United States of America

Declining U.S. coal still has bright spots

16 Mar 2012

You wouldn’t know it: coal’s share of U.S. power generation has dipped below 40 pct for the first time since 1978. Cheap gas and tougher pollution rules should extend the trend. But investors can still make winning bets if they plan for the industry’s decline.

Review: Flawed defence of the good of finance

16 Mar 2012

Robert Shiller is better placed than almost anyone to show that finance can be a force for the good. The Yale professor has imaginative ideas about products which share risk and make finance more democratic. But his latest book doesn’t show Shiller at his best.

U.S. market rumblings point to revved up growth

15 Mar 2012

Rising oil prices and interest rates are election-year bait for politicians, but in reality - along with higher stock markets - they suggest a long-awaited strengthening of the economy. But sticker-shock at the pump and more expensive debt could yet knock confidence.

Fed’s Citi logic is hard to follow

15 Mar 2012

The bank narrowly failed its stress test. Reconciling the results with the balance sheet suggests it tried to give too much back to shareholders. But loss assumptions also were higher for Citi than most rivals. From the data available, it’s tough to make the Fed’s numbers add up.

Tapping oil stockpiles could turn into bad habit

15 Mar 2012

With U.S. fuel prices near the politically risky $4-a-gallon, Britain and the United States may release strategic reserves. It would be the second time in as many years authorities have done so. Emergency stashes should be for real supply emergencies. Iran isn’t causing one yet.

Cisco’s John Chambers falls off the M&A wagon

15 Mar 2012

Less than a year ago, the networking giant’s boss, in an unusual mea culpa, forswore big deals and promised discipline. Now, he’s shelling out $5 bln for NDS, a pay TV software firm. But this acquisition might deliver justifiable returns and fit nicely with Cisco’s strategy.

U.S. dealmakers should beware trustbusters abroad

15 Mar 2012

Bankers are oozing optimism about cross-border M&A. But as Western Digital’s recent $4.8 bln takeover of Hitachi GST shows, antitrust watchdogs around the world are proceeding cautiously and baring their teeth. Other globetrotting buyers like UPS will need to pack some patience.

Banks need to take the guesswork out of Libor

15 Mar 2012

Probes into alleged manipulation of the benchmark interest rate have exposed a crucial flaw: sometimes it’s based on an educated guess. That won’t restore confidence in a figure that underpins $360 tln of loans and derivatives. A better approach would be to use real transactions.

Bank stress tests renew dividend-buyback debate

14 Mar 2012

JPMorgan and Wells Fargo are doing both after passing the Fed’s exam with flying colors. But in an industry suffering from slow growth, increasing the dividend payout ratios back to, if not above, 2007 levels may make more sense for shareholders than repurchasing stock.

Private equity riches gawked at, not appreciated

14 Mar 2012

Add Leon Black’s haul, and the buyout barons from Apollo, Blackstone, Carlyle and KKR earned almost $1 bln last year. The lucre is mostly investment profit. But when valuing their firms, investors prize management fees. It’s a riddle even for the masters of the universe.

Calpers gets real, sort of, on pension returns

14 Mar 2012

The $233 bln California pension fund finally cut its long-term return assumption by 0.25 percentage point to 7.5 pct - the first move in 10 years. The figure should probably be lower still, but even that tweak opens a $303 mln annual gap that the Golden State has to plug.

Goldman’s omerta loses force – along with brand

14 Mar 2012

A banker’s public resignation has revived accusations the bank puts its interests ahead of clients, or “muppets.” Though the complaint is familiar, it’s usually kept private. The worry for Goldman is some employees are no longer scared of the firm nor take pride in its pedigree.

Ethical economy: What’s really wrong with Europe?

14 Mar 2012

It’s not the economy. On that score, despite recent stress, Europe is working at least as well as the United States. But the euro crisis showed a deeply defective political system. Europe needs more discipline, greater solidarity and a higher purpose. It should be able to manage all three.

New York Times pay structure isn’t fit to print

14 Mar 2012

The venerable U.S. newspaper group revealed that it rewards bosses with fat bonuses for a mere 1.6 pct return on capital. That’s a fraction of the company’s cost of funds, and much lower than its own previous standard. A high bar for journalists doesn’t extend to management.

Fed strikes right balance with latest stress test

13 Mar 2012

Unlike the last look under the hood, investors have been given reams more useful data to separate sheep from goats in U.S. finance. At the same time, the Fed’s acting prudently to ensure capital adequacy across the system. It’s a sensible way to head off another financial crisis.

All inflation seems temporary to the Bernanke Fed

13 Mar 2012

The central bank said the impact of higher gas prices would be fleeting, justifying its pledge to keep rates low through 2014. But price rises are already above the Fed’s soft target. The intellectual contortions needed to maintain policy for 30 more months will get interesting.

Markets fear loss of QE3 and LTRO3 boosters

13 Mar 2012

More U.S. jobs is better news than the reaction of stocks and oil suggest. Exuberance is restrained because markets have prospered on abundant Fed and ECB liquidity, and may now face the loss of their stimulants. Still, a market retrace could be good for global growth.

Citi, time to hand Smith Barney to Morgan Stanley

13 Mar 2012

The firm led by James Gorman should get Fed approval this week to buy another 14 pct of the stockbroker it owns with Citi. But acquiring it all would make more sense and unlock capital for Citi. Assuming they can agree on price, of course - and convince regulators of the plan.

China has much to gain from rare earths fight

13 Mar 2012

A new WTO case against China may put Beijing on the defensive. But China’s global dominance puts it in a strong position to resist pressure. Besides, the backdoor trade protectionism plays well at home, as does the effort to make rare earth mining less environmentally damaging.

Splitting AT&T CEO and chairman roles a no-brainer

13 Mar 2012

Randall Stephenson’s botched plan to buy T-Mobile USA came with a $4 bln tab. The board didn’t see fit to hold him accountable with his pay package. But shareholders can have their own say - and should vote to strip Stephenson of his chairman title and install an independent.