Financial engineering won’t help Euro oil majors 25 Jul 2011 Big European oil companies are trading at large discounts and could be tempted to follow Conoco's lead and demerge upstream and downstream activities. But valuations in Europe are low because oil majors are barely growing reserves. Splitting up wouldn't change that.
Will the real price of oil please stand up? 21 Jul 2011 Oil is a quintessential global commodity. But the price of the black stuff has got harder to grasp thanks to the gap between the two main benchmarks. Brent and WTI may diverge more, to the delight of U.S refiners. Then questioning about the true price of oil could get louder.
Hoarding gold makes sense only for the hopeless 19 Jul 2011 Compared to U.S. share prices, gold has rarely been more expensive. The yellow metal was even more valuable during the economic disasters of the 1930s and 1970s. Today's worries could push it higher. But only the gloomiest can think gold will maintain its glittering trajectory.
Australia is the canary in China’s coalmine 19 Jul 2011 Chinese commodities demand created a mining boom, and turned Australia's credit market into a proxy for its trade partner's economy. That market is now flashing red for Australia's exposure to a Chinese slowdown. Even if China averts a dreaded hard landing, Australia may not.
Glencore slump shatters UK IPO market 16 Jun 2011 The commodity trader's shares are down 10 pct since floating, twice as much as the market. That shows the importance of offering new shares at a decent discount. Having embarrassed investors, it also makes life incredibly hard for other firms which would like to list in London.
Rothschild’s latest M&A machine has weak precedent 15 Jun 2011 The financier's new Vallares acquisition vehicle is an energyfocused replica of his Vallar coal venture. Vallar has created value. But shareholders would have done just as well in the index. While it's early days, Vallar isn't a great advert for the new project.
Glencore move on ENRC would be logical but tricky 13 Jun 2011 The commodities trader would get instant heft in mining by buying ENRC and inexpensively, given the boardroom disarray that has hurt the Kazakh miner's shares. But the timing is bad, and adopting ENRC's assets and investors won't help Glencore win over the sceptics.
Hostile paper bid encounters more than David Brent 7 Jun 2011 International Paper's $3.3 billion bear hug for TempleInland is up against stronger defenses than what The Office manager might have proffered. The target is armored with a staggered board and just adopted a poison pill. Without a sweeter bid, the battle could be protracted.
Peru narrowly votes to imperil commodity wealth 6 Jun 2011 Ollanta Humala promises Lula's Brazil, ushering in growth despite leftwing tendencies. But investors expect something more like Chavez' Venezuela. Peruvians missed a chance to reinforce freemarket wealth, and instead should brace for an unhappy turn of the commodity cycle.
Russia’s Prokhorov exploits gold reserve thirst 3 Jun 2011 The oligarch wants to merge Polyus Gold, which he partly owns, with a global industry player. A tieup would boost the investor appeal of Russia's largest gold miner, in return for which it can offer access to its enormous reserves. But price is likely to be a sticking point.
Food inflation favors corporate strongmen 27 May 2011 Fickle weather, decreasing farmland and more mouths are pushing up prices of wheat and other soft commodities. Companies are now being forced to pass along these costs to consumers. Big brands and proactive market leaders, like McDonald's and Pepsi, stand to brave the storm best.
Glencore banks don’t merit full IPO kicker 27 May 2011 The commodity trader's bookrunners sold its $10 bln IPO during a resources selloff, wooing big names to the register. But they tripped on the pricing. Glencore may well disburse an $83 mln discretionary bonus on top of fees of $170 mln. But it's hard to say it's all deserved.
Glencore’s debut may be weaker than it looked 20 May 2011 The Swiss trader's IPO is hugging its float price. But early trading can be deceiving. New issues often benefit from intervention by bookrunners mandated to stabilise the shares. This saves the issuer face, but it can create distortions and attract the wrong type of investors.
Glencore’s IPO gets only middling marks 19 May 2011 The commodity trader's jumbo IPO started trading just a smidgen above its 530p float price. That's not bad. But nor is it great, given the 23 bookrunners, host of cornerstone investors, and a lastminute hike in the price range. Glencore could have priced the deal more keenly.
Glencore can learn from Goldman on risk 16 May 2011 The commodity trader's sprawling business is exposed to some unusual risks, from traders going rogue to corruption in frontier markets. Investment banks have been here before. Besides topclass lawyers, a Goldmanstyle standards committee might give investors further confidence.
Valuing G force is key to Glencore float 16 May 2011 The commodity tradercumminer is worth around $56 bln, or near the top of the range, on a breakup basis. But governance concerns mean that it deserves a discount to the sum of the parts. That takes its fair value down to perhaps $50 bln, a bit below the midpoint of the range.
Global commodity craze should be good for Africa 11 May 2011 But it probably won't be. High commodity prices should bring higher revenues to cashstrapped states. But for development to occur, those funds need be converted into private sector activity. Given Africa's corruption, poor infrastructure and bad policies, that's a tall order.
Oil crash shows investors still trust flawed model 9 May 2011 Historic price movements suggest last week's sell off in commodities should happen only once every several thousand years. It is surprising that riskassessment techniques undermined by the credit crisis are still used. But it also reflects a lack of decent alternatives.
Commodities rout wouldn’t leave Glencore unscathed 6 May 2011 The commodity giant's trading arm may not be too sensitive to absolute falls in oil or metal prices. But the bulk of Glencore, its mining assets, would be. And financing could be harder if collateral falls in value. Still, the pain would be less than for a pureplay miner.
Volatile commodities pose sizeable contagion risks 6 May 2011 Worse for global investors than high oil prices are volatile oil prices. More worrisome still is the slide could be part of a messy unraveling of speculative commodity investments that started with silver. It could create a domino effect across financial markets.