Comment, analysis and other offerings from Friday’s FT,
Gillian Tett: Greece and Dubai show system remains unstable
A watershed in the derivatives world could be reached this week: the cost of insuring against a bond default by Greece, using credit derivatives, may rise above the comparable metric for Turkey for the first time. Just two short years ago, that would have seemed almost inconceivable to most credit default swaps traders, never mind proud Greek politicians, writes Tett. After all, in 2007, the Turkish CDS spread — like that of many “emerging markets” — was trading at about 500 basis points on perceived fiscal risks.
Jim Krane: Dubai gambles with its financial reputation
When you start building a third island shaped like a palm tree, intending it to be as big and crowded as Manhattan, you are crying out for a sober voice to bark: “Stop!”, writes Krane, author of ‘Dubai: The Story of the World’s Fastest City’, published in North America as ‘City of Gold: Dubai and the Dream of Capitalism’. But when that island is just one atoll in an artificial archipelago that would reconfigure the Persian Gulf coast into a thicket of trees, a map of the world, a whirling galaxy, a scythe and a sun that looks like a spider, what you need is some corporate restructuring.
Editorial: A breathtaking blunder in Dubai
Of all the glitzy emirates on the western shore of the Gulf, Dubai is easily the brashest. With the grenade it has just lobbed into the capital markets by calling for a six-month creditor standstill for its flagship Dubai World holding company, it is effortlessly living down to that reputation. Dubai’s action looks like either a serious misjudgement or, more likely, a breathtaking cock-up.
Lex Dubai World
Argentina’s default in 2001 didn’t come out of the blue. Nor did Lehman’s collapse. Yet both caused shockwaves. Now it may be Dubai’s turn.
Anthony Bolton: Chinese stocks are set to lead the world
I recently spent three months based in Fidelity’s Hong Kong office and this rekindled my interest in the region and China in particular, writes Bolton, president, investments at Fidelity International. After a few weeks there, I said to my wife that the exciting opportunities available in China, and my belief that the market could go a lot higher over the next few years, made me wish I was still managing money.
Avinash Persaud: Boomtime politicians will not rein in the bankers
One of the features that singles out the Warwick Commission on International Financial Reform, which publishes its final report on Friday, is that while other expert groups tiptoe around it, we have been able to point to the true source of the worst financial crisis since the 1930s: regulatory capture and boom time politics, writes Persaud, chair of the Warwick Commission, chairman of Intelligence Capital and an emeritus professor of Gresham College.
Al Gore and David Blood: Time is up for short-term thinking in global capitalism
Why do investors and business leaders continue to focus on the short-term and ignore the fact that businesses that think long-term end up more competitive and profitable, write Gore and Blood, former vice-president of the US and managing partner of Generation Investment Management respectively. Behavioural economists believe they have the answer.
Analysis: Organic mechanics
What do you call a financier in search of the iron laws of human behaviour? Answer: someone with a bad case of “physics envy”.That is the peculiar psychological disorder diagnosed by Andrew Lo, a professor of financial engineering, as afflicting bankers and economists. Symptoms include a desperate search for the predictive certainty that comes from the hard sciences.
Markets: Slide in trading volumes puts spotlight on rally
US stocks have surged more than 60 per cent since their March lows, but trading volumes have dwindled, raising questions about whether the rally is sustainable.
View of the Day: Oil prices are too high
An oil price at $80 a barrel is inconsistent with supply and demand dynamics, inventory levels and the current macroeconomic environment.
Short View: CoCos
Are they bonds? Are they stocks? Or are they actually catastrophe insurance? “They” are contingent convertible capital notes, a new form of hybrid, nicknamed CoCos.