BofA on a roll, but investor zeal looks overdone 15 Jan 2014 Bumper results in wealth management and global banking helped the bank run by Brian Moynihan earn $3.4 bln. That’s just shy of a 10 pct equity return even with big legal costs. But it relied on a very low tax rate. BofA is rebounding, but setbacks are still possible.
Edward Hadas: Madoff/subprime – spot the difference 15 Jan 2014 The fraudster’s rise and fall has alarmingly close parallels to any story of financial boom and bust. Greedy investors rush to a hot manager, but his promises prove empty. Ironically, Madoff’s dupes will ultimately suffer less than legitimate subprime investors.
U.S. natural gas price finally reaches safety zone 15 Jan 2014 At near $4.50 per mln Btu, drillers can turn a profit on gas after several painful years. Cold weather has helped push up the price, but with demand rising it’s more than a blip. Meanwhile, production costs have come down. The likes of Exxon and Chesapeake can breathe easier.
GM’s dividend hits right spot on multiple levels 15 Jan 2014 At 30 pct of expected 2013 net income, it’s a punchy return to shareholder payouts. GM’s profit is rising, it has plenty of cash to handle its challenges and the timing implies shareholder returns rank ahead of executive pay. Mary Barra is set for a good first day as CEO.
Japan’s cheap debt drives Suntory’s animal spirits 15 Jan 2014 The privately-held booze group will borrow $14 bln to finance its bid for Beam, leaving it with more than twice the leverage of big rivals. Ultra-low funding costs make the debt burden affordable until growth comes through. The lesson will not be lost on the rest of Japan, Inc.
Another reason to be gloomy about emerging markets 15 Jan 2014 Workers in developing economies aren’t cranking up output as much as before. Fading productivity growth will put a brake on wages and consumption, and slow emerging markets’ quest to become less reliant on spenders in rich nations. Investors are right to be pessimistic.
Net neutrality requires bolder U.S. backing 14 Jan 2014 Washington’s communications watchdog tried not to regulate broadband providers while also preventing them from discriminating between content types. Now a court says it can’t have things both ways. With broadband pipes often oligopolies, internet users need Uncle Sam to step up.
Time Warner Cable can jack up Charter’s bill 14 Jan 2014 Charter’s $62 bln takeover bid contains no premium. Its first proposal last July didn’t either. The valuation falls short of other industry deals and in theory Time Warner Cable could be worth more by turning the tables on its suitor. Expect Charter to come up more than halfway.
Brazil shares cheap for a reason: Meddling state 14 Jan 2014 The Bovespa’s 16 pct decline last year has left Brazilian stocks relatively undervalued. For one explanation, investors need only look at Brasilia’s efforts to prod a private sugar firm to absorb the nation’s top rail operator. Such statist matchmaking warrants a discount.
Diageo counterbid for Beam would be strong stuff 14 Jan 2014 The Johnnie Walker distiller could top Suntory’s $16 bln offer. Rival Pernod Ricard would find it harder but not impossible to bid, too. Either could reap some cost savings. But there are strategic, financial and antitrust reasons why a counterbid looks like a long shot.
Jamie Dimon’s trials extend far beyond litigation 14 Jan 2014 JPMorgan’s boss may have the biggest legal issues behind him. Stripping those out and other funnies in the quarter, though, exposes a more fundamental issue: core earnings are falling. JPMorgan isn’t alone, but Dimon looks more exposed than most of his rivals.
U.S. employers can handle a minimum wage rise 14 Jan 2014 Even for companies like Macy’s and Safeway with lots of low-paid workers, a rise in the federal baseline to $10 per hour would need only tiny changes to pricing or margins, a Breakingviews analysis shows. Modest cuts in bosses’ pay can also help offset higher wages at the bottom.
Google raises temperature on "internet of things" 13 Jan 2014 The search giant’s decision to pay $3.2 bln for Nest, a maker of smart thermostats, signals a shift in Silicon Valley’s arc of disruption. Sending data to people on the go looks rather ho-hum next to a future where consumers communicate with and control their products remotely.
Sears’ downward spiral starting to look terminal 13 Jan 2014 Poor holiday sales were the latest blow to Eddie Lampert’s flailing retailer. Widening losses mean Sears may have to keep selling assets and cutting inventory to fund a turnaround. If that chases even more customers away, it’s questionable whether Sears has a future at all.
Gold’s would-be king attempts Midas deal touch 13 Jan 2014 Canada’s Goldcorp is stalking Osisko in a bid that could push it past Barrick as the world’s biggest miner of the yellow metal by market value. The C$2.6 bln price looks high, but Goldcorp is using its own richly valued shares. It’s a solid gold move against stumbling rivals.
Big Pharma should nourish biotechs, not eat them 13 Jan 2014 Productive drug labs rarely survive M&A intact. The market rightly loves Alnylam’s purchase of assets from Merck and simultaneous $700 mln sale of a chunk of itself to Sanofi. Instead of killing the golden goose to try to harvest eggs, Sanofi’s deal could encourage production.
Botched $8.5 bln Celesio deal creates only losers 13 Jan 2014 U.S. drug wholesaler McKesson has failed to buy its German peer - despite both sides and most shareholders wanting a deal. The drawn-out process exposed weaknesses at Celesio and in Germany’s M&A rules. Elliott, the hedge fund that tried to play kingmaker, will suffer too.
Suntory lives up to motto with $16 bln Beam bid 13 Jan 2014 The Japanese booze group’s slogan is “Yatte Minahare” or “Go For It.” In finance argot it means Suntory’s willing to pay about 20 times EBITDA for the distiller of Jim Beam, Maker’s Mark and other tipples. It’s a big price which won’t be lost in translation for Diageo or Pernod.
Cross-border capital flows fall to healthier level 13 Jan 2014 A 61 percent decline since 2007 might sound like a dangerous retreat in globalisation. But at the peak only 5 pct of the funds went to emerging markets. Too much involved land speculation and carry trades. Today’s smaller but sounder investments probably do more good.
Accelerating carmakers face dangerous potholes 13 Jan 2014 Once-resurgent sales growth is now slowing as the industry’s annual confab kicks off in Detroit. Competition is rampant with VW, Hyundai and others making a renewed U.S. push. The weak yen could lead to a price war. Most companies are equipped to cope, but profit may take a hit.