Year: 2009

Merrill-style bonus heist foiled by Commerz

18 Feb 2009

BofA lamely tolerated bonuses at hapless Merrill after agreeing to rescue the firm. But Commerz has killed Dresdner Kleinwort s pretakeover E400m bonus pledge. It s a raw deal for bankers who stuck around for a payday. But they should know best how cutthroat the business is.

US to build express train to perdition

18 Feb 2009

Fast trains are a good idea, but why is the US spending $8bn of US taxpayer money to speed gamblers journey from California to Las Vegas? The clear answer: politics. The subtler answer: bad economics. It s all too typical of how the US economy has been and is being run.

Russian cash crisis offers China great oil deal

18 Feb 2009

China s $25bn oil purchase agreement with Russia trades cash for bargainpriced oil over 20 years. That solves a chunk of China s longterm oil supply problem. Russia may be unreliable, but the deal s advantages make it well worth the risk.

US mortgage plan is well-designed

18 Feb 2009

Obama s proposed plan to reduce foreclosures pulls off a neat trick. Subsidising servicers and lenders to reduce mortgage payments minimises moral hazard and is an efficient form of intervention. This may be the best spent of all the bailout monies.

General Motors employs mother of all scare tactics

18 Feb 2009

The ailing carmaker reckons bankruptcy would require a stonking $100bn or more making the extra $16bn of taxpayers money it wants look like chicken feed. GM s logic is untested. But if it jolts all stakeholders to take the necessary haircuts, it may yet serve a purpose.

Stanford scandal creates another alpha nightmare

18 Feb 2009

Investors crave positive alpha more return than risk. Madoff and now Allen Stanford are accused of providing it the easy way just make up the numbers. The alleged frauds raise legitimate doubts about all wouldbe superior investors. Is alpha just an alphamale fantasy?

Recession favours fashion’s outsize models

18 Feb 2009

As the biannual catwalk season gets underway in the midst of global downturn, the fashion houses with the best strut are Xlarge. LVMH, Gucci Group and Richemont can still catch the shopper's eye even in this market. Lesser brands risk getting squished.

Commerz’s E3m net profit not as neat as it looks

18 Feb 2009

The German bank ended 2008 just in the black and with a 10% Tier 1 ratio, partly thanks to negligible bonuses. It s a tidy close to a terrible year. But Commerz is warning of hefty provisions this year. Further pain for shareholders lies ahead.

SocGen sees eastern Europe as glass half-full

18 Feb 2009

The French bank survived the E5bn Kerviel fraud to make E2bn in profits last year. Its domestic retail business is countering weakness in investment banking and fund management. But SocGen may regret paying such a juicy dividend if its eastern European business weakens further.

Sirius throws itself on the mercy of Malone

17 Feb 2009

The US satellite radio firm seems to have avoided bankruptcy and maintained control thanks to a $530m loan from cable magnate John Malone. But with a tsunami of maturing debt on the way and not enough cash, its independence is probably illusory.

L’Oréal finds blemishes that no makeup can cover

17 Feb 2009

Years of doubledigit earnings growth at the cosmetics giant came to a brutal end in 2008. Sales plunged in the US and customers around the world turned away from highend products. Downbeat consumers are disproving the theory that everyday luxury goods are recessionproof.

FSA looks wary of forcing insurance rights issues

17 Feb 2009

A plunging share price has bounced Legal & General into early disclosure of moves to strengthen its reserves. The UK life insurer is preparing to withstand a savage recession. But the absence of a rights issue suggests that the regulator for one is comfortable.

Investors, regulators miss the obvious on Stanford

17 Feb 2009

Regulators looked into the alleged fraud for months but only acted when Madoffspooked investors realized doubledigit safe returns on $8bn of certificates of deposit were too good to be true. Watchdogs and investors should have tripped over red flags far sooner.

Lenders should draw up naughty borrower lists now

17 Feb 2009

Trump's casino company just filed for bankruptcy for the third time. During the boom, banks overlooked big borrowers track records. They should make a list of who to shun and stick to it next time. It could also include Zell, Macklowe and a lot of US consumers.

L’Oréal finds blemishes that no makeup can cover

17 Feb 2009

Years of doubledigit earnings growth at the cosmetics giant came to a brutal end in 2008. Sales plunged in the US and customers around the world turned away from highend products. Downbeat consumers are disproving the theory that everyday luxury goods are recessionproof.

Rescues will push US debt towards crisis levels

17 Feb 2009

On base case assumptions about the costs of fiscal stimulus and the bank bailout, the US debttoGDP ratio is heading toward 70% by 2011. That s in line with tripleB rated Hungary s ratio. US Treasuries may not really be a safe haven investment.

Unicredit should look for extra boost

17 Feb 2009

The lurch in eastern European economies deals another blow to the Italian banking group. Unicredit the selfstyled first truly European bank is looking vulnerable again. A E3bn dose of capital support from Austria could help.

Santander should reconsider fund freeze

17 Feb 2009

The Spanish bank wants to limit withdrawals from a E3.2bn property fund. Rival BBVA bought holders out in a similar situation last year. A repeat now would be riskier, but would help the bank s reputation and give some small Spanish investors muchneeded liquidity.

Web 2.0 economy has further to fall

17 Feb 2009

Blogging service Twitter s latest round of financing valued it at $250m half of what it was looking for three months ago. Social network Facebook s stilloutsized value has been slashed by three quarters. Even these figures may reflect wishful thinking.

Lloyds should plan orderly exit of Blank, Daniels

17 Feb 2009

The credibility of the UK bank s chairman and CEO has been greatly undermined by last week s revelation of fresh losses linked to the takeover of HBOS. Alternative leadership could help restore confidence. But neither succession should be rushed.

Congress stimulates financial innovation

16 Feb 2009

Thanks to the 11thhour antibonus amendment to the stimulus bill, Wall Street's finest have been mobilised. Not on fixing the financial system, but rather on getting around this misguided legislation and paying back Tarp prematurely.

G7 fiddles as economy burns

16 Feb 2009

The world s leading finance ministers praised themselves for prompt and vigorous responses to the credit crunch. That is too generous. The current policies may work, but a 3.3% drop in Japanese GDP is alarming. The leaders need to consider more radical alternatives.

Hypo rescue held back by history

16 Feb 2009

A comprehensive bailout of the German lender is dragging on, even as state guarantees have surged to E100bn. While the US and UK have been quick to set aside dearly held principles during the crisis, Germany looks beholden to a scarred past. Nationalisation needn t be feared.

It can’t be that hard to find a BP chairman

16 Feb 2009

Paul Skinner s apparent withdrawal from the running to become chairman of BP should not be such a huge setback for the oil major. A proper international search should have thrown up more than one alternative candidate to the underfire Rio Tinto chairman. Here are a few names.

Rio’s China deal can and should be defeated

16 Feb 2009

There are two ways to undo the $19.5bn deal, which gives Chinalco too much power over the AngloAustralian miner. One is for shareholders to commit to their own capital raising; the other is for BHP to pay up for at least some of the assets the Chinese miner is set to buy.

Congress stimulates financial innovation

16 Feb 2009

Thanks to the 11thhour antibonus amendment to the stimulus bill, Wall Street's finest have been mobilised. Not on fixing the financial system, but rather on getting around this misguided legislation and paying back Tarp prematurely.

India dodges banking crisis, not recession

16 Feb 2009

The government has opted to leave any further economic stimulus measures to the winner of the upcoming general election. India has avoided a banking crisis but a ballooning fiscal deficit, and perhaps loss of its investment grade rating may be the cost of keeping up growth.

EU should focus on recession, not regulation

13 Feb 2009

Sure, the rules in global financial markets need to be reworked. But European leaders are wrong to try put regulation at the top of the agenda for the Rome G7 meeting this weekend. There are far more pressing matters: deepening recession and rising protectionism.

Retail won’t make Microsoft cool

13 Feb 2009

The software giant plans to open retail stores to compete with Apple s hip outlets. But its focus on software, rather than cool hardware, will make that difficult. And tapping a 25year WalMart veteran to run the scheme will do little to overturn its image as a boring monopoly.

New LSE chief needs to think big

13 Feb 2009

Xavier Rolet has a golden opportunity to take the exchange to another level. New trading venues are proving that this is a contestable business. Joining in a downturn makes it easy to slash costs. He should aim to make the LSE the most efficient platform for European equities.