Blackstone stock tells similar tale to Hilton’s 4 Dec 2013 The buyout firm’s traded units are at last nearing their $31 debut price of 2007. The recovery coincides with a profitable float of the hotelier, a $27 bln deal Blackstone struck the same year. While the results diverge for investors, both speak to private equity’s timing nous.
Forget museum art – Banksy might help Detroit 4 Dec 2013 Christie’s says artworks owned by the bankrupt Motor City could fetch up to $866 mln. That’s nearly 10 pct of unsecured creditors’ claims. But there’s no need to stop there. With 78,000 abandoned buildings and a Banksy tag worth $1 mln or more, graffiti could save the day.
Libor losers become EU cartel winners 4 Dec 2013 Barclays and UBS escaped $930 mln and $3.4 bln of trust-busting fines for exposing Libor cartels. It’s compensation for taking the reputational hit of settling early with other regulators. When the saga is done, the balance of financial pain may be in the whistleblowers’ favour.
Volcker Rule looking too complex to be practical 4 Dec 2013 U.S. watchdogs may soon adopt a stricter version of the law banning prop trading than expected. That may impede banks’ ability to hedge risk and trade for clients. Using a blend of metrics to raise red flags and regulatory power to intervene would be smarter and more realistic.
Edward Hadas: The pope takes on economics’ pro-rich bias 4 Dec 2013 Economists generally set out to be value-neutral, but many of their theories are implicitly pro-rich, or at least not pro-poor. Pope Francis is no economist, but his teachings on poverty could improve the profession. Politicians and billionaires could also benefit.
StanChart’s setback isn’t a turning point 4 Dec 2013 The emerging market lender has warned of a drop in 2013 operating profit, ending a golden decade of growth. The main problems are quite specific: hostile Korean regulation and subdued trading. Growth may be bumpier from here, but the share sell-off looks excessive.
StanChart adds exuberance to offshore yuan race 4 Dec 2013 The UK lender has launched London’s first clearing system for the Chinese currency. It’s good for China’s global ambitions, though not for StanChart’s short-term profitability. Market share and political favour may matter more than immediate financial logic.
Tesco’s mediocre plan may be as good as it gets 4 Dec 2013 Investors’ patience with the UK’s largest supermarket operator is justifiably wearing thin. There’s a desperate shortage of the kind of good news needed to rebuild confidence. But while the turnaround is coming at a painfully slow pace, there’s no obviously better alternative.
Greece on arduous journey back to markets 4 Dec 2013 After years living off EU and IMF bailouts, the country aims at tapping private creditors next year. Brutal austerity means the Greek budget has a primary balance, while the debt load remains. Haircutting official creditors would square the circle – yet is politically toxic.
Westfield shops for premium with $28 bln carve-up 4 Dec 2013 The Australian shopping mall giant is separating its international and local assets in a cash-and-share deal. The cleaner structure may allow Westfield to command a higher valuation like its U.S. peers. To lure new investors, it might need an overseas listing.
Detroit case revs up bankruptcy option for others 3 Dec 2013 Court approval of Motown’s filing may force bondholders, insurers and pensioners to share restructuring pain. The ruling also confirms bankruptcy as a credible choice for even the biggest cities. That could give shaky municipalities a needed kick to get their finances in order.
Investors plug Tesla back into stock supercharger 3 Dec 2013 The electric car maker’s shares revved up 15 pct after a positive Wall Street report. Fears over recent Model S fires had taken the high-flying stock down to an almost defensible 27 times 2016 profit. Now shareholders are again showing too much faith, too soon, in CEO Elon Musk.
UK goes soft on Big Finance 3 Dec 2013 The Bank of England has parked the idea of a 4 pct leverage ratio, days after retreating from tougher risk-weighted capital requirements. It’s a clear break with the Mervyn King era. But UK banks should keep building their buffers: global forces for more capital are here to stay.
Time for Britain’s buyside to think creatively 3 Dec 2013 The UK’s new Investor Forum is ostensibly concerned with improving corporate governance. It also wants to channel its combined wisdom into finding new ways to fund promising areas such as biotech or infrastructure. That would benefit the economy and savers alike.
Brazil’s GDP decline is fiscal wake-up call 3 Dec 2013 The economy shrank 0.5 pct in the third quarter. High interest rates and weak commodity prices are hitting growth. Though output rose 2.2 pct year-on-year, Dilma Rousseff’s public sector largesse is not a sustainable response. It’s a warning for emerging economies everywhere.
“Secular stagnation” lament revives wealth paradox 3 Dec 2013 Larry Summers has warned of long-term stasis in rich nations. If the former U.S. Treasury Secretary is right, emerging markets will need to invest more to end the savings glut causing the malaise. But that means confronting an old puzzle: why hasn’t capitalism solved the problem?
Versace’s valuation is as full-on as its outfits 3 Dec 2013 The Italian fashion house is sizing up outside investors and reckons it can triple in value in 3 years. There is real potential, because Versace is so far behind industry trends. But a big price tag for a skimpy stake alongside a powerful family? That’s a hard look to pull off.
China’s market size gives it trust-busting clout 3 Dec 2013 One of the country’s competition watchdogs is investigating Qualcomm. Though details are scarce, a probe is likely to involve the mobile phone chipmaker’s approach to licensing technology. China’s big and fast-growing market gives it extra heft when going after foreign companies.
ADM should call Australia’s bluff with GrainCorp 2 Dec 2013 The U.S. agribusiness faces a paper loss on its 20 pct stake in GrainCorp after Australia blocked its A$3.4 bln takeover, arguing the market wasn’t sufficiently mature. ADM should sit tight, and then try again later. That would force Australia to show its real hand.
Canadian economy far from loony 2 Dec 2013 GDP expanded at a 2.7 pct rate in Q3, while stocks are up 8 pct in 2013. Housing may be set for a downturn and softer commodity prices don’t help. But its well-run banking system and moderate money supply growth mean Canada remains better crisis-proofed than most big economies.
Amazon’s drone promise is yet more jam tomorrow 2 Dec 2013 The online retailer expects airborne deliveries just a few years hence. It’s a striking vision, but it seems as overly optimistic as investors’ expectations of the company overall. Amazon’s market value has ballooned to $180 bln despite big profits always hovering in the future.
Ukraine’s European future needs space for Russia 2 Dec 2013 Demonstrators in Kiev want to boot out the president, who closed the door on a deal with the EU in order to stay close to Moscow. It’s not so easy. Ukraine is broke and its government has failed. It needs help now. And Europe hasn’t paid enough attention to Russia’s concerns.
Markets see only one shade of Mark Carney 2 Dec 2013 Sterling and gilt yields rose after the Bank of England governor said mortgage lending subsidies would end. Traders saw the move as a proto tightening. Maybe. But the BoE could equally be giving itself room to delay rate rises. Markets see black or white when the picture is grey.
The synthetic CDO returns humbled and tame 2 Dec 2013 Mere mention of the complex derivative induces ire and laughter for its role in the crisis and JPMorgan’s whale fail. Citi’s latest iteration of the CDO, though, is less of a monstrosity. It shows that while there’s no way to eradicate greed, buffers for it can at least be built.
Icahn’s Talisman revamp may not bring fortune 2 Dec 2013 The activist has won two board seats at the Canadian energy firm. But it was already clear that the $12 bln company needed to sell assets. With BP, Apache and Conoco also offloading wells, the problem is not so much the strategy as whether it can add value in a buyer’s market.
BoE’s small-firm stimulus is blueprint for Draghi 2 Dec 2013 The European Central Bank is reportedly mulling cheap loans to banks to gee up lending. The newly tweaked UK Funding for Lending scheme shows this isn’t easy, and replicating it in the euro zone would be even tougher. But Europe’s businesses need a leg-up even more than the UK’s.
ThyssenKrupp’s capital hike may not suffice 2 Dec 2013 The German steelmaker is raising $1.6 bln selling assets to Arcelor and Nippon Steel. But other disposals have collapsed and shareholders now have to find almost 1 bln euros to help cut debt. Even with Thyssen’s operational progress, the measures won’t put it in the comfort zone.
Hugo Dixon: Italy has two chances post-Berlusconi 2 Dec 2013 The first is that PM Enrico Letta will push through reforms now Silvio Berlusconi has been kicked out of parliament. If not, Matteo Renzi – who is expected to become the Democrats’ leader on Sunday – should force elections and show he is as radical in deed as he is in words.
Bangkok’s fiscal bias fans Thai political angst 2 Dec 2013 Political turmoil is at least partly a symptom of extreme inequality. About 70 percent of government spending goes to urban Bangkok; the rural north east gets just 6 percent despite having a third of the population. Any lasting solution must include improving the fiscal balance.
China index: Sober lending, spending slows growth 2 Dec 2013 Our alternative index shows China’s growth prospects at a four-month low. Lack-luster exports played a part. But the dip also reflected a healthy slow-down in new loans, sales of property and Audis, as well as a sharp fall in luxury liquor stocks.