Sunday, 6 June 2010

Dow plunged below 10K, euro slid to where it started (1.19) ten years ago and commodities dived last week like there was no bottom. Oil looked up for a while but was close to 70 again. Volatility in US-EU indices attained parity with Mumbai and Hong Kong last week. In the midst of collapsing commodities and crumbling currencies, uncertain and nervous is the only way to describe the atmosphere.

Greece and Spain were joined by Hungary last week. Ratings downgrade for several others are under consideration. Europe is on an austerity binge. Every economy is freezing wages and pensions and hiking taxes. Even Germany is planning to hike VAT on some products from 7% to 19%. Sovereign ratings are likely to be cut for several economies.

For US austerity is a four letter word but household savings are rising. “(US) Savings will have to rise faster than consumption for the coming years,” said Nouriel Roubini last week. Household debt of Americans is over 100% of annual disposable income and if they keep saving at the current rate of 5%, it may take them a decade to cut it by half. Since China isn’t listening on yuan, US has started prescribing higher consumption for EU and Japan also.

Eurozone banks may have to write off 195 bn euros in loans over the next 18 months, in addition to 238 bn of bad debts incurred since 2008. European banks, in turn, owe some money to US banks. Singapore spends 3% of its GDP on R&D and has started attracting students and scientists from all over the world. France has called for a separate body to handle economic governance in the eurozone. Deutsche Securities mistakenly placed sell orders for index futures worth $182 bn at Tokyo exchange. It was corrected quickly. Israel’s offshore discoveries of natural gas are being estimated at 16 tn cf, twice UK. 6.76 mn Americans have been unemployed for 27 weeks or more and the figures for Europe aren’t very different. China now owns two of the world’s ten fastest supercomputers, one of which ranks second in speed.

BP CEO Tony Hayward is 53 and even after having spilt 53 mn liters of oil in the Gulf of Mexico, continues to look 43. That by itself is reason enough for Obama to feel furious. BP’s market cap has plunged over 35% and many are looking at it hungrily. Meanwhile, Lukoil profit doubled last quarter to 2 bn and Shell has decided to convert its refinery in Montreal into a terminal since it has failed to find a buyer.

Google has started reducing internal use of Windows because of security concerns. Fujitsu plans to complete building of the world’s fastest supercomputer by 2012 and have sales of a billion dollars a year by 2015, giving it about a tenth of the global market; currently HP and IBM have 42% and 37% share, respectively. Apple seems to be preparing for launch of a new version of iPhone, and Reliance Media of India is to form a JV with CBS of US to launch TV channels.

CitiFinancial of the Citi group, up for sale, is to close 330 of its 1,833 branches in US. Prudential has pulled out of its deal for AIG’s Asia business having 320,000 agents and 23 mn customers and the surprising part is no other buyers have emerged. JPMorgan Chase has been fined nearly $50 mn by UK for failure to protect client money.

Ford’s China JV is to recall 236,643 cars, Hitachi has announced plans to trim its portfolio and allocate 70% of investments to infras like power plants, and Boeing has received orders for 65 planes from Russian Technologies, some of which are to be used by Aeroflot also, besides Rosavia, its own carrier. So far Aeroflot has been buying Airbus.

Kimberly-Clark has opened its $170 mn unit in Russia to make Huggies diapers, and P&G has finally realized that men’s skincare products will gel with Gillette which it bought five years ago.

Whirlpool is recalling 1.7 million dishwashers in US due to potential fire hazard and McDonald's has recalled 12 mn tumblers because they contain cadmium. Wal-Mart expects to create 500,000 jobs worldwide over the next five years, though it is feeling the pressure on its customer base in US as footfalls are falling because of high gasoline prices.

United Airlines left a woman locked in a plane by mistake; the woman has sued for illegal detention. China has asked bus drivers to address passengers as sir or madam, instead of comrade. Former US VP Al Gore is divorcing his wife after 40 years of marriage, the apparent reason being that enough is, well, enough. A bird put on so much weight after Australians fed too much of sausages and barbecues that it can’t fly now. The Sydney Zoo is exercising her to make her fit to fly.

Research says coffee offers no real perk up to regular drinkers, Americans prefer to treat depression with drugs rather than therapy, German males accord greater preference to watching World Cup than having sex with their partners, and a brunette Citi had fired last year because she was too much of a distraction to male colleagues has filed a lawsuit.

Cosmetic surgery business is booming in the still war ravaged Iraq and Australians have started organizing concerts for canines. Air pollution in London continues to exceed EU limits and the EU Commission is contemplating a fine of several hundred million dollars. Environmentalists have built a five room hotel in Rome with inorganic waste.

Besides financial, political uncertainties have also surfaced. Korea and Iran issues continue to simmer, if not boil. Hold your money in your pocket. Statistics savvy economists are going to make room for some down-to-earth attitudes and prices of real estate, commodities and consumer goods are all likely to decline significantly. Definition of savings in these times is money in the bank, not in mutual funds.

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