Americas

Boeing flagship glitches look like mere turbulence

16 Jan 2013

The grounding of two Japanese airlines’ Dreamliner fleets is a warning: Boeing needs a fix to ensure a smooth future for the much ballyhooed and delayed 787. But the problems aren’t so far bigger than the Airbus A380’s teething troubles. Investors’ mild reaction seems right.

Goldman and Wall Street finally wake up on pay

16 Jan 2013

The firm led by Lloyd Blankfein gave more to investors by taking from bankers. Morgan Stanley is deferring all bonuses for top staff and should be trimming payouts. Jamie Dimon is taking a hit for the whale debacle. These are encouraging signs of a new attitude on compensation.

JPMorgan board goes soft on Jamie Dimon over whale

16 Jan 2013

The bank’s 132-page report into the trades that cost it $6.2 bln dishes out blame to several now departed managers. But it just echoes the chairman and CEO’s own mea culpa. The $10 mln docked from Dimon’s pay will sting but the board could do more, like removing one of his hats.

Don’t look to MLPs for window into IPOs

16 Jan 2013

Three master limited partnerships, one led by Carl Icahn, are poised to kick off the year’s new listings. Higher taxes on the rich make the sector more appealing to some buyers. That’s why MLPs are expanding beyond pipelines - and why they won’t reflect broad investor sentiment.

Facebook creativity isn’t too destructive yet

15 Jan 2013

The social network unveiled a new tool that allows users to find people, photos and interests more easily. It should make Facebook’s site stickier and could eat into Yelp, LinkedIn and IAC. But the search results will still be limited and there’s also no clear revenue windfall.

Digital TV revolution gets a fresh spark

15 Jan 2013

U.S. cord-cutting has been a slow migration not a stampede. However, a launch into 22 big cities for Aereo, which bypasses cable operators with broadcast channels, could nudge the herd. When mixed with the likes of Netflix, it renders traditional pay TV far less compelling.

JPMorgan risk scrutiny better late than never

15 Jan 2013

Two U.S. watchdogs have put the bank on notice over risk management following last year’s $6 bln trading loss. CEO Jamie Dimon has tried to put the episode behind him. The regulators may be late to the game, but they’re right to focus on improving how complex banks are managed.

U.S. manufacturing could use some long-term help

15 Jan 2013

Rising global labor costs have brought jobs back to America in a sign of how markets are helping. Impatient investors, however, won’t allocate the capital needed to jumpstart the sector. New proposals urging the government to invest in research and training are smart next steps.

Flu epidemic exposes U.S. risk management flaws

14 Jan 2013

The virus kills about 36,000 Americans and inflicts $90 bln of economic damage annually. While one year’s death toll is 10 times greater than all terrorist attacks since 2000, the government spends far more on homeland security. Poor resource allocation can be a hard thing to cure.

California budget shows merit of forced discipline

14 Jan 2013

Governor Jerry Brown faced a deficit crisis in 2011. Now, his 2013-14 budget achieves a modest surplus. Spending cuts and higher taxes were required by the state’s balanced budget law and encouraged by bond downgrades. Washington should learn from the former and fear the latter.

M&A machines can’t live off debt forever

14 Jan 2013

Privately held Ardagh has grown sevenfold since 2007 through deals bankrolled by high-yield investors. Now the Irish packager is buying a Saint-Gobain unit for $1.7 bln. Debt-funded M&A sprees needn’t end in tears. But Ardagh will one day need the support of equity investors too.

Fiat pegs Chrysler as most undervalued carmaker

14 Jan 2013

CEO Sergio Marchionne’s latest offer to buy a stake in Chrysler from the UAW trust sets the U.S. manufacturer’s worth at $6 bln. True, it lacks the cash and margins of Ford or GM. But it’s a purer play on a recovering U.S. market. Fiat can safely value Chrysler more generously.

Europe brings the pain for UPS and TNT

14 Jan 2013

Competition watchdogs are barking again, after killing DB-NYSE last year. A likely EU veto has led the U.S. courier to drop a $7 bln bid for its Dutch peer. TNT’s stock is down 50 pct. If the group’s strategy since its demerger has been to get bought, it needs to think again.

Wells Fargo productively bides time

11 Jan 2013

The San Francisco-based bank generated a record $5.1 bln quarterly profit even as its net interest margin tumbled another 10 basis points. Wells Fargo, like its peers, can’t lend out the deluge of deposits fast enough. It’ll be an ongoing challenge until the Fed reverses course.

Breaking debt cap is best of bad options for Obama

11 Jan 2013

He must meet U.S. obligations, and he can’t cut spending without Congress’s say-so. But some lawmakers want to stop him borrowing more. Trillion-dollar coins aside, breaching the debt ceiling is legally the president’s safest bet. That could force his critics into hard choices.

Review: Haiti’s unreconstructed disaster story

11 Jan 2013

It is three years since a massive earthquake hit the Caribbean state. A new book suggests that a multi-billion dollar international aid effort failed badly. Much of the supposed help was wasteful or even harmful. Money proved a poor substitute for know-how, empathy and trust.

Beware bond-equity rotation and focus on value

11 Jan 2013

Investors have started 2013 feeling bold. Equities are firm, bonds are weak and gold is soft. Is this the long-awaited rotation back to risk? Blindly chasing perceived switches in asset allocation is dangerous. But the value argument is there: shares look cheap relative to bonds.

Big U.S. banks have plenty to prove in 2013

10 Jan 2013

Wells Fargo aside, valuations have languished below book value. After a strong 2012 for stock markets and with Q4 reports imminent, JPMorgan and Goldman are again near that level. Getting there will be a relief rather than anything to crow over, and investors rightly remain wary.

Venezuelan political folly is a cue for investors

10 Jan 2013

Allies of ailing Hugo Chavez seem to be taking even greater liberties interpreting the constitution than expected. There’s no inauguration, caretaker government or sign of a new election. If markets truly hate uncertainty, then animus toward Venezuela should be off the charts.

Public choice theory will outlive its founder

10 Jan 2013

While Keynesians see government as an impartial economic problem-solver, James Buchanan, who died on Jan. 9, assumed public sector decision-makers were self-interested. The lessons - big government comes with big risks, and firm rules can improve behavior - are essential.