Hunt life lesson: Ideology and business don’t mix 22 Oct 2014 The right-wing beliefs of Nelson Hunt, dead at 88, colored his judgment on 1970s policies and led him to buy silver. An attempt to corner the market blew out when the Fed tightened money. Hunt’s failure showed why billionaire politics are best limited to funding candidates.
Amgen boss makes a prime breakup target 21 Oct 2014 Former Morgan Stanley banker Robert Bradway runs the $109 bln biotech being eyed by activist Dan Loeb. Splitting into a cash cow and a growth arm comes up often in the industry but rarely happens. In Amgen’s case, its drug focus and the CEO’s background give the idea a chance.
CVS smokes policy could trip antitrust alarms 21 Oct 2014 The U.S. pharmacy chain’s benefits arm may charge customers extra for using drugstores that, unlike CVS, sell cigarettes. That’s reminiscent of anti-competitive tying that got Microsoft in trouble. The cases differ, but concerns about market power make the company worth watching.
Rob Cox: Fragility bigger worry than volatility 21 Oct 2014 Recent rollercoaster markets are a symptom of a more concerning malady. They reflect the shock accompanying recognition that widely accepted assumptions about everything from monetary policy to geopolitics, and even the state of global health, are dangerously flimsy.
Bank culture powwow blends carrot, stick, naivete 21 Oct 2014 During an off-the-record self-examination by Wall Street, Fed bigwigs outlined ideas for pay structures, risk management and personal and institutional punishment. Some of it sounds sensible, some unworkable and some nostalgic. And official failings still need addressing, too.
Coke and McDonald’s serve unhappy investor combo 21 Oct 2014 The U.S. consumer giants’ weak results risk becoming chronic as customers eat healthier or trade up to posher fare. Problems overseas, fierce competition and toppy markets mean neither stock looks like a bargain. Cutting more fat looks the best way to keep shareholders satisfied.
Apple’s new, new things overshadowed by old thing 20 Oct 2014 The drumbeat for innovation banged on till the watch and payments technology finally appeared. In the meantime, it was iPhones that spurred better than expected revenue of $42 bln, accounting for 56 pct of the total. Apple’s one-trick pony will do until the herd picks up speed.
Two useful AbbVie inversions to pay for failed one 20 Oct 2014 Turning tail on the $54 bln Shire deal exposes the U.S. drugmaker’s folly chasing a lower tax bill. Investors facing a $1.6 bln break fee should push for other AbbVie flips: boss Richard Gonzalez’s compensation and the company’s governance in the form of an independent chairman.
U.S. mortgage watchdog risks subprime repeat 20 Oct 2014 New rules on federal guarantees clarify lending criteria. They also cut required down payments to 3 percent. That invites another wave of underwater borrowers. Sure, home ownership is down from its peak. But focusing on that, rather than prudence, helped inflate the last bubble.
U.S. Senate shift may give Wall St glimmer of hope 20 Oct 2014 Most polls suggest Republicans will take control of Congress in November’s election. Their possible slim majority won’t mean much for lawmaking. But chairing banking committees and the confirmation process could reduce some of the pressure on the financial sector.
IBM keeps earnings bug hardwired in system 20 Oct 2014 Investors zapped $13 bln off Big Blue’s value after the firm ditched its 2015 goal of making $20 a share and had to pay to get rid of its chip business. That’s not the worst of it. What’s worrying is that CEO Ginni Rometty is sticking with the same plan that has sent sales lower.
Morgan Stanley homes in on underwhelming target 17 Oct 2014 The Wall Street firm’s Q3 showing came in just shy of CEO James Gorman’s 2015 goal of a 9 pct return on equity. It’s the result of another consistent overall performance. But until the bank can find its way to more lucrative returns, it’s dullsville for the stock price.
Airbnb and Uber lack full spirit of sharing 17 Oct 2014 Most of the $10 bln home rental service’s New York listings are illegal, a top lawman has found. And Pennsylvania judges put the kibosh on the $18 bln taxi app. Many regulations are outdated for the likes of Airbnb and Uber, but a more cooperative attitude would help their cause.
Spreadsheet bungles alive and well in high finance 17 Oct 2014 No less a practitioner than Goldman Sachs double-counted some of Tibco Software’s shares in calculating the company’s value in a sale worth $4.3 bln – oops, sorry, $4.2 bln. The mistake probably didn’t change much. What’s telling is that no one spotted a fairly obvious blunder.
Chesapeake gets double win in $5.4 bln shale sale 16 Oct 2014 The U.S. gas driller’s market cap jumped 17 pct, or about $2 bln, after rival Southwestern agreed to buy some wells. The acquirer’s 11 pct share-price slide suggests the deal favors Chesapeake. But it also gives CEO Doug Lawler a one-shot fix for his company’s balance sheet.
U.S. food merger may choke on antitrust precedent 16 Oct 2014 Sysco says its $3.5 bln purchase of US Foods preserves local competition. Critics argue that’s irrelevant because the two operate nationally. Similar logic led watchdogs to nix AT&T’s $39 bln deal for T-Mobile US. They could find it hard to swallow the food distributors’ union.
Jammed exits amplify global market gyrations 16 Oct 2014 It’s the worst financial turbulence since the euro zone crisis. Waning economic confidence and contagious fear can explain some of the rush out of stocks and into safe bonds. The decline of active market-makers is magnifying the movements.
Goldman pulls every lever to make machine run 16 Oct 2014 Bankers and traders helped the firm increase profit 50 pct from a year ago. Investments like Tesla supplier Mobileye contributed, too. Socking away less for pay, though, provided the real fillip to 11.8 pct return on equity. In tough times especially, that’s how it should work.
Wal-Mart and Amazon have yet to blur one big line 16 Oct 2014 The U.S. mega-retailer is belatedly paring brick-and-mortar investment in favor of e-commerce. Amazon, meanwhile, plans to open its first storefront in a radical departure from two decades of online disruption. As strategies slowly converge, valuations may start to inch closer.
Megadeals like AbbVie/Shire invite arbitragedy 16 Oct 2014 Doubts over the $55 bln takeover have hurt Paulson, Elliott and other hedge funds. This caps a dismal half-decade for merger arbitrage. Bids have been scarce and spreads narrow. And the biggest, most investable deals often come with the worst political and regulatory pitfalls.