Shell could use BP tips to make U.S. shale pay off 13 Mar 2014 Disappointing returns on North American investments have pushed the Anglo-Dutch firm to cut jobs and sell assets. But BP is spinning off shale operations into a more nimble unit. The British oil giant’s entrepreneurial approach gives it a better shot at pumping out profits.
Swiss banks learn that some crimes don’t pay 13 Mar 2014 Credit Suisse has followed UBS into the spotlight for helping Americans dodge taxes. The banks will suffer reputational and regulatory damage that far outweighs any financial gains. Cross-border U.S. business was only 1 pct of client assets per firm and not very profitable.
Futures traders bask in more than just Florida sun 13 Mar 2014 The industry is escaping the cold at its annual glad-hander in Boca Raton. It’s also developing a healthy glow as business expands thanks to higher volumes, volatility and new technology. New regulations may cause some pain, but it’s not as bad as what’s facing the swaps market.
Amazon Prime is about locking in, not loading up 13 Mar 2014 The internet retailer is upping the cost of its free shipping program. That could add $400 mln to its skinny bottom line. But that’s not the point. The increase barely covers inflation since Prime started. The bigger goal is to boost the top line by changing customer behavior.
Candy Crush maker picks $7.6 bln IPO from thin air 12 Mar 2014 King Digital uses creative metrics like MGABPPU to justify its whopping valuation. But there’s no way to calculate what an enterprise is worth when its profit can skyrocket 70-fold one year and could collapse the next. Rival Zynga’s IPO flub serves as an apposite warning.
Itaú schools investors on minority rights in Chile 12 Mar 2014 The Brazilian bank’s $3.7 bln deal to take control of CorpBanca shafted public shareholders, including the Bank of Chile and the World Bank’s IFC. A U.S. fund is making a stink. But the best it’s likely to come away with is a useful, if painful, lesson in governance.
Big Apple offers outsize bite of banker bonuses 12 Mar 2014 Compensation may be flat across the securities industry unless you’re a Wall Street CEO. But New Yorkers working in finance took home an average 15 pct more in 2013 than the previous year, according to New York’s comptroller. The boost relied on deferred pay, but a jump’s a jump.
Edward Hadas: Russia and the unreliable West 12 Mar 2014 Ukraine has revived tensions between Russia and the West. The clash is geopolitical, but bad economics lurk in the context. Russia has suffered from two ideological imports, first communism and then ultra-free markets. Now it is harmed by Western easy money and capital flight.
Fannie investors may be using magic calculators 12 Mar 2014 The latest plan to wind down the U.S. mortgage giant tanked its volatile stock. Some hedge funds still want to revitalize the business. Trouble is, even kind assumptions suggest Fannie isn’t worth enough for shareholders to get anything back – unless Uncle Sam is crazy generous.
Chinese remedy offers little salve for Bill Ackman 11 Mar 2014 Ratcheting up his Herbalife campaign, the uppity investor says the company broke Beijing’s pyramid scheme rules. Twitchy authorities may agree, but the country accounts for only a small portion of revenue. It’s hard to see just how China could help push Herbalife’s stock to zero.
Old hands pull every thread to sew up suit deal 11 Mar 2014 Jos. A. Bank’s directors, with an average age of over 70, proved to be wily even as they flouted good governance. Goading Men’s Wearhouse with all sorts of risky M&A tactics eventually secured a sweetened $1.8 bln takeover. It’s not, however, a playbook for the faint of heart.
Chevron looks to be best of Big Oil’s bad bunch 11 Mar 2014 Like its rivals, the energy giant is facing a stagnant crude price, soaring drilling costs and slower output. Yet even after trimming forecasts, Chevron’s production will rise five times faster than at larger peer Exxon. That makes Chevron’s cheaper valuation most attractive.
Detroit turns bankruptcy precedents upside down 11 Mar 2014 Motown’s plan for restructuring $18 bln of debt envisions paying equity holders – i.e. ordinary Detroiters – at the expense of secured creditors. This shareholder-friendly approach might save the city, and make Judge Rhodes a hometown hero. But markets may yet exact a price.
Scandal will reshape FX trading dynamics 11 Mar 2014 Probes into possible currency market manipulation will speed up industry change. The shift to electronic trading will be accelerated, squeezing banks’ trading profits. And with traders cagier about sharing juicy titbits on flows, exchange rates may start to move differently.
Unicorns stampede through tech fantasyland 10 Mar 2014 The single-horned stallions have made the leap from legend to run free through Silicon Valley, New York, London and the plains of Israel. The term unicorn is now used to describe the most successful startups. In a different and unintended sense, the trope couldn’t be more apt.
Lehman scourge may finally root out old GM 10 Mar 2014 Mary Barra, the automaker’s CEO, has brought in lawyer Anton Valukas to investigate how faulty ignitions became a 10-year saga behind 13 deaths. Valukas unpicked Lehman’s failure and didn’t mince his words. A similar approach at GM could bring the revamp that bankruptcy didn’t.
Time to tune up U.S. music licensing cartels 10 Mar 2014 Internet radio giant Pandora balks at royalties higher than terrestrial stations pay. But ASCAP says the firm plays songs more often, justifying bigger fees. The artist consortium has a point, but its tactics echo old monopoly conduct. The dated system needs a tech-savvy rewrite.
Finally, someone rewrites economic history 10 Mar 2014 A new study moves beyond the typical GDP barometer of progress. Equally weighting income, education and life expectancy, Leandro Prados de la Escosura found the poor are better off than their GDP suggests and global welfare inequality has fallen. It’s a useful fresh perspective.
Rival’s split makes it harder for Dow to resist 10 Mar 2014 FMC, a $10 bln pesticide-to-battery-parts maker, is splitting its fast-growing ag and pharma businesses from stodgier commodity minerals. It’s similar to the breakup activist Dan Loeb wants at Dow Chemical. Boss Andrew Liveris is standing firm. FMC’s move weakens his case.
Just ditch forward guidance 10 Mar 2014 Central banks’ long-range rate forecasts prod excessive financial risk-taking and may slow necessary tightening, says the Bank for International Settlements. Forward guidance fails the risk-reward test. Although the BIS didn’t say it, the policy just doesn’t stack up.