United States of America

Music gods again divert EMI’s destiny

11 Nov 2011

With both EMI and Warner under new owners, it seemed the stars might finally uncross for their long-awaited union. But Sony and Universal brought their own karma and cash to the EMI auction, and Warner is again alone at the altar. Further twists of fate are in regulators’ hands.

Biotech firm Verastem’s IPO carries some big risks

11 Nov 2011

Founded by the man who sold GSK his last creation for $720 mln, the firm wants to raise $50 mln. Yet it has no revenue, no drugs in trials and looks predicated on unproven science. Verastem may deserve funding - but from venture capital, not public market, investors.

Life continues sweetly for the .001 percent

10 Nov 2011

Hours after another market meltdown, plutocrats spent over $300 mln at Sotheby’s in what connoisseurs called an epic auction of contemporary art. Celebrity chef Mario Batali also learned that even besieged bankers wield clout. This time doesn’t seem all that different.

Green Mountain shows how momentum works both ways

10 Nov 2011

The coffee company’s stock is the latest to crash down from a nose-bleed trading multiple, following Netflix and OpenTable. Fast growth can help paper over valuation or accounting worries, but in time they often catch up. Chipotle and Salesforce.com investors should take note.

Mark-to-market rethinks imply bank pain goes deep

10 Nov 2011

Fear of losses isn’t what’s prompting Goldman and Morgan Stanley to reconsider hallmarks of their accounting. Rather, it’s a need to juice profit. Though it may not amount to much, every dollar counts nowadays. As long as the shift stays at the margins, it’s not terrible policy.

Jefferson County isn’t a recession victim

10 Nov 2011

The Alabama county’s bankruptcy stands to be the largest in U.S. history, but investors shouldn’t see it as a sign of more to come as municipalities suffer in the wake of the recent downturn. Corruption and woeful mismanagement sank the county, not recession and falling revenue.

U.S. money funds may not be players in next crisis

9 Nov 2011

Money market funds have a bit part in the euro zone crunch as short-term lenders to European banks. U.S. regulators, meanwhile, want to end the fiction that they are just rebadged savings accounts. The industry won’t like that, but the global financial system could be safer.

Ohio vote shows deficit realities haven’t hit home

9 Nov 2011

The state’s voters overturned Republican attempts to limit bargaining rights of public sector organized labor. Even when they accept the need for cuts, Americans - like Greeks - are struggling to embrace structural change. The fight over national entitlements is looking grimmer.

Old ghosts still haunt new GM

9 Nov 2011

The Chevrolet centennial is reason to celebrate tradition. And GM’s Q3 profit reflects well on the recent past - its quickie bankruptcy. But the automaker is still cutting costs, has big unfunded liabilities and a gloomy end-of-year outlook. History may still be holding GM back.

Citi risk measurement scheme warrants closer look

8 Nov 2011

CEO Vikram Pandit is touting a plan for financial firms to disclose regularly how risk scenarios play out for a standard, hypothetical portfolio, as well as their own assets. Such a comparative tool might have raised red flags about MF Global -one reason it deserves attention.

Citi’s CDO settlement now seems to pass muster

8 Nov 2011

Judge Jed Rakoff raised tough but fair questions about the bank’s $285 mln deal with the SEC. Though Citi initially appeared to get off light compared to Goldman, its responses to the court show the case’s many gray areas. The watchdog may in fact have exacted all it could.

Dynegy failure provides a wake-up call to lenders

8 Nov 2011

The power provider’s partial bankruptcy comes with a twist - creditors exposed to losses ahead of equity investors. Bondholders stand a good chance of turning the tables in court but may have avoided the drama with better protection. It’s a reminder of how much covenants matter.

Crisis anniversary marked with much dead wood

8 Nov 2011

Five years ago today, Meritage became the first notable subprime mortgage lender to fail. Too few heeded this canary in the coal mine. Now, while there are some signs of progress, the mortgage market remains moribund. It’s worth a look back - and forward.

Warburg and Paulson catch falling knife in bakery

8 Nov 2011

Britain’s biggest food producer is now a struggling penny stock. Two of Premier Foods’ largest investors, Warburg Pincus and John Paulson, appear lousy bargain-hunters. Buying a listed stake probably also hindered Warburg in taking private equity’s typical hands-on approach.

New U.S. poverty tally offers budget cuts warning

8 Nov 2011

Revamped poverty data show an extra 3 mln Americans barely scraping by. Yet the figures also suggest that federal programs targeted by cost-cutters do actually help. Trimming help for the poorest risks worsening poverty and stoking the disquiet evident in Wall Street protests.

Fed might actually need maligned savers

7 Nov 2011

Ben Bernanke said last week that low interest rates, which penalize savers, served the greater good of economic growth. But high savings rates correlate with growth over both the long and short term. Bernanke’s discouragement of prudence could yet stymie his objective.

When is a merger-of-equals really a takeover?

7 Nov 2011

One easy way to tell is when the top brass get rich, undeserved paydays. Take NSTAR’s pending $4.7 billion “merger” with Northeast Utilities. NSTAR’s top five executives could feast on $50 mln of payouts from change of control even though they’ll stay, and even run, the place.

Unlikely Mussolini muse guides Wall Street protest

7 Nov 2011

Occupy Wall Street is really a campaign against economic inequality. Ironically, the work of fascist thinker Corrado Gini - he of the coefficient - may be most useful to their cause. Other statistics also show that the top 1 percent is pulling far away from the madding crowd.

BP making a habit of botched M&A

7 Nov 2011

Closing a $7 bln disposal in Argentina is not as urgent today as it was a year ago, when the oil major was reeling from the Gulf of Mexico disaster. But setbacks look bad, coming after the collapse of the Rosneft deal. BP is now stuck with a challenging partner in Buenos Aires.

Groupon makes IPO of scarce shares look cheap

4 Nov 2011

The Internet coupon firm’s stock popped as much as 50 pct. Short-term excitement was assured by signing up most of Wall Street to peddle 6 pct of its stock. Longer term, keeping a valuation approaching $20 bln will require more tangible things like profit.