Philips: a credible recovery story at a full price 29 Jan 2013 The Dutch electronics giant reported solid results and is selling its home entertainment unit. This represents the latest evidence of a successful overhaul. But after a sustained rally, the stock looks richly priced - despite the promise of a brighter future in lighting and healthcare.
Ford needs non-U.S. units to step up a gear or two 29 Jan 2013 The automaker’s home market is carrying the company. Granted, problems in Europe - which lost $1.8 bln in 2012 - are being addressed, South America’s woes are containable and revenue in Asia is growing. But Ford could use solid profit elsewhere to balance America’s resurgence.
Activist exposes Hess as latest governance villain 29 Jan 2013 Hedge fund Elliott reckons the U.S. oil company could be worth more than double its current $20 bln-plus value. But as at other energy groups, like Chesapeake and SandRidge, a too-cozy board has brought waste and strategic blunders. New broom directors would help change that.
Currency war is not worth fighting 29 Jan 2013 The downside of competitive devaluations is clear: international ill will and higher risks of both inflation and financial disorder. The upside is less clear. In developed economies, devaluations don’t always boost exports. They can also defer helpful reforms.
European carbon market doesn’t need a supply fix 29 Jan 2013 Collapsing carbon prices have policymakers racing to shore up the EU’s emissions trading scheme. But even if the value of permits fell to zero, the level of emissions would stay below the limit agreed for 2020. Authorities should rethink the cap, not fiddle with supply.
Rate cuts won’t revive India’s stalled growth 29 Jan 2013 The latest reduction in interest rates will be as futile as the previous one nine months ago. GDP growth will pick up when New Delhi curbs its own profligacy and improves the investment climate. The February budget may be the current government’s last chance to do both.
China must learn to live with corporate default 29 Jan 2013 Bonds in China don’t default. Instead, issuers like solar panel maker Chaori are bailed out in private. That has warped perceptions of risk, and made banks look safer than they really are. Though the first failure will be a shock to the system, it is inevitable - and necessary.
Markets’ new-year euphoria looks overdone 28 Jan 2013 The S&P 500 is up 5 pct, earnings look good, investors are shoveling record sums into equities and Treasuries are flirting with 2 pct yields. But fiscal cliff woes remain and at least one incentive to put money to work may wear off. It’s OK to feel better, just not to excess.
Smartphones may not dial in bumper profit for long 28 Jan 2013 Sales of advanced handsets grew 43 pct last year and now account for more than two-fifths of the otherwise stagnant cell phone market. But simple math dictates growth should slow. And history suggests prices will continue to fall. That’s a toxic combination for margins.
Hess needs more than standard activist fare 28 Jan 2013 The $21 bln U.S. oil group is selling terminals and closing its last refinery just as activist hedge fund Elliott Associates is showing interest. Hess is already becoming a purer explorer. Closing the valuation gap with peers requires more than spinoffs or financial engineering.
Legal piracy could pay off for frustrated Antigua 28 Jan 2013 The Caribbean haven nearly lost its shirt to Texan Allen Stanford. Now it’s hurting from a U.S. Internet-betting ban that violates trade rules. A WTO-blessed plan to retaliate by selling U.S. copyright works online may be Antigua’s ace. Uncle Sam doesn’t hold all the cards.
Iceland bank ruling finds UK was the greater fool 28 Jan 2013 A European court has ruled that Reykjavik didn’t break depositor protection laws in 2008, when UK and Dutch taxpayers paid for its bust banks. The verdict pans British and Dutch naivety. That’s fair, but it will complicate the drafting of new cross-border bank resolution plans.
Carney should remember central banks’ limits 28 Jan 2013 Mark Carney, the incoming governor of the Bank of England, thinks the monetary authorities can do more to help the economy. His suggestion of targeting nominal GDP instead of inflation rates may be fashionable, but that policy is more likely to stoke inflation than growth.
GM and Ford could be set to turbo-charge 28 Jan 2013 The two U.S. automakers are admirably cautious about this year’s prospects. An improving domestic economy could, however, accelerate pent-up demand among subprime borrowers and especially pickup truck buyers. That would give a lift to margins at GM and Ford - and their stocks.
Washington shows how two wrongs can wind up right 28 Jan 2013 In a bid to limit the power of a new financial regulator, U.S. lawmakers blocked the president’s nominee to lead it. Obama’s back-channel appointment of Richard Cordray could be rendered illegal by a Friday court ruling. But Congress should be ready to approve him now anyway.
Buoyant markets give ECB upper hand in Irish spat 28 Jan 2013 The European Central Bank has rejected a plan by Dublin to restructure its bank bailout. Any deal needs to balance the risks of derailing Ireland’s recovery against a breach of its own rules by the ECB. For now, low Irish bond yields give Frankfurt an advantage.
Hugo Dixon: MPS saga not just a local affair 28 Jan 2013 Revelations that complex financial transactions used by the Italian bank had the effect of hiding losses are causing a political storm, potentially helping Berlusconi in the upcoming election. Mario Draghi’s competence is also being questioned, as is the role of foreign banks.
Egypt chaos points to longer, riskier transition 28 Jan 2013 The deadly clashes in cities along the Suez Canal indicate that the country’s transition will be longer and more painful than expected. The seriousness of political and social divisions has been underestimated. The ruling Brotherhood must build consensus to find stability.
China FX swap may blur Bank of England mandate 28 Jan 2013 The central bank is under pressure to set up a swap facility with its Chinese counterpart. Doing so would boost renminbi trading in London. But the BoE’s main concern should be financial stability, not the City’s competitiveness. Confusing the two would be a mistake.
Ackman vs Icahn is an epic but pointless battle 25 Jan 2013 A personal feud between the two New York billionaires has erupted anew. Though it’s emblematic of their approach to investing and escapist fun for financiers, the two men play important roles in the markets. Their aggressions are better directed at supine boards than each other.
No-retreat strategy may backfire on SandRidge CEO 25 Jan 2013 Rebel investors want the oil chief’s head over his financial excesses and conflicts of interest. So Tom Ward resorted to new rules making it harder to remove him. Offering governance concessions, as fellow bad boy McClendon did at Chesapeake, would be a surer way of surviving.
Colombia faces bigger threats than guerrillas 25 Jan 2013 FARC’s resumption of hostilities after a two-month ceasefire is disappointing. But peace talks continue. Colombia’s solid economic growth, though, is being infected by hot money from abroad distorting the currency and heading to the wrong sectors. That seems the greater worry.
ECB liquidity payback gamble was worth the risk 25 Jan 2013 EU banks have repaid over a quarter of the 489 bln euros of three-year central bank loans they took in 2011. The risk is weaker banks still hooked on cheap liquidity get stigmatised. But the stronger ones will benefit, and the euro zone has other options if the crisis reignites.
"Don’t be evil" business mantra not conflict-free 25 Jan 2013 Like Google’s founders, executives at Davos want their firms to be socially useful. Strategically, this usually boils down to getting out of “bad” products or services. That’s fine if those business lines aren’t performing. But it’s a real test when they contribute financially.
Draghi haunted by ghosts from Italian past 25 Jan 2013 The ECB president, who will soon be the euro zone’s top banking supervisor, has experience. He oversaw Italian banks when he ran the country’s central bank. Monte dei Paschi’s questionable deals happened under his watch. He has some explaining to do.
Real Madrid’s money-league triumph has rotten base 25 Jan 2013 Soccer’s revenue league shows this is the decade of the $1-billion-a-year club. Leader Real Madrid could break that barrier by 2016, at current growth rates. But unequal TV deals play a big part in the team’s triumph. The loser is Spanish football - both on and off the pitch.
Could the banking union have avoided Monte’s mess? 25 Jan 2013 The euro zone’s new banking supervisor will have significant powers. It will also rely on domestic regulators. This will be an improvement on the status quo - not a guarantee that the type of derivative debacle that hit Banca Monte dei Paschi can always be avoided.
IMF calls for stimulus, no, make that austerity 25 Jan 2013 The world is struggling for growth and the IMF is critical of both the UK’s austerity and Japan’s stimulus. But is the UK, with Europe’s biggest deficit, really austere? And will Japan’s stimulus stimulate? Fiscal and monetary policy cannot solve all the world’s problems.
TPG runs rings around Li Ning shareholders 25 Jan 2013 The buyout firm has revised the terms of convertible bonds it bought last year, while underwriting the Chinese sports brand’s discounted $240 mln issue. Li Ning needs the money. But it gave away too much when it first invited TPG in. Shareholders are paying for that largesse.
Ticket to ride up London’s Shard looks toppy 25 Jan 2013 Western Europe’s tallest building will soon offer a near-$40 view. That’s lofty compared to famous vistas in New York, Paris and elsewhere. Adjusted for height, the cost looks even steeper. Blame may lie with the same footloose global capital that has flooded into London property.