Comment, analysis and other offerings from Tuesday’s FT,
Frederic Mishkin: Not all bubbles present a risk to the economy
There is increasing concern that we may be experiencing another round of asset-price bubbles that could threaten the economy, writes Mishkin, professor of finance and economics at the graduate school of business, Columbia University, author, and a former member (governor) of the Fed board of governors. Does this danger provide a case for the Fed to exit from its zero-interest-rate policy sooner rather than later, as many commentators have suggested? The answer is no.
Gillian Tett: Flood initiative shows cross-border risk
As G20 financial policymakers gathered in Scotland, there was a debate about policy reform — and the lessons that financiers should learn from past banking disasters, writes Tett. But for another — more offbeat — clue about policy challenges awaiting the G20, financiers might do well to take a glance at a meteorological initiative that is under way in Reading, England, to measure European flood risk.
Lex on US oil refiners
Capacity utilisation is now barely above 80 per cent and may go lower next year as huge and efficient new refineries, mostly in Asia, worsen the glut . But there is light at the end of the tunnel for stronger independents. Meanwhile, disposals by integrated companies have put some attractive assets on the block at good prices. Furthermore, pessimism over the hefty cost of US cap and trade legislation may be exaggerated. Independent refiners may have to wait five or more years to see profits return to normal, but their shares are trading as if it will be an eternity.
News analysis: Threat from large budget deficits looms
Government bond yields have been at historic lows this year as extremely easy monetary policy, quantitative easing and an anaemic global outlook have underpinned the market, write FT reporters. However, in recent weeks yields, which have an inverse relationship with prices, have started to tick higher. Is that simply pricing in economic recovery or does it invite the question, will 2010 be the year of a sovereign debt sell-off?
The Short View: M&A is bad for bonds
Takeover talk buoyed the stock markets on Monday. Intuitively, however, dealmaking is bad for bonds – it means that management is focusing on growth, not the balance sheet, which will weaken anyway with any debt used to fund the deal. Ironically for a year with so little M&A, unprecedented investor appetite and the resulting bond market rally mean the standard negatives would have been unlikely to have resulted in significantly higher borrowing costs to any well-regarded bidder. The question for this expected raft of would-be acquirers is whether they will be quite so lucky with the market mood next year.
Trading Room, video: High-frequency trading, the big issues
Larry Tabb, founder and CEO of financial markets consultancy Tabb Group, discusses growing concerns about computer-driven high-frequency trading.
Energy Source: How to solve ‘carbon leakage’
One of the difficult issues facing countries negotiating at Copenhagen is ‘carbon leakage’. Developed countries agree — in principle — that they should sign up for more stringent emissions reduction targets. But this has raised the prospect of ‘carbon leakage’ – or, work going offshore to developing countries that have more generous limits. Professor Graciela Chichilnisky, a key designer of the Kyoto Protocol carbon trading system, says the carbon leakage problem could be addressed in a way that saves face for both the US and China, and means emissions will be reduced.
View of the Day: Gold’s new standard
A new floor is being established for gold at $1,000 an ounce says Stephen Walker, director of global mining research at RBC Capital Markets, who expects positive momentum to continue into 2010. While there may be short-term corrections in gold prices and gold equities, he would view these as an investment opportunity rather than a catalyst for liquidation.
Stefan Stern: Farewell to a brilliant thinker
The death of Russ Ackoff a few days ago, even at the impressive age of 90, has provoked an outpouring of expressions of regret and admiration from former students and colleagues of this management thinker, writes Stern. I suspect that some of them feel his work never quite received the recognition it deserved, even though he was widely admired. But like Peter Drucker, Ackoff rejected the label “guru”. Followers of gurus do not think for themselves, Ackoff believed. He preferred to see himself as an educator.