The Great Debate

Stock research is more than just a headline

ericauchard1– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Stock research analysts get no respect these days. An academic study has concluded that share recommendations have little impact.

A 51-page study entitled “On the information role of stock recommendations,” finds that buy and sell ratings are uninformative and often try to “piggyback” on actual news for their influence. This begs the dismal question: if professional analysts can’t get it right, what hope for the ordinary investor? Click here for PDF.

Sell-side research — driven by the need of the analyst’s employer to trade stocks — dominates daily market conversations. Recommendations are the signposts of these debates, without which many investors would be lost.

Analysts are not alone in selling their independence to the highest bidder, and their reputation has suffered after so many were exposed as marketers for investment bankers, favoured clients or company managements. But independence is not the same as efficacy of stock recommendations.

Piech must decide which car he’s driving

Alex Smith-GreatDebate– Alexander Smith is a Reuters columnist. The opinions expressed are his own –

Ferdinand Piech needs to decide whether he’s driving a Porsche, Cayenne or a VW Touareg. The Volkswagen chairman and part owner of Porsche cannot continue to drive both. He should step down as chairman and hand VW CEO Martin Winterkorn the wheel to negotiate any merger talks between the two carmakers.

Piech’s shareholding in the Porsche holding company leaves him hopelessly conflicted. However hard he tries to balance his responsibilities, Piech is always going to be left open to accusations of double dealing and almost certainly to legal challenges by minority shareholders should a deal be struck.

India poll should boost world trade

Paul Taylor Great Debate– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

India’s voters have just given stalled world trade talks their biggest potential boost since the financial crisis spurred fears of rising protectionism.

By handing the governing Congress party a decisive victory, unshackled from the Communist party, Indians have created a chance to break a deadlock in negotiations on global commerce that foundered last year on a U.S.-Indian spat over farm trade.

Doing the contango

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

The current contango structure in crude oil futures and most other commodity markets — with future prices significantly above the spot market — is providing a strong incentive to buy and store record quantities of raw materials, with most of the cost borne by retail investors in exchange-traded funds and institutional investors in long-only commodity indices.

This “cash-and-carry” strategy rewards market participants with access to storage or finance at the lowest cost. It is providing huge profits for physical commodity merchants, investment banks, and the owners and operators of warehouses and tank farms during the downturn, and helps explain the record profitability from commodity operations reported recently by some of the largest banking and trading groups.

U.S. should batten down the TARP

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The U.S. faces a lengthening series of request from industries and interests seeking shelter under the Troubled Asset Relief Program, most of which it should dismiss out of hand.

YRC Worldwide, a large trucking company, told the Wall Street Journal it will seek $1 billion in TARP funds to help relive it of its pension obligations.

President Obama should consider Sullivan for Supreme Court

Paul Sousa– Paul Sousa is co-founder of the non-profit GLBT rights organization, Join The Impact MA, which puts on grassroots events in the metro Boston area.  Paul is also the founder and president of Equal Rep, a Boston based organization that focuses on rapid online mobilization to lobby for the appointment or election of highly qualified openly GLBT politicians.  The views expressed are his own. –

Supreme Court Justice David Souter is planning to retire at the end of the current Supreme Court term after 19 years on the bench. The vacancy will give President Obama his first chance to name a member of the high court and begin to shape its future direction.

President Obama recently stated, “the issues that come before the Court are not sport, they’re life and death. And we need somebody who’s got the heart–the empathy–to recognize what it’s like to be a young teenage mom. The empathy to understand what it’s like to be poor or African-American or gay or disabled or old–and that’s the criteria by which I’ll be selecting my judges.”

Advanta shows spreading U.S. credit woes

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The decision of the 11th biggest U.S. credit card issuer Advanta to pull all of its credit lines from one million customers bodes poorly both for the economy and the banks.

You can’t really blame Adventa, which specialises in credit cards for small businesses, for closing its credit window: uncollectable debt reached 20 percent at the end of March.

Clarity important for Europe stress tests

sap_executiveboard_apotheker_001– Leo Apotheker, co-CEO and member of the executive board of German software maker SAP AG, is a guest columnist. The views expressed are his own. —

The U.S. government’s recent bank stress tests were all about clarity. With hard data and clear facts, they shone a bright light on the shadowy uncertainties of complex financial transactions.

The question now is: Will this sort of clarity be a part of doing business in the financial industry?

Did Twitter make flu fears viral?

twitter1 Now that the panic over the H1N1 flu strain has somewhat subsided, experts are contemplating what role Twitter played in helping the virus, commonly known as swine flu, go viral.

The H1N1 virus has caused around 6,500 infections in 33 countries and 65 people have died so far, according to the World Health Organization. Common seasonal flu kills up to 500,000 people a year worldwide.

So did Twitter put the media before the message and escalate anxieties by propagating rumors of biological attack and pork production infection?

U.S. military giant, diplomatic dwarf?

Bernd Debusmann - Great Debate— Bernd Debusmann is a Reuters columnist. The opinions expressed are his own —

The U.S. armed forces, the world’s most powerful, outnumber the country’s diplomatic service and its major aid agency by a ratio of more than 180:1, vastly higher than in other Western democracies. Military giant, diplomatic dwarf?

The ratio applies to people in uniform (or pin-striped suits). In terms of money, the U.S. military towers just as tall. Roughly half of all military spending in the world is American. Even potential adversaries in a conventional war spend puny sums in comparison. The 2010 defense budget now before Congress totals $534 billion, not including funding for the wars in Iraq and Afghanistan. China’s defense budget is $70 billion, Russia’s around $50 billion.giant_dwarf_w350