Panama Canal heading towards silly global failure 6 Feb 2014 A dispute over cost overruns could stop the 70 pct complete expansion of the Panama Canal. That’s ludicrous. American ports have already invested to take the bigger ships the wider canal will allow. With arbitration stalled, it’s time for a strong mediator to step in.
Minimum wage can’t supersede need for less greed 6 Feb 2014 George Osborne’s call for a big UK minimum wage rise is irresponsible vote-seeking. The chancellor should let the Low Pay Commission do its work. In any case, corporate morality is more valuable than laws. Bosses should show less generosity to themselves, and more to employees.
General Motors, analysts both have egg on faces 6 Feb 2014 The automaker missed Q4 estimates by a mile. Some overseas markets are a concern, but most of the shortfall stems from restructuring charges, not a slump in business. These ought to have been known in advance. Either GM’s failing to communicate or analysts aren’t listening.
Petrobras risks becoming Latin America’s Gazprom 6 Feb 2014 Brazil’s petro-giant increasingly resembles Russia’s gas monopoly as state meddling and rampant spending destroy value and crowd out more productive investment. Petrobras shares have fallen so low it’s like 2007’s “gift from God” never arrived. It’s not too late to change course.
Credit Suisse stuck in a hit-and-miss phase 6 Feb 2014 The Swiss bank has cut leverage and may beat long-term balance-sheet targets. Its legal bills look bearable too. But the operational restructuring is still a work in progress. Until that’s fixed, the wobbly performance of the fourth quarter could be repeated.
Standalone Vodafone starts to look healthier 6 Feb 2014 Quarterly results suggest revenue declines are finally moderating. Competition, regulation, technological change and the slump have all hurt the mobile giant. It now hopes to ride a boom in mobile data. Yet Vodafone’s role in future M&A remains the top question for investors.
For third Greek bailout, EU could try generosity 6 Feb 2014 Brussels and the IMF are mulling how far they could go to ease the Greek debt burden, without agreeing to a straightforward haircut. They should act fast - and be bold. If they fail, calls for more radical measures will grow louder, ahead of crucial European elections.
Revving-up Daimler still not running at full speed 6 Feb 2014 Shiny new models helped the carmaker show record sales and profit in 2013. But Daimler still faces big challenges. While margins are increasing, they’re still below rivals’, and headaches in China are only abating slowly. The shares are already counting on much more good news.
AstraZeneca challenged but no longer cheap 6 Feb 2014 The UK pharma group says patent expiries will hit earnings harder than analysts expected. Management sees growth returning in 2017, but rivals like Sanofi offer a less risky earnings trajectory. After a good run in recent months, AstraZeneca’s shares are taking a lot on trust.
Sony jumps onto Japan’s taboo-breaking wagon 6 Feb 2014 The troubled Japanese giant is finally getting serious about restructuring. It’s selling its ailing PC business to a local buyout fund and is separating out its loss-making TV unit. The moves are a welcome sign that Sony is willing to shrink in its bid to return to health.
Twitter a victim of its own measure for success 6 Feb 2014 The social network is growing and mining lots of user dollars, but not enough to justify a whopping value of 30 times sales. The lofty figure rests on a rise in the company’s touted home brew of “timeline views.” That number’s falling, suggesting tweeters are losing interest.
Green Mountain puts Coke in home brewed soda race 6 Feb 2014 Partnering with the single-serve coffee maker gives Coca-Cola a way into a fizzy new market. Sales of traditional soda are down, but upstart SodaStream proved some thirsty customers want to make their own. Coke syrup in Green Mountain capsules could be a profitable mix.
Chinese e-commerce IPO more Amazon than Alibaba 6 Feb 2014 JD.com has filed for a U.S. listing ahead of its bigger rival. The online retailer has a different strategy and is barely breaking even. Like its Seattle role model, the bet is that expansion now leads to future earnings. To keep growing, JD.com will need capital to keep flowing.
HBO gives Netflix investors a grim sneak preview 5 Feb 2014 Time Warner disclosed financial details of the pay-TV network behind “Girls” for the first time, which imply it is worth about $17 bln. Netflix already trades at a 40 pct premium to its stronger, more mature rival. That suggests a need for heroic growth and profit assumptions.
Puerto Rico malaise makes debt a game of chicken 5 Feb 2014 The beleaguered island territory wants to borrow $2 bln, implying bondholders still see some value. But job losses are up, people are leaving in droves, balancing the budget without layoffs looks fanciful and debt costs are high. Puerto Rico bonds are not for the faint of heart.
Lazard puts M&A feet firmly in big boys’ camp 5 Feb 2014 The Wall Street firm didn’t just hit its operating margin targets for 2013. Like JPMorgan and Morgan Stanley, its bankers also raked in bumper revenue in the second half of the year as bigger deals picked up. Smaller rivals Evercore and Greenhill, meanwhile, couldn’t keep up.
Edward Hadas: Apple, banking and taxpayer subsidy 5 Feb 2014 Why does Apple have such high profit? Why does the banking system have a tendency to fail? The answer is the same: taxpayers subsidise business risks but the rewards aren’t fairly distributed.
Markets escape tyranny of risk-on/risk-off 5 Feb 2014 Global asset gyrations may smack of panic but the reality is more complex. Stocks have fallen, but some supposedly risky sovereign bonds have gained. It’s less blanket risk aversion than a welcome display of investor discrimination.
Quitting tobacco, CVS has a Don Draper moment 5 Feb 2014 Like the “Mad Men” protagonist, the drugstore chain has made a highly publicized and well-orchestrated virtue of a moral necessity. Pulling cigarettes from shelves will cost just 17 cents a share. But the healthcare bona fides against rivals like Walgreen can offset the hit.
Hugo Dixon: QE is the way for the ECB to go 5 Feb 2014 With euro zone inflation falling to 0.7 percent and trouble in emerging markets, the risks of deflation are up. The ECB says inflation expectations remain anchored at near 2 percent. But if the anchor slips, deflation fears could be self-fulfilling. QE is the most effective tool.
Abe can afford to ignore slumping Japan equities 5 Feb 2014 The prime minister’s anti-deflation therapy could have done without the 11 percent drop in the stock market this year. But as long as the bond market remains calm and the yen weak enough to help boost inflation expectations, Shinzo Abe can focus on reforms and leave stocks alone.
Central bank alchemy turns credit into equity 5 Feb 2014 Bond markets are turning into equity. Esoteric products like PIKs, AT1 CoCos and corporate hybrids give yield when rates are low. The downside is that such products may perform erratically in a crisis, and investors may not realise they are taking equity-like risk.
IPO flops will come back to haunt Li Ka-shing 5 Feb 2014 The tycoon’s HK Electric utility is trading 5 pct below its offer price and is the third spinoff in a row to lose money for investors. Li’s reputation as a canny trader is well deserved. But that will make it harder to get a premium valuation for his retail business, A.S. Watson.
Apple ripe for win over e-books antitrust monitor 4 Feb 2014 The iPad maker claims a judge-imposed overseer is not only costly and disruptive but blatantly unconstitutional. It’s a persuasive argument, akin to ones that doomed the independent counsel role of Iran-Contra fame. A U.S. court of appeals has the opportunity to say so.
The first $1 million drug may be a bargain 4 Feb 2014 An approved gene therapy by uniQure, whose IPO is slated for this week, has an eye-popping cost. It could eliminate a lifetime of hospital trips for sufferers of a rare disease, but it’s hard to say because so few patients have been tested. Even so, it may be rationally priced.
Microsoft founders recede into middle distance 4 Feb 2014 Satya Nadella’s experience makes him a solid CEO choice. He also has greater room to maneuver as Bill Gates steps down as chairman. He’ll need to grapple with bad decisions, like the Nokia deal, and is unlikely to pursue a breakup. But he can focus on what the company does best.
Don’t blame the economy for melting markets 4 Feb 2014 Small-country troubles, shaky Chinese demand and a few U.S. disappointments would not normally be enough to push investors into fear mode. The current volatility proves what a difference a tapering Fed makes to the health of financial markets.
John Malone’s drive for F1 shows value of sport 4 Feb 2014 The cable tycoon offered to buy a stake in Formula One last year. His recent focus has been on distribution, not programming. But the taste for motor racing highlights live sport’s must-have status in content. If he wants it, he can expect an auction and a $10 bln-plus valuation.
TPG’s bitter coffee should wake up private equity 4 Feb 2014 David Bonderman’s shop and Israel’s Strauss family are feuding over their java joint venture. Buyout firms prefer control for good reason, though it isn’t always possible. While the payoffs from different ownership structures can be big, the risks are often commensurate.
UBS’ next task: avoid U.S. overreach 4 Feb 2014 The Swiss group’s revamp into a wealth manager with a smaller investment bank tacked on has paid off. UBS’ capital position is solid and over 20 bln Swiss francs of tax assets give it options. But management should heed the risks of breakneck expansion - especially in the U.S.