Hugo Dixon: Dos and Don’ts of EU banking union 10 Dec 2012 The conventional wisdom holds that the euro zone needs banking union to solve its crisis. That’s wrong. There are alternatives. What’s more, centralisation will undermine sovereignty. That said, if merged banking regulation is the goal, the euro zone needs more than a fudge.
China Inc helps AIG streamline, at a price 10 Dec 2012 Selling its aircraft leasing arm to a Chinese consortium will raise $4.2 bln - half the value of the U.S. government’s remaining stake in the insurer. The cash could help fund a later buy-back. But the price looks mean next to similar deals, and AIG isn’t getting a clean exit.
Canada gets worst of both worlds with oil verdict 10 Dec 2012 Premier Stephen Harper sent a confused signal by approving two bids by foreign state oil firms, but saying no more are welcome. By clearing CNOOC’s $15.1 bln Nexen purchase he misses out on a populist lift. Yet his rhetoric may slow crucial energy investment. It’s a no-win, eh.
Enjoy cheerier U.S. jobs figures while they last 7 Dec 2012 The 146,000 new positions in November were more than expected while the 7.7 pct unemployment rate is the lowest level since the end of 2008. But the labor force participation rate also sank to a 30-year low and fiscal austerity looms. That portends a workforce reversal of fortune.
Netflix row opens a Pandora’s box on disclosure 7 Dec 2012 The SEC warned it may sue the online video company and CEO Reed Hastings over a Facebook post. What he wrote hardly looks material and it reached more people than if he had said it on CNBC. It’s a bad test case on the question of investor protection in the age of social media.
Uncertain SEC leadership heralds 2013 dysfunction 7 Dec 2012 By elevating one of five commissioners to replace departing Chairman Schapiro without naming a replacement the White House has put Wall Street’s watchdog in a bind. Rule-making will be gridlocked along partisan lines and new blood won’t want to work for a boss seen as temporary.
Freeport deal triangle gets cozier and cozier 7 Dec 2012 The mining group’s market value has plunged $6 bln following news of its foray into energy. Yet the chairman will come out ahead. Now it seems the boss of one target, Plains Exploration, will collect $130 mln and a pay rise. Freeport’s board owes shareholders an explanation.
Bond in driving seat in Aston Martin investment 7 Dec 2012 Its high-yield bond, that is. A $240 mln injection from Investindustrial should boost research and growth at 007’s favourite carmaker and spare some of its Kuwaiti owners’ blushes. But creditors are the immediate winners. After a rough ride, the bonds have roared back towards par.
Banking union will revive pan-EU bank M&A 7 Dec 2012 The euro crisis has balkanised the continent’s banks, with national authorities protecting their own turf and forcing domestic mergers. A single regulator and central bailout fund will lift these barriers. And it might also make EU banks more attractive to non-euro competitors.
Starbucks belatedly discovers new tax zeitgeist 7 Dec 2012 Making tax rules fair used to be lawmakers’ job. Clever tax lawyers battled over how much was owed. Starbucks’ decision to pay quasi-taxes in the UK shows that companies must worry about fairness now. Across finance, the definition of acceptable conduct is shifting.
Corruption is a deceptively good bad investment 7 Dec 2012 A new list of the world’s most corrupt countries includes some of the past decade’s most lucrative growth markets, such as China and the Philippines. Corruption may not scare investors in the early days. But that doesn’t mean it can’t come back to haunt them later.
Petrobras wrestles with local and global ambitions 6 Dec 2012 To play on the world stage, Brazil’s oil champion must branch out. That may be why it seems reluctant to sell Gulf of Mexico assets. Yet the company also needs cash for a domestic agenda that includes a $237 bln capex plan. With Brasilia’s meddling, Petrobras can’t have it all.
M&A combatants face their own "don’t ask" repeal 6 Dec 2012 An obscure but common provision in merger deals bans suitors from seeking to be freed from agreements not to go hostile. A U.S. judge now says such “don’t ask, don’t waive” terms are basically moot. It’s a small but significant win that should help enhance value for shareholders.
HP breakup is on tech world’s 2013 agenda 6 Dec 2012 The revered tech group represents the essence of Silicon Valley. But its era as an everything-to-everyone tech conglomerate is over. CEO Meg Whitman and the board won’t stick around for a five-year turnaround. Breaking up HP would be quicker, and could almost double its value.
Barclays bet lives up to rich billing for Qatar 6 Dec 2012 Qatar has earned a 19 pct IRR on its complex 3.4 billion punt on Barclays at the height of the crisis. That’s a decent return for the then huge risk. But an ongoing probe into fees related to the capital-raising marks an unanticipated, non-financial cost.
Deutsche spat reopens mark-to-model/myth debate 6 Dec 2012 Former employees of the German bank allege it hid $12 bln of losses during the crisis. Banks valued the structured credit assets in question with their own models. This raises the question of whose interests would have been served by a more robust approach.
EADS’ governance rejig falls short of true reform 6 Dec 2012 Paris and Berlin will reduce their influence over the aerospace group. Private shareholders Lagardere and Daimler will be free to divest their stakes. But EADS is still a long way from the kind of reform that would prevent unwarranted government meddling in its operations.
China shadow bank shakeout would be welcome 6 Dec 2012 A wealth product goes wrong; a small Chinese bank blames a rogue employee. It sounds trivial. But if Hua Xia’s crisis shakes confidence in China’s shadow banks, it could jeopardise $2 trillion of loans. Sorting it out might be painful, but produce a healthier financial system.
The 1 pct find a way to stimulate themselves 5 Dec 2012 Special dividends are coming thick and fast in the U.S. to avoid higher tax rates in 2013. Oracle’s Larry Ellison and the Waltons of Wal-Mart are among the beneficiaries. Payouts may have saved recipients $5 bln so far. Uncle Sam might have put that to work fixing infrastructure.
Obama starting to look like fiscal cliff jumper 5 Dec 2012 The president’s approach to solving the budget crisis could take America over the edge. His first offer was dead on arrival and he quickly rejected Republicans’ compromise response. The politics of not reaching a deal might appeal to Obama, but it’s not good for the economy.
Ethical economy: Economics for Christmas 5 Dec 2012 The holiday season is a good time to think about the fundamental weaknesses of conventional economic theory. Frenzied gift-buying cannot easily be reconciled with a Scrooge-like “economic man”. For more realistic analysis, start with a more generous view of human nature.
Citi’s new boss wields his predecessor’s machete 5 Dec 2012 Mike Corbat is picking up where Vikram Pandit left off. The bank will cut 11,000 jobs, reaping savings of $1.1 billion a year. It won’t endear the new boss to his staff. But it’s not a radical move, hitting back-offices hardest. Corbat’s merely tweaking Pandit’s strategy.
UK budget looks right – if the growth forecast is 5 Dec 2012 George Osborne stuck to the austerity script, but shifted some money from rich to poor and added a little infrastructure spending. He could hardly have done more. The big question is whether his forecaster, the OBR, is right. Will UK growth return while Europe struggles?
British bank levy hike even sillier than feared 5 Dec 2012 The coalition again upped its charge on bank balance sheets to cancel out the gift of lower corporation tax. But the levy will now raise more than the 2.5 bln stg originally sought. That looks gratuitous and short-sighted given that banks are meant to be growing domestic lending.
Banking union is on the way. Resistance, too 5 Dec 2012 All the differences between France and Germany on the euro zone common banking regulator can be surmounted by compromises. The main questions are how long it will take to find them, and whether the ECB will be energetic enough to overcome the inertia of 17 national regulators.
Freeport’s $20 bln splurge lives down to tradition 5 Dec 2012 The miner’s complex plans to buy oil explorers Plains and McMoRan swiftly erased $5 bln of value. Freeport Chairman Jim Bob Moffett also runs and partly owns McMoRan, which gets a rich 74 pct premium. The strategic and governance bravado affirm the industry’s Wild West culture.
HSBC proves canny trader with $9.4bln Ping An sale 5 Dec 2012 The emerging market lender flogged 16 pct of the Chinese insurer at a premium to the market price. That’s impressive compared with Bank of America and Goldman Sachs, who accepted discounts for their bank stakes. It should also buy HSBC time to explain its broader China strategy.
Tesco will expose itself by removing U.S. fall guy 5 Dec 2012 The UK-based supermarket group has finally admitted that its American dream has gone sour. But the likely exit from the U.S. will focus investor concern on a much bigger issue: the health of its core grocery business in Britain and its hotchpotch of other international markets.
China’s pick-up is a tale of three engines 5 Dec 2012 Breakingviews’ China Tea Leaf Index shows the economy regaining traction. But not all growth is equally good, and not all the moving parts are yet running as they should. Yet more real estate investment and higher Audi sales suggest China’s bad habits are proving hard to kick.
Judges affirm that greed is perfectly legal 4 Dec 2012 A U.S. court tossed a tax shelter case against two Ernst & Young partners, even though they helped deny Uncle Sam $2 bln. The decision shows how hard it is to prove that dodgy financial conduct is criminal. It’s a reality check for those still baying for Wall Street blood.