Sunday, June 20, 2010
Saturday, June 19, 2010
Friday, June 18, 2010
That would be a mistake. Many of S&P’s dividend aristocrats rely on the goodwill of consumers and politicians to keep accumulating cash for payouts. The mood following the bail-out of Wall Street is now so hostile to corporations, and public budgets so strained, that any slip would make them vulnerable.
Robert Reich, the former US labour secretary who wants the US government to put BP into temporary receivership although many of its investors are UK-based, defines the affair as a “contest between citizenship interests and shareholder interests”."
Wednesday, June 16, 2010
But even if that creed works for non-financial companies, there is a basic problem with applying this principle to banks. The average non-financial company is composed of 60 per cent equity and 40 per cent debt. But at banks, leverage has been so high that debt can account for 95 per cent of value, and equity only 5 per cent.
Thus, if bank executives focus only on equity prices – say, by raising profits – but have less incentive to protect the long-term value of debt – most notably by creating a stable business – that creates a mismatch, particularly since bank debt is typically protected by governments. Or as a paper* recently co-authored by Mr Mehran says: “Structuring CEO incentives to maximise shareholder value in a levered form tends to encourage excess risk-taking.” Hence the credit boom."
At that point, the Singularity holds, human beings and machines will so effortlessly and elegantly merge that poor health, the ravages of old age and even death itself will all be things of the past."
Sunday, June 13, 2010
Michael Aronstein Calls European Rescue `Deflationary': Video - Bloomberg.com
Wednesday, June 09, 2010
Germany, where the average age is 45 and rising even as the population is beginning to shrink, is a nation of savers, and public policy has encouraged keeping wages under control and building up export industries.
By contrast, the younger Greeks, Irish and Spaniards went on borrowing binges, driven in particular by rising demands for new homes and consumer goods that, in several cases, turned into housing bubbles before going bust. Wages were pushed up, encouraging spending but soon making it all but impossible for their industries to compete with the thrifty Germans, Dutch and other Northern Europeans.
Most economists, beholden as they are to their “promiscuous but essentially useless” economic models, Mr. Hugh rails, missed what he considers an easily predictable outcome. And that, he adds, “is why we are in such a big mess now.”"
Tuesday, June 08, 2010
This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads."
Given the plunge in BP’s share price — the company has lost more than a third of its value since Deepwater Horizon blew — some bankers and analysts say BP is starting to look like takeover bait. The question is, who would buy BP, given its enormous potential liabilities?
Shell and Exxon Mobil are both said to be licking their chops. And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup — and potentially billions of dollars in legal claims — into a separate corporate entity."
But the real difference in costs between, say, Houston and Bismarck, N.D., may result less from how doctors work than from how patients live. Houstonians may simply be sicker and poorer than their Bismarck counterparts."
Friday, June 04, 2010
Mr. Casey is gathering support for his curiously named 'Create Jobs and Save Benefits Act,' a bailout for union-run retirement plans. Similar to House legislation from North Dakota Democrat Earl Pomeroy and Ohio Republican Patrick Tiberi, the bill would transfer tens of billions of dollars worth of retiree liabilities to the Pension Benefit Guaranty Corporation, i.e., to taxpayers."