Month: October 2015

The Bernie Sanders budget math

13 Oct 2015

Breakingviews estimated that the socialist U.S. presidential wannabe would spend $8 trln more over 10 years than his tax proposals would bring in. Readers questioned our figures. As with rival analyses, many assumptions are required. Some of them are laid out in more detail here.

VW scandal fuels investor fears about environment

13 Oct 2015

Shareholders managing some $1 trln in assets are pushing the biggest carmakers to disclose how emissions rules affect their businesses. The investors also want to know about the companies’ links to regulators. It’s another sign of how climate issues can sometimes take the wheel.

Rob Cox: VW needs an eight-step recovery plan

13 Oct 2015

That’s the minimum number of constituencies the $68 bln carmaker, snagged in a giant engineering deception, must now mollify to restore credibility. Customers, investors, suppliers, dealers, governments, unions, staff and ordinary people each will require a unique approach.

Barclays tiptoes back to investment bank see-saw

13 Oct 2015

Hiring ex-JPMorgan executive Jes Staley as its CEO might augur the UK bank returning to its former investment bank-led growth strategy. Trouble is, growing that kind of business in the new regulatory landscape is hard. And Barclays Capital’s returns were never that great. 

AB InBev may suffer beer-swill antitrust hangover

13 Oct 2015

The brewer’s latest deal could trip over a decades-old Supreme Court defeat for former rival Pabst. That case’s crackdown on beer mergers led to a backlash and big JVs like Molson’s with SABMiller. Since AB InBev’s bid for the latter, trustbusters seem ready to turn back the clock.

Hef’s cover-up exposes magazine industry softness

13 Oct 2015

Playboy is to stop publishing pictures of nude women and focus on journalism to try to boost sagging readership. But print industry ad revenue is down 30 pct since 2000 and competition is fierce. The notion that more men really will read Playboy for the articles could be a tease.

AB InBev must change spots to make SAB deal work

13 Oct 2015

Having won its UK rival’s agreement to merge, the Budweiser brewer now gets to put its fearsome talent for cost-cutting to work. But that may not be enough. AB InBev will need to create growth and court governments to make the $104 bln bid stack up. Those are different skills.

UK regulator will squirm at Barclays CEO choice

13 Oct 2015

Jes Staley oversaw rapid growth at JPMorgan, and the BoE pushed out another expansionist investment banker as the UK bank’s boss in 2012. But Staley will commit to Barclays’ current plan to shrink, and its traders and advisers need a leader. Signing him off will be a tricky call.      

Glencore getting smaller but maybe not wiser

13 Oct 2015

The embattled commodities trader is hacking back production in a bid to reduce its debts. The latest cut could be a fifth of its copper production. Companies with strong, single-minded leaders often choose to shrink rather than change after crisis hits. That leaves them at the mercy of markets.

Worldpay IPO justifies owners’ sale snub

13 Oct 2015

The UK payments processor has listed with an enterprise value of 6.3 bln stg. That values it at just below the sector average – about right given modest growth – and close to what bidder Ingenico had offered. Worldpay’s private equity backers were right to float rather than flip.

Dimon diaspora extends to Barclays

13 Oct 2015

Jes Staley, JPMorgan’s onetime investment banking chief, is poised to be the UK lender’s next boss. He would join a coterie of Jamie Dimon’s former lieutenants now in CEO roles including at First Data, Visa and StanChart. Staley will put the mega-bank skills to the biggest test.

Indian stock market bright spot warrants caution

13 Oct 2015

The return of sizeable IPOs is another sign Indian equities are defying emerging-market gloom. The promise of reform in the world’s fastest-growing large economy has prompted foreign investors to pile in. But high valuations leave plenty of room for disappointment.

President Bernie Sanders would dig an $8 trln hole

12 Oct 2015

The socialist U.S. candidate would shake up the economy with dramatically more government spending. But promises from free college tuition to a government health system would cost more than $12 trln over a decade – far short of additional revenue, like a Wall Street trading tax.

Sergio Marchionne revs pre-IPO Ferrari to the max

12 Oct 2015

The Fiat Chrysler boss has cranked up margins at the sports car firm, which he chairs. That could help justify a near $10 bln market cap and a bumper multiple. The need to keep the investment tank full and get the top line growing, though, may mean margins and the valuation fade.

Couch-sports on TV could be whole new ball game

12 Oct 2015

U.S. cable network TBS is starting a competitive videogame league with talent agent William Morris in a bid to build on the power of live programs. With online viewership for “League of Legends” battles already on a par with events like soccer’s World Cup, it may be a big score.

AB InBev makes an offer SABMiller shouldn’t refuse

12 Oct 2015

Budweiser’s parent has made a fourth proposal for the UK-listed brewer at some $103 bln. The cash-and-shares bid is 42 pct above SAB’s stock price before the latest approaches were made, and comes at nearly 15 times last year’s EBITDA. It is just about time to say “I do.”

EMC investors get $67 bln ticket out of trouble

12 Oct 2015

Michael Dell and others are paying $33 a share for the tech conglomerate. Sure, most of the notional 38 pct premium comes as a flaky tracking stock in EMC sub VMware. But there are no other obvious bidders and breaking up the company is a risky alternative for only slight gains.

Dell takes $67 bln EMC challenge out of public eye

12 Oct 2015

The PC maker has deleveraged since going private in 2013. That’s also how it plans to handle the disk storage firm after adding debt to buy it. A waning EMC core business, a need for revenue synergies and other twists make this another deal best tackled behind closed doors.

Deaton’s taste for reality brings economics Nobel

12 Oct 2015

Academic economists often rely on complex and unrealistic models. Angus Deaton is a master of equations, but the Princeton professor focused on people’s actual behaviour. His concern for the world’s poorest sets an excellent example for a sometimes hard-hearted profession.

EU needs better capitalised banks, not bigger ones

12 Oct 2015

SocGen and Barclays warn big European broker-dealers are being outmuscled by U.S. rivals. That’s true, but American superiority is partly due to better capital positions. Sorting this out, even at the expense of short-term competitiveness, makes more sense than easing regulation.

Hugo Dixon: European populism can be tamed

12 Oct 2015

Demagogic movements of the left and right have gained traction in most European Union countries in recent years. A mixture of competence, fairness and leadership can combat them. There are signs that the fightback is succeeding.

Credit Suisse wins first-to-the-trough equity edge

12 Oct 2015

The Swiss lender is readying a share sale as part of a strategic review. Adding 5 bln Swiss francs would suffice, but raising more means firepower for acquisitions and regulatory caprice. Boss Tidjane Thiam stands to gain from beating Deutsche Bank and StanChart to the punch.

German nuclear relief masks deeper power shortage

12 Oct 2015

Shares of E.ON and RWE jumped more than 10 pct as regulators approved the sector’s 38 bln euro nuclear provisioning. But overall prospects remain dismal. Rules favouring green energy production dent wholesale prices. Exposure to carbon-rich lignite is an Achilles’ heel. 

China index reveals economy of two halves

12 Oct 2015

Breakingviews’ refreshed Tea Leaf Index shows the world’s second-largest economy running at different speeds. A shift towards tech, services and consumer goods should make for more sustainable growth. But traditional drivers like heavy industry and construction remain weak.

Review: Steve Jobs, both man and machine

9 Oct 2015

A new Hollywood biopic directed by Danny Boyle provides a glossy, fictionalized yet revealing glimpse of the human being behind Apple’s iconic products. A recent documentary has a harder critical edge. Four years after his death, Jobs’ flawed genius defies categorization.

U.S. consumers are more than just Sunday drivers

9 Oct 2015

Lackluster jobs and GDP estimates hint at a possible bump in the recovery. Contrary to earlier suspicions, however, Americans are spending most of their cheap gas windfall, a JPMorgan think tank reckons. It means the oil price may be an even bigger economic factor than expected.

Elon Musk whistles past Tesla’s graveyard

9 Oct 2015

Apple poached engineers from the electric-car maker. CEO Musk dismissed the threat, saying: “If you don’t make it at Tesla, you go work at Apple.” His ventures are impressive, but Michael Dell and Steve Ballmer, among others, can attest to the perils of underestimating Apple.

Aggressive AB InBev risks joining sorry M&A club

9 Oct 2015

The Bud brewer is as close to a hostile bid for SABMiller as possible without formally going directly to shareholders. About half of big, unsolicited, cross-border deals eventually close. The results, however, are often disastrous, as Vodafone, RBS, Mittal and others can attest.

Peace and fiscal virtue may clash in Colombia

9 Oct 2015

An end to the Andean state’s half-century-long war with FARC rebels may cost up to $3 bln a year. Yet income from oil, its biggest export, is likely to fall by a similar amount and the economy is slowing. It poses a dilemma for a government that’s careful with the purse strings.

The Devil’s Dictionary of Post-Crisis Finance

9 Oct 2015

Ambrose Bierce wrote “The Devil’s Dictionary” a century ago, ranging acerbically across government, commerce and life. Breakingviews’ original re-use of the form for finance – in 2007, when the crisis was barely beginning – is no longer adequate. Herewith part one of the sequel.