Mongolia gives a little in investment tug-of-war 7 Oct 2013 As Rio Tinto thrashes out terms for its stalled copper project, a promise of equal treatment for foreign investors bodes well. Mongolia’s rich resources mean overseas groups will tolerate occasional bad behaviour as long as they mostly get their way. That now looks more likely.
Twitter’s sky-high R&D hits the right spot 4 Oct 2013 At 44 pct of revenue, the microblogging site is spending far more than Facebook. But with a lower number of users than its rival, Twitter needs to grow to make new investors happy. Hiring engineers at a fast clip to build new features and services is the best way to deliver that.
Rebooting Microsoft keeps getting harder 4 Oct 2013 Departing CEO Steve Ballmer and Chairman Bill Gates both want to stay on the board even as they seek a new boss. Whoever steps in will already be saddled with the Nokia acquisition. Now there’s the risk of answering to two former chiefs. Ctrl-Alt-Del looks disabled at Microsoft.
Brazil’s oil emperor models a worrisome suit 4 Oct 2013 The 7 bln barrels of oil Eike Batista’s OGX once touted is now more like 88 mln. For investors who bought into the hype, it’s yet another gut-punch. The lack of oversight on such claims also raises questions about the credibility of a 12 bln-barrel find Brazil is auctioning.
Review: Economic history makes a happier return 4 Oct 2013 In “The Great Escape”, Angus Deaton recounts the frequently forgotten economic accomplishments of the last century. There were massive improvements in health and welfare. While giving new perspective to the rise of inequality, he makes a persuasive case against foreign aid.
There’s no preparation for debt-ceiling collapse 4 Oct 2013 A U.S. default could unleash global financial panic. Non-payment almost certainly won’t happen, because neither the Fed nor the nation’s creditors want to try out Lehman-to-the-power-of-10. Which is good, because portfolios cannot be trimmed to risk-manage Armageddon.
Barclays’ investment bank still looks too big 4 Oct 2013 Despite a revamp earlier this year, the UK lender’s investment bank is still two-thirds of assets. As regulators focus more on overall leverage instead of risk-weighted capital, it’s not yet clear that rights-issue success will protect Barclays’ strategy from future shifts.
Twitter stakes claim as least-evil tech IPO 4 Oct 2013 The microblog service’s $1 bln filing is a model of simplicity. There’s one class of stock. Existing investors aren’t selling. The CEO hasn’t written a sappy letter. And growth is roaring. Twitter still faces risks, but avoiding many Silicon Valley excesses is encouraging.
Too soon to cheer Lisbon’s latest health check 4 Oct 2013 Portugal got a thumbs-up from lenders, but uncertainty over the outlook persists as it stumbles to the end of its programme. Investors are still antsy, growth is elusive and austerity has reached its limits. The country could yet turn into the euro zone’s biggest drag.
Japan’s bonus boom masks bigger wage challenge 4 Oct 2013 The 8 percent jump in payouts this year is the best since 2006. Yet, bigger bonuses alone won’t end Japan’s deflation. Regular wages, which drive consumer spending, are still stagnant. Targeted fiscal incentives, followed by labour reforms, can boost both pay and productivity.
China’s dash for dairy based on frothy forecasts 4 Oct 2013 Foamy figures about milk’s popularity in China have lifted share prices of domestic producers, propelled Huishan’s $1.3 bln IPO last week and attracted big investors like Henry Kravis. China’s market size potential is massive, but the rate of growth may be leaner than advertised.
Solo stars Goldman and Morgan Stanley share stage 3 Oct 2013 Relationship banking of yore meant the two banks slugged it out for exclusive assignments. Now, in M&A as well as IPOs like Twitter’s, they work next to each other more often than with almost any other peers. Clients most of all are forcing Wall Street’s biggest rivalry to fade.
Late lawsuit deserves U.S. Supreme Court knockout 3 Oct 2013 A screenwriter’s daughter waited 18 years to sue owners of the movie “Raging Bull” over copyright. Timing can be everything in a lawsuit, as investors and watchdogs have learned. But dawdling deprives targets of legal certainty. The justices should make this a quick fight.
Poor returns, hostility trouble giant patent troll 3 Oct 2013 Intellectual Ventures wants another $3 bln to gobble up more intellectual property. But its last fund’s performance is uninspiring. Previous backers like Microsoft and Google aren’t interested and the U.S. is cracking down on the business. New funding may be tough to find.
UniCredit bets less will be more in eastern Europe 3 Oct 2013 The Italian lender has lobbed in a bid for Poland’s Bank BGZ as it concentrates investment in just four central and eastern European countries. That’s welcome: banks had spread themselves thin in the region. But with the choicest markets in high demand, growth won’t be easy.
Europe’s news is good but full cure is a way off 3 Oct 2013 Economic momentum has turned clearly positive in both the euro zone and the UK. GDP growth in 2014 could surpass 2 pct. That’s nice, but it will still take years to undo the damage from the post-Lehman recession and the lingering euro crisis. Demographics make everything harder.
UK’s Help to Buy scheme is a no-brainer for banks 3 Oct 2013 Sure, the government’s mortgage guarantee scheme could backfire on banks’ reputations if overstretched borrowers lose their homes and taxpayers wind up paying the bill. But capital benefits and the need to defend market share look like compelling reasons for banks to sign up.
Doubling down on Alitalia bad idea for Air France 3 Oct 2013 After having burnt 1.1 billion euros since its 2009 “fresh start”, the loss-making Italian carrier is once again close to the brink. It is trying to convince Air France-KLM to add to its 25 percent stake. The French group isn’t overly excited at the prospect - for good reasons.
Euro states don’t merit sovereign debt privilege 3 Oct 2013 Banks can count most government paper as risk-free. This treatment is plain dishonest for euro zone members. Countries that can’t print their own money can default. Ending the lie would be painful, but the benefits outweigh the cost - particularly if strong states help the weak.
Tokyo Electron takeover is no template for Japan 3 Oct 2013 Applied Materials wooed its smaller rival with an all-stock merger and shared governance. Other buyers may try a similar approach to tempt Japanese partners to the altar. But a large chunk of Tokyo Electron’s stock is already held overseas. Other targets lack that advantage.
Political decay threatens developed economies 2 Oct 2013 The United States and Italy are bouncing along the bottom. Germany is without a government, France and the UK have weak ones. Extremism, self-serving politicians and the end of strong ideology have taken a severe toll on the single most important part of any economy.
Italy stronger after humiliation of Berlusconi 2 Oct 2013 A schism in the ex-premier’s party forced him to drop a bid to collapse Italy’s coalition government. The crisis leaves Prime Minister Enrico Letta with a stronger mandate for reforms and fiscal rigour. Berlusconi is weakened and disgraced, although he hasn’t been silenced - yet.
Private U.S. payroll data get moment in sun 2 Oct 2013 Monthly jobs numbers from the government give investors coveted, official information on which to trade. A shutdown could preclude Friday’s release, meaning today’s modest ADP figures and a few other private sources may have to do. It should be enough to satisfy market junkies.
Portugal Telecom’s Oi deal is a good stepping stone 2 Oct 2013 The long-anticipated 5.6 bln euro merger of the Portuguese company with Brazil’s largest fixed-line operator creates a highly indebted enterprise, even after a capital hike. And claimed synergies are punchy. But teaming up makes sense in a consolidating Latin American market.
LVMH finds way to keep talent: list it 2 Oct 2013 Shares in Louis Vuitton’s parent company took a hit on news that creative director Marc Jacobs is off. He will focus on a flotation of his fast-growing namesake label, which is part-owned by LVMH. Bernard Arnault may have found an original way to keep hot designers in the family.
Edward Hadas: Elop and the neo-feudal revolution 2 Oct 2013 The Nokia executive’s $25 mln payout is typical of the prevailing approach to top executive pay - vast quantities under all circumstances. The persistence of such anti-egalitarian arrangements suggests a social move backwards: to exorbitant privileges for an undeserving elite.
Nestle lacks a good reason to sell L’Oreal 2 Oct 2013 The Swiss foods company may put its 23 bln euro stake in the French cosmetics group up for sale. If Nestle offloads, it is likely to use the money to fund a share buyback. What’s lacking is clear rationale for the KitKat company to make the break.
An Abenomics lesson on politics for Uncle Sam 2 Oct 2013 While dysfunction has shut Washington, Japan pushed ahead with a 60 pct consumption tax hike and $51 bln stimulus. What’s startling about the contrast is that Japan was the paralyzed one two years ago. Staring down the barrel of a demographic gun concentrates the political mind.
Japan’s pension pool can help in deflation fight 2 Oct 2013 A panel set up by the prime minister may ask the country’s $1.9 trillion public pension funds to shift cash to equities. Higher stock prices can help lift the gloom of a sales tax increase. For more enduring gains, though, fund managers must pressure companies to boost returns.
Global snowbelt leaves the world behind 2 Oct 2013 From a southern country and want to succeed? Head north, to the global snowbelt. That may be the message of a new Human Capital Index. Talent is squandered in much of the world while newcomers help the U.S. cover up domestic failures. Migration risks reinforcing economic gaps.