Kathleen's Feed
May 20, 2011
via The Great Debate UK

Are investors nuts for LinkedIn?


By Kathleen Brooks

Who would have thought that LinkedIn — the business social networking site launched in 2003 — would at one point be worth more than $90 a share on its first day of trading, within minutes doubling its $45 opening price?

Not the banks who managed the IPO or analysts who priced the stock prior to the listing. Neither did the naysayers who thought $45 (the equivalent to 17 times 2010 earnings of just over $243m) was way too high a price to list at in the first place.

May 12, 2011
via The Great Debate UK

Mario Draghi: A breath of the fresh air at the ECB

It looks all but certain that the next head of the European Central Bank (ECB) will be Bank of Italy Governor Mario Draghi. He has received the crucial backing from Germany’s Chancellor Angela Merkel and is likely to be voted in, bar a major shock, when the EU leaders meet next month.

With a PhD from the Massachusetts Institute of Technology, Draghi  has a resume as long as your arm:  a one-time economics professor at Harvard University, a former Vice President at Goldman Sachs, the head of the Italian Treasury that oversaw Italy’s transition to the euro as well as being Italy’s central bank chief since 2006.

May 3, 2011
via The Great Debate UK

A very uneven recovery

By Kathleen Brooks

The readings for first quarter growth from the U.S. and the UK are out and it was a fairly sluggish start to the year on both sides of the Atlantic.

A lacklustre 0.5 percent quarterly growth rate in the UK is unlikely to stoke too much enthusiasm for the UK, especially with public sector cuts setting in this quarter.

Apr 19, 2011
via The Great Debate UK

The U.S.’s big, fat political debt problem

By Kathleen Brooks

The U.S. has practically zero chance of solving its debt problem in the foreseeable future while politicians line up to contest the 2012 Presidential elections.

We have already heard President Obama lay out his partisan cards. He called for Congress to come up with a plan to trim $4 trillion from the U.S. deficit in the next 12 years. His favoured way to do this: end tax cuts for the rich – a well versed refrain from Democrats throughout the ages.

Apr 8, 2011
via The Great Debate UK

Bernanke steps up to scrutiny

-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.-

While ECB head Jean Claude Trichet is nearing his final post-policy decision press conferences – he retires in October – on the 27 April the Fed’s Ben Bernanke will be stepping up to the podium for his first.

Apr 1, 2011
via The Great Debate UK

Would the euro solve Switzerland’s problems?

By Kathleen Brooks. The opinions expressed are her own.

While some market commentators are questioning if the euro zone should even exist, authorities in Switzerland might be looking with envy at the 27-member currency bloc.

But why would a nation as renowned for political as well as financial stability like Switzerland desire the euro? The chief benefit is for its export sector.  Swiss companies including watch marker Hublot have complained recently about the strong Swiss franc weighing on their competitiveness. And watch markets are not alone. Exporters in sectors as diverse as cheese and chocolate to engineers, pharma companies and chemical firms are all suffering from the same problem: a strong franc.

Mar 22, 2011
via The Great Debate UK

George Osborne and the band-aid effect

The second budget presented to Parliament by Chancellor George Osborne is likely to be less talking and more doing when it comes to bringing the UK’s public finances under control.

This won’t be to everyone’s tastes. Some argue that the UK is in less financial danger than Europe’s financially troubled states, yet Osborne is embracing deficit reduction plans with as much gusto as Ireland or Greece.

Mar 21, 2011
via The Great Debate UK

Tide turns against nuclear energy

By Kathleen Brooks. The opinions expressed are her own.

As the nuclear threat in Japan steps up a gear, global politicians have pre-empted a wave of anti-atomic feeling from their public and spoken out against nuclear reactors, which threatens its future as a viable alternative to oil.

As Japan has found out with devastating consequences when things go wrong with atomic energy the effect is both devastating and immediate. Unlike carbon fuels, which have a lagged detrimental effect on the atmosphere, a nuclear accident doesn’t get worse in increments – once radioactive material is released into the atmosphere the damage to the surrounding areas is done.

Mar 7, 2011
via The Great Debate UK

Are graduates really immune from U.S. unemployment misery?

A lot has been written about the U.S.’s stubbornly high unemployment rate. Although it fell below 9 percent to 8.9 percent in February, this is unlikely to placate the Federal Reserve who wants to see unemployment drop back to 5-6 percent before it feels comfortable that the economy does not need any more policy support.

But one sector of the U.S. population that doesn’t need more policy support is college graduates. According to U.S. Department of Labor, people over 25 years old with a Bachelor’s degree or higher academic qualification had an unemployment rate of a mere 4.3 percent in February. Although this is roughly 1.5 percent higher than it was before the recession, there is no doubt that graduates have had an easier time than other workers in recent years. For example, for those who didn’t graduate high school nearly 14 percent are without work, which has barely improved over the past year.

Feb 28, 2011
via The Great Debate UK

Did the Fed catastrophically mis-time QE2?

The sternest criticism of QE2 is the way it pumped up asset prices like commodities in recent months without making much of an impact on U.S. economic growth. Rising fuel and food costs have weighed on inflation everywhere from emerging markets to the UK. But this criticism might step up a gear if Middle East tensions lead to a spike in oil prices and the Fed tries to protect growth using a similarly blunt tool as QE2.

The political crisis in the Middle East has been the game-changer for the global economic outlook in the past couple of weeks.  In just five days WTI oil (U.S. crude) jumped $10, and Brent (European oil) surged to within touching distance of $120 per barrel. This showed us what fear is like: since the 1970’s each recession has been preceded by an oil price shock. You don’t need much more evidence than this to see the extremely close relationship between oil and growth especially in the U.S., the largest consumer of crude in the world.