Year: 2009

Growth or bubble? That is the market question

10 Sep 2009

Equities are up around the world, but why? Perhaps it is a rational response to the resumption of growth as last year s bank panic fades into history. But falling bond yields suggests ample cheap money is still the driving force. That makes the rally and the recovery fragile.

BoE resists testing the limits of monetary policy

10 Sep 2009

Surprise! Eccentricity was absent from the Bank of England s monthly statement. Massive stimulus and moneyprinting has now fostered a tentative economic recovery. But the BoE has also reached the limits of what monetary policy can achieve.

Surviving Lehman: The financial industry crawls back from the abyss

10 Sep 2009

No markets predicted the turmoil that followed the bank s failure. But stock prices can provide a good read on the global financial sector twelve months on. Rob Cox introduces our new ebook assessing the industry s winners, survivors, strategically challenged and walking dead.

Opel gets an owner, with politics attached

10 Sep 2009

General Motors has finally decided to stick to the original plan and sell a majority of its unprofitable European division to Canadian carparts maker Magna. But with the German, Russian and US government all involved in some way, the new Opel will have trouble breathing.

US healthcare debate descends into irrationality

10 Sep 2009

You lie! a congressman yelled, breaking decorum, over Obama s contention that reform won t benefit illegals. It s an odd choice to get worked up over when the proposal has explicit restrictions on benefits to foreigners and far richer targets, like its price tag.

Gorman has work cut out as Mack’s successor

10 Sep 2009

Morgan Stanley s smooth transfer of power is a welcome relief after more than a year of nasty surprises on Wall Street. But asset management woes, the integration of Smith Barney, a yoyoing trading strategy and low returns present new boss James Gorman with a challenge.

US health reform: a primer for the uninitiated

9 Sep 2009

President Obama is making a rare address to both houses of Congress on Wednesday evening in an effort to put his healthcare reform firmly back on the rails. Robert Cyran explains the issues, what went wrong and what might happen next.

Regulatory assault may force strategy questions

9 Sep 2009

Investment banks used to post 20%plus returns on equity. But though they again stormed ahead in the first half, vengeful regulators could force ROEs down sharply. It might even make boring old retail and commercial lending look sexy at least for a while.

Blankfein repeats himself – but at right time

9 Sep 2009

The Goldman boss s comments on banking reform and compensation are hardly earthshattering. But his exhortations to triggerhappy lawmakers not to stifle risktaking completely and to ensure regulators are properly equipped make sense, even if they are partly selfserving.

Dresdner bankers’ bonus lawsuit is a long shot

9 Sep 2009

Commerzbank slashed expected bonuses by 90% when it bought Dresdner. Now 72 bankers are suing. But Dresdner provided no written guarantees, making the challenge look flimsy to any reasonable observer. The bankers will be hoping for a very sympathetic judge.

Zain Telecom’s $30bn valuation looks rich

9 Sep 2009

A group of Indian and Malaysian investors will pay $14bn for 46% of the Kuwaitbased telecom operator. Even with exposure to growth markets in Africa, the multiple is excessive compared to what Zain s recent suitor Vivendi is looking to pay for roughly similar assets in Brazil.

Regulators on the wrong side of the fines line

9 Sep 2009

Turkish tax authorities have slapped a $2.5bn fine on a media group supportive of the political opposition. That s extreme. Also extreme the other way is the UK FSA s piddling £2.45m fine on BarCap for 58m reporting violations. Fines should be both fair and effective.

New banking rules need credible calendar

9 Sep 2009

The G20 finance ministers and central bankers have agreed on the principles of bigger and better capital ratios. But first they need to speed up the international standardisation of accounting rules. Without that, their efforts will be unproductive.

Santander E17bn tender offer not the flop it seems

9 Sep 2009

The Spanish bank's securitisedbond buyback received just 4% takeup. That suggests investors are not so worried about staying exposed to Spain s troubled housing market. But the figure shouldn t be taken at face value.

Harrah’s plays catch up – but isn’t home and dry

9 Sep 2009

The US casino operator has just completed the latest stage of a restructuring designed to cut its debt. But the business may still be worth less than what it owes creditors. It s a reminder of how frothy debt markets became and why new creditors to old LBOs should be cautious.

Franco-German JV solves UK mobile problem

8 Sep 2009

The 5050 joint venture of Deutsche Telekom and France Telecom s UK operations will create a clear leader in an overcrowded market. Even rivals appear to welcome the prospect of less destructive competition. The challenge will be to keep the perfectly balanced management united.

Industry’s derivatives reform: too little, too late

8 Sep 2009

Despite dealers attempts to reduce counterparty risk and improve transparency since Lehman s collapse, it looks as if US watchdogs aren't convinced. As politicians return to Washington from their summer breaks, Congress appears poised to crack down.

Oil producers will struggle to anchor price at $70

8 Sep 2009

For four months, oil has been floating at between $60 and $75. There s no absolutely right value, although $70 feels like a reasonable resting point. Market stability would help almost everyone. But Opec will find it hard to steady the oil price in an overly financial world.

China and US should unwind environmental imbalance

8 Sep 2009

Tension over climate change mirrors economic friction. China s emissions come from overproduction, the US s from overconsumption. The richer partner needs to take the lead by getting used to fewer cheap Chinese imports and by sharing the cost of any environmental cleanup.

Cadbury break-up faces sticky obstacle

8 Sep 2009

A NestléHershey joint bid might be more attractive to the UK confectionery group than an offer from Kraft. But there s a snag: both white knights may be interested in keeping the same bit of Cadbury. Hershey would need a carrot to be persuaded to take the piece Nestlé can t.

How much more can Kraft pay for Cadbury?

8 Sep 2009

If the food giant wants to avoid sacrificing value for growth, it should resist paying a premium greater than the value of synergies. Based on similar deals, Kraft can squeeze out over $625m of annual costs. But that still only justifies a slight bump from what s on the table.

Mexico can’t fix oil operations with fancy finance

8 Sep 2009

Mexico s $8bn oil hedging gain distracts attention from its operational failings. Pemex s resistance to outsiders caused oil output to fall in a region where others find recordbreaking fields. Economically suicidal statist policies can t be offset by even the savviest hedging.

G20’s fine words need to be followed by action

7 Sep 2009

The G20 finance ministers have called for raising banks capital buffers and agreed on a common approach to curb bonuses. But, with a few exceptions, that's pretty much where they were after leaders met in London in April. What is needed now is detailed followthrough.

Brown’s profligacy could cause depression

7 Sep 2009

The UK prime minister has urged fellow leaders to rack up still higher government deficits. But that could lead to higher inflation, forcing central banks to reverse the rate cuts that have helped stabilise economies. Far from saving the world, Brown would make things worse.

T-Mobile-Orange joint venture looks a winner

7 Sep 2009

Deutsche Telekom is on the verge of deciding what to do with its subscale UK unit. A sale to rivals Vodafone or Telefonica under the £4.5bn book value would hurt. But a JV with France Telecom s more successful UK unit would consolidate the market without giving benefits away.

$37bn says deals are back

7 Sep 2009

That s Monday s total value of deals proposed, mooted and rumoured. Almost a year after the Lehman collapse, the markets and economy are stable enough for bosses and bankers to think about growth. There s even a hint of the old exuberance in Kraft s hostile interest in Cadbury.

Telefonica’s Chinese crush no longer unrequited

7 Sep 2009

The Spanish operator s interest in China has always been a oneway street. Now it will broaden its alliance with China s Unicom by boosting its stake to 8% with a $1bn share swap. But this is a small step on a long road. And it s not clear what Telefonica expects to achieve.

EU justifies rescued banks’ uncertainty discount

7 Sep 2009

The Commission s desire for the debtholders of bailedout banks to take some pain is reasonable. Preventing the likes of RBS from calling debt is also fair game. But as long as the banks are subject to arbitrary state interference, their bonds will keep being marked down.

Kraft will need to sweeten hostile £10bn Cadbury pitch

7 Sep 2009

The food giant's opening offer of a 31% premium isn't compelling, especially since it is mostly in USlisted paper. But a combination makes sense and Kraft s synergy estimates are conservative. Upward revisions could fund a more generous offer.

US job losses may reflect lost advantage

4 Sep 2009

The loss of 6.9m jobs in this recession easily sets a new postwar record. Aside from the impact of the global downturn, this may reflect a secular weakening in America's once mighty capital position. A narrowing of the gap with wages and living standards elsewhere could follow.