Wall Street finds new way to put investors second 24 Jan 2013 Banks may finally be bowing to pay pressure, but they’re still shirking shareholders. JPMorgan wants to stop them from voting on a breakup while Goldman Sachs wants a chairman/CEO split off the ballot. It sounds like these supposedly master sellers are afraid they can’t close.
Law firms face real disruption from virtual rival 24 Jan 2013 Already under threat from pickier clients and cheaper alternatives like LegalZoom, the profession now confronts Clearspire. Flat fees, salaried attorneys and online advice upend the traditional business model. This U.S. upstart’s approach could be the way of the future.
Bigger U.S. economic woes lurk beneath joblessness 24 Jan 2013 Even as the unemployment rate has fallen under 8 pct, the number of Americans receiving disability payments and food stamps has grown at a breakneck pace. With at least 15 pct of the nation needing such aid, the extent of underlying workforce shifts may not be fully appreciated.
Investors remain justifiably twitchy about Nokia 24 Jan 2013 Full-year results from the Finnish mobile giant dampened the enthusiasm from a surprisingly strong pre-announcement two weeks ago. Microsoft’s help comes at a cost, the year’s start was typically weak, and there’s scant evidence that its smartphones are getting any U.S. traction.
Obama’s SEC pick is just what doctor ordered 24 Jan 2013 Ex U.S. Attorney Mary Jo White is slated to be the watchdog’s new boss. She’ll have to mend fences between fellow commissioners and show that her skills tackling mobsters can be turned to financial crime. But her prosecutorial zeal is what an SEC seen as soft on Wall Street needs.
M&A boutiques show signs of staying power 24 Jan 2013 Greenhill’s 4 pct revenue drop last year suggests smaller shops are weathering a deal-making decline even better than bigger rivals. The type and size of transactions help. But experience and a desire for independent advice means merger specialists should keep holding their own.
Davos desperately seeking the next Internet 24 Jan 2013 Delegates at this year’s World Economic Forum want solid reasons to be bullish. And so the U.S. shale gas revolution has taken on an undeserved status as a Web-like catalyst for global change. In the echo chamber of Davos, semi-logical conclusions quickly become common wisdom.
Greece flirts with single-digit yields 24 Jan 2013 Greek 10-year government bonds haven’t traded below 10 pct since October 2010, but they’re just above that psychological threshold now. Fears of Grexit have receded and reforms are largely on track. But the big prize - borrowing in the open market - is a long way away.
Glencore Xstrata needs governance champ in chair 24 Jan 2013 The commodity trader’s board is already stuffed with operational expertise. CEO Ivan Glasenberg should resist the temptation to go for more of the same. The board needs a chairman with impeccable governance credentials. One former UK government minister fits the bill.
ICAP’s Libor woe comes at awkward time for broking 24 Jan 2013 The London-based inter-dealer broker is being investigated by its regulator for possible breaches related to the fixing of interbank interest rates. All firms caught in the Libor hydra will suffer. But regulation is forcing big changes to broking business models.
Dutch headed for good old, 2008-style bank bailout 24 Jan 2013 SNS Reaal is running out of road to address big property loan losses. That gives the Dutch government a chance to try out its new bank intervention powers. These should help, but the Netherlands will struggle to achieve the holy grail of bailouts: one that wouldn’t punish taxpayers.
South Korea may need a rate cut to fight weak yen 24 Jan 2013 Economic growth is anaemic and manufacturers like Hyundai are feeling the pinch. While a boost in fiscal spending may revive GDP, a looming currency war with Japan would take the fizz out of a much-expected recovery in exports. Lower rates could help to ease the pressure.
Apple finally succumbs to uncreative destruction 23 Jan 2013 The iPhone and iPad catapulted Apple to investment royalty, but that five-year run is ending. Some $50 bln of value just vaporized after Q4 profit was flat. Copycats have caught up and margins are shrinking. CEO Tim Cook needs a real innovation to escape this Red Queen’s race.
Washington downgrades debt threat to DEFCON 3 23 Jan 2013 The House has passed a GOP motion to raise the nation’s borrowing limit for four months. That implies Republicans will use fear of a government shutdown to try to cut the deficit. It’s akin to putting a gun to a kneecap rather than a head. It’s less messy and might just work.
Toothless MACs giving way to deal terms with bite 23 Jan 2013 Exceptions have all but neutered material adverse change clauses. That’s why some recent transactions like Freeport-McMoRan’s purchase of Plains Exploration spell out specifically when a buyer can bail. Change may not come easily to dealmakers, but they should welcome clarity.
Big Oil and MLPs on verge of beautiful friendship 23 Jan 2013 The likes of BP own mature wells that often don’t generate a decent return. Until now they had few options for offloading them. But the emergence of tax-exempt partnerships that pump oil and gas provides buyers that can pay top dollar and extract fat returns for investors.
Four questions Monte dei Paschi must answer 23 Jan 2013 The Italian bank is probing how opaque derivatives trades racked up hundreds of millions of euros in losses. It has promised to come clean about how it got into the mess. Investors and taxpayers need transparency on what it was doing, why it was doing it, and why they weren’t told.
Corporate surgery may be in order at Novartis 23 Jan 2013 The Swiss pharma giant has hired back an old hand to replace veteran Chairman Daniel Vasella. That implies continuity, not change, at Europe’s second-biggest drugmaker. Still, new chair Joerg Reinhardt might ask whether the sprawling group needs to do fewer things better.
Robin Hood tax is proving Cameron wrong on Europe 23 Jan 2013 The financial transaction tax that 11 EU countries want to implement is a case study of David Cameron’s self-defeating approach to Europe. Refusing to engage with its partners means London will bear the consequences of decisions taken without the UK’s participation.
Ethical economy: The demographic effect 23 Jan 2013 From a narrow economic perspective, low birth rates are nothing worse than a minor nuisance. That is one lesson from Japan. But the rigidity of ageing populations could cause financial and political problems. For society as a whole, the new generation gap looks impoverishing.
U.S. companies need to get real about pensions too 23 Jan 2013 As lawmakers wrestle over how to fix the nation’s ailing retirement benefit programs, AT&T and Verizon took a whopping $17.2 bln of charges for theirs. Return expectations remain too rosy and deficits are rising. The private sector isn’t exactly leading the way on the issue.
Hugo Dixon: UK faces five years of limbo-land 23 Jan 2013 The promise of referendum on Britain’s membership of the EU by end-2017 means a long period of uncertainty which will be bad for investment. It also heightens the risk of a “Brexit”. There is an opportunity here, however, to press for more competitiveness and less centralisation.
Cameron bets big on confused European ideas 23 Jan 2013 The British prime minister’s vision of a largely economic European Union may play well at home, but is far too simplistic for today’s EU. The UK referendum on membership is a pointless distraction. It will reduce British clout in Europe and discourage business activity.
Europhobic pound faces year of two halves 23 Jan 2013 The pound is sliding. An EU membership referendum is a definite new negative. Trade and public finance data feed the doubts. A poor GDP figure and snow may compound the weakness. But the UK is still expected to outpace the euro zone this year. Decline may turn into opportunity.
Google’s mobile pain coming to end 23 Jan 2013 The search giant’s fourth-quarter results imply advertisers are having a change of heart. They are overcoming their reluctance to pay top dollar to promote their wares and services on smartphones. With searches on these devices proliferating, that’s a boost for Google.
Maroc Telecom bidders defy unrest in $6 bln sale 23 Jan 2013 Vivendi’s 53 pct stake in Morocco’s leading telecom operator is on the block and generating much interest. Maroc’s slight premium to peers, weakness in its home market and regional tensions are not deterring the would-be buyers keen to capitalise on political ties.
China’s bail-in bonds leave room for conflict 23 Jan 2013 ICBC may become the first Chinese bank to issue debt that can be written down to zero by the regulator in a crisis. Since the state is also the bank’s biggest shareholder, that leaves bondholders exposed. If bad loans swell, outsiders could be forced to foot a chunk of the bill.
Microsoft shows why tech cash needs a discount 22 Jan 2013 The software giant may put up $3 bln to fund a leveraged buyout of Dell. The PC maker is cheap and Microsoft’s investment record, including Facebook, isn’t bad. But a Dell financing would divert money that could be returned to shareholders to plug holes and postpone obsolescence.
U.S. Bancorp puts rivals big and small to shame 22 Jan 2013 The Minneapolis-based bank with $350 bln of assets cranks out better returns than giants like JPMorgan and midsize lenders like PNC. Its success is no secret: a good mix of business, no stretching for profit and costs kept in line. The shock is that so few others can pull it off.
Pfizer spins, but not completely off 22 Jan 2013 The pharma giant’s $2.2 bln IPO of its animal health unit, Zoetis, should cheer investors. Those contemplating buying the stock, however, will want to read the warning labels closely. Super-voting shares could mean Pfizer retains board control even if its stake goes below 50 pct.