Moody’s shaming brings UK gain in currency war 25 Feb 2013 The loss of triple-A is humiliating, but that’s now history. The lingering effect of Moody’s action is a weaker pound, and that should serve to stimulate exports, GDP growth and inflation. If so, there’s less risk of unlimited BoE money printing when Mark Carney takes charge.
Pearson confronts harder financial times 25 Feb 2013 The media group has focused more keenly on educational publishing. But the digital revolution is transforming the staid world of textbooks. Making a successful switch will take time and money. And a fresh pledge to retain the Financial Times might disappoint some investors.
Cameron deserves some sympathy for losing triple-A 23 Feb 2013 The UK prime minister looks foolish and inept after Moody’s took away the UK’s top credit rating. He shouldn’t have tied his policies’ success to triple-A status. But other approaches would probably have ended in the same place, or worse.
Bumi debacle teaches some all too basic lessons 22 Feb 2013 Most of the mess at the London-listed Indonesian coal miner could have been avoided if Nat Rothschild and his backers had followed what should be standard practices for risky investments. Breakingviews has a check-list for future purveyors of exotic deal structures.
UK employment highs more puzzling than dazzling 21 Feb 2013 The number of employed people in the UK is at an all-time high. Very cheering news, except that the economy is flirting with a triple-dip recession. There are many explanations for the workers’ apparent low productivity, but none of them is fully persuasive. The mystery remains.
European insurer dividend angst looks overdone 21 Feb 2013 Allianz and AXA have respectively held and increased their dividends, a day after UK rival RSA cut its own. While all insurers are battling low investment yields, the larger players have more room for manoeuvre. The same logic should apply to the payout of fellow big beast Aviva.
BoE tempted by monetary radicalism 20 Feb 2013 One third of the UK central bank’s rate-setting committee wants to push monetary policy further. If the economy remains tepid and the next governor follows up on his dovish talk, the UK could test a no-holds-barred money-push. That would be exciting - but not in a good way.
Bank firewalls: a guide for the perplexed 19 Feb 2013 The UK, U.S. and Europe have different ideas about partitioning their banks. The Vickers, Volcker and Liikanen plans reflect divergences in the regions’ pre-crisis banking systems, and how badly taxpayers suffered. Breakingviews mulls over whether their lack of agreement matters.
RBS share giveaway: a shareholder writes 19 Feb 2013 The UK government is toying with the idea of giving away its RBS shares to the public. It should consider the law of unintended consequences. A putative investor sets out what could go wrong in this unhappy letter to the bank’s chairman, after throwing in the towel in 2015.
EU bonus crackdown means more cash for bankers 19 Feb 2013 European plans to cap handouts will do little, if anything, to cut banker pay. Salaries will rise, leaving less to be clawed back for bad behaviour. It’s a perverse outcome. Better to make banks hold more capital, compete more effectively, and allow them to fail.
Mega-buyout in UK mobile risks skinny returns 18 Feb 2013 Debt is cheap and plentiful. Big M&A is stirring. And EE’s parents are keen to float Britain’s biggest mobile operator. No wonder buyout shops are circling, for what could be a $15 bln-plus deal. But even with high leverage, the returns wouldn’t be much to ring home about.
Counterpoint: The UK would be mad to join the euro 15 Feb 2013 When Edward Hadas reviewed the arguments on Britain joining the single currency, he said the UK’s economic position would be improved by membership. But why sign up to a project which remains flawed, even after the latest anti-crisis measures?
Vodafone cable mega-deal would be logical but pricey 13 Feb 2013 Telcos trade at a discount to cable, so Vodafone investors may balk. But the UK mobile group has reasons to eye Germany’s Kabel Deutschland. Households are ready to buy landlines, mobile, TV and Internet together. Vodafone could afford a 10 bln euro deal. And real savings exist.
King warns Carney that the UK is OK 13 Feb 2013 In presenting the latest inflation report, the outgoing governor of the Bank of England had two messages: be flexible on inflation and recovery is in sight. Markets only heard the first. But the economic comment is a warning to his successor Mark Carney not to overdo stimulus.
Bumi shareholders should back incumbent board 13 Feb 2013 Competing plans to salvage value at the coal miner both have serious flaws. But current management, rather than Nat Rothschild, is best placed to achieve an all-important split with Indonesia’s Bakrie family. Once assured by a promised break fee, investors should offer support.
Barclays takes first step to a re-rating 12 Feb 2013 The UK bank’s new CEO is cutting staff, businesses and risk-weighted assets. The investment bank is being revamped. Antony Jenkins’ challenge is cultural resistance. If he succeeds, income lost from reputationally risky activities could be offset by a higher earnings multiple.
Money printing is actually a great idea 11 Feb 2013 Adair Turner, the UK FSA boss, broke a taboo by suggesting that governments should sometimes just print money to cover deficits. The regulator didn’t go far enough. Governments can create and destroy money at will. They shouldn’t be afraid to do so to melt away leverage.
UK horsemeat scandal has bright side 11 Feb 2013 The combination of cost-conscious consumers and food producers anxious to oblige them has encouraged ingredient substitution. That’s bad, but it is very good to see the problems discovered. Technology, regulation and communication is making food safer and labels more accurate.
Carney still has to pass the really hard UK tests 7 Feb 2013 The incoming Bank of England governor charmed the scrutinising UK parliamentary committee. He dodged hard questions and backtracked on his one mildly radical policy suggestion. But he didn’t sound ready to deal with big fiscal deficits or the British fixation on house prices.
Ethical economy: The knots of development 6 Feb 2013 What’s wrong with British housing? So many things, from planning to self-destructive financial expectations. The strands are entwined into a knot of interlocking self-interests. What keeps some countries poor? Too many of these knots, made tighter by corruption and ignorance.