China’s lodestar is not reform but avoiding chaos

May 18, 2015

The authorities want banks to show mercy to stressed local government-linked borrowers. The plan seems to be to avoid chaotic deleveraging. Though it’s a step back from reform and market forces, until a clear line has been drawn between good and bad, it’s the right thing to do.

Bond turmoil signals new era of return-free risk

May 15, 2015

Forget the risk-free rate - investment safe havens are in short supply. Cash can be costly. Gold is a dollar proxy. And recent gyrations in the largest debt markets have undermined the concept of risk-free returns. When this last compass fails, investors are really at sea.

EU growth surprises hide clear pattern

By Edward Hadas
May 13, 2015

Recovering Spain was still the GDP star in the first quarter, but traditionally strong Germany did no better than perpetually stagnant Italy, while France defied gloomy predictions and the UK disappointed. Behind the mix-up, the recoveries are real, but mostly slow and unsteady.

Deutsche Bank revamp puts capital ahead of returns

April 27, 2015

Exiting Postbank, and cutting 200 bln euros of investment bank assets and 3.5 bln euros of costs, is what the German lender needs. A 5 pct leverage ratio goal is also higher than expected, raising the bar for European rivals. But it means investors face a wait for decent returns.

Review: Some of what is wrong with economics

By Edward Chancellor
April 17, 2015

Meghnad Desai mocks his fellow economists for not seeing trouble ahead during the early 2000s credit bubble. The retired professor wisely calls for more study of history and a less narrow perspective, but he is still too conventional. He ignores the crucial financial cycle.

Grenada offers debt restructuring model for Greece

April 9, 2015

The Caribbean island is close to agreeing a deal with creditors after years of wrangling. The deal structure, including warrants and phased debt relief, is equitable, and provides incentives for reform. It looks like a decent model for Ukraine—or even Greece.

Greece comes kicking and screaming to reform table

April 2, 2015

The Syriza government’s latest reform proposals include some concessions to its public creditors. The plan still lacks detail, and reneges on past promises. The government is fiddling while Athens burns, and the risk of an accidental euro zone exit is rising.

Good news: China’s bad debts are on the rise

March 25, 2015

Agricultural Bank’s 28 percent increase in duff loans over six months looks modest next to what’s happening at some lenders. Across the board, write-offs and overdue loans are ballooning. Still, China’s economic slowdown may be giving cover for some welcome honesty.

Holcim can push for more in Lafarge tie-up

March 13, 2015

The Swiss cement group is outperforming its French rival, creating cracks in their $44 bln union. A special dividend or higher exchange ratio could fix matters. That is more likely to happen than deal failure, given that both sides would suffer if it fell apart.

Kaisa haircut is bad omen for China property debt

March 9, 2015

The troubled developer’s proposed restructuring leaves creditors facing lower interest rates and delayed repayments. A shrinking cash pile and the sudden appearance of $5.6 bln of previously hidden debt should alarm all investors in the sector. Kaisa may not be an isolated case.