American universities need lesson in capitalism 26 Dec 2013 Spiraling degree costs are an economic drag, with $1.2 trln of student debt and parents’ savings hit. Yet graduate income is falling. President Obama is pushing for better value for money. A few colleges are already showing how education can pay off for students and country.
Wall Street’s pitchfork mob needs new villain 24 Dec 2013 Bernie Madoff is doing time and Goldman Sachs has executed a successful charm offensive. The case against Jamie Dimon has struggled to take hold. Steve Cohen, the hedge fund Wizard of Oz, is nursing legal wounds. The culture of greed in finance won’t disappoint for long, though.
U.S. housing recovery could run out of steam 24 Dec 2013 Banks are likely to tighten lending standards once new rules come into place in 2014. Rising interest rates may drive down home loan volume, too. Cash purchases by investors could set a floor for house prices, but they may not be enough to prevent a major slowdown.
Buzzword visionaries will rightsize the lexicon 24 Dec 2013 Is a laser-like focus on jargon mission critical? Can only visionary C-suiters move the needle at the investor day or on the Davos panel? Some expressions are relentlessly taking share. Others, net-net, are past an inflection point. Breakingviews takes a deep dive.
Beware old tech seeking fountain of youth 23 Dec 2013 Hardware makers like Cisco, IBM and HP are falling prey to natural selection in Silicon Valley. They’re devouring smaller firms to keep pace, but weaknesses are getting harder to hide. That could lead to desperate deals for richly valued business software and cloud companies.
Brazil infrastructure drive risks running aground 23 Dec 2013 President Dilma Rousseff’s $100 bln plan to spruce up rickety roads and ports only partly makes up for years of neglect. And a looming credit downgrade makes this the priciest time to splurge. Without a shift in Brazil’s savings rate, any investment boom will be short lived.
Governance will matter south of the U.S. border 23 Dec 2013 A 10-year boom in natural resources and easy money allowed bad Latin governments to do as well as good ones. Now with commodities flat and rates rising, regimes that respect investor and property rights, while spending money and allocating capital wisely, should shine.
Detroit pension shakeout bares generational rifts 20 Dec 2013 The bankrupt U.S. city’s crisis manager wants pensioners to take a hit along with younger city-dwellers, who face higher taxes and degraded services. As Motown’s fate plays out in 2014, the legal and philosophical divisions may surface in other cash-strapped metropolises, too.
Wall Street watchdog to lose one of sharpest teeth 20 Dec 2013 The U.S. Supreme Court is poised to muzzle shareholder class action suits. While not part of the SEC’s official arsenal, they help deter fraud. Letting the regulator levy stiffer fines could fill some gaps. But clamping down on private litigation will remove some serious bite.
Target’s 40 mln hackees only tip of iceberg 20 Dec 2013 In this case the U.S. retailer’s in-store card readers may have been hacked. Fake ATMs are a clunkier hardware danger. But consumers who go online, especially on mobile devices, are running greater risks. By one broad definition, 1 mln of them suffer cybercrime every single day.
Colombia’s biggest challenge: reducing inequality 20 Dec 2013 The economy grew a robust 5.1 pct in Q3, thanks to a construction boom. But the country’s rigid social structure has contributed to the highest rich-poor gap in the region. For the sake of prosperity, and peace, this needs addressing. Rural infrastructure is one solution.
Germany will lift the soccer World Cup 20 Dec 2013 The football-mad Brazilian hosts have won five times, more than any other country. But on Breakingviews’ analysis of the hard numbers – the players’ transfer value, population, participation and public engagement – Teutonic power will squash the romantic dream of a sixth win.
M&A potential will succumb to laws of physics 19 Dec 2013 The investor love being heaped on acquirers should be a catalyst for takeovers amid plentiful cash and credit. Other market anachronisms also suggest the pendulum could swing. Yet CEOs and boards have settled into a cautious mindset. Inertia is about as powerful a force there is.
Wells will knock louder on bulge bracket’s door 19 Dec 2013 The California lender is now one of the top global investment banks, thanks to doubling underwriting and M&A fees since 2008. Much of that stems from smaller clients. If Wells Fargo decides to go after bigger fish, it could put Wall Street’s bigwigs on the back foot.
Dueling watchdogs’ crossfire harms fraud victims 19 Dec 2013 It’s Irving Picard’s job to recoup Madoff Ponzi scheme losses. Yet U.S. prosecutors are about to snatch a $2 bln JPMorgan deal from under his nose. Such rival efforts in this and other cases can raise costs and delay payouts. More cooperation would better serve duped investors.
Markets quaff perfectly mixed punch 19 Dec 2013 It sounds like a paradox: stocks go up when the Fed takes some money away. But investors have figured out that central bankers see economies which are strong enough to provide profit growth but too weak for serious tightening. The party could last until inflation reappears.
Fixed income trading goes from bad to worse 19 Dec 2013 Revenue from rates, credit, currencies and commodities was down 18 pct in 2013. The effects of scandals, new rules and central bank policy could lop off at least as much again in the next 12 months. Recent changes at investment banks mean some will suffer more than others.
New U.S. mortgage bubble index is worth watching 19 Dec 2013 Many people thought the last U.S. housing boom was unsustainable – but couldn’t prove it. Metrics created by a Washington think tank could help spot the next round of home loan excesses as they emerge. It may repay investors and regulators to keep the new data on their checklists.
Astra’s $4.1 bln divorce from BMS JV looks happy 19 Dec 2013 The pharma group is taking full control of its diabetes venture with Bristol-Myers Squibb. It’s a logical and fairly priced move enabling each firm to focus on core strategies. The assets may not be great, but Astra’s fightback against its fundamental challenges is gaining ground.
Translation tech will put a new accent on growth 19 Dec 2013 The mythical “universal speech translator” is close to being realised. Even if a truly perfect device remains years away, anything that erodes language barriers could boost global trade, tourism and investment. One day, watch out for wearable devices that also read body language.