Currency still weak point of independent Scotland 26 Aug 2014 Alex Salmond used a second TV debate on Scottish independence to sketch out Plan Bs to a sterling currency union. The alternatives sound iffy. The leader of the secession campaign could probably negotiate a currency deal, but voters will still think twice about finding out.
France’s housing slump is sign of deeper woes 26 Aug 2014 House prices are falling and Paris is a buyer’s market. Hollande’s clumsy policies and lower interest rates should have the opposite effect. But the seriousness of the slowdown incites households and companies to hoard cash. Only shock therapy can end the death spiral.
Court order adds urgency to India’s coal crunch 26 Aug 2014 The Supreme Court has ruled the practice of allocating coal mines to metal and power companies to be illegal. In the long run, transparent auctions will be better. But the verdict will force the government to find a timely solution to an acute coal shortage that may now worsen.
China digital money adds to odd cash aversion 26 Aug 2014 Mobile phone users can now pay each other with barcodes. Coins and notes are starting to look passé. It’s part of Chinese citizens turning away from liquid but low-yielding assets. As savers demand higher returns but instant access to funds, risk is mounting.
S&P 500 at 2,000 invites "new normal" thinking 25 Aug 2014 A price-to-earnings ratio under 20 is only moderately above average, but U.S. earnings are at a peak relative to GDP. Adjust them to the long-term norm and the U.S. benchmark would be a third lower. Cheap money is still buoying stocks, but such new paradigms usually don’t last.
Burger King tax flip merger logic doesn’t stack up 25 Aug 2014 The $9.6 bln burger chain’s investors cheered its talks to buy Canadian doughnut shop Tim Hortons and move its headquarters across the border. There’s little obvious tax arbitrage, and Burger King isn’t larded with foreign cash. Inversion alone can’t justify the market’s appetite.
Roche’s $8 bln bet outsmarts ice-bucket challenge 25 Aug 2014 Dumping cold water on heads, the social-media phenomenon now boosting ALS research, is a great way to raise charitable cash. But the drug made by Roche’s target, InterMune, treats a disease with more sufferers. The market may be the more efficient way to direct funds.
Hollande buys credibility at political price 25 Aug 2014 French Economy Minister Arnaud Montebourg’s latest criticism of government policy proved too much for François Hollande, who has demanded a new cabinet. The French president’s move will get him kudos abroad. But the socialist left will become more vocal in its opposition to reform.
Italy caught between two slowdown theories 25 Aug 2014 No one questions that the euro zone’s third largest economy is in trouble. But Germans think the problem is institutional, while Keynesians think the challenge is monetary. They’re both right, and it might be possible to address both issues simultaneously.
Asia’s top-down corporate reforms vary in promise 25 Aug 2014 Newish leaders across the region are pushing to change the way companies work. Although the mechanisms and targets vary between countries, increasing efficiency appears to be a common theme. But investors eyeing improved returns will find not all reforms are equal.
China telco tower spin-off is early reform test 25 Aug 2014 Outside investors may be able to buy into a new company created by big telecom groups to share network costs, in line with plans to let more private capital into the economy. Whether it works depends on how conflicts are addressed - like the telcos also being big customers.
Dynegy’s $6.25 bln grab marks return of ambition 22 Aug 2014 The U.S. power company once tried to buy Enron and eventually went bust after a spat with activist Carl Icahn. Two years out of bankruptcy, Dynegy is roughly doubling its business with two deals. They look sensible, but the lesson from the past is to avoid getting carried away.
Great Recession has spawned weak economic thinking 22 Aug 2014 Post-2008 navel-gazing has produced some doubtful notions. Thomas Piketty’s excessively popular wealth theory is one. Others are a déjà-vu fear of stagnation and overdone hopes for monetary policy and regulation. Maybe another year’s Jackson Hole gathering will debunk them.
Review: Paul Ryan changes delivery but not direction 22 Aug 2014 “The Way Forward,” by the U.S. congressman and former VP candidate, is more campaign manifesto than memoir. Ryan’s rhetoric has softened but his harsh policy proposals haven’t. The title is accurate in at least one way. His austerity ideas probably will guide Republican strategy.
ECB deserves to lose market’s inflation confidence 22 Aug 2014 Euro zone inflation is moribund. Investors are increasingly doubting Mario Draghi’s ability to boost it, according to normally quiescent market signals. That’s quite right, given how ineffectively monetary policymakers are addressing the problem.
Equity research revolution fails cost-benefit test 22 Aug 2014 The UK market watchdog wants fund managers to pay for stock analysis themselves instead of using client money. Pricing is opaque at best, and investors need protection. But the change could favour big banks and hike funding costs for smaller companies. Evolution is better.
Asia’s reform spotlight swings to Indonesia 22 Aug 2014 The election of a charismatic leader raises hopes for overdue change. Joko Widodo’s rise invites comparisons with India’s Narendra Modi and Shinzo Abe in Japan. In some ways, Indonesia’s new president faces the more daunting challenge. But the rewards for faster reform are large.
Stock-based bank pay one reform China doesn’t need 22 Aug 2014 Bank of Communications’ goal of compensating staff with shares sounds like progress. But as long as China’s lenders are state pawns, it’s unlikely that bosses will have much influence over valuations. At worst, dysfunctional banks with glum management could be the unhappy result.
BofA’s FIRREA-swallowing act causes indigestion 21 Aug 2014 Regulators are using the obscure law with longer deadlines to extract hefty penalties, including a record $16.7 bln from BofA. Even Countrywide’s Angelo Mozilo seems in their grasp. Aggrieved investors may be appreciative but it’s a dubious way to make up for a missed crackdown.
Hertz gears up for another financial spin 21 Aug 2014 Carl Icahn is the latest to buy into the struggling $14 bln car rental firm. Over nearly a century, automakers GM and Ford, an airline, a 1960s conglomerate, private equity and the public have owned Hertz. It’s a perennial investor plaything. Maybe Uber could even be next.
Central banks should forget about inflation 21 Aug 2014 When they talk in Jackson Hole, central bankers will undoubtedly fret about prices. It’s a waste of time. Inflation and deflation rates are too low and stable to be a threat. The monetary authorities have more important worries: debt, reserves and managing rate rises.
Blackstone finds way to outsource skin in the game 21 Aug 2014 The private equity firm’s latest securitisation would normally require it to keep 5 percent of the risk. But Blackstone has found a way to outsource its equity sliver to other investors. The structure looks acceptable – but investors should be wary of copycats that might not be.
Infineon’s $3 bln buy relies on profit margin hike 21 Aug 2014 The German semiconductor company is paying a rich 48 pct premium to snap up International Rectifier. The fit is complementary: its U.S. peer’s strength is chips that consume less power than the typical Infineon product. But top-notch execution is required.
China Mobile’s foreign foray risks meagre returns 21 Aug 2014 The dominant Chinese operator is using its $73 bln cash pile to hunt for growth overseas. The strategy has failed to create value for other telcos. Expansion may help to push Chinese technology, but rival governments may be wary about allowing China Mobile to take control.
China’s CICC mulls shift from contacts to capital 21 Aug 2014 China’s first global investment bank has seen better days, judging by poor returns and sliding league table positions. But a mooted IPO in Hong Kong might not be a bad solution. CICC’s connections are solid. What it lacks, like scale in lucrative margin trading, can be bought.
Berkshire owner’s departure dims Buffett mystique 20 Aug 2014 Value investor David Winters sold his shares in the Oracle of Omaha’s conglomerate over a clash about Coca-Cola’s pay practices. The rare backlash follows other governance and market performance letdowns. Buffett’s recent choices are undermining his legacy and maybe Berkshire’s.
Ballmer’s exit value is now Nadella’s to preserve 20 Aug 2014 Microsoft’s market capitalization grew by over $100 bln from the day about a year ago the longtime CEO said he would resign to Tuesday, when he left the board. With his predecessor fading from the picture, maintaining the momentum is now firmly in new boss Satya Nadella’s hands.
Luxottica: nice specs, bad optics 20 Aug 2014 The glasses maker’s Chief Executive Andrea Guerra may be leaving following a rumpus with owner Leonardo Del Vecchio. Power politics or strategy may be the cause – or not. The lack of clarity and the absence of a succession plan are an eyesore on Italy’s corporate landscape.
Tragedy may reshape Brazil economy, not just vote 20 Aug 2014 Marina Silva, set to be the opposition presidential candidate after Eduardo Campos’ plane-crash death, is a fresh threat to Dilma Rousseff. Silva has long fought special interests. If she wins October’s election, a plausible outcome, Brazil could gain from less state meddling.
Latest blunder hits StanChart where it most hurts 20 Aug 2014 New York regulators have fined the emerging markets bank another $300 mln for compliance lapses. StanChart’s biggest problem is still its misfiring strategy. But such avoidable missteps reinforce a disturbing impression that senior managers are too detached from daily operations.