China’s solar bonds leave dim hope of payback
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Dim prospects for payback await bondholders in China’s Suntech Power Holdings. The stricken solar panel maker, unlikely to meet a $541 million bond payment due on March 15, has persuaded over half its foreign creditors to hold off for two months. On purely financial grounds, it’s hard to see how the bondholders could come away with anything in the event of a default. What value remains is a bet that China values foreign investors too much to snub them outright.
U.S. stocks may soar higher – only to crash-land
By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The S&P 500 Index of U.S. stocks is nearing a new record close to eclipse the peak of 1,565.15 set in October 2007. Simple interest-rate based valuations, such as the so-called Fed model, suggest the benchmark could more than double again – but on long-term assumptions, it would then crash-land.
Thanks for this. A good (circular) assessment…
Interested to hear and see a similar your assessment on the Fed exit options i.e., to unwind the balance sheet of the Fed and pull in Money Supply.
Would the argument be that at some turning point – 6.7% UE, LTI of 2.5% and rising “real wealth” asset prices – bonds and MBS will normalize in price (i.e., yields will rise)? And that the normalization of yields would not be seen as detrimental to US economic B/S because of the impact lower relative currency position (vs. 2008) will have on corporate profits?
This would seem to make sense of the Feds position i.e., that Bernanke then can unwind or sell back MBS or sit on the expiring bonds acquired – provided the world does not have a “shock” event (i.e., major war, loss of faith in US credit, or trade / currency wars or regional economic collapse or basic resource shortage) emerge. True?
Or is it that we are missing something here… namely that the NAM and EUR flat lines under austerity (i.e., corporate cost cutting can go no further) – resulting in stubbornly high unemployment, capital / human flight to high risk / emerging assets and/or capital being returned to its owners? Thus perhaps stimulating a re-emergence of inflation – led by the emerging economies who perhaps may stimulate a wealth effect for their households through political means), which in turns lifts yields/the price of risk in the developed economies thus stifling credit and growth further = stagflation?
China starts 2013 the way it can’t hope to go on
By John Foley
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
China began 2013 with the same old economic model. Growth for the first two months of the year was driven mainly by exports and real estate. The increase in construction appears to have been fuelled by credit. The current trajectory can continue only by pumping ever more leverage, and risk, into the system.
Financiers failing own version of Hippocratic Oath
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Financiers are failing their version of the Hippocratic Oath. They aren’t taking the necessary measures to keep client money safe, the U.S. Securities and Exchange Commission warns. The failure is as basic as doctors not washing their hands, despite reminders from the likes of Refco and MF Global. The extent and severity of the problem should worry customers and investors alike.
I fully agree with the article and the underlying Western morality standards compromised by the entire financial community. Since we have identified many of the people responsible for the immoral and mostly illegal behavior, and their institutions, primarily the larger banks, where are the subpoenas, the Attorney Generals, both State and Federal, the “Teddy Roosevelts”, the institutions of redress? Instead, we the people are being ignored and these people, institutions, are allowed to continue the Grand Theft of resources.
UK would gain from homeowner tax switch
By Robert Cole
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
George Osborne, the UK’s Chancellor of the Exchequer, will present his annual budget on March 20. To maintain credibility he needs to stick to his austerity agenda. To tackle debt he needs to protect tax revenue. To maximise revenue, and appease recession-restless voters, he needs to promote economic growth. He could do all three by stamping on the UK’s property transaction tax and closing a loophole: capital gains tax (CGT) is not currently levied on owner-occupied homes.
Isn’t there a problem in that people always have a demand for housing services, and so an inflationary gain in house prices is offset by an equivalent gain in the cost of future housing services? ie if you live in a 100,000 house, and it rises to 200,000, and you want to move to the identical next door house, you will be 50k down, but not better off?
Review: The massacre of Britain at Bretton Woods
By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Benn Steil calls his study “The Battle of Bretton Woods” but in reality the 1944 conference which created a new financial system after World War Two was more of a massacre of British interests by the U.S. Treasury’s Harry Dexter White.
This is viewing history with today’s perspective. 1944 was the time when the world war was at the beginning of the end. In reality Japan and Germany were defeated by the industrial and military might and resolve of the USA. Why should not Bretton Woods be skewed toward the USA, at that time in history? The world situation is certainly different now. The downfall of Bretton Woods was due to the devaluation of the dollar because of the unrestrained spending of the US government in the sixties. Emerging market countries are playing a larger global economic role and should have more input. Maybe we need a Bretton Woods II given the impacts of today’s dollar, euro, and yuan.
China’s currency inflows could be illusory
By John Foley
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
China’s currency is a fickle measure of confidence in the country’s fortunes. For much of 2012 the yuan stagnated, causing investors to hold back on previous bets on its appreciation. Recent data suggests they have been piling back in to the Chinese currency – but that may not last.
UK policy rhetoric flies in the face of reality
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
When words and actions don’t match up, the problem is usually overly ambitious promises. In the debate on economic policy in the UK, the failure is in the present – the government’s description of fiscal and monetary policy flies in the face of reality.
Goldman-Morgan rivalry gets personal in Asia
By Peter Thal Larsen
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Goldman Sachs and Morgan Stanley are the Montagues and the Capulets of investment banking. It’s almost as unusual for a senior banker to quit one firm for the other as it was for members of Romeo and Juliet’s feuding clans to consider marriage. That gives Goldman’s poaching of Kate Richdale, Morgan Stanley’s head of investment banking in Asia, an added edge. But while it’s tempting to see the defection as evidence of a decisive shift in the balance of power in the region, the grudge match has proved surprisingly enduring.
Global finance isn’t dead, only shrinking
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The global financial system isn’t dead. But it might be shrinking. For the past four years, bankers have fretted that finance is retreating behind national borders, with dire consequences for trade and economic growth. The reality is that a diminution of the financial sector was overdue. And outside the euro zone, cross-border flows are still reasonably healthy.
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