Dissing Uncle Sam is a low-cost political tactic 25 Sep 2013 Brazil’s Dilma Rousseff canceled a U.S. state visit and made a critical speech at the UN. Yet even pariah Iran has shown long-term growth on a par with some U.S. allies like the Philippines and Egypt. Bashing Washington doesn’t seem too costly. Wall Street is another matter.
Nokia boss gets golden parachute without ejecting 25 Sep 2013 Big payouts are meant to compensate bosses for being fired or sidelined after a takeover. Yet the sale of Nokia’s phone unit to Microsoft gives CEO Stephen Elop a major role back at the U.S. giant, which was his previous employer. A $25 mln golden parachute is hard to defend.
Maybe Gates should follow Ballmer out of Microsoft 25 Sep 2013 Steve Ballmer has been CEO too long, and allowing him to buy Nokia as he exits will saddle his replacement with a flawed strategy. Chairman Bill Gates bears some responsibility. With under 5 pct of the stock, Gates matters more to his charitable foundation these days.
ICAP’s Libor lesson: client service has limits 25 Sep 2013 The interdealer broker has been fined $87 mln, and three ex-employees have been charged for aiding Libor-rigging at banks. Going too far to help clients can be a problem in all areas of finance. But the regulators’ reports depict an industry that was especially susceptible.
Austerity is killing France’s attempt at reform 25 Sep 2013 The French budget for 2014 is heavy on spending cuts and lighter on tax hikes. The Brussels-imposed fiscal deficit goals won’t be met until 2015. As austerity takes its toll, the reforms are stalled. François Hollande should forget about the targets and focus on the long term.
We need to talk about Jamie Dimon 25 Sep 2013 JPMorgan has shelled out $20 bln in legal costs, with billions more possibly coming to settle a raft of outstanding U.S. government charges. The CEO is part of the problem. Breakingviews imagines how lead director Lee Raymond might lay out his dilemma for two new board members.
Edward Hadas: America says it has got poorer. That’s rich 25 Sep 2013 The government reports that median household incomes were 1.3 pct lower in 2012 than in 1989, suggesting that people are no better off now than 24 years ago. That’s ridiculous. The United States has economic problems, but stagnant consumption isn’t one of them.
Hong Kong’s Alibaba loss would be New York’s gain 25 Sep 2013 The Chinese internet giant is turning to the U.S. for a listing after Hong Kong regulators balked at its governance. The principled stand may cost the city-state the year’s largest IPO. For New York, though, Alibaba’s partnership model is better than dual-class share structures.
Dangerous Fed roulette rules global markets 25 Sep 2013 Central bankers claim to be predictable, so investors can see what’s coming. But last week’s surprise from the Fed showed the real rules. Markets look more like roulette, with the Fed spinning its unpredictable policy wheel - while distorting them with its printed chips.
Austrian banks are Europe’s latest problem child 25 Sep 2013 In September alone, Vienna’s lenders have racked up a failed debt sale, a quasi-profit warning and a fresh bailout. The largest banks are less levered, but have weaker solvency. Despite Raiffeisen Bank’s new cost-cutting drive, both it and peers will probably need more capital.
Hong Kong shouldn’t brush off Shanghai threat 25 Sep 2013 Shanghai’s new free trade zone faces one big drawback in becoming a financial hub: it lacks Hong Kong’s rule of law. But Hong Kongers can’t be complacent. Shanghai may yet turn its sights on other things the city-state holds dear – like its low taxes, and luxury-hungry tourists.
Billionaire offers YouTube clue to U.S. torpor 24 Sep 2013 Ray Dalio has taken to video to argue that Uncle Sam is stuck in a deleveraging recession, occurring on a 70 to 80 year cycle. Fed policy largesse, meanwhile, keeps prices stable as debt declines. The Bridgewater founder’s hedge fund success makes it an idea worth spreading.
Common sense could yet bring U.S. debt limit deal 24 Sep 2013 Republicans who want to torpedo Obamacare are off track. And blocking an increase in the federal debt limit proved bad politics in 2011. But trading a higher borrowing cap for fixes to recent cuts and long-term retirement benefits could help the economy and the GOP’s image.
BofA trial could cut crisis accountability deficit 24 Sep 2013 The bank, like its peers, has paid hefty mortgage settlements without admitting fault. Now it must answer to a U.S. jury for selling Fannie and Freddie bad paper. The lender could beat the fraud charges, but it may finally have to come clean about its role in the 2008 meltdown.
Only PDVSA can make Petrobras look commercial 24 Sep 2013 The unreliable Venezuelan state oil firm isn’t paying its way, so the Brazilian giant is taking over a joint $17 billion refinery project. It shows how political deals can go astray. Brasilia should take note. The more it interferes, the more Petrobras looks like another PDVSA.
ECB crisis loans worked. Now for the hard part 24 Sep 2013 Banks are slowly but surely repaying the ECB’s crisis loans. It’s a good sign but there is a snag - money market conditions will tighten further if too much is repaid too quickly. That’s the last thing the central bank wants. It must decide soon how, and when, to react.
Chrysler impasse needs Fiat to make first move 24 Sep 2013 A year-long shareholder dispute about the value of the U.S. automaker has now led to an IPO filing. Listing would be an expensive waste of time. The sensible road out of this boggy no man’s land is marked “compromise”. Fiat is best placed to crank the process into first gear.
M&A diplomacy features in $29 bln tech deal 24 Sep 2013 Applied Materials has heeded local sensitivities and ceded governance duties in its acquisition of Tokyo Electron. At the same time, most of the financial benefits will accrue to its own shareholders. The merger is a tactful inauguration of Abenomics-style corporate reform.
Telefonica set to call the shots in Italy 24 Sep 2013 The Spanish group is raising its stake in the company that controls Telecom Italia. This should break the deadlock over the indebted Italian operator, and prompt a breakup of TI’s Brazilian arm. A sale would help cut debt at TI - and strengthen Telefonica’s position in Brazil.
CIC’s potash stake bodes ill for cartel revival 24 Sep 2013 The Chinese sovereign wealth fund’s 12.5 pct stake in Uralkali will give Beijing some leverage in the Belarus-Russia potash spat. A purely financial investor might prefer a return of the producers’ cartel. But China is unlikely to support any move to drive up global prices.
No quick fix for long-term bonus plans 24 Sep 2013 Fidelity says European executives should wait five years to benefit from long-term bonus plans, even if share grants vest sooner. That makes intuitive sense. But companies may have to pay more to secure top talent as a result. Case-by-case implementation would be wise.
Chinese finance: A phrase book for the perplexed 24 Sep 2013 Can you tell an AMC from a WMP? Confused about when to Marx-to-market? China’s rapidly expanding system has coined a wealth of new terms, and given new meanings to some old ones. Breakingviews presents a glossary for the curious financial tourist.
BlackBerry shares finally find bottom of sorts 23 Sep 2013 Backer Fairfax has made a $4.7 bln buyout offer for the beleaguered smartphone maker. That might be justified by the company’s $2.6 bln of cash plus the market value of its IP. But a meltdown in demand for its phones makes the case for a successful turnaround a fragile one.
Supreme Court’s Wall Street bias needs redress 23 Sep 2013 The U.S. justices are hearing more securities law cases than ever. Yet they too often block investors and watchdogs from pursuing financial fraudsters. The court’s new term will start with suits involving Ponzi schemer Allen Stanford. It’s a chance to set tougher precedent.
Fixed income lull could be more than flash in the pan 23 Sep 2013 Investment banks are warning that third-quarter revenue from trading debt, currencies and commodities will be down. That partly reflects a knockout quarter last year. But Fed tapering and tougher leverage requirements are good reasons why activity may settle at a lower level.
BlackBerry washout leaves a white-collar stain 23 Sep 2013 The original smartphone arrived at the dawn of the new millennium as the gadget of choice for a mobile Wall Street class. This spawned an aspirational boom among consumers. Fittingly, its demise is occurring with the BlackBerry as a symbol of the professionally indentured.
Germans’ vote for euro comes with a few spices 23 Sep 2013 It was a close call, but Germany’s new anti-euro party eventually failed on election day. Despite Deutschmark nostalgia and inflation phobia, the country remains immune to euro scepticism. The AfD could, however, create some headaches for Merkel - and the rest of Europe.
Merkel’s triumph maintains Europe’s muddle-through 23 Sep 2013 The exalted chancellor still needs a partner, probably in a grand coalition with the left-of-centre SPD. That will not bring big policy changes. Europe should brace for more fiscal squeezes and slow progress on banking union. But the new coalition’s lifespan may be short.
Corporate group-think will lead to shared FX pain 23 Sep 2013 Currency swings will make Adidas miss its targets. The German sportswear maker won’t be alone - most European companies are fashion-followers in not fully hedging foreign exchange. There are good reasons for not standing out from the crowd - but that sometimes brings group-pain.
If only all China’s problems were as simple as Bo 23 Sep 2013 China’s leaders are basically managers. For them, the life sentence for purged politician Bo Xilai is a job well done. A closed system and centralized power can resolve many issues – financial too. But challenges are getting more complex, and managers sometimes get complacent.