
The challenges facing the US economy are so large and deep-seated that it is often difficult, in fact close to downright impossible, to believe that all may yet be well. Take a deficit of $1.5 trillion this year, unemployment above 10%, massive surplus capacity and a consumer market that is just not spending and you have all the ingredients for a disaster that could run and run. There are those who are predicting that another huge wave of housing foreclosures is just around the corner…

Americans (some Americans anyway) remain deeply anxious about China’s ownership of $1–2 trillion of their country’s debt. The fears that these massive holdings leave the US vulnerable and expose intensified on February 15 when it was reported Beijing had dumped some $34.2 billion of US Treasury bills. There are fears, for example, that Beijing might suddenly offload its circa $1.5 trillion holding of Treasury bills and, in so doing, spark an economic version of mutually assured destruction…

Legendary Omaha-based investor Warren Buffett often uses his annual letter to shareholders in Berkshire Hathaway group to impart some homespun financial wisdom and disseminate a few trade secrets. The letter accompanying the conglomerate’s 2009 annual report, released on Saturday, doesn’t disappoint. Perhaps Buffett’s most pertinent recommendation, concerns the corporate governance of large financial institutions. Buffett, 79, strongly believes that…

While the bottom of a global recession is hardly the moment that companies in developed economies can be expected to go on a worldwide acquisition spree, there is little doubt that we will see acquisitions being made in both directions, from West to East and vice versa in the year ahead. This raises an interesting question. Asian sovereign wealth funds, who are likely to be doing the vast bulk of the East to West buying, enjoy transparent pricing of Western assets…

There was good news and bad news for M&A watchers in the latest report on European Merger Activity in the financial sector from PwC. The bad news was that 2009 was a year when deal-making in the banking sector dived to its lowest level in the seven years PwC has been compiling this report (excluding deals by governments to prop up failing banks, of course). On the up side, insurance deal values were at a comparable level to 2008…

It’s time that institutional investors woke up to the wider repercussions of the Greek tragedy and rethought their attitudes to risk as well as their approaches to asset allocation. Obviously investors are aware of the way in which the credit crisis has accelerated the shift in the balance of economic power from the developed and towards the emerging world, a shift that has obviously been influenced by the fiscal irresponsibility of the former…

One reason why the regulators had no visibility of just how badly the banking sector had over-leveraged itself across the developed world prior to the 2008/2009 crash, was the excessive use of special purpose entities (SPEs) by the banks. The SPEs made many transactions look “arm’s length,” and not part of a bank’s trading book, that were actually nothing of the kind. Inevitably, as part of its “rethink” on the regulatory framework…

With emerging markets expanding the boundaries of the possible at startling speeds, the old defensive mantra which emphasizes Western know-how and innovation over Asia’s ability to out-compete on low-skill manufacturing, is already starting to sound hollow. The plain fact is that while Chinese and Indian students demonstrate a huge hunger for places on science and engineering degree courses, the hard sciences are seen as too hard by too many Western youngsters…

It will be a long time before bankers are forgiven for the excesses that triggered the credit crunch and the global recession so, inevitably, each time the media gets a chance to loudly go on about bankers’ bonuses, they do. The furor over Barclays Bank’s announcement of its bonus strategy almost eclipsed the fact that the bank’s record results were absolutely outstanding. I had a lengthy interview several months ago with Anders Bouvin, general manager for Handelsbanken’s…

It has become fashionable to scoff at Basel II, the key regulatory platform for the international banking community, for its failure to prevent or expose the wild excesses of global banks before the sector imploded, triggering the worst global downturn since the Great Depression. The common charge brought against Basel II is that it took far too easy a line in allowing banks to model their own risks, which, as events showed all too clearly, they almost universally massively understated and…
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