Companies should resist buyback temptation 23 Aug 2011 Share repurchases are creeping back into fashion, and are easier to like when markets are on their knees. But boards have often sanctioned buying programmes that have destroyed value. Share buybacks make more sense in a bear market, but the investment case remains unconvincing.
EU bank funding backstop may need fine tuning 23 Aug 2011 As euro zone liquidity becomes more strained, the European Central Bank’s ability to cover any gaps with an unlimited supply of euros and dollars is vital. Yet that support can backfire if investors spot which banks are getting help. Lessons from the UK could be helpful here.
Next wave of patent rulings could ease tech wars 23 Aug 2011 Google, Apple and others are spending billions on invention rights. But they’re really buying legal protection. That’s because federal judges have approved broadly defined patents, exposing firms to infringement claims. The courts need to sync up the law with the real world.
Regulators have the ideal tool to boost banks 22 Aug 2011 Given the bitter fight to impose new rules, it might seem odd to go easy on banks now. But as markets tumble and economies stutter, the sector must be encouraged to lend. Setting the new “counter-cyclical” capital buffer at a low level could be a clever way to get credit flowing
EU bank shares braced for recession – and worse 18 Aug 2011 The huge sell-off in European bank stocks is partly due to sovereign-related funding fears. But it mainly reflects the hit to earnings that lenders would suffer in another economic downturn. Investors also seem to be pricing in another round of capital injections.
High volatility the price for still unfixed system 18 Aug 2011 The tail-risk fear of a Lehman sequel in the euro zone has whipsawed stocks, bonds and just about every other market. Gloomy data on the U.S. economy didn’t help on Thursday. While policymakers and fundamentals alike offer no conviction, global volatility is set to stay high.
EU banks’ summer funding lull may bring autumn woe 18 Aug 2011 Post-crisis reforms and central bank backstops mean Europe’s lenders are less vulnerable to a short-term funding freeze. But if markets do not reopen in the autumn, or if wholesale borrowing costs remain high, the economic fallout for the euro zone could be nasty
Baidu smear campaign can’t be brushed aside 18 Aug 2011 Critical reports by Chinese state TV have knocked 9 percent off the dotcom giant’s shares. It may be professional envy rather than political conspiracy. Still, the Communist Party’s relationship with the web is fractious. And Baidu’s ownership structure may be an Achilles’ heel.
Sell-off tests hedge funds’ post-crisis resilience 16 Aug 2011 Hedgies have doubtless suffered in the market rout. But painful lessons learned in 2008 have made them more robust in turbulent conditions. Their funding is more secure, and they’ve borrowed less. Still, it’s far from clear their performance merits the high fees.
Split EU regulators weakened by dubious short ban 12 Aug 2011 Without the cover of European unanimity, countries that imposed short-selling curbs have made it look like they have something real to worry about. Bank shares are still gyrating - hardly evidence of a more stable market. Watchdogs risk suffering a hit to credibility.
Citadel shows some moats are still hard to cross 12 Aug 2011 Ken Griffin’s hedge fund is abandoning its foray into investment banking. Internal clashes didn’t help and adding a middle man to a trading business creates conflicts, too. But bulge-bracket firms also held up better than expected. Wall Street turf has some solid defenses.
Financial lifeboats starting to get crowded 11 Aug 2011 Safety from sinking stocks has been sought in Treasuries, and even bonds backed by U.S. homes. But other places of refuge like the Swiss franc and gold showed on Thursday how quickly they can be rocked when too many investors pile in. Havens aren’t immune to mania either.
European market meddling would not be worth it 11 Aug 2011 Shares have jumped on expectations that some countries will impose short-selling bans. The desire to protect banks from a potentially self-fulfilling loss of confidence is understandable. But changing the rules in volatile times would risk damaging markets in the longer term.
News Corp cash finds the right target: investors 11 Aug 2011 After phone-hacking pay-offs and allegations of payments to UK police, News Corp cash is going in the right direction - dividends and buybacks. News also pledges deal discipline. But governance neglect and Murdoch’s unyielding passion for newspapers still hold the company back.
Investment bank cull won’t protect survivors’ pay 11 Aug 2011 Wholesale banks are cutting thousands of jobs. But business is tailing off faster. The only way to protect bonuses would be to pay out a higher proportion of revenues. With capital under pressure and investors wanting better returns, that would be hard to defend.
Groupon’s odds of success may wilt with market 10 Aug 2011 The online coupon company’s Q2 sales increased 10-fold from a year ago. Yet its net loss also swelled to over $100 mln as it financed growth with cash owed to merchants. If investors shunning risk close the window for an IPO, it would leave Groupon less financial wiggle room.
Financials investors brace for the worst 9 Aug 2011 They wiped $100 bln off the 20 largest U.S. institutions on Monday. It may be panic selling. But most big banks are back below book value. Shareholders might not believe a 2008-like crash is coming, but the rout suggests they’d rather get out first and ask questions later.
Cheaper oil may be last best stimulus 9 Aug 2011 Falling crude prices are the silver lining to market woes. While governments lack economic ammo, one estimate says each cent off gas adds $1 bln to US pockets alone. OPEC is unlikely to intervene any time soon, meaning lower fuel costs could be the only economic booster for now.
Why Apple just might be the first $1 trln company 9 Aug 2011 The iPhone maker’s sales have been surging 80 pct a year, and profit faster. While its $342 bln value overtook Exxon’s briefly, it trades on par with the sluggish market - and at half the multiple it fetched in 2006. Relatively, at least, Apple looks worth far more.
Asian equity sell-off reflects three flavours of fear 9 Aug 2011 While the region’s economies are in good shape, investors fear the impact of a U.S. recession - both on exports, which remain key to growth, and on closely linked capital markets. A third worry is that plunging asset prices could cause a real pullback in credit and investment.