Epidemics aren’t profitable enough for drugmakers 29 Apr 2009 Roche s Tamiflu is the remedy of choice for swine flu. Yet the Swiss group s experience suggests the financial rewards for producing drugs to treat deadly diseases that can spread to epidemic proportions aren t sufficient to spur companies to develop new treatments.
BofA holders should withhold support for Ken Lewis 28 Apr 2009 The CEO s botched Merrill deal, which he s tried to pin on others, pummeled the firm s stock and prompted a double government bailout. And BofA may need more capital yet. The board has failed to act. Shareholders should take matters into their own hands at the AGM Wednesday.
BP and Shell can cope with $50 oil 28 Apr 2009 Neither company is comfortable with the current price. They think at least $60 a barrel is needed to keep up investments and maintain their dividends. But both can borrow more. BP looks like the safer shortterm bet. It is growing faster and spending less than Shell.
Italian bond scandal threatens to run and run 28 Apr 2009 Italy could be brewing its biggest scandal since Parmalat. Prosecutors have reportedly seized assets from investment banks accusing them of misselling derivatives to local government. With E35bn of derivatives sold to municipalities, it s a worry for the banks and the state too.
Asian economies’ flu defences already compromised 28 Apr 2009 SARS hit Asia hard in 2003, in part because there was no warning. But even with a headsup, Asian governments have less flexibility to respond now. Stimulus plans have stretched government budgets and the recession is hurting export revenues. Antiflu measures will slow recovery.
UK likely to copy US on too-big-to-fail tax 28 Apr 2009 Having decided not to forcibly break up the big boys, the government is instead likely to impose tougher capital ratios on Barclays, Lloyds, RBS and HSBC. The US is doing the same. Such a regime is a good idea. It might even encourage giants to break themselves up.
Nikko deal marks end of Japan’s Glass-Steagall 28 Apr 2009 Sumitomo Mitsui s purchase of Nikko Cordial, if it happens, will end Japan s separation of banking and brokerage, established in the 1940s. Since primary Japanese client relationships are with banks, it may be the key to creating Japanese houses that are fully competitive.
Tech bellwether profits predict distant recovery 28 Apr 2009 Earnings season for industry giants like IBM and Microsoft was mostly a story of unexciting results and tepid guidance. Tech outperformance usually presages recoveries. When the technology Pollyannas don t believe good times are just around the bend they probably aren t.
TCI retreat hands win to critics of activists 28 Apr 2009 The hedge fund fought hard and scrappily to get on the board of CSX, the US railway group. Now a weakened TCI has bailed. Such outcomes boost those who criticise activists as shortterm profitseekers. Unfortunately, they also risk silencing legitimate shareholder concerns.
KKR’s next move could be new riff on old theme 28 Apr 2009 The US buyout firm is frontrunner to buy OB, South Korea's number two brewer and cashcow in a duopolistic market. It's like the olden days: the buyer shouldn't have to do much more than leverage it up and watch it go. But look out for some modern problems: financing and price.
Germany should just answer the E800bn question 28 Apr 2009 A leaked memo over how many risky assets the country s banks are holding has created a heap of confusion. The financial regulator says the E816bn figure being reported distorts the truth. Instead of trying to root out the leak, efforts to clear the air would be more productive.
Double bankruptcies are a warning for vultures 28 Apr 2009 US department store Fortunoff is being liquidated after filing for bankruptcy for the second time. Filene s Basement is also about to make a repeat appearance in bankruptcy court. This shows that buying failed companies, even on the cheap, isn t necessarily a bargain.
Deutsche Bank fails to swing the naysayers 28 Apr 2009 Record firstquarter debt trading and boomtime return on equity failed to sustain recent share gains. Minor disappointments on capital, equities and wealth management unnerved investors. But the bigger fear is that Deutsche can t sustain this heady pace of revenue generation.
US housing still has a way to fall 28 Apr 2009 The rate of decline in US house prices moderated in February. Great news for housinghobbled banks, right? Maybe not. Better isn t the same as good . And the cities with the worst price declines are still leading the charge downward.
Fortis holders vote with their shoes 28 Apr 2009 Belgian investors weren t content to fight a BNP Paribas takeover of Fortis in the courts. Footwear flew through the air at a shareholders meeting. It s a far cry from the sandwichgrabbing behaviour of yore. But there are better ways to express dissatisfaction.
Generali helps Agricole avoid E1.5bn writedown 27 Apr 2009 Credit Agricole and the Italian insurer have signed a shareholder pact for their combined 11% of Intesa Sanpaolo. That could spare the French bank the pain of marking its 5% stake down to market. Generali s favour allows it to ask for something in return. But when, and what?
Grübel brings some continuity to UBS shake-up 27 Apr 2009 With enough change already, UBS s new boss has chosen a familiar face to lead the investment bank. Veteran UBS dealmaker Alex WilmotSitwell should boost morale, while his cohead, a former Goldman exec, knows about fixed income. But external candidates were probably sparse too.
Is Fed stretching numbers to justify looser money? 27 Apr 2009 The US central bank has calculated the optimal interest rate based on inflation and GDP. But its conclusion minus 5% doesn t add up. The socalled Taylor rule suggests a rate around 2%. The Fed is either underrating current inflation or overrating the output gap.
Qualcomm pays $891m to secure handset toll booth 27 Apr 2009 The mobile technology firm agreed to a huge settlement in a patent suit filed by Broadcom. This certainly stings. But it strengthens Qualcomm s efforts to make handset firms like Samsung and Sony Ericsson pay substantial royalties for using its patents.
GM takes first real stab at Ch 11 – minus the name 27 Apr 2009 The teetering carmaker is slashing dealers, factories and workers, cutting brands, offering bondholders shares only and even wants the US to swap half its loans for equity. But it may still leave GM s balance sheet laden with tens of billions of dollars of liabilities.
Chinese gold rush would benefit China least 27 Apr 2009 Changing US Treasuries into gold would help Beijing undermine the dollar s dominance. But years of mercantilism can t be unwound painlessly. Big Chinese buying would drive the yellow metal s price sky high. The biggest beneficiary of a gold rally? Step forward, Uncle Sam.
Cameron protects UK from its budget folly 27 Apr 2009 One reason the markets aren t freaking out about soaring budget deficits is that investors don t think the government will last beyond next year. Meanwhile, David Cameron, leader of the opposition Tories, is banging on about fiscal irresponsibility and the need for painful cuts.
Germany wise to ignore new protectionist law 27 Apr 2009 A new law allows the government to limit foreign investments on security grounds. With the recession hitting hard and the exportdriven economy shaken to the core, the timing is terrible. Germany needs all the foreign capital it can get. And guess what: the government agrees.
Portfolio’s closure not just about gilded era’s end 27 Apr 2009 Yes, the magazine s April 2007 launch with a $100m budget and golden skyscrapers on the cover was badly timed. But if anyone had the ingredients to make it work, Conde Nast did. The financial crisis, though, accelerated the shift from printed word in ways hard to predict.
3i’s jumbo issue tests appetite for equity 27 Apr 2009 The private equity group is seeking up to £700m of equity half its market cap. Shareholders should support the move, if only because they were keen on 3i s imprudent gearing up a few years ago. And a deleveraging discounted deal could further narrow the shares discount to NAV.
Ackermann defies discarded bank CEO trend 27 Apr 2009 The Deutsche Bank boss has agreed to stick around for an extra three years. He s had a good crisis, so the continuity makes sense heading into a deep recession. But by 2013, Ackermann will have been CEO for 11 years. That s pushing it. The board should aim for change sooner.
Flu scare sets scene for anxiety through the autumn 27 Apr 2009 The chance of containing swine flu is essentially zero. The question now is how virulent it will be especially as the virus will mutate quickly over the next several months. Expect multiple waves of market panic in the runup to flu season.
Swine flu is last thing fragile global economy needs 27 Apr 2009 The virus that has hit Mexico and emerged in New York and elsewhere could hamper mobility and trade, not to mention confidence. With the economy already in the dumps, this could be a bigger blow than SARS.
European telecoms losing status as safe havens 24 Apr 2009 The old idea was that telephone service was a necessity, so operators wouldn t suffer much in a recession. Reduced expectations from Deutsche Telekom and Teliasonera suggest that is an illusion. But investors might find a modified version of the theory still holds up.
US sunshine policy leaves bank investors in the dark 24 Apr 2009 The government s white paper on bank stress tests reveals nothing new. The markets still don t know what loss estimates regulators are using for different assets or what capital levels they want. They should dispel the uncertainty and release more detail.