Zombie retailers may yet rejoin land of living 9 Jun 2014 The crushing influence of Amazon is accelerating the apocalypse, as evidenced by the new Breakingviews Zombie Retail Index. There are small signs of life, however, such as the real estate owned by Sears. And the likes of Best Buy and Staples also can still adapt to survive.
Obama student loan fix spares rod, spoils borrower 9 Jun 2014 Extending repayment caps and debt forgiveness to older graduates gives too many high earners a break. Making everyone pay a flat percentage of income would be simpler, fairer – and cheaper for taxpayers. It could also deliver a valuable lesson in financial responsibility.
M&A shows symptoms of overheating 9 Jun 2014 Global deal volume is up 63 pct this year, and Monday’s mergers hint at toppiness. Merck is justifying a 239 pct premium with optimistic revenue synergies. Tyson Foods is overpaying in its $8.5 bln sausage deal. And investors are still boosting buyers’ shares. They may regret it.
U.S. inequality looks less bad with closer analysis 9 Jun 2014 Gross income growth has been wildly unequal over several decades, but the measure is crude. Comparisons based on living standards and income mobility suggest that the poor have not done so badly. Add in a change in the way people live, and the picture is truly muddy.
China-U.S. cyber spat risks corporate casualties 9 Jun 2014 Beijing has responded to spying charges by taking aim at American tech companies. An escalating dispute could lead to blocked deals in the U.S. and lost sales in China. Though companies can try to ease security concerns, it’s hard for them to escape a political escalation.
U.S. jobs’ full circle shows slow pace of upturn 6 Jun 2014 All 8.7 mln jobs lost in the Great Recession have finally been replaced. But America needs about the same number again just to allow for population growth since the early 2008 peak. There are shifts from manufacturing to services but overall it’s simply a long, sluggish recovery.
Facebook is near-universal buyer in virtual world 6 Jun 2014 The $160 bln website’s users are worth nearly $130 each. WhatsApp, at $19 bln or $42 per user, was a relative steal. Users of Twitter and Japan’s Line look cheap, too. Clamp on an Oculus Rift and there’s a case for Mark Zuckerberg to buy most of the planet’s social and chat apps.
Future financiers condemned to repeat sins of past 6 Jun 2014 Some 150,000 wannabe investment advisers, bankers and analysts take the CFA exam this weekend. Success hinges on understanding WACC and ROE. Knowledge of the South Sea Bubble or the Great Crash is not required. Vast ignorance of financial history is an overlooked systemic risk.
BNP’s dollar clearing capability is non-negotiable 6 Jun 2014 The French bank’s impending penalty for alleged U.S. sanctions-breaking could include a temporary ban on clearing payments through New York. Such business appears to be less than 5 pct of revenue. But its value to BNP Paribas’ wider operations and growth strategy is far greater.
SoftBank may as well roll dice on U.S. mobile deal 6 Jun 2014 The Japanese group’s Sprint unit is pushing ahead with a bid for T-Mobile US. The odds are high regulators will block it. But creating a stronger third player could produce $30 bln in synergies. The alternative of a miserable future justifies the risk of paying a big break fee.
BRICS bank: a good idea that can do grave harm 6 Jun 2014 Brazil, Russia, India, China and South Africa are sponsoring a World Bank clone. The new lender could ease the infrastructure deficit in emerging markets, but could also end up backing social and environmental disasters. The bank’s governance will decide if it’s a boon or a bane.
Flash boys get a belated dressing down from SEC 5 Jun 2014 The U.S. watchdog’s plan to scrutinize high-frequency dealing lacks detail, but more trader and dark-pool oversight seems a no-brainer. The point is that the markets are set for a major review as investor faith erodes. Making them simpler and more stable would be a worthy goal.
"GM salute" should snap Mary Barra to attention 5 Jun 2014 Employees passed the buck at the U.S. automaker by folding their arms and pointing at each other, according to the new report on faulty ignition switches. It’s one of many embarrassing revelations. Such chronic dysfunction will take a long time for the new boss to exorcise.
Wall Street watchdogs keep barking up wrong trees 5 Jun 2014 Blown trials and an iffy probe of Carl Icahn are coming back to bite U.S. regulators. Fuzzy insider trading laws are one problem, but a weakness for big names and stale cases has also led enforcers astray. They might have more luck chasing down abuses like accounting fraud.
GM chief gives bank bosses a lesson on apologies 5 Jun 2014 Mary Barra got the contrition right about how faulty ignition switches led to at least 13 deaths. The Valukas report on the problems may have left her little choice, but finance CEOs are often more grudging about failure. Changing GM’s culture, though, will take more than words.
Microsoft’s new boss can hang up on Nokia 4 Jun 2014 Buying the Finnish handset maker was Steve Ballmer’s swan song as CEO of the U.S. software giant. If Satya Nadella wants to put his stamp on the company, he could reverse course on the $7.2 bln deal. He’ll have to act fast, though, to pin the folly on his predecessor.
Gannett carve-up is just a matter of Time 4 Jun 2014 The $6.6 bln owner of USA Today isn’t getting credit for its TV transformation. Apply broadcaster valuations, and the newspapers are all but ignored by investors. As Time Warner sets free its publishing arm this week, a Breakingviews analysis suggests Gannett should do the same.
Carl Icahn finally reaches peak of Mount Activism 4 Jun 2014 Having scaled corporate America with his fight against Apple, the billionaire has set his sights even higher: U.S. Congress. Icahn’s new stakes in Fannie and Freddie may pay off if lawmakers can be persuaded to preserve them. Wheedling Washington is probably beyond his reach.
Citi CDO judge suffers best defeat of his career 4 Jun 2014 A U.S. appeals court has ruled that Jed Rakoff overreached in rejecting the bank’s $285 mln settlement with the SEC. But the watchdog and other courts have already adopted his policy of forcing miscreants to admit fault. That looks like a win for investors as well as the judge.
Voracious buyers find the meat on Sara Lee’s bones 4 Jun 2014 The conglomerate broke up into Hillshire and D.E Master Blenders in 2012 after spurning a $12 bln offer. That was a raw deal - until now. Add the latest bid in the war for the sausage maker to the coffee unit’s sale and a special dividend and owners may finally make good.