United States of America

Washington downgrades debt threat to DEFCON 3

23 Jan 2013

The House has passed a GOP motion to raise the nation’s borrowing limit for four months. That implies Republicans will use fear of a government shutdown to try to cut the deficit. It’s akin to putting a gun to a kneecap rather than a head. It’s less messy and might just work.

Toothless MACs giving way to deal terms with bite

23 Jan 2013

Exceptions have all but neutered material adverse change clauses. That’s why some recent transactions like Freeport-McMoRan’s purchase of Plains Exploration spell out specifically when a buyer can bail. Change may not come easily to dealmakers, but they should welcome clarity.

Big Oil and MLPs on verge of beautiful friendship

23 Jan 2013

The likes of BP own mature wells that often don’t generate a decent return. Until now they had few options for offloading them. But the emergence of tax-exempt partnerships that pump oil and gas provides buyers that can pay top dollar and extract fat returns for investors.

U.S. companies need to get real about pensions too

23 Jan 2013

As lawmakers wrestle over how to fix the nation’s ailing retirement benefit programs, AT&T and Verizon took a whopping $17.2 bln of charges for theirs. Return expectations remain too rosy and deficits are rising. The private sector isn’t exactly leading the way on the issue.

Google’s mobile pain coming to end

23 Jan 2013

The search giant’s fourth-quarter results imply advertisers are having a change of heart. They are overcoming their reluctance to pay top dollar to promote their wares and services on smartphones. With searches on these devices proliferating, that’s a boost for Google.

Microsoft shows why tech cash needs a discount

22 Jan 2013

The software giant may put up $3 bln to fund a leveraged buyout of Dell. The PC maker is cheap and Microsoft’s investment record, including Facebook, isn’t bad. But a Dell financing would divert money that could be returned to shareholders to plug holes and postpone obsolescence.

U.S. Bancorp puts rivals big and small to shame

22 Jan 2013

The Minneapolis-based bank with $350 bln of assets cranks out better returns than giants like JPMorgan and midsize lenders like PNC. Its success is no secret: a good mix of business, no stretching for profit and costs kept in line. The shock is that so few others can pull it off.

Pfizer spins, but not completely off

22 Jan 2013

The pharma giant’s $2.2 bln IPO of its animal health unit, Zoetis, should cheer investors. Those contemplating buying the stock, however, will want to read the warning labels closely. Super-voting shares could mean Pfizer retains board control even if its stake goes below 50 pct.

Global currency war would lack euro fighter

22 Jan 2013

Jens Weidmann is afraid that major central banks are bowing to their governments’ pressures to push down currencies. The Bundesbank head wants Europe to stay above the fray. For once, he and Mario Draghi agree. Japan’s new policies won’t tempt the ECB to take up arms.

Hugo Dixon: When is it OK to avoid tax?

21 Jan 2013

It is clearly wrong to infringe the letter of the law as, for example, many Greeks do. It is also wrong to infringe the spirit of the law. But, as last week’s Goldman Sachs UK bonus row shows, it is also important to take account of the spirit of the times.

Caterpillar’s Chinese lesson: dig below top line

21 Jan 2013

Getting stung by accounting fraud is unfortunate. But Caterpillar’s $580 mln write-down - three-quarters of the price it paid for ERA Mining just last year - suggests a bigger misjudgment. The Chinese machine maker’s potential was clear, but so was the low quality of its growth.

James Gorman must shine or resign in 2013

18 Jan 2013

The Morgan Stanley boss presided over a poor Q4. Even so, there are some encouraging signs. The trouble is, investors have seen them before and not yet reaped the benefits. Success requires cutting pay and other costs and improving FICC. This year Gorman needs to make it happen.

JPMorgan flaws should ring alarms everywhere

18 Jan 2013

The huge U.S. bank is supposed to be among the top risk managers. If the conflicting mandates, discredited theory, inadequate checks and primitive technology behind its $6.2 bln trading losses in 2012 are really as good as it gets, plenty of regulators and investors should worry.

McMoRan flop makes Freeport bid more like bailout

18 Jan 2013

The U.S. explorer is bleeding cash after plowing $1 bln into a failing deep gas well. That makes the 74 pct premium offered by miner Freeport, whose chairman also runs McMoRan, look even richer - especially with gas cheap and abundant. Freeport’s shareholders are the losers.

U.S. trade arbiter is wrong referee in patent wars

17 Jan 2013

The ITC is supposed to stop foreign infringers. But the speed of its process and a fuzzy remit are making it a popular place to sue American firms, too. While patent trolls benefit, so do companies seeking to block rivals in a hurry. The losers may be investors and innovation.

Carbon tax would beat green energy credits

17 Jan 2013

A new bill to end U.S. energy tax handouts doesn’t go far enough. Washington’s problem is an excess of expenses over revenue. Replacing preferential treatment for government darlings with a tax on discouraged emissions could help fix that while also reducing market distortions.

AT&T should beware a value trap across the pond

17 Jan 2013

The U.S. telco is reportedly eyeing deals in Europe. With valuations at their current low, running numbers makes sense. But cross-border tie-ups offer limited cost savings, and operators are only cheap because markets are tough. AT&T would need to spot some serious hidden value.

Citi, BofA give investors only reasons to fret

17 Jan 2013

Both U.S. banks had a messy fourth quarter full of litigation expenses and other charges. Stripping those out still left each with measly single-digit returns. With rivals more solid, BofA chief Brian Moynihan and new Citi boss Mike Corbat are under even more pressure to perform.

Rich country services deal looks worth the effort

17 Jan 2013

With global trade talks stymied and bilateral deals proliferating, a multilateral services deal among mostly rich countries could cover a lot of trade and address numerous knotty problems. Even without the BRICs, it would fight creeping protectionism and should bring big returns.

$20 bln Dell LBO could be worth the stretch

16 Jan 2013

It’s too big for one buyout firm, and club deals are infamous – think TXU. Moreover, the computer maker’s shrinking business doesn’t look that attractive. But an LBO could still deliver high returns because – unlike bubble-era targets – Dell is cheap.