What we’ve been reading

16 November 2011

25 May 2011

European sovereign debt crisis… timeline… Athens express or a slow motion train wreck?

  • Greece asks for help in tackling public debt – UK Telegraph
    In a series of clandestine meetings, initially denied by officials, the challenge of how Greece reduced debt whilst in a recession was put to politicians and central bankers. Markets swirled as evidence grew of disagreement between the various players. Competing proposals ranged from debt restructuring, recommitment to austerity with particular focus on asset sales, or even the provocative suggestion of Greece leaving the single currency.
  • On the true agenda behind Der Spiegel’s story that Greece is thinking of exiting the euro – Yanis Varoufakis
    Was the suggestion of Greece leaving the Euro credible? What seems clear is that there was a dispute most evident between German political circles and the ECB that Greek debt needed to be restructured.
  • Ireland’s future depends on breaking free from bailout – Irish Times
    The debate about Greek debt was made all the more problematic by stirrings in Ireland about the reasonableness of the deal that had been struck with Europe. As noted before the Irish election the Irish people have had foisted on them for debts one can argue many are not responsible a deal designed to discipline the rest of Europe. The article above details this. Written by high profile Irish academic Morgan Kelly it emphasised that the deals being struck behind closed doors for the “ultimate well being of Europe” where increasingly being seen as suspect in Europe, both in the core and the periphery.
  • Why I Won’t Support More Bailouts – Wall Street Journal
    In AAA rated Finland, the populist-nationalist True Finn Party, which did well in recent elections, echoes many of Ireland’s concerns about the viability of the Eurocrat’s solutions. This column by it’s leader is a succinct summary of the extreme scepticism the ECB is seen with.
  • IMF Weighs Extending Greek Repayments – Wall Street Journal
    Clearly elements were considering a variant on re-structuring Greek debt. The variation was extending repayment periods to lessen the immediate blow. The reality is that such a change would still represent a diminution of the market value of those loans, and probably trigger a CDS event. European Banks and the ECB would take significant losses. Remember the ECB has accepted Greek government debt as collateral to supply liquidity to Greek and other European banks. And if Greek got special consideration it would be a short step to Ireland and Portugal demanding similar consideration.
  • European Central Bank threatens to pull the plug on Greek lending – UK Telegraph
    After all the talk of debt restructuring the ECB came out controversially and aggressively threatening to stop honouring Greek sovereign debt as collateral. This would bring down the entire Greek banking system, and possibly a significant part of the European banking system. Why would they do this?Our understanding of theECB’s perspective can be summarised as follows. The ECB understands that an adjustment of Greek debt would involve an adjustment to all peripheral debt, something which the system would struggle with. Further to that the ECB’s offered solution cannot be read just from surface utterances. Rather it seeks the peripheral states to move towards primary surpluses and structural reform, before potentially launching new funding structures that would materially lower funding costs of the peripheral states. This is as much a political as an economic matter. Such a funding structure, for example a euro-bond, would be politically unacceptable to core voters until discipline was shown. Then funding costs would fall radically and a virtuous cycle would commence. The problem is can the peripheral states get across the line politically? The short term costs are politically unpalatable to a large part of the population that do not feel responsible for the debts incurred. So there is a dangerous impasse. Leaving the Euro could see the value of assets, and the pension systems of peripheral states collapse. Staying in means enduring pain. Hence the pressure from the periphery to restructure debt.
  • Greek Aid Level Hinges on Asset Sales – Wall Street Journal
    Within Europe complaints at the speed of Greece’s actions have focused much on the question of asset sales, as much as spending cuts or tax increases. The slowness of Athens to sell assets has been seen as problematic. Within Greece the idea that assets would be put up for a potential fire sale is seen as an affront to national pride. As it stands now the Greek Prime Minister appears to be towing the line.
  • Greek Prime Minister rules out any restructuring of debt – UK Telegraph
  • Spain Vote Threatens to Uncover Debt – Wall Street Journal
    The political risks were highlighted by Spanish local election results. Combined with street protests by unemployed young people where unemployment has reached 45%, wins by the opposition raise a collection of risks… What local government debts might be revealed? Have the Spaniards been under-reporting? And if more medicine is needed can it gain the political consensus needed.
  • Greece crisis worsens amid political stalemate – UK Telegraph
    And now the news is that the Greek government will not receive support from opposition New Democracy. Whilst measures will pass parliament, numerous groups in Europe are demanding a political consensus in Greece in order to guarantee that the country persists with hard reform. Initially consensus was loosely achieved in Ireland, but the question is can it persist under the weight of few gains in a deflationary debt spiral?

    Speaking to market participants there has been widespread complacency on the Greek issue. It is believed that it is containable because whilst Ireland, Portugal, and Greece are not of sufficient scale to bring down the system, it requires Spain to fall… and Spain is rich enough to respond despite fears… The testing moment might be upon us.

6 May 2011

  • Portugal faces two years of recession, warns finance minister Teixeira dos Santos – UK Telegraph
    As we frequently mentioned, bailout packages in Europe condemn the recipients to major impediments to growth… Portugal now forecasts two years of recession based on implementation of the IMF-EU package.
  • ECB holds off raising interest rates – UK Telegraph
    The same day Trichet announces no rate increase. Growth impetus in Germany is decelerating, whilst the periphery is sick. Germany is very sensitive to China. The ECB is desperate to avoid debt restructuring in the periphery. And the strong Euro is hitting peripheral Europe, which is competing with low labour cost competitors harder than it hits Germany. So Europe’s capacity to be macho about interest rates seems exposed. The Euro tumbled. Does this mean that world growth is rolling over? Or are we changing leadership away from Europe and China towards a recovering US? The US data does not yet show a broad enough recovery.
  • Crude Oil Falls Below $100 a Barrel – New York Times
    Was oil strong because of increasing cost of production, high world growth, weak USD, or all of the above? ‘Speculative’ or financial interests in the oil market were at record highs. So we saw a dramatic sell off last night in oil and commodities. What was the prompt? Are markets just taking profits, pricing sitting above production cost levels which sit around $80-90 or is this forecasting the global economy rolling over?
  • Ahmadinejad allies charged with sorcery – UK Guardian
    Middle Eastern politics remain treacherous. There is a power struggle taking place in Iran between the President and the Clerics. What will this mean for the region?
  • Power bubbles are Hu’s big challenge – Asia Times
  • Alarm at China’s private credit crunch – Sydney Morning Herald
    The recent tightening of credit in China as in other economies sees funding starved most dramatically to smaller businesses. In China though this equates to the private sector, versus state-controlled larger businesses, meaning the credit crunch also has major political and structural economic implications as money is streamed to support inefficient activities over efficient. Is this one of the reasons for the increasing risk of political instability? Food prices are just one cause of discontent. Disenfranchised middle classes were the triggers of the French and Russian Revolution.
  • Technology: A binary goldmine – Financial Times
    Location based data is now the talking point of privacy and business models… the scary brave new world considered…

5 May 2011

  • Mexican central bank buys 100 tonnes of gold – Financial Times
    As Warren Buffet similarly commented, we haven’t been particularly interested in gold as a productive asset. But we fully acknowledge that gold is a monetary asset. Given that the Euro has certain question marks given sovereign debt questions, the yen is the currency of a nation facing extraordinary structural challenges, and China is yet to float its currency marking it as an asset that is first and foremost the property of the state, gold is being re-adopted as a currency choice. It is telling that as the US dollar is negatively impacted by a loose domestically-focused monetary policy, China is yet to significantly de-peg its currency magnifying the global imbalances.
  • South Korea seeks to shift reserves to China – Financial Times
    Again on the question of reserve currencies South Korea indicates its intention to hold Chinese RMB in its foreign currency reserves. It joins a handful of central banks with these holdings – Malaysia, Norway, and Hong Kong… Such holdings have to be currently sanctioned by the Chinese authorities. We watch this space. What is the significance of who is on the list? And who will be permitted to join?
  • China, Japan, Korea to Study Local-Currency Trade Settlement – Wall Street Journal
    Further to move away from the US dollar as the reserve currency of settlement.
  • Two Beijing Economists Urge Yuan Free Float – Wall Street Journal
  • Experts: Time not ripe to float yuan – China Daily
    When will RMB float?
  • Siemens warns on Brazil’s strong real – Financial Times
    The mirror of this is the strength of commodity currencies. We have blogged about this. In Brazil with its massive population, and the need to sustain domestic employment the high currency speaks threatens domestic industry, and new investment in sectors other than mining. Industrial giant Siemens references specifically the growing challenges of doing business in Brazil.
  • Struggling families delay paying electricity bills – News.com.au
    And we wonder how much strain parts of Australia not directly benefitting from the mining boom are under now, and the implications for interest rates and the Australian dollar.
  • US set to regain industrial crown – Financial Times
  • Analysis: Will Costs Drive Firms Home? – Wall Street Journal
    Conversely to the problems facing Brazil, a report from Boston Consulting Group picks up a theme that is now gaining popular attention, the re-industrialisation of the US Rust Belt. Loose monetary policy, in weakening the US dollar is now setting in place perhaps the intended reaction, investment in jobs and production in the US. Chinese wage rises are helping. We are concerned about China.
  • Intel claims 3D chip revolution – Financial Times
    TSMC head Maurice Chang was suggesting that the Moore’s law productivity improvements, representing effectively the doubling of computing power at a given price point every 18-24 months were drawing towards a close. Intel now claim a technological breakthrough that will significantly extend Moore’s Law. The design breakthrough involves moving from two dimensional circuits to three dimensional circuits.

3 May 2011

  • Eurozone output shows second fastest monthly jump since 2000 – Guardian UK
  • German Unemployment Declines to 19-Year Low as Export Boom Drives Demand – Bloomberg
  • Euro-Zone Inflation Hits 30-Month High – Wall Street Journal
  • Spain’s Jobless Ranks Soar – Wall Street Journal
  • German Retail Sales Drop 2.1% – Wall Street Journal
    On the surface European growth looks good, in part explaining the strong Euro versus a US$ mired in the politics of fiscal consolidation and the perception of a Fed ‘printing money’. European exports to China continue strong. But is this peaking? Europe is caught between weakness in peripheral economies, with inflation fears at the core. And even in the core consumer confidence is not solid. Market concern; rates rise as the economy is fragile…
  • Germany Finally Opens Labor Market to Eastern Workers –Spiegel Online
    Germany unlike Britain declared a moratorium in opening its borders to European migration for 7 years. That moratorium rolled off May 1. German unemployment is now reaching 19 year lows at 7.1%. More significant wage rises have just started in Germany after years of caution. Will incoming labour diffuse wage pressure? But what will the local population feel about this?
  • EU’s Barroso: reintroducing Schengen borders ‘a possible option’ – Wall Street Journal
    The politics of North African refugees is threatening Europe’s open borders. Italy has threatened to issue refugees visas allowing them to cross into other European nations based on the open border policy. Europe is concerned. North Africa is Europe’s ‘Mexico’. There is even talk of a Marshall Plan for North Africa. Seems impossible as the European periphery melts down.
  • ‘North Africa Needs a Marshall Plan – Spiegel Online
  • New Households Form at Fastest Rate Since ’07 in Resurgent U.S. – Bloomberg
    As the US economy picks up will demand for housing spring back? Signs improving…
  • Banks Are Lending, but Pace Falls Shy – Wall Street Journal
    A critical question facing equity markets, and the economic recovery, is whether bank loan growth will resume? And what are the spreads that banks will earn on those loans? The profit share going to financials at the peak of the past cycle looks clearly excessive, but what is the norm? The US banks were the first out of the crisis [if you ignore Australia], but after their initial bounce, what is future growth like?
  • Rapprochement leads to hopes for regulatory holiday – Financial Times
    Telecom companies are now caught up in the capital needs for mobile broadband. Around the world they are asking for regulatory changes to “justify” the investment. In Europe where the Telcos have relatively greater political leverage given there are still significant state shareholdings and they are large employers they seem likely to extract greater favours. But is this good news? Watch this space.

2 May 2011

  • Greece: Hard to hold the line – Financial Times
    Greece reignites as problematic. Whilst Greece undertook initial social security reform, the government has baulked at privatisation of assets, and deregulation of bureaucracy that would have cut outstanding debt, and increased economic flexibility. This suggests that default risk is high because of the nexus of a debt deflation trap with GDP contracting 4.5% last year, and potentially 3% this year, with public resistance to any change, given that “someone else is to blame” for the nation’s problems. The Euro seems inured to these problems, focusing on German strength. If Greece is let go to the wall, will things be so benign?
  • German Politics Faces Grass-Roots Threat – New York Times
    Democracy can no longer deliver coherent execution of the old strategies. The public no longer believe that they are being delivered what was promised. They are questioning short term sacrifice to what end?
  • Obama’s perilous assault on the rich – Financial Times
    Understanding the US tax debate is critical in appreciating one of the key political dynamics of fiscal reform in the United States. Published US tax rates, particularly when adding state and local taxes, as well as insurance levies, are not low, but tax paid is. Why is this so? One element well illuminated in this FT Clive Crook column is tax deductions on mortgage interest, as well as low capital gains tax. The focus needs to be not on stated tax rates, but tax reform he argues. Illuminating.
  • America’s ‘rust belt’ states lead recovery – Financial Times
    Manufacturing grew 9.1% in q1 2011.
  • Hiring in the U.S. Still Trails Corporate-Profit Gains – Wall Street Journal
    Working hours still remain subdued generally.
  • Climate change and national security – ABC
    This is a great interview on Radio National with Professor Daniel Moran about global political response to climate change. It speaks not just to whether political processes can cope, but asks a powerful question, do extreme weather events globally shift the politics of climate policy. Do the Tornados mark the beginning of a change in how climate problems are perceived in the US?
  • Climate change could spawn more tornadoes – USA Today
  • Hiring in the U.S. Still Trails Corporate-Profit Gains – Wall Street Journal
    Working hours still remain subdued generally.
  • Climate change and national security – ABC
    This is a great interview on Radio National with Professor Daniel Moran about global political response to climate change. It speaks not just to whether political processes can cope, but asks a powerful question, do extreme weather events globally shift the politics of climate policy. Do the tornadoes mark the beginning of a change in how climate problems are perceived in the US?
  • Climate change could spawn more tornadoes – USA Today
  • Apple’s Chinese workers treated ‘inhumanely, like machines’ – Guardian UK
    Working conditions at Apple supplier Foxconn have been the focus of much understandable attention. On going newsflow remains critical. Apple does have a policy response on acceptable behaviour. We are investigating its effectiveness. We also attach Apple’s most recent response from its web site.
  • Supplier Responsibility at Apple – Apple.com
  • China Data Show Inflation Threat Easing – Wall Street Journal
    Is Chinese tightening policy biting?

28 April 2011

  • Federal Reserve cuts forecasts for growth in the US – UK Telegraph
    Low US interest rates are one of the elements weakening the US dollar. Whilst the Federal Reserve’s stance might not be fuelling inflationary directly, is it indirectly fuelling inflationary pressure by weakening the US dollar? If the US does not have a ‘self sustaining’ recovery, to quote Bernanke, and fiscal consolidation is required, the policy choices are difficult. We believe there are signs of strength in some manufacturing/export oriented sectors.
  • Fed Takes Foot Off the Gas – Wall Street Journal
    Whilst Bernanke flagged no increases in interest rates, he did confirm the Fed’s intention to step out of the bond market. With the end of QE2 (Quantitative Easing 2) investors are left wondering how the bond market will respond. Is this the de facto the beginning of tightening?
  • Britain ‘on the edge of a double dip recession’ – UK Telegraph
    What is happening in the British economy under the weight of tax increases?
  • Greece: a restructuring looks inevitable – Financial Times
    The math of Greek debt explained… There are those that see this restructuring as the apocalypse… but currency markets are more focused on the US at present.
  • Jobs Defends iPhone Location Practices – Wall Street Journal
    There has been outrage in parts of the tech-universe with respect to the tracking of location both by Apple and Google-Android devices. There would appear a number of technical reasons why the data was first collected, and assurances that it wasn’t being used beyond that. Jobs now has moved beyond this to give more assurances, recognising that the Apple brand must not get entwined in this extremely sensitive privacy debate.
  • Apple Q&A on Location Data – Apple
    Here is Apple’s response btw…
  • Yum Gets Hungry for Growth in China – Wall Street Journal
    Finger lickin’ fast food favourite Yum Brands further ramps up China growth with this proposed acquisition of a leading Chinese fast dining chain.

27 April 2011

  • Greece forced to pay sky-high rates to borrow – UK Telegraph
    As we have noted, high levels of austerity in collapsing the Greek economy makes repayment of debt impossible. The Greek Government must start writing off some portion of the debt. An interesting question is why the establishments of these countries have so resisted making these write-offs.
  • Jaguar Land Rover plans assembly plant in China – UK Telegraph
    One of our favourite stock stories at the moment is Tata Motor. What is seen by many as an Indian auto maker is sitting on top of what could be a remarkable global turnaround of Jaguar and Land Rover…
  • Temp Work Booms in Germany, to Labor’s Chagrin – New York Times
    Germany’s low unemployment has been in part achieved by the use of temporary workers.
  • Rich People Still Don’t Realize They’re Rich – New York Times
    The way we understand the state, government, tax is clearly changing. The social contract may be in need of renewal. This is a very important theme.
  • Singapore aims to be renminbi hub – Financial Times
    Finding the systems to facilitate the Chinese currency in a global economy is critical… Singapore unsurprisingly wants to lend a hand…
  • IT spending rebound lifts Intel and IBM – Financial Times
    Results from Intel suggest corporate IT spending has not softened.
  • China to alter taxes in attempt to cut wealth gap – United States Securities and Exchange Commission
    China is now caught in a huge struggle to reorient their economy in a number of ways.
  • Thoughts on Residential Investment Recovery – Calculated Risk Blog
    Calling a turn-around in the US housing market is one of the critical variables.
  • The Bipartisan March to Fiscal Madness – New York Times
    The best summary of the contradictions of the US fiscal mess I have seen of late. Is this the impossible catharsis before real change?
  • EM central banks are doing Fed’s dirty work – Financial Times
    Whose loose monetary policy is fuelling inflationary pressure?
  • The Y Article – ForeignPolicy.com
    A ‘private report’ from the Pentagon examining America’s geopolitical position is a startling and frank exposé. It asks the question, ‘does it make sense to have doubled spending on defence whilst slashing spending on education?’ Truly must read.
  • Hole in Greek finances bigger than thought as bond flight continues – UK Telegraph
    Greece looks truly trapped in a debt-driven economic contraction baring the inconsistencies in the current bailout approach. The telling observation here is ‘The European Central Bank, the only major potential buyer, “won’t buy whilst (some eurozone countries such as Germany) continue to speak and put pressure on Greece to restructure”, said one trader.’
  • Clashes erupt in Shanghai as truck drivers strike near port – Reuters
    China fears the Jasmine Revolution. How far does discontent simmer below the surface?

13 April 2011

  • China Developers Could Resist Cheap Housing Push – Wall Street Journal
    The Chinese authorities have clearly indicated they want to push social housing as opposed to private sector housing. There are numerous reasons for this. As we have seen in Australia more aggressive policies may be needed to boost more affordable housing. Germany has significantly avoided the property bubbles seen in other parts of Europe, the US, and China by supporting social housing.
  • Oil and trouble – The Economist
    The IMF shows beyond the short-term risk of supply shocks from Libya, and potentially other parts of the Middle East due to political upheaval, the longer-term supply situation could imperil world growth, and most particularly those economies most dependent on oil. Compelling.
  • Studies Say Natural Gas Has Its Own Environmental Problems –New York Times
    Gas has been the principle short-term alternate energy source to more carbon heavy coal and oil fired power generation. Now some serious questions have been raised about some of the newer sources of natural gas. This may not hold back the development of these fields as the US is as much interested in energy independence as it is on carbon emission.
  • Greek Debt Restructuring Looks Inevitable – Spiegel Online
    The question about Greek debt is increasingly not if it will be restructured but when. This piece from Der Spiegel highlights the conflict between the interests of the banking community and the German Government with respect to interventions in ‘peripheral’ Europe. Be under illusion this issue is not the health of the ‘peripheral economies’ but who is responsible for supporting core banks and the ECB exposure to those economies. Is it the German tax payer? Why shouldn’t the banks take the hit. The alternative, as we saw in sub-Saharan Africa is extended pain at street level. Of course corrupt or inept leadership needs to be firmly dealt with. But democracy makes this all very hard. Corrupt leadership can hide behind street protests.
  • Japan quake’s economic impact worse than first feared  – Reuters
    Fukushima has been upgraded to Category 7. Further to this we have been concerned that supply chain impact was almost impossible to ponder.
  • Industry left high and dry – Financial Times
    The FT examines the question of the impact of the Japanese supply chain.
  • Foxconn seeks iPad deal with Brazil – Financial Times
    Note that Brazil has long been concerned that a depressed Chinese RMB tied to the US dollar depresses Brazil’s capacity to develop manufacturing industries to absorb its large population. Brazil, like Australia, sees its currency strong echoing its position as a leading commodity exporter. The Chinese are announcing a string of industrial deals during the visit of the Brazilian President, Dilma Roussef, to Beijing, ranging from electronics assembly to aircraft.

8 April 2011

6 April 2011

  • Office for National Statistics reveals first drop in family income for 30 years – UK Telegraph
  • Sweden tries to solve nuclear storage problem – Financial Times
    Nuclear fallout. In Britain the leader of the junior coalition partner, the LDP, Nick Clegg appears to have effectively torpedoed nuclear power. The debate will only get more intense. Interestingly in Sweden, the Government is now considering an application to build the world’s first long-term storage facility for nuclear waste, for up to 100,000 years!
  • Japanese nuclear engineers plug Fukushima leak – Guardian UK
    The Japanese may have plugged holes in a leaking reactor shell.
  • Fishing Halted in Japan’s Ibaraki After Radioactive Water Contaminates Sea – Bloomberg
    96% of fishing in Ibaraki was suspended, representing 3.4% of total output in Japan after radiation was detected above legal levels. The problem is as much fear is hitting Japanese food manufacture. We hope the problem is peaking but resolution is clearly deeply complex and involves sustaining the over-heating reactors in crisis mode for a sustained period.
  • U.S. Sees Array of New Threats at Japan’s Nuclear Plant – New York Times
    The New York Times summarises the complexities here.
  • Amber Waves to Ivory Bolls – New York Times
    In another challenge to world food supplies, high cotton prices are seeing a shift in US agricultural production away from food-related crops to cotton.
  • Food Inflation Kept Hidden in Tinier Bags – New York Times
    As our friend Pippa Malmgren has long noted, food inflation is here, but much of it is disguised as shrinking packet sizes of your favourite supermarket staples.
  • German Banks Are Critical of Tough Standards for Stress Tests – New York Times
    Europe is on the verge of announcing bank stress test results. It is not just some of the peripheral banks that look at risk, but tellingly some banks in the core, such as the German Landesbanks. The negotiations around sovereign debt are seen by many as more focused on protecting the weaker banks at the core, than in helping the resolution of European imbalances.
  • India telecoms minister and chiefs charged – Financial Times
    Indian capitalism has struggled with corruption, both within certain major companies with some notorious accounting frauds, and liaison with the Government. The country has been rocked with corruption scandals, most particularly focusing on major irregularities in awarding telecom licences. The former minister of telecommunication has been charged with corrupt handling of spectrum auctions that have cost the state up to 39bn.
  • Fed Minutes Show No Haste to End Stimulus – New York Times
    Central banks attitudes to interest rates are always in focus. The US Fed’s much debated Quantitative Easing policy, particularly its most recent incarnation, QE2, rolls off end of June. Has it worked? The jury is out. It may have helped, but the US is not out of the woods yet according to the latest Fed minutes. Housing prices are worryingly still falling in the US. But has it caused the inflationary jump in oil and food prices we have seen? Again this is highly contentious. The weak US dollar has probably driven up oil prices at the margin, but the increase can be as much attributed to global supply factors, a supply shock.
  • China raises rates to tackle inflation – Financial Times
    China raised rates on Monday. Is inflation yet under control? The market is speculating that China is close to ending its tightening process, hence the Chinese market and the Australian dollar didn’t weaken on the surprise news.
  • ECB set to lay out rate hike strategy – Google News
    And the European Central Bank is expected to raise rates this week, even as Portugal was downgraded by Moody’s, and local Portuguese banks threaten not to bid for a government debt issue, unless the Government accepts at least a short-term EU bank bailout.

29 March 2011

  • A grand bargain that cannot end the crisis – Financial Times
    FT columnist Wolfgang Munchau summarises very well here the contradictions of Europe’s attempts to get its fiscal shop in order. Politics in Europe is getting more difficult not less, making the deals done so far more problematic.
  • German Greens hail state victory in vote overshadowed by Fukushima – Guardian UK
    The Greens may have won power in Germany’s richest state, Baden Wuttermberg.
  • Nicolas Sarkozy’s party rebuked in French local elections – UK Telegraph
    And in French local elections, the Left and far Right won at the expense of Nicholas Sarkozy’s government, both political movements being opposed to ‘economic reform’.
  • Tainted Water at 2 Reactors Increases Alarm for Japanese – New York Times
    Can markets discount worse case scenarios or do they just get numb after initial fears and then wait and see? The Japanese nuclear situation continues to deteriorate. Is this inevitable pockets of bad news in a pattern of containment, or a death of 1000 cuts.
  • Agency knew of staff nuke risk at Fukushima plant – The Australian
    The radioactive puddles might indicate a breach in core reactor containment units. These pools may stop workers gaining access leading to cascading deterioration. Company management credibility is negligible. Deeply concerning.
  • Google Sets Role in Mobile Payment – Wall Street Journal
    Using your mobile phone as a payment tool is the much expected next big thing. It’s coming, soon. Google announced a partnership with Mastercard and Citicorp to develop a version of the technology.

25 March 2011

  • Portugal in crisis after prime minister resigns over austerity measures – Guardian UK
    Markets go up despite the resignation of the Portuguese Prime Minister yet the politics of European sovereign debt seems far from resolved.
  • Franco-German tensions rise on twin shocks – Financial Times
    The European communiqué for the summit is delayed until Monday. And Franco-German relations have hit a few big boulders right at this moment. France is the most committed European country to nuclear energy. German statements on nuclear energy hit French local politics, just as France unilaterally recognised the Libyan opposition, and pushed for the UN resolution. Germany notoriously abstained.
  • Fischer Joins Criticism of German Security Council Abstention – Spiegel Online
    Germany’s bid for a permanent seat on the Security Council looks in trouble.
  • Expectations Rise for Bailout of Portugal – New York Times
    Now a bailout of Portugal looks inevitable. But to pass certain measures the approval of all members is required. Finland has already said it cannot approve some of them before parliamentary elections on April 17. But the markets are not pricing credit risk in Spain for any contagion. The Bank of Spain delivered credit assessments of its banks and credit co-ops [cajas] that did not meet many more conservative estimates, but the ultimate capacity of Spain to meet more onerous credit conditions is now seen as more credible. And the Spanish authorities see that a number of their weaker banks may be able to raise capital from the private sector, so they need not replicate the Irish experience of the public balance sheet being exposed to failing banks.
  • Spanish Cajas in talks with hedge funds – Financial Times
    There are certainly a number of hedge funds and private equity vehicles examining investing in Spain.
  • Spain’s Bank Rescue Hits Headwinds – Wall Street Journal
    But will investors bite? The jury is out. But consensus seems very relaxed right now.
  • The west can’t rebuild on the China cheap – Business Spectator
    Cheap goods from China has been a major theme of the past decade or so. One of the most high profile companies that has literally powered this process is Li and Fung. L&F is responsible for the outsourcing of clothing manufacture for an array of high profile retailers including Wal Mart and Gap. It has just announced the era of cheap Chinese production is drawing to a close. Price rises are coming. The markets have expected this for a while, in part because of high cotton prices. Wages have risen around 20% this year in China for L&F, though production is now moving to Indonesia, Vietnam, and Bangladesh.

23 March 2011

  • Stress Test for the Global Supply Chain – New York Times
    The global supply chain has gotten very tight with cost minimising strategies. This is one of the primary areas of concern for impact of the Japanese earthquake on the global economy.
  • Some Worry That Success of Apple Is Tied to Japan – New York Times
    Can the likes of Apple and HP get the parts they need in their production processes. Apple, whilst thus far executing superbly, being a market darling is particularly vulnerable in the short term.
  • A global energy war looms – UK Telegraph Blogs
    The market confronts the probability of significantly higher energy prices. Whether this is driven by the geopolitics of the oil production, rising demand, question marks raised over nuclear, or the necessity for carbon pricing, we are confronted by the need for innovation, and a challenge to the economy.
  • Natural Gas Now Viewed as Safer Bet – New York Times
    Natural gas is seen as the biggest mid-term winner in this process. We have long focused on this, but it will be a few years before new gas fired power stations come on line. And is nuclear dead? The jury is clearly out, but it is interesting to note that these B grade reactors have thus far survived an earthquake of 9.0  on the Richter scale, and a tsunami.
  • Why Fukushima made me stop worrying and love nuclear power – Guardian UK
    The argument against nuclear is not clear.
  • Safe nuclear does exist, and China is leading the way with thorium – UK Telegraph
    And there is a safer nuclear technology in thorium.
  • Portugal crisis threatens to trigger poll – Financial Times
    There is quiet belief that Portugal will come under European protection, forced to accept the costs that are likely to be imposed. Spain is seen by many as having shored up its situation sufficiently, with sufficient latent strength to not require this aid, and withstand Portuguese restructuring. The end of this week will be marked by another European summit and pronouncements on this issue. Bailing out Portugal is expected to be announced as close to German regional elections as possible, so as to not impose political costs on Angela Merkel. But Portuguese politics may not comply.
  • Portugal edges towards ‘inevitable’ bailout from EU partners - Guardian UK
    And against this rumours of an Irish bank default re-emerge.

14 March 2011

  • Japan’s Nuclear Crisis Stokes Fear in Europe – New York Times
    The tragedy of the Japanese earthquake and tsunami now risks a major second round catastrophe as nuclear facilities tip into meltdown. This ecological disaster challenges the newly forming consensus that nuclear power is a practical choice in the face of a carbon-challenged world, as well as to those states seeking energy independence from either Russia or the Middle East. This will be an important debate impacting energy policy and investment. Angela Merkel has described Japan as a turning point. Does she mean it? Or is she just playing for an imminent regional election?
  • Second Explosion at Reactor as Technicians Try to Contain Damage – New York Times
    New York Times summarises the current state of the risks here. The use of saltwater to flood reactor has been described as a ‘Hail Mary’ pass i.e the situation has gone beyond any planned strategy. The failure of backup power to meet multiple redundancies sits at the centre of a critique as to the safety of the Japanese facilities. And what are the economic consequences? Whilst smaller, the Kobe quake struck closer to a large city. Economic production was forecast to take up to a decade to recover. Instead, within 18 months production recovery was close to 98%.
  • Total German triumph as EU minnows subjugated – UK Telegraph
    Will the democracies of peripheral Europe accept what Germany has imposed on them?
  • EU States Duck Financing Challenge – Wall Street Journal
    The ECB seems left having to buy bonds as governments seem at logger heads. Ireland may not comply. Portugal tries to comply, but at street level it is getting ugly. And Greece, even if it does comply, is still in trouble. Default is being demanded now by significant elements of the population. What does this mean, for example, for the likes of Ireland?
  • State will need all the help it can get in finding a way to repair banking system – Irish Times
    How much capital must the country put into its banks, at the same time being told to fire-sale distressed assets?
  • Some 300,000 protest job insecurity in Portugal – AFP
    In Portugal, 300,000 people took to the streets to protest. Yet, maybe it is good news that at least someone is getting their way, even if it is Germany. This is how leadership looks.
  • Euro Leaders Turn Fund Into Bond ‘Firewall’ as Greek Rates Cut – Businessweek
    The Euro rose on the news, suggesting the market saw the outcome as better than expected.
  • Muddling through will not work this time – Financial Times
    FT columnist Wolfgang Munchau summarises here how this is a muddle-through plan. In summary the strategy is if things are held together for long enough European banks will get themselves in order ahead of potentially necessary defaults. The critical question lurking below the surface is whether, if the elastic band breaks, and Greece, Portugal, and Ireland individually or collectively default, and/or leave the Euro block, is that good or bad news for the rest of Europe, and the World? Spain looks like it is working its way through the crisis.
  • Saudi Arabia Is Back: 200 protest In Riyadh, Police Fire Shots In The East – Business Insider
    But there are still skirmishes. Failure of the West to intervene in Libya may mean local authorities believe they have implicit sanction for aggressive suppression.

11 March 2011

10 March 2011

  • EU paralysis drives fresh bond rout – UK Telegraph
    Europe sitting again on the brink of catastrophe. Debt writedowns are essential, but this requires the recapitalisation of core European banks… always the stumbling block because forced recapitalisations mean senior bankers lose their jobs, God forbid.
  • Europe’s banks face 5% stress test ratio – Financial Times
    It is interesting to note against the backdrop of the European Sovereign bond crisis, the second round of bank stress testing being undertaken by European authorities.
  • Europe Blinks on Bank Test – Wall Street Journal
    The market is uncertain as to how stringent these tests will actually be.
  • Media will be forced to play by the internet’s rules – Financial Times
    Battle lines are being drawn over how media subscriptions will be accessed. Apple is aggressively enforcing contractual terms linked to its iTunes format. Media companies are baulking. What is at stake is not just media subscriptions but the move to electronic payments. Apple is joining the likes of Amazon as an e-payment hub.

21 February 2011

16 February 2011

  • Print me a Stradivarius – The Economist
    The Economist reports that developments in 3D manufacturing could have a profound impact on mass production.

10 February 2011

7 February 2011

31 January 2011

  • How Apple and Google will kill the password – Computerworld.com
    This is a great summary of how Phones could change the world and become a key for so many things. This is part of what I was talking about as the opportunity for Google in 2011 to do payments etc. According to blog from Schmidt, payments will be launching this year. NFC is already in Nexus S. Make an important point that Apple is perhaps in a stronger position than Google given they already have 200mn users Credit Card information with iTunes.
  • Inflation in China May Curb U.S. Trade Deficit – New York Times
    Inflation in China anecdotally appears to be having a real impact on Chinese export competitiveness.

29 January 2011

  • Crouching tiger, soaring cranes, rumbling doubts – Sydney Morning Herald
    The local Australian press which has tended to increasingly see China as a one way bet for the next 10-20 years are now picking up on some of the emerging concerns on the economic and policy front in China. The long-run effects of the recent very strong credit growth and extremely ‘loose’ monetary policy in China are not at all clear.
  • China Will Face Crisis Within 5 Years – Bloomberg
    Bloomberg survey that showed 45% of Investors (Bloomberg customers) believe China will face a ‘Financial Crisis’ within the next five years. However, as the article points out ‘timing is everything’ and the property market is absolutely critical to what happens in China …

24 January 2011

21 January 2011

20 January 2011

19 January 2011

17 January 2011

Europe:

  • Irish lenders besiege central bank for emergency loans – UK Telegraph
    Problems continue for Ireland even after the bailout. The UK Telegraph reports on the growing liquidity crisis of the Irish banks. Asset losses and a slow motion bank run has apparently left the banks with little left which they can use as collateral to continue borrowing from the ECB.

 

US:

  • Hedge Funds’ Pack Behaviour Magnifies Swings in Market – Wall Street Journal
    The WSJ reports that the growing herd behaviour of hedge funds is amplifying moves in capital markets, and helping to create ‘risk on’ or ‘risk off’ days.
  • State and Local Budget Update – Calculated Risk
    The US Local and State budget problems are growing. Calculated Risk and Huffpo outline who, and how much.
  • New Hit to Strapped States – Wall Street Journal
    And the WSJ highlights the approaching State and Muni bond refinancing crunch, as investor demand shrinks for bond issuance shrinks.

Asia:

13 January 2011

12 January 2011

11 January 2011

8 January 2011

  • Why Chinese Mothers Are Superior - Wall Street Journal
    An article worth reading if your child is starting or back at school this week. The article on “extreme” parenting techniques (no TV or computer games, no playdates, no grades less than ‘A’, etc) is based on a book by Amy Chua entitled “Battle Hymn of the Tiger Mother”. This article has been the most read story on the WSJ website this month. The new celebrity ‘Tiger Mom’ also featured in a debate with Larry Summers at Davos last week.

 

6 January 2011

  • Brazil pledges to stop US ‘melting the dollar’ – UK Telegraph
    It is interesting to compare Brazil to Australia re currency. Brazil with its large population cannot afford to let its currency appreciate in an unfettered manner without serious damage to its manufacturing sector, whereas Australia has very limited employment in manufacturing.
  • The coming hunger: Record food prices put world ‘in danger’, says UN – The Independent
    Food price inflation looks like topping out in China, but is this just a temporary respite against a global wave of food inflation.
  • Inflation flies up, up and away - UK Telegraph
    The Telegraph in the UK looks at this from an English perspective, but the analysis can be applied globally. The cause of the food price increases is as much that the West is now competing with the developing world for luxuries like meat. Western economic growth has stalled. Western consumers look set to lose out in that competition.
  • Big Media Tells Big Media That Hulu Is Hurting Big Media – All Things Digital
    Recent comments by Phil Kent, the head of Time Warner’s cable network, highlight growing discontent between distribution companies and content owners over the increasing availability of (increasingly expensive) content online, which is threatening to undermine what has been till now a very lucrative relationship for the cable networks who generate significant affiliate fee revenues and advertising revenues from the cable/satellite distribution companies.

5 January 2011

  • The Total Economic Impact of Juniper Networks’ JUNOS Network Operating System – Forrester Consulting
    Europe’s lost generation. Economic success is in significant part a function of culture. Southern Europe’s economic challenges crystallising now in the sovereign debt concerns reflect societies where new business formation and rigid labour markets leave educated youth unemployable without strong family connections. This is why we are now seeing youth rioting across Europe. Hope is being lost. Important.
  • What the hell is going on with TV? – Fortune
    The trend towards internet enabled televisions has been an area rich in product innovation in recent years with technology companies, TV manufacturers, and more recently the cable companies increasingly competing (or collaberating) with one another in a race to secure control of how viewers search and access web video content. In the US market the cable companies have historically controlled this function via the TV cable set-top box and with good reason they are keen to preserve the status quo although this is becoming more difficult as consumers increasingly go online to source their video content.
  • TV Viewing Continues to Edge Up – New York Times
    A related article highlighting the fact that despite a growing list of alternative media, recent data continues to show Americans are watching more TV than ever before which is the key reason advertising dollars continue to flow to TV.

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