Year: 2009

Obama’s honeyed words on trade may conceal a Smoot

3 Mar 2009

The US president s agenda appears to include more obstacles to free trade than incentives. New trade deals, for instance, must satisfy tough standards on workers rights and the environment. Obama s trade rhetoric may sound soothing but his practice could prove protectionist.

Letter to the editor: Bonuses

3 Mar 2009

Readers repond to Hugo Dixon's view that high base salaries are not the solution to the question of bankers' pay.

Ferretti shows why luxury and leverage don’t go

2 Mar 2009

Candover has written off as worthless its £225m stake in Italian yacht maker Ferretti. It wasn't alone in gambling, wrongly, on the immunity of the superrich to a downturn. Private equity may one day make a comeback. But luxury business won t be on the shopping list.

EU wise to shun grandiose Eastern bailout

2 Mar 2009

The EU summit turned down a proposed E180bn fund to help financially strapped eastern European countries. The more piecemeal approach it endorsed is less dramatic, but should be more helpful. The EU will pick up the tab by providing custom packages for each troubled country.

Geithner should communicate like Buffett

2 Mar 2009

The US Treasury secretary needs to be held accountable by taxpayers for using their money to subsidise AIG, Citi and the rest. Fielding questions on conference calls would seem an impossible logistical task. However, the Sage of Omaha may have a way forward.

Private equity pays for its sins

2 Mar 2009

Candover s layers of leverage have forced it to back out of its latest fund, sack staff and cut asset values by 50%. Terra Firma s hubristic EMI buy is wiping out five years of the firm's fees and causing a E1.3bn impairment. Both firms seek absolution one may not get it.

US to stump up more for expanding AIG black hole

2 Mar 2009

The struggling insurer reported a $61.7bn loss, the largest ever. US authorities aren t going to repeat the Lehman experiment with letting a key institution fail, so more losses just mean more taxpayer support. This collapse is still being badly managed.

AIG’s PR army could irk taxpayers

2 Mar 2009

The allbutbankrupt insurance giant employs four public relations firms. Private jets, golf days and lobbying are out for recipients of government rescue funds. Some taxpayers and their representatives in Congress could see PR in the same category.

PC makers face long-term decline

2 Mar 2009

The number of PCs sold this year may fall 12% according to a new estimate, and prices are tumbling. Worse still, virtualisation and the rise of ultracheap models mean PC makers' problems won t lift when the economy recovers.

BofA might need to match Citi’s $50bn equity swap

2 Mar 2009

That would put its common equity ratio on a par with its rival s. Sure, BofA has a bigger cushion against losses. But it also has a larger balance sheet, meaning, despite boss Ken Lewis s protestations to the contrary, BofA may have to follow Citi s ignominious lead yet again.

HSBC’s $18bn cash-call defensive, not offensive

2 Mar 2009

The lender suggests that its $17.7bn rights issue will help it make opportunistic acquisitions. But the cashcall should be seen mainly as plugging holes, current and future. HSBC s latest results show deterioration in the US and, worryingly, in the bank s Asian growth engine.

AIG’s toxic spill still isn’t contained

2 Mar 2009

The insurance giant got less onerous terms on its bailout package and is hiving off businesses. But even as it tries to wind down bad assets, its plans for isolating the financial products division the main source of its $99bn loss in 2008 are still clear as mud.

US stocks are cheap – if the economy isn’t broken

2 Mar 2009

With the Dow below 7,000, the market is cheap relative to its early1995 valuation adjusted for changes in nominal GDP if the prospects for growth are as good as then. But a stimulusinduced return of inflation or crowding out of investment would change the picture.

China bondholders get lesson in crisis capitalism

2 Mar 2009

The government is backing a cash boost to Asia Aluminium but only if the troubled metals group buys back its offshore bonds at a pittance. Such rough treatment could deter foreign investors into Chinese firms. But with the economy slowing, the authorities may not care.

Capital hike turns HSBC from canary to parrot

1 Mar 2009

Two years ago, the UKlisted bank s woes were an early sign of the subprime crisis. Now, it is set to raise £12bn. HSBC is strong enough to get the money without state help. But the need to follow the capitalraising crowd suggests the crisis has entered an ugly new phase.

US strong-arms SWFs to share Citi pain

27 Feb 2009

Singapore s sovereign fund and others are swapping convertible preferred shares into common stock. The carrot is, they get more Citigroup shares than they would have done. But the stick is stronger: if they don't participate, they lose their dividends. They had little choice.

Citi becomes United Nations of banking system

27 Feb 2009

Uncle Sam gets the biggest chunk of Citi. It isn't nationalisation, but fold in Singapore, Kuwait and a Saudi prince and you have a quasisovereign group controlling what was formerly the biggest US bank. This multinationalisation may not be so bad for Citi s business.

Is the third time the charm for Citi?

27 Feb 2009

The latest round of US government intervention boosts the bank's common equity, saves cash and puts more investors in the same boat. But it doesn t address lingering concerns about toxic assets and manageability. Given Citi s track record, scepticism is likely to persist.

Blackstone heralds private equity’s day of reckoning

27 Feb 2009

The firm s abysmal fourthquarter earnings and plummeting asset values reflect the wider industry s woes. But Blackstone s diverse business strategy may allow it to ride out the storm better than its rivals. That bodes ill for other buyout shops.

Are Berkshire Hathaway shares oversold?

27 Feb 2009

They lost more than 30% in 2008 and more since. Yet even in Buffett's worst year ever, the company's portfolio fell a notsobad 10%. The Sage of Omaha doesn't focus on the share price. But he says risks are now being overstated. As that corrects, the shares could benefit.

India can’t afford junk rating

27 Feb 2009

India relies less on foreign cash than other Brics, so its credit rating shouldn t make much difference. But imported capital has kept growth up. And populist politicians are likely to build even bigger deficits. A threatened downgrade to junk would make them harder to finance.

Higher base salaries not the answer for bankers

27 Feb 2009

Bonus has become such a dirty word that UK regulators are now encouraging higher base salaries for bankers. This is the wrong sort of reform. It will mess up the industry s business model. Much better to focus on linking bonuses to genuine performance and profits.

Dire US GDP figures may have silver lining

27 Feb 2009

The GDP growth revision from minus 3.8% to minus 6.2% looks bad. But while it rules out mild recession it may also rule out a 1990s Japan scenario. The US could be approaching the bottom, wherever it is. Also, banks with 4Q profits or modest losses may be stronger than they seem.

GE’s Immelt should ask the Drucker question

27 Feb 2009

In 1981 the management guru challenged then GE boss Jack Welch to ask: If you weren't already in a business, would you enter it today? Apply that now to GE Capital and the answer would be no. Current CEO Jeff Immelt should prepare shareholders for a divorce from finance.

Credit Suisse veterans could nest in Grübel’s UBS

27 Feb 2009

New UBS boss Grübel will want to stamp his mark on the bank by recruiting fresh blood. The exCredit Suisse CEO could face hostility by raiding his old employer for top talent. But that shouldn t stop him from hiring some of his former colleagues to create a trusted inner circle.

HBOS losses give clue to Lloyds’ bad-bank terms

27 Feb 2009

Lloyds has rightly delayed saying how it will use the UK government s toxicasset insurance scheme. It s not ready. But fresh detail on losses from its HBOS takeover suggest the bank will have to pay more to use the scheme, with a higher policy excess, than rival RBS.

UK’s bad bank finally looks credible

26 Feb 2009

Last month s false start sent bank shares and sterling into a downward spiral. But the government s more detailed scheme looks capable of regenerating the industry without putting too big a strain on the public finances. Barclays and Lloyds should follow RBS in accessing it.

Prop trading should survive FSA attack – just

26 Feb 2009

The UK regulator wants banks to hold substantially more capital against trading activities. That would sharply lower returns, and could accelerate the migration to hedge funds. But there should still be room for disciplined and cautious bank prop desks.

JPMorgan adds a chink of light to doom and gloom

26 Feb 2009

It slashed the dividend and boss Jamie Dimon is managing the bank for a worsening economy. But executives are also seeing tentative signs that the pace of the housing crisis may be slowing. Of course, it s one of the few banks that can afford to be both cautious and optimistic.

RBS gets recession armour-plating

26 Feb 2009

The state isn t just providing a massive £325bn insurance policy on its toxic assets. It is also injecting £13bn in new capital all on moderately favourable terms. RBS s higher core tier 1 ratio will hopefully draw a line under its agony and help it function properly again.