Monetary moves have lost their magic 22 Sep 2011 Markets spurned the Fed’s latest love offering. The Twist was seen correctly as a small manoeuvre that can do little to speed up growth. It could even be more dangerous than helpful. Central banks should not try too hard - the pains of economic rebalancing cannot be avoided.
IMF issues timely warning on ultra-low rates 21 Sep 2011 Just as Ben Bernanke and his crew contemplate further easing, a new IMF report lays out the multiple threats created by such loose monetary policy. In rich nations, small firms suffer while in emerging markets, capital inflows produce bubble conditions. The FOMC should pay heed.
IMF financial crisis indicator bodes ill for China 21 Sep 2011 The fund has found a measure of credit growth that could predict crunches. It makes the Middle Kingdom look precarious and heralds problems for Turkey and Vietnam. The IMF’s crisis-spotting record is lousy. But overheating nations shouldn’t dismiss what seems a sensible metric.
New CEO wouldn’t fix dysfunctional HP board 21 Sep 2011 The tech group’s directors are thinking about jettisoning yet another boss, Leo Apotheker, after less than a year and right after green-lighting his $12 bln purchase of Autonomy and other radical changes that have rattled shareholders. But the board may be the real problem.
Netflix’s clumsy divide could have one step to go 20 Sep 2011 The once-soaring video service angered customers again by separating mail-order from streaming. It will take far more subscribers to justify even its vastly shrunken valuation and to pay off rising obligations. Netflix may yet need to sell the DVD arm to preclude a cash crunch.
Ponzi bluff may yet help weak legal poker hand 20 Sep 2011 U.S. prosecutors seem to face long odds in a case against the Full Tilt Poker website. Gussying up fraud charges against the firm and some famous players by evoking Madoff sounds a stretch but could prove an ace in the hole. At least it shows the feds aren’t ready to fold.
Jefferies shows bank investors are braced for pain 20 Sep 2011 Rather than punish the growing investment bank for its 85 pct crash in Q3 debt trading revenue, the market shrugged. True, a tough quarter was expected. But such nonchalance about this and JPMorgan’s earlier warning implies investors reckon fixed income will suffer for some time.
IMF’s education remedy won’t cure rich world ills 20 Sep 2011 The fund’s flagship yearly outlook laments a jobs crisis and rising inequality in wealthy nations. But its prescription of more education spending is unlikely to do the trick. Though desirable in many ways, such outlays aren’t the golden ticket economists often claim.
Proxy advisers’ clout is overstated 19 Sep 2011 When it comes to say-on-pay, director elections and the like, some U.S. companies fear that shareholders just parrot ISS and other purveyors of sometimes flawed advice when they vote. New research suggests the worriers should relax: company owners are more thoughtful than that.
Slashing tax deductions a big help for U.S. budget 19 Sep 2011 Forget the provocative Buffett Rule. Obama’s simpler proposal to cut tax deductions could add up to $9 trln to the government’s revenue over 10 years. There’s even a hint of common ground with the GOP. Best of all, killing off many deductions would do little economic harm.
SEC’s Abacus rule shuts several stable doors 19 Sep 2011 Banning middlemen from betting on the failure of asset-backed bonds they create sounds worthy. And the regulator’s new rule at least looks fairly narrow. But between the Volcker Rule and the exposure Goldman already found it had over Abacus, this issue already looks covered.
Tyco sets new example for conglomerate bondholders 19 Sep 2011 When the industrial group last broke into three in 2007, an ugly fight with creditors ensued. This time, Tyco’s paying them more heed. It plans to spread $4 bln of debt evenly rather than dump it into one unit. Lenders to other breakup candidates may want to gird themselves.
Masters of synergies create few for themselves 16 Sep 2011 To support the M&A ambitions of their clients, investment bankers routinely claim 1+1=3. Yet since JPMorgan, BofA and Barclays bought Bear, Merrill and Lehman, respectively, each has shed, not gained, market share. These numbers, at least, undermine Wall Street’s deal math.
Settlements feed U.S. prosecutor overreach 16 Sep 2011 From Google to tire-maker Bridgestone, firms pay big money to avoid fights with the government in U.S. courts. Trouble is, these deals encourage prosecutors to go after what they can punish, not what the law prohibits. It’s another unpredictable cost of doing business.
Inflation reality and Fed policy further diverge 16 Sep 2011 The 0.4 pct August increase in U.S. consumer prices puts the rate up 3.8 pct in the last year and reveals real interest rates to be heavily negative. A 10 pct rise in M2 also shows just how loose money is. The FOMC’s job of squaring it all just got tougher.
Netflix storyline hits a disturbing plot twist 16 Sep 2011 The fast-expanding web video firm’s decision to raise prices has forced the firm to cut its subscriber growth forecast. That’s a hit to the virtuous circle fueling Netflix. If growth slows further, it could impede Netflix’s ability to secure content on favorable financial terms.
Ackman’s gamble on Hong Kong unlikely to pay 16 Sep 2011 The activist fund manager is betting Hong Kong will re-peg its currency higher against the dollar. That may make sense given divergent economies, but could hurt the city’s competitiveness and do little to combat inflation. Bets like Ackman’s only encourage authorities to dig in.
Morgan Stanley misses a trick on Mack succession 15 Sep 2011 The chairman’s departure isn’t a terrible thing. But adding his duties to CEO James Gorman’s already full slate is unfortunate when investors haven’t fully embraced his strategy. It also frees other banks to unify the roles and legitimizes the status quo at Goldman. Too bad.
Frac Tech’s sellers need a racy valuation in IPO 15 Sep 2011 The U.S. fracking specialist’s debut was delayed in May by a buyout. Now it’s coming back to market. The new owners will want an equity valuation above the $3.5 bln they paid. That may be rich for a firm that, while growing swiftly, remains vulnerable to a supply glut.
Solyndra debacle reveals poor means to policy end 14 Sep 2011 The U.S. solar firm’s bankruptcy shows how poor risk assessment and crony capitalism undercut government loan guarantee programs. Germany’s mandated 20-year fixed-rate contracts for clean energy work better. They shrink the state’s role picking winners and maximize market forces.