Year: 2009

Unilever’s no-guidance policy is forward thinking

7 May 2009

Calling time on guidance isn t only the right thing for the consumer goods giant. Other companies should follow. Financial targets can encourage management shorttermism. In any case, the market is usually better than executives at forecasting company performance.

Barclays takes its chances on recovery

7 May 2009

The UK bank shone in the first quarter and financial stocks are rallying. The conditions are ideal for raising equity. But Barclays still plans to rebuild capital with profits alone. Rival Lloyds dire results make clear this is a risky approach. Barclays remains a big gamble.

AB-Inbev’s turn to curse the buyer’s market

7 May 2009

The brewing giant drove a hard bargain to buy Budweiser last year. Now it's on the end of one. KKR has snapped up AB s Korean business, Oriental Brewery, for $1.8bn but thanks to a heap of concessions it had to make, the actual price looks about 15% lower.

So will stress-tested banks boost lending now?

7 May 2009

Don t count on it. The recession will keep both supply and demand muted for a while. And securitisation, which funded half banks' lending in the boom, remains moribund. Taking insolvency risk off the table simply means there s less reason for banks to crimp lending further.

US shouldn’t give up value in Tarp warrants

7 May 2009

The bank stress tests scores are out, and the graduates are keen to repay the government's investment as fast as they can. That s understandable. The feds should take the money back but shouldn t let industry lobbyists push them into easing the terms of related stock warrants.

UK right to play tough with Jaguar Land Rover

7 May 2009

The government is seeking its pound of flesh from the lossmaking luxury carmaker in return for facilitating a £800m bailout. If the demands drive parent Tata Group to decide it can do without state help, it s a winning move.

UK sticks to one sound principle in LDV rescue

6 May 2009

The government will lend £5m to the Deripaskacontrolled ailing vanmaker. The state support means taxpayers may well end up owning a bunch of trucks. But at least the UK s statebacked banks weren t coerced into helping against their better judgment. That s a good precedent.

Personal view: US consumers don’t need online gambling

6 May 2009

Legalising internet gaming would provide muchneeded tax revenue. But it would encourage bad behaviour all round. The gambling urge reduced saving and love of speculation and excess leverage has already done enough damage to the US economy.

Hedgies will struggle to build Greenwich of the East

6 May 2009

With investment banks slashing prop desks in Asia, traders are setting up hedge funds. Emergingmarkets expertise should help attract cash. But most startups are likely to remain friendsandfamily boutiques especially given the special favours promised to early investors.

Blackstone reflects more stable new reality

6 May 2009

The bluechip private equity firm posted another loss. But management fees are steady giving a stable base for valuation and noone is banking on performance fees. The recent rise in Blackstone's shares suggests investors have noticed that things should be set to get better.

BofA can plead the RBS defence in China

6 May 2009

Bank of America may need $34bn of new capital to pass US stress tests, and the $13bn paper profit on its CCB shares is a good place to start. Like Royal Bank of Scotland, it can claim force majeure. That addresses the loss of face though not the loss of opportunity.

Tarp exit conditions miss the point

6 May 2009

Like the strings Congress attached to the cash, the conditions the US government wants to tie to its repayment could do more harm than good. Chief among them is weaning banks off governmentbacked loans. Sure, that s crucial but it s too important to mix it up with Tarp.

GMAC is staring nationalisation in the face

6 May 2009

The government has told the finance company it needs $11.5bn more equity. That may be almost double what GMAC is worth. Chief owners General Motors and Cerberus can't help. That means Washington will probably have to assume full control and pay over the odds for it.

What does BofA’s $34bn capital shortage really mean?

6 May 2009

The dearth of specifics makes it tough to tell. But if the infusion of common equity is just to keep its capital ratios where they are now, then a backoftheenvelope calculation implies that under a worstcase scenario, BofA could lose up to $100bn by the end of next year.

Opel doesn’t need Oleg

6 May 2009

Russian oligarch Oleg Deripaska might join Canadian carparts maker Magna in bidding for GM s European subsidiary. Deripaska already controls one nearbankrupt company, Russia s Gaz. It s hard to see what he could bring to Opel.

Rising confidence turns vicious circles virtuous

6 May 2009

Debtladen companies like Dow Chemical recently found themselves trapped in a downward spiral as fears of insolvency sent their equity values plummeting, making it difficult to deleverage. Dow s $1.6bn stock sale shows this spiral may now be beginning to reverse.

Overpriced European clearing demands regulation

6 May 2009

An inefficient market for clearing is inflating the cost of European securities trading. A single mutually owned clearer is one solution, but looks hard to achieve. Better to drive competition by forcing exchanges to use the cheapest clearer even if they don't own it.

France can’t maintain hard line on hedge funds

6 May 2009

The French finance minister is calling for maximalist EU regulation of those wicked things. That might play well to the home crowd ahead of European Parliament elections in June. But she d better calm down afterwards. Otherwise, she ll end up with no regulation at all.

Are stocks a better guide to stress test results?

5 May 2009

The market should be the ideal place to digest all the analysis, guesstimates, rumours and leaks on which banks may be short of capital. Pricetobook value multiples imply that seven firms may need more. But with test parameters still unknown, even this measure could be off.

US insider trading case could weaken CDS critics

5 May 2009

Regulators charged two people with fraudulently reaping $1.2m in the credit default swap market. It s the first US insider trading case involving these instruments, and if prosecuted successfully, it would demonstrate that the CDS market isn t entirely lawless.

Mexico’s malaise goes deeper than the flu

5 May 2009

The global downturn and the H1N1 flu outbreak will give Mexico its worst year since the 1995 Tequila Crisis. But when the flu passes, Mexico will still lose out to Asia. It is developing badly: education languishes, oil production falls and political challenges are ducked.

US government bond bubble may soon deflate rapidly

5 May 2009

Seasonal funding needs, huge government borrowing requirements, green shoots of economic stabilisation or recovery and the inflationary effect of Fed liquidity creation are combining to send Treasury bond yields upward. They may go a lot higher, quite quickly.

Newspapers learn from mobile phone operators

5 May 2009

With the launch of Amazon's new electronic reader, the New York Times and rivals are borrowing a trick from the mobile phone world: cheap hardware in return for signing longterm subscription contracts. The Grey Lady and others might even be able to give the gadget away.

Obama’s rhetoric prejudges Chrysler creditors

5 May 2009

The identities of the bankrupt car company s nonTarp creditors are still under wraps. Their lawyers wanted to keep it that way. The US president s rhetoric has made the group wary of going public even to ask for their legal rights. It s a bad precedent for Obama to set.

Google/Apple antitrust probe is warning shot

5 May 2009

The US is investigating whether it s anticompetitive for the two technology leaders to share board members. It s easy enough to end the overlap. But that probably wouldn t be the end of it for Google. The new administration looks ready to take a tougher line on competition.

Fiat’s dealing will change Italian capitalism

5 May 2009

The probable dilution of the Agnelli family Fiat s controlling shareholders who are as iconic as its 500 car will mark a gear shift for the country. Italy s traditional way to do business is waning. But not necessarily an improvement. Berlusconism would be a deterioration.

UBS will struggle to shake laggard status

5 May 2009

The Swiss bank s gloomy Q1 results and outlook contrast with hopeful tones from perkier rivals. Not only did UBS miss out on the fixedincome trading bonanza but its supposed strength wealth management remains troubled. The UBS strategy still looks right, but the slog long.

How will StanChart exploit its credibility?

5 May 2009

The emergingmarkets lender is the latest bank to shine in Q1. Its strong showing in Asia looks more sustainable than the bumper trading profits that boosted US banks. The performance puts it in a strong position to raise equity for opportunistic deals like RBS Asia.

John Malone avoids trouncing DirecTV’s shareholders

4 May 2009

True, Liberty shareholders are getting a slight premium in their $13bn merger with the US satellite broadcaster. And DirecTV gets some content assets that Liberty shareholders weren t ascribing much value to. But at least the deal offers clarity on DirecTV s ownership.

Crack in US tech’s IPO glacier not the same as thaw

4 May 2009

Software firm SolarWinds wants to be the first venturebacked tech company to debut since last August. Its success would show that investors have regained some risk appetite, a boon for backedup venture firms and underwriters. But it s unlikely the floodgates will fly open.