Why do investors prefer Amazon to Apple? 24 Oct 2012 Sure, the gadget maker’s market value is far larger. Yet investors are willing to pay almost nine times as much for the retailer’s estimated earnings. That’s expensive in any case. But it’s also odd, because Amazon perpetually promises more jam tomorrow, while Apple delivers it.
Fed may hike rates sooner than it reckons 24 Oct 2012 The FOMC’s sticking with its near-zero target till 2015. But after the presidential election longer-term savings and inflation risks of current policies may be more salient than short-term jobless trends. If so, the Fed may soon raise rates, no matter who wins the White House.
Add another 15 bln euros to the euro-dream bill 24 Oct 2012 That’s how much a half-announced two-year delay to Greek deficit targets is likely to cost lenders. Bad deal? Not really. It’s 0.1 pct of annual euro zone GDP and gives valuable support to Athens’ reform-minded government. Besides, time seems to be healing many euro zone wounds.
Buyers too soft on first Bolivian bond in 90 years 24 Oct 2012 The Andean nation’s $500 mln bond carries a 5 pct yield. That’s half what investors charge richer Venezuela on similar debt. They may be putting too much faith in Evo Morales. They’d better hope Bolivia’s president respects debt obligations more than private property.
Ethical economy: Unrealistic Nobel economics 24 Oct 2012 The latest prize rewarded the study of stable pairwise matching. Like so much of game theory, the winning idea is simple, slightly illuminating for economists, occasionally useful for everyone - and profoundly misleading. People should not be reduced to calculating machines.
Rosneft buy may leave Russian oil industry wanting 24 Oct 2012 The country needs to enhance the efficiency of its lucrative oil business. Rosneft’s $55 bln swoop on Russia’s number-three producer might help, if TNK-BP’s superior oilfield know-how rubs off on the lumbering state-dominated giant. More likely, the deal will stifle competition.
Facebook shows signs of answering mobile question 24 Oct 2012 The social network’s mobile ad business grew sixfold in three months and provided 14 pct of ad sales in Q3. Worries remain about durability, cost control and competition. But for the first time, the shift to mobile devices seems an opportunity for Facebook rather than a threat.
Hong Kong suffers from being small and open 24 Oct 2012 The territory has intervened again to stop its currency rising. But Hong Kong’s peg is only partly to blame for its liquidity glut. Singapore’s more-flexible exchange rate isn’t faring much better. Small, open Asian economies are basically helpless against Western money-printing.
Can Barclays old boys make the Irish play pay? 24 Oct 2012 Barclays alumni made millions helping their ex-employer offload subprime assets in 2009. Now they have taken a 17 pct stake in Ireland’s 74 bln euro bad bank. The terms aren’t public. But the arrangement seems to need leverage, or a discount, or both if history is to be repeated with this new punt.
Apple takes lower-priced tablet fight to Amazon 23 Oct 2012 The new iPad mini takes Apple closer to the price point for the online retailer’s devices. The iPhone maker is risking some cannibalization, and possibly lower margins. But for Amazon, selling content is all-important. The new hardware rivalry could trigger price cuts.
Canada banks give local M&A advisers hope 23 Oct 2012 Zealous watchdogs have nixed several deals, or talked of doing so. While Chinese buyers face the heaviest fire, locals aren’t immune. But the risk should be low for RBC’s $4 bln purchase of Ally’s Canadian auto finance arm and TD’s of Target’s credit card business for $6 bln.
Last U.S. debate neglects foreign policy realities 23 Oct 2012 Listening to Barack Obama and Mitt Romney spar, it would have been easy to forget that Europe exists, free trade matters or global coordination of finance remains a priority. Worse, the politically facile China-bashing suggests both men are missing the big opportunity.
Experian sees gold in Brazil’s blind credit boom 23 Oct 2012 The credit bureau’s $1.5 bln purchase of the rest of Serasa brings Experian’s total outlay since 2007 to below nine times EBITDA for a business that has tripled. As Brazil’s banks lend aggressively with little information on a rising middle class, there’s further growth to harvest.
Equities business hits the pain threshold 23 Oct 2012 The cash equities model is broken. An industry plagued by overcapacity and weak profitability can’t cope with higher costs and lower volumes. Some investment banks are trimming equities headcount, when they really need to decide whether they should be in the business at all.
BBC discovers curse of successful institutions 23 Oct 2012 The UK broadcaster is engulfed in a scandal for its faulty handling of a star and his alleged sexual misdeeds. The BBC’s failures already look painfully obvious. But as BP, the Catholic Church and many others have discovered, self-correction is easier to preach than to practice.
China’s liquidity non-problem could turn ugly 23 Oct 2012 China is thirsty for “ultimate liquidity”, the money and debt which the government guarantees completely. Loans could dry up unless the central bank greases the credit machine more liberally. But the creation of more ultimate liquidity would also - ultimately - be risky.
It’s not too late to choose an Economic Dream Team 22 Oct 2012 As the U.S. presidential candidates head to their final debate, we’ve added new choices for key economic jobs. Should financial reformer Barney Frank have a spot? Can deficit hawk Martin Feldstein, or Treasury’s No. 2 Neal Wolin, help fix the U.S. fiscal mess?
Farallon founder navigates hedgie succession trail 22 Oct 2012 Hedge fund moguls aren’t known for achieving smooth transitions to new management. Some struggle to let go, fail to retain would-be successors, or see investors flee. But Tom Steyer, who started the $20 bln San Francisco-based Farallon, seems to have checked the right boxes.
Goldman exposé doesn’t go according to plan 22 Oct 2012 Greg Smith’s resignation book doesn’t blow the lid on Wall Street the way “Liar’s Poker” did. Even his purported tale of disillusionment has been done before and better by Goldman veteran Jonathan Knee. The real revelation is the firm’s apparent erosion of employment standards.
Russian resolution helps put BP in play 22 Oct 2012 The UK oil major is exiting its fractious Russian JV for $12 bln in cash and 19 pct of state-backed Rosneft. If a settlement for the Gulf of Mexico disaster follows then BP will be free of poison pills. Factor in weak shares and wounded management and it’s an enticing bid target.
Moody’s-S&P spats offer fix to ratings conflicts 22 Oct 2012 Moody’s has publicly trashed its rival’s work on a mortgage bond, the second such squabble in two weeks. Companies may now fear getting punished for cherry picking the most favorable rater. But that’s the best antidote yet to the ratings business’s inherent conflicts of interest.
McGovern embodied U.S. economic left’s last stand 22 Oct 2012 The South Dakota senator, who died on Sunday, lost the 1972 presidential election on a platform proposing the government as employer of last resort. That did not seem wild when communist regimes had full employment. McGovern has no heirs in America’s political mainstream today.
Hugo Dixon: Euro zone doesn’t need Disziplin union 22 Oct 2012 At their summit last week, European leaders nudged forward plans for a fiscal union with discipline as its leitmotif. Such a union is neither desirable nor necessary. It may not be politically feasible either.
Japan exporters should fear slowdown, not boycott 22 Oct 2012 Ire over islands has hit Chinese consumers’ yen for things Japanese. But China’s slowing economy is having an even bigger impact on exports. And while China has toppled the U.S. as Japan’s biggest market, it’s plunging demand from Europe that’s dragging trade down the most.
China’s top reshuffle means suspense for investors 22 Oct 2012 Wang Yang, a vocal supporter of political reform, may miss out on a job on the Communist Party’s top body. Wang Qishan, a darling of foreign investors, should make the cut but may not get a key economic role. That could mean sweeping personnel changes in China’s financial sector.
India in depth: Too soon for central bank rewards 22 Oct 2012 Galloping rural wages and a loose fiscal policy are keeping inflation high even as the nation relies on hot money to fill a large trade deficit. An interest-rate cut now could be risky. The government must pursue more reforms before it can expect a reward from the central bank.
Is everything sacred in Canada? 20 Oct 2012 At first it was a hole in the ground - then the stock exchange and a DIY chain. Now the government has blocked a $5.2 bln shale gas deal - signalling to investors that the market for corporate control is effectively shut.
Even GE can’t beat sluggish global growth 19 Oct 2012 The U.S. conglomerate and economic bellwether missed third-quarter revenue estimates, putting it in the same camp as more than half the nation’s top companies. Cutting costs and shrinking assets only does so much. Economic growth provides the real juice. That’s in short supply.
Internet parasitism powers Barry Diller’s returns 19 Oct 2012 IAC is abandoning Newsweek in print as the mogul’s web businesses flourish. An online search boom has powered the $4.6 bln firm’s stock this year. But much of the growth seems driven by customers unwittingly downloading IAC toolbars. It’s a risky way to build a lasting business.
ArcelorMittal uses iron ore to dodge the junkyard 19 Oct 2012 The world’s biggest steelmaker is on the edge of full relegation to “junk” credit status. A rights issue would be one - painful - solution. It’s easier to sell a minority stake in its Canadian iron ore unit for $2 bln or so, even though Arcelor likes to feed its own steel mills.