Year: 2009

US corporate tax crackdown is only a start

4 May 2009

President Obama's plan may raise the effective corporate tax rate above 20% still below the 1994 level. If profits revert to trend, the extra revenue won t lower US deficits much. But combining fewer loopholes with a reduction in the 35% headline tax rate would be helpful.

How much does Buffett’s successor matter?

4 May 2009

The Sage of Omaha says the undisclosed candidates to succeed him as Berkshire Hathaway s investing supremo didn t do too well in 2008. That s perhaps forgivable. But their skill may not be the only key to Berkshire s future. The company s insurance bosses may be as important.

China pays Taiwan geopolitical dividend

4 May 2009

Financial turmoil has brought the two closer. Taiwan, its economy slammed by a 30% fall in exports, will gain from opening up to Chinese capital and tourists. Investors will welcome the reduced political risk. China may yet win with finance what threats of force didn t get.

Bottlers could squeeze just a bit more from Pepsi

4 May 2009

Pepsi Bottling snubbed PepsiCo s $4.2bn offer for the remaining twothirds of the company. It has a point: the offer values it at a big discount to other bottling deals and there could be more synergies. But its fortunes are tied to Pepsi, so it doesn t have much leverage.

Marchionne’s jumbo carmaker project is fraught with risks

4 May 2009

The Fiat chief's vision for building a major transcontinental car group on the rubble of GM's Opel and Chrysler simultaneously has theoretical attractions. But multiple hurdles will have to be jumped to pull off this extremely complex operation successfully.

Telecom equipment makers move to razor-blade model

4 May 2009

Mobile phone saturation is leading to increasing pressure on network operators. For equipment makers, this is both a threat and an opportunity. Prices are falling, but new businesses are opening up. Operators are looking for suppliers like Ericsson to manage their networks.

Three cheers for obstreperous investors

1 May 2009

Bondholders in Chrysler are being vilified by President Obama, while the German government is laying into Chris Flowers for resisting being squeezed out of Hypo Real Estate. Whatever the merits of individual cases, it is good that investors are willing to test their rights.

US pension insurer minor sinkhole in bailout world

1 May 2009

Chrysler s bankruptcy may add to its deficit, but only by $2bn because of payout limits. Even so, it remains insolvent however diligently it tries to hide it. But its freeze on benefits and the decline of definedbenefit pensions limit the hole US taxpayers must fill.

Logic favours Jain as next Deutsche Bank CEO

1 May 2009

A lot can happen before Ackermann s new extension ends in 2013. But as it stands, Deutsche will want an insider with investment banking knowhow. Division cohead Anshu Jain looked to have an edge on counterpart Michael Cohrs before the crisis hit. It may be his job to lose.

Why hasn’t the crisis incited more violence?

1 May 2009

May Day is traditionally when workers unite against oppression. But this year s protests seem strangely weak against a backdrop of the worst recession in decades. The reason: the pain of rising unemployment is so well cushioned. It s one of the bonuses of prosperity.

Bank stress tests shouldn’t be open to debate

1 May 2009

The spectacle of US regulators arguing over the results strains the tests tenuous credibility. Watchdogs run these tests all the time. This cynical public exercise shows regulators need justification for telling banks what to do. That means banks have grown too powerful.

The changing world of Warren Buffett

30 Apr 2009

As Berkshire Hathaway shareholders gather for this year s Woodstock for capitalists , the legendary investor wants them to ask more about the company s business than usual. They should do that and listen up. Through Buffett s choices and market forces, Berkshire is changing.

Chrysler may face a bankruptcy battle

30 Apr 2009

The US wants the car company to use an expedited process to get in and out of Chapter 11 quickly. The socalled section 363 approach sounds smart. But some of the company s creditors feel shortchanged and could wage a legal challenge. They have decent grounds to do so.

Ericsson’s optimism misplaced

30 Apr 2009

The Swedish telecoms equipment maker sounds more positive than its rivals. But there s little reason. Operating cash flow is negative and Sony Ericsson, its lossmaking mobile joint venture, needs cash. Investors are right to be spooked by Ericsson s willingness to stump up.

BNP gets Fortis – plus risk of government meddling

30 Apr 2009

After more than six months of legal skirmishes, BNP Paribas finally has the goahead to buy its troubled Belgian peer. The Belgian and French governments are each going to own a sizable chunk of BNP s shares. The French bank gains in size, but may lose some of its independence.

Independent M&A shops face overcrowding

30 Apr 2009

Boutiques have risen from the ashes of Wall Street giants, while established midsize firms are exploiting the bulgebracket backlash. Demand for independent advice may be rising. But results from Lazard and Evercore suggest it may still be too small to feed that many mouths.

Fiat goes all in with Chrysler

30 Apr 2009

The Italian car maker has pulled off a remarkable coup. In exchange for noncash bits and bobs, it has secured a path to control the US car company after its bankruptcy. But running a sprawling car maker is difficult just ask Renault s Carlos Ghosn.

Colgate outshines P&G in battling downturn

30 Apr 2009

Both consumergoods groups saw quarterly revenues fall. But because of a more discretionary product mix, P&G took a bigger beating. And as Colgate was more aggressive in trimming costs, it teased out a 9% rise in profit making it look more capable of weathering the recession.

Markets infected by confidence pandemic

30 Apr 2009

European stocks have erased this year s losses. US Treasury yields are above 3%. Killer flu? No worries. Negative growth? Not for long. A kind of flight from safety is underway. It shows the medicinal power of monetary and fiscal injections. But painful side effects will follow.

Yahoo needs more than reconstructive surgery

30 Apr 2009

New boss Carol Bartz is already making her mark on the struggling internet giant. She s cutting back and selling off dormant units and trimming workforce fat. But that alone won t be enough to turn Yahoo around. Change is good, but Bartz needs to give the company a mission.

Chrysler holdouts should keep fighting Obama’s cramdown

30 Apr 2009

It s politically expedient to blame recalcitrant hedge funds for forcing the carmaker into bankruptcy by not accepting 33 cents on the buck. But treading on their rights as secured creditors is bad for capitalism and may hamper Obama s exit strategy from Bailout America.

SocGen’s Bouton yields to scapegoat status

29 Apr 2009

The French bank s longstanding chairman has quit, citing personal attacks on him since last year s Kerviel trading scandal. He made a few mistakes recently. But he seems to have realised that his position was untenable amid pervasive Boutonbashing endorsed by President Sarkozy.

Big Spanish banks weathering the storm

29 Apr 2009

The domestic economy is in serious trouble and Latin America is weak. But relatively prudent lending and wide margins have kept Santander and BBVA well in the black without relying on trading profits. Conditions are getting tougher, but the Spanish still look relatively strong.

Forward start agreements ease credit woes

29 Apr 2009

ArcelorMittal, Telefonica and Reed Elsevier all recently extended loan maturities by paying lenders a higher fee and margin. This nifty way to bypass troubled syndicated loan markets and lockin future funding is taking off. But despite the fees, lenders share some pain.

Outcry at EU hedge fund rules is overdone

29 Apr 2009

Europe s proposals for regulating hedge funds and private equity firms sensibly focus on disclosure and give local regulators latitude in implementation. Plans for minimum capital requirements need more thought. But the blueprint is a reasonable starting point for debate.

Obama has what he needs to restructure Chrysler

29 Apr 2009

With banks holding 70% of Chrysler s secured debt agreeing to the Treasury s 30 cents on the dollar offer, the reorganisation can move ahead. Of course, with the other 40 lenders still willing to fight, it means Chrysler is hardpressed to avoid bankruptcy.

BofA boss Lewis rightly stripped of chairman’s title

29 Apr 2009

Despite the parochial hoopla of the bank s AGM in Charlotte, a resolution to separate the chairman and CEO roles received enough support for the board to act. But naming a lifelong academic to oversee the domineering Lewis looks like a fig leaf.

ArcelorMittal set to get mid-crisis $3bn

29 Apr 2009

Demand looks strong for the giant steelmaker s share and convertible bond offer. It needs the money after the first quarter left it burning cash. The steel industry is in bad shape, but investors trust the Mittals optimism, despite the family taking only 10% of the new shares.

Apple sets foxes loose in US smartphone henhouse

29 Apr 2009

The gadget maestro s success with the iPhone has Verizon, Microsoft and AT&T jockeying for a piece of the action. The outcome may be greater iPhone distribution, better terms for Apple or a new rival from a competitor with less of a track record. In any case, Apple probably wins.

US GDP is not as dismal as it looks

29 Apr 2009

Q1 consumption turned positive, inventories dropped and weak government spending which won t be a problem going forward depressed growth. Yes, capital investment plummeted, but the slowing decline suggests the economy is nearing a bottom. However it may stay there.