May 23, 2012 13:06 UTC

Did Chesapeake miss Enron lessons?

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By Christopher Swann and Robert Cyran
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Chesapeake Energy, the embattled U.S. natural gas producer, seems to have missed some of the lessons of Enron’s demise. There have been no allegations of fraud. But the U.S. gas firm’s vast trading operation, fondness for complicated holdings and relationships, and corporate generosity are among the traits that, in hindsight, should have invited greater scrutiny of Enron’s edifice.

Chesapeake is a force in the U.S. gas market. It owns real assets, and it is the second-largest producer in the United States, accounting for about 9 percent of gross domestic gas supply according to a recent company presentation. It is the most active driller of new U.S. wells, and has substantial proven and unproven reserves. Meanwhile, joint-venture partners including Total of France and Norway’s Statoil attest to the substance of the projects they are involved in.

COMMENT

not to mention the massive spills, explosions, leaks requiring water treatment to landowners, and killing cows, silica dust inhalation causing lung cancer, flare offs causing nosebleeds, vomiting, rashes, frack sites rendering property owners inability to secure mortgages… here is the latest May 19-25 and ongoing methane / toxic chemical leaking in wetlands, streams and well water in four homes… http://old.post-gazette.com/pg/12145/123 4310-100.stm

we need to ban fracking like Germany, France, Bulgaria, Nova Scotia, Quebec, VT and over 100 towns in NY have done.

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May 23, 2012 11:46 UTC

Miners can live with a not-so-super cycle

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By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The super cycle is turning and miners’ super returns are under threat. But they can probably avoid another period of value destruction like the one that preceded the decade-long materials boom.

May 23, 2012 11:38 UTC

Hot infrastructure auctions drive down returns

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By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The market for infrastructure assets is heating up. Yield-hungry investors are keen on large, predictable businesses in the less rickety bits of Europe. So auctions like E.ON’s sale of its German gas pipes run pretty hot. Even if the bets are less extravagant than during the credit boom, returns will suffer.

May 22, 2012 21:10 UTC

The business of ice hockey has never been so good

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By Rob Cox
This column appeared in the May 21 edition of Newsweek magazine. The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It must be killing Gary Bettman to keep so much good news on ice. The National Hockey League is Bettman’s business, and business is the best it has been since he became its commissioner nearly 20 years ago. Thanks to ferocious competition inside the rink and the biggest broadcasting commitment in league history, more Americans are debating the finer points of penalty kills and two-line passes than ever.

May 22, 2012 11:28 UTC

China diversified dot-coms avoid Facebook pitfalls

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By Wei Gu

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

High-growth Chinese internet companies may be surprisingly defensive investments. True, fears about the cyclical advertising business have driven down shares in Renren, China’s Facebook lookalike. But other Chinese dot-coms should suffer less. Strong roots in gaming, whose revenue is still surging, makes diversified players like Tencent and Sohu comparatively recession proof.

May 21, 2012 21:21 UTC

Nasdaq howler can’t explain Facebook flop for long

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By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Nasdaq OMX is rightly coming in for a bashing after a systems howler on its U.S. exchange left Facebook’s stock trading in the dark for much of its public market debut on Friday. Chief Executive Bob Greifeld has already fessed up that the stock exchange was at fault. But the blunder has a limited shelf life as an explanation for Facebook’s IPO flop.

May 21, 2012 18:43 UTC

JPMorgan loss kicks succession race into high gear

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By Rob Cox
This column appeared in the May 21 edition of Newsweek magazine. The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A time-honored tradition for handling executive succession on Wall Street is the practice of putting two ferrets in a sack, figuratively speaking. That’s when a bank takes two promising managers and makes them co-heads of the same business. The expectation is that, like two feral mammals clawing each other in the darkness, one will emerge victorious. He will become CEO. The other is named deputy vice chairman of Bolivian equities. JPMorgan has yet to officially haul out the burlap sack, but the $2 billion trading loss it disclosed two weeks ago has accelerated the contest to succeed Jamie Dimon at the top of America’s biggest financial institution.

Not that Dimon is leaving anytime soon. His hair may be silver, but he’s only 56 and has every intention of running the place into his 60s. Moreover, the losses from bets on funky derivatives incurred by the chief investment office in London look manageable for a bank that minted a $5.4 billion profit in the first quarter and boasts nearly $200 billion in capital. But as Dimon readily admits, the trades were dumb. They certainly undermined many of his public arguments for resisting additional regulation of the banking industry. As a consequence, the question of who will one day fill Dimon’s wingtips has become a money-industry parlor game.

COMMENT

It will be interesting to see what comes of this. A 2b trading loss isn’t that big of a deal in the larger scheme of things (remember last year when a certain bank lost that much due to a rogue trader?) But I agree, whoever fixes this better earns some serious brownie points. Unfortunately for the article, I never got passed the mental image of two Wall Street execs fighting in a burlap sack.

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May 21, 2012 11:23 UTC

Long-awaited Yahoo deal heaps pressure on Alibaba

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By Wei Gu

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Alibaba has finally reached a truce with Yahoo. The Chinese e-commerce giant is offering at least $7 billion to buy back its own shares from the U.S. internet group, recapturing half the stake Yahoo acquired in 2005 for $1 billion. The timing is good, since Facebook’s IPO has left cashed-up investors who could help finance the deal. But a successful outcome will heap pressure on Alibaba.

May 21, 2012 11:17 UTC

Graff Diamonds IPO gleams but doesn’t dazzle

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By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It’s hard to think of a company more plugged into the 0.1 percent than Graff Diamonds. The UK diamond merchant, which in 2011 sold rocks worth almost $100 million to a single customer, plans to list its shares in Hong Kong, in an offering that could raise $1 billion and value the whole at $4 billion. Strip out the hype over the ascent of the super-rich, and the valuation looks solid if not a steal.

COMMENT

My concern about putting my clients assets to work in Graff is I am certain the not all 20 customers represent 5% of the revenue to equal 100% (the total). My concern with this particular segment is that if 2 or 3 of the 20 customers may represent 40 % or more of the revenue in this segment- how do we know? And if our living large Russian and Chinese friends really take it on the chin- they are less likely than US top 1% to continue to buy high end regardless-their culture is not the same. Russias wealth is so extremely consentrated in oil, that any pain felt in this area and ” Boris” will be drinkning vodka all day in his new 1 bedroom flat. I think the Graffs MUST expand and market to wealthy customers and bsuiness segments that have very diversified means of wealth creation. Do you agree?
YES, millionaires I said- NOT billionaires, most likely make up the VAST majority of the extreme high end diamond customer base- example: BMW’s, Mercedes, R. Royce, higher end Yachts, etc. – it’s perception. Multi- millionaires or ( less) will find a way to buy the items they can’t quite afford and feel they are entitled too these “riches” I see it in my financial practice every day- it’s human nature and numbers support this claim to show they can buy the “best” for their wife and loved ones- Perception is reality and diamonds will always make the cut ( pun intended)
” A diamond can cut glass, and create the perception of class”… Please respond if you can feel you can add anything, much appreciated! – Perino :)

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May 18, 2012 20:25 UTC

Facebook IPO features best and worst of capitalism

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By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Facebook’s initial public offering on Friday showcases the best and worst sides of capitalism. Execrable puffery accompanies the entrepreneurial achievement of transforming a dorm-room project into a company worth over $100 billion in just eight years. Poor corporate governance, Silicon Valley cronyism, breathless pundits spewing misinformation, bankers in hoodies and manic investors are all on display. And yet the flip side of such indulgence is worth admiring. 

Wall Street’s premier event of the year turned into an outright circus, including a 30-minute delay for the shares to start trading on Nasdaq despite considerable anticipation of the mega-volume that ensued. At its most benign, otherwise serious thinkers about capital markets devoted unthinkable amounts of time publicly debating whether founder Mark Zuckerberg’s casual dress was a slight to investors while financiers cravenly sucked up to the 28-year-old. But there’s a darker side to the hoopla, too.