Comment, analysis and other offerings from Monday’s FT,
Clive Crook: Stimulus for America — as good as it got
Barack Obama’s administration faces a torrid time between now and November’s mid-term elections, writes the FT’s Crook. Mr Obama finds himself at a disadvantage, his political capital running low. One reason is the public’s verdict on last year’s fiscal stimulus.
Tony Jackson: The Pru and a question of value
Last week’s 20 per cent plunge in the share price of UK insurer Prudential over its planned purchase of AIG’s Asian business has been variously explained. The $35.5bn deal is hugely ambitious and involves $30.5bn worth of new shares, against the Pru’s current $20bn market value. There is another reason which, if it is not in the front of investors’ minds, certainly should be. It looks like those shares will be issued below their intrinsic value. That last term is slippery, both in principle and in practice. But it matters. To see why, consider musings from Warren Buffett on the subject.
Lina Saigol: Thiam’s 12-point guide to M&A
Last week, Tidjane Thiam, Prudential’s CEO, launched a $35.5bn bid for the Asian business of AIG. Since then, the share price of the UK insurer has fallen 13.7 per cent. The deal comes as many chief executives are still reluctant to commit themselves to undertaking transforming deals of the type usually only seen at the peak of bull markets. But for those now itching to expand through acquisitions, read Mr Thiam’s 12-point guide to express M&A in a downturn, written with the assistance of his lead adviser, Credit Suisse.
EnergySource:How financial traders changed oil markets
The arguments over the effect of financial traders on energy markets are complex and often lacking in hard data, writes FT Energy Supply’s Kate Mackenzie. But commentator John Kemp has dug up some compelling evidence that suggests long-dated oil contracts are now determining spot prices, instead of immediate supply and demand concerns – and that’s mostly because of hedge funds and swap dealers.
Alexander Friedman: How banks can help the world’s poor
It has become something of a trend to demonise capitalists and praise philanthropists, writes Friedman, a former Lazard investment banker who has just stepped down as CFO of the Bill & Melinda Gates Foundation. But if we are to tackle our most pressing social problems and live up to our moral obligation to help those in extreme poverty, these two seemingly polarised groups need to come together in fundamentally new ways.
Analysis: Germany’s vision begins to blur
The centreright coalition formed by German chancellor Angela Merkel for her second term was intended to have a clearer political direction than its predecessor, writes the FT’s Quentin Peel. But, perversely, Merkel and her administration are now faring rather worse.
Lucy Kellaway: Why feedback forms should be binned
Some time ago I had lunch with the chief executive of a well-known company in London. He told me that every time he goes to a dinner party, he offers unsolicited feedback to guests on either side of him about the quality of their conversation during the meal. How vulgar, I thought. Yet, every time I’ve sat next to people at a dinner who were not pulling their weight, I have thought about him and wished that I was brave enough to offer tips on how they could improve.
Lex: Stability accounting
Among the many arguments over regulatory reform, a central one has yet to really start, says Lex. Looming is a debate over who should take charge in guarding financial stability. But instead of pitting the Federal Reserve, say, against another US bank regulator, this argument could position regulators against the accountants. Ultimately, however, accounting needs to stay a true business snapshot. Regulators must find their backbone elsewhere.
FTfm: Accounting rule threatens DB funds
Proposed changes to international accounting standards will accelerate the pace at which UK corporate pension schemes are selling out of equities and closing to further accrual by existing members, says FTfm. The proposals come amid concerns that legal and regulatory changes are already forcing pension schemes to shift out of equities, if not to close down completely.