Securitizing rent has more problems than promise 26 Jul 2012 Crafting bonds backed by rent is being touted as a way to fund mass purchases of foreclosed U.S. homes. But big obstacles - sparse data, management challenges and new risks for investors - complicate matters. It could be years before such bonds are sold. And they won’t be cheap.
Growth gem Ghana needs to husband its resources 26 Jul 2012 Sitting President John Atta Mills died this week, five months before the next election. Ghana’s economy is among the fastest-growing anywhere, helped by new oil output. But there’s a risk the bonanza is wasted. Mills’ successor needs discipline to achieve long-term prosperity.
Spain’s global banks are still hostage to Spanic 26 Jul 2012 Santander and BBVA have been rocks in a storm thanks to overseas profits. But they remain vulnerable. A downgrade of Spain to junk would be painful. If the banks really were quasi-supranational, the shares wouldn’t rally so much when the ECB president makes supportive noises.
Ireland gives euro zone a hint of crisis freedom 26 Jul 2012 Dublin is issuing long-term debt for the first time since the rescue of 2010. The funding is likely to be pricey. But if the deal gets sold, it will show that bailouts needn’t be forever, or end in default. With Spain and Italy on the brink, euro zone partners will be thankful.
M&A Davids wallop Wall Street Goliaths 26 Jul 2012 Bulge bracket banks had a decent second quarter on deals. But combined advisory revenue this year for Evercore, Greenhill and Lazard is stable, while for their bigger rivals it’s down by 24 pct. In a slow market, every victory matters, and the battles won’t get any easier.
Exxon’s record profit belies missed opportunity 26 Jul 2012 The $15.9 bln bottom line may have been the best single quarter in corporate history, but it was greatly flattered by the sale of a Japanese refinery. Worse, Exxon’s U.S. crude output slipped and U.S. capex fell by a third. The domestic surge in oil production is passing it by.
New York Times looks blind in land of one-eyed 26 Jul 2012 Fellow embattled companies like Yahoo and Avon found respectable CEOs in relatively short order. After eight months, however, the newspaper publisher is still searching. Circulation growth helped lift an otherwise dim Q2. But the long quest for a boss is a bad sign of the Times.
Telefonica payouts may go on hold for longer 26 Jul 2012 The Spanish telco has finally scrapped this year’s dividends and buybacks. That’s sensible as Spain’s financial crisis deepens: the group could now cope with being shut out of the bond markets for a long stretch. But a pledge to reinstate dividends in 2013 looks optimistic.
Nomura resignations pave way for the Lehman unwind 26 Jul 2012 The departing CEO and COO authored the Japanese brokerage’s purchase of Lehman Brothers. Their strategy wasn’t wrong, just unlucky. While parts of Nomura are doing well, the market is brutal and returns on equity meager. The new broom has a rare chance to suggest a graceful exit.
Shell struggles with market myopia 26 Jul 2012 It was never going to be a stellar quarter after the recent fall in oil prices. But Shell’s big Q2 miss is a blow, particularly after its dividend disappointed some investors in Q1. Few oil majors look better-positioned for the future, but expectations-management needs work.
Lloyds weighed down by familiar bugbears 26 Jul 2012 Further hits from insurance misselling pushed the UK bank into the red again in the first half. But underlying trends remain sound: bad debts are falling and the margin outlook hasn’t worsened. Plus the government’s new loan support scheme may help both Lloyds and the British economy.
Beijing rains warn investors about political climate 26 Jul 2012 Floods inflicted a high human cost for a modern city. Attempts to squash criticism of the response made matters worse. The lesson isn’t just that Beijing needs better drains, but that anxiety and defensiveness prevail ahead of a leadership change. China’s risk premium is rising.
Zynga disaster casts cloud over Facebook 26 Jul 2012 The Bubble Safari creator’s Q2 results were a mess. Most popular games lost users, its recent purchase of the maker of Draw Something looks a bust and Zynga pointed the finger at Facebook for some of its woes. Their symbiotic relationship will hurt as much as it has helped.
Macau’s high rollers cut bets as China’s odds dim 26 Jul 2012 Weaker profits at Las Vegas Sands suggest mainland gambling fanatics are taking a breather, including VIPs. There might be more at stake than just gaming profits: in better times, Sands owner Sheldon Adelson offered to wager $100 million on Mitt Romney’s U.S. presidential bid.
Ford’s dings shouldn’t distract investors 25 Jul 2012 The Detroit automaker made clear in its latest results that it has some kinks to hammer out in Europe and South America. But its U.S. business is cruising along nicely and the balance sheet is well-tuned. Ford isn’t the lemon the market valuation implies.
Ills of offshore stashes matched by state hoarding 25 Jul 2012 Over $12 trln was held in the top tax haven private banks in 2010, a 63 pct increase from 2005, says a new study by an advocacy group. Meanwhile, central bank foreign exchange reserves grew twice as fast. Bad policy fueled both and helps explain sagging economies.
Insider traders pay too dearly for defiance 25 Jul 2012 Miscreants like ex-McKinsey partner Anil Kumar get off lightly by snitching next to those who don’t cooperate. John Kinnucan’s guilty plea after he famously refused to help a U.S. probe provides a fresh chance to distinguish between breaking the law and being stubborn.
Greece isn’t at end game quite yet 25 Jul 2012 True, Athens will need more cash because it won’t hit its targets - and Berlin won’t want to give it more money. But nobody wants Greece to leave the euro until the “Spanic” has passed. There could be ways of squaring the circle and buying time provided Athens plays ball.
Sandy Weill U-turn fuels big bank breakup fire 25 Jul 2012 The former Citi boss wants banks to ditch their Wall Street ops. That’s rich coming from the man whose banking behemoth helped overturn Glass-Steagall. But it reflects growing frustration with financial reform across the political spectrum. A convert like Weill is hard to ignore.
Vodafone pay endorsement should hearten CEOs 25 Jul 2012 Britain’s “shareholder spring” shouldn’t cow bosses too much. Investors remain relaxed about executives getting filthy rich - provided companies perform, of course. Look at the huge support for Vodafone, the telco whose CEO will make more than 500 times the average UK wage this year.
Conoco underlines rich nations’ oil resurgence 25 Jul 2012 The company’s first earnings report as a refinery-free driller made much of surging production in the U.S. and other developed economies. The trend reflects a renewed focus on resources in the rich world as opposed to emerging markets. While it lasts, it’s less risky for Big Oil.
Deutsche Bank’s profit miss isn’t temporary hiccup 25 Jul 2012 Weak client activity and the falling euro’s impact on costs have driven the German bank to warn that Q2 net income will be only 700 mln euros, 30 pct below forecasts. These aren’t short-term headaches. And Deutsche’s capital and job-cut plans still look less punchy than peers’.
UK’s big GDP shock may herald more stimulus 25 Jul 2012 A 0.7 pct fall in GDP in the second quarter is much worse than expected. Construction accounts for half the drop. True, the figures exaggerate the pain: the Royal Jubilee, wet weather and Europe were all drags. Even so, the under-fire government may feel compelled to respond.
Asian conglomerate owners owe Heineken a toast 25 Jul 2012 The Dutch brewer’s $6bn bid for its beer venture with Fraser and Neave should prompt the Singapore drinks and property group’s independent directors to consider a full-blown breakup. Even after the recent rally in its shares, the pieces are worth some 20 pct more than the whole.
Global slowdown splits Bangalore’s IT industry 25 Jul 2012 In boom times, all the region’s IT outsourcers could grow in tandem. But in today’s climate, the industry is in a fight for market share. TCS and HCL look to be on top, but don’t rule out a revival at Infosys and Wipro. The manifest competitive tension is good for everyone.
Could be worse is no rallying cry for Arcelor 25 Jul 2012 The Q2 results weren’t a disaster, but the steel giant sees little respite from weak demand. A 2 pct jump in ArcelorMittal’s shares suggests investors are taking comfort in a thwacked valuation, and progress reducing debt. But it would take nerves of steel to bet on a rally.
Anticipation makes Apple miss 24 Jul 2012 An unexpectedly sub-stellar quarter knocked nearly $30 bln off the company’s market value. Apple’s success has become a kind of burden. With most fresh products a hit - the next a new iPhone - it’s ever harder to get customers to buy current devices as launches approach.
IMF gets quasi-Goldman resignation moment 24 Jul 2012 Greg Smith’s public rant triggered fresh scrutiny of the Wall Street firm even though he said nothing new. So it could be with Peter Doyle, a 20-year IMF economist. His exit blast is causing internal soul-searching. Yet no-one should be surprised to hear that the fund is flawed.
Obama’s not the trustbuster he thought he would be 24 Jul 2012 The president promised an antitrust crackdown. A new study finds, however, that despite high-profile cases like AT&T, he’s no bolder than his predecessor, who Obama called wimpy on the subject. While tough talk can be a deterrent, the law trumps politics in deal enforcement.
Brazil’s bank giants put prudence before politics 24 Jul 2012 Itau and Bradesco are slowing consumer lending as loan defaults climb. That’s counter to the aims of President Dilma Rousseff, who’s pushing the nation’s banks to lend more at low rates. But with consumers and the broader economy under pressure, financial conservatism is welcome.