Sunday, 20 June 2010

The world is looking for a currency other than the dollar, without much success. Every time there is even a hint of trouble in world markets, the dollar surges, reminding the euro and the yen that they are nowhere near the Almighty. That has not prevented Russia from joining the ranks of those aspiring for global acceptance of their currencies. Gold keeps rising and slipping on and off, though some insist it can only go up. China has reportedly decided to let the yuan appreciate to some extent. Meanwhile, US keeps admonishing other countries for fiscal and external deficits and surplus.

Moody’s cut Greece’s rating to near junk last week and the euro surged to over 1.23. The future of Europe and the euro continues to be viewed as uncertain. Austerity plans are being followed up with higher taxes and increases in retirement age. EU, as well as the euro zone do not have significant external deficits and the austerity wave can only help restore fiscal balance. Europe was generally less boisterous than the Americans during the heydays of 2003-2008 and seems to have started settling down with its own new-normal, i.e. lower living standards. If that is what Soros calls a prolonged recession, well, so be it.

What is happening in the US economy remains unclear but it is absolutely clear that US (and Japan) have no intention of raising rates in the foreseeable future. Both continue to look at government spending as the only way to boost employment and keep the economy going. There is little hope of any drastic changes in the financial system as thousands of lobbyists are registering silent successes in blunting most of the proposed amendments. The real problem is that America wants to do nothing more than managing other people’s money.

Switzerland has finally agreed to provide details of 4450 clients suspected of tax evasion to the US. Greece continues to face flak for profligacy, particularly pensions (only 1.7 workers per pensioner) which add up to an eighth of GDP.

Ghana’s economic woes appear to be peaking and considering the increasing attention Africa as a whole is receiving from investors, it may be in for massive investments. Afghanistan’s estimated mineral wealth includes iron ore and copper deposits worth $421 bn and $273 bn, respectively, besides significant deposits of gold, molybdenum and silver. Chinese firms have already committed investment of $ 4 bn in copper mines.

Taiwan has drawn a billion dollar plan to develop its own cloud computing. Romania is asking its citizens to donate cash for keeping deficit within limits agreed with IMF under a $25 bn aid package. Russia has developed a new fighter jet that it plans to produce jointly with India. Putin says it matches F-22 of US and will cost less than a third.

Obama fumed and fretted from the Oval office last week, vowing to make BP pay, but the very next day BP’s CEO Hayward used “I don’t know” 66 times when deposing before the US Congress. Nobody knows how and when the spill estimate rose from 5,000 to 60,000 barrels a day as media, politicians, lobbyists, bankers, investment firms and even oil companies are having a field day figuring out ways of making money from the disaster. Nothing is clear, except that continued gushing of oil in the Gulf of Mexico has fathomed crude prices successfully, at least for the time being.

Fannie Mae and Freddie Mac, which together either own or have guaranteed about three fourth of all US housing mortgages ($10 tn plus) continue to receive significant government aid for writing off bad loans. One reason is that foreign governments own their bonds to the extent of over $900 bn. Citi plans to raise $3 bn for funding PE and hedge businesses. AgBank of China (24,000 branches) is once again preparing to launch its massive $23 bn IPO, the biggest ever in the world.

Facebook surprised markets last week by announcing 2009 revenue of $800 mn; its COO Sheryl Sandberg insists email is on the road to extinction as only 11% of teens use email, the rest opting for texting. Apple sold 600,000 units of its new iPhone4 on the very first day. Sony, Nintendo and Microsoft are upbeat on prospects of video games and are now talking in terms of cloud gaming which would let consumers hire, instead of buying.

Boehringer has been refused approval for its female version of Viagra by the US FDA. Nestle is suing Sara Lee for patent infringement. Genting, debt free Malaysian casino operator having $1.7 bn in cash, is planning to set up shop in US. Toyota has suspended production at its main unit in China because of a strike at a parts supplier. NewsCorp controls BskyB but wants full control and is willing to pay $12 bn for the remaining 61% stake. FedEx says healthcare and pension costs will pinch profits in 2011; revenue rose 20% to $9.43 bn last quarter.

Women’s groups in France are aggressively moving to raise the number of women on company boards; some wore fake beards last week to tell a French water company that they resent the board having only one woman. Soccer continued to dominate lives last week. Lightning destroyed a 62 foot Jesus statue in Ohio last week.

Russia banned consumption of vodka at a top conference last week; only wine was allowed. A convict was executed by a firing squad in Utah in response to his own wish. A recent survey found that obesity results in less sex, more sexual diseases and more unplanned pregnancies. Warren Buffett and Bill Gates, together worth about 100 bn, are asking other American billionaires to give away at least one half of their wealth to charities under a campaign they call the Giving Pledge. A management guru says the ability to sleep in planes is a major prerequisite for success in the corporate world.


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