Big Oil could use some venture capital mojo 28 Feb 2014 An unwillingness to tackle small wells meant oil majors missed out on the lucrative U.S. shale oil boom. Exxon and its ilk were too focused on mega-projects. Seeding a new generation of nimbler upstarts, a strategy that worked for Big Pharma, might renew verve and boost output.
Review: GDP and its discontents 28 Feb 2014 Diane Coyle’s new book discusses the many weaknesses of GDP, the standard measure of economic success. Why do policymakers still rely on it? Her answer is that the alternatives are no better. That’s fair, but her analysis leads to a more aggressive, and compelling, conclusion.
Panglossian view of euro zone debt has pitfalls 28 Feb 2014 Italian and Spanish bond yields are falling with German ones. Investors no longer view southern European debt purely through the prism of credit risk. That makes sense for now. But over-optimism may be unwise, especially if low-to-no inflation hampers debt-cutting.
State aid may just prolong Qantas’ pain 28 Feb 2014 The Australian carrier, which just cut 5,000 jobs, is struggling to compete against its loss-making, foreign-backed rival. Lifting a cap on foreign ownership will only help if Qantas can find a deep-pocketed investor. A state guarantee for its debt may just extend the price war.
Macau casino stocks are priced for perfection 28 Feb 2014 A building boom will expand capacity in China’s gambling enclave. But to justify their valuations, casinos not only need to attract more punters but encourage them to spend more at the tables. Any slowdown in visitor numbers or increased competition could test excited multiples.
Merkel starts to take British EU exit seriously 27 Feb 2014 The German chancellor disappointed British eurosceptics, who wanted her to tell the UK parliament that she wants less Europe. They should be flattered. Her robust endorsement of European political idealism was directly aimed at the threat they pose to the region’s prosperity.
SoftBank’s Alibaba stake both blessing and burden 27 Feb 2014 Billionaire chief Masayoshi Son is expanding the Japanese internet firm through M&A. But its 37 pct stake in the Chinese e-commerce giant dominates its valuation, according to a Breakingviews calculator. When Alibaba goes public, SoftBank may come under pressure to let it go.
China’s yuan plan looks too clever by half 27 Feb 2014 The central bank seems set on bashing speculators betting on a stronger yuan, without changing the currency’s long-term appeal. The trick is to target low volatility that fuels trades. But it’s a fine balancing act – and risks rewarding those who were betting on a China downturn.
Wall Street may have lost its last DC cheerleaders 26 Feb 2014 Democrats delivered bankers a whipping after the financial crisis. More draconian regulation was only kept at bay by Republican pushback. With the GOP now calling for a big bank surcharge and a tax hike on fund bosses, the industry looks even more friendless and vulnerable.
UK GDP offers partial vindication for BoE caution 26 Feb 2014 The latest growth report shows consumer spending up a little and business investment up a lot. As more confident businesses invest, they should boost productivity, wages and then spending. It’s a slow process. In the meantime, “lower for longer” interest rates look justified.
Edward Hadas: How hunger and obesity go together 26 Feb 2014 It’s a scandal that poor people in rich countries have to choose between eating and winter heating. The problem is not the traditional economic curse of inadequate production nor the modern scourge of malign neglect by politicians. This hunger is a symptom of societal malfunction.
Japan bond investors’ overseas trip may flop again 26 Feb 2014 The Federal Reserve’s taper talk discouraged Japanese investors from venturing abroad last year. Now wobbly emerging markets are threatening this year’s outing. That’s bad news for bondholders searching for better returns - and for the Bank of Japan’s anti-deflation campaign.
China internet Godzilla moment is in the making 26 Feb 2014 Like the nuclear waste that spawned the fictional monster, China’s peculiar conditions – from scale to censorship – have allowed tech behemoths to grow. Can they run rampage outside their home market? Tencent has a good chance; e-commerce group Alibaba may find it harder going.
More careful aim needed for U.S. insurance bazooka 25 Feb 2014 Congress is considering both flood and terrorism backstops this week. There may be a role for the feds, but not if it usurps private markets. And if lawmakers want to check Uncle Sam’s actuarial ambitions, they could start with the most sweeping: mortgage guarantees.
Outside investors in Mexico will want results soon 25 Feb 2014 Foreign direct investment nearly doubled in 2013, reaching 2.7 pct of GDP, yet the economy grew only 1.1 pct. There’s room for more offshore money, but its providers will expect growth to pick up. Keeping FDI flowing will require the government to follow through on reforms.
Who bails out bitcoin depositors? 25 Feb 2014 The pseudo-currency’s main exchange has disappeared from cyberspace, leaving customers at least temporarily bereft. Bitcoin’s supposed attraction is being government-free. When things go awry, users learn why conventional finance has expensive regulation and political backstops.
At least Venezuela’s unrest is simply economics 25 Feb 2014 Ukraine’s split is ethnic, Thailand’s regional and Syria’s religious. Venezuela is ethnically and religiously united and even has oil wealth. But income inequality and chaos bedevil the Latin nation. In theory, these problems can be alleviated even without political upheaval.
Italy’s Renzi has big dreams and small mandate 25 Feb 2014 The new prime minister announced ambitious reforms on a tight deadline. But his position in parliament is weaker than his sleepy predecessor’s. The promise of shock therapy may give Italy kudos in Europe. But markets need more details - and delivery - before giving him credit.
Scottish secession boxed in by dodgy debt dynamics 25 Feb 2014 An independent Scotland would find it difficult to adopt either the pound or the euro, after snubs from London and Brussels. A brand new currency would be logical, but risky. Whatever the option, assuming their share of UK debt will leave the Scots with little wiggle room.
Emerging market fitness plan: Diet, workout, pill 25 Feb 2014 Developing economies are health cheats. They deny addiction to hot money until capital starts fleeing and currencies begin to tumble. But what can policymakers do differently when capital is on its way in – rather than out? Here’s a step-by-step checklist for staying in shape.