Ebenezer Scrooge came into the room slowly. He was, to my surprise, much as Charles Dickens had described him. How, I wondered, could he have changed so little over 170 years? It must be the benefit of being a literary character, I decided.
“Good morning, Mr Scrooge,” I remarked politely. “I have come to interview you about your best-selling new book Scroogenomics – or How to Do Well out of Doing Good.”
Scrooge smiled. “Yes,” he responded, “I had to show that Joel Waldfogel’s Scroogenomics, cleverly reviewed by your John Kay, merely portrayed my unenlightened self. But Dickens, albeit a talented writer, was just a sentimental fool. He never understood what my change over that Christmas was about. I learnt, above all, to appear benevolent. That, with my business acumen, turned Marley & Scrooge into a global enterprise. Fortunately, that philanthropy has become less painful, since my charities are tax deductible. What can be less painful for a miser than state-subsidised charity?”
I was shocked by his candour. He must have drunk too much at the book party earlier. After the abstinence described by Dickens, one drink would have a big effect.
Category: Investing
When Analysts Look Over Their Shoulders
Scott Cleland is one tough Google (GOOG) critic.
From his office in McLean, Va., as founder and president of research firm Precursor, Cleland routinely fires off pages of analysis whenever news on Google’s market dominance hits the media.
Cleland’s words have irked Google, which is engaging in an unusual behind-the-scenes effort to counter Cleland’s views. The case is spotlighting the issue of how companies should deal with critics on the public stage.
New Interest in Turning Gas to Diesel
Diesel and jet fuel are usually made from crude oil. But with oil prices rising even as a glut of natural gas keeps prices for that fuel extraordinarily cheap, a bit of expensive alchemy is suddenly starting to look financially appealing: turning natural gas into liquid fuels.
A South African firm, Sasol, announced Monday that it would spend just over 1 billion Canadian dollars to buy a half-interest in a Canadian shale gas field, so it can explore turning natural gas into diesel and other liquids. Sasol’s proprietary conversion technology was developed decades ago to help the apartheid government of South Africa survive an international oil embargo, and it is a refinement of the ones used by the Germans to make fuel for the Wehrmacht during World War II.
The technology takes “a lot of money and a lot of effort,” said Michael E. Webber, associate director of the Center for International Energy Environmental Policy at the University of Texas, Austin. “You wouldn’t do this if you could find easy oil,” he said.
Bond deal puts San Francisco’s Asian Art Museum on brink
The great and the good who sit on the board of San Francisco’s prestigious Asian Art Museum are grappling with problems that run deeper than reviving recession-hit visitor numbers or repairing a dented endowment fund.
A financial derivative gone bad is threatening to become the last straw that tips the museum into bankruptcy – unless a stand-off involving the city and two prominent US financial institutions can be resolved within the next two weeks.
The museum’s problems have touched off a war of words in recent days. Dennis Herrera, San Francisco’s city attorney, fired off letters last week to JPMorgan Chase and bond insurer MBIA, accusing them of taking millions of dollars in fees from the city while washing their hands of the problems to which they have contributed.
“The city’s involvement is not just for the city attorney to write a letter and say it’s everyone else’s problem,” retorted Mitchell Sonkin, chief portfolio officer at MBIA. The city itself had short-changed the museum in recent years, forcing it to draw more heavily on its endowment, and should take part in a rescue.
Moral Hazard, Thy Price Is $3.3 Trillion
Sunshine doesn’t hurt after all. Bank shares leapt Wednesday despite the Federal Reserve’s detailed disclosure of who got $3.3 trillion of emergency lending during the crisis. That is hardly what investors might have envisaged, given dark warnings from the Fed that such disclosure could endanger financial institutions. The central bank released the data only because of a provision in the Dodd-Frank financial-overhaul bill.
True, it will take time for investors to comb through all the gory details of about 21,000 transactions by multiple emergency Fed lending facilities. And some details may leave firms with egg on their face: Goldman Sachs, which insisted it would have survived the crisis without government assistance, tapped one special Fed facility 84 times to borrow nearly $600 billion in overnight money. Morgan Stanley tapped the facilities more than 200 times.
Even if individual details of the programs aren’t that surprising, the breadth of companies that accessed them is notable. The disclosure shows how far the Fed went in attempting to prop up just about every part of the financial markets, with users ranging from the biggest U.S. and international banks to small firms that peddled complex and often toxic securities, as well as industrial companies such as General Electric, Harley-Davidson and Verizon.
In search of a lightning bolt of rational thought.
In the midst of the biggest green car push in automotive history – what with Chevrolet touting its extended-range electric Volt as the greatest thing since sliced bread while crossing green swords with Nissan, which is shouting similar missives from the rooftops about its all-electric Leaf – it has become readily apparent that the vast majority of the American consumer public couldn’t be bothered. As in they couldn’t care less. That is unless someone – i.e., Washington – is throwing money at them to care.
Hybrid sales in this market are going to finish the year down again, which will mark three straight years of decline, and this includes the $4.00+ per gallon spike in the late spring-summer of 2008, when fuel economy hysteria took hold in the U.S. for four solid months. It seems that the Shiny Happy Green Sensibilities Act – or whatever you want to call the ongoing “shove-it-down-the-American-consumer-public’s-throats-and-they-will-learn-to-lilke-it” mentality that pollutes the political brainiacs/stumblebums in Washington and Northern California – is going nowhere.
As a matter of fact our illustrious leaders in Washington used a considerable chunk of money from the 2009 economic stimulus package to buy up hybrids from various auto manufacturers to prop-up hybrid vehicle sales, couching it as a noble attempt at improving the overall fuel-efficiency of the government fleet, when in fact the real reason was to not only – hopefully – jump-start American consumer thinking into accepting these vehicles as being mainstream choices, but to help the vehicle manufacturers who were battered and bullied to build the vehicles in the first place to keep the production lines going.
But alas, this is the pattern we find ourselves in as a nation at the moment. A minority of the citizenry in an absolute lather about climate change – aided and abetted by maliciously clueless politicos with an axe to grind and an agenda that has more to do with their personal ambitions than it does with such quaint ideas as “being good for the country” – dictating to the majority of the American public how it’s going to be.
The ultimate carry trade
JUDGING by the callers on a late-night BBC radio programme, the British public is none too enthusiastic about the country’s participation in the Irish bailout. The standard reasoning was “Why are we giving money to Ireland when we haven’t got any ourselves?” Perhaps similar sentiments were being expressed on Radios Luxembourg, Belgium and Portugal.
But of course, the money isn’t being given to Ireland, it’s being lent. And even if the eventual rate is below the market level of 8%, the new debt may still carry a rate of 5% or so. Well, Britain is still paying 3.3% for 10-year money. So this is a profitable gig, borrowing at 3.3% to lend at 5%. Perhaps the government should sell the scheme to the public as the ultimate carry trade, turning Britain into a hedge fund like LTCM.
Congressional Members’ Personal Wealth Expands Despite Sour National Economy
Despite a stubbornly sour national economy congressional members’ personal wealth collectively increased by more than 16 percent between 2008 and 2009, according to a new study by the Center for Responsive Politics of federal financial disclosures released earlier this year.
And while some members’ financial portfolios lost value, no need to bemoan most lawmakers’ financial lot: Nearly half of them — 261 — are millionaires, a slight increase from the previous year, the Center’s study finds. That compares to about 1 percent of Americans who lay claim to the same lofty fiscal status.
And of these congressional millionaires, 55 have an average calculated wealth in 2009 of $10 million or more, with eight in the $100 million-plus range.
US muni bonds see biggest drop since 2008
Municipal bonds had their biggest one-day sell-off yesterday since the height of the financial crisis, prompting some borrowers to delay financing plans.
The yields on triple A 10-year bonds rose 18 bps to 2.93 per cent, the largest one-day rise since October of 2008, according the MMD index, which is owned by Thomson Reuters.
Absolute yields, however, remain well below crisis-era levels.
The $2,800bn “muni” bond market where states and municipalities raise money has been under pressure over the past week amid a rise in the yields of benchmark US Treasury bonds, heavy bond sales and uncertainty about federal support for the market.
The market declines have made investors, who are mostly wealthy individuals benefiting from tax breaks on muni debt, nervous about an uptick in defaults. Munis historically have been a relatively safe place to invest, but budget deficits and underfunded public pensions have created widespread concern that local entities could struggle to pay their debts.
Germany Criticizes Fed Move Finance Minister Says Policy ‘Doesn’t Add Up,’ Sees U.S. Model in ‘Deep Crisis’
German officials, concerned that Washington could be pushing the global economy into a downward spiral, have launched an unusually open critique of U.S. economic policy and vowed to make their frustration known at this week’s Group of 20 summit.
Leading the attack is Finance Minister Wolfgang Schäuble, who said the U.S. Federal Reserve’s decision last week to pump an additional $600 billion into government securities won’t help the U.S. economy or its global partners.
The Fed’s decisions are “undermining the credibility of U.S. financial policy,” Mr. Schäuble said in an interview with Der Spiegel magazine published over the weekend, referring to the Fed’s move, known as “quantitative easing” and designed to spur demand and keep interest rates low. “It doesn’t add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank’s printing presses, artificially lower the value of the dollar.”
At an economics conference in Berlin Friday, Mr. Schäuble said the Fed’s action shows U.S. policy makers are “at a loss about what to do.”
Mr. Schäuble hit back at critics in the Der Spiegel interview. “Germany’s exporting success is based on the increased competitiveness of our companies, not on some sort of currency sleight-of-hand. The American growth model, by comparison, is stuck in a deep crisis,” he said. “The USA lived off credit for too long, inflated its financial sector massively and neglected its industrial base. There are many reasons for America’s problems–German export surpluses aren’t one of them.”