Venezuelan oil gets a slightly new sheen 6 Mar 2013 Under Hugo Chavez, state-controlled PDVSA spent twice as much on welfare as it invested in production. Reversing the ratio would better exploit the world’s largest reserves. Whoever succeeds Chavez, however, probably will follow his model - at least until the price of oil falls.
Newtown effect yields bumper crop for gunsmiths 6 Mar 2013 Smith & Wesson’s order backlog hit an all-time high following the Connecticut school shooting. Sales projections were raised again. The prospect of tighter gun restrictions - however remote politically - has buyers in a panic. The NRA has earned its keep for another quarter.
New high for Dow sends cryptic market message 6 Mar 2013 One thing is clear: investors have pushed a not very representative U.S. stock benchmark above its previous peak. But the meaning of this is obscure. Markets have done well or badly, shares may be cheap or expensive, and people managing money may be optimistic or glum.
Ethical economy: Morality and monetary policy 6 Mar 2013 Central bankers think of themselves as financial technocrats. But ethical analysis could have helped them avoid the financial crash and today’s abnormal policies. Freedom to lend and borrow is not an absolute good, and the greed of bankers and borrowers is a dangerous evil.
Global finance isn’t dead, only shrinking 6 Mar 2013 Bankers worry the world’s financial system is fragmenting, with dire consequences for trade and growth. But after an unsustainable boom, some shrinkage is inevitable, and desirable. Besides, excluding the euro zone, cross-border capital flows are still reasonably healthy.
Samsung cash injection still leaves Sharp short 6 Mar 2013 The Korean giant is investing $111 mln in its cash-strapped Japanese rival. In return it gets a 3 pct stake and locks in a supplier of liquid crystal displays. The vote of confidence is important for Sharp. But with $11 bln of net debt, it needs more fresh equity to pull through.
Market dislike of Axel Springer is over the top 6 Mar 2013 The German media group spooked shareholders with news that the restructuring of its print unit and further digital investments will eat into 2013 profit. The fears look overdone. Springer is coping with the digital transition much better than most of its peers.
Hungary’s budding market success may not last 6 Mar 2013 Investors seem hungry for Hungary. Last month Budapest raised funds from the market for the first time since 2011, luring buyers with high returns and improved finances. But the government’s erratic agenda ahead of a 2014 election could curb future appetite for the country’s debt.
Southeast Asia is wrong to neglect inflation risk 6 Mar 2013 Central banks in Indonesia, the Philippines and Thailand are turning a blind eye to rising prices in their fast-growing economies. They fear being swamped by capital inflows. But their reluctance to signal higher interest rates will make inflation harder to control in future.
Chavez’s economic program did everything but work 5 Mar 2013 The Venezuelan strongman won elections regularly and his populist economics played well at home. His rule coincided with a giant surge in oil prices, helping avoid bankruptcy. Yet Chavez’s policies alienated foreign investors as well as governments and kept Venezuelans poor.
Shareholders must remind lawyers who’s in charge 5 Mar 2013 Legal eagles are eyeing cases over company stock-plan violations after pouncing on say-on-pay votes and proxy disclosures. The new litigation supposedly benefits stockholders. But it seems more of a feast for lawyers. Big investors ought to call out the weaker suits.
Brewing Latam defaults could prompt 1980s re-run 5 Mar 2013 Argentina may stop all debt payments to avoid paying holdout creditors from its last default 11 years ago, and Venezuela’s credit looks shaky. The danger is that one failure to pay sparks others in the region, and even virtuous borrowers like Colombia are cut off from credit.
Securitization clan condemned to repeat history 5 Mar 2013 Banks and investors are abandoning the American Securitization Forum over a pay and governance brouhaha. As Washington puts final touches on new industry rules, the timing couldn’t be worse for the trade group. Like the pre-crisis MBS market, arrogance is trumping common sense.
How to get richer than Warren Buffett, Zara-style 5 Mar 2013 Inditex founder Amancio Ortega successfully flouted many of the rules of fashion retail. The company behind Zara has now made him one of the world’s richest men. The shares look painfully expensive. But the Spanish group’s unusual approach brings durable competitive advantages.
RWE will find it tough to renew its powers 5 Mar 2013 Germany’s biggest utility is in better shape than many seemed to think. RWE beat profit targets and pleased with a decision to sell its oil unit. Medium-term challenges are formidable, though. It will find Germany’s push for renewable energy especially hard to cope with.
Latvia now well placed to benefit from euro 5 Mar 2013 The Baltic state has applied to join the single currency - a move some deem foolish given the euro zone’s woes. But Latvia’s membership should be a reason to cheer: the monetary union can do with some support - and it is a chance for Riga to stabilise and boost its economy.
U.S. housing reform takes baby step uphill 5 Mar 2013 A much-needed overhaul of mortgage giants Fannie Mae and Freddie Mac is proving to be a Sisyphean task. Regulator Edward DeMarco keeps pushing, though, and is set to streamline their duplicative securitization businesses. It’s time for lawmakers to get things seriously rolling.
Markets wrong to downplay Italian political risk 5 Mar 2013 Italian bond spreads have risen since the election. But it could have been worse - and considering the possible scenarios, it should. The priority is political reform, so a credible government can emerge at the next election. But even this isn’t assured.
Glencore/Xstrata results herald tense integration 5 Mar 2013 Last year’s profit fell less at commodity trader Glencore than at mining merger partner Xstrata. Glencore’s trading arm provided a cushion as the metals cycle turned, while ambitious Xstrata had to take big writedowns. Expect a brutal “Glencorisation” of Xstrata’s culture.
StanChart risks remain economic, not regulatory 5 Mar 2013 The London-listed lender shrugged off the fourth-largest industry fine to register its tenth consecutive increase in pre-tax profit. Though UK rules and taxes are a drag, StanChart’s growth is firmly hitched to emerging markets. That makes it unique among Western peers.
Bonus-rule get-arounds would invite retribution 5 Mar 2013 If the banking industry is true to form, it will try to find legal ways of dodging proposed European rules capping bonuses as a percentage of base pay. And it could succeed. But the victory will eventually lead only to more trouble for an industry the public loves to hate.
Three roadmaps for an urbanizing China 5 Mar 2013 Managing the growth of China’s 711 million urban dwellers is high on the new leadership’s agenda. There are three options: let people go where they like, send them where resources are abundant, or put them where empty buildings are. The first is fairest; the last is most likely.
Like it or not, U.S. Treasury needs a banker 4 Mar 2013 New Secretary Jack Lew is a budget and legislative whiz, but he lacks important financial nous. The revolving door with Wall Street may still rankle, especially with bailout critics, but hiring someone like Morgan Stanley CFO Ruth Porat as his deputy would help fill the gaps.
Travel budgets could spare U.S. boards legal bills 4 Mar 2013 Financial fraud is easily hidden abroad. That’s the trap Caterpillar fell into, and now it has snared directors of mining company Puda Coal. Judge Leo Strine recommends on-site visits. They’re not always necessary, but boards owe investors closer scrutiny of operations overseas.
Bertelsmann’s new BMG tune strikes the right chord 4 Mar 2013 The German media group is buying out KKR, its co-owner of music rights venture BMG. Having sold its music business five years ago, the deal appears to suggest strategic confusion. The truth is more subtle - and appealing. Bertelsmann could yet show greater boldness, though.
European banks were asking for a slap 4 Mar 2013 It was meant to be a bad bonus round in Europe, reflecting a weak business environment. In fact, pay for the average investment bank employee at Europe’s top four firms fell just 2 pct last year to $313,000. Deferred awards cloud the picture, but there’s little sign of restraint.
UK lending subsidy: politics 0, economics 1 4 Mar 2013 British banks trebled usage of the Bank of England’s cheap funding scheme in the fourth quarter, but net lending shrank. The initiative seems to be helping big banks more than small businesses. Politically, it’s embarrassing. Economically, it’s still a good outcome.
Hess rejects activist push – by caving to it 4 Mar 2013 The $24 bln oil company’s inefficient sprawl and cozy board made it a ripe target for Elliott Management. Hess claims the hedge fund’s prescriptions are wrongheaded, but is selling assets, nominating new directors and returning capital. That’s much of what Elliott was pushing for.
QInvest-EFG Hermes deal tests new Egypt 4 Mar 2013 Ten months have passed and the Qatari firm is still waiting for regulatory approval for its deal to carve up the region’s top investment bank. Criminal allegations against EFG’s co-CEOs make this a political hot potato for Egypt. But both firms may be weaker if nothing is done.
Weak pound need not turn into sterling crisis 4 Mar 2013 The soft pound suits UK policymakers. Along with low gilt yields, it helps stimulate the economy. But if it falls too far and too fast, gilt yields would rise and decline could turn to rout. Further quantitative easing is risky, overt monetary financing would be disastrous.