Americas

Nasty Petrobras surprise won’t be its last

6 Aug 2012

The Brazilian oil giant’s first quarterly loss in 13 years reflects harmful state meddling. President Rousseff seems happy for Petrobras to miss production targets if fuel prices stay low. Big well writedowns may help reset expectations, but policy damage will be tough to gauge.

Itaú’s aims would be badly served by Citizens

6 Aug 2012

The Brazilian bank has been tipped as a possible buyer for the U.S. retail arm of RBS. While Citizens might come cheap relative to Itaú’s own valuation, competing in a saturated country with the likes of Wells Fargo and BofA would be unwise. Better to stick with emerging markets.

Best Buy bid looks about as shaky as its target

6 Aug 2012

Richard Schulze, the U.S. electronics chain’s founder, wants to take it private for up to $8.8 bln. His 20 pct Best Buy stake adds credence to the offer, but financing and backers remain elusive. And given where it’s based, going hostile for the embattled retailer could be tough.

Knight makes most of an abysmal situation

6 Aug 2012

The $400 mln rescue underscores the painful cost of its trading debacle and dilutes existing investors. But the saviors CEO Tom Joyce assembled include a good mix of rivals and clients. That should give him scope to rebuild Knight without having to bow to a rapacious cabal.

BYD caught in two Chinese economic traps

6 Aug 2012

Warren Buffett bought into the automaker, but insiders are now selling amid falling profits. BYD expanded too fast after Beijing’s 2009 stimulus. The downturn is hurting its mostly low-end customers. Besides, a fatal tragedy has reinforced the Chinese love of foreign brands.

Bank breakups – a guide for the perplexed

3 Aug 2012

Sandy Weill created the Citigroup financial supermarket in 1998 by calling the bluff of U.S. lawmakers and ignoring the Glass-Steagall Act, which limited what banks could do. Washington soon repealed the law. Now, Weill says big banks should be broken up. What gives?

What hedge funds share with rock’n’roll festivals

3 Aug 2012

Not a lot, at first sight. But both are subject to the law of large numbers. Festivals like this weekend’s Pickathon are limiting entry to make the experience less mundane. And the likes of Moore Capital are seeking better-than-average returns by shrinking, too.

Shale writedown tarnishes BHP’s street cred

3 Aug 2012

The miner isn’t the only company to overpay for U.S. shale. But a $2.8 bln writedown on acreage it bought for $4.75 bln last year is embarrassing for a group that trades on its canny reputation. Gas may pay off for BHP eventually, but Marius Kloppers is right to waive his bonus.

Knight shows that next creative loss is never far

2 Aug 2012

The market-maker’s unlikely $440 mln hit may put its future in doubt. The software error behind it, fresh on the heels of UBS’ head-scratching Facebook blunder, proves investors can never be too imaginative about the potential to lose money. Risk just can’t be regulated away.

M&A discretion will come with a price of its own

2 Aug 2012

Martin Marietta forfeited a hostile bid after rival Vulcan successfully sued it for a confidentiality breach. Now, a Blackstone-owned firm is accusing a suitor of illegal blabbing. Leaks can be harmful, but dealmakers and their clients may also find they miss the chatter.

Goldman shows not all innovation in finance is bad

2 Aug 2012

A $9.6 mln loan to the Big Apple is a canny use of pocket change. The bond will yield a tidy profit only if criminal recidivism in the city declines. It may be PR, but Goldman has a chance to prove not all Wall Street concoctions are weapons of financial mass destruction.

Brazil’s Chevron ban straddles worst of two worlds

2 Aug 2012

Suspending the U.S. oil giant’s operations over a minor spill keeps Latin America’s biggest economy aligned with the likes of Argentina. Such meddling won’t help Brazil revive flagging growth. At the same time, the prosecutorial zeal apes bad practice from the developed world.

Man Utd counts on investors behaving like fanatics

2 Aug 2012

The English soccer club’s supporters expect nothing but success. That ethos carries over to Manchester United’s IPO, which seeks to value the enterprise at an optimistic 22 times EBITDA. Though Man Utd fans are rarely disappointed, buyers of the stock at the mooted price will be.

Fed looks helpless until at least 2013

1 Aug 2012

The FOMC bewailed slowing U.S. growth but made no policy changes. Absent crises, more quantitative easing this year is unlikely. QE3 may anyway be more effective in theory than in practice. After the U.S. election, though, the Fed may face much tougher choices.

The $10 bln LBO may again be within reach

1 Aug 2012

Even if private equity firms don’t scoop up $8.5 bln LabCorp, a buyout on that scale looks possible. Big funds collectively have some $500 bln of purchasing power, lenders are hungry for yield and terms are easing. But it would also mean a return to the dreaded club deal.

Market flap shows danger of throwing glitch stones

1 Aug 2012

Knight Capital’s trading hiccup caused halts in several stocks. The firm, whose shares dropped over 20 pct, is separately demanding recompense from Nasdaq over the Facebook IPO debacle in May. Companies reliant on tech perfection should join hands before they point fingers.

Loser Citi lawsuit sends SEC back to drawing board

1 Aug 2012

A jury cleared a banker of misleading CDO investors, while also urging the U.S. watchdog to bring more financial fraud charges. But quantity isn’t the issue. The SEC has filed over 100 crisis-related suits. What’s too often lacking, as with the Citi example, is a solid case.

Avon needs clean break from discredited Jung

1 Aug 2012

Revenue at the cosmetics giant is tumbling, and it’s losing sales reps in key markets like Brazil. New CEO Sheri McCoy wants to get back to basics. Yet Andrea Jung, her predecessor and architect of the chaos, is still executive chairman. Any value in her sticking around is gone.

Conoco refining spinoff catches industry wave

1 Aug 2012

The May split that created Phillips 66, America’s largest refiner, was nicely timed. Cheaper oil and reduced competition helped the $24 bln company deliver a 14 pct surge in Q2 profit. It’s a useful start, but Phillips 66 still needs to beef up its promising chemicals business.

Eike Batista adds bottom feeding to tangled web

1 Aug 2012

The Brazilian billionaire is taking his logistics arm LLX private after the share price halved in a year. Investors may rue getting on board with Batista, but delays, losses, missed targets and a slowing economy swamping his complex conglomerate make it a good time to jump ship.