United States of America

Wall Street’s conflicts misery gets legal company

19 Oct 2012

Goldman Sachs and Barclays have come under fire in court for playing both sides of deals. Now, U.S. law firm Covington & Burling just got tossed from a case for a similar offense. Ethics rules and clients usually keep attorneys in line. That’s what makes this lapse so troubling.

Review: The danger of trading machines

19 Oct 2012

It’s a quarter-century since computerized program trading led to Black Monday on global stock markets. Scott Patterson’s “Dark Pools” is a good introduction to the latest machine-based trading technique. Arcane algorithms have reduced real liquidity and expanded rent-seeking.

Vickers’ ring-fence is worth defending

19 Oct 2012

Paul Volcker has picked a hole in the UK Commission’s plan to isolate banks’ retail deposits. The ex-U.S. central banker is probably right that fences would fall in an extreme crisis. But that doesn’t make them worthless. They’d simplify banking and protect the financial system.

Spat with Exxon bad for Iraq – and oil consumers

18 Oct 2012

The U.S. major may exit the country’s top field, and Baghdad could push Exxon and others out of deals with Kurdistan. The tangle undermines hopes that Iraq could supply half the expected increase in world crude demand by 2035. Falling short would cost Iraqis and raise oil prices.

Morgan Stanley investors must wait for pay day

18 Oct 2012

Boss James Gorman set aside more for bankers in Q3 after railing against Wall Street’s “heads I win, tails you lose” culture. Revenue rebounded, but not enough for shareholders to get the cut Gorman says they deserve. His model for Morgan Stanley needs to catch up to his message.

U.S. energy boom spurs economic vs political clash

18 Oct 2012

Meaningful exports of oil are banned. But with output surging and crude fetching a 20 pct discount at home, producers want to ship it overseas - a red flag in Washington. There are similar reasons to export gas, but big practical hurdles. Unblocking trade could benefit everyone.

Patent lawyers: Y’all better Deutsch sprechen

17 Oct 2012

The smartphone wars are moving from eastern Texas to western Germany. The shift is occurring because courts in Mannheim let the likes of Apple block rivals without proving harm, and their rulings carry global weight. The transatlantic legal arbitrage hurts competition, though.

No need to dress up Exxon gas deal as an oil play

17 Oct 2012

The energy titan says it is buying Celtic to spur crude production. But the Canadian firm’s assets are 75 pct gas. The feint is understandable, given investor grumbling over Exxon’s splurge on gas producer XTO. With exports to Asia looking up, though, the $2.6 bln deal makes sense.

Latest attempt to find Libor victim: Main Street

17 Oct 2012

U.S. homeowners are accusing big banks of making money out of nudging the benchmark interest rate higher. Bringing in Joe Public could add to political pressure for tougher regulation. Even so, it’s hard to see how more than a tiny amount of harm was done.

Brian Moynihan can’t ignore Citi’s regime change

17 Oct 2012

The BofA boss has had less time in the corner office than Vikram Pandit did. But he faces the same challenges to boost performance, as the bank’s third-quarter 6.3 pct ROE shows. While improving, Moynihan needs to do more before he, too, clashes with the board and shareholders.

Murphy’s law means something new for Big Oil

17 Oct 2012

The U.S. energy company’s value jumped 8 pct after executives said they would split off its retail business. Sure, they only acted after pressure from activist investors. But if larger players like Marathon follow suit, it could unlock billions of value for shareholders.

ASML pays up for tighter control of new technology

17 Oct 2012

The Dutch semiconductor-equipment maker will pay $2.5 bln, mostly in stock, to buy out U.S. partner Cymer. A 61 pct premium looks steep, and valuation details are scant. But synergies should follow. And ASML smoothes the shift to a new generation of chip technology.

Starbucks cross-border tax tactics fail taste test

17 Oct 2012

Shareholders expect companies like Starbucks to keep tax payments as low as can be. Customers may benefit. But multinationals should be careful about pushing too much profit into low tax jurisdictions. Even legal tax avoidance can irritate the governments which lose out.

Pandit succumbs to “three strikes you’re out” rule

16 Oct 2012

A trio of failures, not all of his making - pay, dividends and Smith Barney - lost him the confidence of shareholders, regulators and the board. It was time to go. Mike Corbat is solid. But radical change like a value-enhancing breakup would be a more surprising move for Citi.

Goldman exceptionalism remains elusive

16 Oct 2012

The bank’s Q3 net income beat Wall Street forecasts and enabled a small dividend hike, but the 8.6 pct return on equity still wasn’t enough to cover the bank’s cost of capital. Goldman CEO Lloyd Blankfein has more room to maneuver than Citi’s boss, but the bar is also far higher.

Stock investors vault ahead of housing recovery

15 Oct 2012

Economic signals point to a U.S. property rebound, but the bulls may be chasing a mirage. Last week saw a big bump for a real estate agency’s IPO. Home Depot trades well above its bubble-era highs. Fundamentals suggest the market has bottomed, but a boom still looks distant.

Amped-up Carlyle gulps double dose of muscle milk

15 Oct 2012

After bulking up with acquisitions all this year, its first as a public company, the buyout firm is now stretching the balance sheet at vitamin maker NBTY to pay itself a $720 mln dividend with PIK-toggle debt. Such juicing may be easy again, but can have risky side effects.

Citi’s mediocrity shines through dark quarter

15 Oct 2012

Two big Q3 hits left the mega-bank with just a 1 pct return on equity. Excluding them boosts net income to $3.3 bln, though still with a meager ROE flattered by loan loss releases. Operating leverage progress is welcome, but it’s time for CEO Vikram Pandit to raise Citi’s game.

Sprint shareholders have most to smile about

15 Oct 2012

Softbank’s $20 bln deal to buy 70 pct of the U.S. cellphone operator hands them a premium of about 30 pct. The Japanese group’s owners aren’t keen. Meanwhile, Sprint’s mountain of debt will shrink thanks to an $8 bln cash injection. But it will still be weak compared to rivals.

Nobel economics prize a welcome nod to match-makers

15 Oct 2012

Americans Alvin Roth and Lloyd Shapley won the 2012 Nobel prize for economics for their research on efficient match-making. It shouldn’t come as a shock. Unlike sexier fields like finance, successful matching can claim it fixes systems - and even saves lives.