Xstrata should accept revised Glencore pitch 10 Sep 2012 The merger is now a $35.5 bln takeover at a modest premium. The tie-up is riskier since Xstrata CEO Mick Davis would exit after six months, although Chairman John Bond would stay. Xstrata investors will want more. But it’s hard to see a realistic alternative offering better value.
Hugo Dixon: Spain and Italy mustn’t blow ECB plan 10 Sep 2012 Mario Draghi’s bond-buying scheme has bought Madrid and Rome time to stabilise their finances. But if they drag their heels, the market will sniff them out. It will then be almost impossible to come up with another scheme to rescue them - and the single currency.
China’s unbalanced path is still the right one 10 Sep 2012 President Hu Jintao has advocated more infrastructure spending, amid grisly new economic data. It’s at odds with the received notion that consumption should drive expansion. But a blind push for rebalancing makes no sense. China still needs investment - just not waste.
Obama job adds match Bush, Clinton but not Reagan 7 Sep 2012 Thirty months after the U.S. nadir, employment is a bit over 3 pct higher. That’s in line with the post-recession record of the last 2-1/2 presidents - but far short of Reagan’s 10 pct. The August picture was also mixed: both presidential hopefuls, and the Fed, get talking points.
U.S. political jamborees alienate Mr. Market 7 Sep 2012 The stark contrasts in tone at the Charlotte and Tampa conventions mirror the different options facing Americans. Republicans and Mitt Romney served up fiscal spinach while Democrats and Barack Obama dangled pro-worker red meat. Neither choice is likely to thrill investors.
Glencore-Xstrata mess makes bankers look powerless 7 Sep 2012 The deal’s basic set-up proved surprisingly vulnerable. Pay squabbles wasted weeks. A rejig has now come at a comically late stage. The tie-up’s many banks may be giving duff advice; more likely, they are bit players in Ivan Glasenberg and Mick Davis’s CEO-led production.
Who dares call Qatar dumb money now? 7 Sep 2012 If Qatar’s sovereign fund didn’t command respect before the Glencore-Xstrata saga, it certainly does now. Qatar has made Glencore boss Ivan Glasenberg budge on price. But its achievement is capped by the fact that it still hasn’t obtained a wholly acceptable proposal.
Glenstrata drama is no way to do M&A 7 Sep 2012 Ivan Glasenberg’s curveball on Glencore-Xstrata shows bad form in deal making. Halting a shareholder vote after markets opened makes Glencore’s boss look more trader than statesman CEO. A solid deal may be imminent. But the messiness of it all should give investors pause.
IMF could guide euro zone out of austerism 7 Sep 2012 The new ECB bailout-light window may involve the IMF, and the Washington-based fund’s reputation for neo-liberal fundamentalism is deterring Spain and Italy from applying. But the reality is different. The fund could help the EU soften its self-defeating austerity policies.
Asia’s crowded IPOs keep banks busy but poor 7 Sep 2012 A dearth of listings has forced underwriters to crowd onto new offerings. Banks get league table credit, while companies can claim safety in numbers. But there’s little sense in scrapping over a dwindling fee pool. Banks must justify their existence in other ways - or shrink.
EU probe may pull rug from Chinese solar makers 7 Sep 2012 Government subsidies have made Europe the largest market for the country’s solar industry. But the flood of cheap Chinese imports risks attracting punitive duties. Manufacturers that borrowed heavily to expand capacity are already suffering. EU tariffs could be the final straw.
U.S. insider trading cops win battles, lose war 6 Sep 2012 Nabbing the likes of Raj Rajaratnam hasn’t slowed investing on leaked secrets, new research shows. The practice may still be too lucrative and easy to hide. But with other nations also cracking down, the U.S. could lead the way with clearer laws and more consistent enforcement.
Chavez’s cash pump PDVSA runs on empty 6 Sep 2012 Venezuela’s troubled oil group may now pay suppliers with IOUs instead of cash. That’s not surprising because Hugo Chavez is using PDVSA to finance social spending ahead of elections. Harder to imagine is what happens when oil prices decline from today’s lofty heights.
Investor ignorance and complex markets mix badly 6 Sep 2012 An SEC study reveals financial illiteracy, but is short on ideas. Most everyone should learn about compounding, how debt differs from equity, and simple risks like inflation. Even then, modern markets are daunting. Maybe investors need a road test to move beyond basic products.
Draghi’s bazooka could be third-time lucky 6 Sep 2012 The ECB’s third bond-buying plan in as many years won’t please everyone; the IMF will be involved, and markets won’t get explicit yield targets. Most important, the plan is a gamble on governments keeping their promises. But the euro zone should soon have a powerful backstop.
U.S. leaders could learn from European austerity 6 Sep 2012 America is coming late to fiscal reform, following allies across the Atlantic. Noting the continent’s flubs and fixes would help either Barack Obama or Mitt Romney tackle a debt load that just surpassed $16 trln. Waiting too long may give investors time to make a new choice.
Time for a hard reset in UK directories 6 Sep 2012 Near-bust yellow-pages group hibu has one main class of debt, but multiple species of creditor. Expect a row between hedge funds and banks over how much to haircut its 2.2 bln stg of borrowings. Hibu is in existential crisis. The more aggressive its restructuring, the better.
How to stop Basel bank safety net becoming a noose 6 Sep 2012 Global regulators are racing to agree tough reforms to prevent bank funding crises. Overly loose rules won’t be trusted, but overly prescriptive ones could choke credit to the real economy. A solution is possible. But supervisors have to avoid inflating the next bubble.
China’s “guanxi” system may cost Wall Street dear 6 Sep 2012 Citi, Goldman and UBS have benefited from the “do a favour, get a favour” principle. All bailed out troubled Chinese firms, and got special perks later. Rivals have not been so lucky. Yet problems facing China’s banks could mean more special treatment is required in future.
No need for Malaysia to jump off a fiscal cliff 6 Sep 2012 Two rating agencies have taken harsh views of the country’s public debt in the past month. But Kuala Lumpur shouldn’t panic. Public spending is helping to attract private investors. Though Malaysia needs to broaden its tax base, hasty belt-tightening would be counterproductive.
Unequal competitiveness trips up Europe 6 Sep 2012 In the World Economic Forum’s competitiveness league, Switzerland remains number one, despite the strong franc. The top 10 includes north European countries, the U.S., and the UK. But Italy is at 42nd - and Greece 96th. The gap casts troubling light on the euro zone’s struggle.
How Obama can improve a measly C- economics grade 5 Sep 2012 As he begins his re-election campaign in earnest, the U.S. president can show only a middling report card. Despite good marks for stabilizing the banks, he barely passes on debt and jobs. Obama needs to show he can play well with others - the GOP - and do better in fiscal math.
Murdoch’s reformation stops with governance 5 Sep 2012 The media mogul has sensibly deployed capital as part of a big turnaround at News Corp since the phone-hacking scandal rocked his empire. But two new board nominees look like the old Murdoch at work. Investors shouldn’t so soon forget the havoc an unchecked emperor can wreak.
Buyout bosses lose another layer of their mystique 5 Sep 2012 New York is probing a complex technique used by private equity to pay less tax on fee income. Even if legal, it’s more engineering. And it’s mainly aimed at enriching fund firms and their people, not investors. It makes claims of investing and management mojo less convincing.
Memo to UK’s new air strategists: let numbers talk 5 Sep 2012 After years of make-do-and-mend, the UK is once again arguing about London’s airport capacity, and possible expansion at Heathrow. Most people seem most keen to rubbish plans they dislike. The right approach is more positive. Analyse all ideas robustly: then make a decision.
Facebook crystallizes blundered IPO with buyback 5 Sep 2012 Mark Zuckerberg’s social network will essentially cut its outstanding share count by 101 mln by promising to use cash, rather than stock, to settle a tax obligation. Buying back stock four months after an IPO at half price looks cynical. In this case it’s just incompetence.
Counterpoint: Gender quotas are a bad idea 5 Sep 2012 The EU’s justice commissioner means well, but her plan to make the non-executive side of boards 40 percent female is deeply flawed. The goal is doubtful, the technique is counterproductive and the precedent is dreadful. As often when it comes to sex, reason goes out the window.
Ethical economy: Can communist China drop Marxism? 5 Sep 2012 It is easy to dismiss the verbiage of China’s leaders as buzzword bingo, but behind the many slogans lies a serious debate about how the monopolistic Communist Party can evolve in ways that suit its more prosperous society. In truth, it can’t evolve. It should yield gracefully.
BP’s path to Macondo settlement just got harder 5 Sep 2012 U.S. lawyers say they’ve got emails showing gross negligence in the 2010 oil spill disaster. There’s still scope to settle before a trial, but the aggressive tack complicates BP’s effort to get a favourable deal. The market reaction - wiping $5 bln off BP’s value - looks right.
Santander’s Mexican IPO more forced than it looks 5 Sep 2012 Spain’s biggest bank is seeking up to $4 bln by listing 25 pct of its Mexico arm. The move is consistent with its strategy, and either way Santander shouldn’t need to tap the current Spanish bank bailout. But if Spain deteriorates, the lender will need all the capital it can get.