Year: 2009

Stock market fall brings pensions back to reality

9 Apr 2009

Booming stock markets seemed to make the pension challenge look more tractable. That s over now. But the hope was always vain. The political pension choice the right income split between workers and pensioners can t be dodged with high investment returns, says Edward Hadas.

Low recoveries from junk defaults aren’t so scary

9 Apr 2009

Recouping less than 20% of face value half the norm amid rising bankruptcies sounds frightening. But it's in line with other downturns. And junk bond prices are low. Investors who think the worst of the credit crunch is over should consider indulging in a little greed.

WFC Q1 hints crisis, if not downturn, may be over

9 Apr 2009

Calling the end has been an exercise in painful futility. But Wells Fargo cranking out $3bn in earnings despite more writedowns and reserves is encouraging. Of course, even if the banking crisis is over the worst recession in decades will bring more pain.

Berlusconi wisely changes tack on disaster aid

9 Apr 2009

The Italian prime minister initially turned down foreign offers of aid after the Abruzzo earthquake. Now he is accepting support for reconstructing cultural treasures. That s a prudent Uturn, both for the disaster survivors and for the wider economy.

ING revamp points the way for other banks

9 Apr 2009

The Dutch bancassurer has redoubled its effort to derisk and simplify. It will move from six lines of business to two: bank and insurance. In what s left, the slogan will be back to basics . The era of excessive complexity is over, and not just in the Netherlands.

Germany tries tactical gamble in Hypo rescue bid

9 Apr 2009

The state s bid for the struggling realestate lender is priced higher than the legally prescribed minimum. But will recalcitrant shareholder JC Flowers sell out? It may not matter. The government could get enough shares to force a capital increase that squeezes Flowers out.

Letter to the editor: Naked short sales

9 Apr 2009

Jonathan Johnson, president of US online discount retailer Overstock.com, responds to Dwight Cass's article on short selling, and argues that more must be done to solve the problem of manipulative naked sales.

Chávez gets China wrong by about thirty years

9 Apr 2009

In Mao s day, the Venezuelan president could have shared his revolutionary talk with comrades from Albania and North Korea. Now, Beijing s power politics is nonideological. China still likes dealing with widely shunned leaders, but only because it sees the potential for profits.

Pernod Ricard opportunistically cuts debt

8 Apr 2009

The French spirits maker is raising more than E1.4bn with a rights issue and the sale of its Wild Turkey bourbon whiskey. Why? Because of its toppy acquisition of Absolut Vodka in 2008. At least Pernod is among the first European corporates to be tapping shareholders to cut debt.

US bank regulator OTS deserves dismantlement

8 Apr 2009

Financial regulators spent the years leading up to the crunch in a race to the bottom. The Office of Thrift Supervision which oversaw Countrywide, WaMu, Indymac, and AIG is the clear winner. Robert Cyran explains why closing its doors would be a good first prize.

Capital flight may try Indonesia’s resolve

8 Apr 2009

Indonesians have reasons for high spirits as they go to the ballot box on Thursday. They ve been spared their neighbours tradeinduced misery. But the risk of foreign lenders pulling out looms large. Indonesia can weather that storm, but not without some unpopular decisions.

Rio Tinto price-cut chatter is embarrassing

8 Apr 2009

Reports the mining group offered Asian customers a 20% temporary price cut look bad just when Rio is schmoozing China for $20bn of new capital. The reality is probably more benign but it shows the minefield Rio faces in cozying up to its biggest customer.

Private equity can’t escape fat cat label

8 Apr 2009

The European Commission is mulling proposals to regulate alternative assets together. Private equity argues it should be treated separately, and more kindly. But the industry was happy enough to be called alternative when the going was good. It s too late to change spots.

Politics of short-selling tests US watchdog

8 Apr 2009

Lawmakers and pundits are calling for reinstatement of the uptick rule or some variant. The SEC has now floated new proposals. Its board is aware of the dangers but it caved to pressure to temporarily ban shorting last year. It needs to stiffen its resolve this time around.

Irish government bows to inevitable on banks

8 Apr 2009

The state has spent over six months trying to avoid nationalising its stricken banks. Now it will take up to E90bn face value of assets in a new bad bank . That should get banks back in business. But the process is almost certain to lead to the state taking majority stakes.

Merkin kicks three-headed dog while it’s down

7 Apr 2009

Cerberus s entire $7bn investment in Chrysler looks lost, and GMAC is hardly a model of health either. To cap it all, Ezra Merkin the investor accused of Madoffrelated fraud had more than $700m with Cerberus. It's one more potential headache for the buyout firm.

Japan’s stimulus risks worsening its recession

7 Apr 2009

For believers in fiscal boosts, Japan is a paradox. With no bursting bubble and relatively larger stimulus plans than the US, it still has a deeper recession. It could be that public debt at 175% of GDP is suffocating private investment that might otherwise restore growth.

Some Russian companies are more equal than others

7 Apr 2009

Gazprom, for example. The debtladen Russian giant has agreed to buy out Eni's 20% stake in Gazprom Neft for $4.2bn. The Italian oil major bought in two years ago when former oil major Yukos was broken up, under state pressure. Where will Gazprom get the money? From the state.

Is Lloyd Blankfein the new J.P. Morgan?

7 Apr 2009

That s a stretch. But the Goldman CEO s latest speech and his defence of fair value accounting could yet see him reluctantly stepping out of his firm's shadow to join a few credible leaders into something like the role Morgan played in steadying the Panic of 1907.

Tchenguiz’s gloomy milestone in pub securitisation

7 Apr 2009

Securitising UK pubs was de rigueur in the boom. But declining interest in oldstyle boozers has accelerated in the credit crunch. Supposedly secure cashflows are now anything but. Globe, run by tycoon Robert Tchenguiz, is the first to break covenants. It won t be the last.

A window briefly opens for equity issuance

6 Apr 2009

HSBC s $18bn rights issue was a success. Two Chinese IPOs have prospered, and even defiant Rio Tinto is mulling a share issue. Instead of draining capacity, HBSC may have inspired confidence. The recent market bounce could create a slim opportunity for other issuers to follow.

Banks face painful end to liquidity life-support

6 Apr 2009

Central banks can t provide emergency liquidity to the banking sector forever. But liquidity regulation is needed as the life support ends. A framework is due by 2010. Expect it to force banks to raise deposits and tie up assets in lowyield, liquid securities, says Chris Hughes.

Canary Wharf debt buyback could buy Songbird time

6 Apr 2009

The UK property group is buying back some of its debt at a discount. The accounting treatment could help Songbird, its highly indebted majority owner, avoid a covenant breach. It sounds like a neat plan for everyone. But Canary Wharf s minority shareholders might think otherwise.

Merkin should have listened to old fox Teicher

6 Apr 2009

Ezra Merkin, whose funds invested heavily with Bernie Madoff, is facing allegations of fraud. If only he d listened to excon Victor Teicher. Teicher long ago served his time, but he was alert enough to dodgy dealing that he seems to have warned his former associate off Madoff.

UK seems close to fiscal U-turn

6 Apr 2009

Only a few weeks ago Brown was telling other governments to spend more. But that was before he realised his own budget deficit would be a scary 11% of GDP. Austerity comes next. That s no fun, whether it comes as higher taxes or lower spending. Inflation may be more tempting.

Speculators likely to face tougher regulation

6 Apr 2009

Buried in one of the papers published as part of this month's G20 summit is a suggestion that certain investors access to credit should be more tightly controlled. That could hit hedge funds, prop traders and the next generation of oligarchs during the next upswing.

Eurozone doesn’t need new member troubles

6 Apr 2009

The IMF suggests that Eastern Europe would benefit from a speedy adhesion to the euro. That s doubtful, especially with eurozone authorities already struggling to keep fiscally troubled members in line. Expanding in a hurry would weaken the euro, but not help Eastern Europe.

Countercyclical capital risks becoming a ratchet

6 Apr 2009

It s all very well to jack up bank capital ratios in good times. But how easy will it be to lower them when the next crisis hits? Countercyclical capital is one of the G20 s big ideas for preventing future bubbles. But it could cause damage unless it is presented well.

Merckles will take pain of HeidelbergCement’s mistake

6 Apr 2009

The German cement group overpaid for UK rival Hanson at the top of the cycle. Now Heidelberg is straining under E12bn of debt. The controlling shareholder, the Merckle family, has its own debt woes. Banks may be lenient, but the family look set to lose control.

G20 gives China what it wants, not what it needs

6 Apr 2009

The world's top nations have started to acknowledge Chinese policy. And China will welcome the G20sponsored boost to world trade, even if it could encourage too much reliance on exports. But the G20 made no progress on a key issue for China: unwinding the global trade imbalance.