Year: 2009

Freescale suit could dim hope for debt-laden LBOs

27 Mar 2009

Senior lenders to the US semiconductor company sued it for boosting the status of unsecured creditors in return for reducing their principal, among other things. If they win, the suit could make debt swaps a lot harder further darkening the prospects for overleveraged LBOs.

Bull market looks premature

27 Mar 2009

By one definition, a 21% rise in the Dow index makes this a threeweek old bull market. The rapid change of heart might indicate that lessened financial stress will soon bring happier times. But even if panic is no longer called for, sharp profit falls could restrain enthusiasm.

US resolution scheme can’t handle global giants

27 Mar 2009

Geithner wants the power to wind down financial institutions such as AIG and Lehman in an orderly fashion. But some institutions are so multinational that a USonly scheme won t work. If this idea is to be a runner, global collaboration will be needed, says Hugo Dixon.

UK banks find strange new sort of government aid

26 Mar 2009

RBS and Lloyds will mop up some of their own junior debt at knockdown prices a move which will boost capital strength. That makes life easier for the banks dominant shareholder the UK government. But fears about what the state will do lie behind the low prices on the debt.

ICBC sale to bring in capital – for Goldman staff

26 Mar 2009

Selling shares in the Chinese bank wouldn t change the firm s capital ratios at all. But it would make a big difference to employees who are struggling to fund capital calls from Goldman s own funds. The $1bn or so of cash they re due would be a welcome relief.

Geithner’s two-tier regulatory plan looks smart

26 Mar 2009

The US Treasury secretary wants to identify banks, insurers and others that are too big to fail and make them hold more capital. There are big technical problems, but the mere threat of capital charges could help by encouraging many firms to become small enough to fail.

Value-seekers find practice harder than preaching

26 Mar 2009

Wendel and Eurazeo used to give haughty lectures on extracting shareholder value. But the two listed French investment funds have lost threefourths of their market capitalisation in a year, and Wendel s boss has just been ousted. Activists need to rethink their approach.

Weimar 1923 may have more lessons than US 1932

26 Mar 2009

The US raised taxes and shrank money supply from 1930 to 1932. But from 1919 to 1923, Weimar Germany ran deficits and bloated money supply with negative real interest rates. That sounds familiar. Then it led to hyperinflation and a depression. Expect a variation on that theme.

Banks learn the Chinese for negative strategic value

26 Mar 2009

Goldman Sachs and HSBC have earned walloping returns on their Chinese bank investments. But they seem afraid that cashing them in would prove costly in terms of lost business. They will be watching closely to see if UBS and RBS, which sold their holdings, get squeezed out.

Rio Tinto concedes Chinalco isn’t the only way

26 Mar 2009

It s reassuring that the AngloAustralian miner has a Plan B in case regulators or shareholders block its $19.5bn tieup with Chinalco. But a public discussion suggests Rio s management is privately reconsidering, especially as the Chinese put option now looks less appealing.

AIG’s derivatives janitors need a new pay scheme

26 Mar 2009

Many at the insurer s financial products arm have given back 2008 bonuses. But amazingly, they re in line for another $161m for 2009. A better deal for taxpayers would see these renegotiated at a hefty discount and paid monthly for as long as it takes to mop up the $1.6tr mess.

Italian banks brace as crisis hits home

26 Mar 2009

Italian banks have reported relatively solid results. That even goes for Unicredit, the most exposed to eastern Europe. Still, they want E9bn of state funds to bolster weak capital ratios. With the home economy slipping, they will need that to keep lending up.

Sainsbury’s gains from past weak management

25 Mar 2009

The UK retailer has reported the fastest underlying sales growth in a decade. That s not what an upscale supermarket is supposed to do in a bad recession. Boss Justin King has done a good job in part by correcting former mistakes. Sainsbury s may do even better in a recovery.

Russia set to reap benefits of reality check

25 Mar 2009

The Russian government has scrapped its former rosy budget projections and is bracing for GDP contraction this year. Yet stock markets are up along with oil prices. The economy isn t out of the woods, but the Kremlin s strict policies should help speed the recovery.

YouTube snub shows China’s desire to disconnect

25 Mar 2009

China has blocked the US video site before. But the latest clampdown is another sign of the Middle Kingdom s dwindling faith in the West s sacred cows. It wants to deal with the rest of the world, but on its own terms. Next week s G20 meeting should make for compelling viewing.

Giant bonuses alive and well in hedge fund land

25 Mar 2009

Industry icons such as Jim Simons and John Paulson can boast 2008 pay packets in the billions, according to Alpha magazine. Bull market capitalism lives on for now provided you make money for investors, are privately owned and don t take government cash.

Who wants a job at AIG Financial Products?

25 Mar 2009

The perks: low pay, no bonuses and public vilification. Career track: be the last guy to turn the lights off. Bonuses may be boomeranging back, but the staff is leaving. Let s hope, for taxpayers sake, someone s left to unwind the derivatives book.

Mervyn King’s salvo first in wider war

25 Mar 2009

The BoE governor s warning that the government can t afford another big fiscal boost should be seen as an attempt to avoid no fewer than three crises that could be looming: a fiscal crisis, an inflation crisis and a constitutional clash.

Making money off China’s addicted gamers

25 Mar 2009

Internet giant Sohu's gaming arm, Changyou, is going public. It saw its revenues grow 22fold over the past two years. But it doesn't need the cash. Government crackdowns on players' addiction and the fleeting popularity of games may be behind its timing.

US too big to fail tax looks worth copying

25 Mar 2009

Given the havoc the likes of Lehman have caused, it s sensible to regulate giant banks more tightly than smaller ones. It may even encourage the Citi and BofA leviathans to break themselves up. Other countries should follow the US lead even though their behemoths won t like it.

Faint US housing market dawn is a big global plus

25 Mar 2009

Upticks in home sales suggest the US housing market may be approaching bottom. Prices are close to their longterm average in terms of multiple of buyers earnings, and may decline only modestly further. That s good news for US banks asset portfolios and the global economy.

US super-liquidator for non-banks faces challenges

24 Mar 2009

The bosses of the US Treasury and Federal Reserve want a mechanism to shut down troubled nonbanks. A FDIClike institution sounds like a great idea. But nonbank covers a lot of territory. Different liquidation mechanisms may be needed for different institutions.

Good start by banks could mean much more

24 Mar 2009

Credit Suisse and Deutsche Bank are the latest to bring cheer about early 2009. But booming trading business today is masking tomorrow s loan provisions and regulatory capital demands. The more meaningful good start could be banks laying the groundwork for future profitability.

Exclusive: Nomura offers choice of job for life or career

24 Mar 2009

The firm has told 3,000 of its Japanese staff that if they choose continuous employment, they re effectively off the fast track. That may sound harsh, but it s a reflection of how transformative the Lehman deal has been.

Paper gold: nice idea, shame about the politics

24 Mar 2009

China s suggestion for a world reserve currency managed by the IMF is smart. It would address some of the financial imbalances that tipped the world into crisis. But China seems to be primarily motivated by friction with the US the nation with most to lose from such a plan.

Geithner plan won’t reveal fundamental value

24 Mar 2009

The US thinks pumping liquidity into toxic assets will remove the illiquidity discount depressing valuations. It will certainly drive up market prices but only by giving investors headsIwin tailsyoulose bets financed by taxpayers. Don t confuse that with fundamental value.

Moral suasion on bonuses works better than revenge

24 Mar 2009

While US lawmakers debate a vindictive and destructive bonus tax, some top executives at AIG have returned their illgotten gains. Such asceticism is becoming an international fashion. Bankers may only discover their consciences at gunpoint, but the trend is good for capitalism.

Stubborn inflation is part of UK’s impoverishment

24 Mar 2009

Markets took the unexpected rise in the UK consumer inflation rate to 3.2% as a sign of economic strength. But the persistence of abovetarget inflation merely reflects expensive imports. The pound s devaluation will help get trade into balance while making UK consumers poorer.

Newer luxury brands left stranded by receding tide

24 Mar 2009

Tiffany's latest results were better than feared. That reflects an emerging trend in the luxury world. The US retailer has a history and a solid reputation. Such brands are slowly regaining customers while newer names are struggling. That split will be reflected in valuations.

Japanese political mess threatens economic future

24 Mar 2009

Prime minister Aso is at 10% in the polls, while the DPJ s Ozawa faces a funding scandal. Both party leaderships favour 1990s Keynesian spending while their freemarketers are sidelined. Elections in September need to provide a shakeup and new policies but that looks unlikely.