Market signals turning point in U.S. gun debate 18 Dec 2012 Private equity isn’t known for squeamishness - or for dumping promising investments. So it’s significant that Cerberus is selling firearms maker Freedom Group following the Newtown school atrocity. Gunmakers’ shares are plunging, too: big money is betting on tougher restrictions.
Jefferies puts Wall Street’s dilemma in a nutshell 18 Dec 2012 The firm reported record annual revenue but only a paltry 8 pct return on equity. CEO Richard Handler, like bosses of larger rivals, wants to improve on that. He has a tax-efficient merger on the cards to help. But without an upturn or big cost cuts, others won’t be so lucky.
Rising US inequality shows need for fiscal reform 18 Dec 2012 A Reuters study shows tax changes and federal outsourcing have helped funnel income to the well-off at the expense of the poor and middle class. Such polarization can slow economic growth and fuel financial instability. Restoring some balance would be both just and rational.
Merkel set for uncomfortable electoral victory 18 Dec 2012 The German parliamentary election in the fall of 2013 is one of the most important pre-planned political events in Europe next year. It is certain that the incumbent will prevail, but her policies will take on different shades, depending on her coalition partners.
Grains are the commodities to watch in 2013 18 Dec 2012 Iffy global economics make it hard to gauge the outlook for copper and iron ore. Grains are different. Stocks are low and the drought that hit harvests in 2012 has continued. Low rainfall is also hitting river-borne U.S. trade routes. Expect prices to stay high.
India in depth: Consumption bets will outperform 18 Dec 2012 In 2013, the economy will plod through its fifth year of deficit-fuelled, bad-quality GDP growth. A stock-picking strategy tilted toward consumption will yield greater rewards than premature bets on an investment recovery, which is still some distance away.
Congress should push for mandatory gun insurance 17 Dec 2012 Firearm ownership is a U.S. constitutional right. But it comes at a cost. Requiring liability coverage could pass legal muster while helping to compensate victims. The market might also do a better job than politicians at keeping the most dangerous weapons from unstable hands.
U.S. VAT could become practical politics in 2013 17 Dec 2012 Washington’s budget spat shows that reducing deficits will be tough without new sources of revenue. A value-added tax could soon become a serious option. Using VAT to replace other taxes, especially corporate levies, could help boost U.S. competitiveness and growth.
Warning to investors: Chavismo doesn’t need Chavez 17 Dec 2012 A big win for the Venezuelan president’s allies in regional elections, despite his absence for cancer treatment, hints at the popularity of his approach. Anyone hoping that Chavez’s successor will have to ditch his ideology for more market-friendly policies should take note.
Deutsche bosses live down to unfortunate tradition 17 Dec 2012 The bank’s arrogance is legendary in Germany. Bosses have been making PR gaffes for decades. So a report that the co-chief executive whinged to a state governor about a police tax investigation sounds all too familiar. Jürgen Fitschen just made Deutsche’s problems worse.
Central bank independence at risk in 2013 17 Dec 2012 The Fed celebrates its centennial next year. In recent decades the independence of the U.S. lender of last resort and its peers elsewhere has become an article of faith. But with Western central bank balance sheets swelling toward 30 pct of GDP, that faith is far from rock solid.
When your town is Newtown 17 Dec 2012 The scene of last week’s school massacre is a bucolic New England town with a deep sense of community. That will play a crucial role as its residents deal with their grief, says Breakingviews Editor Rob Cox, who grew up in Newtown and returned to live there with his family.
KPN’s spectrum binge makes rights issue more likely 17 Dec 2012 The struggling telco will sacrifice dividends after splashing a far higher-than-expected 1.35 bln euros on Dutch mobile spectrum. Forgoing licences wasn’t an option. Carlos Slim’s recent stake-building really doesn’t look too clever. And a capital increase now seems a real risk.
Auctions are wrong way to allocate mobile spectrum 17 Dec 2012 Anxious operators just agreed to pay the Dutch government 3.8 bln euros for 4G spectrum. That amounts to an upfront tax on shareholders and customers, and a big bet for companies. It’s financially inefficient. A pay-as-you-go arrangement would be more sensible than a bidding war.
Abe era will herald a three-digit yen 17 Dec 2012 Japan’s newly elected prime minister will slay the currency to save the economy. That means it will make the kind of move it made after Lehman collapsed in 2008 – but in reverse. Then, risk aversion saw the yen rise 20 percent. In 2013, a U.S. dollar will buy 100 yen or more.
Hugo Dixon: Why Mario Draghi scores AAA on PPP 17 Dec 2012 The ECB boss is Europe’s most powerful man. The reason? He rates highly on the three Ps of power: position, personality and pivot points. Draghi may not outrank Angela Merkel, but he outscores other men such as Francois Hollande and Mario Monti.
Deutsche Bank CEOs are running out of chances 14 Dec 2012 The last week has seen Deutsche warn on Q4, suffer police raids and be forced to pay corporate damages. True, the issues relate mainly to the bank’s history. But Anshu Jain and Juergen Fitschen now have no margin for error as they try to move Deutsche on from its, and their, past.
Whole of sub-Saharan Africa is the real quasi-BRIC 14 Dec 2012 South Africa alone can’t match the others in the emerging club. But add non-Arab continental neighbors, and the combined GDP is over $1 trln and growing fast. Single countries are too small for most investors. But if the region can combine markets and trade, it could take off.
Review: Every monetary system needs a Paul Volcker 14 Dec 2012 William Silber’s biography praises the man whose determination and integrity overcame U.S. inflation with monetary policies the opposite of today’s, against opposition from politicians and economists. Yet once his work was done, policy slid back and his abilities were wasted.
Other banks may take most of the UBS Libor pain 14 Dec 2012 The Swiss lender is set to pay $1 bln for fiddling interbank rates. That’s more than twice as much as Barclays, which lost a CEO over the case. After many reputational blows, UBS has less to lose. But fellow Libor miscreants will be looking at an even more hostile world.
Singapore property spat may hinge on tax oddity 14 Dec 2012 SC Global’s controlling shareholder has offered to take the high-end apartment developer private. Large investor Wheelock is holding out for a better price. Ending the standoff may require some clarity about Singapore’s discriminatory approach to taxing foreign-owned property.
India’s Jet a better bet than Kingfisher for Etihad 14 Dec 2012 The Abu Dhabi airline is spoilt for choice in India. It can rescue and run grounded Kingfisher, or buy a smaller stake in better-managed Jet Airways. The latter offers a better fit. Besides, a low-key and passive entry into a market that is just opening up makes more sense.
What if regulation makes finance more efficient? 13 Dec 2012 Though technology and innovation have squeezed trading costs, the industry’s profits are accounting for a bigger share of U.S. GDP, a former Goldman banker says, needlessly diverting some $635 bln from the broader economy. It lends credence to ideas like a transaction tax.
Brazil’s ailing oil industry needs a nudge 13 Dec 2012 Petrobras can’t meet output targets. The fallout from Chevron’s spill is making it hard for companies to hire. And Eike Batista overhyped OGX, whose value has plummeted. The country’s once-promising oil bounty is going to waste. A revival may need fresh thinking from Brasilia.
Goldman gets reward for taking year-end block risk 13 Dec 2012 Renault’s sale of its 6.5 pct stake in Volvo is a boon for the French carmaker. But it was hazardous for Goldman, which stood to wear as much as 1.5 bln euros in selling the block. Any loss would hurt just as the books are about to close for 2012. The upside? League-table credit.
UK banking union concessions don’t count for much 13 Dec 2012 Britain’s newly won safeguards to protect its big financial sector are worth having. But they may be revisited if most non-euro zone states join the new ECB-controlled bank union. And it will in any case be hard to avoid moving in step with new initiatives pushed by Frankfurt.
Sprint confronts starry-eyed activists 13 Dec 2012 The U.S. mobile operator being acquired by Japan’s Softbank is offering $2.1 bln to buy the rest of Clearwire. The 5 pct premium won’t satisfy uppity investors who want Clearwire to seek other options. Sprint’s control limits their power, but they could elicit a sweetener.
EU shows it can bank on its union after all 13 Dec 2012 The deal Europe struck on the banking union has all features of a good European compromise. Amazingly, it even managed to make the Brits happy. Against all odds, the EU is functioning. It needs to work, because there are still huge problems to solve.
Qatar gives SocGen an honourable exit from Egypt 13 Dec 2012 Qatar National Bank is buying the French lender’s 77 pct stake in its Egyptian unit, valuing the whole at $2.6 bln. The price of 2 times book value is below pre-revolution multiples, and SocGen faces currency risk. But with few other buyers, it’s better to shrink while it can.
Central bankers may embrace old enemy: inflation 13 Dec 2012 Central banks in developed economies have been trying to juice the economy for years, without much success. As they run out of fresh ideas to battle the doldrums in 2013, they may reluctantly decide that debt-melting price increases are the least bad way forward.