Americas

How many reais needed to screw in a light bulb?

12 Sep 2012

That’s what investors should ask about Brazilian President Rousseff’s plan to slash sky-high electric rates that are restraining economic growth. Power companies are being forced to shoulder most of the burden. Government can afford to pick up the tab on the next round of cuts.

Listen to Moody’s, not the markets on U.S. outlook

12 Sep 2012

The rating agency blew its credibility on subprime, but its sober take on U.S. finances is spot on, if obvious. Too bad Mr. Market is still on a bender, with the Fed ready to pour more drinks. The market’s complacency shouldn’t lull policymakers into a false sense of security.

Facebook’s stock slump could be self-reinforcing

12 Sep 2012

Founder Mark Zuckerberg now admits the social network’s IPO fiasco has hurt morale. No kidding. He hired nearly 60 pct of his 4,000 staff since the stock last traded as low as $18 a share on SecondMarket. That’s a lot of folks potentially poorer who thought they’d be rich by now.

Banks big winners from Chesapeake $6.9 bln sale

12 Sep 2012

Selling another batch of family silver helps close the gas group’s cash gap. That makes a liquidity meltdown less likely. But the broadest smiles ought to be at Goldman Sachs, which continues to get fat fees from Chesapeake’s rolling sales and will be repaid on a $4 bln loan.

Rewarding even tainted whistleblowers makes sense

11 Sep 2012

The U.S. taxman just handed $104 mln to the banker - and convict - who spilt the beans on UBS. That’s an extreme case. But retaliation against regular whistleblowers is on the rise. Offering meaningful cash rewards, including to the guilty, should help keep companies honest.

Tech IPO disaster represents epic cautionary tale

11 Sep 2012

Hollywood effects creator Digital Domain, whose credits include “Titanic” and the Tupac hologram, has filed for bankruptcy less than a year after going public. Elements of the company’s problems are shared by many other new tech stocks. It’s a case study for investor skepticism.

U.S. austerity chances hit blowback in Chicago

11 Sep 2012

Union pushback in the Windy City is to be expected but in this case it’s President Obama’s labor-loving allies standing up to a rare teacher work stoppage. That marks a political shift from recent fights elsewhere and suggests how hard it will be to slash federal deficits.

Goldman at last gets a conflicts comeuppance

11 Sep 2012

The bank forfeited $20 mln after playing both sides of Kinder Morgan’s $21 bln El Paso deal. It’s peanuts next to Goldman’s other profits from the transaction. But on the heels of Barclays and Del Monte, it warns Wall Street about skewed incentives in terms it can understand.

James Gorman edges Vikram Pandit in JV showdown

11 Sep 2012

The two Wall Street bosses were miles apart valuing the joint wealth management unit Morgan Stanley is buying from Citi. The agreed $13.5 bln valuation is a bit nearer Gorman’s number. More significantly, he now knows the price he’ll pay for the whole of Citi’s 49 pct stake.

PXP’s $6.1 bln BP/Shell deal quacks like an LBO

10 Sep 2012

The $4.7 bln U.S. oil minnow is leveraging up to buy Gulf oil fields from the two majors. Asset sales and cash flow should cut debt within a few years. But shareholders will come second until lenders are happy - and there are operational risks too. No wonder PXP’s stock tanked.

U.S. Congress oddly keen to undermine own power

10 Sep 2012

Tough as lawmakers are finding it to pass any laws, a new bipartisan effort would empower the president to delay the effects of some that do pass. That seems a recipe for even more uncertainty about, say, new financial regulations. Worse, it allows legislators to pass the buck.

AIG anniversary deal merits cupcake not champagne

10 Sep 2012

The U.S. Treasury is ceding control of the insurance giant four years after its $182 bln rescue, a cause for celebration. Uncle Sam should net a profit on a planned sale of $18 bln of AIG shares. But exuberant political messaging would create the wrong impression about bailouts.

Santander can teach Citi the art of breaking up

10 Sep 2012

The notion of a Spanish bank instructing the rest of the world on anything may sound, well, loco at present. But Santander’s methodical IPOs of operating units, the latest due in Mexico, present a reasonable model for an undervalued colossus like Citi to consider.

Obama job adds match Bush, Clinton but not Reagan

7 Sep 2012

Thirty months after the U.S. nadir, employment is a bit over 3 pct higher. That’s in line with the post-recession record of the last 2-1/2 presidents - but far short of Reagan’s 10 pct. The August picture was also mixed: both presidential hopefuls, and the Fed, get talking points.

U.S. political jamborees alienate Mr. Market

7 Sep 2012

The stark contrasts in tone at the Charlotte and Tampa conventions mirror the different options facing Americans. Republicans and Mitt Romney served up fiscal spinach while Democrats and Barack Obama dangled pro-worker red meat. Neither choice is likely to thrill investors.

U.S. insider trading cops win battles, lose war

6 Sep 2012

Nabbing the likes of Raj Rajaratnam hasn’t slowed investing on leaked secrets, new research shows. The practice may still be too lucrative and easy to hide. But with other nations also cracking down, the U.S. could lead the way with clearer laws and more consistent enforcement.

Chavez’s cash pump PDVSA runs on empty

6 Sep 2012

Venezuela’s troubled oil group may now pay suppliers with IOUs instead of cash. That’s not surprising because Hugo Chavez is using PDVSA to finance social spending ahead of elections. Harder to imagine is what happens when oil prices decline from today’s lofty heights.

Investor ignorance and complex markets mix badly

6 Sep 2012

An SEC study reveals financial illiteracy, but is short on ideas. Most everyone should learn about compounding, how debt differs from equity, and simple risks like inflation. Even then, modern markets are daunting. Maybe investors need a road test to move beyond basic products.

U.S. leaders could learn from European austerity

6 Sep 2012

America is coming late to fiscal reform, following allies across the Atlantic. Noting the continent’s flubs and fixes would help either Barack Obama or Mitt Romney tackle a debt load that just surpassed $16 trln. Waiting too long may give investors time to make a new choice.

How to stop Basel bank safety net becoming a noose

6 Sep 2012

Global regulators are racing to agree tough reforms to prevent bank funding crises. Overly loose rules won’t be trusted, but overly prescriptive ones could choke credit to the real economy. A solution is possible. But supervisors have to avoid inflating the next bubble.