The Great Debate UK

from Breakingviews:

Stock market rally celebrates bittersweet birthday

Birthdays are a good time to look back. The first anniversary of the global stock market rally -- the lows were hit on March 9, 2009 -- certainly brings back memories. It's easy to see why the MSCI World Index  is 71 percent higher now than then.

Then there was a steep recession, now there is GDP growth. Then it was realistic to worry about such horrors as rapid deflation, serial banking crises and a competitive protectionism. All of those menaces have now receded. And stock market investors can be cheered to see companies sufficiently in control of their short-term destiny for most of them to meet or beat analyst expectations of reported profits.

But this birthday celebration is no better than bittersweet. The stock market rally has spluttered somewhat. While the UK's commodity-heavy FTSE 100 index is hitting new highs, most others have made almost no progress for five months. That stalling reflects both an unexpectedly tepid economic recovery and serious worries about whether there will be much to celebrate on future birthdays of the 2009 stock market trough.

Too many of the wounds of the financial crisis remain unhealed. Central banks are still extraordinarily generous and unemployment rates remains unacceptably high. The world remains too leveraged for its own good. And while the financial system is no longer in crisis, its newfound ebullience is itself a cause for worry.

Cable: parity is still a long way off but $1.40 beckons

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Jane FoleySince 1982, cable has been contained by the 1985 low of GBP/USD1.0790 and the 2007 high of USD2.0798.  The bulk of this time cable has remained within a narrower 1.40 to 1.80 trading range.

These statistics illustrate how significant it would be if the pound were to slip to parity with the dollar this year.  They have not, however, stopped some commentators speculating about such an event.

from Breakingviews:

Goldman Sachs needs to admit it made mistakes

By Chris Hughes

Even the mighty Goldman Sachs makes mistakes. The Wall Street bank's decision to help Greece keep some of its debts hidden from public view in 2001 was one of them.

The transaction allowed the Greek government to present accounts which understated the state's liabilities by 1.6 percent of GDP.

Whither UK economic policy?

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David Kuo-David Kuo is director at the Motley Fool. The opinions expressed are his own.-

The day of reckoning is looming ever closer.

Political leaders are jockeying for position with ad-hoc appearances here and a flesh-pressing engagements there to curry favour with voters ahead of the general election. How long will it be before we get our first baby-kissing photo opportunity?

But as yet, none of the main parties has told the electorate exactly how bad things are with the UK economy. Instead, they pussyfoot around difficult economic issues in the hope that if they don’t say anything, then maybe we won’t ask.

Will they have the nerve to call the next phase QE2?

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Laurence_Copeland- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

It is hard to be too pessimistic about the economic outlook for the rich countries, and impossible as far as the UK is concerned. With every day that passes, it becomes clearer that, far from being out of the woods, we are once again plunging into recession and possibly crisis.

Signs are positive for markets and economy

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SCHWAB.IMG_4329-Kully Samra is UK Branch Director at Charles Schwab. The opinions expressed are his own.-

There is no doubt that since the lows in March 2009 the U.S. market has rallied massively. However, at Charles Schwab we believe that whilst economic progress will continue, we must look to the months ahead with some caution.  We remain optimistic regarding the equity markets in the longer term and the economy in the short term, but recognise that increased volatility will likely characterise 2010.

from The Great Debate:

Fed redux: Making policy behind the curve

-- John Kemp is a Reuters columnist. The opinions expressed are his own. --

With clear signs the U.S. and world economies have returned to growth, investors are trying to guess when the Federal Reserve will begin to raise interest rates again.

Voting to maintain the federal funds target at 0.00-0.25 percent at this week's meeting, the rate-setting Federal Open Market Committee (FOMC) reiterated that low rates of capacity utilisation, subdued inflation trends and stable inflation expectations were "likely to warrant exceptionally low levels of the federal funds rates for an extended period".

from Breakingviews:

China needs fertilizer more than steel

China needs fertilizer more than steel. If the Middle Kingdom's industrialization follows the course of other nations, per capita demand for infrastructure like concrete and steel will peak long before meat consumption.

This may explain why mergers and acquisitions activity in the agriculture sector has become so hot. For example, miner Vale just agreed to buy Bunge's Brazilian fertilizer assets for $3.8 billion.

from The Great Debate:

There’s no way to hedge politics

Ben Bernanke in peril and the Volcker crackdown on proprietary trading by banks show two truths of the current dispensation: there is no effective hedge against politics and the reflation trade rests on fragile foundations.

Neither of these realities is particularly good for financial markets and neither is going away any time soon.

from Breakingviews:

Cash, not China, is Google’s biggest problem

Cash, not China, is Google's  biggest conundrum. More precisely, where should the search giant point its gusher of greenbacks?

The online advertising market recovery and increasing efficiency pushed free cash flow up 44 percent to $2.5 billion in the fourth quarter. Adding that to the company's $24 billion cash hoard doesn't make sense -- but giving it to shareholders does.

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