China tries out short selling as others retreat 9 Oct 2008 It looks like strange timing to test stock shorting when other countries are restricting it for fear it exacerbates market woes. But China's plan for selected brokerages to roll out a trial is more about the gradual maturing of its markets than any shorterterm turmoil.
Crunch makes East Europe shaky 9 Oct 2008 Countries in the region with big payments deficits are vulnerable in a global liquidity crisis. The Iron Curtain shielded their leadership and people from market woes in the 1970s. Eccentric policymaking and political instability could follow, a recipe for defaults and disarray.
Pandit right to leave Wachovia to Wells 9 Oct 2008 The Citigroup boss s clever swoop would have been a handy fillip to the bank s franchise, funding and capital. But he couldn't compete with Wells Fargo s offer. It was worth a fight, but insisting on the previous terms risked becoming a liability for Citi.
Global rate cuts welcome but of limited use 8 Oct 2008 Putting on a wellorganised cavalry display doesn t win battles. Sure, the joint action by central banks is a symbolic recognition of the seriousness of financial market distress. But more targeted liquidity initiatives, perhaps modeled on UK or US moves, are probably needed.
Will Polonius bring down the US economy? 8 Oct 2008 Consumers are starting to heed the advice of Shakespeare s tightwad by cutting back on borrowing for the first time in a decade. Getting one s personal balance sheet in order is a smart move, but on a larger scale, less credit could further damage an already ailing economy.
Russia unable to stop market meltdown 8 Oct 2008 Foreign capital is fleeing faster than the government can replenish it. The latest a 15% stock market drop despite $36bn in new midterm loans from the state to the country s major banks. Russia has put 10% of its GDP into the banks, to no avail. But there s no easy cure.
US should ape UK’s medium-term funding guarantee 8 Oct 2008 The comprehensiveness of the UK bank bailout plan makes US efforts look rather ad hoc. Unlike the US, it contains a guarantee for mediumterm debt issuance by banks. That, in conjunction with capital injections, should go a long way toward breaking the interbank lending logjam.
Spain’s black economy is no secret weapon 7 Oct 2008 It s been suggested Spaniards move money from under the mattress and into the bank. A quarter of Europe s E500 bills are in Spain mostly in the black economy. That could inject E54bn. But it s not a silver bullet and the moral hazard in pardoning tax evaders is too great.
Fed’s CP fix makes it look more like a bank 7 Oct 2008 The move to buy commercial paper may break that market s logjam. But it will be hard to reverse unless the Fed can convince nervous investors to lend directly again. By inserting itself between lenders and borrowers, it s acting like a bank. That could cause unforeseen trouble.
Personal view: Interest rates 7 Oct 2008 A decade of cheap money has brought an imbalance between supply and demand for funds. Banks are deleveraging hard, and so are loath to lend. Higher interest rates could attract capital from outside the banking system and reduce demand for debt, reducing the current imbalance.
US $700bn bailout needs to be re-aimed 7 Oct 2008 It s not too late to take the cash and use it to recapitalise weak banks directly rather than buying dodgy assets. This would be a more effective way of restoring confidence and protecting taxpayers. What s more, it wouldn t even require new legislation.
Dexia caught in failed-bailout curse 7 Oct 2008 Shares of the BelgianFrench bank keep diving, despite last week s supposed rescue a E6.4bn injection of taxpayer money. After the Fortis debacle, even governments have credibility problems. Shareholders worry with reason that a more radical plan will wipe them out.
Private equity style-drift dangers start to show 6 Oct 2008 It isn t just TPG or JC Flowers that lost money on minority investments. KKR s investments in Sun Micro and Legg Mason and Blackstone s Deutsche Telekom deal are all performing poorly. Private equity can lose more than just their investors' money.
Tarp already out of sight and mind for markets 6 Oct 2008 Last week's $700bn US bank rescue plan hasn t calmed the patient. US markets plunged along with the rest of the world before clawing something back. The Tarp was never going to be a quick cureall. If anything, the credit crunch is still spreading.
Fed’s latest liquidity bonanza could backfire 6 Oct 2008 The US central bank will pay interest on banks deposits. That should help bring in cash to fund its elephantine loan schemes. It might also offset the effects of flooding markets with liquidity. Unfortunately, though, it could further diminish banks' appetite to lend to others.
Hedge fund slump changes the game 3 Oct 2008 Hedge funds are having a rotten year and it s been getting worse, with the average fund down 7% in September. Poor performance, shortselling bans, scarce leverage, market volatility and investor redemptions all play their part. The result could be a reshaped industry.
US economic graph tilts sharply downwards 3 Oct 2008 US employment fell 159,000 in September, more than expected. Factory orders, car sales and the ISM index have all turned weaker. The US economic graph has tilted sharply downwards, looks to be heading for a recession. That will turbocharge calls for more stimulus spending.
TCI battle with Deutsche Börse is too personal 3 Oct 2008 The activist investor emailed the German stock exchange demanding an EGM to remove Kurt Viermetz, the supervisory board chairman. It s not suggesting strategy changes or other board candidates. This looks like a personal grudge not a responsible investment policy.
US Senate passes Tarp with side of sausage 2 Oct 2008 After the shock rejection of Paulson s $700bn bailout, the wide Senate majority offers some succour to investors craving action. But the House could still say no again. The bill is weighed down with a barrel of pork and last week s rescues show other solutions are possible.
Commercial paper makes ominous grinding sounds 2 Oct 2008 The market for shortterm debt saw a record fall in issuance last week. The market simply isn t open to weak companies or for long maturities. One factor Treasury issuance crowding out corporate borrowers could prolong the pain.