U.S. housing recovery could run out of steam 24 Dec 2013 Banks are likely to tighten lending standards once new rules come into place in 2014. Rising interest rates may drive down home loan volume, too. Cash purchases by investors could set a floor for house prices, but they may not be enough to prevent a major slowdown.
Buzzword visionaries will rightsize the lexicon 24 Dec 2013 Is a laser-like focus on jargon mission critical? Can only visionary C-suiters move the needle at the investor day or on the Davos panel? Some expressions are relentlessly taking share. Others, net-net, are past an inflection point. Breakingviews takes a deep dive.
China’s hard-pressed central bankers get a B+ 24 Dec 2013 A funding squeeze in the interbank market has been treated with an injection of cash. The real economy is unlikely to notice any difference. The central bank is still passing its basic test of keeping China’s monetary system stable, but no longer with flying colours.
Europe holds a key to Turkey’s crisis 24 Dec 2013 Prime Minister Erdogan has upped the conspiracy rhetoric to criticise a corruption probe engulfing government officials. Investors are edgy. The intra-government issues are domestic, but without a clear prospect of joining the EU, Turkey has less incentive to liberalise.
Western debt magic is poison for Africa 24 Dec 2013 A poor continent with limited savings is hugely vulnerable to a credit crunch. Africa desperately needs capital, but only the sort that can’t easily leave. Speculative investors and yield-hunters will eventually do more harm than good. There’s a caution here for Bob Diamond.
Brazil infrastructure drive risks running aground 23 Dec 2013 President Dilma Rousseff’s $100 bln plan to spruce up rickety roads and ports only partly makes up for years of neglect. And a looming credit downgrade makes this the priciest time to splurge. Without a shift in Brazil’s savings rate, any investment boom will be short lived.
Governance will matter south of the U.S. border 23 Dec 2013 A 10-year boom in natural resources and easy money allowed bad Latin governments to do as well as good ones. Now with commodities flat and rates rising, regimes that respect investor and property rights, while spending money and allocating capital wisely, should shine.
Tokyo looks most credible new Asia casino capital 23 Dec 2013 Asian countries from Malaysia to Sri Lanka are lining up to steal gaming business from heavyweight Macau. Regional resorts could catch a spillover of high rollers, though taxes and geography matter. Japan may have the best chance of turning gambling into big business.
Carney will struggle to sustain BoE governorship 23 Dec 2013 The UK’s central bank chief is a vulnerable hostage to fortune. The Canadian thinks the British economy will enjoy economic recovery with low inflation and no housing market mess. If he’s right, he’ll be fine. If he’s wrong, Carney will find himself friendless.
Hollande could use electoral defeat to change tack 23 Dec 2013 No French president has been more unpopular than François Hollande, and the economy is stalling. Major defeats loom for his Socialist party at the municipal and European elections. That needn’t be such a bad thing if terrible results prompt him to change both style and substance.
China’s bureaucrats play online war games 23 Dec 2013 Who controls the internet? The authorities can’t decide. The Ministry of Culture is an unlikely favourite, after it clamped down on unsavoury online games. It’s a tussle between the online entrepreneurship China says it wants, and the old-school bureaucracy it actually has.
Detroit pension shakeout bares generational rifts 20 Dec 2013 The bankrupt U.S. city’s crisis manager wants pensioners to take a hit along with younger city-dwellers, who face higher taxes and degraded services. As Motown’s fate plays out in 2014, the legal and philosophical divisions may surface in other cash-strapped metropolises, too.
Colombia’s biggest challenge: reducing inequality 20 Dec 2013 The economy grew a robust 5.1 pct in Q3, thanks to a construction boom. But the country’s rigid social structure has contributed to the highest rich-poor gap in the region. For the sake of prosperity, and peace, this needs addressing. Rural infrastructure is one solution.
Germany will lift the soccer World Cup 20 Dec 2013 The football-mad Brazilian hosts have won five times, more than any other country. But on Breakingviews’ analysis of the hard numbers – the players’ transfer value, population, participation and public engagement – Teutonic power will squash the romantic dream of a sixth win.
Spain embarks on dispirited recovery 20 Dec 2013 The country may be growing again, but it won’t feel like it in 2014. Few will find jobs. The proportion of temporary workers will stay high. More people will emigrate. Without further action, Spain’s unemployment rate could remain double digit for the next 15 years.
Dueling watchdogs’ crossfire harms fraud victims 19 Dec 2013 It’s Irving Picard’s job to recoup Madoff Ponzi scheme losses. Yet U.S. prosecutors are about to snatch a $2 bln JPMorgan deal from under his nose. Such rival efforts in this and other cases can raise costs and delay payouts. More cooperation would better serve duped investors.
Markets quaff perfectly mixed punch 19 Dec 2013 It sounds like a paradox: stocks go up when the Fed takes some money away. But investors have figured out that central bankers see economies which are strong enough to provide profit growth but too weak for serious tightening. The party could last until inflation reappears.
Khodorkovsky pardon comes too late to matter 19 Dec 2013 Russian President Vladimir Putin says he will pardon the jailed former oligarch. Years ago, such clemency might have signalled openness to reform. Today it has nothing to do with political or economic liberalisation. It just reflects a desire to make the Sochi games run smoothly.
Fixed income trading goes from bad to worse 19 Dec 2013 Revenue from rates, credit, currencies and commodities was down 18 pct in 2013. The effects of scandals, new rules and central bank policy could lop off at least as much again in the next 12 months. Recent changes at investment banks mean some will suffer more than others.
Italy gathers ingredients for a slow-cooked reform 19 Dec 2013 Shifts in Italian politics are making reform possible. Silvio Berlusconi has been chased out of government; a reformist leader is taking over the centre-left. Italy needs speedy political and economic medicine to escape its debt trap. At least 2014 won’t be worse than 2013.