U.S. law firms mistake new partners for piggybanks 20 Aug 2015 BakerHostetler may join DLA Piper and others in offering salaried attorneys equity stakes. What looks like a promotion for the lower ranks, though, is often just a way to pad capital and payouts at their expense. As defunct Dewey has shown, greed at the top can be dangerous.
Adultery site hack reveals risqué business model 20 Aug 2015 The exposure of Ashley Madison’s customer list – with its apparent profusion of Wall Street domains – was bad enough. But the revelation that women made up less than 10 pct of users may be its death knell. The balanced network crucial to its purpose seems to have been a sham.
Markets fear central bankers are only human 20 Aug 2015 Unexpected events like China’s devaluation and commodity price drops are having a surprisingly big effect on long-range market inflation expectations. Previously, investors tended to look past such phenomena. But trust in policymakers’ ability to offset shocks is at a low ebb.
Portugal offers drama without a crisis 20 Aug 2015 Debt is too high, investment too weak, and reforms patchy. Still, the country’s politics are relatively stable, the economy is growing and unemployment is falling. Lisbon has done more to avoid collapse than Greece but has yet to find a way of lightening its fiscal burden.
Raiffeisen’s bonus plan is a capital idea 20 Aug 2015 The Austrian bank’s listed arm will only pay bonuses if its balance sheet position improves. That safety-first policy befits its considerable exposure to Russian borrowers. Over-reliance on any single target for setting pay can be risky, but this is a step in a helpful direction.
SoftBank’s hired gun takes high road to ownership 20 Aug 2015 Nikesh Arora will invest $483 million in the Japanese tech group, cementing his place as successor to founder Masayoshi Son. It’s a refreshing change from the complex awards handed out by many U.S. companies. It should also help the ex-Googler push through more bold investments.
Kirin pins M&A comeback hopes on risky Myanmar 20 Aug 2015 The Japanese drinks-to-pharma group is buying 55 pct of the country’s top brewer for $560 mln. It’s a welcome change from a sluggish home market. But beer’s last frontier comes with risks. Kirin is teaming up with a military-linked partner at a time of political uncertainty.
"Female Viagra"-maker slips the FDA a roofie 19 Aug 2015 U.S. regulators approved the first pill for increasing sexual desire in women. The drug had been rejected twice because it’s barely effective and carries severe adverse effects. The lesson for pharma firms: a public relations campaign successfully changed a watchdog’s mind.
U.S. interest rates need their old normal back 19 Aug 2015 Minneapolis Fed boss Kocherlakota says the central bank shouldn’t hike rates with inflation so low. Yet its other concern, jobs growth, is on track, interest rate-inflation causality isn’t clear, and today’s negative real rates are a distortion. It’s time for the Fed to lift off.
Yum adjusts Chinese flavouring, now for packaging 19 Aug 2015 The KFC parent has waved off Sam Su, the man who practically invented fast food in China. Su’s tinkering with the classic menu wasn’t enough to overcome a slew of unfortunate food scares. For a crispy golden sequel, Yum could do worse than spin off the China business altogether.
Edward Hadas: Amazon’s ultra-XY management style 19 Aug 2015 The retail giant denies running a cruelly competitive workplace. But when a super-charged inspirational management style collides with an excessively discipline-centred one, impossible expectations of what staff can achieve become normal. Fortunately, the mix is unlikely to last.
Glencore tripped up by faith in rational markets 19 Aug 2015 The commodity trader’s earnings have disappointed as copper and coal have tumbled. Anticipating the market is getting harder because both rivals’ behaviour and Chinese demand for raw materials are even more unpredictable. Glencore is thus focusing on what it can control: cash.
Carlsberg’s new CEO sends for the stomach pump 19 Aug 2015 The Danish brewer’s new boss Cees ‘t Hart has slashed forecast operating profit. Missed cost savings, bad weather and over-exposure to Ukraine and Russia ensure a lengthy hangover. With a new strategy not due until 2016, this looks like a sensible attempt to purge the bad news.
Rebellious Germans ignore Greek silver lining 19 Aug 2015 German Chancellor Angela Merkel is facing a revolt from her own party over the Greek bailout. The fear that Greece is a bottomless pit is fair. But it’s not all lost money: nearly a third of the 86 bln euro loaned will repay debt to public creditors, including Germany.
Indian e-tailer’s funds will disappear in a flash 19 Aug 2015 Online marketplace Snapdeal is raising $500 mln from investors led by Alibaba and Foxconn valuing it at $5 bln. Securing more big-name backers is a coup for the Indian start-up. But the huge discounts it offers to lure buyers and sellers means the new funds won’t last long.
China pharma buyout keeps take-private trend alive 19 Aug 2015 U.S.-listed WuXi PharmaTech has finalised a $3.5 bln takeover. Given China’s slumping stock market and slowing economy, persuading investors to put up $2 bln in fresh equity is impressive. There’s still hope for some of the two dozen other Chinese companies seeking to delist.
New bank M&A powerhouse leaves rivals for dead 18 Aug 2015 Regional U.S. lender BB&T’s $1.8 bln swoop for National Penn is its fourth deal in a year. The acquisition makes financial sense and is more proof the Fed supports industry tie-ups. The longer other banks stay on the sidelines, the more it’ll look like they fear rejection.
Wal-Mart’s "investment" in wages may pay off 18 Aug 2015 Lower oil prices and rising consumer confidence should make it a great time to be a low-end retailer. Yet margins at America’s biggest store chain are being squeezed by rising pay. As labor markets tighten and lawmakers push higher wage floors, Wal-Mart may have the last laugh.
BNY Mellon gifts nepotism cops low-hanging fruit 18 Aug 2015 Hiring unqualified offspring of a Middle East sovereign-fund’s boss made the bank an easy target for bribery charges. Far harder are the likes of JPMorgan and Citi, under scrutiny for employing Chinese princelings. Companies deserve to know when connections become corruption.
Carlyle hedge fund speed bumps morph into sinkhole 18 Aug 2015 Claren Road lost money on Fannie and Freddie, energy and Greece. That doesn’t explain how assets tumbled from more than $8 bln to potentially $2 bln in a year. The saga shows how a scatter of small doubts can quickly erase a solid record – even amidst unthreatening broader markets.
Wall Street accountability undercut by SEC greed 18 Aug 2015 The U.S. watchdog wants in-house judges to hear an S&P fraud case and other suits involving the 2008 crisis. The venue would give it an edge, but federal court trials are fairer and shed more light on misconduct. A backlash may force the SEC to put public interests above its own.
Sizing up FX rigging damage is imperfect science 18 Aug 2015 There are ways of guessing how much currency rate manipulation cost some investors on some days. Settlements by banks in the U.S. have set the ball rolling. But these are just estimates, and sometimes there may have been gains. Nuisance value may matter more than client losses.
Peripheral EU banks get reminder of their frailty 18 Aug 2015 Lenders stuffed with government bonds have gained from falls in yields since 2012, but Greek volatility hurt their book values in the second quarter. Right now, ECB quantitative easing means bond prices won’t fall far. If this ended and bond markets crashed, things could get trickier.
Bangkok attack shakes Thai economy’s last support 18 Aug 2015 The deadly bombing of a shrine will scare off tourists whose numbers were up 29 pct this year. It’s another jolt to an economy already grappling with flat exports and weak private investment. Military rulers have been slow to boost public spending. That’s making things worse.
Malaysia’s hefty oil dividend is unsustainable 18 Aug 2015 State-owned Petronas is cutting capex and costs but maintaining its payout despite falling oil prices. The group contributes about one third of Malaysia’s federal revenues. Political pressure to keep filling the troubled government’s coffers may weigh on future profitability.
Amazon swaps more than size with Wal-Mart 17 Aug 2015 The $250 bln online retailer recently surpassed its bricks-and-mortar rival in terms of market value. The goliath led by Jeff Bezos also finds itself in another spot Wal-Mart will more happily cede: defending workplace practices. Like its rival, Amazon too will find wisdom.
Liquidity risk: a bondholder survival guide 17 Aug 2015 Wall Street executives Jamie Dimon and Gary Cohn blame trickier trading on new rules, an argument ex-Fed boss Paul Volcker refutes. But investors need not panic. They already have tools at their disposal to help combat a sudden drought in the market, and one or two new ones, too.
John Malone takes home shopping over the top 17 Aug 2015 Buying Zulily, a flash-sale site for moms, would increase online revenue at the cable mogul’s QVC broadcast arm from about 40 pct to half. The target’s growth is already slowing quickly, however. And at $2.4 bln, or 38 times EBITDA, the deal reveals the high cost of chasing Amazon.
Tinder’s executive reshuffle could be right match 17 Aug 2015 The dating site dumped its CEO after just five months, replacing him with founder and former boss Sean Rad. Returning to an ex might seem risky, especially as parent Match prepares for an IPO. But IAC exec Greg Blatt is chaperoning as chairman. Tinder may be ready to get serious.
French housing weakness builds up trouble 17 Aug 2015 Gallic households are hardy consumers but poor investors. Reluctance to buy new housing – which counts as investment, unlike purchases of old homes – is offsetting a recovery in business spending. With demographics partly to blame, such weakness will continue to hold back growth.