Frankenstorm is salient risk management reminder 29 Oct 2012 When it comes to natural disasters like the freak storm slamming into the eastern U.S., there’s no such thing as too much preparation. The same is true in business, particularly banking: calamities often strike without warning and there’s no such thing as too much capital.
Pearson plays long game with Penguin 29 Oct 2012 Merging Penguin with Bertelsmann’s Random House to create a publishing giant makes sense. And Pearson, which will own 47 pct, has carefully built in a range of exit options. Investors may need convincing, but this complex setup could plausibly be better than taking hard cash now.
Nomura still limping towards new reality 29 Oct 2012 Buoyant fixed income revenue and better results from the United States challenge the notion that the Japanese group is retreating to its roots as a domestic stockbroker. But as the industry reshapes, Nomura’s new CEO still has to prove he can cut his way to better returns.
Hugo Dixon: World needs healthy capitalism 29 Oct 2012 The term “healthy capitalism” may seem an oxymoron. But health involves vigour, well-being and resilience. Capitalism can have all those qualities provided warped incentives are corrected and the prevalent culture of greed is tempered by a culture of serving customers.
India’s interminable wait for its next Gandhi 29 Oct 2012 Rahul Gandhi has forfeited his chance to build a track record in government before 2014 polls. The ruling party will now have to rely solely on the 42-year-old’s famous last name to project him as a prime ministerial hopeful. Investors will continue to find him hard to assess.
UBS rethinks the impossible 27 Oct 2012 The Swiss bank is going where no bank dares tread with a bold strategy to wind down fixed-income trading. It will be a costly and slow task - that’s why rivals tend to think it can’t be done. But if UBS thrives as a mega-boutique, others could follow. And the system benefits too.
Pandit putsch is setback for U.S. board governance 26 Oct 2012 Separating the jobs of chairmen and chief executives is generally to be encouraged. But the logic is undermined by recent events at Citigroup. Chairman Mike O’Neill’s ouster of ex-CEO Vikram Pandit is looking increasingly like a power-grab rather than a service to shareholders.
U.S. GDP growth sharpens election knife-edge 26 Oct 2012 The economy grew at a 2 pct rate in Q3, just above expectations. That gives Obama a wafer-thin lead in Breakingviews’ election model. But beneath the headline, private sector growth has slowed further. That’s a hint of the problems facing whoever next occupies the White House.
Berlusconi sentence a mark of Italy in transition 26 Oct 2012 The 76-year-old former prime minister was convicted of tax fraud and sentenced to four years in prison. That is a defeat for Il Cavaliere’s cavalier approach to business and politics. But appeals will drag on, and the country is still without a functioning modern democracy.
Random Penguin could fly 26 Oct 2012 Consolidation makes sense as publishers swap paper and ink for bits and bytes. Hence Bertelsmann and Pearson’s talks to combine Random House and Penguin. The $3.4 bln tie-up could significantly cut costs, while gaining heft to take on the industry’s new digital kingmakers.
Eike Batista comes to his own rescue 26 Oct 2012 With his energy and infrastructure empire a mess, the Brazilian billionaire is trying to hold things together. He offered to buy $1 bln of oil company OGX stock at a premium and is also raising his stakes in two other units. In this case, shareholders should beware the buyer.
Review: A practical guide to writing in Chinese 26 Oct 2012 Mo Yan may have the Nobel, but celebrity blogger Han Han rules online. In his new book of blog posts, China’s self-proclaimed “Most Popular Literary Star” shows how writers can work with the system to speak out - as long as they know when to shut up.
To fix U.S. finances requires compromiser-in-chief 26 Oct 2012 Achieving a grand bargain on tax, entitlements and spending will take a leader who is capable of bipartisan dealmaking. Having worked with Democrats as governor of Massachusetts, Romney may have the edge over Obama, whose signature legislative triumphs were party-line deals.
Letter to the Editor: IAC 26 Oct 2012 Joey Levin, CEO of IAC Search & Applications, responds to an Oct. 19 Robert Cyran column about IAC’s internet strategy.
Cynthia Carroll’s departure won’t fix Anglo 26 Oct 2012 After years of sub-par returns, Anglo American and its chief exec are parting ways. Carroll’s early missteps hurt, but she did deliver needed cultural change. Her successor may gain from more industry experience, but Anglo’s largest problems are mostly out of management’s control.
China insider exposé is explosive and predictable 26 Oct 2012 A New York Times investigation into the wealth of Premier Wen Jiabao’s family is both startling and mundane: China’s elite are very rich. Fund flows suggest investors are comfortable, so long as they think they can benefit too. But growing inequality corrodes China’s prospects.
Risk relief may soften banks’ commodities blow 26 Oct 2012 Proposed regulation is making it tougher for investment banks to trade commodities. That presents unregulated trading houses an opportunity to poach people and looks unfair. But banks which pull back also dial down risk, and that may earn them higher valuations in the market.
Time for Samsung to pay Galactic return to owners 26 Oct 2012 The smartphone giant’s stock has recovered some since losing to Apple in court. But for a company that seems to mint record earnings with every new Galaxy gizmo it launches, it still looks undervalued. Doling out some of its $27.7 bln in cash might help ease investor scepticism.
Apple results shrink iPad mini’s relevance 25 Oct 2012 Hawking nearly 27 mln iPhones last quarter dwarfs all the hoopla around the launch of the tinier tablet, which may sell about the same amount in a year. Moreover, iPad margins don’t compare – and the mini’s will be smaller still. The phone still energizes the Apple ecosystem.
U.S. housing recovery not as solid as it looks 25 Oct 2012 Prices are up 4 pct. But cash-rich buy-to-rent investors, not consumers, seem to be behind the uptick. Blackstone is snapping up 666 houses a week. While helpful and done with no taxpayer aid, if investor interest dries up before individuals jump back in, the recovery may falter.
New York Times cash can stretch only so far 25 Oct 2012 The U.S. newspaper publisher’s ugly Q3 erased about 15 pct of its market value and put further demands on a roughly $1 bln war chest. Shareholders, including the Sulzberger family, will want a dividend and pension funds are short. The Times, however, could use the cushion.
Lazard advises Wall Street on how to take the pain 25 Oct 2012 Christmas came early for activist Nelson Peltz, if not some of Lazard’s employees. The firm will slice $125 mln in expenses by year-end. Though Lazard still pays out more to staff than rivals, the move is consistent with CEO Ken Jacobs’ goal to boost returns for shareholders.
Santander’s fortification phase is far from done 25 Oct 2012 The Spanish bank turned a profit in the third quarter despite taking big provisions - ordered by the state - against the splintering economy. But Santander looks weak compared to global peers under new Basel III capital rules. If anything, closing this gap is getting harder.
Upbeat Unilever shows dangers in generalities 25 Oct 2012 A weak season for corporate earnings is creating new nervousness in the world’s leading equity markets. But the pleasant surprise just served up by Unilever shows what can be missed in broad brush impressions. Take your lead from averages, and your returns may be somewhat mean.
Conoco already falling behind new chosen peer 25 Oct 2012 After shedding its refineries in May, the energy explorer set its earnings to coincide with new rival Occidental. Conoco’s Q3 profit of $1.8 bln beat expectations. But output slipped, while at Oxy production increased 4 pct. Conoco has its work cut out to keep shareholders happy.
Credit Suisse keeps on finding more costs to cut 25 Oct 2012 The Swiss bank led peers last year with a 3 bln Swiss franc cost reduction plan. That programme is well under way, but returns are still squeezed. So it has announced another 1 bln of cuts. With unrelenting pressure for more capital, investment banking remains a tough business.
China’s SOEs aren’t earning their keep 25 Oct 2012 While their earnings have grown 25 percent a year since 2003 - comfortably faster than nominal GDP - returns on equity of 6.7 percent are still laggardly, considering how much capital has been poured in. Bringing in more private investment might help, but it’s no panacea.
Gupta insider trading sentence apt but incomplete 25 Oct 2012 The former McKinsey boss and Goldman director asked to be allowed to help Rwandans. Instead he got two years in the slammer. His request oozed chutzpah but made a useful point. Ideally, sentences should punish crooks but also exploit their skills. This one goes only half way.
Mixed messages for Chinese IPO hopefuls 25 Oct 2012 Fosun Pharma’s $500 mln offering breaks a three-month lull in Hong Kong. But a real estate trust backed by Li Ka-Shing has cancelled its Singapore listing, showing investors are still cautious. Despite a market recovery, the pipeline of Chinese IPOs looks set to remain crowded.
Politics will delay Egypt’s economic reforms 25 Oct 2012 A deal with the IMF, which might come in November, would boost confidence. But President Mursi’s government is inexperienced and constrained by upcoming elections. That will make it tough to cut the subsidies which cripple the government’s finances and slow Egypt’s development.