U.S. fiddles pointlessly with GDP accounting 23 Apr 2013 The key measure is already too influenced by arbitrary “hedonic adjustments” and cost-based accounting for government services. A new set of revisions will increase the dependency on estimates and fine demarcations. GDP will become less transparent and easier to distort.
New groat plan could suit an independent Scotland 23 Apr 2013 The UK exaggerates the difficulties of operating a “sterling zone”. But an independent Scottish currency - call it the groat - is workable. Though there are risks, a new money order would bring advantages for self-determination, macro policy, growth and employment.
Will Netflix star in "The Easter Island Effect"? 23 Apr 2013 The Internet video service seems to be using up resources faster than it can produce them. New series like “House of Cards” lure customers, at a cost. Netflix cash flow remains negative and obligations are rising. It’s starting to evoke the centuries-old Polynesian society.
Finance may be effect, not cause, of economic woe 23 Apr 2013 Conventional wisdom dictates the economy is being held back by weak banks or excess government debt. But demographic changes and the rise of developing economies may have messed up a financial system that is calibrated to faster growth. If so, the policy debate should change.
Barnier broadside leaves EU looking soft on banks 23 Apr 2013 The EU’s top financial regulator seems out of touch on banking reform. While his peers want lenders to keep more capital, Michel Barnier says the U.S. should give European banks a break. He thinks global teamwork can avert problems. History suggests that’s naïve.
Japanese workers need to go back to the 1980s 23 Apr 2013 Whether the Bank of Japan’s money-printing succeeds in engineering 2 percent inflation depends on wages growing by about 5 percent a year. Although Japanese workers haven’t seen such largesse for two decades, a weak yen and a tightening labour market could do the trick.
China’s manufacturers prepare shipment of bad debt 23 Apr 2013 Disappointing PMI data suggests trouble for exporters, confirming recent warning signs from banks that lend to them. If lay-offs remain moderate, the adjustment may be healthy for the economy. For lenders, though, slower trade could create a further rise in non-performing loans.
Justin Welby’s UK banks sermon welcome but flawed 23 Apr 2013 Britain’s new Archbishop of Canterbury has called for a big UK bank to be split up. Welby is financially literate, and a little authoritative radicalism is welcome in this debate. But RBS is almost free of past sins. It’s probably too late for this penance.
IMF needs more creative ideas on growth 22 Apr 2013 The world’s richest nations are on track to grow just 1.2 pct this year, half the pre-crisis rate. The policy experiments - austerity, stimulus and easy money - aren’t yet paying off. The IMF seems stuck too. More innovative research and advice would make the fund more valuable.
Mafia and Cyprus may release IPO animal spirits 22 Apr 2013 High debt didn’t deter buyers from Intelsat and SeaWorld stock sales. Now comes Qiwi, a Cyprus-domiciled, Russian payment system warning about risks from organized crime, the island’s bailout, money laundering and dual-class shares. It puts investor appetite to the ultimate test.
It’s about time regulators cottoned on to Big Data 22 Apr 2013 Banks are griping about the newest U.S. financial watchdog’s appetite for stockpiles of borrower records. It’s not surprising given the industry’s zeal for asymmetrical information. Sniffing out unfair lending practices in the 21st century, however, demands 21st-century methods.
German women lose board battle. Maybe not the war 22 Apr 2013 Angela Merkel narrowly stifled a mutiny among MPs who wanted to force women quotas on corporate boards. She had to promise a softer reform in return. The fight against quotas is as desperate in Germany as it is in the rest of Europe. Companies should adjust to that reality.
Turkish IPO market faces key test in Pegasus sale 22 Apr 2013 The low-cost carrier’s $360 mln IPO is the largest deal in Turkey’s lumpy new-issues market since 2010. Secondary offerings dominate the equity pipeline but success could encourage other families to IPO big businesses - and help Istanbul’s ambition to be a major financial centre.
U.S. courts make mark in Argentina creditor spat 22 Apr 2013 Judges have, unusually, tried to broker a deal between the Latam nation and hedge funds still objecting to debt swaps in 2005 and 2010. Ordering Argentina to honor its contracts and pushing others to clarify theirs were also useful moves. The rule of law is coming out ahead.
ABB takes a shine to solar 22 Apr 2013 The Swiss engineer is buying Nasdaq-listed Power-One for $1 bln. The solar glut has spelt financial misery for many, although ABB says its target is in a sweet spot. ABB is being unusually acquisitive for a European blue-chip. It needs to show investors its M&A strategy makes sense.
“Schwarzman scholarships” have many beneficiaries 22 Apr 2013 The Blackstone founder’s $100 million donation for a Beijing study programme may not be wholly philanthropic - China lost much more than that investing in his buyout firm’s IPO. But improving links between Chinese and Western elites is a noble and necessary cause.
Hugo Dixon: Greece will probably pull through 22 Apr 2013 Although the economy will have a terrible 2013, next year should be better. But the outlook is fragile: political crisis could yet rear its ugly head, tax evasion is rife and there’s the risk of external shocks, from Cyprus or further afield.
Prioritizing U.S. debt could stamp out market risk 19 Apr 2013 Drama over the cap on Uncle Sam’s borrowing power rattled investors back in 2011. A new proposal would force Treasury to pay bondholders before contractors and seniors. If the debt limit can’t just be scrapped, at least markets could be spared some of Washington’s dysfunction.
Is Microsoft the quiet villain of global finance? 19 Apr 2013 Excel errors overstated structured finance ratings, dented JPMorgan’s risk management and tripped up theories on fiscal austerity. PowerPoint, Word and Outlook also can obfuscate in myriad ways. The value of the U.S. software giant’s tools is undercut by the trouble they cause.
This time the ENRC board has to show real mettle 19 Apr 2013 A possible bid led by one or more of the troubled Kazakh miner’s dominant shareholders could offer minorities a welcome exit. But there’s a serious information gap to cross. The cleanest way for the board to secure a robust asset valuation is to get an auction going.
Review: Walking cure for cash-strapped U.S. cities 19 Apr 2013 With financial woes hitting American cities big and small, urban revival requires attracting residents who prefer foot power to cars, says city planner Jeff Speck. A demographic bulge of “millennial” workers and empty-nesters want walkability. Build it, and they will come.
New oil dynamics may challenge crude growth logic 19 Apr 2013 Fears for the wobbly world economy have pushed Brent below $100 a barrel. Cheaper energy helps industry. Better still, booming shale output, greater efficiency and the rise of natural gas as a rival transport fuel may keep the oil price subdued even as growth is stimulated.
Google has an enduring mobile harvest to reap 19 Apr 2013 The search company has hit its smartphone stride. In its first-quarter results paid clicks grew strongly and revenue per click fell less that in the previous three months. That’s good, because high-profile efforts like Google Glass and Fiber aren’t going to deliver profits soon.
Toyota-isation of banking brings reputational risk 19 Apr 2013 Forget financial models derived from quantum physics. The solution to low returns in banking may be found in the car industry of 30 years ago. A production-line revolution replacing people with machines could drive profit in a low-growth world. But society may suffer for it.
IMF crowd should cut Japan some slack 19 Apr 2013 Prime Minister Shinzo Abe’s economic policies are in for a drubbing at the fund’s spring meeting. IMF officials bemoan Japan’s “risky” fiscal stimulus while America grumbles about the yen. But Japan, which is one of the IMF’s staunchest supporters, was right to act.
Hostile drug deal gets too clever for its own good 18 Apr 2013 Finance firm Royalty Pharma tried to use Elan’s $1 bln stock buyback to swoop up the entire company. But it devised a puzzlingly complex tender offer that ended up replacing a solid long-term shareholder with investors much more likely to demand a chunkier premium.
Two-tier money market fund reform as clear as mud 18 Apr 2013 The U.S. SEC is trying again to regulate these mutual funds, which compete with bank deposit accounts. But the rules could favor funds that invest in government debt over those buying corporate debt. That would complicate supervision and obscure, not clarify, the risks.
Brazil boxes itself into corner on growth 18 Apr 2013 The central bank just raised interest rates to fight inflation. GDP expansion, meanwhile, is already stalling. High public spending and rapid private credit growth, the fuels for Brazil’s boom, are both reaching their limits. President Rousseff may be running out of options.
Morgan Stanley playing well to CEO’s strengths 18 Apr 2013 Wealth management, the centerpiece of James Gorman’s strategy, powered the bank’s improved Q1 profit. Cost discipline and a tax break helped. A competitive return on equity, however, requires more from its weaker arm: fixed income. Until then, Morgan Stanley will be a laggard.
Nokia’s new stumble sharpens focus on smartphones 18 Apr 2013 Weak results have hit Nokia’s shares hard, again. The nastiest surprise is a 30 pct plunge in sales of simple handsets. Losing this cash cow faster than expected is bad news. But with smartphone sales accelerating, it is too early to call the group’s turnaround a failure.