Predictions for 2014

Europe will court shutdown with new parliament

27 Dec 2013

Eurosceptics and fringe parties will make big gains in next year’s European Parliament elections. A U.S.-style deadlock is unlikely, but mainstream parties will have to compromise more, and passing laws will be harder. It will look more like the old-style Italian model.

China’s banks are coming – this time for real

27 Dec 2013

Overseas assets are growing as lenders chase the country’s corporate diaspora. Takeovers are a likely next step. Japan’s “follow-the-client” banking strategy in the 1980s ended badly, but red tape and lack of foreign funding should make China’s rise slower and more sustainable.

U.S. employers will bring more jobs back home

26 Dec 2013

The nation’s energy costs and wage growth are lower than in many other countries. Productivity’s higher, too. Not only does it make outsourcing to the likes of China less appealing. It may also herald a renaissance for American manufacturing.

American universities need lesson in capitalism

26 Dec 2013

Spiraling degree costs are an economic drag, with $1.2 trln of student debt and parents’ savings hit. Yet graduate income is falling. President Obama is pushing for better value for money. A few colleges are already showing how education can pay off for students and country.

Wall Street’s pitchfork mob needs new villain

24 Dec 2013

Bernie Madoff is doing time and Goldman Sachs has executed a successful charm offensive. The case against Jamie Dimon has struggled to take hold. Steve Cohen, the hedge fund Wizard of Oz, is nursing legal wounds. The culture of greed in finance won’t disappoint for long, though.

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.

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.

Beware old tech seeking fountain of youth

23 Dec 2013

Hardware makers like Cisco, IBM and HP are falling prey to natural selection in Silicon Valley. They’re devouring smaller firms to keep pace, but weaknesses are getting harder to hide. That could lead to desperate deals for richly valued business software and cloud companies.

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.

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.

Wall Street watchdog to lose one of sharpest teeth

20 Dec 2013

The U.S. Supreme Court is poised to muzzle shareholder class action suits. While not part of the SEC’s official arsenal, they help deter fraud. Letting the regulator levy stiffer fines could fill some gaps. But clamping down on private litigation will remove some serious bite.

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.

China is moving closer to its “Dubai moment”

20 Dec 2013

The emirate in 2009 shocked lenders who assumed it stood behind all local debt. As China shifts to a more market-based financial system, it will have to draw a clearer line between public and private loans. A system for protecting bank deposits is crucial to limiting the fallout.

M&A potential will succumb to laws of physics

19 Dec 2013

The investor love being heaped on acquirers should be a catalyst for takeovers amid plentiful cash and credit. Other market anachronisms also suggest the pendulum could swing. Yet CEOs and boards have settled into a cautious mindset. Inertia is about as powerful a force there is.

Wells will knock louder on bulge bracket’s door

19 Dec 2013

The California lender is now one of the top global investment banks, thanks to doubling underwriting and M&A fees since 2008. Much of that stems from smaller clients. If Wells Fargo decides to go after bigger fish, it could put Wall Street’s bigwigs on the back foot.