December, 2009
[Wilmot on AV] False idols: are US consumers really over leveraged?
If there is one axiom of today’s Pigovian pessimism it is the idea that after decades of decadent reliance on debt to goose up consumption, US consumers are structurally over leveraged. And that it may take a decade or more of pain to unwind the damage,
[Wilmot on AV] Slugging it out … (in a gentlemanly sort of way) …
In the meantime, Jim Grant is telling us all to keep an open mind…
From Bear to Bull in the Wall Street Journal:
As if they really knew, leading economists predict that recovery from our Great Recession will be plodding,
[Wilmot on AV] A short history of financial euphoria
Another favourite: J.K. Galbraith this time.
That the free enterprise economy is given to recurrent episodes of speculation will be agreed. These — great events and small, involving bank notes, securities,
Allied Irish Banks’ burden-sharing bonus
Burden sharing for European bondholders is something the market has become extremely familiar with in recent months.
So Allied Irish Bank’s announcement on Tuesday morning, that it has agreed to the European Commission’s request that it should not make discretionary coupon payments on its Tier 1 and Tier 2 capital bonds,
[Wilmot on AV] One damn panic after another…
All the US bank runs and panics of the late 19th century — 1857, 1861, 1866, 1873, 1877, 1890, 1893, 1896 and 1907 — are clearly visible in the chart below of the call money rate — the rate for borrowing collateralised against equities.
Reserves and reservations – Japan’s QE redux
Here’s a question worth answering in light of the Bank of Japan’s consideration of Round Two of Quantitative Easing.
Are bank reserves — the things which QE increases — in any way special?
Claudio Borio and Piti Disyatat don’t think so.
[Wilmot on AV] The Pigou effect (but not as you know it)…
The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born not an infant, but a giant; for (the) boom has necessarily been a period of strong emotional excitement,
Australia: She’ll be right, mate
Trust the Aussies to implement one of the most newsworthy yet widely expected interest rate hikes around. The Reserve Bank of Australia on Tuesday raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month,
Dubai World – the $26bn debt workout begins
An overnight press release, with our highlights:
Dubai World (“Dubai World”) and its subsidiaries (the “Group”) would like to update their lenders on recent developments relating to their debt obligations.
[Wilmot on AV] Further reading
- The BOJ – getting serious about deflation?
- Carbon Tax or Cap and Trade…Tim Harford makes it simple.
- Clever Robots and virtual worlds…beyond human intelligence.
- China is humming no longer speeding up.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Sultan Sooud Al Qassemi: This is not the end of the road for Dubai
It is already clear that Dubai’s future is not what it used to be, writes Sultan Al Qassemi,
AV after dark
On FT Alphaville late Monday,
- UBS: still a ‘below average’ bank.
- AIG’s shares tumble on loss reserve fears.
- Just a regular cement deal on Aim?
- Port in a storm: DP World’s London Gateway struggles for funds.
Snap news
Breaking pre-market news on Tuesday,
- Dubai World to carry out restructuring in an ‘equitable way’ – statement.
- GSK completes extension of strategic collaboration with Aspen – statement.
- Xstrata copper enters agreement with Zijin mining group – statement.
[Wilmot on AV] Guest editing for the day…
We FT Alphavillers are (partially) writing ourselves out of the script for a day.
On Tuesday from 7am London time, Jonathan Wilmot, the chief global strategist at Credit Suisse’s investment banking division,
Dubai rejects debt guarantee
Dubai’s government will not guarantee the debts of Dubai World, the state-owned holding company struggling with $59bn in liabilities, arguing that lenders were mistaken to think there would be sovereign backing.
Dubai World begins restructuring
Dubai World said on Monday that other companies in its group such as DP World, Jebel Ali Free Zone and Istithmar would be excluded from its restructuring because they were financially stable. In its first statement since the state-owned company shocked markets last week with news of a debt-stand-still,
Australia raises rates – again
Australia’s central bank raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month amid mounting evidence of a strengthening economy, reports Bloomberg.
GE, Vivendi agree NBCU deal
General Electric has agreed to pay Vivendi $5.8bn for the French group’s 20% stake in NBC Universal, paving the way for the conglomerate’s planned sale of 51% of the US media group to Comcast. The valuation,
French win bid for Areva unit
Alstom and Schneider Electric of France on Monday night trumped foreign rivals GE and Toshiba with a €4.1bn (£3.7bn) bid for the transmission and distribution arm of Areva, France’s state-owned nuclear group.
Carlyle sued by Kuwaiti group
A prominent Kuwaiti conglomerate is suing the Carlyle Group in a local court, alleging that the US buy-out firm misrepresented the safety of its affiliate, Carlyle Capital Corp, a public debt fund that collapsed in March 2008.
De Beers to receive $1bn injection
The three shareholders of De Beers, the world’s biggest diamond producer, have agreed in principle to inject up to $1bn in the company through a share placing, the FT has learnt. Global mining group Anglo American,
UK banks could face more scrutiny
The UK Treasury is considering tougher requirements on bankers’ pay disclosure than those proposed last week by Sir David Walker.
Alistair Darling, the chancellor, announced a formal consultation on Monday on whether legislation should go further than the Walker review,
Wen hits at renminbi pressure
Wen Jiabao, premier of China, lashed out on Monday at demands for Beijing to allow its currency to appreciate, and suggested that foreign pressure for a strong currency could be aimed at slowing China’s economic development.
Tokyo pledges to tackle deflation
Japanese authorities sought to ease fears for the economy’s fragile recovery, with ministers pledging stimulus action that would offset recent yen strength and the central bank vowing to “do its utmost” to defeat deflation.
India’s growth shatters forecasts
Strong manufacturing and services helped India’s economy to shatter growth forecasts in the quarter through September, raising the prospect of an early rise in interest rates. The economy grew by 7.9% yoy,
France Telecom to repay state aid
France Telecom, Europe’s third-largest telecoms group, on Monday lost its court appeal against a European Commission order to repay about €1bn ($1.5bn) of state aid to the French government that Brussels had deemed illegal.
Report finds gap in AIG reserves
A report by research firm Sanford C. Bernstein on whether the US insurance industry has set aside sufficient funds to pay its claims has found that AIG has a shortfall of $11.9bn in its property and casualty business,
China’s Wisco buys MMX stake
Wuhan Iron and Steel Company (Wisco), China’s third biggest steel maker, has agreed to pay $400m for 21.5% of MMX, a Brazilian iron ore miner. Wisco agreed to purchase at least 50% of iron ore from mines MMX bought in 2007 and 2008 in south-eastern Brazil.
Macquarie plans second Korean fund
Macquarie Group is preparing to launch another $1bn South Korean infrastructure fund that is expected to highlight continuing investor appetite for the focused investment vehicles. The Australian financial group,
Venezuela closes two seized banks
Venezuela’s government has closed two private banks, a day after Hugo Chávez, president, said he would have “no problem” nationalising banks that failed to lend to the poor. The government seized control of four banks on Nov 20,