Benmosche leaves new AIG boss suitably normal job 11 Jun 2014 The colorful CEO bullied, blustered and cajoled his way to a new start for the insurer after its $182 bln bailout. He streamlined AIG, beefed up capital, wound down derivatives and helped Uncle Sam offload its stake at a profit. Successor Peter Hancock has a different challenge.
Wall Street gets joke about fixed-income trading 10 Jun 2014 Several banks estimate Q2 FICC revenue will drop by around a fifth. Shareholders reckon it’s a long-term slump. Brokerage execs may publicly claim otherwise, but Credit Suisse’s decision to outsource some trades is an acknowledgement that the business is fading.
One U.S. coal miner could be a canary 10 Jun 2014 When $11 bln Consol bet big on gas in 2010, investors sold in favor of rivals focused exclusively on the black rock. Now, with a clean air crackdown coming, Consol’s value dwarfs that of once-larger Peabody. The prescient hedge could be a telltale sign for the energy industry.
Rob Cox: Investors cheer for Brazil World Cup rout 10 Jun 2014 Each dip in Dilma Rousseff’s poll numbers bumps the Bovespa. Markets are hoping her experimental economic policies will come to an end at the October ballot. With labor tight and millions lifted from poverty, however, it will take crushing defeat on the pitch for that to happen.
Hurrah for low volatility, a sign of saner markets 10 Jun 2014 The VIX volatility index is at multi-year lows. That’s just the leading example of soporific financial markets. Blame uncertainty or tighter bank capital rules. But without hyperactivity, markets get closer to underlying economic reality. If only it could last.
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.