businesses more focused and valuable. So outside investors should approve. But News Corp’s political rehabilitation may be slow, especially if the Murdoch family keeps control of both parts.
Cyprus is the last of Europe’s baby bailouts 26 Jun 2012 Losses on Greek bonds and its own economic weakness have forced the island to seek euro zone help. Though implementing reform could be controversial, the 10 bln euro rescue is peanuts for the zone’s bailout funds. Europe needs a different strategy for coping with Spain and Italy.
Oil markets could snap at the shorts 26 Jun 2012 After Brent’s rapid collapse from $126 to $90 a barrel, oil traders appear to be dismissing Iran risks and China’s ability to stimulate growth. And today’s picture of excessive Saudi production and sputtering global demand could change by year-end if Europe muddles through.
Evergrande red flags are real, even if fraud isn’t 26 Jun 2012 A short-seller report knocked $1 bln-plus off the Chinese property company’s market value. Some of Citron Research’s maths look duff, and bank analysts have come to Evergrande’s defence. But concern is justified, if only because the firm’s opaque reporting invites confusion.
Chesapeake leaves investors wondering what’s next 25 Jun 2012 The U.S. gas producer is feverishly trying to dispel a cowboy reputation, including by shaking up the board. But emails suggesting Chesapeake colluded to buy land on the cheap are a setback. With all that’s happened so far, it’s also hard to believe this scandal will be the last.
Man U’s New York listing crowns race to the bottom 25 Jun 2012 Most of the $24 bln raised by the 21 top U.S. IPOs this year consisted of shares with lousy voting rights. Greater leeway for poor governance in the Big Apple rather than Americans going gaga for the sport is likely to be the greater driver of the UK soccer club’s market debut.
Hunt for legal eagle fraudsters aims too low 25 Jun 2012 Two U.S. law firms will cough up $88 million to settle mortgage Ponzi scheme charges. And the SEC’s after four attorneys for aiding dodgy stock deals. That’s a good start. But watchdogs should also draw a bead on bigger legal targets for their role in the financial meltdown.
Ousting Paraguay’s Lugo may not have been smart 25 Jun 2012 The turbulent ex-bishop sparked violence with land-reform efforts and failed to tackle corruption but his overall economic record was OK. Impeaching him shook Paraguay’s democracy and stirred up regional leftists. Paraguay’s constitution needs tweaking to make impeachment harder.
Mario Monti pinned between two comedians 25 Jun 2012 Beppe Grillo, a professional comic and leader of Italy’s second force, wants the country to quit the euro and default on its debts. Silvio Berlusconi is also toying with euroscepticism as he attempts a comeback. This makes it much harder for a technocrat PM to manage the crisis.
AB InBev can pay top dollar to gulp down Modelo 25 Jun 2012 The brewing giant is considering buying the rest of the Mexican beer maker it doesn’t own. That would give it another leg up over regional rival Heineken and let CEO Carlos Brito cut costs. Just matching Modelo’s operating margin to its own would justify a $15 bln price tag.
Blaming London for bank botches is too convenient 25 Jun 2012 Say what you will about JPMorgan’s stupid trades, the bank has at least owned up to its failings. That’s more than can be said for U.S. authorities, who are instead pointing fingers at their UK counterparts. It should light a fire under dragging global coordination efforts.
Fiscal cliff “Cialis plan” deserves firm support 25 Jun 2012 That’s the love-pill codename for a bill Erskine Bowles, of Simpson-Bowles fiscal reform fame, is pushing in Congress to help Uncle Sam avoid severe dysfunction at year-end. Politicians fiddling with JPMorgan trades and Mexican guns could use a cure for when it’s urgently needed.