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Blog Profile / Reuters Breakingviews Blog

Filed Under:News
Posts on Regator:2526
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Archived Since:June 19, 2011

Blog Post Archive

Deadly assault brings new kind of risk to China

The shocking knife attack that killed at least 33 in the Southwest suggests rising ethnic tension. Until now, belief in China’s relative stability has helped keep its cost of capital down. Even a small reassessment may hit assets, from real estate to the yuan, at a fragile time.

Citi’s Mexico fraud besmirches industry further

The mega-bank has been cheated out of $400 mln by an oil services firm in one of the most basic businesses in banking – accounts receivable. Citi’s Banamex didn’t even spot it – Mexico’s government did. Missing such simple fraud is something that should worry Citi’s rivals, too.

Dan Loeb bids against himself at Sotheby’s

The hedge fund activist surprised the auctioneer by nominating three directors, after the firm offered him one uncontested board seat and listened to, and even acted on, some of his gripes. Loeb must have reasons, but it may discourage other targets from engaging with activists.

Review: GDP and its discontents

Diane Coyle’s new book discusses the many weaknesses of GDP, the standard measure of economic success. Why do policymakers still rely on it? Her answer is that the alternatives are no better. That’s fair, but her analysis leads to a more aggressive, and compelling, conclusion.

Blackstone bets Versace can go up a few sizes

The U.S. group is buying 20 pct of the Italian fashion house. The 1 bln euro, all-equity minority deal shows that buyout firms are lacking classic takeover opportunities. This is also a bet that Versace’s lightweight business can one day match the power of its extra-large brand.

Macau casino stocks are priced for perfection

A building boom will expand capacity in China’s gambling enclave. But to justify their valuations, casinos not only need to attract more punters but encourage them to spend more at the tables. Any slowdown in visitor numbers or increased competition could test excited multiples.

PayPal has outgrown eBay’s warm embrace

The online merchant’s ownership provided rich soil for the payments system to thrive. But PayPal is now mature enough to grow faster on its own. Separating the two businesses could send eBay’s stock up 15 percent or more.

Investors take note: low inflation isn’t deflation

The theory says that bonds benefit and stocks suffer during deflation. In the real world, disinflation has yet to turn into persistent price declines. Sluggish price rises are no bar to equities doing quite well, as long as there is GDP growth. It’s too early to write off stocks.

SoftBank’s Alibaba stake both blessing and burden

Billionaire chief Masayoshi Son is expanding the Japanese internet firm through M&A. But its 37 pct stake in the Chinese e-commerce giant dominates its valuation, according to a Breakingviews calculator. When Alibaba goes public, SoftBank may come under pressure to let it go.

Bursting U.S. gun bubble begins to take victims

Fear of legislation following the Connecticut shooting drove demand for guns to absurd heights. It’s increasingly clear laws won’t be tightened. Sturm Ruger is the first to admit the emotion that fired up the bottom line has run its course. The reckoning will be painful.

Rudloff’s retirement is bad timing for Barclays

The UK lender’s chairman of investment banking is retiring after a distinguished 50-year career. Hans-Joerg Rudloff transformed Credit Suisse and Barclays into European contenders on Wall Street. As Barclays forges a new path, it could use his institutional memory and vision.

AB InBev deserves premium-strength rating

The Budweiser brewer seems to pump as much cash as beer out of the business. Latest results suggest its key markets may be improving too. Its well-oiled M&A machinery may flatter the underlying long-term reality. But it is hard to see why investors’ taste for the stock will wane.

Japan bond investors’ overseas trip may flop again

The Federal Reserve’s taper talk discouraged Japanese investors from venturing abroad last year. Now wobbly emerging markets are threatening this year’s outing. That’s bad news for bondholders searching for better returns - and for the Bank of Japan’s anti-deflation campaign.

At least Venezuela’s unrest is simply economics

Ukraine’s split is ethnic, Thailand’s regional and Syria’s religious. Venezuela is ethnically and religiously united and even has oil wealth. But income inequality and chaos bedevil the Latin nation. In theory, these problems can be alleviated even without political upheaval.

Who bails out bitcoin depositors?

The pseudo-currency’s main exchange has disappeared from cyberspace, leaving customers at least temporarily bereft. Bitcoin’s supposed attraction is being government-free. When things go awry, users learn why conventional finance has expensive regulation and political backstops.

Italy’s Renzi has big dreams and small mandate

The new prime minister announced ambitious reforms on a tight deadline. But his position in parliament is weaker than his sleepy predecessor’s. The promise of shock therapy may give Italy kudos in Europe. But markets need more details - and delivery - before giving him credit.

Weibo IPO plan stretches financial logic

Listing a $500 million stake in China’s version of Twitter looks like a response to sky-high tech valuations. But investors can already buy shares in parent Sina, whose value is mostly made up of Weibo already. They should be skeptical about the idea that two plus two is five.

Facebook stock is not so different from bitcoin

Both are currencies that can be used for certain purposes, but not everything. They depend on networks of people but are not backed by a government. And their worth reflects demand, which is based on murky fundamentals. The trick is to monetize them while they still have value.

Ukraine, the bailout Europe cannot shirk

After triggering the end of the Yanukovich regime, the EU has a responsibility to help with Ukraine’s dire economy. It won’t provide all the needed $20 bln, but it can give the IMF political cover, while calming Russian anger. The ultimate goal has to be for Kiev to join the EU.

G20’s growth pledge is missing a demand booster

The world’s largest nations have vowed to raise collective GDP by an extra 2 percent in five years. Tinkering with regulation and labour markets may raise productivity. But with wages stagnant and governments reining in spending, there may not be anybody to buy the higher output.

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