Year: 2009

China throws petrol on speculative fire

2 Jun 2009

A 7% raise in official petrol prices is a nod towards market forces. Beijing is clearly worried about cushioning the fragile consumer. The problem is that its petrol price controls can encourage speculation.

Peugeot unlikely to rush into Fiat merger

2 Jun 2009

The controlling family of the French car maker has opened the door to an industrial alliance or even a merger. But Peugeot s insistence the company should remain independent, and the family s intention not to be diluted, seem to mean it doesn t have Fiat in mind.

Let US bank watchdogs fight it out

2 Jun 2009

Lawmakers are rightly sceptical of Obama s emerging plans for an allpowerful federal bank regulator. Duplication of effort among overseers that have tangible interests in the health of their charges could unearth problems earlier and keep them from festering.

UK housing recovery is wishful thinking

1 Jun 2009

Several indices suggest house prices are stabilising. But the signs aren t strong enough to call the bottom of the slump with certainty. That would require a turn in the labour market and improved mortgage financing for firsttime buyers. Both look some way off.

Don’t blame the credit crunch for GM’s failure

1 Jun 2009

The financing crisis certainly didn t help the carmaker. But the writing was on the wall for years that GM s liabilities would consume its assets. Executives and unions acted too late and too slowly. With luck, pressing the reset button with the help of taxpayers will work.

Why no sterling crisis?

1 Jun 2009

The UK economy and public finances are in a mess. But parliament is transfixed on the scandal over MPs expenses. It sounds like a recipe for market panic. Yet the pound is holding up largely because the odds of an early election and a Conservative landslide have risen.

US mortgage investors amplify Treasury sell-off

1 Jun 2009

The government s massive borrowing needs and investors rebounding risk appetite have caused Treasury bond prices to fall. Hedging by mortgagebacked securities investors is adding to the selloff, possibly hurting the housing market and those MBS investors even more.

DJIA rejig underlines souring of Weill’s legacy

1 Jun 2009

The former Travelers boss built Citigroup before spinning the insurer off again. Now Travelers is replacing the failed Citi megabank project in the Dow Jones Industrial Average. Cisco, meanwhile, is finally displacing bankrupt GM. The irony, though, is all on Weill.

Ford gets bupkis for its financial virtue

1 Jun 2009

By cleaning up its two US rivals Uncle Sam has put Ford at a competitive disadvantage. As the top GM shareholder it s also conflicted. Ford may not need a handout, but there are ways the government can level the playing field.

General Motors bankruptcy: in their own words

1 Jun 2009

The carmaker s executives have been denying the need for bankruptcy for as long as Breakingviews has been advocating it as a way to restructure the troubled carmaker. Herewith, we ve compiled a selection of comments both bullish and bullheaded since late 2005.

Is the Fed ignoring its own stress tests?

1 Jun 2009

Not quite. But the US regulator has added a kicker for healthy, capitalrich banks waiting to pay back Tarp cash: prove you can raise more capital first. JPMorgan and Amex have already jumped. Even JPMorgan's $5bn is a modest amount, but the Fed shouldn't need this extra proof.

Is Canada – not the US – the world’s safe haven?

1 Jun 2009

Its biggest bailout to date wasn t one of its own but rather GM s local arm. Its banks are sound, its recession relatively shallow, and its finances in reasonable shape. With an economy strong in resources and a fiscally careful government, Canada looks safer in turmoil.

RH Donnelley bankruptcy shows it’s not dead yet

29 May 2009

By some measures, the US yellow pages group is in less bad shape than others dependent on local advertising that are clinging onto business as usual, like newspaper operator McClatchy. The difference may be that a debt restructuring might actually keep Donnelley alive.

GM’s unions get better end of stick, again

29 May 2009

Like the government and unsecured bondholders, the UAW has agreed to take some of what it's owed in the form of equity in a restructured GM. As at Chrysler, they stand a better chance of recovering it than Uncle Sam or creditors. Our calculator shows you how.

Magna holds the chips in dramatic Opel poker game

29 May 2009

The Canadian car parts manufacturer seems to have a provisional deal to buy Opel from GM, blessed by the German government. Fiat had earlier stormed out of talks to acquire GM's nearbankrupt European division. If Fiat's move was a bluff, it seems to have failed.

WoodMac looks a bear-market gusher for Candover

29 May 2009

The oncetiny oil research firm has seen turbocharged growth under private equity ownership. Now Wood Mackenzie is for sale at a mooted E750m. That would give Candover a heady IRR and dealstarved buyout firms a rare investment opportunity. It looks very much an isolated case.

Nice-guy politics shouldn’t thwart China-US rebalancing

29 May 2009

Don t expect verbal grenades from Treasury secretary Geithner on his first state visit to Beijing, despite his past swipes at Chinese currency manipulation. It s pointless to lash out after all, supertanker economies take a long time to turn around. But turn around they must.

Arcandor doesn’t deserve state aid

29 May 2009

The German group must refinance E710m by June 12 or face insolvency. With an election looming and 70,000 jobs on the line, the temptation to throw the underperforming group a lifeline is great. But there are plenty of parties to be squeezed before the taxpayer.

Anglo Irish kicks Ireland’s economy while it’s down

29 May 2009

With state borrowing soaring, the last thing the Irish government needs is to pump E4bn into the nationalised Anglo Irish Bank. But the consequences of letting the bank fail altogether could be even more expensive.

Costco offers greenish shoot on US prime

28 May 2009

True, the upmarket US warehouse retailer saw sales fall 5% and missed expectations. But its membership ranks, the key to its profitability, actually grew. This, rather than sales of megaboxes of cereal and plasma screens, is the more telling sign.

Political fear of gas tax risks trillions

28 May 2009

US Energy Secretary Steven Chu s claim that a gas tax is not politically feasible seems wrong on two levels. First, Obama has sufficient support. Second, a gas tax would be a far better way to fight climate change than new CAFE standards and a cap and trade system.

Which EU country could grow this year?

28 May 2009

The surprise answer is Poland. It may be located in the heart of troubled Central Europe. But it avoided the credit boom, ran a prudent economic policy and has competitive industry. What s more, its floating currency and Germany s car scrappage scheme have helped its exports.

Obama revs up antitrust effort by blocking $3.1bn CSL deal

28 May 2009

The administration made clear its more vigorous approach to competition law. It even laid out targeted areas: health, tech, energy, and agriculture. The FTC s move to block the merger of two drug companies is the first taste of what s in store.

Can the US ever make its money back on GM?

28 May 2009

It s doubtful. In exchange for more than $50bn of financing, Uncle Sam gets 72.5% of a postbankruptcy GM. For taxpayers to recoup their dollars, the whittleddown carmaker must be worth at least $70bn a value it never even achieved in its heyday.

UK bank lending decline is no cause for panic

28 May 2009

The UK corporate sector is borrowing less. But it s not clear that the fall is due to banks withholding credit. Demand has fallen too. What matters is that the banks stick to their commitment to make credit available to suitable borrowers should demand pick up.

Hypo fiasco embarrasses a haughty Germany

28 May 2009

German authorities were quick to blame lax oversight elsewhere for the financial crisis especially the UK. But leaks suggest advance warnings on ailing German lender Hypo Real Estate went unheeded. The dithering makes it sound like the country had its own Northern Rock episode.

US homeowners may be poorer than they feel

28 May 2009

The 19% drop in US house prices in the past year looks less dire than the S&P 500 s 40% plunge. But adjusted for leverage, homeowners may have lost more than they think. Throw in price opacity and lack of liquidity in housing, and stocks may provide better shelter.

EU should stick to its guns over Germany and Opel

28 May 2009

The EU, prompted by the UK and Belgium, is calling an urgent meeting on Germany s bailout plans for Opel. The fear that German workers might be favoured is legitimate. But Europe already has regulation to prevent this. The EU should simply say that it won t tolerate rule bending.

US basketball is no slam dunk for Chinese cash

28 May 2009

Investors from the Middle Kingdom are buying into the Cleveland Cavaliers home to LeBron James, one of sport s hottest stars. The team could use the capital and marketing deals. But the investment could easily end up another western miss for China if James signs elsewhere.

UK stress tests not super-conservative

28 May 2009

Britain has modelled a severe drop in property prices to test whether banks can weather the storm. Its overall economic assumptions are tougher than the US but not especially bearish. And Barclays has been given leeway to respond to a nightmare scenario only if it occurs.