United States of America

Ethical economy: Salvation through work

27 Feb 2013

In 1790, Benjamin Franklin predicted the four-hour working day. He looked prescient until 1935, when the U.S. abandoned a plan to move from eight hours to six. The decision to prefer more job to more leisure is cultural, not economic - but it’s bad for both economy and culture.

Stronger economy is Bernanke’s Godot

26 Feb 2013

The Fed chairman is keen on reducing deficits, but not while the U.S. recovery is fragile. Trouble is, there’s no sign of growth gathering much more steam. Waiting for a robust recovery before making meaningful spending cuts is looking more and more like a fool’s errand.

U.S. taxes on rich and poor not created equal

26 Feb 2013

Federal government levies on the wealthy hurt the economy. But sales gloom at Wal-Mart relative to Macy’s and Saks shows that letting payroll taxes rise again has socked it to poorer consumers. That’s worse for economic growth because the less well-off actually spend their wages.

Companies need more lawyers on board

26 Feb 2013

Not so much the bill-by-the-hour variety, though they help cover bosses’ behinds. Rather, hiring attorneys as directors may cut risk, promote stability and boost value. Based on new research, investors should be glad that lawyers are turning up more often in U.S. boardrooms.

Negative intellectual equity traps mortgage reform

26 Feb 2013

The latest plan to shake up U.S. housing finance, from a bipartisan think tank, offers nothing new. It rests on the usual received wisdom that the market cannot exist without a government backstop. The idea’s prevalent among lawmakers, bankers and investors. It’s wrongheaded.

CME-DB deal is both justifiable and unlikely

26 Feb 2013

The U.S. exchange reportedly made merger overtures to its German rival. Creating a $32 bln powerhouse would mean real savings, and antitrust problems could be solved. But resistance elsewhere could be stiff. And Deutsche Boerse has no pressing reason to give up its independence.

Apple’s halo loses shine in investor fight

25 Feb 2013

Greenlight Capital founder David Einhorn won a legal point, but better governance wasn’t his main objective. Apple and its lawyers come off amateurish. Calpers, despite worthy aims, looks careless. The SEC also missed a trick. The result is a distraction for shareholders.

RBS, UK set for responsible Citizens decision

25 Feb 2013

The British government-owned bank may soon reveal plans to float its U.S. lender. That should assure taxpayers that RBS is trying to raise capital and focus on its core business. And listing a minority stake allows the still-ailing bank to book Citizens’ earnings for a while yet.

$6.6 bln won’t be enough to end Elan’s rash dreams

25 Feb 2013

The biotech has grand M&A plans after selling rights to a blockbuster drug for $3.25 bln. Royalty Pharma’s indicative offer is based on the notion that it will invest more wisely than Elan’s current bosses. It’s a credible premise, but a 4 percent premium won’t seal the deal.

Citi pay plan raises the bar, just not enough

22 Feb 2013

Shareholders forced the mega-bank to rethink its compensation scheme for top executives. New, more rigorous targets for boss Michael Corbat and others are overdue. One important performance metric, however, seems to keep expectations too low.

U.S. housing quagmire embodied in JPMorgan deal

22 Feb 2013

The bank looks set to sell its first mortgage bond without government backing in years. That hints at a belief in such products among both lenders and investors. But until mortgage finance rules are clarified and Frannie’s funding advantage is withdrawn, these deals will be rare.

Review: How economics became the hijacked science

22 Feb 2013

Mainstream economics has been hijacked by vested interests and turned into an ideological weapon, Norbert Haering and Niall Douglas claim in “Economists and the Powerful”. Their case against the profession isn’t iron-clad, but it’s definitely thought-provoking.

Apple owners don’t need consumer-like innovation

22 Feb 2013

Investor David Einhorn’s idea of creating new preference shares is essentially an idea he proposed last year, with some fresh packaging. The trouble is it lacks the simplicity that is Apple’s hallmark. And for shareholders it’s not obvious “iPrefs” will have iPhone-like appeal.

Heinz deal suggests Big Food deserves a fresh look

22 Feb 2013

Strong brands and steady margins give food-makers’ strong finances a very long shelf-life. So makers of sauces, spreads and cereals may offer hidden value for patient investors. Warren Buffett-style bid or not, ConAgra, Danone, General Mills and others look cheap.

New breed of jewel thief stalks M&A world

21 Feb 2013

Deals like the $8.2 bln sale of NYSE include so-called “crown jewel” lockups, which hand over valuable assets even if a transaction fails. Courts have looked askance at such side agreements, but they’re creeping back. The potential benefits may rob shareholders of a higher bid.

Market renaissance dethrones would-be debt kings

21 Feb 2013

The crisis in Europe put top-rated U.S. corporate debt on something of a safe-haven par with sovereign issuers. The return of big buyouts like Heinz and Dell and rising U.S. Treasury yields leave these bondholders vulnerable to big losses. Risk-free is now and forever a myth.

Gold melts as economy warms and Fed warns

21 Feb 2013

The price of the yellow metal has fallen by 12 pct since October, including a 3 pct drop after the U.S. central bank minutes suggested money printing might stop. Gold’s two-way bet - both safe-haven currency and speculative punt - looks to be ending. It has a long way to fall.

A $4.3 bln oil deal parlays financial engineering

21 Feb 2013

Linn Energy’s purchase of Berry Petroleum is the first time an oil master limited partnership has swallowed a whole exploration company. The bold move leans on the tax advantages of such structures and raises the sector’s risk profile. Linn’s 8 pct yield is a necessary buffer.

BofA structures Brian Moynihan’s pay just so

20 Feb 2013

He landed one of the biggest raises among peers despite the lender’s many lingering problems. Even so, return on assets and the share price soared. BofA also requires specific financial targets be met for the CEO to be paid in full. In this regard, the bank is an industry leader.

U.S. debit-card deal recalls value of subprime

20 Feb 2013

Since the crisis, borrowers with middling to poor credit have been all but abandoned by mainstream lenders. Yet the $1.1 bln sale of prepaid card provider NetSpend, which caters to them, values the company at 17.5 times expected earnings. It’s a sweet spot that now eludes banks.