City Republic: Northern Rock, Associated, Wall Street and China
City Republic is the latest great new addition to BR. Every Monday and Wednesday, Stephen Foster takes a personal view on the latest news from financial markets and what all this means for marketing and media.
Northern Rock struggles to plot its escape route
Northern Rock shares plummeted today (Monday) in early trading even as the FTSE100 rose, showing pretty clearly that the market sees it as a basket case and has moved on.
The fall follows the receipt of just two bids for the bank (from Virgin and former Abbey chief Luqman Arnold). These, according to the increasingly surreal mortgage lender, "materially undervalued" the Rock.
The market evidently thinks otherwise.
Sometime today, Chancellor Alastair Darling will have to try to calm things down, otherwise there'll be another run on the bank (even though its deposits are guaranteed by the government).
In many ways, administration (effectively nationalisation) would be neatest solution but it overlooks the shareholders.
Many of Northern Rock's small army of shareholders (mostly former building society members) took the guarantee to depositors to mean that the bank would be supported too.
If they lost all their money what's left of the government's reputation for prudence would be well and truly shot (even though administration is probably the prudent response).
The most sensible all-round option is to keep the Rock going, and in many ways former Abbey National "saviour" Luqman Arnold's suggestion that his turnaround team takes a small stake -- and then profits, or not, by repairing the bank certainly looks the most politically attractive.
But it may already be too late for that.
Associated sees the wood beyond the trees
The Sunday Times thinks Associated Newspapers will appoint the head of its information division as its new boss next year, over the heads of various newspaper managers.
Martin Morgan's Connecticut-based DMG Information is apparently making more money than the newspapers these days and online is where the company sees its growth coming from.
Morgan, or whomever, won't actually be the boss of course (whatever title he takes) because the company is still controlled by the Rothermeres with 89% of the voting stock.
So the current Viscount Rothermere, Jonathan, will stay in charge.
But chairman Jonathan has done remarkably well since taking over from his late father Vere, growing Metro in the UK and sitting on top of the mid-market newspaper sector as well as growing quietly in online.
He's also giving News International (that other family fiefdom) a good run for its money in the London free newspaper wars with London Lite refusing to lie down before thelondonpaper.
Will the new man be prepared to slug it out with Rupert Murdoch? Will he have the choice?
A merry Thanksgiving on Wall Street
Well one part of it anyway, the opulent headquarters occupied by "Goldmine Sachs".
This Thursday, the Goldmanites will be able to treat themselves to a second slice of Thanksgiving turkey as they contemplate the 2007 bonus pot ($16.9bn currently).
While other banks have been writing off billions on sub-prime (the term apparently comes from the meat market, prime was the edible stuff, choice or sub-prime needed rather longer cooking), Goldman Sachs offloaded most of its liabilities long before the credit crunch.
And it's been making money hand over fist elsewhere.
Wall Street will be closed Thursday with shorter trading on Friday.
Before then we'll have figures on consumer sentiment (hardly likely to be good), housing starts (which may not be quite as bad as people think) and (later today) earnings from HP (stellar, probably).
So the world might not end.
A lot of bankers, from the Bank of England's Mervyn King to HSBC's Stephen Green are worrying aloud that share prices are worryingly high.
This could be because some of these gentlemen have seen their own fall rather precipitately.
The view probably doesn't look as bad from the vantage point of Apple or Microsoft or, indeed, HP, the world's biggest PC maker.
So HP's results will be awaited with even more interest than usual.
Chinese wall of money is heading – somewhere else
According to HSBC Global Research China may invest up to $246bn next year in overseas stock markets, but not, alas, in the US and Europe.
So far, the Chinese authorities have authorised $40bn, half of which has already gone into Hong Kong stocks with South Korea reckoned to be next on the list.
Some of this will find its way to US and European companies with big footprints in the Far East but the Chinese seem to have twigged that the US authorities are wary of them buying up big chunks of US companies and are steering clear.
One immediate beneficiary is UK Far Eastern specialist Standard Chartered Bank, whose shares were up 3% in early trading today (Monday) on speculation that three Chinese banks had approached the Singapore Investment Authority over its 17% stake in the bank.
Perhaps they'd like to buy Northern Rock?
Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.
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