Year: 2009

Shareholder value lives on – just about

16 Mar 2009

A few years ago, many people thought companies should be dedicated solely to shareholder value understood as total return for equity holders. The crisis has shaken faith. Breakingviews writers try to sort out the wheat from the chaff.

Murdoch could be a richer man

16 Mar 2009

Even after a recent rally, News Corp trades at a yawning discount to the sum of its parts. If broken up, sold or spun off, its assets could be worth 50% more than its current stock price. But that won t happen until the big guy is out of the picture.

Opec accepts hard reality

16 Mar 2009

The oil cartel says it didn t cut production quotes because it s worried about what high oil prices would do to the fragile economy. But it hasn t delivered on recent promised production cuts. Until Opec can keep its word, it makes sense not to overpromise.

Stock market rally doesn’t look like real thing

16 Mar 2009

A 10% jump can t be sneezed at, but the stock market rallied by 20% in December, only to fall back to new lows. There are a few good signs in the financial and economic worlds, but more bad ones. Unless the stimulus plans work magic, the market is getting ahead of the news.

AIG bonuses stink – but taxpayers must hold noses

15 Mar 2009

Paying $165m in guarantees to employees involved in making AIG a ward of the US government is disgraceful. But the commitments appear binding. Still, the government can name and shame to mitigate the pain, modify behaviour and avoid a firestorm that does more damage than good.

Investors should use their sway over hedge funds

13 Mar 2009

Most investing agreements are absurdly onesided. The manager gets to dictate what supposedly suits investors hence the rampant blocking of withdrawals, which investors actually hate. Richard Beales argues it s time for investors to push for more rights.

Tactical tax surrender eases Switzerland’s pain

13 Mar 2009

The Swiss decided to concede, rather than to fight to the end, on tax evasion. Cooperation lets Switzerland keep some kind of secrecy intact, and gives the country a chance to stay in the international finance game. The G20 get a victory, but lose an easy target of moral outrage.

Bankers fight for their rights – to be zombies

13 Mar 2009

The bosses of Citi and BofA played up the impressive earnings power of their institutions. But potential asset writedowns mean they may be in for years of muddling through. That might preserve some top jobs but raises a bigger public policy question about the banks' purpose.

Investment banking survivors jockey for share

13 Mar 2009

The growth ambitions can be seen in personnel moves. Deutsche Bank is elevating the roles of its investment bank coheads as Nomura relocates the unit s chief from Tokyo to London. Trying to get bigger in a smaller world is risky but these moves at least indicate awareness.

Google presents a problem for the DJIA

13 Mar 2009

Citi and GM's nearpenny stock status may get them booted from the benchmark US stock index. Google seems a sure standin given the Dow's history of reflecting the technology of the times. But its inclusion would distort the entire index. The DJIA s structure needs a rethink.

AOL’s condition needs more than a great doctor

13 Mar 2009

The former internet highflier has hired hotshot Google sales boss Tim Armstrong. That suggests a spinoff from Time Warner is near. The separation can't hurt, but Armstrong will need some luck or magic in addition to his skills to get the fading AOL off its deathbed.

Done deals could be undone by US regulators

13 Mar 2009

With fewer acquisitions to investigate, US antitrust watchdogs have time on their hands. They also have the backing of a more interventionist administration. Don t be surprised to see some revisiting of mergers like CVSCaremark or WhirlpoolMaytag.

Personal View: Tony O’Reilly shouldn’t be the end of an era

13 Mar 2009

The departing Irish media baron entered the industry when newspapers still thrived. He leaves as little more than a gentleman proprietor, subsidising a lossmaking title. Michael Prest argues for successors in that role.

Swiss devaluation need not spark trade war

13 Mar 2009

Switzerland has sold francs to weaken its currency. The precedent sounds frightening. In a growthhungry world, are competitive devaluations back? They needn t be. The Swiss problem is unique safe haven status has made the franc too strong. Imitation is not recommended.

Beware the flight of capital

13 Mar 2009

A coordinated global stimulus may very well revive demand. But it will also funnel capital away from emerging markets at an alarming rate. The world should heed the US s call for a much enlarged IMF safety net. Without it, many of the gains from stimulus would be lost.

Enel’s E8bn cash call more than enough

12 Mar 2009

The Italian utility plans to raise up to E8n in a rights issue, probably more than it needs to keep its A credit rating. It also plans to squeeze dividends, sell assets and cut capex. In these turbulent times, erring on the side of caution makes sense.

One-size stimulus for all doesn’t make sense

12 Mar 2009

The US idea that every G20 country government should pump 2% of GDP into the economy is impractical and wrong. Sure, some EU members could do more to fight the recession. But Europeans are right to point out that their generous welfare states are powerful antislump weapons.

GE downgrade guts rationale for finance unit

12 Mar 2009

It just lost its tripleA rating, a big reason for keeping its industrial and finance arms together. This shouldn t affect its financing cost markets have ignored the rating for some time. And its customers should still be able to get financing from GE Capital after a split.

The mega-rich are still very much with us

12 Mar 2009

The market crash cut the number of billionaires on the Forbes list by 30% in a year, and sliced $2 trillion off their paper net worth. But outside of Russia, the world s moneypower group hasn t been changed that much. The foundations of most great fortunes still look solid.

Unfashionable monetary policy strengthens Brazil

12 Mar 2009

At 11.25%, Brazil s shortterm interest rate is still over 5% in real terms. That gives it massive room to stimulate its economy further by monetary means. Brazil has shared other countries fate during the global decline, but its recovery should be quicker and more robust.

Would Augustine have approved of giant stimulus?

12 Mar 2009

The saint s prayer for chastity, but not yet is often cited as a model for big government borrowing now with a firm promise of frugality later. But the bishop of Hippo had something quite different in mind. More like the sooner the better . That might be good fiscal advice.

Tiny tax havens put squeeze on G20’s big fish

12 Mar 2009

Liechtenstein and Andorra have bowed to global pressure to help stop tax evasion. That leaves the likes of Switzerland and Singapore in the path of crusading world leaders. The next question is what the capitulation really means for the rich and the places they stash their cash.

Hard times make China look, well, normal

11 Mar 2009

Plunging exports pushed the country s economy almost into balance in February. That may not last. But it s an encouraging view of what China could look like were its Rmb4 trillion spending spree deployed wisely and a grim view of where that would leave its neigbours.

Obama wants to make IMF belle of the G20 ball

11 Mar 2009

After being snubbed by US policymakers for years, it now finds itself key to Obama s international economic recovery plans. The US wants to stuff its coffers and even wants it to name and shame countries that it deems too stingy with stimulus. It s a big reversal of fortune.

Obama himself must draw line under bank crisis

11 Mar 2009

As long as Washington dithers on getting the banking system working, other economic initiatives are likely to be futile. The precise terms of the rescue are important, but what really matters is being able to declare credibly that the crisis is over. Obama must take the lead.

UK’s lack of trade and goods makes recovery hard

11 Mar 2009

British manufacturing output plummeted in January back to the levels of twenty years ago. The shortage of manufactures is a problem hampering a UK recovery. The slump in the global economy makes the task harder still. The rebalancing has hardly begun.

G20 must keep trade on the agenda

11 Mar 2009

Global trade has so far fallen a third of the way towards the 65% drop seen in the Great Depression. Whether the problem is scarce finance, inventory backup or weak demand, arresting the decline is a component of economic recovery the industrialised nations need to pursue.

Scandal of a century ends with a whimper

11 Mar 2009

That s it move along nothing to see here. Madoff will plead guilty and go to jail. No riots, no riveting trial just a sad old man in a Barney s trench coat checking into a correctional facility. Madoff was a brilliant fraudster, but he s proving a colourless villain.

Ebay’s future lies in payments not auctions

11 Mar 2009

The company's analyst day made clear that future growth will come from Paypal. While its core marketplace expects flat sales, Paypal's revenues could double over the next three years. A spinoff would let shareholders reap the full benefit.

Are funds of funds on the way out?

10 Mar 2009

The hedge fund middlemen thrived in the good times on investor demand, extra leverage and claims of due diligence skill. But assets declined around 30% in 2008 faster than hedge funds and that was before the Madoff scandal sank in. Many could, and probably should, disappear.