US hot money’s new crush: Canadian, Japanese banks 25 Jun 2012 It’s hard to blame US money market funds for seeking safer harbors than the turbulent euro zone. Yet Canadian and Japanese lenders - as well as the National Australia Bank - must remember not to become too enamored with the attention from their fair-weather friends.
India’s finance minister goes out with a flop 25 Jun 2012 Talk about over promising and under-delivering. Pranab Mukherjee inflated the market’s hopes that he’d take bold measures to boost investor confidence, but came up with a few small tweaks - on his last day as finance minister. Hopefully his successor will talk less and act more.
How 50 bln euros might save the euro 25 Jun 2012 Germany is against euro bonds. But what if countries in the euro zone’s core used their low borrowing costs to subsidise interest rates in the periphery? This would bring Spanish and Italian funding costs down sharply. And it would only cost around 50 bln euros over seven years.
RBS tech mess will entrench UK’s "free" banking 25 Jun 2012 A systems glitch has deprived thousands of the UK lender’s customers of basic banking. Their highly visible pain is a public relations disaster. British banks need depositors to pay more directly for services. That makes sense, but it’s a tough sell - and it just got tougher.
The world’s central banks are running out of road 25 Jun 2012 The Bank for International Settlements laments that extraordinary monetary measures distort the system and store up problems. True, but consider the alternative. A global slump would make independence and sound money even harder to defend. Central bankers don’t have it easy.
No quick wins for Egypt’s new Islamist president 25 Jun 2012 For the Muslim Brotherhood, victory is bittersweet. The top job carries little power and might not last long. Securing an international aid deal would be the fastest way to jumpstart the economy and consolidate support. But donors may look on Egypt just as warily as before.
Credit Suisse puts central bank in its place 22 Jun 2012 The Swiss group’s board has reaffirmed support for CEO Brady Dougan - and rejected the SNB’s claims that it needs to raise capital. Squaring off publicly with a regulator is usually a bad idea. But with another authority in charge of capital, it’s a risk Credit Suisse can manage.
Uruguay’s bold cannabis fix lights hope for region 22 Jun 2012 Legislation to legalize marijuana sales would make the small South American country the first state directly involved in the weed business. The U.S. won’t like the idea. But the plan is a first step toward finding a market-based solution to the drug violence ravaging Latin America.
Canada scraps to sidestep U.S.-like housing woes 22 Jun 2012 A new set of mortgage reforms will make it ever harder for Canucks to borrow. Yet ultra-low interest rates keep feeding a housing boom that three previous government initiatives haven’t stopped. Prudent regulation can only limit by so much the distortions created by easy money.
Bank regulators should get heavy on risk-weighting 22 Jun 2012 The financial and euro zone crises have shown the drawbacks of attaching varying weights to bank risk. Such models encourage unhealthy arbitrage. A tougher cap on the ratio of equity to total assets would limit abuse. So would banning risk measures that ignore extreme events.
Review: Is inequality a crisis or just capitalism? 22 Jun 2012 In “The Great Divergence”, Tim Noah offers a thought-provoking analysis of 30-odd years of widening U.S. income inequality. Yet some disparity is inevitable in any kind of market system. It’s the real decline in middle-class incomes that justifies serious concern.
Spanish banks still face a long sticky summer 22 Jun 2012 Two independent consultancies have identified a capital hole of up to 62 bln euros. That’s at the lower end of market fears. And though the hurdle looks low, the stress test assumptions are harsh. But the results are not final. The actual bill won’t become clear until September.
Reform denial puts Hollande in minority of one 22 Jun 2012 France, Italy and Spain will try to convince Germany to accept some form of debt mutualisation at a four-way summit today. But the most serious divide is between France, which doesn’t see the need for economic reform, and its three partners, who have embraced it.
Monte dei Paschi faces its moment of truth 22 Jun 2012 The world’s oldest bank will next week explain how it can close a huge capital gap identified by European regulators. Since its foolish takeover of rival Antonveneta in 2007, little has gone right for Italy’s third-largest lender. And there are no obvious solutions to its problems.
Japan needs more than apologies on insider trades 22 Jun 2012 Handing a $6 bln privatization to Nomura’s rivals after the bank apologized for leaking earlier share sales seemed like a government rebuke. But Nomura probably lost fair and square. Either way, Tokyo needs to make leaks illegal and trying to profit on them much more painful.
Icahn may owe Goldman, but the reverse is true too 21 Jun 2012 The banking titan is suing CVR Energy, an oil refiner the uppity billionaire just bought. Goldman defended CVR and alleges Icahn blocked payment of $18.5 mln of fees. Theirs is a classic Wall Street rivalry. Maybe Icahn reckons Goldman has made enough off his activism already.
Downgraded banks should rush to borrow 21 Jun 2012 Most don’t need the cash. And despite the 15 Moody’s ratings cuts - by three notches at Credit Suisse and two at Morgan Stanley - short-term funding and collateral weaknesses should have already been fixed. But jumping back into markets quickly is the best way to show up Moody’s.
Regulator grudge match redux: Geithner vs Bair 21 Jun 2012 The former FDIC chief has formed an independent group to help push forward reforms in the U.S. financial system. The primary pressure point will be the council of regulators led by Treasury Secretary Tim Geithner. The two have sparred before. But their interests now look aligned.
Xstrata price fears no reason to vote for "Glenstrata" 21 Jun 2012 The miner’s shares could fall sharply if investors vote no on the Glencore merger. But that’s a red herring. Technical factors would be a big driver. A combined Glenstrata would also be vulnerable to a correction. And for a standalone Xstrata, life would go on.
What do you get if you cross comedy and austerity? 21 Jun 2012 The prime minister and the Twittersphere condemned a British comedian for legally sheltering 3.3 million pounds from taxes. Jimmy Carr apologised abjectly. In the new zeitgeist, an insouciant attitude to personal taxation is passé. Paying in full is a moral obligation, not a joke.
Taking the leverage out of economic growth 21 Jun 2012 For two decades private sector debt in the U.S. and euro zone expanded at a faster rate than nominal GDP. The binge helped boost output, but led to the crisis. Reducing leverage without choking growth is a challenge that economists and central bankers have just begun to ponder.
Chesapeake gets short-term gravitas at the top 21 Jun 2012 At 73, former Conoco boss Archie Dunham can’t have plans to stick around and unseat Aubrey McClendon from the energy empire he has built. So investors are disappointed. But he does have his legacy to protect and the god-given heft to keep Chesapeake’s reckless founder in line.
Even crazy cheap debt can be cheaper still 21 Jun 2012 In a world of rock-bottom rates, some corporate issuers are finding ways to save even more. Time Warner Cable, a U.S. company with only U.S. customers, just sold $1 bln of 30-year paper denominated in sterling. The textbook arbitrage may save it 25 basis points. It’s easy money.
Cement ruling mixes India’s business reputation 21 Jun 2012 New Delhi has done itself a big favour imposing a record $1.1 bln price-fixing fine against 11 cement firms. For all the criticisms recently levelled, it suggests there is an appetite for competition and a willingness to take on vested interests.
Corporate earnings hopes are still too high 21 Jun 2012 Analysts are paring back profit forecasts as euro zone worries clog the wheels of global commerce. Yet history suggests that when earnings go into reverse, the shift is rarely gradual. Investors may still be expecting too much from companies, at least in the near term.
Alliance Boots boss pulls off quite a coup 21 Jun 2012 Normally when you sell a company for a fat premium, you lose control. But Stefano Pessina has extracted both a rich price from Walgreen and will end up as by far the largest shareholder in the merged group, with a 15-16 percent stake.
Bankers need to follow the money into China 21 Jun 2012 Goldman’s new global vice chairman won’t be the last person to eschew the easier climes of Hong Kong. Mainland China is where foreign banks will add jobs, and where the majority of 2012’s IPOs in Asia took place. Attracting the right talent for the local market will be a challenge.
Denmark is another costly refuge 21 Jun 2012 In search of a safe haven? Denmark ticks the boxes. The economy is strong and the krone isn’t the euro, but shadows it. Tempted investors should think hard. The central bank is against them and two-year yields are negative. Investors only win if Germany exits the euro.
UBS royal pickle reveals Gulf M&A minefield 21 Jun 2012 The Swiss bank is fighting a claim that it failed to pay a Kuwaiti sheikh for advising on an $11 bln deal. Even if UBS suffers no lasting damage from the spat, it has exposed the extent to which big banks fall over themselves when schmoozing Gulf royals to win scarce business.
Fed’s diminishing ideas bring diminishing returns 20 Jun 2012 It’s extending Operation Twist to the end of the year, leaving the Fed even more on the hook once rates rise. It also means both monetary and fiscal policy remain locked on stimulus. Yet economic and jobs growth are slowing. The drugs’ obvious effects are starting to wear off.