RBS/Lloyds share-sale mandate: for masochists only 28 Jun 2013 The UK government has invited investment banks to pitch for the right to help sell down its bank stakes. Bragging rights and league-table credit are up for grabs - but so is intense public scrutiny during and after the sales. The winners could wind up with a Pyrrhic victory.
Remodeled MBA program makes good business sense 28 Jun 2013 UCLA’s Anderson school will no longer rely on California taxpayers. Filling the funding gap from revenue-generating programs and alumni gifts should restrain tuition cost growth. That may help woo students to degrees that lead to high-paying jobs and ultimately help the economy.
New EU bail-in a great tool for previous crisis 28 Jun 2013 New rules forcing losses on investors would have saved taxpayers money in the bailouts of wholesale-funded banks like RBS, Bankia and maybe even Anglo Irish. But the new system assumes lenders have ample stocks of bail-inable debt. Public money may still be needed if they don’t.
UK’s big build dreams still dogged by past binge 28 Jun 2013 There is real austerity in some parts of the UK budget, but not enough to keep total spending from rising. A cap on welfare spending won’t reverse the huge previous rise. The government’s talk of 100 billion pounds in infrastructure projects sounds bigger than the pinched reality.
China’s corporate spying is three-cornered problem 28 Jun 2013 U.S. prosecutors could slap a $4.8 bln fine on a Chinese wind turbine maker accused of stealing code from a U.S. supplier. Such cases are on the rise. Corporate espionage often requires three factors: opportunity, pressure and rationalization. China has them all in spades.
Review: Tales from China’s wild lending frontier 28 Jun 2013 Former banker Joe Zhang spent a year running a microcredit firm, then wrote about it. “Inside China’s Shadow Banking” is part memoir, part advice for reining in the country’s credit boom. Despite the title, it’s the regular banks that are the ultimate source of the trouble.
Abe’s vote gamble is a welcome sign of reform zeal 28 Jun 2013 The Japanese prime minister will set up a commission to rethink a lopsided electoral system which favours rural voters. The move, which hurts Abe’s own party, will raise hopes of a similar step-up in the pace of economic reform after next month’s crucial upper house elections.
IPO investors sober up as punch bowl drains 27 Jun 2013 CDW and HD Supply both were forced to slash their debut stock prices. Buyers had been lapping up new issues at a pace not seen in six years. Without the intoxicating effect of low rates, though, revenue-free startups and heavily indebted buyouts will be harder to serve up.
Finance 101 would get U.S. pensions back on track 27 Jun 2013 Illinois, Connecticut and New Jersey are among the states that neglected the most powerful force in retirement saving: compound returns. Their pension burdens are much heavier because they short-changed the funds, a Moody’s study finds. It’s time to revisit the basics.
Investor imperative – get on top of bond duration 27 Jun 2013 Until now, only geeks worried about this measure of a bond’s sensitivity to changing rates. But if yields keep rising, duration will become a crucial indicator. For a start, it shows how the UK government is well prepared for the shift - and how the U.S. Treasury is vulnerable.
Peugeot family may hold key to European autos M&A 27 Jun 2013 Descendants of the French automaker’s founders may give up control for closer ties with General Motors, according to Reuters. Its U.S. partner may balk at a merger. But the family’s recognition that its time is up may help spur much-needed broader industry consolidation.
EU bail-in rules give taxpayer partial protection 27 Jun 2013 The template European politicians agreed on for bailing in the creditors of failed banks is a step forward. But governments will retain some autonomy on how bail-ins will be implemented. The new rules should prevent another Ireland, but may not prevent another Cyprus or SNS.
Repsol can wring a better deal for losing YPF 27 Jun 2013 The Spanish oil major had to snub Buenos Aires’ tentative compensation offer for the expropriation of its Argentinian subsidiary. It wants $11 bln. The state’s package wasn’t worth the $5 bln ascribed to it. Repsol may never get full recompense. But it can hold out for more.
Market bloodletting may be more 2003 than 1994 26 Jun 2013 Bankers are smart to ask if the recent jump in rates could cause a replay of bond pain two decades ago. A better comparison may be 2003. Markets threw a hissy fit when the Fed signaled easy money would end. It didn’t last long. More importantly, nothing big blew up.
Chevron ruling could erode M&A home-court edge 26 Jun 2013 Allowing deal lawsuits to be forced into the preferred corporate forum may initially swell Delaware’s caseload. But the decision could also lead companies to bypass courts for arbitration. That would eat into investors’ rights - and perhaps the state’s business law supremacy.
Wall Street finds itself in a 1994 state of mind 26 Jun 2013 Back then a jump in rates inflicted mega damage. Goldman Sachs partners even had to recapitalize their firm. Bank bosses are confident today, saying they’re no longer holding inventory and ceded prop trading to hedge funds. If true, maybe they have regulators to thank.
Edward Hadas: Salaries good, big bonuses bad 26 Jun 2013 Straight salaries account for less than a fifth of top executive pay. The rest comes in bonuses, shares and perks. But complicated and contingent pay arrangements make little sense. They rely on wrong ideas about motivation and a faulty understanding of what bosses actually do.
Spinoff wave reaches the Dead Sea 26 Jun 2013 Corporate carve-ups are all the rage. Now Israel’s richest man is joining in. Unravelling his sprawling Israel Corp will be complex but worthwhile. There are still countries where conglomerates make sense. But where capital is easily available, markets much prefer simplicity.
Australia’s political bang is an economic whimper 26 Jun 2013 PM Julia Gillard has been ditched as head of the ruling Labor Party in favour of her predecessor, Kevin Rudd. The brutal switch might make Australia’s impending election a closer contest. But the country’s economic future still depends more on events in China than Canberra.
Coup at GSW heralds new governance era in Germany 26 Jun 2013 A shareholder revolt has led to the ousting of the chairman and CEO of the German residential property company. The putsch marks a watershed for governance in Europe’s most powerful state. Boards should wake up: cosy capitalism is on the way out.
Italy still can’t shake off old derivative sins 26 Jun 2013 Rome’s use of financial engineering in the 1990s is known, but news of a possible 8 bln euro loss on pre-euro swaps is still embarrassing. The debt crisis hasn’t fully clarified Italy’s opaque public finances. Lingering obscurity won’t help if Italy has to ask the ECB for help.
Fed’s sand will make Asia’s investment wheel creak 26 Jun 2013 The fivefold jump in Asian fixed-asset investment in the last decade was largely a result of negative real interest rates. With the Fed deciding to curb stimulus, that cheap-money era is now over. An investment strike in the world’s fastest-growing region may be hard to prevent.
France’s poisonous politics bound to hit economy 26 Jun 2013 Corruption scandals are tarring all the mainstream political parties and populist organisations are on the rise. With no signs of economic growth, François Hollande’s useful but tentative reforms look ever more doubtful. France’s already-big credibility deficit is growing.
China bank rout favours big lenders over small 26 Jun 2013 The country’s four megabanks have a structural advantage in garnering deposits. Smaller rivals have less to lend, so are prone to liquidity squeezes and forced to seek riskier income streams. Though the central bank has pledged to help cash-starved banks, the imbalance persists.
Basel leverage fudge puts heat on Wall Street 26 Jun 2013 The Swiss-based global regulator has hit at U.S. banks more than euro peers in its attempt to harmonise leverage rules. Basel’s proposals stop American lenders offsetting derivatives. But by trying to steer a middle path it actually makes international convergence less likely.
Marc Rich leaves empire at the peak of its powers 26 Jun 2013 The commodities king and former fugitive, who spawned Glencore Xstrata, has died in Switzerland aged 78. Rich’s willingness to trade with almost anyone made him billions, but often posed moral questions. And though he created an industry, its best years may be in the past.
Obama’s anti-carbon plan is more cost than benefit 25 Jun 2013 The president’s new pollution caps will probably just lead to increased coal exports, already at a record high, and lower industry profitability – but not to the intended goal of climate improvement. His $8 bln fund to clean up the fossil fuel is a better way forward.
Weil Gotshal may have first-mover advantage 25 Jun 2013 The powerhouse U.S. law firm is slashing the number of attorneys and the pay of partners. The cuts target weak practices and acknowledge a potentially structural slowdown in legal business. Banks have learned there are risks to such boldness. Weil, though, could come out ahead.
Snapchat’s valuation built on false assumption 25 Jun 2013 Mistakes last forever on the Internet. That’s why everyone from teenagers to traders have latched onto Snapchat’s app, which can send self-deleting pictures and videos. Problem is, it’s not foolproof – and the perception that it is could lead to even more embarrassing mistakes.
Football cleanup won’t hit goal with fans offside 25 Jun 2013 Yet another scandal is shaking up European football. Italian authorities are investigating 41 clubs on suspicion of tax fraud and money laundering. The case highlights the sport’s poor governance and questionable integrity. Unfortunately supporters may not care that much.