Year: 2009

SEC catch of Madoff wannabes is small consolation

8 Jan 2009

The US regulator has charged three alleged Ponzi scheme smallfry since Madoff s $50bn whopper missed by the SEC came to light. While it s good to see the watchdog isn t quite comatose, at less than $100m combined the three cases only highlight how the big fish got away.

Mortgage market right to prefer cash to promises

8 Jan 2009

US mortgage bonds have rallied since the Fed said it would buy $500bn of them. That seems odd they re already allbutguaranteed by the government. But with the administration issuing mixed messages about its backing, investors are right to prefer cash on the barrelhead.

Germany bites the Dresdner bullet

8 Jan 2009

The state is making another massive capital injection into the CommerzbankDresdner merger. It is proving a terribly expensive rescue for Germany and for Allianz, Dresdner's parent. But the cost of inaction could have been even higher.

BoE looks reluctant to go nuclear

8 Jan 2009

The Bank of England has cut its policy rate to its lowest level in 314 years. Yet the halfpoint cut seems designed to hold some ammo in reserve. The BoE is probably concerned about extreme fiscal loosening and a weak pound, and may want to avoid unconventional monetary measures.

Careful, Wall Street – block trades are back

8 Jan 2009

That s no surprise given companies need to raise cash quickly. But banks lost packets a few years ago by buying big chunks of stock at a discount and trying to resell them immediately. They'd better hope lessened competition makes it different this time.

Sainsbury’s King deserves kudos for turnaround

8 Jan 2009

The UK supermarket group s focus on the midmarket makes it acutely vulnerable in a downturn. But Sainsbury is proving it can pick up shoppers trading down from upmarket rivals M&S and Waitrose. Boss Justin King could well emerge from the recession with enhanced authority.

RBS has greatest need for Philip Hampton

8 Jan 2009

The City grandee has barely settled in as chairman of the UKFI government agency managing UK bank stakes. Yet he is now a frontrunner to chair RBS. It shows how few real candidates there are for the vacancy, and how much the Treasury needs a credible figure heading the bank.

Chinese banks should benefit from new investors

8 Jan 2009

Western banks have good cause to cash in some of their $25bn of paper profits in Chinese lenders. The exits may be bad for share prices, but China s banks should welcome some fresh strategic investors. Having the likes of UBS or RBS on the register isn t the boon it once was.

Merckle shows liquidity is a slippery concept

7 Jan 2009

The suicide of German billionaire Adolf Merckle, blamed on financial woes, raises a question: how could a man with E7bn of assets run aground over a mere E400m loan? A double bet on company shares may be one reason along with the difficulty of turning assets into cash.

M&A excesses produce impairment reflux

7 Jan 2009

After massive share price falls, auditors are pushing companies to take big impairment charges on assets bought in better times. Time Warner and Intel are early sufferers, making already crummy results look worse. It s not a cash charge, but a sad reminder of past overoptimism.

Financial crisis brings dark days to India

7 Jan 2009

When the chairman of Satyam, India s fourthlargest software exporter, couldn t meet margin calls, he had to admit to fiddling the books for years. It s a dire revelation from a bellwether stock in a flagship industry and a big blow to confidence in Indian capitalism.

Madoff twists knife on old-school hedge fund ways

7 Jan 2009

The habit of doing middle and back office work inhouse, especially prevalent in longestablished US funds, was already looking a bit oldhat. But Bernie Madoff s alleged fabrications, made possible by his selfcontained operation, have accelerated the march towards outsourcing.

Shorts merit same disclosure as longs

7 Jan 2009

The UK regulator is right to consider broadening disclosure of short positions. Investors should know about large shorts, just as they know about big holdings albeit for different reasons. But the FSA should set a reasonable high threshold for disclosure something like 3%.

Sarkozy wrong on state aid for car industry

7 Jan 2009

The French president wants car makers to pledge they will stop exporting jobs to lowerwage countries before they can benefit from state aid. This is the wrong approach. Boosting profitability and productivity creates jobs. In the long run, jobprotection schemes backfire.

M&S restructuring is a mixed bag

7 Jan 2009

The UK retailer's response to the recession is soso. Cutting 1.5% of the workforce and shutting 27 stores looks lacklustre. But capping the finalsalary pension is bold. With gross margins under extreme pressure, more radical steps may yet be needed.

Buzz over Bono’s Palm bet reflects tech’s woes

7 Jan 2009

The talk at this week s tech confab in Vegas focuses on Palm s new smartphone. Its success is crucial to Elevation Partners, the VC fund affiliated with the U2 singer. But more broadly, the tech market s buzz about a bet on a troubled company reflects its own sad state.

Trillion-buck US deficits may not be financeable

7 Jan 2009

Presidentelect Obama warned 13digit deficits could last years. This year s possible $1.6tr hole would be 11% of GDP. In a deep recession, that s financeable. But persistent huge deficits plus Medicare and social security outflows from 2015 risk turning Treasuries to junk.

S&P’s watchdog needs real teeth

7 Jan 2009

The ratings firm has appointed an ombudsman in its latest attempt to rebuild its shredded reputation. Such jobs can devolve into toothless PR exercises. To be useful, the watchdog must be given power to push for necessary but painful reforms, rather than just air complaints.

Enel and Acciona’s divorce is for the best

7 Jan 2009

The Spanish utility and Spanish construction company may tear up their partnership in Endesa sooner than expected. It s an expensive option for Enel, but probably the best alternative. For Acciona, it looks like a good deal all around.

Failed German auction challenges stimulus plans

7 Jan 2009

Having derided Keynesian stimulus, the German government plans to have a little go at it, although on a modest scale compared with the freespending US and UK. A failed German bond auction on Wednesday is a warning, but more for the big fiscal spenders than for Germany itself.

Big pharma could replace R&D with M&A

7 Jan 2009

The ten biggest drug makers spent more than $50bn on research in 2008. For the same amount, they could own the entire US biotech industry save the five biggest companies. It might be a better use of their cash.

What does Wall Street have against porn?

6 Jan 2009

Despite a historic drought in the IPO business, no investment bank save the Cyprus unit of a Russian bank has put its hand up to handle the $460m offering of nudie magazine Penthouse s parent. Maybe that's because the business looks a little too sexy for bankers tastes.

India’s 3G auction looks shambolic

6 Jan 2009

Successive delays, confusion on eligibility and an eleventh hour proposal to double the reserve price have marred the effort to sell third generation technology licences in the world s fastest growing mobile market. It s enough to discourage any new entrants.

Russia benefits from Ukraine gas row

6 Jan 2009

Gazprom can make a good case that Ukraine is an unreliable partner to the West and gets its own gas at a steep discount to world prices. Russia will be happy with the likely result of the latest dispute greater enthusiasm for alternative supply routes from Russia to the EU.

LyondellBasell’s failure is a lesson in bad science

6 Jan 2009

It s no shock that the chemicals firm has buckled under $26bn of debt it can no longer service. That s what happens to overleveraged cyclical companies in a downturn. But the speed and intensity of Lyondell's meltdown bodes ill for other troubled deals.

How to prevent crises: fight asset-price bubbles

6 Jan 2009

This financial crisis is far from over, but a healthy debate about how to prevent the next one has already started. Central bankers want, and deserve, more power. But for that to work, they must believe that sharp rises in asset prices show that something is going badly wrong.

Madoff victims shouldn’t hope for refunds

6 Jan 2009

The Prince of Ponzi s efforts to sneak $1mplus of jewellery to family members suggests he has a few assets. But those trinkets won t help investors hit by his alleged $50bn fraud. Even longterm, they shouldn t expect to recoup much maybe pennies on the dollar at most.

Merckle suicide gives crisis grim defining moment

6 Jan 2009

The German billionaire is not the first to take his life amid the financial turmoil, but he is the most prominent. This crisis has been a sudden reversal of fortune for many. Moreover, some emerge looking like victims of folly and that can be particularly hard to bear.

Can BofA control the Thundering Herd?

6 Jan 2009

Merrill Lynch's 17,000strong broker network was its most valuable asset. So the abrupt departure of boss Bob McCann seems a bad omen for the new owner. But, barring a major business overhaul, BofA s choice of successor Dan Sontag should keep further exits to a minimum.

Obama must avoid the protectionist tide

6 Jan 2009

China opened a new protectionist front, accusing Google of pornography. Global protectionism in the 1930s worsened the Great Depression. Obama must avoid protectionist Buy America provisions now, because the real danger may come later, if monetary and fiscal expansion fail.