Opinion

Ben Walsh

from Felix Salmon:

Counterparties: A series of unfortunate repositioning actions

Ben Walsh
Dec 5, 2012 23:27 UTC

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Citigroup will fire 11,000 employees as part of a “series of repositioning actions”. The full press release is a meticulously assembled monument to business-speak. If only its first paragraph, appropriately skewered by Derek Thompson, could be laughed off as parody instead of pink slips for 4% of the company’s workers:

Citigroup today announced a series of repositioning actions that will further reduce expenses and improve efficiency across the company while maintaining Citi's unique capabilities to serve clients, especially in the emerging markets. These actions will result in increased business efficiency, streamlined operations and an optimized consumer footprint across geographies.

Just five days ago, newly installed CEO Michael Corbat was faced with headlines which questioned whether Citi “had a formal cost-cutting plan”. Consider the answer an emphatic yes. The layoffs will save the company more than a billion dollars a year, about two percent of its operating costs. The cuts dwarf Citi’s previously announced plans to eliminate 300 sales-and-trading jobs, or its competitors’ much smaller reductions.

The NYT’s Jessica Silver-Greenberg writes that 80% of the layoffs will be in consumer banking and back-office roles. Bloomberg’s Christine Harper and Yalman Onaran report that Citi’s global footprint is shrinking: the bank plans to “sell or significantly scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay. It will also cut branches in Brazil, Hong Kong, Hungary and Korea, as well as the US”.

from Felix Salmon:

Counterparties

Ben Walsh
Dec 4, 2012 23:25 UTC

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President Obama said in an interview with Bloomberg today that to reach a deal on the fiscal cliff, “we’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it”. The President pushed back against a proposal from Speaker Boehner, saying an insistence on tax increases is “not me being stubborn; it's not me being partisan. It's just a matter of math”.

Josh Barro was not impressed by Obama’s comments:

The President’s frame on what the fiscal cliff is is completely wrong. The fiscal cliff is an austerity crisis...we are going to have tax increases and spending cuts that are going to drag down the economy in 2013 if they are not reversed. [The President’s] top priority going forward is a tax increase...but raising taxes has nothing to do with relieving austerity. And then what he talks about giving in exchange for that is entitlement cuts.

from Felix Salmon:

Counterparties: Greece’s latest bond deal

Ben Walsh
Dec 3, 2012 23:36 UTC

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Greece is buying back €10 billion of bonds it issued earlier this year, at between 30% and 40% of face value. As Landon Thomas notes, the expected average price of 32-34 cents on the euro represents a “premium of 4 cents above the level where the bonds traded at the end of last week”.

The program is part of the agreement Greece reached on November 27 to decrease its debt burden to 124% of GDP by 2020. That agreement allowed Greece to remain on track to receive more than €40 billion in vitally needed aid.

from Felix Salmon:

Counterparties: Why your house is getting more valuable

Ben Walsh
Nov 30, 2012 22:38 UTC

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Two things you don’t expect to see together are the nation’s highest foreclosure rate and a housing shortage. Yet as Bloomberg’s John Gittelsohn and Prashant Gopal report, that’s exactly what Stockton, California is experiencing right now. While there are lots of foreclosures, they’re not happening at heavily-discounted prices. “People see a foreclosed home for sale in this area and they’re going to jump on it”, said one longtime Stockton realtor.

There’s also evidence that Obama administration’s much-maligned foreclosure relief program is now picking up pace. Susan Wachter, a Wharton professor, was particularly impressed:

from Felix Salmon:

Counterparties: Inflate your turkeys

Ben Walsh
Nov 21, 2012 22:14 UTC

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Thanksgiving is getting more expensive. The WSJ’s Ian Berry reports that wholesale turkey prices are up 26%, on the East Coast, compared to last year. That’s far above the modest increases in other food prices.

As Ben Bernanke noted in his speech at the New York Economic Club yesterday, for most consumers, short-term commodity price spikes don’t translate into higher grocery bills. Despite “the increase in farm prices brought on by this summer's drought”, he said consumer price increases have averaged “almost exactly 2%”. Turkey is an exception, Berry says, thanks to the peculiarities of a seasonal, capital-intensive industry loathe to expand production in the aftermath of the 2008 recession.

from Felix Salmon:

Counterparties: We know what the fiscal deal will look like

Ben Walsh
Nov 19, 2012 22:57 UTC

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The fiscal cliff has already found at least one victim, the WSJ reports: “half of the nation's 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next”.

Investors and small business owners, the NYT reports, are worried about about things like higher capital gains taxes -- one lawyer says he’s never seen such a “flood of desire and action to transfer a business and cash out”. For big companies, meanwhile, there’s $150 billion worth of corporate tax breaks to fret about.

from Felix Salmon:

Counterparties: When climate change gets fiscal

Ben Walsh
Nov 15, 2012 22:43 UTC

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Neither candidate paid much attention to climate change during the presidential election: it wasn’t so much as mentioned in any of the three debates. Then came Superstorm Sandy, Mayor Bloomberg’s climate-motivated endorsement of President Obama, and Businesweek’s mince-no-words cover. There’s also the fiscal cliff (or austerity bomb, if you prefer). What better time to start taxing carbon?

The logic is simple: a carbon tax could raise $1.25 trillion over a decade, and according to Treasury officials, the President could be on board. Even anti-tax crusader Grover Norquist, famous for his pledge to never raise taxes, was open to the idea of a “carbon tax swap” -- until the denialist Koch brothers intervened and Norquist hastily reversed his position.

from Felix Salmon:

Counterparties: The lessons of tuition inflation

Ben Walsh
Nov 14, 2012 22:47 UTC

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Why have college costs risen 12 fold in 30 years? In a terrific story today, John Hechinger points to “administrative bloat” at public universities like Purdue, which has made a habit of doling out six-figure salaries to armies of administrators:

Purdue has a $313,000-a-year acting provost and six vice and associate vice provosts, including a $198,000 chief diversity officer. It employs 16 deans and 11 vice presidents, among them a $253,000 marketing officer and a $433,000 business school chief.

Wall Street’s rational Romney bet

Ben Walsh
Nov 14, 2012 16:01 UTC

It was never a secret that much of Wall Street put its money behind a Romney presidency. The publicly available tally shows that extent of their support: $19.6 million to Romney directly and more than $100 million to Romney and Republicans via other channels like Super PACs and advocacy groups. Beyond dollars, financial heavyweights like Steve Schwarzman and Leon Cooperman publicly criticized Obama in hyperbolic terms. Other executives, most notably Jamie Dimon, took almost every chance possible to make their deep displeasure with the administration’s policies clear. Some lifelong Democrats, like Lloyd Blankfein, remained pointedly disengaged.

And yet, unlike in 2008 when Wall Street backed Obama, their guy lost.

How stupid, right? Time to mock bankers for screwing this up too! Backing Romney, the argument goes, was Wall Street’s “second worst trade of 2012” (after JP Morgan’s CIO blowup). Couldn’t they see that the numbers pointed to an Obama win? New York Magazine went back to the well of masculinity metaphors, with Kevin Roose saying Obama’s win was a defeat for “Wall Street’s impotent billionaires“. And the statistically savvy Paul Krugman ridiculed their “bad investment decision“:

The limits of their power have been cruelly exposed, and the reelected president now owes them nothing. Did I mention that Elizabeth Warren is going to the Senate — a Senate that will be substantially more progressive and less Wall Street friendly than before?

from Felix Salmon:

Counterparties: The hunt for spurious causality

Ben Walsh
Nov 7, 2012 22:16 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Yesterday Americans were choosing a president and the S&P 500 was up 0.8%. As one trader put it, “any time you take an element of uncertainty off the table, volatility comes down and the market tends to look higher”. We have now chosen Barack Obama to be president and the S&P is down 2.4%.

Is Wall Street reacting sourly to the possibility of four more years of hurt feelings, increased regulation, and (shudder) Elizabeth Warren sitting on the Senate Banking Committee? The outcome really shouldn’t have been any surprise: an Obama re-election has been clear to numerate observers for quite a while.

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