China needs history’s biggest spring clean 19 Dec 2014 Reforms targeting reckless lending, homebuilding and graft have stopped the mess getting worse. Behaviour won’t really change until China deals with its backlog of bad debts, empty houses and dirty secrets. This would be a good year to sweep the skeletons from the closet.
Dry powder may explode in buyout barons’ faces 18 Dec 2014 Everything is going up in private equity except deal volume. Acquisition multiples are at a record high, as is competition from corporate buyers. For big firms such as Apollo and Blackstone, $1.5 trln of purchasing power may be tough to deploy without cratering returns.
James Gorman can leave Brian Moynihan in slow lane 18 Dec 2014 The Morgan Stanley and BofA CEOs each marks five years in charge in 2015. Neither has had an easy time of it. Gorman, though, ought to be able to lead his firm back above a 10 pct ROE – an important, if humdrum, ambition. Moynihan’s lending behemoth remains a ways off that.
Europe’s bank supervisor constricted by slump 18 Dec 2014 The ECB wants to follow its stress test with further harmonisation of European lenders. But as the central bank toys with QE, financial stability may take a back seat. The reform agenda of supervisory chair Danièle Nouy will have to accommodate fears for the area’s growth.
China’s superlative growth looks hard to sustain 18 Dec 2014 Assume the economy expands as briskly in the next 20 years as in the past decade. Its share of world GDP could top 35 percent, a Breakingviews calculator shows. A static workforce would have achieved heroic productivity gains. If it doesn’t, China’s slowdown has only just begun.
Europe could edge past U.S. in race to courthouse 17 Dec 2014 New rules and bank scandals boost financial fraud and class-action filings in Britain. Patent combatants flock to German judges. And spats over failed investments clog EU courts. The upshot: a lawsuit boom that may topple America as the world’s business litigation capital.
The too-big-to-fail club will shrink in 2015 17 Dec 2014 The list of global banks deemed systemically important has hardly changed since 2011. But membership now comes with ever-larger capital requirements and increased regulatory meddling. In an attempt to escape, some lenders will decide to become smaller or less interconnected.
Chinese companies will mostly stay at home in 2015 17 Dec 2014 Even with a slowing economy the People’s Republic offers lots of growth for home-grown corporations. Hostile regulators, stronger rivals, and cultural differences discourage foreign expansion. Though some will take the plunge anyway, in most cases overseas growth can wait.
This is as good as global recovery gets 16 Dec 2014 Since 2009, each new calendar year has brought declarations of the end of the crisis and predictions of an economic upswing. This time the mood is gloomy, and with reason. Weak growth turns out to be the new normal, not part of the transition.
Solar upstarts and utilities head for uneasy truce 15 Dec 2014 The soaring popularity of solar panels in the U.S. cuts carbon emissions but upsets utilities trying to make a return on grid investments. The industry’s attempts to slap fees on solar users sparked uproar in 2014. A new cost-sharing approach may take the heat out of the debate.
European telecoms will dial up more deals 15 Dec 2014 Investors have brightened as M&A has swept the sector. Thanks to BT, Britain is up next. More mergers could follow in France, Italy and Belgium. What’s not to like? Well, windfalls from big cross-border deals looks distant and valuations already price in most of the good news.
Volkswagen can turn investors round 10 Dec 2014 Shareholders don’t really trust Europe’s largest carmaker. That may change in 2015, as hot new cars boost sales and cost-cutting takes hold. If boss Ferdinand Piech throws in higher dividends too, that could seal the deal – and narrow the valuation gap with BMW and Daimler.
Rob Cox: Yellen should gird for activist investors 9 Dec 2014 Uppity shareholders have so far avoided complex banks like Citi and JPMorgan. Regulatory pressure, middling performance and a dearth of large-cap options make them increasingly attractive for shakeup artists. That may put Fed Chair Janet Yellen in a new, uncomfortable position.
Strong dollar is $10 trillion headache for debtors 8 Dec 2014 The global private sector has borrowed $9.5 trillion from foreign banks; companies in emerging markets have raised another $500 billion by selling foreign-currency bonds. With a big chunk of claims getting settled in dollars, a strong greenback could threaten financial stability.
Iran’s reintegration is a prize worth working for 20 Nov 2014 Nuclear negotiations with six world powers remain contentious. Just talking reduces geopolitical risk, but bringing Iran back into the international fold would repay the effort. A newly unfettered economy, bigger than Singapore or Greece, would move the global needle.
Sub-$100 oil will inflame geopolitical tempers 30 Oct 2014 Even with sharply lower crude prices, OPEC may not cut supply. Saudi Arabia, the lynchpin, can afford to run deficits. Not so Venezuela. Less pricey crude is painful for Russia, too. Oil at $80-plus per barrel will boost world growth, but it could make global tensions worse.
Blackstone sale may kick off next deal trend 10 Oct 2014 Spinning off its advisory arm marks an end to the buyout firm’s beginning. Merging it with ex-Morgan Stanley banker Paul Taubman’s shop potentially heralds the start of something else. The rise in global M&A could spawn a super-boutique or entice a big bank to buy an indie firm.
Future financiers condemned to repeat sins of past 6 Jun 2014 Some 150,000 wannabe investment advisers, bankers and analysts take the CFA exam this weekend. Success hinges on understanding WACC and ROE. Knowledge of the South Sea Bubble or the Great Crash is not required. Vast ignorance of financial history is an overlooked systemic risk.