World In 1000 Words

Sunday, 4 July 2010

2010-07-04T14:51:00.000+05:30

The Dow dived below 9700, oil plunged to around 72 and the euro surged back to 1.25 last week, surprising pundits and straights alike. Attitudinally, nothing has changed for US while for EU everything has changed and BRICs are enjoying the sunshine like never before. Japan seems to have gone spiritual, devoid of desire by design. Ideological divides are sharpening by the day. Domestic opposition to Angela Merkel has become strident, UK is busy preparing for fall out of the BP fiasco and perhaps Sarkozy is waiting to guess the direction from which he will be attacked. Politically, one never knows what will happen when and why. Only two things are clear – the consumer is trying to save more and cash hoard with trade and industry is growing.

US wages are declining as the 7 mn unemployed are offering to work more for less. Savings are rising slowly but steadily and yet flows to the St are slowing. Sales of automobiles in China are likely to exceed US sales pre-Lehman. GM is selling more cars in China than at home. China and Taiwan have cut tariffs on imports from each other. Hedge funds have started closing shop in Europe. The Swiss are trying hard to contain the rising franc as it has started hurting exports. As governments across europe cut spending and curb speculation, the EU economic climate is beginning to stabilise.

South Africa expects the World Cup to add 0.4% to its GDP, Hong Kong’s retail sales are growing at nearly 20%, and Russia continues to amass petro dollars/euros, maintaining output at nearly 10 mn bpd. Australia has adjusted super profits tax on mining after fears of decline in investments rose. In Pakistan, the army, the supreme court and the presidency, along with other state bodies owe an estimated $2 bn to the national power company.

God will not abandon the people affected by the oil leak, said a priest last week, even if BP and Obama do. Still nobody knows how much oil is leaking. Fed is examining whether BP’s collapse could cause a major crisis on the St; UK and US say they want a strong and stable BP. Russians say nuke the well (they have done that successfully in the past) to plug it. Seafood prices are rising and tourists are abandoning beaches. However, despite the leak continuing and the supposedly magnificent recovery of developed economies, oil plunged again last week to around 72.

Apple’s iPhone4 has antenna problems; some customers have sued, alleging Apple was aware of defects before launch. Microsoft, after having shelved tablet PC, has withdrawn its Kin smartphones also. Google seems to be making up with China, of course on China’s terms; it has stopped redirecting Chinese users to its Hong Kong site. China Mobile has started looking for overseas takeover opportunities. Yahoo has launched a $3 bn stock repurchase plan that would run for 3 years.

Amazon has started expanding its Internet-based retail operations selling food and wine in Germany also. Dell wants to move upmarket and compete with IBM, HP, etc. It has bough a software firm.

Spanish bank Santander’s US unit is going all out for expanding auto loans in US; it has bought $3.2 bn of auto loans from Citi. Barclays is moving to consolidate units in Spain, Portugal and Italy and has entered India, Pakistan, Russia and Indonesia. AIG has decided to sell its two Japanese units for about $5 bn; its deal with Pru for Asian unit is almost dead now.

Teijin and Toray may witness some explosive growth if automakers developing electric cars achieve reasonable success as most of them are looking at carbon composites as the key to reducing weight while maintaining strength. Teijin has signed a 15 year deal with Airbus to supply carbon composites. Toshiba is developing lithium batteries with Mitsubishi.

Air China is to buy 20 Boeings for $1.4 billion, Celgene Corp (pharma) is buying Abraxis for $2.9 bn, and Malaysian sovereign fund Khazanah is competing with Fortis of India for controlling equity in Parkway hospitals operator of Singapore. Sanofi has completed acquisitions worth $17 bn since 2008 and is reportedly negotiating a $20 bn deal in US. It generated $10 bn of cash last year. Sumitomo is to acquire 30% of iron ore mining unit of Usiminas of Brazil for $1.93 bn. Gas storage facilities of a Exxon-Shell JV in Germany are up for sale.

A US report says clandestine sales of data amounted to $1 tn last year, surpassing revenue of the drug trade. The Chinese are figuring out ways of helping single soldiers find love. A cat has been successfully fitted with prosthetic limbs in UK and can now walk on all its four. The US Supreme Court has rejected a company’s plea for patenting the structure of a hedge deal. Larry King has decided to hang his boots after a glorious 25 years as the world’s most popular talk show host.

A lock of Napoleon’s hair has fetched US$13,000. Luanda (Angola) has become the world’s costliest city for expatriates and Ndjamena (Chad) has ranked third. A Swiss company has developed a fabric that can soak oil up to seven times its own weight. US scientists have developed engineered lung tissue that may be used for transplants and elsewhere researchers say genes can tell who is likely to live 100 years or more.

Warren Buffet is transferring his wealth to the Bill & Melinda Gates Foundation at a steady pace, giving away $1.6 bn this year. A fourth of inmates of all jails in Russia are businessmen and professionals, half of whom are to be released shortly. Russia did not qualify for the World Cup and yet a poll last week said 8% of Russians expect their country to win the World Cup.

Gold and euro are the in the eye of the same storm and automobiles and cash are equally starved of safe parking space. Follow Tony Hayward. Forget worries and watch the World Cup.

xxxxx

Sunday, 27 June 2010

2010-06-27T17:44:00.000+05:30

Germany, France and UK resolved last week to live within their means, ignore sensory pleasures of speculation, and strike a balance between current consumption and conserving cash for the future. Budget cuts have been announced by all the three and UK is to hike VAT from 17.5% to 20%. They want a global tax on banks in general and financial transactions (read speculation) in particular. In simple words, the three leaders want their people to live within their means and start saving for a rainy day.

The elite and the media are ganging up against the Merkel-Sarkozy-Cameron trio. George Soros says Merkel is endangering democracy itself while Obama says Germany will be shirking its global responsibility if it starts living frugally. However, the Iron Lady has so far held her ground, though nobody knows the eventual outcome, particularly because China and Japan are stoically silent. It may not be easy to hoodwink this not-so-unformidable trio. Their populations are ageing, their banks are weak and fragile and the mercurial rise of the dollar has convinced them that cash inflows aren’t as endless for them as for the US. However, effective mudslinging at home turf may make mud cling to their galoshes, effectively weakening their resolve.

The US Senate sat through a 21 hr long session last week and produced what was expected of it – nothing. This ‘nothing’ too is unlikely to pass legislative muster because no corporate chieftain in US worth his Learjet is willing to give up the right to play poker with borrowed money.

As oil reached the shores of Panama City and Pensacola Beach, and otherwise prosperous fishermen started living off dole (compensation from BP), Tony Hayward watched a yacht race off the British coast. A US judge halted the halt on deep sea drilling ordered by Obama even as estimates of the Leak kept swinging wildly, going right upto 100,000 barrels a day. Who earned how much from the $100 bn plunge in BP’s market value would remain a mystery forever but perhaps more was earned in oil futures.

It was hilarious to see financial pundits making confusing sounds after China mocked a bow on yuan. The likes of Apple and Adidas were counting their costs and at the same time the St was speculating on their possible gains! It may not be long before the St knows that China isn’t going to let them play poker with the yuan; even S Korea has banned banks from lending in forex.

Besides Asia, developed world consumer is also saving more than ever before and it may not be long before sovereign funds are left with no option but to buy top rated corporate bonds too. The ability to use money productively is going to command a premium the kind of which has perhaps not been seen before.

An interesting trend is some biggies buying CNG and storing it in tankers for sale on a future date. Who knows, the trend might catch up to cover not only crude but some other commodities also. If one has enough money and ships, one can force manufacturers to pay more. Or may be industrial consumers will increase their inventories so much that speculators will become mute spectators.

Emirates mercurial growth has started rattling competitors; it already has more intercontinental seats than BA and Air France taken together and takes Asians to US via Dubai, instead of London, Paris or Frankfurt. China Southern is now the world’s third-largest (after American and Delta); it carried 66.28 mn passengers in 2009. Qantas has signed a code-sharing arrangement with China Eastern.

ICANN has decided to allot suffix .xxx to pornographic websites. Apple juggernaut is still rolling as over 3 mn iPads have been sold in as many months and iPhone keeps increasing its market share in smartphones worldwide. Whether Samsung and LG will be able to maintain momentum, edging out Nokia and RIM steadily, remains to be seen.

Citi’s legendary energy trader Andrew Hall, to save whose 100 mn paycheck Citi sold the division he headed, has raised $1 bn for a new offshore commodities fund. JPMorgan Chase may buy Brazilian asset management firm Gavea, having $5.3 bn in assets, and Societe Generale seems to be treading cautiously in pursuing legal action against Jerome Kerviel, whose unauthorised trades cost it over $6 bn.

Biovail (psycho drugs) of Canada is buying Valeant Pharma of US in a $3.3 bn deal, Corn Products is to buy National Starch from AkzoNobel for $1.3 bn in cash, and Rio Tinto and BHP are making progress in their $116 bn iron ore JV which has received Australia govt approval; it will be larger than Vale of Brazil and shall account for more than a third of world trade in iron ore.

Las Vegas Sands has opened its casino in Singapore officially and is confident of achieving 150,000 visitors a day, Kellogg has recalled 28 mn boxes of cereals from US stores because of a peculiar smell reasons for which have not been explained, and Ford is to build a new $450 mn facility in Thailand that may employ over 10,000 eventually. Rumours of Hasbro being up for sale are persisting, despite its denial.

Population of millionaires ($1 mn plus investable assets) is now about equal in US, EU and Asia-Pacific – about 3 mn each. Wealth owned is also about the same, around 9-10 trillion. 38 amateur physicists have successfully fabricated small nuclear reactors, including a 15 yr old. A quarter of all beaches in Germany are polluted to unacceptable levels. Approval is being sought for selling a genetically modified salmon fish for human consumption. The Japanese have started celebrating divorce by saying ‘I do’ and then holding ceremonies similar to weddings.

Where does the world go from here? Take at least 30 days off from work like the French, cook more at home and start measuring GDP by the Happiness Index like the tiny Bhutan.

xxxxx

Sunday, 20 June 2010

2010-06-20T18:17:00.000+05:30

The world is looking for a currency other than the dollar, without much success. Every time there is even a hint of trouble in world markets, the dollar surges, reminding the euro and the yen that they are nowhere near the Almighty. That has not prevented Russia from joining the ranks of those aspiring for global acceptance of their currencies. Gold keeps rising and slipping on and off, though some insist it can only go up. China has reportedly decided to let the yuan appreciate to some extent. Meanwhile, US keeps admonishing other countries for fiscal and external deficits and surplus.

Moody’s cut Greece’s rating to near junk last week and the euro surged to over 1.23. The future of Europe and the euro continues to be viewed as uncertain. Austerity plans are being followed up with higher taxes and increases in retirement age. EU, as well as the euro zone do not have significant external deficits and the austerity wave can only help restore fiscal balance. Europe was generally less boisterous than the Americans during the heydays of 2003-2008 and seems to have started settling down with its own new-normal, i.e. lower living standards. If that is what Soros calls a prolonged recession, well, so be it.

What is happening in the US economy remains unclear but it is absolutely clear that US (and Japan) have no intention of raising rates in the foreseeable future. Both continue to look at government spending as the only way to boost employment and keep the economy going. There is little hope of any drastic changes in the financial system as thousands of lobbyists are registering silent successes in blunting most of the proposed amendments. The real problem is that America wants to do nothing more than managing other people’s money.

Switzerland has finally agreed to provide details of 4450 clients suspected of tax evasion to the US. Greece continues to face flak for profligacy, particularly pensions (only 1.7 workers per pensioner) which add up to an eighth of GDP.

Ghana’s economic woes appear to be peaking and considering the increasing attention Africa as a whole is receiving from investors, it may be in for massive investments. Afghanistan’s estimated mineral wealth includes iron ore and copper deposits worth $421 bn and $273 bn, respectively, besides significant deposits of gold, molybdenum and silver. Chinese firms have already committed investment of $ 4 bn in copper mines.

Taiwan has drawn a billion dollar plan to develop its own cloud computing. Romania is asking its citizens to donate cash for keeping deficit within limits agreed with IMF under a $25 bn aid package. Russia has developed a new fighter jet that it plans to produce jointly with India. Putin says it matches F-22 of US and will cost less than a third.

Obama fumed and fretted from the Oval office last week, vowing to make BP pay, but the very next day BP’s CEO Hayward used “I don’t know” 66 times when deposing before the US Congress. Nobody knows how and when the spill estimate rose from 5,000 to 60,000 barrels a day as media, politicians, lobbyists, bankers, investment firms and even oil companies are having a field day figuring out ways of making money from the disaster. Nothing is clear, except that continued gushing of oil in the Gulf of Mexico has fathomed crude prices successfully, at least for the time being.

Fannie Mae and Freddie Mac, which together either own or have guaranteed about three fourth of all US housing mortgages ($10 tn plus) continue to receive significant government aid for writing off bad loans. One reason is that foreign governments own their bonds to the extent of over $900 bn. Citi plans to raise $3 bn for funding PE and hedge businesses. AgBank of China (24,000 branches) is once again preparing to launch its massive $23 bn IPO, the biggest ever in the world.

Facebook surprised markets last week by announcing 2009 revenue of $800 mn; its COO Sheryl Sandberg insists email is on the road to extinction as only 11% of teens use email, the rest opting for texting. Apple sold 600,000 units of its new iPhone4 on the very first day. Sony, Nintendo and Microsoft are upbeat on prospects of video games and are now talking in terms of cloud gaming which would let consumers hire, instead of buying.

Boehringer has been refused approval for its female version of Viagra by the US FDA. Nestle is suing Sara Lee for patent infringement. Genting, debt free Malaysian casino operator having $1.7 bn in cash, is planning to set up shop in US. Toyota has suspended production at its main unit in China because of a strike at a parts supplier. NewsCorp controls BskyB but wants full control and is willing to pay $12 bn for the remaining 61% stake. FedEx says healthcare and pension costs will pinch profits in 2011; revenue rose 20% to $9.43 bn last quarter.

Women’s groups in France are aggressively moving to raise the number of women on company boards; some wore fake beards last week to tell a French water company that they resent the board having only one woman. Soccer continued to dominate lives last week. Lightning destroyed a 62 foot Jesus statue in Ohio last week.

Russia banned consumption of vodka at a top conference last week; only wine was allowed. A convict was executed by a firing squad in Utah in response to his own wish. A recent survey found that obesity results in less sex, more sexual diseases and more unplanned pregnancies. Warren Buffett and Bill Gates, together worth about 100 bn, are asking other American billionaires to give away at least one half of their wealth to charities under a campaign they call the Giving Pledge. A management guru says the ability to sleep in planes is a major prerequisite for success in the corporate world.

xxxxx

Sunday, 13 June 2010

2010-06-13T20:21:00.000+05:30

Too Big To Kick (TBTK) corporate asses became a problem last week. Obama’s outbursts failed to wipe the smirk off BP CEO Hayward’s face; Brits said they can’t let BP go under as it accounts for about an eighth of dividend payouts. BP bought search results for “oil spill” from Google even as Florida demanded $2.5 bn in escrow for cleanup costs and Mexico feared spilled oil will reach its shores by December. TBTF Stanchart says BP is ripe for takeover by PetroChina. British pensioners have lost over $5 bn. Yet, nobody knows how much oil is getting into the sea and why the leak cannot be fixed. Oil clawed its way back to $75 last week, pushing indices up and perking up commodities in general.

US economy, despite its high dependence on services, is able to expand its output even after cutting over eight million jobs and India is able to expand industrial production 17% with less than 6% extra electricity. In China, prices of clothing, vegetables, home appliances and consumer goods are either steady or falling but the world is worried about inflation hurting its economy.

Euro recovered to 1.21 late last week but Roubini says parity with dollar is inevitable. Eventual default by Greece is considered a given by most. Uncertainty on euro has resulted in four Persian Gulf states postponing their plans for a common currency. Germany, France and Italy are determined to preserve the euro and significant convergence has been achieved on checking speculation. However, the overall scene is that everybody expects something to happen in Europe, though nobody knows what will happen when.

US economy continues to be shrouded in mystery. Even as retail sales are either flat or falling (gasoline demand dropped 5.8% in the most recent week), Bernanke says recovery is solid, without saying how long will the US keep 8 mn on dole. Public debt is already close to GDP, though without counting social security and trust programs it is still below $10 tn. CMBS issuance last year was 3.04 bn compared to 232 in 2007. Debate on the Volcker rule and issuing periodic warnings to China on the yuan issue have become perennial. Last week a 32 year old got Democratic nomination for the Senate from S Carolina without any campaigning or spending while former CEOs of eBay and HP won Republican nominations after spending nearly 100 mn dollars. Someday the US just may list its administration on NYSE, letting a dozen TBTFs ‘elect’ the President.

Number of millionaires in the world recovered to its 2007 figure in 2009 when global AUM was estimated at $111 tn, of which US+Canada account for 35 tn and Europe 37. IATA says worldwide industry profits will be $2.5 bn this year. Japan’s new PM, 5th in 4 years, says he wants to “drastically rebuilt Japan.”

China’s economy is going strong and it expects trade surplus to decline significantly this year. S Africa operationalised its first rapid rail system last week to connect Johannesburg airport to the city. Kenya wants to have a new constitution to usher in peace and investments. It has been doing that for several decades now.

As Americans and Europeans save more, liquidity is going to rise. Where the money will go remains an open question. Besides, the austerity wave sweeping Europe is going to have some political fall out too, contours of which may take time to develop.

After having sold a peak 8.75 mn iPhones last quarter, Apple unveiled iPhone4 last week, with a thinner body, better resolution and a front facing camera. Sprint says it did overstate launch day sales of EVO 4G phone 200%. Following merger of phone units of NEC, Casio and Hitachi, Fujitsu and Toshiba have decided to merge theirs. Motorola and BlackBerry have settled their IPR disputes.

France Telecom is to set up a 17K Kms cable to connect 23 African countries with broadband and India’s Bharti Airtel has taken over Zain’s African business to have total customer base of 180 mn. Emirates has decided to order 30 more A380 superjumbos, in addition to 58 already in the pipeline. Cathay and Air France have started introducing airbags in economy class also. GM is recalling 1.53 mn vehicles worldwide because of potential fire hazards and Volkswagen is to set up a 10th plant in China to double capacity to 3 mn vehicles.

AIG has been sued for having underreported premiums between 1985 and 1996 and while it is still undecided on its Asian operations, Manulife says its Asia business now accounts for a sixth of its revenue of C$40 bn. Lehman has sought court clearance to invest $255 mn in a Park Av building to protect an existing investment of $437 mn. Santander, Spanish bank, is buying out partner BofA in a JV in Mexico.

Warren Buffett’s famous lunch was auctioned for over $2 mn this year and Kellogg has agreed to stop claiming that its Krispies strengthen children’s immune system.

Macau is planning to ban smoking in casinos in three years. Catholics in US are angry because Empire State Building refused to illuminate itself in honour of Mother Teresa. Germany’s corporate honchos have magnanimously resolved that employees should be allowed to watch World Cup matches during office hours also.

Research says it costs about half-a-million to raise a child, without counting college. Add an equal amount for a couple’s own retirement and every family needs a million. Obviously, it is cheaper to import people from India and China. In Scotland, they say 97.5% of adults are either smokers or heavy drinkers or overweight. Donna Simpson of New Jersey weighs 600 lb and intends to touch 1,000 to become the heaviest living woman in the world.

US is determined to keep the roulette rolling but eurozone, and now S Korea (it has made prior approval necessary for derivatives; govt had to pay $3 bn to get exporters out of currency options in 2008) give cause for hope.

xxxxx

Sunday, 6 June 2010

2010-06-06T20:14:00.001+05:30

Dow plunged below 10K, euro slid to where it started (1.19) ten years ago and commodities dived last week like there was no bottom. Oil looked up for a while but was close to 70 again. Volatility in US-EU indices attained parity with Mumbai and Hong Kong last week. In the midst of collapsing commodities and crumbling currencies, uncertain and nervous is the only way to describe the atmosphere.

Greece and Spain were joined by Hungary last week. Ratings downgrade for several others are under consideration. Europe is on an austerity binge. Every economy is freezing wages and pensions and hiking taxes. Even Germany is planning to hike VAT on some products from 7% to 19%. Sovereign ratings are likely to be cut for several economies.

For US austerity is a four letter word but household savings are rising. “(US) Savings will have to rise faster than consumption for the coming years,” said Nouriel Roubini last week. Household debt of Americans is over 100% of annual disposable income and if they keep saving at the current rate of 5%, it may take them a decade to cut it by half. Since China isn’t listening on yuan, US has started prescribing higher consumption for EU and Japan also.

Eurozone banks may have to write off 195 bn euros in loans over the next 18 months, in addition to 238 bn of bad debts incurred since 2008. European banks, in turn, owe some money to US banks. Singapore spends 3% of its GDP on R&D and has started attracting students and scientists from all over the world. France has called for a separate body to handle economic governance in the eurozone. Deutsche Securities mistakenly placed sell orders for index futures worth $182 bn at Tokyo exchange. It was corrected quickly. Israel’s offshore discoveries of natural gas are being estimated at 16 tn cf, twice UK. 6.76 mn Americans have been unemployed for 27 weeks or more and the figures for Europe aren’t very different. China now owns two of the world’s ten fastest supercomputers, one of which ranks second in speed.

BP CEO Tony Hayward is 53 and even after having spilt 53 mn liters of oil in the Gulf of Mexico, continues to look 43. That by itself is reason enough for Obama to feel furious. BP’s market cap has plunged over 35% and many are looking at it hungrily. Meanwhile, Lukoil profit doubled last quarter to 2 bn and Shell has decided to convert its refinery in Montreal into a terminal since it has failed to find a buyer.

Google has started reducing internal use of Windows because of security concerns. Fujitsu plans to complete building of the world’s fastest supercomputer by 2012 and have sales of a billion dollars a year by 2015, giving it about a tenth of the global market; currently HP and IBM have 42% and 37% share, respectively. Apple seems to be preparing for launch of a new version of iPhone, and Reliance Media of India is to form a JV with CBS of US to launch TV channels.

CitiFinancial of the Citi group, up for sale, is to close 330 of its 1,833 branches in US. Prudential has pulled out of its deal for AIG’s Asia business having 320,000 agents and 23 mn customers and the surprising part is no other buyers have emerged. JPMorgan Chase has been fined nearly $50 mn by UK for failure to protect client money.

Ford’s China JV is to recall 236,643 cars, Hitachi has announced plans to trim its portfolio and allocate 70% of investments to infras like power plants, and Boeing has received orders for 65 planes from Russian Technologies, some of which are to be used by Aeroflot also, besides Rosavia, its own carrier. So far Aeroflot has been buying Airbus.

Kimberly-Clark has opened its $170 mn unit in Russia to make Huggies diapers, and P&G has finally realized that men’s skincare products will gel with Gillette which it bought five years ago.

Whirlpool is recalling 1.7 million dishwashers in US due to potential fire hazard and McDonald's has recalled 12 mn tumblers because they contain cadmium. Wal-Mart expects to create 500,000 jobs worldwide over the next five years, though it is feeling the pressure on its customer base in US as footfalls are falling because of high gasoline prices.

United Airlines left a woman locked in a plane by mistake; the woman has sued for illegal detention. China has asked bus drivers to address passengers as sir or madam, instead of comrade. Former US VP Al Gore is divorcing his wife after 40 years of marriage, the apparent reason being that enough is, well, enough. A bird put on so much weight after Australians fed too much of sausages and barbecues that it can’t fly now. The Sydney Zoo is exercising her to make her fit to fly.

Research says coffee offers no real perk up to regular drinkers, Americans prefer to treat depression with drugs rather than therapy, German males accord greater preference to watching World Cup than having sex with their partners, and a brunette Citi had fired last year because she was too much of a distraction to male colleagues has filed a lawsuit.

Cosmetic surgery business is booming in the still war ravaged Iraq and Australians have started organizing concerts for canines. Air pollution in London continues to exceed EU limits and the EU Commission is contemplating a fine of several hundred million dollars. Environmentalists have built a five room hotel in Rome with inorganic waste.

Besides financial, political uncertainties have also surfaced. Korea and Iran issues continue to simmer, if not boil. Hold your money in your pocket. Statistics savvy economists are going to make room for some down-to-earth attitudes and prices of real estate, commodities and consumer goods are all likely to decline significantly. Definition of savings in these times is money in the bank, not in mutual funds.

xxxxx

Sunday, 30 May 2010

2010-05-30T21:17:00.001+05:30

“Death to America” was not what Iranians shouted when their President addressed a public meeting last week. They chose to demand employment instead. That should worry US-EU more than equities, currencies and commodities taken together. The eurozone crisis is far from over as Portugal, Italy and Ireland are yet to happen. Sweeping austerity measures have been announced by Spain and Italy and more are in the offing but outcome is uncertain. Italy seems to be heading for Greece-like political upheaval as public employees wouldn’t be “the only ones to make sacrifices.” Possibility of the entire Europe facing a political uprising can now hardly be ruled out.

The dollar is the safe heaven yet again, notwithstanding China’s commitment to maintain its exposure to the euro. The big surprise last week was recovery of oil.

Higher taxes on high incomes is being seen as a way of placating people, though history says it doesn’t work. Money cannot be collected back for redistribution beyond a limit; its concentration has to be prevented, not cured.

The reality is that the developed world cannot export enough to cover what it needs to import. Except for an orderly move towards what they call recession, there is no way US-EU can reduce the pain of their people. Germany is pushing for a formal process for sovereigns’ bankruptcy in Europe and it is preparing to extend ban on naked short selling to all stocks. However, global consensus on leashing of financial magicians is still nowhere on the horizon. Lofty words spoken at the Capitol are leading to nowhere in particular, Obama is passive and confused as ever, and in Europe the Sarkozys and Berlusconis are too busy living their glamorous lives to the hilt.

Share of services in Hong Kong GDP has risen from 86.1% in 1999 to 92% in 2009; services exports were $85 bn last year. China holds US Treasuries worth $895 bn now, compared to Japan’s 785 bn. An economist says China stocks can rebound only if real estate crashes. Citi and BNP have forecast 20% drop in home prices this year.

Japan’s unemployment is refusing to decline and more job cuts are in the offing. Govt has waived high school tuition fees as a direct transfer of money to the people. India GDP grew 8.6% annualised in Q1-2010 while car sales rose 40%. Zambia is to raise $1 bn from sovereign bonds for rail and power projects. Zimbabwe inflation is down to minus 7.7% and GDP growth this year is estimated at 7%. Rwanda also expects to grow 7% this year. Africa just may be in for a mercurial makeover as cash-laden corporates and banks have no parking places left. Russia, which has become as sensitive to oil as OPEC countries, is pushing companies to invest in what it calls single-company towns.

BP continued to be the most talked about company in the world last week as oil kept gushing from its damaged well in Gulf of Mexico. Obama’s popularity has plunged as Americans are unhappy with his handling of the spill. Overall impact for BP is being estimated in tens of billions. Shell is buying East Resources (shale gas) of US for $4.7 bn; its plans to drill wells near Alaska are being put on hold because of environmental concerns.

Apple’s market cap has grown ten times in last ten years and last week it surged past Microsoft, to $222 bn; Apple says consumers in Australia and Japan waited 40 hrs in queues to buy iPad. Dell has launched Streak tablet computer that can double as a mobile to compete with iPad, Facebook has started offering more privacy options to users and Intel capacity utilization has risen to 80% from last year’s 50%. IBM is buying Sterling Commerce unit of AT&T for $1.4 bn cash to expand software and has announced plans to spend $20 bn on M&A over the next five years.

Foxconn, Taiwanese owned contract electronics manufacturer with 800,000 employees in mainland has decided to raise wages 20% after several suicides. J&J has recalled 40 non-prescription childrens products after its Pennsylvania factory was found ill-maintained. Lehman has sued JPMorgan for having seized collateral worth $8.6 bn days before 15 Sep 2008. Societe Generale is pursuing the case against one of its traders whose unauthorised trades (loss $6 bn) were discovered in Jan ’08.

Prudential continues to pursue AIG’s Asian business; if it goes through, it would be the largest life insurer in HK, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines.

M&S sales rose 3.2% to about $13 bn last year. Tiffany has reported rise in sales of $50K plus products; total revenue in quarter to 30 Apr was up 22%. Heinz sales last quarter were up 8% to $2.72 bn. Wal-Mart is buying 193 Netto stores in UK for $1.13 bn. Daimler expect sales in China to grow threefold from current 100,000 units by 2015. Tata Motors is planning to produce Jaguar and Land Rover in China.

Duchess of York (Fergie) was captured on camera demanding money for introducing somebody to Prince Andrew. British confectioner Hotel Chocolat is raising $7.2 mn by issuing chocolate bonds that offer holders interest in chocolates rather than cash. Research says 65 mn suffer high blood pressure in US and 38 mn of driving license holders are unfit for roads. US Space Posture Review says space has become so congested that satellites orbiting earth may begin experiencing collisions, bringing communications to a halt. A rebel Somali leader has hired 100 German mercenaries to train his forces.

Skirmishes between US and China on yuan are continuing, though US exports to China have already started growing. Euro it seems has to soften further. Tension in Korea has become palpable; US is firmly behind South while China is trying to soothe ruffled feathers. A political volcano just may be in the offing. Africa and LatAm should be in news in not too distant a future.

xxxxx

Sunday, 23 May 2010

2010-05-23T21:15:00.000+05:30

Angela Merkel hit hedges with a sledgehammer last week. Equities, euro and oil tumbled. Before anybody could uncork champagne, euro bounced back from 1.2144 to 1.2522, and oil failed to recover. Sarkozy’s shenanigans got lost and Austria called for Europe-wide curbs on speculation. The Lioness said markets will not be allowed to extort the state and the mighty markets meekly melted into submission. UK was isolated. Rendered irrelevant.

Europe is dead serious about a pan-European watchdog with powers to coax information out of hedge funds. Greece, Portugal, Spain and Ireland and even France are yet to shun profligacy for frugality. The euro will eventually have to price itself more competitively but that can happen more smoothly and quickly now as the Iron Lady won’t allow New York to tinker with costs and cash flows of factories in Germany. Perhaps Hu Jintao should tell Geithner to postpone his visit and invite Angela since like China, Germany too is more interested in producing real wealth, real goods and real services rather than securitizing other people’s money, houses and wealth for earning livelihood.

The Capitol actually did some serious work last week as it was the Dow, not the Dax, that was running for cover. Senate is now working on banning banks from trading in derivatives, circuit breakers for all US stocks, an independent watchdog to safeguard consumers and borrowers, higher taxes on the so-called investment partnerships and powers for the government to decide which agency will rate whom. Europe is very likely to go for a rating outfit of its own.

US demand for home loans has plunged again, unemployment among 20-24 is 17%, credit card usage are declining steadily and 43% of workers have less than $10K in savings. However, for US, Dow and Nasdaq are the only measures of economic health; employment, savings and consumption are too mundane. Sales of Saks are more relevant than Wal-Mart and Home Depot. Harvard and Stanford dwarf primary education. Consumption has to remain unchanged, if not decline, in coming years.

Chinese economy is maintaining course with stable exports and growing domestic consumption; credit card usage in Q1 jumped 75% to CNY2.15 tn or over $300 bn. Auto sales are above a million a month. Forex reserves are expected to grow $100 bn this year also. Macau is catching up with Las Vegas.

Taiwan’s exports to China are booming and tourist arrivals too are growing. South Korea wants a Citi or BofA of its own. Venezuela currency is now unofficially trading at less than half the official rate. Bt cotton has started creating problems for farmers in China and India. Germany has completed 4G spectrum auction. Pakistan has banned YouTube and Facebook. Is that fighting Taliban?

HP expects sales of $125 bn in 2010 as global IT spending is to grow 5%, Symantec is to buy rival VeriSign for $1.28 bn in cash, Novell (software) is up for sale and 20 are interested and Twitter is being asked by Pennsylvania state to identify two users who criticized the Attorney General. BlackBerry (RIM) has started facing exodus to iPhone in the banking industry; Stanchart has allowed its employees to opt for iPhone and more banks are expected to follow suit.

Lufthansa has got its first superjumbo and seats are sold for months; fuel per passenger is 17% lower. Airbus has delivered 28 superjumbos so far. British Airways has announced loss of nearly $800 mn for 2009-10. Ford and Mazda, currently working jointly with Chongqing, are planning independent JVs with the Chinese auto firm. GM says it would stop paying union employees in US to leave the company.

BP is being accused of understating the oil leak crisis; some say leakage rate is 70K and not 5K barrels a day. US wants it to bear full cost, which cannot be estimated as of now. Abbott is to buy generics unit of India’s Piramal Healthcare in a $3.72 bn deal which will make it the largest pharma firm in India.

Unilever has put Italian frozen food unit on the block while Pepsi has announced further investment plans of $2.5 bn in China, to set up 10-12 new plants, besides expanding the existing 27. Wal-Mart is moving to lift goods directly from vendors’ plants, the idea being to cut transportation costs; its stores in high unemployment areas are hurt. Overall big retailers all over the world seem to be in reasonably comfortable position.

BofA has sold its stake in Itau of Brazil for $4.4 bn. Dubai World has worked out a deal to restructure its $23.5 bn debt. Seven of top ten trades recommended by Goldman resulted in losses for its clients last quarter.

Billionaire Allen Ponzi Stanford appears to have been beaten severely while in jail. Hyperion and Toshiba are close to commercialising nuclear reactors no larger than a large refrigerator with capacities ranging from 5 to 25mw. Specially developed chocolates can help prevent wrinkles and slow aging, besides making skin radiant, says a Swiss chocolate maker. Every fifth American visits an emergency room once a year. Scientists in China are using chemicals extracted from cigarette butts to protect steel from rusting. Bill Gates has been told by his father that Microsoft should pay more in taxes. Scientists finally appear to have created synthetic life.

A textile mill buys 6-month forward cotton from US, hedges against a dip in price, buys 6-month forward dollar, hedges forex receivables for a year and covers furnace oil for two years. NY shorts euro. Frankfurt buyer says sorry no demand. Cancel my order. The surplus goes on streets of Beijing at half the price. Some mills close. Thousands of workers are sent home to their villages. NY gets its share in exports that were never shipped. Get it? No? Hire McKinsey. It will tell you to cover against euro plunging also but then euro will go up and the buyer will demand a discount. Confused? That’s the new normal for industry.

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Sunday, 16 May 2010

2010-05-16T22:39:00.000+05:30

“We aren’t Greece,” Krugman screamed, tweeted and blogged last week.
“You aren’t Greece but you will be if you don’t move fast enough and when you do become Greece, you will make the whole world Greece,” a tweet back to him.

The trillion dollar European plan for saving the euro failed to “shock and awe” and the trio of Greece, Spain and Portugal saw euro plunging to 1.22 while oil hurtled towards $70 at an unbelievable speed last week. What the scene will be if dollar attained parity with euro and oil touched 50? A euro buys in Europe less than what a dollar buys in the US and perhaps euro-dollar parity would turn out to be nirvana for eurozone like it did in the aftermath of the dotcom bust. Impact on Asia may not be as intense as is expected since domestic consumption is growing.

The volcano in Iceland erupted yet again, bringing aviation in Europe to a near standstill yet again. May be it would stop only when rich boys UK and Denmark stop bullying the tiny nation for recovering a debt the people of Iceland do not owe.

The consumer in the developed world has to cut consumption. Should oil plunge to 50 or below, all economic data and GDP figures will go haywire, making data dressing a difficult task. Economics of solar and wind energy would change dramatically and the developed world would find it even more difficult to compete with Asian manufacturers.

The trillion dollar plunge in NYSE market cap on May 6 rattled Washington last week, leading to Washington summoning St operators to unravel the mystery that some attributed to extraterrestrials and N Korea too. Paranoia made way for some pragmatism by week end and the US moved closer to comprehending the meaning of unfettered financial innovation. Senate voted to leash the credit card industry and prosecutors probing big boys of the St (Goldman, Morgan Stanley, Citi, Deutsche, JPMorgan, Merrill Lynch, UBS, Credit Agricole and Credit Suisse) accelerated investigations.

However, as on date, the St is busy with swaps, CDOs and leveraged loans as if Lehman happened in 1929, not 2008. Nevertheless, the strain of managing the world’s largest economy has started showing on Obama and Geithner, both of whom have aged a decade in less than two years.

As the tech sector moves to make the consumer move from laptops to smaller devices, wars in smartphones market have started becoming smarter. Google says its Android software had displaced iPhone as the second largest smartphone software, prompting Apple to contest the claim. HTC, Apple and Nokia are engaged in patent wars, each accusing the other two of infringement. Looks like it is Apple’s profitability, not volumes, that has made rivals sit up; Nokia has changed management twice in seven months as its revenue dipped 19% last year and profit plunged 76%.

Meanwhile, Wal-Mart seems to be in for further growth in sales of mobile-phone services as consumer appetite for pre-paid (contract-free) SIM cards is growing. P&G is realizing the awesome power online communities have vested in the consumer as moms across US have ganged up against Dry Max diapers.

Mobile and cloud computing are the hot areas with Microsoft claiming 500 mn users and Google 25 mn. SAP has bought accounting software firm Sybase for $5.8 bn and one reason is it wants its solutions to be accessible from mobile devices. Microsoft has updated its Office software yet again but whether it has made some sensible change this time would be clear only by 2011. Global online adspend is now over 15% of total.

In last ten years 227 companies fell off the Global Fortune 500 list. Farmers in China bought over 20 mn household appliances in Jan-Apr as subsidies continue to be doled out in rural areas. The new British PM called the change of guard a historic and seismic shift but few expect any radical change in policies.

China is tripling subway rail system under a $146 bn plan. Malaysia has raised interest rates for the second time this year. After US, debate on healthcare has started intensifying in Germany. In 12 months to 31 March 2010 US saw 1.53 mn bankruptcy filings and the country is losing $60 bn in taxes because of transfer pricing by its MNCs.

The worst seems to be over for Toyota as its sales in US have recovered despite recall of 8 mn vehicles. In year to March 2010 its sales fell less than 100,000 units in US. Volkswagen says it will have to pay money to get rid of its Spanish unit Seat that had operating losses of 340 mn euros last year; its Bentley unit is also losing money. SABMiller has patented an easy-to-open beer can that converts into a drinking cup when the top has been removed.

Michelle Obama wants to eradicate the 15% childhood obesity in one generation and hubby is backing her. Research says British bureaucrats working 10-11 hours suffer more heart problems than those putting in only 7 hrs and 55% of Russians believe bribes have to be paid for most public services; Russia is ranked 146th on the corruption perception index. The private prisons industry in US has probably crossed the billion dollar mark as it continues to have 0.756% of population in jails and private prisons offer lower escape and mortality rates.

Driving schools in Japan are offering lessons in driving BMWs with massage and manicures thrown in. Chinese households are offering foreign visitors free stay in exchange for lessons in English. Whistleblowers in US received $2.39 bn in awards between 1987 and 2009 for providing information on companies making false claims for their products, the latest being a $45 mn award shared by two who said AstraZeneca was marketing a schizophrenia drug by making false claims. Abu Dhabi now has a vending machine selling gold and Google says its cars photographing streets around the world have inadvertently collected personal data of individuals tapping open WiFi networks.

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Sunday, 9 May 2010

2010-05-09T13:17:00.000+05:30

In a rather eventful week, euro tumbled and recovered partially, oil dived and didn’t come back, and Dow plunged a thousand points Thursday like it was Mumbai or Shanghai. The Greenback flexed its muscles, asserting it was still the Almighty.

“We want an end to the freefall of our living standards,” said a Greek union leader, while Angela Merkel insisted that “in the long run, you can’t live beyond your means.” Living within means implies adjusting living standards but the 11 mn Greeks are livid largely because they have been, like much of the developed world, on a high since 2003. The world needs to fear spread of not financial crises but discontent among people in countries with ageing populations where thrift continues to be discouraged actively by governments and available reserves of real wealth are still being swallowed by the slick and the smart.

Living standards in not only Europe but the entire developed world have to fall. Definition of normal is changing. Every eighth American is receiving food stamps, households net wealth declined by $17 tn between 2007 and 2009, and the people are no more in a position to keep paying $100 bn in credit card interest charges and penalties. Only 576 mn credit cards are now in circulation, against 708 mn in 2007. 68 banks have already closed shop in 2010. Unemployment is no more a stigma for most individuals.

Germany and France are frantically looking for ways of stabilizing euro and Europe as Spain and Portugal continue to be on weak wickets, UK is figuring out what the people want, and Italy says it is safe and sound. Some in the east like Hungary are jittery while Russia is minting money from oil. Greenland’s 56,000 citizens are looking forward to a prosperous future as oil majors are rushing in with huge investments.

Hong Kong retail sales are almost back to pre-Lehman levels, Korea South is being deluged by dollars while North’s Kim has finally seen inevitability of dependence on China. Japan’s ratings are being reviewed, Australia is ecstatic on the back of high commodity prices, and Brazil’s financial standing is growing while Costa Rica is undecided on controls on capital inflows.

Relief should come from oil softening. Crude 2018 is above 100 but Russia and Mexico continue to sell below market. Instability is going to cause pain to Asia too but Asia is willing to leash capital flows when necessary and composition of world consumption will likely change in favour of manufactures.

Looks like inevitability of adequate regulation of the finance industry is beginning to dawn upon policy-makers. US and EU are likely to tighten supervision significantly and restraints on capital flows are expected from many countries. Switzerland, with a much bigger TBTF problem than US, is pushing UBS and Credit Suisse to be more conservative. However, the developing world (plus Japan) seems to be determined to pass through the path US and EU have traversed.

BP was the most talked about company last week as it faced an estimated $14 bn of cleaning costs and its shares plunged. After takeover of Continental, United will be the world’s biggest airline with revenue of $29 bn while Cathay grapples to hedge or not to hedge oil. Starbucks has been sued for serving excessively hot tea, Nestle CEO says corporate philanthropy often misuses shareholders money, and US hospital chain HCA, bought for $33 bn by KKR and Bain, is issuing equity to cut debt. Swire of Hong Kong and Chian Tian Yuan Mining have postponed their IPOs. Newcrest of Australia is buying rival gold miner Lihir for $8.5 bn as it wants more overseas earnings. Nike expects revenue to grow from 20 to 27 bn by 2015; China now accounts for 10%.

Apple and Google are fiercely buying any available promising small and mid-sized tech firms, Nokia and Microsoft have launched software for running Office on cellphones, and FCC has ruled that Internet service providers cannot block others content.

Goldman Sachs, currently settling fraud charges with SEC, has found an ally in Warren Buffett who says Abacus was fine and normal. UBS is going all out to tap wealth management in Asia, Citi’s credit cards exposure expanded $80 bn last year, and American Express, with average card spending of $8,665 in 2009 (against 3,073 for Visa+Master), was the top performer among Dow components in 2009; Visa and Master aren’t affected by defaults since they do not issue any cards directly.

Prudential’s largest shareholder Capital Group is gunning for its CEO; acquisition of AIG’s Asian unit is getting delayed for want of regulatory clearances. AIG says it has started earning real money. Well, congratulations.

Moody’s, S&P and Fitch are beginning to face real heat now; over 90% of triple-As issued to subprimes in 2006 and 2007 have been downgraded to junk. Now S&P will rate debt of 23,000 unrated firms, hoping to eventually make them pay.

US nuclear warheads stockpile has plunged from 22,217 in 1989 to 5,113, says the Pentagon, rupture of a water main has forced Boston residents to boil all drinking water, and TIGER21, an exclusive club of those with $10 mn or more in investable assets (each member pays $30K a year) is looking for upright investment advisors.

US has about 100K centenarians and a survey says 8% are already texting, 12% have iPods and a majority wants to date Betty White. Another research says toddlers who watch too much TV eventually eat more snacks and score less in maths. US govt is trying to make physical exercise in school compulsory. US FDA is 15 years late in saying Tylenol doesn’t help much.

A fair in Italy aims to help divorcees start happy new lives; annual number of divorces is about half of marriages. Pakistanis, avoided by US employers since 9/11, have now started calling themselves Indians. Pollution in London is seven times that in Frankfurt; is there a positive correlation between pollution and financial innovation?

xxxxx

Sunday, 2 May 2010

2010-05-02T16:29:00.002+05:30

“Nothing has changed, except, of course, jobs have been lost, homes have gone into foreclosure, retirement incomes have evaporated, housing values have declined.” As Senator Dodd was saying these soul-stirring words, details of Goldman Sachs cheating widows and orphans in Europe were tumbling out and Amex was selling credit-card-loans backed bonds worth nearly a billion; some may get repackaged by somebody at some point of time, to cheat some charity or municipality. Nobody wants to utter Glass-Steagall. Buffett wants existing hedge deals to be excluded from regulation. Europe and Japan are equally passive.

The euro, not Greece, is what the world is speculating upon. Instability is suddenly in the air once again. After Greece, sovereign ratings of Portugal and Spain have also been cut. Shares of Asian companies having large sales in Europe, including Sony, Samsung and LG are down and most of them are moving to hedge their expected revenue against currency upheavals. Sony’s profit dips $500 mn for every one yen decline in euro. Looks like Asian economies are more dependent on euro’s health than the economy of Europe itself.

The euro started softening decisively last week and some are talking of parity with dollar. Agreement on Greece continues to elude Europe for reasons that aren’t very clear. Greece isn’t going to become Ghana tomorrow. It has already banned short-selling and possibility of the entire euro zone clamping down on speculation cannot be ruled out. Europe can’t afford to let euro be dismembered. Nevertheless, European consumption pattern will have to change to some extent.

Significant expansion of global capital flows, as well as M&A activity, are foregone conclusions now, though consumers are working hard to restore sanity. Purchases Americans made with Visa credit cards in Q1 were up 3.4% while debit card transactions leaped 21%. Europe says taxes of over $6 bn were evaded by carbon traders in 18 months to Dec 2009. Spain, with unemployment at around 20%, has started balking at subsidies for solar power and Germany may have to do the same. This is one area where the US has perhaps the most sensible approach as increased cost instantly gets distributed over the entire energy consumption.

Russia has stunned Ukraine by proposing merger of Gazprom with Naftogaz, China has started curbing lending and liquidity relentlessly and seems to have persuaded US to stop harping at the yuan. Brazil’s forex reserves have risen to $247 bn and its currency has rose 9% last quarter, Saudi Arabia has agreed to let Citi reestablish operations that were discontinued six years ago, and Singapore is fast emerging as a major in water recycling technology; its companies have won contracts worth over $5 bn in 15 countries. Japan has started looking at the venture capital industry to boost technological innovation and to address continuing deflation. Switzlernad’s exports plunged 15% last year as watches, cheese and chocolates were all down.

Ireland’s banks still need some $40 bn in additional capital because of losses from bad loans. Korea received net FDI of $140 bn last year, mostly in equities while its outstanding outward investments rose $40 bn. Hotel chains are looking at Europe for growth as they account for only 34% of hotels (in Europe) while the figure for US is 70%.

Smartphones seem to be changing the cellphones market landscape. Nokia and Samsung+LG continue to account for about two third of global market. Google is pushing its Nexus One and RIM too is growing. HP has bought Palm. Panasonic, NEC, Fujitsu and Sharp of Japan are working on having a common core software for cellphones. Ads on iPhone and iPad are in the pipeline. Baidu is benefiting from Google’s exit from China. Sony is exploring use of Intel chips and Google software to regain market share in home-entertainment devices.

Revenue and profits of most oil companies, including BP, Shell, ExxonMobil, ENI and others are rising, and the massive spill threatening US coastal areas can only result in further boosting investment in the oil industry. Pemex of Mexico is planning investments of $25 bn a year. German energy firm E.ON Ag is to sell assets worth over $12 bn to cut debt.

Volumes of companies producing necessities (Unilever, Whirlpool, Colgate, P&G, etc.) are growing furiously in Asia and LatAm, though the picture isn’t very clear as early 2009 was a particularly distressed period. In the latest quarter, 3M revenue rose 25% while UPS volume jumped 18%. DuPont is growing on chemicals used in photovoltaic cells and semiconductors. Caterpillar sales of engines and turbines plunged 28% in latest quarter; it expects fewer housing starts in US in 2010.

Wal-Mart continues to face charges of sexual discrimination against women employees, though perhaps it has provided part-time jobs to more women than any other company. BYD of China has started taking concrete steps to sell electric cars in US. National Pension Service of Korea continues to buy real estate in the developed world, the latest being the move to buy Sony Center in Berlin. Charles Schwab has agreed to pay 250,000 individual investors $200 mn against losses in a bond fund.

US narcotics authorities are beginning to realize that most drug cartels have succession plans in place and putting drug lords behind bars hardly impacts their functioning. A German managed to siphon electricity from an overhead line for a month with an ordinary meat hook.

Reuters research says Americans are losing confidence in effectiveness of healthcare plans; the US healthcare industry is spending more than a million a day on lobbying. Australia has decided to be the first country to ban branding of cigarettes. Belgium has voted to ban full face veils in public places and many expect several other EU countries to follow. Maryland researchers say American college students addicted to cellphones, social media and the Internet need treatment. So Google or Tweet? Just remember that if Sarah Palin’s emails can be hacked, so can be yours.

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Sunday, 25 April 2010

2010-04-25T09:30:00.002+05:30

“You could sell one 50,000 square-foot supermarket in the UK and buy something 10 times the size in China,” said a Tesco director last week. Retail price of most products sold by the big retailers are about the same all over the world.

G20 leaders patted themselves for the recovery act but do not seem to have any plan to withdraw stimulus. US is almost gung ho now; recovery is V, not U-shape. Profits are up, equities are up and the dollar is up. In China Q1 retail sales leaped 18%, electricity consumption was up 24.2% and trade surplus declined at least 50%, despite exports having largely stabilised. Even if trade surplus declines 50% for the full year, it will still be around $100 bn ($196 bn in 2009) in 2010. However, Chinese consumption cannot compensate world economy for decline in developed world consumption; US, EU and Japan consume 87% of all drugs produced in the world.

London expects to recover financial jobs steadily in coming years, Russia has started raising low cost dollars by selling bonds, Japan has announced plans to support its bullet-train companies bidding for US projects, and Australia is tightening rules for FDI in real estate. Germany now experiences unwanted surge in electricity output on windy nights as wind energy now accounts for 7.5% of total demand. In Spain too utilities are being forced to lower prices because of high generation by windmills.

Currencies and commodities, including oil, have become remarkably stable, pushing equity indices up. However, non-financial economies (the world less US+UK) shouldn’t uncork champagne. Despite skeletons tumbling out of rating firms cupboards, markets are stubbornly refusing to recognize systemic deficiencies. Big boys on the St have now started looking at smaller (below 50 mn) retirement funds and financial innovation seems to have gained traction again. Senate can discuss legislation until eternity and Obama can keep scolding the St but there is no hope on the horizon. The focus on salaries can only hurt economic development; how would somebody earning half-a-million a year react when taken to the Bahamas for a luxury holiday in a private jet?

Companies of all hues, around the world, are flush with funds. At least five trillion, may be ten, is looking for parking. Near term future would largely depend on how much money flows into what direction. Financial flows can make and mar small economies with equal ease.

The volcano in Iceland cost airlines an estimated $2 bn in lost sales while hotels made hay. Dutyfree shops sulked, ATF demand plunged, traffic on travel Web sites surged, and flowers and food products worth millions perished. BMW faced components shortage. Few seemed to know anything worthwhile about impact of ash on aircraft engines.

Apple continues to dominate the tech-domain; sold 8.75 mn iPhones in latest quarter, notching sales of $13 bn plus. AT&T got nearly a million new customers in Q1 because of its exclusive offering of iPhone.

Google, fighting censorship in over 20 countries (China isn’t alone) may soon face severe censoring in Australia too; Brazil, Germany and India demand significant content removal. Lenovo has emerged as the prime contender for Palm, after Huawei declined. China Mobile Q1 sales rose 7.7% to over $16 bn, though subscriber growth declined and ARPU plunged from 80 to 70 yuan. Amazon is being pressured by NC state to provide details of its customers.

Chrysler says its cashflow turned positive in Q1 and Toyota has been downgraded by Moody’s but that hasn’t prevented its share from recovering. Boeing delivered 108 (121) commercial planes last quarter and Japan Airlines debt is being sold at 80% by lenders.

Seed giants Monsanto, DuPont and Syngenta are now after drought-resistant seeds that offer higher than normal yields, and Asahi, hitherto serving beer mostly to the Japanese, though having presence in US and China, is on the prowl for acquisitions in India, Indonesia and Russia. Heineken revenue declined marginally in Q1 as sales in Russia plunged 40% because of a 200% hike in tax.

Novartis Q1 sales rose 25% to $12 bn, of which over one billion came from the now redundant H1N1 flu; it owns 25% of Alcon (eyecare) and might buy a further 52% from Nestle. Peabody seems to be coming closer to acquiring Macarthur Coal of Australia; latest offer says CITIC, ArcelorMittal and POSCO can retain their stakes. Toshiba revenue fell 4.1% to $63.8 bn last year. Deutsche Bahn is buying UK train operator Arriva for $2.5 bn and plans to have pan-European transport operations, including buses. Food companies like Nestle and Danone and fast food chains like McDonald’s seem to be doing well. Same goes for Pepsi and Coke.

Eurozone is worried about 500-euro bills being accumulated by terrorists and tax evaders, though one wonders how a ten trillion plus economy is surviving with currency-in-circulation of 800 bn euros. Japan is looking at algae yet again for producing fuel. While Obama wants to raise educational standards, a third of US teens continue to text 100 times a day.

The Apple engineer who left the next iPhone’s prototype at a bar serving German beer has been offered a free trip to Germany by Lufthansa. German media says the computer was invented by a German engineer in 1936 but it wasn’t pursued. In China, a farmer is assembling robots at his home, using scrap materials; they pour tea, light cigarettes and even paint. The developing story is the spread of a deadly fungus, details of which will emerge only after Apple unveils the next model of iPhone. Meanwhile, a study has been initiated in UK to study effects of mobile phones on 250,000 users across Europe.

If Greek deficit turning out to be euro 2.5 bn higher than previously claimed can cut equities valuations by hundreds of billions and increase Greece’s borrowing costs by several billion, anything can happen. Keep tweeting, texting, or chexting or whatever. Tomorrow will be another day.

xxxxx

2010-04-18T16:38:00.003+05:30

Even as Obama vowed not to bail out any bad boys in future and threatened to veto any bill that doesn’t police derivatives, movie box-office futures were cleared by CFTC despite one commissioner calling it “popcorn prediction,” and in Europe one Centaur Galileo fund announced plans to launch a sports betting fund. The only conclusion one can draw is that US and UK aren’t about to get off the poker table. 2+2=3 was the graphic headline of a Swedish daily last week after the govt revised a figure from +2.4 to –2.2 (billion kronors). In US, it should be 1+2=12 and it applies not only to economic recovery related stats but also to what the St keeps telling all to collect money.

Habitual of treating natural disasters as localized events having local impact, humanity was jolted last week as a relatively small volcanic eruption in tiny Iceland is making airlines lose over $200 mn a day.

US trade deficit and imports of consumer goods have stopped declining and surplus in technology products too has started losing steam. US Fortune500 slashed 821K jobs last year as sales plunged 8.7%, even as profits zoomed 200%. NBER (US) has to determine the date on which recession ended, for posterity. It is dilly-dallying because some members aren’t sure if it is really over.

China reported a stunning 11.9% growth for Q1 when industrial output rose over 18%, car sales zoomed 76%, and urban investment rose 26.4%, though China also registered a trade deficit. Besides mining companies, China is also stepping up purchases of farmland in countries such as Australia. The real estate boom, however, is now being seen as possibly a real bubble. New measures have been announced to cool property market, including higher margins and interest rates.

Japan’s GDP shrank 5.2% last year. A third of workers are now part-time, contract or freelance, and every fourth Japanese is over 65. Vietnam has firmed plans for a $56 bn high speed bullet train project with Japanese technology. After a record trade surplus of $17 bn last year, Argentina is offering to settle part of the $95 bn of debt it defaulted in 2001, and India, worried by persistent inflation, is being assured by Wal-Mart that if it is allowed to come in, it would cut inflation by two percentage points.

Twitter created some waves last week by announcing intent to carry ads, Google’s long term prospects are beginning to be questioned by analysts, and doubts about iPad persist. However, PC shipments rose 27% to nearly 85 mn units last year, suggesting the tech sector is live and kicking.

Citic of China is planning a JV with Credit Agricole of France, AIG has sold 53 passenger jets to Macquarie of Australia for $2 bn in cash, and Morgan Stanley’s real estate business is set to lose $8.8 bn. Since 1991 it has bought property worth $174 bn, raising the money from pension funds and universities endowments in several cases. As banks continue to fail (50 this year) in US, troubled assets continue to be lapped by the cash rich playing for the long haul, like Starwood Capital. Dubai World is offering 1% interest to its lenders against 5% they demand.

Taizinai (yoghurt, China) never sold anything contaminated but has collapsed because the organized dairy sector has lost trust of consumers in China. Nestle was approached but declined. EBX of Brazil says it will go for an IPO only after the group is valued at $100 bn or more. BP is to shift solar panels manufacturing from US to China/India.

Apple says iPad has sold better than expected in US, forcing it to delay overseas shipments, though Israel has started asking visitors not to carry iPad because its technology interferes with frequencies. Straddled with massive inventories of unsold smartphones, Palm is looking for a buyer and Huawei of China has shown some interest.

Lufthansa says it isn’t insured against losses from the Iceland volcano, and Carrefour is buying back 6% of its shares and plans to seek acquisitions in Brazil, China and Spain. Mattel sales rose 12% to $880 mn last quarter when Sony’s PlayStation3 also jumped 44%. HP’s former CEO Carly Fiorina is facing flak for bribes HP paid for a contract in Russia during her tenure, and BP’s CEO is facing flak for a 41% hike in pay as earnings fell 22% in 2009.

Schools in southern US states are being accused of continuing segregation in a back-handed way by concentrating white students in some classes. Americans, Indians and Italians have been identified as those who lose temper at sporting events when their kids don’t achieve.

Larry King it seems has been far more sophisticated than Tiger Woods – he has filed for his eighth divorce from his seventh wife; he remarried one after divorce and then divorced her again. The moral is why have an affair if you can do it legally.

Clothes that can trim torsos are being hawked by somebody in partnership with a former investment banker and Somali pirates are acquiring the latest technologies, per some reports. Effectiveness of individual drugs is to be measured under a program that is a part of Obama’s healthcare plan, which some say would virtually pave the way for rating drugs. Meanwhile, Michelle Obama seems to be succeeding in persuading food firms to cut sugar and salt in their products; the lofty objective is to cut obesity in one generation. US continues to account for more than a fourth of all drugs sold worldwide.

If Goldman Sachs can short and hawk a financial product (Abacus) at the same time and Deutsche can persuade a French municipality to speculate on dollar-SFr rates until 2042, where does one go? Learn from former Lehman broker Stone, who went to prison a decade ago for a penny stock scam, set up his own firm after that and is now running Wakabayashi Fund in Japan. Says what’s wrong in sending emails recommending a stock?

xxxxx

2010-04-11T14:38:00.001+05:30

Nobody knows what’s happening and what is likely to happen and how the global economic landscape is going to change. Fitch cutting Greece’s sovereign rating and ratings of its five top banks (assets $470 bn) had only a marginal impact on the euro, though the Greek DyPM did try to pull in Spain and Portugal, saying they could be the next victims. Somebody said the Greeks aren’t as serious as the Germans; perhaps nobody is as serious as the Germans and the Chinese.

Partnerships break in times of extreme success or failure and that is the euro zone’s problem. Germany, Finland, the Netherlands and France are competitive while Greece, Italy, Portugal and Spain have easier outlooks towards life. However, all have benefited from the stable exchange rate euro has provided for trade within the zone; the euro is too big and strong to be killed by financial pirates ruling the world.

Low income never fails to teach thrift. Sooner or later, all will learn.

With net national savings at –2.5%, the US economy remains a mystery. While Obama and Geithner keep touting their success, distress is written all over faces of ordinary Americans. Unemployment doles are becoming unsustainable and even NY, which receives more visitors than any other city in the world, has a budget deficit. The federal govt is finally coming around to accepting VAT. The Fed is willing to maintain ultra-low interest rates as long as necessary; keep robbing millions of Pauls to keep playing the music that keeps Peters on the St swinging.

Speculation on China is growing, with asset bubble being the pet theory and the likely trade deficit in March providing a fillip, though few deny the solid foundation. Rural demand for durables and automobiles continues to boom on the back of subsidies, population of vehicles is still below 200 mn, which is less than a fifth of US on per capita basis, and there is the 3 tn reserve (don’t forget Hong Kong and Macau). What is relevant is China’s ability to continue to work hard and use money judiciously; issues of yuan appreciation and interest rates rising are largely irrelevant. Yuan trading against rouble, won and ringgit is being considered. Imagine what can happen if China fixes values of JPY and euro for the purposes of its own trade deals.

Anheuser-Busch InBev, Volkswagen, Novartis, Apple, Bridgestone, Google and Noble Group (Hong Kong) are the seven major global companies that managed to grow through the turbulent 2009, says SERI (Samsung).

Sony, Intel and Google are working together to develop TVs that would have built-in systems for surfing the web. NewsCorp continues to search for ways of preventing search engines from displaying full articles of its publications.

Daimler may join the Renault-Nissan alliance to share cost of developing new models. Hitachi says it has developed technology that doubles the life of lithium-ion batteries to over ten years. Japan Airlines is to cut workforce by nearly 10K, including 775 pilots and 2,460 flight attendants and British Airways is taking over Iberia (Spain) for $8 bn, expect synergy being over $500 mn a year.

Campbell is finding out that in recessionary times people shun soups and make do with the rest of the meal. Starbucks is finding the going tough in Australia and is preparing to once again go high end at home, with wine, beer and pastries served behind heavy curtains.

BASF is expected to bid for Cognis, maker of ingredients for shampoos and lotions and Pfizer says its Lipitor patent might expire but more products are in the pipeline for Alzheimer’s disease and cancer.

Blackstone owned Hilton hotel chain has cut its debt by $4 bn but still owes $16 bn. Lindahls of Sweden bought the image of a non-descript face from an agency for use in its ads, without bothering to take consent of the man in the picture; now the man is demanding what a celebrity would have demanded – about $7 mn.

Cosco (Shenzhen Energy) continues to have accidents, the latest being a coal ship leaking oil in an environmentally sensitive area in Australia, OAO Novolipetsk, Russian steel producer, is planning to expand capacity 40% to 17 mn tons at a cost of $4 bn, and AgBank of China is working on what may be the biggest ever IPO; at least 20 global banks are in line for a share in the pie.

France Telecom, having near $10 bn in usable cash, is preparing to go on an acquisition spree, particularly in Africa. Total is the latest to be investigated, among 2000 companies which are believed to have paid slush money to Saddam govt for buying cheaper oil.

What people are saying on Twitter is being analysed by techies; some at HP have developed a methodology to predict success or otherwise of movies on the basis of monitored tweets. Germans are taking to car sharing and staying single through out life in growing numbers. US needs more counsellors because about one half of marriages are ending in divorce and one analyst says superstars often have a demotivating impact on colleagues.

Ikea workers are striking because management has set limits on time spent in toilets; Carlsberg employees are livid because company doesn’t let them drink beer while on job, outside lunch hours. US army is telling soldiers in Afghanistan to do without burgers and pizzas as they are not on a picnic. A Republican was caught entertaining potential contributors at a sex-themed nightclub and sending love notes in text from cell phones is now known as chexting. One researcher has found out that the City is in trouble because only two percent of directors are female.

BoJ Governor Shirakawa says as long as US and China hold, Japan will hold. If you can see the dichotomy and aren’t tired enough of carrying your laptop to buy an iPad, you can manage your money and life reasonably well.

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2010-04-04T12:38:00.002+05:30

Nothing illustrates Obama’s desperation at his failure to handle the US economy than Hu Jintao’s visit to US next week and the possibility of China ceding some ground on yuan can hardly be ruled out now; whether it would help the US economy is, of course, a different question altogether. AMCHAM says US companies are facing inconsistent interpretation of rules in China.

Notwithstanding brave claims of consumer spending rising and manufacturing expanding, this one fifth of the world economy is in deep trouble. Hotels and airlines are experiencing declining capacity utilization, clothing imports are declining, and even Manhattan seems set to lose the glitz and the glamour as vacancies are close to 15%; Goldman Sach’s alone is slated to vacate 2 mn sq ft. Several US states are considering legalization of marijuana for fixing budget deficits. Led by antidepressants, prescription drugs sales rose 5.1% to $300 bn last year.

Automobiles population declined 4 mn to about 246 mn in 2009 because Americans scrapped more than what they bought. A rebound this year? The decline has to continue for at least a decade for the economy to alter its consumption composition to regain some hue of sanity. A 20% decline in US consumption means about 4% of global consumption and the world, including China, needs to plan for that. The St is ecstatic with Dow hovering close to 11K, greenback flexing muscles and oil’s gaze fixed at 90 but one thing all this doesn’t mean is jobs. The colored man in the white palace is scared because a fourth of those who put him there are fearful of the future.

World crude steel output declined from 1329 to 1219 mn tons last year, worldwide number of air passengers rose 9.5% in Feb while cargo was up 26.5%, and the $40 bn plus global art market is looking up again. Global solar power capacity leaped from 13.6 to 20 gigawatts last year but still accounts for only 0.5% of generation. China’s manufacturing continues to expand, and Japan expects auto demand to dip 5% this year; wages have declined for 21 consecutive months. Russia is quietly gaining strength as oil and gas output is close to a billion a day.

Notwithstanding the lower decibel of noises about Greece, the noose around the euro seems to be tightening as focus has shifted to Ireland, where banks need $43 bn in new capital and budget deficit has ballooned to 11.7% of GDP.

Cross border M&A deals in Q1 were up 5% to almost $500 bn and acceleration may be in the pipeline as corporates continues to amass cash at a scale never seen before. Worldwide corporate bonds issuance of $738 bn in Q1 was below last year’s trillion but the point is that so far not a billion of that trillion has impacted the real economy.

AT&T networks continue to be jammed because of iPhone and the carrier seems to be virtually in dread of iPad being launched, though not many expect iPad to do as well as iPhone. Vodafone and other UK mobile operators are being asked to cut rates for incoming calls from 4.3 to 0.5 pence per minute, Dell is being investigated for having misreported financials since 2001, and Verizon says the new healthcare bill will cost it $970 mn because it will have to provide some medical benefits to retirees.

BofA, like most US banks, wants to grow globally, organically; they know the rest of the world is yet to traverse the path the US already has. Japan Post already has nearly $2 tn in deposits but is considering doubling the limit for individual deposits to over $200,000; privatisation is also being discussed.

Geely of China is preparing to pump $900 mn in Volvo. Toyota has lost over $15 bn in market value and its electronic controls are being examined by NASA, though the US consumer, ignoring all charges, gave it a thumbs up in March. Hyundai worldwide sales grew 36% last month, to 317,973 vehicles, and Bombardier Q4 revenue declined marginally to $5.35 bn. Total, Shell and Chevron are unable to find buyers for refineries in Europe, and Macarthur Coal (Australia) has rejected a $3 bn bid by Peabody of US (world’s biggest listed coal miner).

After some rumours, Harrods has clarified that it isn’t up for sale, Cephalon of US has failed to win approval for its prescription drug that promises to treat jet lag, and Bright Food (Shanghai) has offered $1.6 bn for sugar business of CSR (Australia) as Cargill too is reportedly interested. Christie’s is being sued by a billionaire for selling counterfeit wine and Samsung’s indicted CEO Lee Kun-hee is back on the board of Samsung Electronics after an official pardon in December.

Spain is considering steps to check illegal downloading of movies from the Internet, following airlines, hotels too have started charging extras for baggage holding and even service, and California has finally decided to pay doles electronically, rather than mailing 41 mn checks a year.

Flight attendants of Spanish airline Air Comet protested by stripping publicly last week as they haven’t been paid wages for nine months, and a parliamentary committee in Belgium has voted to ban the full Islamic face veil. German scientists say a chocolate a day keeps heart attacks away.

Iraq wants to convert Saddam’s palaces into tourist resorts, Mexican drug lords have started using weapons against the army also and pilots taking antidepressants have been allowed to fly passenger planes in the US.

Tech savvy robberies involving billions are in but the good old ways of digging a tunnel below a bank are still live and kicking; it happened in a Paris bank last week. OTC derivatives trade is 4 times GDP in Mexico, 14 times in S Africa, and in the US, it is, well, Obama wants to double exports in five years. Buy an iPhone and download porn in your spare time so you can avoid marijuana.

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2010-03-28T19:01:00.001+05:30

“We got away with it, now we can get on with making money in the same old way,” is how economist John Kay described the attitude at the St. last week. Four banks were seized by US regulators last week.

The US polity is becoming uglier by the day; Republicans are talking of ousting Pelosi and are refusing to work past 2 p.m. in order to delay things. The obvious reasons is the stakes in most major issues, mainly financial regulation and healthcare, are too high. Nobody knows who is batting for whom and who is squatting at whose prodding.

Following Obama, the developing world has quietly started moving towards compulsory healthcare, forgetting that corporatisation of healthcare is an impracticable concept in at least Asian cultures.

The financial world is doggedly pursuing Greece, insisting it has to default at some point of time, the argument being that no nation can cut expenses 25% in one go. However, what matters is not Greece but the euro, which did weaken perceptibly last week. Curiously, problems of Athens have imparted a certain degree of stability to currencies and commodities.

Yuan continues to be a thorny issue and looks like China has started preparing to throw a lollipop of sorts, say 6.7 a dollar, since that may also help control domestic inflation. That is the only conclusion one can draw when CEOs of heavyweight firms like Lenovo, China Merchants and Hunan Steel openly advocate a stronger yuan. But one never knows. If US consumption keeps declining, the bickerings may continue. The key point is that a predominantly manufacturing economy cannot afford to let its currency gyrate like a ballet dancer.

Hungary seems to have actually managed to sell carbon credits that weren’t valid, hurting ‘investors’ in the process. Ireland’s per capita alcohol consumption dipped 9.6% in 2009 and China awarded $112,219 to 737 persons for information they provided about pornography on the Internet. Drought stricken Venezuela has asked everybody to cut power consumption by a fifth and has started punishing violators, which include Sony. Vague and unconfirmed reports say a famine like situation is building in North Korea again. While Hong Kong and Singapore are still struggling to be treated as financial hubs in their own right, and Frankfurt and Zurich continue to fret about London’s status, Warsaw says it too wants to be a financial hub.

The list of companies that are no more considered ethical by The Ethisphere Institute reads like a who’s who: BMW, Danone, Dell, Holcim, Honeywell, HSBC, Kellogg, M&S, Marriott, McDonald’s, Novartis, Oracle, Safeway, Unilever and, of course, Toyota. Start redesigning your algorithms for enterprise valuation since eventually somebody at the St is going to use, sooner or later, these rankings for pushing up (or down) a scrip.

Google isn’t God, insist the Chinese, as the tiff continues to escalate. Frontline companies in China and Hong Kong have started abandoning Google search engine. Microsoft’s browser has lost some share in EU after it made it easier for users to use other engines with Windows and expects a billion to use cell phones with software for Internet-calling, messaging and video within three years. India’s Airtel has finally sealed a $9 bn deal for the 42 mn customer base Africa business of Kuwait’s Zain; perhaps it should have followed China Mobile and bought a bank instead. Cisco expects to expand its payroll by 3,000 this year.

Citi’s latest offering is a credit-card portfolio with $40 bn outstandings. Dai-ichi Mutual Life is to raise $11 bn for God knows what; one thought life insurers are lenders always flush with funds.

Toyota’s aggressive discounts in March have forced rival Honda to follow suit, and the scene stands reversed completely with GM and Ford showing restraint while Toyota and Honda are going for the jugular.

BMW is supply fuel efficient diesel motors and transmissions worth $1.35 bn worth for US police cars, Volkswagon is planning to raise nearly $6 bn to ensure adequate ratings post-takeover of Porsche, and Daimler, accused of having paid bribes in 22 countries, including Russia, China, Greece, Turkey, Nigeria and Vietnam, has agreed to pay over $200 mn in fines.

Posco is going for shipbuilding plants in India and Indonesia under a $30 bn expansion plan and is even gunning for Daewoo Shipbuilding but Warren Buffett, a shareholder, says he would like the company to undertake a thorough study of the market.

Dubai World, which owes money to 90 banks, is to be supported by the govt with $9.5 bn in new funds, Arrow Energy (Australia), having a lot of coal seam gas, is being taken over by Shell and PetroChina jointly, for A$3.4 bn, and sales of Li & Fung of Hong Kong fell only 6% to about $13.5 bn, despite prices having plunged 9%. China Railway has won a $4.8 bn railway contract in Indonesia and Tiffany quarterly revenue is up 17%, rising to nearly a billion in the latest quarter.

Diabetes is reportedly growing in China, having reached 4.5% compared to 7.1% in India and 12.3% in India. Incidentally, diabetes is routinely described as the disease of the rich, perhaps because only the rich can afford permanent medication.

A typical car has about 80 microprocessors and nearly a 100 mn lines of software code and all software have one defect per 10,000 lines. The are going to provide black boxes, like aircraft, but remember you can access them only from up above, after reaching either heaven or hell.

Industrials in S&P 500 had a cash hoard of $832 bn last year and all financials, including banks, are oozing money from eyes and ears. Treasuries are finding few takers while corporates are making hay by handing out fistfuls of bonds. Where is the world going and what to do? Read the Lehman report and try to understand how Repo 105 worked. If it worked for Lehman, may be it will work for your company too.

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2010-03-21T17:52:00.003+05:30

A Krugman or a Soros one doesn’t have to be, to understand that appreciation of the Chinese yuan can only push inflation in US and actually exacerbate Uncle Sam’s problems in several ways. To what extent the diatribe is political gimmickry will perhaps never be known, though one must grant that China’s share in US non-oil trade deficit did leap to uncomfortable levels last year.

Perhaps Obama is trying to convince the 15 mn plus unemployed that the root cause of their plight is the yuan, not the St. The problem is the trade gap, not trade gap with China, and solace lies in either producing more or consuming less, and the US (govt) seems interested in neither. US trade deficit nearly halved in 2009, from $700 bn in 2008, implying the consumer is indeed spending less, but govt insists retail sales remained unchanged.

US bank lending declined 7.4% in 2009 as ‘rated’ bonds kept scoring over loan requests that need laborious evaluation. Bank failures in 2010 are expected to exceed 2009 and yet the five big ones have derivatives exposure of nearly 300 trillion. Bankers are busy lobbying against the proposed consumer protection office that would prevent them from charging a penalty of $25 for overdrafts of $5; 800 bankers told legislators that a consumer watch dog is good for all products except banking services. After sugar, the US is now focused on cutting consumption of salt, whereas what it really needs to cut is gasoline and ATF. Until Harvard and Yale keep competing for earning better yields on their corpus investments, education standards cannot recover.

Greece receded to back pages of newspapers but differences between EU and US+UK on financial regulations are growing. Germany even wants to involve its spy agencies for tracking speculators targeting currencies.

Exports of Swiss watches (industry revenue $35 bn) fell 22% last year and Omega and Rolex are slugging it out in the market place; exports to US dived 38% last year. Australia is upbeat about the new gas fields being developed by the likes of Shell, which plans to have a vessel larger than an aircraft carrier to ferry LNG to Japan and China.

Gross revenue of the booming casino industry in Macao rose 10% to nearly $15 bn last year. Russia remains focused on expanding international trade despite forex reserves hovering close to $400 bn (on the back of high oil prices) and has started softening its stand on Iran, in the hope of entering WTO. Korea is looking closely at what it calls the MICE (Meetings, Incentives, Conventions and Exhibitions) industry. Undaunted by the quake, Chile has decided to go ahead with a $3.2 bn dam project to ease energy shortages, and Mexico’s earnings from drugs are growing but that has started impacting tourism.

The same fiber-optic networks are now carrying Internet, as well as TV. Verizon (mobile telephony) says set top boxes being imported by Cablevision violate its patent rights. What will happen when the wire that brings electricity to your house is able to carry TV and Internet signals also? theflyonthewall.com, a portal that provides equity research reports the moment they are ready, has been ordered by a court to delay pasting, in response to a lawsuit by Merrill Lynch, Barclays and Morgan Stanley. Somebody would start tweeting these reports. Meanwhile, analysts say mobile carriers can forget growth as most in the world already have phones.

PepsiCo is to buy back shares worth $15 bn. Wal-Mart has rolled back prices of 10,000 items, mostly food and consumables, sending other US grocers in a tizzy. It is also considering issuing yuan denominated bonds in Hong Kong. San Miguel of the Philippines is continuing to sell stakes in food, packaging and even liquor (excluding beer) businesses to fund acquisitions in energy and gas. In quarter to 28 Feb, revenue of Fedex and Nike was up 7% each.

Panasonic is boisterous at having acquired battery maker Sanyo Electric last December as most expect demand for batteries to keep rising, and Sony continues to earn hefty profits from sales of Michael Jackson albums. Porsche has started marketing a classy mobile phone that would be offered exclusively to Porsche owners. Be ready to recognize a Porsche owner by suit, tie, shoes and jewelry.

Wells Fargo owned Wachovia Bank has agreed to pay $160 mn to settle allegations it helped Mexican drug lords launder money; it admitted failure to monitor transactions worth $420 bn. E&Y seems to be in a cleft stick because of having taken a benign attitude towards Lehman (before failure) and some believe it may go the Arthur Anderson way.

Lehman is moving to come out of bankruptcy proceedings; it paid over $600 mn in professional fees last year. Lloyds Bank, after incurring a loss of $9.6 bn last year, hopes to almost return to profits in 2010; its advances at the end of 2009 were 169% of deposits. Facebook has overtaken Google in terms of weekly hits registered by the site.

Teva of Israel is taking over Ratiopharm (generic drugs) of Germany; combined sales will be $16 bn. Samsung and LG together have a 30% share in world mobile phones market but smartphones are already altering equations. Toyota seems on way to recovering lost sales in US, suggesting the consumer isn’t impressed by the drama being enacted in Washington.

A Lockheed F-35 jet successfully landed vertically last week, German scientists have finally developed a 3-D technology that can make an object invisible, Somali rebel groups are using Internet effectively to raise funds, and Twitter is being used by 3,000 mobile food vendors of NY to communicate with their customers. Incidentally, small offices in India have been placing orders with food vendors by making ‘missed’ calls on mobile phones for years.

Currencies remained largely stable and equities displayed buoyancy last week, which should actually frighten sane minds because stability at unrealistic levels can only lead to problems later on.

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2010-03-14T20:40:00.001+05:30

Last week 20,000 Greeks protested violently against austerity measures that would change their lifestyles but would leave the rich and the powerful unaffected. Greece is full blown but the need for belt tightening is being felt in most countries and the major reason, in most cases, is the “Sign on the dotted line and take the money” line given to municipalities, universities, charities, real estate moguls and even sovereigns by bankers in Armani suits. As the developing embrace laissez faire zealously, will the proletariat rise in the developed world this time?

Greek PM Papandreou has started a movement against speculation, apparently unaware that for about a fortnight he had enough power to speculate against the dollar and earn tens of billions. EU (minus UK) is now firmly against financial poker while the US-UK duo is determined to protect the system that gives it a share in every mercantile transaction that takes place anywhere in the world. Not surprisingly, Obama’s popularity is plunging and the “Make Wall Street Pay” rallies by unions are becoming more frequent. Meanwhile, derivatives to hedge against flopping of movies are expected to be cleared by CFTC (US).

Monsanto is being investigated by USDA as US farmers had to pay $17 bn (56% more than 2006) for soya seeds; it has a share of over 80% in US, but like pharmas, seeds patents too are coming closer to expiry. Wal-Mart has restarted stocking 300 items it had discontinued last year, after realising that the consumer is the King for the world’s largest retailer too.

Ingersoll has joined Caterpillar, GE, Siemens and others in refraining from doing business with Iran. Following SK Telecom, which had bought 49% of a credit card firm last year, China Mobile has bought a stake in a bank; mobile banking is clearly making real progress. Siemens says after paying $1.4 bn in fines for having paid bribes over several years, it has learned virtuosity.

Sony and Samsung are close to launching 3D TVs globally at prices about 50% higher than LCD TVs, of which 146 mn units were sold last year, Cisco has launched new routers that can handle speeds 12 times faster than existing routers, i.e. download an entire movie in four minutes, and Google has started talking to China again, despite the latter’s insistence that its laws are, well, laws that have to be followed.

Escom, which had bought the sex.com domain for $14 mn in 2006 is now looking for a buyer, Intel paid $1.25 bn to AMD last year, without admitting it had given discounts to those who didn’t buy AMD chips, but is still being investigated for unfair trade practices. Canon expects China to be the largest market for cameras by 2015 and is taking suitable steps.

BP, which overtook ExxonMobil as the world’s largest oil producer last year, is buying Devon Energy assets in Brazil, Mexico and Azerbaijan for $7 bn, Microsoft is offering free online computer courses to help unemployed Americans acquire superior skills, and the Vattenfall electric grid (serves 18 mn in Germany) is being bought by Elia of Belgium, from Vattenfall of Sweden.

Barclays is looking for a retail bank with a strong branch network in US, PE firm Apollo is buying Citi’s real estate investment arm, and Baltimore city is pursuing its charges of predatory lending practices against Wells Fargo. Merrill, JPMorgan, UBS and Deutsche are being investigated by Italy for fraudulent deals.

55,000 flight attendants of 20 US airlines have demanded hand-to-hand combat training, portable devices for speaking to pilots and standardization of carry-on luggage, besides restraints on on-board Internet facilities. Sharon Stone, DiCaprio, Mel Gibson, Spielberg and Clint Eastwood are among celebrities who own small islands and a Toronto firm has 500 islands for sale.

A recent survey says black and hispanic Americans sleep fitfully despite their poverty while whites worry a lot more about jobs and money and Asians use the smallest quantities of sleeping pills. In US, 18% of households earn over $100,000 a year but the figure is 46% for Jews, 43% for Hindus and 21% for Christians. Number of US households having net worth of over a million shrank from 9.2 to 6.7 mn in 2008 but bounced back to 7.8 mn in 2009.

Wild elephants attacked a village in Angola last week, forcing 4,000 residents to abandon their homes. Theatres in West End (London) are infested with mice and flea, says a survey by an actors union. Driving while drunk is a thing of the past for US; a sixth of those driving are under the influence of a drug of some kind (legal or illegal). Canadian parliamentarians mocked animal rights activists last week by relishing meals made of seal meat.

Carlos Slim of Mexico has become the world’s richest man; the last non-US person to be the world’s richest was Yoshiaki Tsutsumi in 1994. Casio, beware; US is actually planning to teach KG students to count up to 100 and second graders to add and subtract.

US continues to see a stronger CNY as the vaccine that can prevent financial crises, at least for its TBTFs. Krugman says global economic growth would accelerate 1.5 percentage points if China lets its currency appreciate, though the reality is that any appreciation of the Chinese yuan would push US inflation, rather than curbing the still significant trade deficit. The developed (read financial) world doesn’t really want a stronger yuan. What it wants is all currencies to tango with each other so that toes keep tripping and gowns keep falling off fragile bodies. Even euro and yen are beginning to feel tired and the dollar is increasingly becoming isolated. The sooner Obama realises that without some data entry computers can’t compute nothing, the better it would be for the world.

US has been commenting on human rights records of all countries. Last week, China published a report on US performance on the human rights front.

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2010-03-07T20:59:00.000+05:30

A dozen odd hedge fund traders had a dinner in New York last week, to discuss the possible decline in euro. Some Germans want Greece to sell some of its uninhabited islands; probably China would gladly pay hundred billion for half-a-dozen of them and even Russia may agree to swam them for some oil and gas. Such a deal can easily make the euro and the pound plunge to parity with the dollar in a jiffy; the question whether U.K. will be the next (after PIGS) is already being asked, though not yet being answered.

Exaggerated nightmares? Akio Toyoda bowed while apologizing to China last week; the week before, he didn’t think it necessary to bow while admitting lapses before the US Congress. Just imagine how things would move if 40% of world population (China+India) starts accounting for about 10-12% of world consumption, instead of 5-6%.

But there is really no need for hallucinations of this kind. CDS rates for Greek debt are actually declining, though it is becoming increasingly clear that several eurozone governments have been as financially innovative as Goldman Sachs or Bernard Madoff. Meanwhile, the primary industry of the world, finance, hopes to keep grinning ear-to-ear, year-to-year.

However, there are talks of a gold bubble ballooning to $2,000 or more before it dives back to wherever; George Soros has hiked his exposure to gold by over 150%.

US bank failures in 2010 have already reached 26, Fannie Mae and Freddie Mac are painstakingly identifying faulty mortgages deceptively palmed off to them by the likes of JPMorgan and Wells Fargo, and the number of 55+ unemployeds has exceeded two million because of what they are calling the Gray Ceiling. Consumer borrowing doesn’t seem to be declining in a meaningful way and Uncle Sam is preparing to launch a new design of $100 bills to counter counterfeiting.

US policy-makers seem to be as unsure of the road to nirvana as they were on the day Lehman happened. The administration wants an independent agency for consumer protection, Republicans want the Fed to shoulder this responsibility, and some want to limit TBTFs. Apparently, the Volcker Rule, announced with much fanfare, seems nowhere near getting written. May be the US is waiting for something drastic to happen somewhere else.

The focus, it seems, is still on finding supposedly more prudent ways of reselling loans, to be bought from the original lender who had sold and bought them back last year, after detachable CDSs are added to the package. The Prez wants to accord top priority to education while students in California are livid at the 30% fees hike announced recently. Dole receivers are selling checks two weeks in advance, at a discount of 15%; interest rate of over 400%.

China invested nearly four times the US in real estate in 2009 and recorded a trade surplus of $196 bn, though that isn’t preventing analysts from forecasting a financial crisis in a couple of years. Sovereign fund CIC has shifted course to buy more real economy assets in the US, such as stakes in Coke, AES and J&J, after having lost heavily in stakes it had bought in firms like Blackstone and Morgan Stanley. China has become the world’s second largest consumer of luxury goods, next only to Japan and the gap between rural and urban incomes is apparently still widening.

Sales of passenger cars are expected to decline 9% in Europe and 25% in Germany this year. Number of hotel room nights sold in EU-27 dropped 5% in 2009, to 1.5 bn while the decline in case of foreigners was 9.1%. ECB is considering doing sovereign ratings in-house and Icelanders have flatly refused to approve repayment of IceSave debt ($15,000 per capita).

In Japan, properties are being sold at prices below construction costs. Brazil expects FDI to leap 74% (to $45 bn) this year, Italy’s budget deficit almost doubled last year, and despite spending 4% of GDP on insurance, Chileans may not get more than half of what they lost in the quake last week. Rents in Singapore plunged 46% last quarter and the city state is offering a cluster of colonial bungalows to hedge funds at attractive rents; 140 already have operations there. Integrated resorts with Casinos are being promoted.

HSBC has discontinued consumer loans but had to make provisions for $26.5 bn in 2009, Warren Buffett has shut his credit card business and sold its bad debt at 55% of face value, and AIG’s Asian unit, having 23 mn live policies, is being bought by Prudential for $35 bn, and it has also sold its MetLife unit serving EU, LatAm and Japan for $15 bn.

Pfizer has bid $4 bn for generics firm Ratiopharm while WellPoint is buying back shares worth $3.5 bn. GE and Philips (diagnostic equipments) are expectantly looking at China’s plans to spend USD 41 bn on 31,000 new hospitals.

GM is fixing power steerings of 1.3 mn compacts. Boeing is trying hard to find buyers for its C-17 planes that can transport 60-ton tanks; the plant employs 5,000. Adidas sales dipped 4.5% last quarter as sales in China (of all places!) dipped, forcing closure of some stores. Van Heusen has reportedly offered $4 bn for Tommy Hilfiger.

Cow manure, considered one of the cheapest and most eco-friendly fuels for centuries, has suddenly become a source of pollution; some have suddenly realized that methane can be as damaging as carbon. Thousands of Australians posed naked in Sydney to celebrate Mardi Gras. US govt believes if it can cut salt consumption 10%, it can save $32 bn a year in healthcare costs. Russia has an estimated surplus of 10,000 tanks, some of which are lying abandoned in mountains. A Swedish pilot was arrested last week for having a fake license he had used for flying Boeing 737, and Canada is debating whether its national anthem should be altered to make it gender neutral; it talks of “thy sons,” forgetting daughters.

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2010-02-28T19:21:00.001+05:30

The entire world seemed to be itching for a second global crisis last week as financial pundits said now that the US is on stronger terra firma, euro and Europe must go bust. Greece may sail through but there are Spain, Portugal, Ireland and Italy to contend with. The problem is that while consumers on both sides of the Atlantic are painfully trying to balance income and expenditure by cutting spending on such essentials as food, clothing and shelter, governments insist that champagne must keep flowing.

Fears of the euro collapsing may be exaggerated but popular sentiment in major EU countries like Germany seems to be in favor of putting Europe’s integration on the backburner. A German professor has even threatened to sue the govt if it decides to bail out Greece! Considering Germany’s foreign minister has publicly opposed the growing use of English, The question is whether it is only EU or the eurozone that is heading for disintegration, or is the process of globalization itself in jeopardy.

The scene is confusing. Goldman Sachs is being accused of having helped Greece hide the magnitude of its deficits. Citi says 24 eurozone banks (two third of the industry) will need to raise nearly a trillion dollars over the next three years. Analysts (and Greece) say a weaker euro is actually helping Germany boost its exports. WSJ says Spain, with 19% unemployment and an economy far bigger than Greece, will be the real problem.

Per WTO, world trade contracted by about 12% in 2009, though part of it must have been due to lower oil prices.

RBS has reported losses of $5.5 bn for 2009 while Lloyds, with a loans to deposit ratio of 169%, suffered bad loans of $37 bn last year. Some reports of some financial turbulence in Turkey came in last week.

Freddie Mac and Fannie Mae lost $26 bn and 60 bn, respectively, last year, and say a large wave of foreclosures is yet to come. One report says US sales of alcohol rose last year because of high unemployment but industry revenue remained flat because people bought cheaper drinks. Japan’s public debt is expected to rise to over 225% of GDP in 2010.

Asia is apparently fine, and determined to achieve what US-EU achieved last decade – greater financial innovation, lower savings and higher consumer spending. China’s household deposits, however, rose 19.3% to $3.9 tn last year also. Australia and China have resumed their free trade talks, perhaps because Australia has finally recognized that China is going to remain the biggest buyer of its natural resources.

US is considering auction of airwaves currently held by TV stations, to help overcome the spectrum crunch and meet demand for mobile Internet services.

Toyota chairman admitted before the US Congress that growth had taken priority over safety at his company. Three Japanese auto parts firms are being investigated by US anti-trust authorities.

Oil field services industry is getting consolidated in a big way; Schlumberger is to buy Smith International for $11.34 bn in stock while Baker Hughes is close to completing its $6 bn takeover of BJ Services.

Wal-Mart says it will expand organically, as well as through acquisitions in LatAm and may become more aggressive in China and India also, Macy’s same-store sales grew marginally last quarter, and Kmart former CEO has been fined $10 mn for misleading investors in 2002, when the company filed for bankruptcy. Coke is buying its bottler in North America for $15 bn to exploit synergy; Pepsi had done that last year.

Apple sold the 10 billionth song on iTunes last week. It says it will retain its growing cash hoard ($25 bn last year) and has banned pictures of bikini clad women on iPhones. China has made it compulsory for individuals to verify identities before setting up personal websites. India’s Bharti Airtel has arranged loans of $9 bn for buying African assets of Zain. While Google executives in Italy have been convicted for violation of privacy laws and probably face prison, its executives in China are being aggressively poached by MNCs like Microsoft and Chinese IT companies alike.

China’s Tengzhong has pulled out of race for Hummer unit and GM has started exploring alternate buyers, while BYD expects to match Toyota and GM in vehicle output in about 15 years.

Allianz has started investing aggressively in areas such as parking meters operators and wind energy, Blackstone has announced plans to invest $732 mn in Shanghai, GE is to sell its stake in Garanti Bank of Turkey, estimated to be worth $3.3 bn, and TCW (L.A. investment company) saw investors pulling out $25 bn after it fired its star bond fund manager.

Five top US airlines say they are open to consolidation by mergers and acquisitions, while Airbus is trying to salvage its A400M military plane project stalled because of disagreements among buyers. Lufthansa’s striking pilots were publicly offered jobs of chauffeurs by a car rental last week.

Bayer sales slipped last year to a little over $40 bn. MGM studio, bought for $5 bn by PE Partners in 2005 is up for sale again but offers haven’t exceeded $2 bn so far. Businesses owned by Berkshire of Warren Buffett shed 24,000 jobs in 2009.

US plans to fence its 2,000 miles border are coming to nought because of malfunctioning of radar sensors and other technical glitches. The US Air Force is, however, training more pilots for operating unmanned aircraft (drones) than fighter jets; drones in Afghanistan are operated from bases in the US.

Britain has apologized for having shipped 150,000 poor children abroad between 1920 and 1960 under its child migrant programme. Following Korean Air, All Nippon too has decided to have separate toilets for women passengers. A single rough diamond (507 carat) was sold for $35 mn last week.

You have attended classes for learning golf, music, language and dance. Now look for lessons in managing personal financial risk.

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2010-02-21T19:55:00.000+05:30

As oil firmed up to 80 and the dollar stayed put at 1.35-1.36 a euro, Dow and S&P 500 had to perk up. Nothing else needs to happen in such a wonderful week.

The Greeks are beginning to realize the need for tightening purse strings. Germans and the Dutch want to throw Greece out of the euro but the problem is that if Greece goes, euro goes. Nope. No calamity in the pipeline there, though Europe just may enforce some severe controls on the financial industry. But one shouldn’t underestimate those who resent having been forced to play in only one currency instead of 16 for 11 long years and face the prospect of further shrinkage as Poland, Hungary, Latvia, Lithuania, Estonia, Bulgaria, Romania, the Czech Republic and even Iceland are contemplating joining the euro.

Boy, can you imagine how larger world trade in currencies would have been, had euro not replaced 16 currencies? A bomb exploded just outside JP Morgan offices in Athens last week. China’s holdings of US Treasuries fell $45 bn in the last five months.

The technology scene is stirring perceptibly as few expect service providers to keep pace with demand for networks infrastructure, and everybody is jostling to get into applications. Google is in the eye of the storm because of its virtual monopoly in virtual advertising; even service providers have started ganging up against Google. Its virtual software store has stirred a hornet’s nest, forcing Microsoft to offer a free Web version of its Office 2010. Cloud-computing services, still foreign to most individuals, clocked revenue of $56 bn last year. Nobody knows how much investment is needed in infrastructure and what the real potential of the industry is.

Packaged food firms in developing world need to watch out. Most global brands, including Kraft, ConAgra, General Mills and Kellogg, are looking at the developing world for growth and they are all flush with funds. Well, retail sales in China jumped over 15% last year and are sure to exceed USD 2 tn in 2010.

Shell is on a divestment spree; may sell assets worth $10 bn, including oilfields and gas stations in North Sea and Africa, besides some operations in Sweden. Gazprom is selling more LNG in Europe because North American demand is sluggish. Striking workers of Total’s six refineries in France started shutting operations last week, because of the policy of shifting refining operations to Middle East. Many say globalization is not even half-way through.

Toyota’s latest problem is related to steering wheels of Corollas and credibility of test reports of Exponent Inc, trusted by NASA until yesterday, is being questioned. Has Toyota really slipped, or is the US livid because it overtook GM and Ford? Meanwhile, India’s Tata Motors has appointed a former GM executive as its CEO.

Oshkosh Corp has received go ahead for a $3 billion medium truck contract from the US army, Volkswagen has guaranteed the jobs of its employees in Germany until 2014 under a new agreement with unions and Daimler pulled out of loss in Q3 but slipped back in Q4 because of lower sales of heavy trucks.

Barclays profit doubled to $18 bn in 2009, one half of which was gain from sale of its asset management arm, Simon Property, the largest owner of shopping malls in US, has offered about $10 bn for General Growth, the second largest, and JP Morgan is to buy non-US assets of a JV of RBS and Sempra Energy, which would enable Sempra to make its US operations independent of RBS. Singapore’s GIC may buy the 13 hotels chain that Morgan Stanley bought from All Nippon in 2007. Berkshire Hathaway is altering its portfolio significantly; it lowered its stakes in ConocoPhillips, J&J and P&G and increased stakes in Wells Fargo and Wal-Mart last quarter.

Yara (Norway) is to buy Terra for $4 bn, which would make it the largest mineral fertilizer producer in the world, AstraZeneca has bought rights to next-generation arthritis drug R788 from Rigel for over $1.2 bn, Wal-Mart same-store sales fell 1.6% last quarter though overall revenue rose to $112 bn, and Sara Lee has put its European shoecare and insecticides businesses up for sale. Playboy says it is looking for growth in LatAm, China and India.

Mexican suppliers of heroin catering to US markets are altering their business model by focusing on white caucasian customers, against orders placed on phone. The system is being fragmented into smaller entities and disintermediation has cut prices by as much as 50% in some cases; the name of the game is to cut prices to boost demand. A poverty relief organisation in Berlin is maintaining a $150,000 Maserati for its CEO, Deutsche Bahn has decided to reduce use of English words, and a restaurant in Taipei is pulling crowds by having sword wielding warrior-like waitresses with whom diners can have their photos taken. In Arizona, motorists continue to damage traffic cameras that monitor speeding. Some French traders have been convicted for shipping counterfeit wine brands to US. A New York rabbi has been arrested for blackmailing a hedge fund, threatening to expose insider trading by the fund, though ransom was to be used for funding schools.

Uncertainties are far from over. Global FDI plunged 39% to a trillion in 2009, contours of impending changes in financial regulation are still unclear, full impact of unemployment is yet to be felt, individuals are still unable to determine the right parking places for their savings, an impending crash in commercial real estate continues to be the buzz in markets, and believe it or not, private management of social security funds is actually being pushed.

Somebody asked last week why is RMB rate a non-issue. The answer is: Could China have prevented the slide in its exports by making RMB 7.8 a dollar? If no, why would its surplus decline if it is 5.8 a dollar? Q.E.D.

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2010-02-14T19:41:00.001+05:30

“Last year, it was banks; this year it is countries,” says The Economist. It began with Greece (GDP 2.7% of euro zone) and Spain, and Portugal and Italy have been added. Euro zone GDP dipped 4% in 2009 and the euro plunged to $1.35 last week as its very survival is being questioned. Something drastic has to happen, sooner or later, unless US-EU (and Japan) leaders understand that stability can come only from a planned reduction of consumption and GDP.

Developed world consumers have started spending less but their governments want positive numbers. US goods exports were down USD 230 bn and bulk of what did not get exported could not have been consumed at home. Non-oil goods imports plunged USD 325 bn, across a wide array of goods. If prices are down and real consumption is the same, then why crib? US states are hiking taxes to cut cigarette consumption but that is going to hurt GDP numbers, or at best may push exports meant for re-imports.

China surprised the world last week by hiking banks reserves further to 16.5%, fuelling speculation about its economy is coming closer to a bubble effect, though few seem to be recognizing that household income accounts for a mere 55% of GDP, which, along with the option to make RMB expensive, gives it all the leeway it needs to regulate growth. Besides, exports of $1.2 tn in 2009 were the highest in the world, ahead of Germany’s 1.12 tn. Including Hong Kong’s $250 bn, forex reserves are now close to $3 tn.

IEA says world oil demand in 2010 will be 86.50 mbpd, the same as the peak in 2007, Vietnam is to build a $56 bn bullet train to connect Hanoi and Ho Chi Minh, Indonesia GDP was up 5% in Q4, and Spain, despite 20% unemployment, wants to increase the retirement age from 65 to 67. Mexico has started attracting medical tourists from across the border; though only about a million Americans go abroad for healthcare, numbers have to swell at a fast clip, whether Obama likes it or not.

Volatility in currencies continues to play havoc with lives of organizations producing real goods and services all over the world. Perhaps the euro’s value vis-à-vis the dollar needs to be fixed, like that of RMB, though that would be tantamount to withdrawing the tax US-EU financial companies are able to charge on every bottle of water or piece of clothing consumed in China, India and elsewhere. The point is that euro zone GDP for 2009 actually declined (further) in week to 14 Feb 2010! Stiglitz says US going bankrupt is absurd because it can print dollars. Oh! No printing facilities available for euro and yen?

Cash holdings of S&P 500 rose 14% last quarter; now they hold $2.18 tn in cash and equivalents, interest on which is obviously being paid by governments. Now that can spur some innovation, and a lot of profligacy.

Google, having $25 bn in cash, is to build fiber-optic networks to provide connectivity at 1 gigabit/sec, which is more than 20 times faster than most connections but would cost about $5,000 per connection. TV content producers like Discovery have started benefiting from consolidation of cable channels as they are able to collect fees more efficiently. A Walt Disney led consortium is to acquire into Bus Online of Beijing, which sells ad space in buses.

GE has charged Mitsubishi of infringement of two of its patents related to windmills, Areva, builder of nuclear plants, is acquiring solar firm Ausra of California, and FirstEnergy of Ohio will have a capacity of 24,000 mw after it completes purchase of Allegheny of Pennsylvania.

In the latest quarter, Coke volumes grew 29% and 28% in China and India, respectively. Pepsi was up 21% in India but negative in China. Confused? It is rather difficult to imagine Indians gulping 25% more in Q4-2009 than in Q4-2008. Cue for researchers – look at corresponding beer numbers.

McDonald’s is to close 430 of its 3,700 outlets in Japan, and SK Foods, one of the four companies that together buy all tomatoes produced in US, has admitted to having bribed executives of Kraft, Safeway, Pepsi and others. Marriott’s average revenue per room was down 12.3% last quarter.

Discover Financial sued Master and Visa for having coerced banks into not issuing Discover cards and won a $2.75 bn suit but the judge says it must be shared with Morgan Stanley, from whom Discover was spun off in 2007. J&J and Wal-Mart face two class action suits for sale of a supposedly toxin children’s shampoo, and Koito (Toyota group) has admitted it falsified safety data about passenger seats it supplies Airbus and Boeing. Toyota chairman is being criticised at home for not being adequately shameful about his company’s safety records and is expected to bow more when he visits the US next month.

A Sanofi-sponsored research says at least 27 mn Americans take anti-depressants and need to manage their problems better, a Singapore research says two cans of soft drinks a week increase risk of pancreatic cancer, and a Leicester University research says cheap electronic goods from China have caused problems for British burglars because economic viability of their activities has been adversely hit.

A restaurant in Dubai is offering a fat-free Camel Burger, and “Up in the Air,” originally shot as a documentary, went on to become a movie that won six Oscar nominations. China is fighting Google but a love supermarket is offering dating services after a $3 registration, and A msterdam found cocaine in roses imported from LatAm last week.

Austrian billionaire Rabeder has decided to give all his money to a charity that would offer microcredit in LatAm, a British think tank has suggested a 21 hr work week, and believe it or not but Sarah Palin is actually shifting to socialist thinking, perhaps hoping to be the first woman President of the US.

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2010-02-07T16:31:00.000+05:30

Eurozone split in the air, US and China unhappy with each other, indices plunging, dollar bursting at seams, and oil showing signs of meekness, if not weakness. A very eventful week.

The world, financially and politically, suddenly seems to have become fragile. US and China are hardening their stances on non-issues like RMB’s value and arms to Taiwan while Europe seems as inconsequential as Peru or Ghana. Moody’s has warned US on its sovereign rating, equities indices have plunged steeply, savings rate is rising, home ownership and home prices are falling, exports are declining and unemployment is rising. No matter how many vows Obama takes, the fact is US is limping while China is jogging; controls on salaries and elaborate checks on derivatives trading cannot fix problems like penchant for junk food and the resultant obesity, and the habit of driving a thousand kilometers every week end.

Global financial markets started debating if euro would survive, questioning economic status of Greece, Spain and Portugal, and the euro tumbled, leaving one wondering if it was a dip or a fall off the cliff. This, despite the euro zone having no current account deficit, a savings ratio of 15.8% and largely steady retail sales, though 17% of EU population is reportedly facing risk of poverty.

France had a trade deficit of $59 bn in 2009, Spain is trying hard to make landlords pay taxes on rent income, South Korea clocked a current account surplus of $43 bn last year and is working to preserve its status as the world’s largest shipbuilder, North Korea’s Kim Jong has started visiting factories to revive the economy, Iraq has sealed ten major deals to resurrect its oil industry, the latest being with Lukoil (Russia) and Statoil (Norway), China now has 120 mn electric bicycles, Hong Kong seems to be steady, and Brazil opened a 87 mw ethanol power plant last week.

Ecuador’s share in world drug trade rose last year while retail sales in Estonia, Latvia and Lithuania plunged 16.4%, 30.2% and 27.2%, respectively, in 2009.

Ills of excessive globalization of the financial industry are beginning to receive attention, though opposing sounds are still quite muted. One typical example is S Korea, which saw a net capital outflow of $50 bn in 2008 and a net inflow of $26 bn in 2009. How do small nations manage their currencies and businesses? How do they plan for the future? When one lends money, one looks at the borrower’s credibility, not at innovative hedge deals to reassure repayment.

Google is planning an online software store where outside developers would be welcome, Amazon has agreed to up prices of electronic editions of Macmillan books, uncertainties about Apple’s iPad tablet are continuing, and AOL’s performance continues to slide.

Kraft is finally home with Cadbury. Will it go for GM cocoa and alter the taste of chocolates the world over? Pepsi sales in volumes in US and EU remained flat last quarter and fell 5% in Mexico. Esprit of Hong Kong has shifted focus on Asia as sales in Germany have slumped. Singapore Airlines successfully cut fuel consumption by 10 tons in its LA-Singapore flight last week with good maintenance and better planning.

Drug majors Pfizer, Roche and AstraZeneca seem to be holding on well, though there are worries about competition from generics. Shell has struck a deal with Cosan for a $21 bn ethanol JV, though its profits plunged 75% in Q4; profits of Chevron and ExxonMobil’s dropped 37% and 25%, respectively, because of weak demand for refined products.

GMAC lost USD 5 bn last quarter because of huge write downs, DriveTime, lending auto loans to the normally unqualified, is raising $1 bn from an IPO, and Citi’s PE unit is up for sale.

BAE systems has agreed to pay over $400 mn in fines for bribes paid for sales to Saudi Arabia, Tanzania and elsewhere, British Airways revenue per passenger fell 8.8% in Q3 and non-premium traffic was down 7.9% in Jan.

Germany has again officially bought stolen data of tax dodgers, sending shivers down the spines of Switzerland, Liechtenstein, Luxembourg and Cayman Islands. Latvia has sold an entire town (11 residential blocks, a shopping centre, etc.) for $3 mn.

Researchers say US could be spending $344 bn because of obesity related healthcare by 2018 and excessive netsurfing causes depression. A Harvard research says business meetings at fancy resorts and normal offices lead to different decisions on the same issues, by the same people.

UK is planning to ban branding of cigarettes, to cut smoking by half, and to check drunks attacking people with broken beer bottles, it has started using shatterproof pint glass. Obviously, US has not been consulted; otherwise it would have unveiled some fiscal measures for solving these problems.

A church in Poland has started recording attendance with fingerprints, about 100 women in seven countries have forbidden themselves from buying any clothing for a year, the Chinese sent 784 bn short messages in 2009, and parking in Beijing can cost up to $1.5 an hr. While Washington is busy removing snow, Vancouver is depositing it on a melting mountain. A warmer Arctic is already costing the world somewhere between USD 60 and 370 bn and the cost may exceed 2.5 tn by 2050.

Political leaders around the world are stubbornly refusing to see the writing on the wall. Australia wants to address the problem of ageing of its population through some economic reforms! There is a saying in the East – as one grows older, one needs to eat less to keep going.

Where will equities and currencies go next week and the week after? Never mind. In the immediate term, the financial world is going to keep demanding a tax on whatever you spend on your food, clothing or shelter. All you can do is try to strike forward deals with your favorite grocery store.

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2010-01-31T14:37:00.004+05:30

Obama will not accept the second place for the U.S. He wants trains as fast as Europe and China, maths and science students as brilliant as Indians, and a cumulative 14% growth in US exports. Tax breaks and budget allocations can deliver hard work, innovation, and all these; access to pornography and lure of gambling dens need not be curtailed.

Despite oil having plunged to 72-73 and volatility in currencies and commodities having disappeared mysteriously, politics and economics were divided into two distinct camps at Davos last week. Brown, Merkel and Sarkozy supported tax on financial trades while bankers held closed-door meetings to figure ways of countering the growing control appetite of politicos. Lloyd Blankfein, Jamie Dimon and Osama bin Laden did not attend; Osama issued statement denouncing the dollar and holding the developed responsible for climate change. Google wasn’t discussed at Davos; China didn’t want it discussed.

IMF says global GDP has probably grown 3.9% in 2009 and next year the rate may be 4.3%, while global trade in goods and services has grown from 42% to 62% of world GDP between 1980 and 2007. FDI rose from 6 to 32%.

US GDP expanded 5.7% (annualised) last quarter while consumer spending was up 2% but Bill Gates said it would take years to recover and even scolded Sarkozy to spend more on malaria than his own baldness. US budget deficit is expected to decline from 1.40 to $1.35 tn this year, Bernanke’s second term as Fed has been confirmed, every tenth American (every fifth black in 20-24 age group) is unemployed, and New York City may lay off 10,000 to balance its budget. The only inference one can draw is that the US is going to keep pumping money to keep the show going, at least for the time being.

China has overtaken US as the largest buyer of Saudi oil. Real estate prices in China were up 7.8% in December and George Soros says its stock market is overheating. However, China is quietly pushing its domestic consumption, largely with domestically produced goods.

Unemployment in eurozone hit 10% (15.8 mn jobless) last month. Greece says it isn’t going to leave euro; speculators are trying to weaken the eurozone as they perceive Greece to be the weakest link. German banks have doubled fees for drawing cash from non-affiliated ATMs. UK continues to lose £30 bn or £621 per adult because of fraud. Japan’s sovereign debt is expected to be close to $11 tn by March 2010, against reserves of about one trillion.

“Not investing in Africa is like missing out on Japan and Germany in the 1950s,” said somebody at Davos. Venezuela is now estimated to have 500 bn barrels of recoverable crude oil, twice Saudi Arabia.

Whether the financial industry is going to be regulated, and if yes, to what extent, is what will perhaps determine the future. Consensus in favor of control is apparently evolving but the developing world (including China) is stoically silent and exchanges in US are pushing for price quotes in increments of 0.10 cents! In the “biggest carry trade” of its kind, banks are buying interest paying treasuries with interest-free borrowings from sovereigns. Despite the cash hoard that is still growing, clean-tech investments seem to be withering.

Apple sold 8.7 mn iPhones last quarter and Mac sales too were strong in Asia and Europe, though views on its tablet vary. Interestingly, Google, not Nokia or Motorola, is emerging as its principal competitor. Cell phone companies around the world are rushing to upgrade infras. Meanwhile, Motorola’s revenue fell 20% last quarter, to $5.7 bn. Microsoft earned $6.7 bn on revenue of $19 bn. Morgan Stanley seems to be earning money in securities, as well as oil products trading.

A JV between BlackRock and Tishman has defaulted on $4.4 bn debt it had borrowed for buying a 11,200 apartment property for $5.4 bn in 2006; it is worth less than 2 bn now.

Ford Motor has reported a profit of $2.7 bn for 2009 and Hyundai profits are up fourfold but Toyota and Honda are being questioned for design efficacy as components suppliers are refusing to take the blame for problems like sudden acceleration, pointing out they existed before their supplies began.

As work on the $5.25 bn Panama Canal project that would enable larger ships to traverse the canal has started progressing, doubts are being expressed about the future of Buffett’s investment in railways. Eli Lilly revenue grew 14% to $5.93 bn last quarter as sales of psychotic and impotence drugs grew.

Wal-Mart and Macy’s are to cut 11,000 and 1,500 jobs, respectively, while Siemens is to eliminate 2000 jobs. DuPont revenue rose 12.3% to $6.42 bn last quarter, and Honeywell revenue slid 7% to $8 bn last quarter. Mattel’s Barbie dolls are selling well. Manchester United, the soccer club, has debt of $ 1 bn.

Tony Blair’s decision to attack Iraq post-9/11 was examined by a commission last week but the crucial question wasn’t even asked: Were there considerations other than the belief about WMDs? France’s move to ban face veils has resulted in Germany thinking on similar lines. There was some fire exchanged between North and South Korea last week.

One research work says men should sleep alone but women benefit from sharing beds. Italian Mafia impacts about 7% of the nation’s GDP and hasn’t suffered from the global meltdown; turnover is estimated at around $200 bn and its spending on bribes ($3.5 bn) appears miniscule compared to what the St and the City spend. Another researcher says it is best to jog without shoes and Ryanair continues to forbid its employees from recharging their phones with electricity paid for by the company.

In the latest Happy Planet Index rankings, Costa Rica, Dominican Republic and Jamaica were the top three while the US is at 114th, China is 20th, India is 35th and Hong Kong is 84th.

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2010-01-24T17:13:00.003+05:30

In Massachusetts by-election winner Republican got 49% against 47% of his Democrat opponent and the world came crashing down last week. Obama announced his “Volcker Rule,” vowing to take Wall St head on, and markets plunged real heavy. The man on the street was vastly amused because he has written off the hope that the new Prez offered in 2008 and would now exercise his mind only in 2012. The rest of the world remained passive because one needs to have a BofA or Citi before one can think of forcing it to downsize! Who says economics has become more important than politics? Even Warren Buffett is demanding that assets of CEOs (and their spouses) of failed companies should be forfeited! Who knows, in 2012, he may consider being the Prez; if Berlusconi and Sarkozy can head governments, why not Buffett?

Volatility has declined significantly and confidence in the US and the dollar has apparently returned with a vengeance but basic figures cannot really be ignored. 30-year mortgage rates are now below 5%, between June 2008 and Sep 2009, outstanding construction loans plunged from 630 to $490 bn and gasoline demand is failing to perk up despite sheets of snow all over the country. US commercial mortgage-backed securities sales plunged from $237 bn in 2007 to $1.4 bn last year as commercial real estate prices in Dec 2009 were 43% below Oct 2007.

Dividends are once again being paid out of new (junk) bond issues as the so-called high-yield bonds returned 57% last year, and hedge funds are busy designing innovative products that can be sold to pension funds with or without inducements for managers. Citi expects a 17% increase in global M&A activity this year.

Never mind how different economies are performing, or are likely to perform. Obama’s fat cats are merrily continuing with carry trade, which has the ability to bugger the best and make the worst shine the most. Meanwhile, US is slapping a 10% tax on 20,000 indoor tanning salons to raise $2.7 bn in revenue.

China has reported GDP of USD 4.9 tn for 2009, and is likely to overtake Japan as the world’s second largest economy in 2010. Rio Tinto’s 49% jump in iron ore output in Q4-2009 is being attributed to Chinese demand. Analysts are vying with each other in doling out advice on hot money, inflation and bubbles and what not but the juggernaut seems to be rolling on. With retail sales still at around USD 2 tn (40% of 5), China has a long way to go. What others need to watch out for is prices of basics like oil and metals.

Greece, Argentina, Russia, Ireland, Portugal, Italy, Spain and Mexico are being viewed as risky economies. UK continues to worry about London’s status as a global financial centre, particularly after peak tax rate rises from 40 to 50% in April. Japan’s spending on plant and equipment is down about 25-30% and prospects of most east European economies are being viewed as lacklustre.

Spain has successfully reduced the number of illegal migrants from Africa,
Chile has elected conservative billionaire Pinera as its president, Hong Kong has been declared as the world’s freest economy for 16th consecutive year even as China has dropped to 140th, and its Disneyland appears to be growing steadily. Oil-rich Venezuela is facing a steep power crisis because of a severe drought but is continuing with its anti-West stance – French-Colombian supermarket chain Exito has been taken over by the government.

Singapore’s export shipments declined 11% last year, Kuwait is facing a popular demand for waiver of all interest on outstanding consumer loans. Icelandic banks operating in UK and Netherlands failed and the two governments provided money for repayment of deposits of their respective citizens. Now UK and Netherlands want Iceland govt to pay this money and the people of Iceland are refusing to approve this payment.

Japan Airlines finally failed to get a fifth bailout and filed for bankruptcy last week, making bigwigs like Toyota, Honda and Hitachi realize that shortfalls in pension plans can cause bankruptcy. JAL’s market value is about $ 150 mn or one standard passenger airplane.

Kraft finally got its hands on Cadbury, after raising bid to $19.6 bn, Ebay expects revenue of about $9 bn this year and its PayPal unit expects total payment volume of over $20 bn this year. Nestle is due to begin selling nutritional drinks for the elderly in Switzerland, Toyota expects to double its output of hybrid cars to a million units by 2011, Travelport is selling shares worth $2 bn to cut debt and Apple is serious about replacing search software of Google with that of Microsoft. Target is preparing to open stores in Canada and LatAm by 2013.

A trim and a shampoo for a dog costs over $100 in Japan, where annual spending on pets is $10 bn; in UK, sales of dog coats are up 70% because of the weather. After Russia, UK too has started cracking down on excessive drinking; measures include ban on speed drinking and unlimited drinking promotions.

A survey says young people in US are spending more than 53 hours a week on the net and a US firm is seeking patent for a new exclamation mark it has designed. Germany will soon have its first Muslim bank, with ten branches, which will charge a fee, instead of interest, for loans. Germany’s population decreased by about a quarter of a million in 2009. Italians’ wagers rose 13% to USD 78 bn last year. Americans have stopped splurging on bottled water; retail price has dropped from 7 to 2.5 USD per 12 liters.

Leave your portfolio in His hands and go to Haiti with half-a-dozen suitcases full of life saving drugs and inexpensive clothing, and a few cartons of packaged food. Consider it a spiritual investment that needs no hedging; the peace the trip would yield will be more than what any junk bond returned last year.

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2010-01-17T18:57:00.002+05:30

“We want our money back,” thundered Obama last week, even as he acknowledged that risky bets are continuing unabated. Obviously, the US isn’t about to strike at the root of the problem, excessive speculation, though there are some murmurs about a possible clamp down on speculation in oil and gas. The proposed 0.15% tax is on liabilities of top financial companies, not on speculative transactions.

What the state of the US economy is and where it is going remains as uncertain as it was when Lehman went under. Imports plunged about 25% in 2009 and in volume terms, oil imports in Nov were the lowest in ten years. Hopes are now pinned on the govt hiring 1.2 mn temps for census work in H1.

Google must have taken the White House into confidence before threatening to quit China, and that may be the beginning of cyber wars, or trade wars (protectionism), or clashes of cultures at an unimaginable scale. Keep fingers crossed, though things at so macro a level take time to get translated into micro effects.

China continues to lend its businesses and subsidize consumer purchases, blissfully ignoring the 16% drop in exports and 27% increase in money supply as retail sales still account for only about 40% of GDP. Forex reserves climbed $453 bn last year also! Retail sales rose by $400 bn to 2.25 tn last year and domestic brands have started mushrooming. Production of mobile phones reached 600 mn, including 145 mn unbranded, while demand for diamonds and gold scaled new heights.

Europe’s trade surplus declined significantly last year but it still has some surplus. Germany’s GDP fell 5% last year and Moody’s said Portugal and Greece economies face slow death, giving rise to wild speculation about Greece quitting or being expelled from the Euro zone. Italy’s amnesty scheme is estimated to have resulted in assets worth $17 bn having been withdrawn from UBS, Credit Suisse and Julius Baer.

Russia’s parallel economy is now estimated at about 20% of GDP or $70 bn, salaries in Japan have declined for 18 consecutive months, and Dubai housing prices were down 50% while population plunged 8% last year. Korea posted a record trade surplus of $41 bn last year. South Africa is trying to figure out whether it would be worth hiking power tariff for boosting investment in generation.

Twitter says share of US in its worldwide users is declining while growth abroad continues to be satisfactory, AOL is closing its German operations, and Verizon and AT&T are cutting tariffs in the post-iPhone era. Apple has filed a patent-infringement complaint against Nokia and Deutsche Post is to launch a hybrid mail service that would combine email with snail mail (whatever it means).

The financial services industry seems to be back to normal; both public investments in PE funds and investments by PE funds in public companies are growing healthily. BC Partners (PE firm) is to raise $8.4 bn for leveraged buyouts. Goldman Sachs has admitted it takes positions before giving sell or buy advice to clients.

J&J has admitted it paid bribes to push a drug for the elderly. Wal-Mart is to close ten Sam’s Club stores but says this has nothing to do with the overall outlook. Airbus and Boeing delivered 498 and 481 airplanes, respectively, in 2009; newer versions are simply too fuel efficient to be ignored. Shiseido, Japanese cosmetics firm, is buying Bare Escentuals for $1.7 bn in cash.

George Soros is trying to spell out the economics of curbs on carbon emissions and a German city has even started offering free parking to environment-friendly cars, but the whole thing is apparently cooling down as it is increasingly being realized that paying Euro 0.40-0.50 a unit isn’t a sustainable way of promoting solar.

News of millions having been paid by investment houses for getting control over billions of pension and retirement funds came in last week. The big wigs of the financial industry deposed before US authorities but admittance of guilt by faceless corporations had no effective impact on the official stance, though the SEC did propose a ban on unsupervised trading by investors on alternative trading systems. In China, over 106,000 officials were punished last year for abuse of stimulus money. The malaise isn’t limited to the financial sector. Germany raided almost every large retailer of food and drugs because of suspected price fixation last week, and Italy has had to cancel order for 24 mn doses of swine flue vaccines it had placed with Sanofi.

Heartrending pictures of devastation in Haiti moved the world last week, though race related events in Italy and Australia and reluctance of elderly air passengers to let security personnel see their diapers continued to make headlines. In Asia, the ratio of men to women continues to fall; China will be short of 24 mn females of marriageable age by 2020. Poland has decided to slap a tax of $820,000 on five years income of a prostitute. Notwithstanding lissom lasses posing nude to support ban on fur, the fur trade says its doing fine. A survey says growth in obesity in US has declined. The Japanese say they are offended more by foreigners talking loudly when travelling by trains than by drunks and a Chinese student donated a staggering $8,888,888 to Yale last week, making his Chinese alma mater squirm.

As far as Obama is concerned, “America is moving forward again,” and that means the world should look forward to singing “happy days are here again” again. May be there is no land left to build a house but one can always buy a floating house – Utopia Residence of Beverly Hills has placed an order for a billion dollar ship with Samsung and would be offering two bedroom units for $3.7 mn each by 2013. Don’t have that kind of money? Put all your savings with Merrill Lynch or Morgan Stanley, so it grows adequately by then.

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