Chuck Hagel is good choice for U.S. deficit hawks 8 Jan 2013 Obama’s pick for defense secretary mixes dovish foreign policy views - at least for a Republican - with budget-cutting fervor. The combination could actually slash Pentagon spending. Reducing it to the proportion of GDP seen in the late 1990s would save Uncle Sam $250 bln a year.
Chesapeake sets unlikely governance reform example 8 Jan 2013 The U.S. gas firm’s revamped board slashed CEO Aubrey McClendon’s bonus to zero and reined in other perks. They’re overdue steps for Chesapeake, which has a long way to go to restore credibility. Still, there’s hope for similarly abused shareholders elsewhere in the oil industry.
Rights issue rethink could ease sting for Deutsche 8 Jan 2013 Anshu Jain and Juergen Fitschen vowed to lift Deutsche’s capital without tapping shareholders. But U.S. capital rules, Libor costs and non-core losses up the ante. A 5 bln euro rights issue might nettle investors - but markets are looking favourable.
Financial sector still has room to shrink 8 Jan 2013 The number of approved professionals in the UK is only down 10 percent from the 2008 peak. That’s not a big decline for an industry that is widely regarded as engaging in vast quantities of socially useless activity. The right-sizing of the City is still a work in progress.
Rothschild’s Bumi shake-up puts cart before horse 8 Jan 2013 The British financier wants to sack most of the board of Bumi, the stricken coal miner, and its new CEO. His slate of replacements is impressive but his shake-up plan looks half-baked. The first priority should be completing a proposed split with Indonesia’s Bakrie family.
CDB highlights China’s dysfunctional finance 8 Jan 2013 China Development Bank raised $193 billion in 2012 to fuel an unusual mix of vendor financing, M&A lending and infrastructure loans. While it has a legitimate part to play in China’s growth, the policy bank’s habit of undercutting rival lenders smacks of capital misuse.
Oil barons and tech hipsters share a dark side 7 Jan 2013 They seem so different. But SandRidge’s CEO and some peers jet around at shareholders’ expense, while at Facebook and Google founder-bosses are insulated from owners by super-voting rights. Clubby boards also feature in both sectors. The oil business may prove easier to clean up.
Private lawyers could add oomph to SEC enforcement 7 Jan 2013 The U.S. regulator has scored big settlements from Wall Street banks. But a new study suggests shareholder lawsuits may do better, especially at pinning blame on individuals. Other government agencies find ways to co-opt private-sector legal talent. Maybe the SEC should try it.
Fed quandary shows finance lost in economic space 7 Jan 2013 The U.S. central bank says it’s concerned about the economic costs of money-printing. That probably means inflation. They should worry more. Extraordinary policies have distorted asset prices. After providing misinformation for four years, markets risk becoming irrelevant.
Airport mess shows limits of German expertise 7 Jan 2013 Berlin has delayed the opening of its high-tech airport - for the fourth time. The fiasco is all too typical of Germany. Ossified local politics and a penchant for over-engineering have led to many botched infrastructure projects. The legend of German efficiency is exaggerated.
Liquidity U-turn is sell signal for bank shares 7 Jan 2013 Prices rose on the news that global regulators watered down tough rules on minimum levels of easily tradable assets. Investors may see higher profits, but the decision suggests that authorities fear slower GDP growth. Without strong economies, banks will be worse off, not better.
Japan comes dangerously late to currency war 7 Jan 2013 Trash-talk from the world’s third-largest economy has pushed the yen down some 12 percent since September. But Japan is a Johnny-come-lately to the global contest to weaken currencies to support growth. Opening another front at this point only makes the contest more dangerous.
Hugo Dixon: The EU speech Cameron should make 7 Jan 2013 The British PM will make a keynote speech about Europe later this month. He should emphasise the importance of maintaining Britain’s influence within a decentralised market-orientated EU rather than push for greater euro zone integration while retreating to the sidelines.
Egypt’s Brotherhood meets financial reality 7 Jan 2013 The fall of the pound creates inflationary pressure and capital controls underscore the shrinking of foreign reserves. Egypt’s ruling Brotherhood must finalise an unpopular deal with the IMF or risk a currency meltdown. Neither option is appealing ahead of elections.
India’s corporate governance cleanup is welcome 7 Jan 2013 A new law seeks to make it difficult for the same person to be both CEO and chairman. The regulator also wants to ensure listed companies have truly independent directors. The changes, which are tougher than some more advanced countries, will narrow India’s governance discount.
Sokol’s escape further fogs insider-trading laws 4 Jan 2013 Warren Buffett’s fallen deputy was a prime target after dealing in Lubrizol shares as Berkshire Hathaway mulled a takeover. Yet the SEC dropped its probe. Even with a broad insider-trading crackdown since the David Sokol affair was disclosed, the crime’s contours remain elusive.
Macondo spill cost Transocean more than money 4 Jan 2013 The U.S. oil services firm will pay Uncle Sam $1.4 bln for its role in BP’s Gulf of Mexico disaster in 2010. That’s a modest sum. But shares in the $18 bln Transocean have lagged those of rivals in the meantime as it avoided heavy investment. It has a lot of catching up to do.
Freer transatlantic trade a worthy G8 goal 4 Jan 2013 British PM David Cameron wants the group to start work on an EU-U.S. free trade agreement. Global trade deals are nearly impossible and bilateral ones tangle world commerce. But a pact between the two Western blocs could set new standards while also boosting the world economy.
Shareholder votes will be a feast for legal eagles 4 Jan 2013 Restrained from suing over securities fraud, lawyers are starting to prey on dodgy disclosure in corporate elections. Say-on-pay votes are popular, but anything needing investor approval is fair game. Starved of other business, attorneys’ hunger for these suits can only grow.
Bank liquidity reform better delayed than diluted 4 Jan 2013 Global supervisors are set to allow lenders more time to meet a key requirement to help them survive bank runs. Giving way on the deadline makes more sense than bowing to industry pressure to weaken the framework. And central banks can deal with any crises in the meantime.
Google won’t evade rivals as easily as feds 4 Jan 2013 An extensive U.S. antitrust probe into the dominant search engine ended with a company promise to behave. The government’s case always looked shaky. If it couldn’t nail Microsoft, Google was a pipe dream. Just as well. For now, it’s still a problem for the market to sort out.
Too early to call UK bank stimulus a game changer 4 Jan 2013 Bank of England data shows banks made much more credit available in the fourth quarter, aided by the BoE’s Funding for Lending scheme. But the small business credit drought isn’t easing. And on its own, the FLS may not be enough to stimulate borrower demand - or the UK economy.
Iron ore market shows perverse efficiency 4 Jan 2013 The steel ingredient is a middleman’s dream. Spot prices fell 37 pct from Jan to Sept, then lurched two-thirds higher to end last year up 5 pct. That’s a kind of efficiency; the market is responding to changes in supply and demand. But for steel mill customers, it’s a nightmare.
Wall St could learn a thing or two from Detroit 3 Jan 2013 Both needed government aid in 2008. But it is the automakers that have restructured and become decently profitable in straitened times. Detroit’s Big Three still have work to do, but they have responded better. Motown’s chiefs can more easily justify big pay days too.
SeaWorld IPO may not make second investment splash 3 Jan 2013 Blackstone is ready to take public amusement parks it bought in 2009 from Anheuser-Busch for a headline price of $2.3 bln. Including dividends already taken, the buyout shop could end up trebling its money. But new buyers expecting similar returns should beware getting soaked.
Liberal economists aid Tea Party in cliff debate 3 Jan 2013 Government spending enthusiasts don’t mind high deficits and don’t like proponents of low taxes. But with the U.S. right more anti-tax than anti-spend, the result is a common acceptance of deficits. That makes budget deals easier, but promotes unrealistic expectations.
U.S. dollar may smile at end of 2013 ugly contest 3 Jan 2013 None of the leading currency contestants is pretty. Central banks across the globe seem willing to debase money with the printing press. The euro’s nerves have improved but the recession-hit zone is fragile. The yen wants to lose. The dollar and the pound may eventually come off best.
Depardieu would find heaven in Putin’s Russia 3 Jan 2013 The French actor, who wants to leave France because of the socialist government’s tax policies, has been made a Russian citizen by his friend Vladimir Putin. The local 13 percent flat tax on income is hard to beat. And Depardieu would live under a regime closer to his liking.
U.S. Congress will listen only to markets 2 Jan 2013 A last-minute, pint-size fiscal deal sets the stage for another cliffhanger in a few months. Worse, chances for deficit reduction are probably weaker now. In theory, everyone should want a broader plan but voters are too narrowly focused. Investors get the final word.
HP admits breakup is on the table 2 Jan 2013 The troubled $29 bln tech pioneer has maintained that splitting up would be a mistake. But in its new annual report, HP says it may sell assets. It’s a no-brainer for the board to consider a breakup. After all, the stock is trading far below the value of the company’s parts.