It’s a Shiller market, but Fama’s would be better 29 Oct 2013 Eugene Fama won his Nobel for arguing in 1970 that equity markets are efficient. Robert Shiller shared the prize by later writing that they tend to form bubbles. Resources and capital would be distributed better in Fama-world. But it will take higher rates to leave Shiller-land.
UBS’ regulatory thwack looks like flesh wound 29 Oct 2013 The Swiss bank’s shares tumbled after its regulator forced it to hike risk-weighted assets to address any future litigation costs. As with Barclays, the unpleasant surprise means UBS has to delay return targets. The good news is that UBS is unlikely to need a rights issue.
Deutsche’s fixed-income pain could exceed rivals’ 29 Oct 2013 The German bank suffered a 48 pct fall in third-quarter debt sales and trading revenue - as bad as any peer. But on top of litigation distractions, Deutsche has more to do on leverage. A necessary hacking back of its flabby U.S. repo book may hit its FICC market share.
Nomura joins investment banking pack in mediocrity 29 Oct 2013 The Japanese firm’s quarterly earnings dropped 42 pct as the domestic equity boom paused for breath. However, its global wholesale business outran peers by keeping pretax profit flat. Though a 6.4 pct return on equity isn’t spectacular, Nomura is no longer the class dunce.
Apple’s simplicity complicated by status quo 29 Oct 2013 Revenue and profit topped expectations and updated iPads are primed for the holiday season. Boss Tim Cook dropped heavy hints of increased share buybacks and a new product in a new category. China growth also is picking up. Each of these factors, however, comes with an asterisk.
Mud sticks for China’s warring heavy industries 29 Oct 2013 Rivals Zoomlion and Sany have faced accusations of fraud, espionage and even attempted kidnapping. Competition is meant to spur efficiency, but the chronically oversupplied construction machine sector shows that without clear rules and a working market, the reverse can happen.
Lump of coal leaves Consol shareholders wanting 28 Oct 2013 Splitting its gas business off from mining the black rock could boost the energy company’s $9 bln market value by half. Instead, Consol has decided just to sell five older coal mines. It’s no disaster, but it’s an early Christmas gift its investors could have done without.
Argentine investors counting their pesos too soon 28 Oct 2013 President Cristina Fernandez suffered midterm setbacks foretold in August primaries. Since then, the Merval benchmark index is up almost 50 pct. There are still two more years for economic damage or political winds to shift course. Her legacy could also hamstring her successor.
Numericable will be a harder sell than rivals 28 Oct 2013 The French cable firm is preparing an IPO at an enterprise value of up to $7.7 bln. M&A and rising valuations in the sector are a helpful backdrop. Yet customer uptake has been low in France and satisfaction patchy. Numericable needs to show its fast broadband offers real growth.
Quirky M&A features require Whac-A-Mole vigilance 28 Oct 2013 Tepid fairness opinions and sellers with a large shareholder have triggered litigation frenzies. Fees that penalize delays in M&A closings could be the next trouble spot. Delaware judges are quashing much of the silliness, but company legal advisers can’t get careless.
Use Aristotle to de-fluff business-society debate 28 Oct 2013 Talk among corporate chiefs about social responsibility is frequently mere rhetoric. Their focus on short-term profit is socially divisive and often economically counterproductive. They have much to learn from the Greek philosopher’s ideas of virtue as a habit of excellence.
Hugo Dixon: The City has huge scope to expand 28 Oct 2013 Finance has rightly been in the sin bin for the last six years. And the cleanup job isn’t finished. But Mark Carney, the new Bank of England governor, is correct to stress that a vibrant City is good for Britain, Europe and the world – provided it’s properly organised.
One idea Samsung could safely copy from Apple 28 Oct 2013 The Korean giant’s $40 bln cash pile is almost as big relative to its market cap as that of its U.S. arch-rival. The hoard allows Samsung to keep investing when others can’t. But with almost two years of capex in reserve, it can afford to mimic Apple and give more to investors.
Brasilia sends Petrobras toward crash with reality 28 Oct 2013 Blame government policies like buying local for the 39 pct slide in the oil giant’s Q3 profit. Rising debt, with more investment needed, makes Petrobras look like a not-for-profit arm of President Dilma Rousseff’s administration. Even next year’s election might not change that.
Malaysia’s fiscal tightening is wise "taper" cover 28 Oct 2013 Prime Minister Najib Razak’s budget has paved the way for a consumption tax and lower subsidies. Fiscal prudence gives foreign holders of public debt added comfort. With the Fed likely to curb money-printing, Najib is right to buy insurance against the risk of capital outflows.
Twitter avoids Facebook IPO overreach – thus far 25 Oct 2013 The microblogging site’s early public offer pricing is $17-$20 a share. Breakingviews calculations suggest that’s modest by available metrics, though without profit these require faith. At least Twitter seems to be avoiding the premature heights of Facebook’s flawed 2012 debut.
Chances of big banking going boring sped by Fed 25 Oct 2013 The central bank and other U.S. watchdogs want American lenders’ liquidity buffers to be safer and in place more quickly than international rules demand. This is likely to hit banks’ bottom lines and dissuade others from bulking up. It’s a smart way to foster financial stability.
DuPont division ought to paint happy picture 25 Oct 2013 Spinning off commodity chemicals used in pigments will give investors in the U.S. chemicals giant a choice between a cash-generating mature business and an innovative, growth-oriented one. It’s a sensible split, but the rump needs to re-rate for the shares to see big new gains.
Renault hit by adverse geopolitical winds 25 Oct 2013 The French carmaker’s falling quarterly revenue sent its shares down. Yet Renault is recovering and in better shape than the numbers suggest. Unit sales and prices are on the rise. Now the group must also face the vagaries of the euro exchange rate.
Batista’s proposed gas sale looks like a giveaway 25 Oct 2013 The fallen billionaire’s OGX seems poised to unload wells for $100 mln, or barely half their value. They already generate some $1 mln of revenue a day, with plenty of untapped capacity. As demand soars in Brazil, bargain hunters stand to profit handsomely from the tycoon’s woes.
Review: Buffett clan puts up a good food fight 25 Oct 2013 The Oracle of Omaha has made billions and his farmer son is helping give them away. In “Forty Chances,” Howard Buffett chronicles efforts to end world hunger and bad philanthropic habits. It’s hard at times to relate to the plight, but reassuring to know his family is on the case.
Carney shows touching faith in financial regulation 25 Oct 2013 The Bank of England governor’s broadly sensible new liquidity regime is part of an “open for business” approach to banking. But if the UK prospers as a global financial hub, it will be tied to a volatile sector. And Carney may overestimate the ability to deal with crises.
Meet Europe’s new star pupil: Spain 25 Oct 2013 Europe’s economies are trading places: Spain is the new China (or Germany), Germany the new France, and France is morphing into either Spain or Italy. These comparisons are eye-catching, pointless in most cases - and at times, thought-provoking.
Weak dollar stress-tests the ECB’s toolkit 25 Oct 2013 The euro has gained 8 percent versus the U.S. currency since early July. The ECB’s official line is that the exchange rate isn’t a target. But the tightening of financing conditions in the euro zone is a source of concern – and the ECB has limited tools to address the situation.
Microsoft results deliver blunt hint to next CEO 25 Oct 2013 PC sales are shrinking, and profits from the consumer business have puckered up. But quarterly earnings are a pleasant surprise, with the enterprise side generating copious black ink. It’s another reminder that the tech giant’s boss-to-be needs to focus on corporate software.
HK anti-foreigner property tax hits wrong target 25 Oct 2013 It’s a year since Hong Kong whacked a 15 percent levy on non-resident buyers. Luxury apartment values are subdued and speculators have moved on. But smaller flats are still getting more expensive. Only higher interest rates and increased supply will reverse the trend.
India’s subsidy shuffle is futile gimmickry 25 Oct 2013 Curbing subsidies before next year’s elections would be political suicide. So Finance Minister P. Chidambaram may simply delay payments to hit his deficit goal. But the sleight of hand will wreck next year’s budget. Accounting trickery is no substitute for fiscal consolidation.
Dow Chemical can’t embrace shale gas fast enough 24 Oct 2013 Volatile oil prices led the U.S. chemicals giant to miss on earnings. Meanwhile, products based on cheap natural gas boomed. No wonder Dow is shedding crude-linked assets at a faster clip to invest in a gassier future. It’s another example of shale transforming American industry.
U.S. defense brain drain demands new thinking 24 Oct 2013 The end of the Cold War and the rise of Silicon Valley have pushed young talent to new tech firms over giant government contractors. Recent Washington gridlock could leave defense firms further behind. With military spending under long-term pressure, diversification could pay.
Daimler’s catchup race switches to higher gear 24 Oct 2013 The premium carmaker had a bad start to the year but is gaining ground fast. Quarterly numbers confirm that major investments in new cars are paying off and that cost-cutting is on track. Investors anticipated the turnaround and the stock, up 46 pct this year, looks fully valued.