Comment, analysis and other offerings from Thursday’s FT,
John Gapper: Buffett needs to stop flying solo
I once hitched a ride on a Gulfstream jet (purely for research purposes, obviously) and enjoyed the experience of being flown in a leather-trimmed cabin at nearly 50,000ft, escaping the turbulence buffeting the commercial aircraft far below, writes the FT’s Gapper. It felt as if I had joined the elite group that lives by different rules to ordinary folk. That too-brief flight in a NetJets aircraft is the only psychological explanation I can think of for the ethical blind spot of David Sokol, NetJets’ chairman, who resigned from Warren Buffett’s Berkshire Hathaway last week after mixing up his own investments with those of his employer. Mr Sokol still does not appear to think he did anything wrong, which makes me think he has been flying too high.
Patrick Honohan: Irish debt repayments should be linked to growth
Damaged far more seriously than that of any other European Union country, the Irish banking system needs a great deal of additional capital to get on to a convincingly sustainable path, says Honohan, the Central Bank of Ireland’s governor. Indeed it is hard to see how the cash now seen as necessary could be sourced so quickly for this purpose, were it not for the EU-International Monetary Fund programme for which Ireland signed up in November. Part of this capital goes to pay for the inevitable losses that will be incurred as the banks sell-off non-core assets that they cannot hope realistically to fund in the market following the drain of funding which flowed out especially in the last four months of 2010. Easily mobilised in euros from an ebullient and permissive international market during the boom, when Ireland was an AAA country, these funds slid away just as quickly when the ratings fell.
Ed Morse: New oil geopolitics bring Armageddon closer
A new dynamic has emerged in oil markets that is likely to push prices on to a higher path in the years ahead than almost anyone had forecast a year ago, writes Morse, former US deputy assistant secretary of state for international energy policy. It relates to the now unfolding critical dimensions of what can be called the “new geopolitics” of oil. Although the disruption of Libyan supplies has had a tangible impact both in the Mediterranean market and in the global balance between light sweet and heavy sour crude streams, the 30 per cent increase in oil prices since the start of the year has had far more to do with changed expectations than market fundamentals. And while there may be good reasons to believe that oil prices could fall later this year, there are many more to fear rising prices.
Jamil Anderlini: Ai Weiwei suffers for princelings’ paranoia
The detention of Ai Weiwei, China’s most famous artist, and six of the country’s most prominent human rights lawyers is a sinister reminder of the Communist party’s authoritarian tendencies, says the FT’s Anderlini. It is also a powerful example of the split between what the party says and what happens on the ground. This is a government that has budgeted billions to turn itself into a global leader in soft power, and which just last month claimed to have established a “socialist democratic legal system” that is “scientific, harmonious and consistent”. Yet it also ignores its own laws and arrests some of its bravest advocates of gradual legal reform, as well as its most renowned modern artist. Mr Ai, a vocal critic of Communist party rule, was led away by security officers at Beijing airport on Sunday morning and has not been heard from since.
Lex on Commerzbank
I want to break free. Freddie Mercury and Commerzbank chief executive Martin Blessing have something in common. Germany’s second-largest lender was hobbled by its mid-crisis purchase of Dresdner Bank and had to be bailed out by Soffin, the state’s bank rescue fund. Mr Blessing vowed to repay most of the €16.2bn injection this year. That is understandable: it carries a punitive, moral hazard-killing 9 per cent coupon.
Leah McGrath Goodman: The global oil casino benefits only its players
Tensions in the Middle East and north Africa, we are told, lie behind the recent increase in global fuel prices, which Wednesday hit a 2 ½-year high, writes Goodman, author of ‘The Asylum: The Renegades Who Hijacked The World’s Oil Market’. Yet while Brent crude this week stayed above $120 a barrel, in Tripoli petrol hovered at around 34p a gallon. And that is not a typo. The popular reason for why those closest to the fighting, in this case, suffer less than those farther afield, is Libya’s hefty subsidies. The less popular reason is that world energy markets have been carefully designed to profit from the slightest supply hiccup, even if there is little evidence of actual shortages.
Editorial comment: Banks 1, Portugal 0
Another eurozone country has been humbled by its banks. Earlier this week, Portugal’s banks were threatening a bond-buyers’ go-slow unless the caretaker government sought financial help from other European Union countries. After being beaten up in Wednesday’s debt auction, Lisbon has waved the white flag. The country’s caretaker leaders have now admitted that Portugal will need outside help. There is no denying that Portugal faces deep problems. The yield on the country’s five-year bonds had touched 10 per cent. On Wednesday, it was forced to pay 5.9 per cent simply to secure one-year money.
Richard Waters: No choice but to chase the ‘high-tech hellhounds’
Business is personal, says the FT’s Waters . It doesn’t matter if you’re the boss of a struggling start-up or a multibillionaire, there are often grudges to be born and scores to settle. That thought sprang to mind last week when it emerged that Paul Allen, co-founder of Microsoft, decided to air some dirty linen about his relationship with Bill Gates. His claims about how his one-time partner tried to squeeze him out of his share of Microsoft, in a memoir to be published this month, convey the distinct sense Mr Allen had been waiting a long time to get things off his chest.