Comment, analysis and other offerings from Monday’s FT,
During a closed-door summit in June, José Manuel Barroso, European Commission president, made a 14-slide presentation to Europe’s presidents and prime ministers on the state of the continent’s economy – but he dwelt on one slide in particular, writes the FT’s Brussels bureau chief. The slide had two bar charts, one showing the level of eurozone debt measured against its economic output (about 88 per cent for 2011) and the other showed the US’s, at nearly 100 per cent of its gross domestic product. Mr Barroso’s message was clear: despite Europe’s debt crisis, taken together, eurozone countries were in better fiscal health than the US, which continues to borrow at exceedingly low rates.
Gavyn Davies: What should we expect from Jackson Hole?
The key focus of the coming week in financial markets will be the speech of Fed Chairman Ben Bernanke at the Jackson Hole conference on Friday, says the economist, investor and FT blogger. Last year, the same speech was taken as confirmation that the Fed intended to embark on QE2, and this eventually triggered a 30 per cent rise in risk assets over the next six months. With the economy still weakening, the Fed is once again in easing mode, and some in the markets are hoping for another full dose of QE. They are likely to get something rather different.
Ralph Atkins: Trichet’s legacy: Keeping the show on the road
Crises make and destroy reputations. To determine his, there is little time left for Jean-Claude Trichet, writes the FT’s Frankfurt bureau chief. This week he heads for the last time as European Central Bank president for some fresh air in Jackson Hole, Wyoming, the US mountain resort that annually hosts the world’s top central bankers. The eurozone he will leave behind for good on October 31 is changing fast. Angela Merkel and Nicolas Sarkozy last week announced tentative steps towards a eurozone government; the ECB revealed it had spent €22bn on government bonds, more than ever before in a single week. Panicky financial markets could force further, bolder moves in the days and weeks ahead.
Richard Lambert: Buy-backs are often doomed to destroy value
Companies step up share buy-backs as prices slump, writes the director-general of the CBI and is a former editor of the FT. That has been the headline on both sides of the Atlantic in the market turmoil of the past few weeks, and you can understand why companies might want to use surplus cash to buy their shares in such volatile times. But that is not their normal behaviour. Far from buying when prices are low and falling, companies in the US and the UK invariably step up buy-backs when their shares are selling at or close to the peak, and they do so on a large scale.
Lex: Junk bonds
Will the next Michael Milken please stand up? says Lex. The disgraced “junk bond king” made his name raising money for risky companies in the 1980s, but now there many more bankers vying for the title. Even though fears of a double-dip recession have intensified, and a flight to safety has sent US treasuries and the Swiss franc to stratospheric highs, risky junk bond issuance has soared. So far this year $232bn of junk bond deals (those rated BB or below) have been completed, according to Dealogic. At that rate, last year’s $311bn record issuance would be broken.
Editorial Comment: Patent problems
The escalating costs of buying protection against the lawsuits sweeping through the smartphone industry, along with extravagant licensing demands from some patent holders, risk becoming a drag on the very innovation patents were intended to nurture, says the FT. It may seem encouraging that Congress is finally moving towards legislation later this year to reform the US patent system. But the current bills are too timid, and this rare opportunity for action must not be wasted.
Lucy Kellaway: Chief Googler’s ‘amazing’ clichés are dull and void
When Larry Page opted to spend $12.5bn of Google’s money on some mobile handsets, patents and set-top boxes, the FT columnist writes, he described his thinking thus: “Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.” These 32 words were last week repeated uncritically in newspapers all over the world, but no one seems to have stopped to wonder: what on earth was he on about?
FT Tech Hub: Wikileaks’ Bank of America data “has been destroyed”
Bank of America may just have dodged a bullet when it comes to the stash of its confidential information that was said last year to be in the hands of Wikileaks, the FT’s Richard Waters reports. After an internal feud, a break-away member of Wikileaks has told Spiegel Online that he has destroyed information that he took from the organisation – and Wikileaks itself says that includes 5 gigabytes of information from Bank of America.