Year: 2009

Bank of England cuts but shuns US activism

5 Feb 2009

The UK central bank cut its interest rate to a new record low of 1%, but avoided mentioning USstyle quantitative easing . The BoE may feel the standard medicine will cure the patient, and fear the risks of unconventional treatment especially as the fiscal deficit soars.

Deutsche’s losses don’t shake its confidence

5 Feb 2009

The fourth quarter loss of E4.8bn was preannounced, so there were only a few negative surprises. CEO Ackermann admits some weaknesses in the model, but insists the bank can get through the crisis without new capital. Delivering that in a deep recession won t be easy.

Buffett squeezes a discredited Swiss Re

5 Feb 2009

The guru investor has secured cute terms for injecting SFr3bn into the Swiss reinsurer after shock losses. No wonder he is content to champion its management. But shareholders, who face a rights issue, shouldn t share Buffett s faith in executives who spring nasty surprises.

Mexican growth should mimic US – without stimulus

5 Feb 2009

The central bank s recent support for the peso was unsurprising the price of its main export has fallen two thirds. Nevertheless the country should get close to the dismal US economic performance in 2009 and that s with oil prices down and no stimulus on offer.

Evercore offers cautionary tale for wannabe boutiquers

5 Feb 2009

Advisory specialists may look appealing in downturns Greenhill has weathered the storm well. But high costs and a struggling money management arm led to an $8.5m Q4 loss at Evercore hardly calamitous, but a timely reminder that boutiques aren t a bed of roses, either.

Kremlin’s fiscal tightening risks social unrest

5 Feb 2009

The government s piggy bank isn t empty, but there are not enough reserves left to shore up an ailing economy while oil prices are low. So the authorities are reverting to tough fiscal discipline. But in a deep recession, sharp spending cuts could prove politically explosive.

SEB dodges state aid with DIY capital fix

5 Feb 2009

Two days after Sweden bolstered its bailout fund, the Scandinavian bank has said it plans to raise SKr15bn from its own shareholders. SEB s problematic Baltic operations will keep getting worse. But the bank s new capital strength and willing shareholders should allay the pain.

Moody’s results reflect intractable rating system

5 Feb 2009

The firm managed to beat estimates despite frozen bond and securitisation markets. That its core business didn t shrivel further shows how deeply its ratings are embedded in the financial system a problem for competitors and reformers alike.

Bluffing game begins for Baugur

5 Feb 2009

The Icelandic group probably can t hold onto its sprawling retail empire. Its main lender Landsbanki claims not to want a quick fire sale, but has its own creditors to appease. UK tycoon Philip Green and private equity groups will surely call the bluff.

Tarp’s $78bn value shortfall casts pall on bailouts

5 Feb 2009

The Congressional oversight panel for the US Treasury s bank bailout scheme says the government massively overpaid for bank preferreds and warrants. With legislators already sceptical, this bombshell could make Obama s new bank rescue scheme a much harder sell.

New boss takes knife to Alcatel-Lucent

4 Feb 2009

Four months into the job, chief executive Ben Verwaayen is writing down the value of the telecoms equipment maker by E3.9bn. It s an acknowledgement of the disastrous 2006 merger. But as the group finally turned cash positive, investors are cheering Alcatel s caution.

Obama’s populist pay limit courts disaster

4 Feb 2009

Voters will cheer a $500,000 salary cap for bosses of corporate wards of the state, although it could make troubled companies worse. Obama should use the support he wins for one simplistic idea to combat a worse one protectionism. If not, recession could turn into depression.

Inflation is not the solution

4 Feb 2009

Some pundits are advocating a policy of deliberately creating inflation in order to reduce the real value of the world s debts. Even if the supposed cure worked a big if it would deter longterm saving and damage capitalism s moral underpinnings.

Don’t trust green shoots of banking recovery

4 Feb 2009

Banks in Russia, Abu Dhabi, Sweden and Ireland are the latest to receive state injections, tallying $27bn. Further rescue efforts are on tap from the US, UK and Germany. Investors seem to be embracing the latest aid as a turning point. But the bottom may be another crisis away.

Lazard shareholders’ optimism looks well placed

4 Feb 2009

A jump in restructuring income helped drive up the Wall Street firm s stock. True, the business has never accounted for much more than a fifth of total revenue. But if it enjoys the same growth as in the last recession it could surpass that and even replace declining M&A fees.

Private equity should play role as bank saviour

4 Feb 2009

Buyout bosses may be increasingly vilified as portfolio companies shed jobs or go bust. But if they begin to swoop in to save troubled banks, it could do wonders for their reputations. That s possible if the prices are right but governments shouldn t give too much away.

US pay cap is dangerously blunt instrument

4 Feb 2009

The president is right to want to constrain pay while taxpayers are on the hook. But to avoid an exodus of talented executives, Obama should consider more flexible methods than a straight $500,000 cap. One might be to let banks pay more, but only if they also repay taxpayers.

Obama’s re-regulation should avoid stimulus errors

4 Feb 2009

Like the $900bn scheme winding through the US legislature, the president s plan to improve financial regulation threatens to fall victim to political interests and expediency. He needs to ensure that not only are good policies embraced, but bad ones avoided.

BA and Iberia ought to find common ground

4 Feb 2009

The UK and Spanish carriers want to merge. But BA s shrinking market capitalisation has complicated discussions over the exchange ratio and governance. A deal that gives BA 55% of the company and clear management control would make sense for both sets of shareholders.

Google’s mobile locator not as barmy as it sounds

4 Feb 2009

Tracking people by their cell phones may seem like an invasion of privacy. But like other jazzy inventions, this one could have some practical applications. And even if those don t pan out, it s another sticky way for Google to bring in the eyeballs.

Personal view: Stimulus may bring bounce, then longer downturn

4 Feb 2009

Recent data suggest the global economy may be set for a bounce. That s a response to the record stimulus applied by governments in the US and elsewhere. Longerterm, however, such policies may prolong the recession rather than end it, raising its overall economic cost.

Glencore takes upper hand in Xstrata’s cash call

3 Feb 2009

The two hardnosed mining firms have thrashed out a complex deal where Xstrata can raise $6bn without its biggest shareholder putting up any cash. Both sides sport battle scars. But Glencore has just about come out on top.

Goldman should be losing more sleep

3 Feb 2009

The investment bank used to say fastgrowing Bric countries could sustain world growth even if the US tripped up. Risks were downplayed. Now that the crisis has broken the dream, Goldman is calling for megadoses of policy stimulus. And guess what? The risks are downplayed again.

Strike contagion poses threat to Europe

3 Feb 2009

Tensions created by unemployment are taking the foreground in much of Europe. Globalisation is under attack and industrial action is rising. As the recession bites, the risk of diverse local grievances spiralling into nationalistic reactions should not be underestimated.

Think the price is right for buyouts? Think again

3 Feb 2009

Company valuations have tumbled. Steve Schwarzman says it s time to buy. But some private equity experts differ. They worry that prices may go lower and that debt and equity funding are scarce. The riskaverse mindset could see buyout shops on the sidelines for a while yet.

The pound’s travails are not over yet

3 Feb 2009

Sterling could well fall close to one US dollar in coming months, just as US investor Jim Rogers predicts. Some of the capital that has come into the UK is flowing out. But a recovery will come after the decline. Rogers is wrong to say the UK and its currency are finished .

IMF’s stimulus prescription wrong for Asia’s woes

3 Feb 2009

Asian economies have suffered because of sharp declines in trade due to the financing crisis and weak Western demand. Most Asian countries should increase domestic consumption. However their problems won t be solved by adding stimulus packages that bloat the public sector.

What’s up with US taxes?

3 Feb 2009

No fewer than three of President Obama s nominees for senior jobs in his administration have confessed to underpayment of personal taxes. This reflects badly on them but also underlines the need for a simpler tax code that doesn t foster tolerance of errors, deliberate or not

Harley fills up the tank with pricey Buffett fuel

3 Feb 2009

The billionaire has added the motorcycle maker to Berkshire s shelf of iconic American brands. He s buying half of Harley s $600m unsecured debt offering. But rather than Buffett handing over a trophy price, Harley is paying the premium for his vote of confidence.

Could a cure for bank crises be found in Singapore?

3 Feb 2009

Much attention has rightly been given to how bankers incentives encourage excessive risktaking. But too little has been paid to the incentives of those who regulate them. Singapore, which rewards its public servants handsomely, offers a good model.