Buyout bosses lose another layer of their mystique
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
U.S. Republican presidential hopeful Mitt Romney’s background at Bain Capital has directed a spotlight onto the unusually low tax rates paid by buyout firm executives. But a New York probe into a complex technique used by private equity firms to pay less tax on fee income may take more sheen off the industry. Even if legal, it’s yet more evidence of financial engineering.
Knight shows that next creative loss is never far
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Knight Capital’s “technology issue” turned out to be a monster, not just a bug. A software update that sent erroneous orders and rocked 150 or so New York Stock Exchange issuers on Wednesday has cost the market-maker $440 million. The coding error that caused it proves that investors can never be too imaginative about the ways in which financial firms will lose money.
Knight handles massive volume for customers. Its market-making business traded $19.5 billion of equities a day on average in June. Yet as an intermediary, it wasn’t supposed to be massively exposed at any given time. So losses equal to almost a third of the company’s $1.5 billion of book equity at the end of June are a shock. Investors slammed Knight’s stock, knocking two-thirds off its $1 billion market value earlier in the week. The company is seeking cash to shore up its finances – or maybe a buyer.
Is this the real Hong Kong handover?
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Hong Kong is on a long journey from foreign outpost to just another province of China. The Special Administrative Region is commemorating one milestone, 15 years since that storm-lashed night when Britain handed it back to China. It is also embarking on a new phase with the appointment of the first chief executive who wasn’t a member of the old colonial club. Leung Chun-ying, also known as CY Leung, is a local policeman’s son who is seen as close to Beijing. It could almost be called the real Hong Kong handover.
Review: Is inequality a crisis or just capitalism?
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Is rising U.S. income inequality a disaster, or just capitalism? In “The Great Divergence”, Timothy Noah analyses the 30-odd year trend, and concludes it’s a crisis. Yet earning differences are inevitable in any kind of market system. It’s arguably not so much inequality per se as the real decline in middle-class incomes that justifies serious concern.
Nobel endowment deserves prize for realism
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Winners of Nobel Prizes for sciences, literature and peace will get 20 percent less cash this year – 8 million Swedish crowns, or about $1.1 million each. That’s because the foundation wants to live within the long-term means provided by its endowment.
Facebook tax witch hunt looks in wrong place
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
There’s outrage on Capitol Hill about one tangential aspect of Facebook’s initial public offering. U.S. Senators Chuck Schumer and Bob Casey object to co-founder Eduardo Saverin’s tax “duck” on his stake in the social network now that he has given up his U.S. citizenship. But becoming a non-American is expensive and complicated. Lawmakers might instead ask what they’re doing wrong for U.S. expatriates even to consider it.
Contemporary art becomes the gold of the new rich
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Contemporary art is becoming the gold of the new rich. This week’s strong auction sales in New York brought record bids for Rothko, Klein, Lichtenstein and several other post-war artists. Scarcity is part of the allure, along with taste and the spending power of the global plutocracy. One thing to please at least the financiers among them is that contemporary art has inked good returns, too.
Facebook reality tops out near bottom of IPO range
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Facebook founder Mark Zuckerberg appears a bit sheepish about touting the company’s initial public offering. He probably doesn’t need to be. The hype around the social network makes it likely the price will go above the indicated $28-to-$35 a share range, which values the company at up to $96 billion. But an update of Breakingviews’ discounted cashflow calculator for Facebook shows that sanity is still at the low end of the valuation scale.
Apple’s valuation isn’t at risk any time soon
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
At about $550 billion, Apple’s market capitalization is mind-boggling. But for a company growing as quickly as it is, the iPhone maker trades at an absurdly low 12 times forecast earnings for the year to September. A new Breakingviews calculator shows why even cautious shareholders shouldn’t worry: even if growth and margins decline improbably fast, Apple should still be worth far more in 2016.
News Corp finds yet another way to annoy investors
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
News Corp has found yet another way to annoy investors. The seemingly tardy discovery by Rupert Murdoch’s family empire that non-U.S. holders control 36 percent of its voting stock – breaching the 25 percent limit for owners of American television broadcasters – has led it to suspend half the voting rights of overseas owners. Even shareholders resigned to disenfranchisement have cause to worry.
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