Balanced budget laws are flawed but not useless 16 Aug 2011 Sarkozy and Merkel like them, and they feature in America, too. But politicians often fudge the numbers, or just change the rules. Nonetheless, in reasonably honest systems such laws slow the build-up of deficits. Perhaps as importantly, they also stigmatize bad behavior.
Rick Perry needs to backtrack on Fed charge 16 Aug 2011 The Texas governor and GOP White House candidate, like the U.S. central bank’s Dallas branch, doesn’t much like its money-printing policies of late. But words like “treasonous” cross a line and further dent Fed independence. Perry could struggle if he doesn’t tone it down.
Battered U.S. junk deserves high-yield name again 16 Aug 2011 With markets volatile, typical junk bonds are yielding north of 8 pct. That’s tasty for those starving on the Fed’s zero-rate diet. And default rates look low, refinancing needs limited and the deal flow manageable. Despite investor wariness, today’s junk looks almost nutritious.
Over-reaction to BP Gulf spill costing U.S. jobs 16 Aug 2011 Oil regulators may have swung from gung-ho to too cautious. Painfully slow drilling approvals mean America could be missing out on 230,000 jobs - and tax revenue, too. Safety matters. But with unemployment and the deficit top national concerns, red tape should be kept in check.
World must let U.S. win currency war 16 Aug 2011 With the Fed bent on inflating the U.S. economy with cheap dollars, export economies may be tempted to suppress their currencies in response. They must resist. Painful as it seems, stronger currencies are a necessary cost of reviving customer No. 1 and preserving global growth.
Solar firm’s demise signals gray industry forecast 16 Aug 2011 Onetime investor darling Evergreen Solar, among the first U.S. green energy companies to go public, just went bankrupt, victimized by a global supply glut. Growing Chinese competition and waning European subsidies mean the solar sector will probably get darker before the dawn.
Texas governor creates two-man GOP 2012 race 15 Aug 2011 Rick Perry’s record, Tea Party bona fides and deep pockets make him the prime rival to Republican front runner Mitt Romney, a former private equity boss. Yet flaws in both candidates mean either one would need help from the economy to push Barack Obama out of the White House.
Return to gold standard seems less unthinkable 15 Aug 2011 Fiat money has worked well in the 40 years since Richard Nixon ended the peg, but this latest recession must gnaw at believers. If years of ultra-cheap cash give rise to serious inflation or a dollar collapse, the gold standard, however erratic and deflationary, may appeal again.
Citadel shows some moats are still hard to cross 12 Aug 2011 Ken Griffin’s hedge fund is abandoning its foray into investment banking. Internal clashes didn’t help and adding a middle man to a trading business creates conflicts, too. But bulge-bracket firms also held up better than expected. Wall Street turf has some solid defenses.
Fretting frackers restrain economic opportunities 12 Aug 2011 Critics of the controversial drilling process contend its hazards have been downplayed and the benefits exaggerated. A new U.S. report suggests just the opposite. Yet until safety concerns are tackled, as with New York’s proposed cleanup fund, shale’s potential won’t be realized.
Financial lifeboats starting to get crowded 11 Aug 2011 Safety from sinking stocks has been sought in Treasuries, and even bonds backed by U.S. homes. But other places of refuge like the Swiss franc and gold showed on Thursday how quickly they can be rocked when too many investors pile in. Havens aren’t immune to mania either.
Nomura’s Wall Street push will be tough to pull off 11 Aug 2011 The Japanese broker is focusing its investment banking ambitions on the United States while trimming its European headquarters. Nomura reckons it can establish itself by hiring rather than buying. But it’s hard to see it succeeding where so many others have failed.
U.S. debt-cut panel already poisoned by politics 11 Aug 2011 It hardly matters who sits on the new “super committee” seeking $1.5 trln of savings over 10 years. Wall St. will struggle to convince lawmakers of how important it is to reach a compromise when both parties are eyeing 2012 elections. Credit raters, however, may not wait so long.
News Corp cash finds the right target: investors 11 Aug 2011 After phone-hacking pay-offs and allegations of payments to UK police, News Corp cash is going in the right direction - dividends and buybacks. News also pledges deal discipline. But governance neglect and Murdoch’s unyielding passion for newspapers still hold the company back.
Defeat for U.S. public unions sets stage for more 10 Aug 2011 Organized labor picked a fight it couldn’t finish in Wisconsin. It won two battles, but lost a recall vote war for the state Senate. Anti-union Republicans remain in control. The outcome may inspire other cash-strapped states to squeeze the power and wages of their workers.
HSBC reassures with $2.4 bln credit card sale 10 Aug 2011 At just twice 2010 earnings, the gain on selling its U.S. cards unit to Capital One isn’t brilliant. The sale will also lower returns and raise the bank’s cost ratio. Still, a clean exit shows CEO Stuart Gulliver is serious about getting back to HSBC’s trade-bank roots.
Groupon’s odds of success may wilt with market 10 Aug 2011 The online coupon company’s Q2 sales increased 10-fold from a year ago. Yet its net loss also swelled to over $100 mln as it financed growth with cash owed to merchants. If investors shunning risk close the window for an IPO, it would leave Groupon less financial wiggle room.
Fed’s "QE lite" another dent in dollar’s crown 10 Aug 2011 Ultra-low interest rates alone won’t knock the dollar off its perch as the world’s reserve currency. The greenback remains the lingua franca of global commerce and foreign central banks’ holding of choice. But the bleeding from a thousand cuts will eventually end its dominance.