Goldman/Espirito Santo mess raises valid question 31 Dec 2014 The U.S. bank may take a hit after a loan to failed lender Espirito Santo was moved by Portugal’s regulator into BES’ bad bank. Goldman has fallen foul of Portuguese law, and its own complex business. The fiasco highlights the need for greater clarity over bank resolution.
Banks will make asset managers pay for regulation 31 Dec 2014 Persistently low returns are spurring investment banks to re-price products like repo financing and prime broking. In 2015, expect firms to get serious about passing on the pain of capital and liquidity rules. Higher costs could in turn force some money managers to consolidate.
Shake Shack IPO disappoints in taste test 30 Dec 2014 Celebrity restaurateur Danny Meyer’s global chain of burger joints is serving up some of the uncommon fixings found in new tech stocks. Two classes of shares and creative financial metrics are unappetizing. At least the bottom line offers a sweet refreshment to wash it all down.
Accounting fraud is ripe for fresh scrutiny 30 Dec 2014 Dodgy numbers will replace insider trading as U.S. watchdogs’ preferred prey in 2015. New auditing and analytics arms give the SEC a head start, even if SarbOx reforms make cases harder to track down. With the likes of SAC chastened, it makes sense to refocus on the next Enron.
M&A spin doctors could get swept up in the action 29 Dec 2014 Financial PR specialists have been buoyed by the boom in mergers and activist investing. History suggests independent outfits like Joele Frank or Brunswick may be tempted to find an investor or bigger owner. They should at least have enough deal nous to know when to sell.
U.S. housing demand is building 26 Dec 2014 The post-crisis rebound boosted home prices 25 pct even as sales and construction lagged. Increasing household formation, job creation and easing credit look set to give the market another leg up, despite rising interest rates and the headwind of sliding affordability.
Bitcoin’s defects will hasten its demise in 2015 26 Dec 2014 The leading crypto-currency’s economies of scale in mining and its transaction system’s vulnerability to subversion by a dominant miner make it unsound. As seignorage declines it will become cost-uncompetitive for transactions. Flaws may cause its price to lose further altitude.
Review: Fixing the CIA – a novel approach 26 Dec 2014 Could an outsider best reform the CIA in the wake of torture revelations? In David Ignatius’ novel “The Director,” a pro-privacy tech CEO tries to drag an agency that has lost its way into a new world of tighter rules, leaky secrets and cyberthreats. Good idea, uneven results.
JPMorgan soul-baring cuts room for error 24 Dec 2014 Jamie Dimon’s bank has followed Goldman Sachs’ 2011 lead by publishing a report detailing how it has responded to crises. Amid the PR-speak are some worrying admissions and much-needed improvements. Future failures and shareholder concerns will be harder to explain away.
Mary Barra gets a second first year at GM’s wheel 24 Dec 2014 The carmaker’s ignition-switch fiasco crashed her debut as CEO. The crisis may, though, have speeded up much-needed changes. Barra needs to show these will stick. She also has to prove the Motown firm is prepared for what may be some of the biggest changes the industry has faced.
Uncle Sam stoked to hash out marijuana in 2015 24 Dec 2014 Now that four U.S. states and D.C. have legalized recreational cannabis, commerce and safety warrant better regulation. But federal rules prohibiting the drug create obstacles. For the fledgling industry to mellow, Washington needs to tweak laws to consent to states’ will.
Bank cyberinsurance is overdue to come of age 23 Dec 2014 It’s a confusing market, but growing fast. No wonder with a huge breach at JPMorgan in 2014, never mind monsters at Sony and Home Depot. Add a Washington campaign, and insurance may become standard. As well as financial cover, that could improve security – but only at the margin.
Kim Jong Un could succeed where Dan Loeb failed 23 Dec 2014 While it’s unlikely the North Korean leader wants to become a new kind of activist investor – despite the generous compensation – the hacking of Sony reignites the issue of whether the Japanese conglomerate should spin off its entertainment unit as Loeb’s Third Point suggested.
Positive U.S. momentum could grow in 2015 23 Dec 2014 Jitters like recessions abroad seem unlikely to derail America’s economic recovery as late-year growth, jobs and incomes came in unusually strong. Lower gas prices and the possibility that housing ticks up make even inevitable interest rate hikes look easy to shake off.
Uber takes patent office for ride on surge pricing 23 Dec 2014 The taxi app’s claim to own the idea of upping charges in peak hours is a stretch. Like the company’s other dubious IP filings, though, this one can slow rivals, at least temporarily. That may buoy investors anticipating an IPO, but the tactic risks fueling costly patent wars.
Acquirers can expect more M&A investor skeptics 22 Dec 2014 There’s no reason to think the $3.2 trln pace of deals will slow in 2015, but the uproarious reception from shareholders is already showing signs of subsiding. As easy pickings of squeezing costs from overlapping operations evaporate, the laws of corporate finance will prevail.
First case against algorithm could reboot U.S. law 22 Dec 2014 A market manipulation prosecution essentially turns on whether one program duped another. That makes proving criminal intent seem futuristic at best. Similar obstacles could trip up other cases where software is the de facto defendant. Judges will tackle the issue in 2015.
Wall St’s $18 bln poker game has more rounds to go 22 Dec 2014 Apollo, Blackstone, Elliott and others are feuding over Caesars. Some senior bondholders in the casino group’s biggest unit back a bankruptcy that its parent’s merger with an affiliate could fund. Others may want to wait. And junior creditors have one card left: more litigation.
More than Slim odds America Movil buys T-Mobile 22 Dec 2014 Carlos Slim’s telecoms empire needs to reduce its dependence on Mexico. The fourth U.S. wireless carrier is cheap, parent Deutsche Telekom doesn’t want it and there’s strategic logic to a deal. The increasingly frightful competition in U.S. telecoms may be a sticking point.
China-U.S. shift will end Cold War peace dividend 22 Dec 2014 The PRC’s military outlays may match Uncle Sam’s in 15 years, while U.S. policy paired with Russian aggression could force up EU spending. Western defense firms face more competition, but added demand. Governments may have to choose between just rearming and an all-out arms race.