U.S. shutdown is only preamble to bigger battle 30 Sep 2013 Budget impasses that force Uncle Sam to close shop aren’t that rare and seldom last long. The bigger problem is a likely rematch over the federal debt ceiling. Back in 2011, even a distant threat of technical default rattled markets. Today’s politics make the danger more real.
Goldman and JPMorgan get one job split right 30 Sep 2013 Neither bank will cleave the chairman and CEO roles, but they’ve at least figured out that allowing the general counsel to also run regulatory compliance invites trouble. Interpreting the rules and ensuring they’re followed too often conflict. Other companies should follow suit.
Politics stops Italy learning new economic tricks 30 Sep 2013 Survival has become the priority for the Letta government, as it was for too many of its predecessors. The longer this is the norm, the more Italy will lag other southern European countries’ success in emulating Germany’s export-reliant growth model.
Great Moderation #2 warrants a muted welcome 30 Sep 2013 Before the 2007 crisis, optimists hailed a new era of steady growth with low inflation. There’s a reprise, but the new moderation is slower and riskier, thanks to high debt and weak politics in rich countries and structural problems in developing ones. Still, it could be worse.
Siemens’ task is about more than cutting jobs 30 Sep 2013 Germany’s industrial giant is slashing headcount by 15,000. Though it has plenty of work on its books, streamlining the workforce is necessary. Yet Siemens’ woes will persist until it tackles its tendency to mismanage large-scale projects and overpay for acquisitions.
Apollo’s energy IPO gives new life to quick flips 30 Sep 2013 Leon Black’s shop is taking EP Energy public less than 18 months after leading a $7.2 bln takeover. The turnaround contrasts starkly with the trend of longer buyout holding times. The twofold return on paper shows that private equity can still dig into its old bag of tricks.
Italy’s resignation fever isn’t yet the revolution 30 Sep 2013 The country looks like it is on the verge of collapse, but the wave of resignations in politics and business could just show that it is painfully trying to get rid of its old patronage system. Yet it is too early to tell whether the latest crises are the start of a true renewal.
Alibaba mess ought to prompt Hong Kong IPO rethink 30 Sep 2013 The e-commerce giant’s governance structure ran afoul of the rules. But the saga has exposed gaps in the way regulators handle IPOs. Hong Kong needs to debate the purpose of its policies, whether the ones it has are effective, and how to make the approval process more transparent.
Li Ka-shing’s Hong Kong spinoff fails to energise 30 Sep 2013 The tepid reaction to the tycoon’s plan to list his local power utility suggests there’s little hidden value. The mature unit’s stable cash flows will look less attractive as interest rates rise. It’s hard not to share Li’s conclusion that cash can be put to better use elsewhere.
UK’s politicians race to the bottom on policies 30 Sep 2013 The 2015 election looms. Which party can come up with the worst proposals? The competition is fierce. Labour made an excellent start with a self-destructive cap on energy prices. The government has hit back with mortgage subsidies and bashing the unemployed. The UK lacks leadership.
Xstrata 2.0 is a bet that other miners are wrong 30 Sep 2013 Former Xstrata boss Mick Davis has raised $1 bln from commodity trader Noble and buyout fund TPG to build a new mining group. The idea is that the industry’s current conservatism provides opportunities. Even if that’s right, Davis won’t easily duplicate Xstrata’s high returns.
China Tea Leaf Index: Hanging on for reform 30 Sep 2013 China’s rail shipments and steel drove our alternative growth index up to 96.3 in August, the highest since January. That looks like enough to give leaders the benefit of the doubt ahead of November’s party plenum, when the tone for future economic growth will really be set.
Berlusconi pushes Italy to the edge, again 29 Sep 2013 Il Cavaliere’s decision to pull his party’s ministers from the coalition government could spook markets, trigger chaotic elections, delay reforms and hurt the country’s fragile recovery. The only silver lining: it could also trigger the long-overdue renewal of Italy’s politics.
Climate change tail risks aren’t like Wall Street’s 27 Sep 2013 Like bank risk managers, researchers rely on complex models to assess worst-case scenarios. The incentives are different, though. Dire predictions can be more rewarding for scientists. That’s the reason to focus on the IPCC’s new baseline forecasts, which are now less alarming.
J.C. Penney’s stock sale reflects discount dimness 27 Sep 2013 The troubled U.S. retailer is struggling to get prices right in stores and isn’t faring any better in the markets. It’s selling some $900 mln of shares at $9.65 each, after paying nearly $37 to buy them back two years ago. Capital misallocation is a new bad sign for J.C. Penney.
Helium fiasco deflates case for strategic reserves 27 Sep 2013 The U.S. government stockpiled the gas for a fleet of blimps that never flew. Now it’s dumping supplies at cut-rate prices, creating market distortions and shortages. A legislative fix is in the works, but it’s a reminder that hoarding resources can be a volatile strategy.
Review: U.S. can’t afford to forget the little guy 27 Sep 2013 Occupy Wall Street failed to ignite much indignation about the widening gap between poor and rich. The documentary “Inequality for All” makes a strong case for action. But Robert Reich, ex-Labor Secretary and chief protagonist, doesn’t explain why the public isn’t outraged.
Royal Mail should price below middle of IPO range 27 Sep 2013 Shares in the soon-to-be privatised UK postal service would have a chunky dividend yield of 6 pct even if sold at the top of the 2.6-3.3 bln stg price range. But the uncertainty of the growth story means investors should demand more, and resist paying top whack.
How to respond to rising London house prices 27 Sep 2013 Some day, the return of normal financial conditions might cool down the capital’s soaring property market. While waiting, policymakers should fight against the possible consequences: economic drag, social injustice and cultural degradation.
Intesa in self-made crisis after skirting big one 27 Sep 2013 Italy’s largest retail bank got out in front of the euro sovereign crisis by raising capital early. Now CEO Enrico Cucchiani may be ousted after a boardroom scrap. Unless Intesa wants to further rile investors, it needs to be similarly decisive in sorting out its governance.
What ThyssenKrupp’s new investor should fight for 27 Sep 2013 Activist investor Cevian, known for its penchant to streamline conglomerates, has increased its stake in the troubled German industrial group. A breakup of ThyssenKrupp makes sense but would be hard to achieve. Cevian should rather push for a comprehensive governance reform.
Review: the puzzle of Fred Goodwin’s rise and fall 27 Sep 2013 Royal Bank of Scotland rode the boom to briefly become the world’s biggest lender. Then it collapsed, making its former boss a pariah. In “Making It Happen”, Iain Martin examines hubris and self-delusion - and finds the blame spreads far beyond one domineering CEO.
Breakups are one oil spill welcome to spread 26 Sep 2013 The spinoff of Conoco’s refinery arm last year fueled a trend that has created plenty of value among energy giants. Now oil service firms like Noble and National Oilwell are putting similar moves in the pipeline. It’s time for investment laggards like Transocean to catch up.
Fresh U.S. mortgage bailout raises timely red flag 26 Sep 2013 Fannie and Freddie are on the mend, but the Federal Housing Administration may need extra Treasury support. New U.S. capital for an agency that backstops home loans would coincide with the re-emergence of private guarantors. It’s a helpful reminder to remember past mistakes.
Wealth retreat reflects bank chiefs’ big fear 26 Sep 2013 Barclays and rival Credit Suisse have sharply cut back where they offer wealth management. After HSBC’s mega $1.9 bln fine, bank executives are terrified of falling foul of anti-money laundering and tax rules. Rising monitoring costs mean the axe has to fall somewhere.
Ackman has Air Products catalyst, now for reaction 26 Sep 2013 The activist hedgie has dislodged the gas firm’s underperforming boss, John McGlade. That quick win brought him a sharp gain of about $100 mln on his 10 pct holding. For bigger, more lasting success, however, a painstaking transformation of the company is now needed.
Lixil finds clever way to tap Grohe’s growth 26 Sep 2013 Japan’s building materials firm is buying the bathroom fittings specialist from private equity for 3 bln euros. Grohe is a fast-growing and profitable brand. On its own, the deal would have been way too big for Lixil. It became possible thanks to help from Japan’s taxpayers.
Bond-buying helps Japan’s banks more than economy 26 Sep 2013 Lenders have sold 12 percent of their holdings of government debt to the Bank of Japan this year. While the debt-for-cash swap may limit banks’ losses when yields eventually rise, it won’t end deflation. For that, banks must lend. But credit growth in Japan remains at a crawl.
Odds shorten on big change at Ladbrokes 26 Sep 2013 A profit warning sent shares in the British bookmaker down 8 pct. The big headache is the trickier-than-expected switch to a new digital platform, but margins are weak across the board. It’s been a horrid few months. The chances of a takeover or a management cull are rising.
Sharp’s $1.7 bln share sale won’t restore its edge 26 Sep 2013 The Japanese electronic firm’s offering of new shares worth 40 percent of its market value will reduce net debt by 16 percent. That will shore up but not repair its balance sheet. With Sharp’s turnaround still far from proven, investors should expect it to return for more.