Buffett adds extra difficulty to Coke challenge 29 Jul 2014 Investor David Winters reckons the soda king can boost its earnings. Agitating at the iconic $180 bln company is hard enough. But he also has to deal with its biggest shareholder. The Sage of Omaha isn’t unassailable but needs a strong incentive to question Coke boss Muhtar Kent.
Deutsche/UBS: there’s life in EU bond trading yet 29 Jul 2014 The two banks and Credit Suisse outperformed Wall Street in second-quarter debt trading. That bucks a trend that has seen U.S. rivals take market share. Of the two, Deutsche Bank looks better placed to gain from any sustained bounce back in fixed income.
Nomura trading prowess demands fuller explanation 29 Jul 2014 The Japanese investment bank’s fixed-income arm is unfazed by broader gloom. Revenue increased 7 pct in the latest quarter. The lack of an old, bad trading book probably helps. It’s hard to tell, though, just how Nomura outflanked rivals, and thus whether success is sustainable.
Renault is showing a healthy turn of speed 29 Jul 2014 Demand is weakening in developing countries and there are some cashflow concerns. But the French car manufacturer is adding market share in Europe, its cost control is relentless, and profit margins are rising. Renault is well placed to move up through the global field of automakers.
China online funds’ yield hunt piles on risk 29 Jul 2014 Money market funds like the one linked to Alibaba are buying longer-term assets to bolster yields. That could create a crunch if savers realise their assets aren’t as safe as cash. Freeing up bank deposit rates would remove the distortion that fueled the boom in the first place.
Korea recklessly dices with property bubble 29 Jul 2014 Seoul has loosened limits on mortgage borrowing to rescue GDP growth. The real problem, though, is two years of below-target inflation. That has hurt consumption by keeping the real value of household debt too high. Bold monetary easing might be more helpful.
Argentine opportunity cost is reason to cut deal 28 Jul 2014 Another default arguably might not make things immediately worse. But it would set back recent efforts to curry favor with international financiers. With maybe $300 bln needed to develop shale oil and gas alone, swallowing national pride and ponying up $15 bln look worth it.
U.S. corporate capex may be as good as it gets 28 Jul 2014 Profits are at record levels, yet capital outlays are only middling as a fraction of GDP. Even that’s an improvement. Capacity isn’t yet stretched, so a surge in investment is unlikely. Besides, bosses know that, right or wrong, stock buybacks and mergers impress investors more.
Yukos ruling casts Russia further into the cold 28 Jul 2014 The Hague’s arbitration court ordered Russia to pay $50 bln to the expropriated oil group’s former shareholders. Moscow will appeal, but could lose again. It will then have to either blow a hole in public finances or ignore the penalty – and spend years in debtors’ hell.
Discounters’ $20 bln deal may spark M&A price war 28 Jul 2014 Dollar Tree has found more than enough savings to cover the 23 pct premium to be paid to Carl Icahn and other Family Dollar investors. As a percentage of revenue, though, the synergies are relatively low. That may leave room for sector giant Dollar General to lob in a bid.
Ripping off the BoE is new low for British banking 28 Jul 2014 Lloyds was kept afloat by billions of pounds of emergency liquidity from the Bank of England. It has now emerged the UK bank was fiddling repo rates to lower the fees on that lifeline. Every revelation like this sets back the sector’s bid to regain public and political trust.
Zillow and Trulia fire up online real estate boom 28 Jul 2014 The two listing services’ $3.5 bln merger won’t produce many cost savings. But the deal promises to reduce competition and squeeze prices higher, creating the potential for even faster growth. With only a tiny slice of the ad market, online real estate may not be tapped out.
Pemex gives Big Oil an even bigger mess to fix 28 Jul 2014 Mexico’s energy giant lost more money in Q2. Chronic inefficiency is pushing crude output to its lowest since 1990. And the government upped its tax take to 132 pct of Pemex’s income. It’s a blessing and a curse for rivals finally allowed to participate in Mexico’s core oil biz.
Hugo Dixon: Euro crisis is sleeping, not dead 28 Jul 2014 The euro zone is suffering from stagnation, “lowflation,” unemployment and debt. It’s not well placed to weather shocks, such as a further deterioration of relations with Russia. A pact to boost inflation and ramp up structural reform is the best way to insure against disaster.
Reckitt pharma spinoff looks like a cold turkey 28 Jul 2014 The UK group is kicking its Suboxone habit. It plans to demerge its prescription drugs unit whose lead product is a heroin substitute. Reckitt is open to a trade sale and that might be more remunerative, but revenue and profit declines mean valuations could be thin either way.
China throws weight around on car parts costs 28 Jul 2014 The whiff of a price probe into vehicle parts was enough to bring concessions from luxury groups Audi and Jaguar Land Rover. That will hit profits, but experience shows in China it is better to admit guilt early than risk bigger fines, or lose access to a critical market.
Samsung investors hope for dynastic dividend 28 Jul 2014 With its patriarch in ill health, the group whose revenue equates to almost a quarter of South Korea’s GDP has kicked off a big restructuring. Cleaning up ties between the 70-plus companies should create value, but it’s the founding family, not investors, who’ll set the agenda.
U.S. airline payouts to investors neglect history 25 Jul 2014 A year out of bankruptcy, American has set its first dividend in 34 years. United will buy back stock. But the industry has a woeful record of rarely covering its cost of capital and often losing billions. On a 7-9 year cycle, U.S. carriers should already be conserving cash.
Memo to Wall Street: more Ace Greenberg please 25 Jul 2014 The onetime Bear Stearns boss, famed for his pithy missives to staff, has died at 86. Though he was no longer in charge, the firm’s 2008 collapse is a notable blemish on an otherwise illustrious career. The industry could use more of Greenberg’s scrappy PSD: poor, smart, driven.
Guest view: U.S. swaps need clearer reform 25 Jul 2014 Four years after the Dodd-Frank law passed, the derivatives market is still reeling. The changes made swaps cheaper for some and enhanced transparency. But the market is prohibitively expensive for others, Chatham Financial’s Luke Zubrod says, and some rules are still fuzzy.
Sky Europe transforms BSkyB investment case 25 Jul 2014 The UK satellite group is paying its 39 pct shareholder Fox 4.9 bln stg for sister Sky outfits in Germany and Italy. The businesses are close already and the price looks reasonable. Sky Europe promises scale, growth, and cost savings. But leverage will soar and cash returns shrivel.
RBS gains much-needed buffer against bad news 25 Jul 2014 Investors welcomed the UK bank’s lower bad debts, plus asset sales coming faster than expected and at higher prices. The progress brings capital targets closer, lessens pressure on RBS to get a high price for its U.S. arm, and makes forthcoming litigation costs more bearable.
UK’s strong GDP has a soft centre 25 Jul 2014 The headline - 0.8 percent second-quarter growth - sounds good. But construction shrank and industrial production was weak. Only services were strong. It sounds like a warning of future problems. Expectations of a UK interest rate rise may be delayed, leading the pound down.
BES clear-up still leaves Angolan question hanging 25 Jul 2014 The troubled Portuguese lender’s three parent entities have all now sought creditor protection. That should clarify the bank’s losses and ownership, leaving Angola as BES’s key uncertainty. There is a way to sort this out too – but it isn’t pretty.
Low-cost plan at Air France-KLM is a bad idea 25 Jul 2014 The Franco-Dutch carrier is mulling a move on Europe’s no-frills carriers. Air France-KLM has reaped rewards from a painful but mostly successful cost-cutting programme. It could undo the good work by challenging super-efficient budget airlines Ryanair and easyJet.
UK construction tie-up needs more than cost cuts 25 Jul 2014 The mooted amalgamation of Britain’s Carillion and Balfour Beatty might qualify as a merger of equals, but only because Balfour has fallen on hard times. Synergy promises will make the numbers work. The danger is that operational misfortunes will drag down the larger group.
Shareholders punish Amazon with whole new multiple 25 Jul 2014 The internet retailer’s stock trades at 112 times next year’s earnings, even though it barely turns a profit. A $126 mln Q2 loss, with worse to come, has investors worried. They wiped out $16.5 bln of value after hours, more than six times Amazon’s net income since its 1997 IPO.
Baidu’s costly transition to mobile is not over 25 Jul 2014 The Chinese search engine operator’s share of revenue from mobile jumped to 30 pct. Better-than-expected margins suggest heavy investments are paying off. But smaller search rivals backed by giants Alibaba and Tencent are creeping in. Baidu’s margin squeeze may not be over yet.
Goldman’s new lead director better as chairman 25 Jul 2014 The bank tapped Credit Suisse’s former client kingpin Adebayo Ogunlesi to be new lead director. Though he has never led a public company, he runs a private firm. His 30 years of investment banking experience also will come in handy. If only Goldman saw fit to call him chairman.
Qualcomm turns from predator to prey in China 25 Jul 2014 Beijing has branded the US chipmaker a monopolist, even as its dominance, which rests on smartphone chips and 3G patents, may be sliding. If that weren’t enough, some Chinese customers aren’t paying their dues. As friction over US-China spying persists, things may only get worse.