Dec. 7 (Bloomberg) -- It turns out the U.S. economy matters after all.
The credit collapse and dollar decline that followed a surge in U.S. home foreclosures jeopardize expansions in the U.K., Canada and Germany, economists said. They also debunk ``decoupling,'' an argument advanced by analysts at Goldman Sachs Group Inc. and Morgan Stanley that the world wouldn't suffer as it did during U.S. slowdowns in previous decades.
The Bank of England and Bank of Canada this week followed the Federal Reserve in cutting interest rates, and the European Central Bank lowered its growth forecast for next year. British policy makers reduced their benchmark rate yesterday, even after Governor Mervyn King expressed concern about inflation just two weeks earlier.
``Two thousand and eight will be the year of `recoupling','' said Peter Berezin, an economist at Goldman in New York, explaining his firm's about-face. ``What began as a U.S.-specific shock is morphing into a global shock.''
Of the 38 countries they monitor, Goldman economists expect growth to slacken in 26 and strengthen in a dozen. That will cause global growth to slow to 4 percent next year from 4.7 percent this year, with Europe and Japan fading faster than the U.S., they say.
``There are a lot of risks out there,'' Goldman Chief Economist Jim O'Neill said in an interview today.
Market lending rates have risen worldwide in the last three weeks as $70 billion of writedowns linked to defaults on U.S. subprime mortgages fanned international concern about the strength of financial institutions.
Roach Skeptical
Decoupling is ``a good story, but it's not going to work going forward,'' Stephen Roach, chairman of Morgan Stanley in Asia, said in an interview in New Delhi on Dec. 2. His colleague, Stephen Jen, said in a report the previous week that because the possibility of a U.S. recession has increased, so has the chance that the rest of the world will falter.
Higher market rates pushed up the cost of lending everywhere, making it costlier for companies and consumers to fund new spending or investment. The cost of borrowing euros for three months, for example, this week rose to a seven-year high.
``Initially the impact of the subprime crisis was on the U.S. directly, but what we're seeing now is a more insidious paralysis of credit conditions moving across different markets and economies,'' said Brian Hilliard, director of economic research at Societe Generale SA in London.
Threat to Airbus
The dollar's decline in sympathy with its economy is also exacting a price overseas. Airbus SAS may cut its 2 billion-euro ($3 billion) research budget to trim costs as the dollar's dive becomes ``life threatening'' for the world's largest planemaker, Chief Executive Officer Tom Enders said Nov. 23.
At the same time, U.S. consumers are starting to retrench in the face of declining home values and rising energy bills as oil prices near $100 a barrel. The Conference Board's index of consumer confidence decreased last month to the lowest since the aftermath of Hurricane Katrina in 2005.
Wolseley Plc of the U.K., the world's biggest distributor of plumbing and heating equipment, said Nov. 28 that first- quarter pretax profit through October fell almost 15 percent after U.S. revenue declined 10 percent.
``The American consumer is the big gorilla on the demand side of the global economy,'' Roach said. ``As the slowdown goes from housing to consumption, we'll find the world is not as decoupled as it thinks.''
U.K. Cut
U.K. monetary policy makers yesterday cut their key rate for the first time in two years to 5.5 percent, pointing to deteriorating financial markets. In August, King said he was optimistic the turmoil wouldn't hobble his economy.
The Bank of Canada identified ``global financial market difficulties'' as it lowered its main rate by a quarter point to 4.25 percent on Dec. 5.
While the European Central Bank is signaling no intention of cutting interest rates soon, Bank of France Governor Christian Noyer said Dec. 4 that there is now a ``question mark'' over his view of September that Europe would remain unscathed from the market rout.
Tai Hui, head of Southeast Asian economic research at Standard Chartered Bank Plc in Singapore, also doubts Asia's economies can weather a collapse in U.S. consumer demand, with Hong Kong, Taiwan, Malaysia and Singapore at particular risk from reduced exports.
`Need to See'
Bank of Japan Governor Toshihiko Fukui said this week that ``we need to see how the U.S. consumer is affected'' as he holds his key rate at 0.5 percent, the lowest among industrialized nations. Waning U.S. demand meant the Japanese economy grew an annualized 1.5 percent in the third quarter, almost half the preliminary estimate, the Cabinet Office said in Tokyo today.
On the other hand, Alex Patelis, head of international economics at Merrill Lynch & Co., is confident ``the time has not yet come to call the end of this global upturn,'' citing demand in emerging markets such as China and Russia.
Patelis predicts the world economy will grow 4.7 percent next year and 5.6 percent if the U.S. is excluded.
John Llewellyn, a senior economic policy adviser at Lehman Brothers Holdings Inc. in London, is unconvinced, arguing that if U.S. consumers buckle, so will growth elsewhere.
``Decoupling is a lovely idea, but I'll only believe it when I see it,'' he said.
To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net
samedi 8 décembre 2007
mercredi 28 novembre 2007
BoJ warns of ‘disease’ in world markets
BoJ warns of ‘disease’ in world markets
By David Pilling in Tokyo
Published: November 27 2007 20:01 | Last updated: November 27 2007 20:01
The yen hit a two-and-a-half year high against the dollar on Tuesday as Toshihiko Fukui, governor of the Bank of Japan, expressed strong concern about the turbulence in world markets, comparing it with “a serious disease”.
The yen briefly rose to Y107.17 against the dollar, although it fell back to Y108 in Tokyo trading. Before July, when investors began to reverse some so-called yen carry-trade positions amid a retreat from risk, the currency had been trading at above Y120 to the dollar.
sharp oscillations sent Japanese equity markets gyrating, with the Nikkei index falling 300 points in the morning amid concern about the effects of a strong currency on exporters, before it rallied to close up 87.64 points as the yen drifted down again. Mr Fukui said the volatile movements in financial markets since July suggested global markets were paying the price for “euphoria and excessive risk-taking”. It was the central bank’s job, he said, “to help markets adjust themselves in an orderly manner as far as possible, while keeping markets functioning at all times.”
The BoJ has reacted to the US mortgage crisis by putting an expected interest rate rise on hold, keeping overnight rates at 0.5 per cent. Although the bank has fractionally pared back its growth and inflation predictions for this year, it has stuck to its central thesis that Japan’s economy remains in a virtuous cycle.
Masaaki Kanno, chief economist at JPMorgan in Tokyo, said a strengthening yen clouded the picture. If the yen broke through Y100 or Y90 to the dollar, he said, it could “be a big blow to the economy” and once more raise the spectre of deflation.
“In the past we didn’t worry so much about yen strength as we believed the global economy would grow steadily,” he said. “But if the strong yen is caused by the slowing of the global eco- nomy together with the spread of risk aversion, then probably we should be a bit more worried than before.”
Other economists said concern about the yen comes on top of worries about the domestic economy, partly brought on by a sharp fall in housing starts.
Jonathan Allum, strategist at KBC Financial Products, said the yen was still relatively weak against the euro, a fact that had helped underpin strong exports to European countries.
On Tuesday, the yen, which peaked at Y168 to the euro in early July, had strengthened to about Y160, compared with previous levels of about Y130.
If the yen appreciated further against the euro it could damage exports to Europe, Mr Allum said. But the “knee-jerk reaction that a strong yen is bad and a weak yen is good [for Japan] is probably a bit out of date.”
Japanese politicians have said that a strong yen is not bad for Japan in the long run, but they have warned about the dangers of sharp movements.
Copyright The Financial Times Limited 2007
By David Pilling in Tokyo
Published: November 27 2007 20:01 | Last updated: November 27 2007 20:01
The yen hit a two-and-a-half year high against the dollar on Tuesday as Toshihiko Fukui, governor of the Bank of Japan, expressed strong concern about the turbulence in world markets, comparing it with “a serious disease”.
The yen briefly rose to Y107.17 against the dollar, although it fell back to Y108 in Tokyo trading. Before July, when investors began to reverse some so-called yen carry-trade positions amid a retreat from risk, the currency had been trading at above Y120 to the dollar.
sharp oscillations sent Japanese equity markets gyrating, with the Nikkei index falling 300 points in the morning amid concern about the effects of a strong currency on exporters, before it rallied to close up 87.64 points as the yen drifted down again. Mr Fukui said the volatile movements in financial markets since July suggested global markets were paying the price for “euphoria and excessive risk-taking”. It was the central bank’s job, he said, “to help markets adjust themselves in an orderly manner as far as possible, while keeping markets functioning at all times.”
The BoJ has reacted to the US mortgage crisis by putting an expected interest rate rise on hold, keeping overnight rates at 0.5 per cent. Although the bank has fractionally pared back its growth and inflation predictions for this year, it has stuck to its central thesis that Japan’s economy remains in a virtuous cycle.
Masaaki Kanno, chief economist at JPMorgan in Tokyo, said a strengthening yen clouded the picture. If the yen broke through Y100 or Y90 to the dollar, he said, it could “be a big blow to the economy” and once more raise the spectre of deflation.
“In the past we didn’t worry so much about yen strength as we believed the global economy would grow steadily,” he said. “But if the strong yen is caused by the slowing of the global eco- nomy together with the spread of risk aversion, then probably we should be a bit more worried than before.”
Other economists said concern about the yen comes on top of worries about the domestic economy, partly brought on by a sharp fall in housing starts.
Jonathan Allum, strategist at KBC Financial Products, said the yen was still relatively weak against the euro, a fact that had helped underpin strong exports to European countries.
On Tuesday, the yen, which peaked at Y168 to the euro in early July, had strengthened to about Y160, compared with previous levels of about Y130.
If the yen appreciated further against the euro it could damage exports to Europe, Mr Allum said. But the “knee-jerk reaction that a strong yen is bad and a weak yen is good [for Japan] is probably a bit out of date.”
Japanese politicians have said that a strong yen is not bad for Japan in the long run, but they have warned about the dangers of sharp movements.
Copyright The Financial Times Limited 2007
samedi 24 novembre 2007
Bank investors prepare flood of ballot measures
By Martha Graybow
NEW YORK (Reuters) - U.S. activist investors are preparing a flurry of corporate ballot measures at Wall Street banks in hopes that some big items on their wish lists, such as CEO pay reforms, will gain new traction amid the subprime lending crisis.
Proposals to give investors an advisory vote on chief executive compensation packages won wide support -- but not enough to pass -- at Merrill Lynch & Co Inc (MER.N: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research) and elsewhere in the last proxy season.
Now, as investment banks reel from big write-downs on risky mortgage investments and shake-ups in the executive suite, activists are filing these "say on pay" proposals again and hoping they'll get more support at next spring's annual stockholder meetings.
They're also pushing for shareholder votes on an array of new executive pay initiatives.
Proxy ballots also could include proposals on risk disclosure and the relationships between banks and credit rating agencies that have been criticized for not sufficiently warning investors of subprime mortgage hazards.
Banks, lenders and others that have suffered from the subprime market collapse "are going to be the target of a lot of shareholder action," said Richard Ferlauto, director of pension and benefits policy at the American Federation of State, County and Municipal Employees.
"The strategy that many of these companies adopted was to assume too much risk," he said. "For awhile, when the market was riding high, they were able to take advantage, but when the liquidity in the market collapsed because of the credit crisis, it came home to roost."
PROPOSAL SUBMISSIONS
This is a busy time for activist investors, such as union-backed pension funds and public retirement systems, which already have had to submit resolutions to some companies or are facing looming filing deadlines if they want to get proposals on next year's ballots.
Proposals do not automatically get on ballots. Filers must meet eligibility rules, and companies sometimes can petition the U.S. Securities and Exchange Commission to exclude them.
Among the proposals that investor groups hope to get on ballots next year is a measure to force financial companies to reveal more about the types of mortgages they trade in. The measure was submitted at Bear Stearns Co Inc (BSC.N: Quote, Profile, Research) and Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) by the pension fund of the Laborers' International Union of North America.
LIUNA, which runs a retirement fund for construction workers, said the proposal did not get into the mechanics of how the disclosures would be made, saying that would be something for the companies to work out.
The fund also has filed measures at Citigroup, IndyMac Bancorp Inc (IMB.N: Quote, Profile, Research) and Wells Fargo & Co (WFC.N: Quote, Profile, Research) to implement new controls on their relationships with credit rating agencies. The three big agencies are McGraw-Hill Cos Inc's (MHP.N: Quote, Profile, Research) Standard & Poor's unit, Moody's Corp (MCO.N: Quote, Profile, Research) and Fitch Ratings, a part of Fimalac SA (LBCP.PA: Quote, Profile, Research).
The proposals would bar credit analysts from covering the same company for more than five years and restrict the job movements of key employees between the credit agencies and the financial services sector.
Also, the Laborers' union has filed proposals at Merrill and Bank of America (BAC.N: Quote, Profile, Research) aimed at forcing them to disclose what kind of CEO succession plans they have in place, said Corporate Affairs Director Richard Metcalf.
COMPENSATION QUESTIONS
Executive compensation also will be front and center following some high-profile CEO departures on Wall Street, whose leaders' paychecks are among the highest in corporate America.
Merrill ousted Stan O'Neal as chairman and CEO last month just days after the company reported its biggest-ever quarterly loss. O'Neal, who took home about $48 million in compensation in 2006, also had about $161.5 million in retained stock awards and benefits when he departed.
Citigroup Chairman and CEO Charles Prince also left early this month amid big mortgage write-downs. He was paid about $26 million last year. Upon his retirement, he left with about $40 million more, including the value of vested options, deferred stock and restricted shares, as well as bonus and stock awards.
The hot issue of "say on pay" voting -- nonbinding votes for shareholders on whether they approve of executive pay packages -- will be reintroduced at an array of banks next year by AFSCME, Ferlauto said.
Elsewhere on the CEO pay front, the AFL-CIO submitted a new proposal at Citigroup to limit the length of an employment agreement with top executives and ban the accelerated vesting of stock options or other stock-based payouts for them.
The measure reflects growing frustration among shareholders who have suffered big stock losses triggered by the mortgage meltdown and are seeing big payments to outgoing chiefs, said Daniel Pedrotty, director of the AFL-CIO Office of Investment.
The shareholder losses are "only going to fuel this effort in implementing corporate governance safeguards and pay for performance -- two things that aren't in place now and need to be addressed," Pedrotty said. "If boards are not looking out for our interests, then we as shareholders should have the tools to hold them accountable."
(Reporting by Martha Graybow)
Reuters
NEW YORK (Reuters) - U.S. activist investors are preparing a flurry of corporate ballot measures at Wall Street banks in hopes that some big items on their wish lists, such as CEO pay reforms, will gain new traction amid the subprime lending crisis.
Proposals to give investors an advisory vote on chief executive compensation packages won wide support -- but not enough to pass -- at Merrill Lynch & Co Inc (MER.N: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research) and elsewhere in the last proxy season.
Now, as investment banks reel from big write-downs on risky mortgage investments and shake-ups in the executive suite, activists are filing these "say on pay" proposals again and hoping they'll get more support at next spring's annual stockholder meetings.
They're also pushing for shareholder votes on an array of new executive pay initiatives.
Proxy ballots also could include proposals on risk disclosure and the relationships between banks and credit rating agencies that have been criticized for not sufficiently warning investors of subprime mortgage hazards.
Banks, lenders and others that have suffered from the subprime market collapse "are going to be the target of a lot of shareholder action," said Richard Ferlauto, director of pension and benefits policy at the American Federation of State, County and Municipal Employees.
"The strategy that many of these companies adopted was to assume too much risk," he said. "For awhile, when the market was riding high, they were able to take advantage, but when the liquidity in the market collapsed because of the credit crisis, it came home to roost."
PROPOSAL SUBMISSIONS
This is a busy time for activist investors, such as union-backed pension funds and public retirement systems, which already have had to submit resolutions to some companies or are facing looming filing deadlines if they want to get proposals on next year's ballots.
Proposals do not automatically get on ballots. Filers must meet eligibility rules, and companies sometimes can petition the U.S. Securities and Exchange Commission to exclude them.
Among the proposals that investor groups hope to get on ballots next year is a measure to force financial companies to reveal more about the types of mortgages they trade in. The measure was submitted at Bear Stearns Co Inc (BSC.N: Quote, Profile, Research) and Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) by the pension fund of the Laborers' International Union of North America.
LIUNA, which runs a retirement fund for construction workers, said the proposal did not get into the mechanics of how the disclosures would be made, saying that would be something for the companies to work out.
The fund also has filed measures at Citigroup, IndyMac Bancorp Inc (IMB.N: Quote, Profile, Research) and Wells Fargo & Co (WFC.N: Quote, Profile, Research) to implement new controls on their relationships with credit rating agencies. The three big agencies are McGraw-Hill Cos Inc's (MHP.N: Quote, Profile, Research) Standard & Poor's unit, Moody's Corp (MCO.N: Quote, Profile, Research) and Fitch Ratings, a part of Fimalac SA (LBCP.PA: Quote, Profile, Research).
The proposals would bar credit analysts from covering the same company for more than five years and restrict the job movements of key employees between the credit agencies and the financial services sector.
Also, the Laborers' union has filed proposals at Merrill and Bank of America (BAC.N: Quote, Profile, Research) aimed at forcing them to disclose what kind of CEO succession plans they have in place, said Corporate Affairs Director Richard Metcalf.
COMPENSATION QUESTIONS
Executive compensation also will be front and center following some high-profile CEO departures on Wall Street, whose leaders' paychecks are among the highest in corporate America.
Merrill ousted Stan O'Neal as chairman and CEO last month just days after the company reported its biggest-ever quarterly loss. O'Neal, who took home about $48 million in compensation in 2006, also had about $161.5 million in retained stock awards and benefits when he departed.
Citigroup Chairman and CEO Charles Prince also left early this month amid big mortgage write-downs. He was paid about $26 million last year. Upon his retirement, he left with about $40 million more, including the value of vested options, deferred stock and restricted shares, as well as bonus and stock awards.
The hot issue of "say on pay" voting -- nonbinding votes for shareholders on whether they approve of executive pay packages -- will be reintroduced at an array of banks next year by AFSCME, Ferlauto said.
Elsewhere on the CEO pay front, the AFL-CIO submitted a new proposal at Citigroup to limit the length of an employment agreement with top executives and ban the accelerated vesting of stock options or other stock-based payouts for them.
The measure reflects growing frustration among shareholders who have suffered big stock losses triggered by the mortgage meltdown and are seeing big payments to outgoing chiefs, said Daniel Pedrotty, director of the AFL-CIO Office of Investment.
The shareholder losses are "only going to fuel this effort in implementing corporate governance safeguards and pay for performance -- two things that aren't in place now and need to be addressed," Pedrotty said. "If boards are not looking out for our interests, then we as shareholders should have the tools to hold them accountable."
(Reporting by Martha Graybow)
Reuters
jeudi 22 novembre 2007
Financial Hypocrisy
This year marks the tenth anniversary of the East Asia crisis, which began in Thailand on July 2, 1997, and spread to Indonesia in October and to Korea in December. Eventually, it became a global financial crisis, embroiling Russia and Latin American countries, such as Brazil, and unleashing forces that played out over the ensuing years: Argentina in 2001 may be counted as among its victims.
There were many other innocent victims, including countries that had not even engaged in the international capital flows that were at the root of the crisis. Indeed, Laos was among the worst-affected countries. Though every crisis eventually ends, no one knew at the time how broad, deep, and long the ensuing recessions and depressions would be. It was the worst global crisis since the Great Depression.
As the World Bank’s chief economist and senior vice president, I was in the middle of the conflagration and the debates about its causes and the appropriate policy responses. This summer and fall, I revisited many of the affected countries, including Malaysia, Laos, Thailand, and Indonesia. It is heartwarming to see their recovery. These countries are now growing at 5% or 6% or more – not quite as fast as in the days of the East Asia miracle, but far more rapidly than many thought possible in the aftermath of the crisis.
Many countries changed their policies, but in directions markedly different from the reforms that the IMF had urged. The poor were among those who bore the biggest burden of the crisis, as wages plummeted and unemployment soared. As countries emerged, many placed a new emphasis on “harmony,” in an effort to redress the growing divide between rich and poor, urban and rural. They gave greater weight to investments in people, launching innovative initiatives to bring health care and access to finance to more of their citizens, and creating social funds to help develop local communities.
Looking back at the crisis a decade later, we can see more clearly how wrong the diagnosis, prescription, and prognosis of the IMF and United States Treasury were. The fundamental problem was premature capital market liberalization. It is therefore ironic to see the US Treasury Secretary once again pushing for capital market liberalization in India – one of the two major developing countries (along with China) to emerge unscathed from the 1997 crisis.
It is no accident that these countries that had not fully liberalized their capital markets have done so well. Subsequent research by the IMF has confirmed what every serious study had shown: capital market liberalization brings instability, but not necessarily growth. (India and China have, by the same token, been the fastest-growing economies.)
Of course, Wall Street (whose interests the US Treasury represents) profits from capital market liberalization: they make money as capital flows in, as it flows out, and in the restructuring that occurs in the resulting havoc. In South Korea, the IMF urged the sale of the country’s banks to American investors, even though Koreans had managed their own economy impressively for four decades, with higher growth, more stability, and without the systemic scandals that have marked US financial markets with such frequency.
In some cases, US firms bought the banks, held on to them until Korea recovered, and then resold them, reaping billions in capital gains. In its rush to have westerners buy the banks, the IMF forgot one detail: to ensure that South Korea could recapture at least a fraction of those gains through taxation. Whether US investors had greater expertise in banking in emerging markets may be debatable; that they had greater expertise in tax avoidance is not.
The contrast between the IMF/US Treasury advice to East Asia and what has happened in the current sub-prime debacle is glaring. East Asian countries were told to raise their interest rates, in some cases to 25%, 40%, or higher, causing a rash of defaults. In the current crisis, the US Federal Reserve and the European Central Bank cut interest rates.
Similarly, the countries caught up in the East Asia crisis were lectured on the need for greater transparency and better regulation. But lack of transparency played a central role in this past summer’s credit crunch; toxic mortgages were sliced and diced, spread around the world, packaged with better products, and hidden away as collateral, so no one could be sure who was holding what. And there is now a chorus of caution about new regulations, which supposedly might hamper financial markets (including their exploitation of uninformed borrowers, which lay at the root of the problem.) Finally, despite all the warnings about moral hazard, Western banks have been partly bailed out of their bad investments.
Following the 1997 crisis, there was a consensus that fundamental reform of the global financial architecture were needed. But, while the current system may lead to unnecessary instability, and impose huge costs on developing countries, it serves some interests well. It is not surprising, then, that ten years later, there has been no fundamental reform. Nor, therefore, is it surprising that the world is once again facing a period of global financial instability, with uncertain outcomes for the world’s economies.
Joseph Stiglitz is a Nobel laureate in economics. His latest book is Making Globalization Work.
There were many other innocent victims, including countries that had not even engaged in the international capital flows that were at the root of the crisis. Indeed, Laos was among the worst-affected countries. Though every crisis eventually ends, no one knew at the time how broad, deep, and long the ensuing recessions and depressions would be. It was the worst global crisis since the Great Depression.
As the World Bank’s chief economist and senior vice president, I was in the middle of the conflagration and the debates about its causes and the appropriate policy responses. This summer and fall, I revisited many of the affected countries, including Malaysia, Laos, Thailand, and Indonesia. It is heartwarming to see their recovery. These countries are now growing at 5% or 6% or more – not quite as fast as in the days of the East Asia miracle, but far more rapidly than many thought possible in the aftermath of the crisis.
Many countries changed their policies, but in directions markedly different from the reforms that the IMF had urged. The poor were among those who bore the biggest burden of the crisis, as wages plummeted and unemployment soared. As countries emerged, many placed a new emphasis on “harmony,” in an effort to redress the growing divide between rich and poor, urban and rural. They gave greater weight to investments in people, launching innovative initiatives to bring health care and access to finance to more of their citizens, and creating social funds to help develop local communities.
Looking back at the crisis a decade later, we can see more clearly how wrong the diagnosis, prescription, and prognosis of the IMF and United States Treasury were. The fundamental problem was premature capital market liberalization. It is therefore ironic to see the US Treasury Secretary once again pushing for capital market liberalization in India – one of the two major developing countries (along with China) to emerge unscathed from the 1997 crisis.
It is no accident that these countries that had not fully liberalized their capital markets have done so well. Subsequent research by the IMF has confirmed what every serious study had shown: capital market liberalization brings instability, but not necessarily growth. (India and China have, by the same token, been the fastest-growing economies.)
Of course, Wall Street (whose interests the US Treasury represents) profits from capital market liberalization: they make money as capital flows in, as it flows out, and in the restructuring that occurs in the resulting havoc. In South Korea, the IMF urged the sale of the country’s banks to American investors, even though Koreans had managed their own economy impressively for four decades, with higher growth, more stability, and without the systemic scandals that have marked US financial markets with such frequency.
In some cases, US firms bought the banks, held on to them until Korea recovered, and then resold them, reaping billions in capital gains. In its rush to have westerners buy the banks, the IMF forgot one detail: to ensure that South Korea could recapture at least a fraction of those gains through taxation. Whether US investors had greater expertise in banking in emerging markets may be debatable; that they had greater expertise in tax avoidance is not.
The contrast between the IMF/US Treasury advice to East Asia and what has happened in the current sub-prime debacle is glaring. East Asian countries were told to raise their interest rates, in some cases to 25%, 40%, or higher, causing a rash of defaults. In the current crisis, the US Federal Reserve and the European Central Bank cut interest rates.
Similarly, the countries caught up in the East Asia crisis were lectured on the need for greater transparency and better regulation. But lack of transparency played a central role in this past summer’s credit crunch; toxic mortgages were sliced and diced, spread around the world, packaged with better products, and hidden away as collateral, so no one could be sure who was holding what. And there is now a chorus of caution about new regulations, which supposedly might hamper financial markets (including their exploitation of uninformed borrowers, which lay at the root of the problem.) Finally, despite all the warnings about moral hazard, Western banks have been partly bailed out of their bad investments.
Following the 1997 crisis, there was a consensus that fundamental reform of the global financial architecture were needed. But, while the current system may lead to unnecessary instability, and impose huge costs on developing countries, it serves some interests well. It is not surprising, then, that ten years later, there has been no fundamental reform. Nor, therefore, is it surprising that the world is once again facing a period of global financial instability, with uncertain outcomes for the world’s economies.
Joseph Stiglitz is a Nobel laureate in economics. His latest book is Making Globalization Work.
mercredi 14 novembre 2007
Buffett backs higher private equity taxes
Warren Buffett on Wednesday threw his support behind a proposal to increase tax on private equity and hedge fund managers as part of a broad appeal to US lawmakers to address widening income inequality.
The statement by Berkshire Hathaway’s chief executive stood in contrast to a lobbying campaign by business groups to stop legislators in the Senate from adopting a proposal that would more than double the tax rate for executives at buy-out groups such as Carlyle, as well as property partnerships and venture capital firms.
The House of Representatives last week passed a proposal that would increase tax paid on carried interest – the compensation paid to executives in partnerships, currently at the 15 per cent capital gains rate – to up to 35 per cent. The measure, part of a package to fund middle-class tax relief, is not expected to pass in the Senate this year. That has not stopped intense lobbying by business groups, however, who fear the issue may gain momentum ahead of next year’s presidential election.
At the heart of the debate is the question of whether investment managers’ stakes in partnerships’ earnings should be treated as ordinary income or as gains on investments. Mr Buffett said he had benefited from carried interest when he ran an investment partnership.
“I was managing money for other people...believe me, it’s an occupation. I believe you should tax people on carried interest,” he said.
The world’s second richest man, whose fortune is estimated at $52bn (€35.5bn, £25.3bn), has been an outspoken critic of rising income inequalities. His remarks on carried interest were made at a Senate finance committee hearing at which he said Washington should give low-income families a $1,000 tax credit instead of repealing the federal estate inheritance tax.
In June, the “Sage of Omaha” told investment bankers and private equity moguls gathered in New York to raise money for Hillary Clinton that the US tax system was unfair because it taxes rich people less than their secretaries or cleaners.
“The 400 of us [here] pay a lower part of our income in taxes than our receptionists do – or our cleaning ladies, for that matter,” he told his audience, who paid $4,600 a head to attend. “If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
The statement by Berkshire Hathaway’s chief executive stood in contrast to a lobbying campaign by business groups to stop legislators in the Senate from adopting a proposal that would more than double the tax rate for executives at buy-out groups such as Carlyle, as well as property partnerships and venture capital firms.
The House of Representatives last week passed a proposal that would increase tax paid on carried interest – the compensation paid to executives in partnerships, currently at the 15 per cent capital gains rate – to up to 35 per cent. The measure, part of a package to fund middle-class tax relief, is not expected to pass in the Senate this year. That has not stopped intense lobbying by business groups, however, who fear the issue may gain momentum ahead of next year’s presidential election.
At the heart of the debate is the question of whether investment managers’ stakes in partnerships’ earnings should be treated as ordinary income or as gains on investments. Mr Buffett said he had benefited from carried interest when he ran an investment partnership.
“I was managing money for other people...believe me, it’s an occupation. I believe you should tax people on carried interest,” he said.
The world’s second richest man, whose fortune is estimated at $52bn (€35.5bn, £25.3bn), has been an outspoken critic of rising income inequalities. His remarks on carried interest were made at a Senate finance committee hearing at which he said Washington should give low-income families a $1,000 tax credit instead of repealing the federal estate inheritance tax.
In June, the “Sage of Omaha” told investment bankers and private equity moguls gathered in New York to raise money for Hillary Clinton that the US tax system was unfair because it taxes rich people less than their secretaries or cleaners.
“The 400 of us [here] pay a lower part of our income in taxes than our receptionists do – or our cleaning ladies, for that matter,” he told his audience, who paid $4,600 a head to attend. “If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
dimanche 11 novembre 2007
Opec to seek assurances on oil demand
Opec will this week seek assurances from some of the world’s biggest oil consumers that they will maintain their demand as the members of the oil cartel come under intense pressure to boost investment in production capacity.
The call, to be made at a summit of the Organisation of the Petroleum Exporting Countries in Riyadh this weekend, could boost long-term prices as investors worry the oil cartel will not invest enough to meet consumption in the face of growing demand from the likes of China and India.
Goldman negative on outlook for oil - Oct-30The summit – only the third in Opec’s 47-year history – comes as oil prices race towards a record $100 a barrel and with Opec crude oil revenues set to rise to $658bn this year, an increase of almost 9 per cent from 2006, according to the latest US government figures. The summit is expected to issue a declaration that will highlight the “relationship between security of supply and security of demand”, according to Opec sources.
Consumer countries, in particular the US and in Europe, are investing in alternative sources of energy, such as biofuels and nuclear power, and energy-saving measures to reduce their dependency on crude oil and combat global warming.
Some Opec countries are worried such moves could jeopardise future demand just as they embark on expansion plans. “The declaration will be a statement on oil relations as seen by Opec,” said one cartel source, referring to a draft of the statement.
The International Energy Agency, the western countries’ energy watchdog, warned last week about the risk of a “supply crunch” before 2015. However, Saudi Arabia will use the occasion to stress it has raised its output capacity, with an extra 500,000 barrels a day arriving next month as part of an $80bn (€54.5bn) investment to reach 12.5m b/d by the end of 2009.
Ali Naimi, Saudi oil minister, has said his country had identified projects for further increases to 15m b/d in the medium term.
The IEA last week forecast Opec would need to almost double production in the next 25 years. It said the oil cartel would need to supply about 60.6m b/d in 2030, up from current output of almost 36m b/d.
Opec plans to invest about $130bn until 2012 to raise its oil output, and between 2013 and 2020 it is expected to invest a further $500bn in capacity.
The call, to be made at a summit of the Organisation of the Petroleum Exporting Countries in Riyadh this weekend, could boost long-term prices as investors worry the oil cartel will not invest enough to meet consumption in the face of growing demand from the likes of China and India.
Goldman negative on outlook for oil - Oct-30The summit – only the third in Opec’s 47-year history – comes as oil prices race towards a record $100 a barrel and with Opec crude oil revenues set to rise to $658bn this year, an increase of almost 9 per cent from 2006, according to the latest US government figures. The summit is expected to issue a declaration that will highlight the “relationship between security of supply and security of demand”, according to Opec sources.
Consumer countries, in particular the US and in Europe, are investing in alternative sources of energy, such as biofuels and nuclear power, and energy-saving measures to reduce their dependency on crude oil and combat global warming.
Some Opec countries are worried such moves could jeopardise future demand just as they embark on expansion plans. “The declaration will be a statement on oil relations as seen by Opec,” said one cartel source, referring to a draft of the statement.
The International Energy Agency, the western countries’ energy watchdog, warned last week about the risk of a “supply crunch” before 2015. However, Saudi Arabia will use the occasion to stress it has raised its output capacity, with an extra 500,000 barrels a day arriving next month as part of an $80bn (€54.5bn) investment to reach 12.5m b/d by the end of 2009.
Ali Naimi, Saudi oil minister, has said his country had identified projects for further increases to 15m b/d in the medium term.
The IEA last week forecast Opec would need to almost double production in the next 25 years. It said the oil cartel would need to supply about 60.6m b/d in 2030, up from current output of almost 36m b/d.
Opec plans to invest about $130bn until 2012 to raise its oil output, and between 2013 and 2020 it is expected to invest a further $500bn in capacity.
Yen bisa memukul balik
LONDON (Reuters) - Just as renewed waves of forced asset sales and bank write-downs risk turning this year's credit market turmoil into a vicious circle, the Japanese yen looks set to deliver another shock to global markets.
An accelerating slide in the U.S. dollar (.DXY: Quote, Profile, Research) this week has been driven by a growing conviction that the U.S. Federal Reserve will be forced into further steep interest rate cuts.
And as dollar losses against the yen started to spiral on Friday, fears have risen of a mass unwinding of the yen "carry trade" -- currency trades funded by cheap, low interest rate yen and estimated to be worth up to $200 billion.
Sudden losses on these trades -- which thrive when currency market volatility is low -- could force speculative hedge funds to cut other market bets to fund those losses, and also reverse the flood of Japanese money invested overseas in recent years.
"The potential for a further carry unwind -- presuming we are now in a second wave of risk aversion -- is quite high now," said Michael Metcalfe, senior strategist at State Street.
"These waves of risk aversion are washing through markets one after the other and seem to be hitting the credit markets first, then equity markets and then the FX markets," added Metcalfe. "It's what happened in July and August and it seems to be what's happening again now."
THREE INJECTIONS
The global financial system supercharged historically low central bank interest rates in recent years in several ways but there were three powerful injections.
One was through repackaging bank loans into securities for sale to a wide range of investors, freeing up bank balance sheets to allow them to lend more. Those markets are now in meltdown after a U.S. mortgage market bust called into question valuations of these complex instruments.
The second was via leveraged buyouts by the likes of private equity firms, who used cheap credit to raise cash and pumped billions into stock markets via a wave of takeovers. The credit squeeze has put much of this activity on ice.
And the third amplifier was currency carry trades, with cheap yen financing at its core.
Now that too looks at risk.
ECHOES OF 1998?
The dollar set successive historic lows against the euro and 26-year lows against the British pound earlier this week.
But on Friday it lurched to an 18-month trough against the yen of 110.52 yen, breaking the stable 5-yen range it had held since the Fed discount rate cut in August reversed a flight from risky currency bets.
The lurch sent currency volatility measures haywire, forcing further closing of yen-funded positions in a self-feeding cycle.
BNP Paribas' currency volatility index surged to a near 3-month high of 9.6 pct on Friday, with implied one-month dollar/yen volatility soaring to more than 14 percent.
And that surge of more than six percentage points marks the biggest weekly rise in implied volatility since 1998 when the dollar tumbled 10 percent in a week after a Russian debt default and near-collapse of hedge fund Long Term Capital Management.
Volatility is simply an anathema to carry trades, which only make sense when there's seen to be a low risk that big currency swings will erase the interest rate pickup.
Hedge funds can borrow yen for three months at less than one percent annualized and put them on deposit in dollars or euros for about four percentage points more. That is a one-way bet as long as currency rates are stable.
But forward interest rate theory suggests that interest-rate differentials merely reflect a premium on the higher-yielding unit to compensate for the inherent risk of depreciation.
With the dollar now falling so sharply, the interest rate gain is being wiped out by exchange rate losses.
"Carry trades do not work in this sort on environment, they work in a low-volatility stable environment," said David Brickman, credit strategist at Lehman Brothers. "Therefore carry trades get unwound and dollar/yen has further to go."
HOW MUCH UNWINDS?
Policymakers have been fretting for over a year about the difficulties of estimating how much money might be caught up in a carry unwind -- not least because the money is a mix of speculative positions and Japanese capital seeking higher yields overseas.
Japan's top financial diplomat Hiroshi Watanabe earlier this year guessed investors might have borrowed between 10 and 20 trillion yen: at current exchange rates, anywhere up to $200 billion.
And the Bank for International Settlements in June warned that this was an accident waiting to happen.
"The underlying problem seems to be a too firm conviction on the part of investors that the yen will not be allowed to strengthen in any significant way," it said in a report.
"Investors might be better encouraged to consider the autumn of 1998, when the yen rose by more than 10 percent against the U.S. dollar in the space of two days, inflicting sizeable losses on those involved in the carry trade business."
(Additional reporting by Kevin Plumberg in New York)
An accelerating slide in the U.S. dollar (.DXY: Quote, Profile, Research) this week has been driven by a growing conviction that the U.S. Federal Reserve will be forced into further steep interest rate cuts.
And as dollar losses against the yen started to spiral on Friday, fears have risen of a mass unwinding of the yen "carry trade" -- currency trades funded by cheap, low interest rate yen and estimated to be worth up to $200 billion.
Sudden losses on these trades -- which thrive when currency market volatility is low -- could force speculative hedge funds to cut other market bets to fund those losses, and also reverse the flood of Japanese money invested overseas in recent years.
"The potential for a further carry unwind -- presuming we are now in a second wave of risk aversion -- is quite high now," said Michael Metcalfe, senior strategist at State Street.
"These waves of risk aversion are washing through markets one after the other and seem to be hitting the credit markets first, then equity markets and then the FX markets," added Metcalfe. "It's what happened in July and August and it seems to be what's happening again now."
THREE INJECTIONS
The global financial system supercharged historically low central bank interest rates in recent years in several ways but there were three powerful injections.
One was through repackaging bank loans into securities for sale to a wide range of investors, freeing up bank balance sheets to allow them to lend more. Those markets are now in meltdown after a U.S. mortgage market bust called into question valuations of these complex instruments.
The second was via leveraged buyouts by the likes of private equity firms, who used cheap credit to raise cash and pumped billions into stock markets via a wave of takeovers. The credit squeeze has put much of this activity on ice.
And the third amplifier was currency carry trades, with cheap yen financing at its core.
Now that too looks at risk.
ECHOES OF 1998?
The dollar set successive historic lows against the euro and 26-year lows against the British pound earlier this week.
But on Friday it lurched to an 18-month trough against the yen of 110.52 yen, breaking the stable 5-yen range it had held since the Fed discount rate cut in August reversed a flight from risky currency bets.
The lurch sent currency volatility measures haywire, forcing further closing of yen-funded positions in a self-feeding cycle.
BNP Paribas' currency volatility index surged to a near 3-month high of 9.6 pct on Friday, with implied one-month dollar/yen volatility soaring to more than 14 percent.
And that surge of more than six percentage points marks the biggest weekly rise in implied volatility since 1998 when the dollar tumbled 10 percent in a week after a Russian debt default and near-collapse of hedge fund Long Term Capital Management.
Volatility is simply an anathema to carry trades, which only make sense when there's seen to be a low risk that big currency swings will erase the interest rate pickup.
Hedge funds can borrow yen for three months at less than one percent annualized and put them on deposit in dollars or euros for about four percentage points more. That is a one-way bet as long as currency rates are stable.
But forward interest rate theory suggests that interest-rate differentials merely reflect a premium on the higher-yielding unit to compensate for the inherent risk of depreciation.
With the dollar now falling so sharply, the interest rate gain is being wiped out by exchange rate losses.
"Carry trades do not work in this sort on environment, they work in a low-volatility stable environment," said David Brickman, credit strategist at Lehman Brothers. "Therefore carry trades get unwound and dollar/yen has further to go."
HOW MUCH UNWINDS?
Policymakers have been fretting for over a year about the difficulties of estimating how much money might be caught up in a carry unwind -- not least because the money is a mix of speculative positions and Japanese capital seeking higher yields overseas.
Japan's top financial diplomat Hiroshi Watanabe earlier this year guessed investors might have borrowed between 10 and 20 trillion yen: at current exchange rates, anywhere up to $200 billion.
And the Bank for International Settlements in June warned that this was an accident waiting to happen.
"The underlying problem seems to be a too firm conviction on the part of investors that the yen will not be allowed to strengthen in any significant way," it said in a report.
"Investors might be better encouraged to consider the autumn of 1998, when the yen rose by more than 10 percent against the U.S. dollar in the space of two days, inflicting sizeable losses on those involved in the carry trade business."
(Additional reporting by Kevin Plumberg in New York)
Financial update 12 november 07
1. Bank Mandiri akan menerbitkan obligasi pada pertengahan Desember, sebesar US$300 juta. Deutsche Bank, Barclays Capital, dan PT Mandiri Sekuritas sebagai penjamin pelaksana emisi (underwriter). Obligasi akan ditawarkan di Singapura, Hong Kong dan London.
2. Pencatatan saham Jasa Marga yang mengumpulkan dana masyarakat sebesar Rp 3,4 triliun akan mendukung likuiditas di Bursa Efek Jakarta atau BEJ.
3. Aliran modal ke Indonesia masih kuat, hingga dua pekan lalu total pembelian investor asing sebesar 3,1 miliar dollar AS dibandingkan dengan 1,54 miliar dollar AS pada periode sama tahun lalu.
4. Semakin banyak investor lokal yang mengalihkan portofolionya ke saham, seperti investor ritel yang membeli reksa dana saham ataupun dana pensiun yang memberikan bobot saham lebih banyak pada portofolionya.
5. Saham sektor energi dan komoditas masih menjadi pilihan menarik karena harga komoditas dunia yang masih tinggi.
6. Sektor ritel juga menarik karena pada akhir tahun ini banyak peristiwa yang menyebabkan konsumsi masyarakat semakin besar sehingga mendorong kinerja sektor ritel lebih baik. Pertumbuhan sebesar 15 persen sudah bagus untuk sektor ritel.
7. PT Destinasi Tirta Nusantara, anak usaha PT Panorama Sentrawisata Tbk, berencana melepas 40% saham melalui penawaran umum perdana (initial public offering/IPO) saham awal tahun depan. Dana hasil IPO saham perseroan akan digunakan mendanai ekspansi bisnis untuk go regional, antara lainThailand, Malaysia, dan Singapura.
2. Pencatatan saham Jasa Marga yang mengumpulkan dana masyarakat sebesar Rp 3,4 triliun akan mendukung likuiditas di Bursa Efek Jakarta atau BEJ.
3. Aliran modal ke Indonesia masih kuat, hingga dua pekan lalu total pembelian investor asing sebesar 3,1 miliar dollar AS dibandingkan dengan 1,54 miliar dollar AS pada periode sama tahun lalu.
4. Semakin banyak investor lokal yang mengalihkan portofolionya ke saham, seperti investor ritel yang membeli reksa dana saham ataupun dana pensiun yang memberikan bobot saham lebih banyak pada portofolionya.
5. Saham sektor energi dan komoditas masih menjadi pilihan menarik karena harga komoditas dunia yang masih tinggi.
6. Sektor ritel juga menarik karena pada akhir tahun ini banyak peristiwa yang menyebabkan konsumsi masyarakat semakin besar sehingga mendorong kinerja sektor ritel lebih baik. Pertumbuhan sebesar 15 persen sudah bagus untuk sektor ritel.
7. PT Destinasi Tirta Nusantara, anak usaha PT Panorama Sentrawisata Tbk, berencana melepas 40% saham melalui penawaran umum perdana (initial public offering/IPO) saham awal tahun depan. Dana hasil IPO saham perseroan akan digunakan mendanai ekspansi bisnis untuk go regional, antara lainThailand, Malaysia, dan Singapura.
The Undervalued Dollar to Keep Weakening
The dollar is cheap, but is likely to undershoot further, particularly in light of the recent downward revisions by our US economists on the growth outlook of the US economy. Euroland, Japan and the UK will also likely slow in the coming two quarters. But the broad theme of economic de-coupling is likely to be preserved, with much of the rest of the world (RoW) weathering the prospective US slowdown better than in the past, making it difficult for an already significantly undervalued dollar to gain much traction in the coming two quarters.
We are now looking for the dollar to bottom against the EUR and GBP in 4Q, at 1.51 and 2.13, respectively. Also, with the dollar and the world’s risky assets under such intense pressure, the JPY is poised to participate, in earnest, in this dollar downtrend. We are looking for USD/JPY to trade down to 106 by 1Q08, before recovering to 114 by end-2008.
Our thoughts
We presented our last set of forecasts on September 13, 2007 (The US Dollar Is the Sub-prime Currency, for Now). In that note, we argued that the dollar would remain on its back foot for two quarters, until the US housing market bottoms in 1Q08, and that the dollar should rebound with the economy. In the coming months, a mid-cycle slowdown in the US, coupled with relative resilience in the RoW and powered in part by a robust Chinese economy, means that the dollar will remain weak for the next two quarters. However, valuation is increasingly in favour of the dollar, and the US ‘twin deficits’ will continue to plunge rapidly to help support the dollar .
Since then, the dollar has weakened by more than we had expected. From a spot rate of 1.39, EUR/USD has overshot our forecast peak of 1.43 and traded above 1.47 earlier this week. It is clear that we had underestimated the intensity of the pressures impinging on the USD and the relative impotence of valuation supporting the dollar.
We make the following points:
Point 1. The US economic outlook has worsened somewhat. To reflect the powerful contraction in the US housing market and the credit crunch that will restrain housing demand, consumption and capital expenditures, our US economists recently revised down their growth forecasts. 2008 growth is now expected to be 1.8%, from 2.1%. The weakness will mainly be concentrated in early 2008 (0.5% in 4Q and 0.7% in 1Q). Consumption growth is expected to slow from above 3% in the first three quarters of 2007 to 1.3% in the coming three quarters. The angst regarding the US sub-prime market will add to fears about USD assets. However, as long as China’s economy and asset prices hold up (i.e., a modest slowdown, nothing sharp), perceived economic de-coupling will continue to lead to downward pressures on the dollar, we believe.
Point 2. The dollar is in trouble. Market psychology regarding the dollar is deteriorating. While we still have a structurally constructive opinion on the dollar and the US economy, we think that, if the situation is mismanaged by the US and European authorities, what has so far been an orderly descent in the dollar could easily degenerate into a more violent event. In contrast to end-2004, when the USD also experienced a sharp correction, only to rally in the new year, the main players pushing the dollar this time around are not hedge funds or real money accounts. Instead, central banks and SWFs from the Middle East and Asia may have been more active than they were back in 2004. The risk here is that, if the ECB and the US Treasury don’t escalate their rhetoric, the market might interpret this as ‘benign neglect’ and could, in response, start to participate in this dollar sell-off. The cyclical reasons for the dollar’s descent are obvious, but there are some structural justifications that investors who are watching the dollar’s decline could easily find convincing.
We will not repeat these structural factors (detailed in our previous note), but still look for the US and Euroland to gradually move into a situation whereby preconditions for coordinated interventions will gradually be met. Since we don’t expect these preconditions to be met soon, the dollar will likely keep falling until the Euroland and UK economies are affected and the G7 are provoked into taking action (see Waiting for Coordinated Intervention? November 1, 2007).
Point 3. The G7’s stance on exchange rates makes little sense now. The G7’s focus on China’s currency policy is misplaced. There is still the outdated notion that, without the ‘sticky’ USD/CNY and USD/Asia in general, EUR/USD would not rise so sharply. This might have been true of the undercurrents in currency markets in recent years, but we believe that it is no longer a good description of the current situation. Exchange rates are no longer driven by trade or concerns about trade imbalances. We don’t remember the last time someone told us that they were selling the USD because of its C/A deficit. Rather, more than ever, exchange rates are driven by cross-border flows, e.g., diversification flows by central banks in Asia and the Middle East, and structural portfolio adjustments in the private sector, as ‘home bias’ declines worldwide. These flows are very powerful, and have little to do with where USD/CNY is. In other words, we don’t find the G7’s notion on currencies compelling. If Mr Trichet repeats the G7’s mantra, we believe that it would have a negligible effect on EUR/USD. As the USD falls in coming weeks, the G7 will likely be pushed into re-thinking their strategy in anchoring expectations about the dollar.
Point 4. What is happening in the world is very healthy. We have previously argued that the low and declining US household savings rate could be explained by three variables – housing wealth, the long bond yield, and equity wealth, with housing wealth being, statistically, the most important determinant of this important variable, which underpins the US external imbalance (see US Savings Rate, the Housing Market, and the USD, September 22, 2005). If we simulate the expected decline in US housing wealth, and changes in the long bond yield and equity wealth consistent with our latest US economic forecasts, the US household savings rate should start to recover by the end of this year.
Another way of thinking about global rebalancing is that the ‘20%-balancing-down, 80%-balancing-up’ scenario we have had should help the world rebalance, with the US slowing, while the RoW catches up. This is precisely what we are witnessing, and policy makers and investors should not be puzzled or alarmed by this development.
Point 5. The JPY may finally participate in this USD sell-off. So far, the JPY has failed to participate in the general USD sell-off. We have long been reluctant to consider downside risks to USD/JPY, because of the extraordinarily high ‘home bias’ in Japan. But with the recent sell-off in the dollar, and the lack of any push-back by the G7 officials, we now believe that the risk to USD/JPY is biased to the downside, as the developed world will likely slow in coming quarters and risky assets come under some downward pressure. However, beyond this period, we are still expecting USD/JPY to drift back up, due to capital outflows.
Commodity and EM currency forecasts
As the developed world (US, Euroland and Japan) slows in the coming two quarters, there will be a bit of a wobble in the commodity currencies and the EM currencies. Our forecasts for the AXJ currencies remain unchanged, as they had already incorporated such a scenario.
Bottom line
Despite believing that the USD is grossly undervalued against the EUR and GBP, and may not be far from the ultimate trough against these currencies, we believe that the market will likely push the USD lower, until the G7 are provoked into threatening or conducting interventions. As the G7 are not yet in a position to intervene, the USD will likely keep weakening, even against the JPY.
taken from Morganstanley
We are now looking for the dollar to bottom against the EUR and GBP in 4Q, at 1.51 and 2.13, respectively. Also, with the dollar and the world’s risky assets under such intense pressure, the JPY is poised to participate, in earnest, in this dollar downtrend. We are looking for USD/JPY to trade down to 106 by 1Q08, before recovering to 114 by end-2008.
Our thoughts
We presented our last set of forecasts on September 13, 2007 (The US Dollar Is the Sub-prime Currency, for Now). In that note, we argued that the dollar would remain on its back foot for two quarters, until the US housing market bottoms in 1Q08, and that the dollar should rebound with the economy. In the coming months, a mid-cycle slowdown in the US, coupled with relative resilience in the RoW and powered in part by a robust Chinese economy, means that the dollar will remain weak for the next two quarters. However, valuation is increasingly in favour of the dollar, and the US ‘twin deficits’ will continue to plunge rapidly to help support the dollar .
Since then, the dollar has weakened by more than we had expected. From a spot rate of 1.39, EUR/USD has overshot our forecast peak of 1.43 and traded above 1.47 earlier this week. It is clear that we had underestimated the intensity of the pressures impinging on the USD and the relative impotence of valuation supporting the dollar.
We make the following points:
Point 1. The US economic outlook has worsened somewhat. To reflect the powerful contraction in the US housing market and the credit crunch that will restrain housing demand, consumption and capital expenditures, our US economists recently revised down their growth forecasts. 2008 growth is now expected to be 1.8%, from 2.1%. The weakness will mainly be concentrated in early 2008 (0.5% in 4Q and 0.7% in 1Q). Consumption growth is expected to slow from above 3% in the first three quarters of 2007 to 1.3% in the coming three quarters. The angst regarding the US sub-prime market will add to fears about USD assets. However, as long as China’s economy and asset prices hold up (i.e., a modest slowdown, nothing sharp), perceived economic de-coupling will continue to lead to downward pressures on the dollar, we believe.
Point 2. The dollar is in trouble. Market psychology regarding the dollar is deteriorating. While we still have a structurally constructive opinion on the dollar and the US economy, we think that, if the situation is mismanaged by the US and European authorities, what has so far been an orderly descent in the dollar could easily degenerate into a more violent event. In contrast to end-2004, when the USD also experienced a sharp correction, only to rally in the new year, the main players pushing the dollar this time around are not hedge funds or real money accounts. Instead, central banks and SWFs from the Middle East and Asia may have been more active than they were back in 2004. The risk here is that, if the ECB and the US Treasury don’t escalate their rhetoric, the market might interpret this as ‘benign neglect’ and could, in response, start to participate in this dollar sell-off. The cyclical reasons for the dollar’s descent are obvious, but there are some structural justifications that investors who are watching the dollar’s decline could easily find convincing.
We will not repeat these structural factors (detailed in our previous note), but still look for the US and Euroland to gradually move into a situation whereby preconditions for coordinated interventions will gradually be met. Since we don’t expect these preconditions to be met soon, the dollar will likely keep falling until the Euroland and UK economies are affected and the G7 are provoked into taking action (see Waiting for Coordinated Intervention? November 1, 2007).
Point 3. The G7’s stance on exchange rates makes little sense now. The G7’s focus on China’s currency policy is misplaced. There is still the outdated notion that, without the ‘sticky’ USD/CNY and USD/Asia in general, EUR/USD would not rise so sharply. This might have been true of the undercurrents in currency markets in recent years, but we believe that it is no longer a good description of the current situation. Exchange rates are no longer driven by trade or concerns about trade imbalances. We don’t remember the last time someone told us that they were selling the USD because of its C/A deficit. Rather, more than ever, exchange rates are driven by cross-border flows, e.g., diversification flows by central banks in Asia and the Middle East, and structural portfolio adjustments in the private sector, as ‘home bias’ declines worldwide. These flows are very powerful, and have little to do with where USD/CNY is. In other words, we don’t find the G7’s notion on currencies compelling. If Mr Trichet repeats the G7’s mantra, we believe that it would have a negligible effect on EUR/USD. As the USD falls in coming weeks, the G7 will likely be pushed into re-thinking their strategy in anchoring expectations about the dollar.
Point 4. What is happening in the world is very healthy. We have previously argued that the low and declining US household savings rate could be explained by three variables – housing wealth, the long bond yield, and equity wealth, with housing wealth being, statistically, the most important determinant of this important variable, which underpins the US external imbalance (see US Savings Rate, the Housing Market, and the USD, September 22, 2005). If we simulate the expected decline in US housing wealth, and changes in the long bond yield and equity wealth consistent with our latest US economic forecasts, the US household savings rate should start to recover by the end of this year.
Another way of thinking about global rebalancing is that the ‘20%-balancing-down, 80%-balancing-up’ scenario we have had should help the world rebalance, with the US slowing, while the RoW catches up. This is precisely what we are witnessing, and policy makers and investors should not be puzzled or alarmed by this development.
Point 5. The JPY may finally participate in this USD sell-off. So far, the JPY has failed to participate in the general USD sell-off. We have long been reluctant to consider downside risks to USD/JPY, because of the extraordinarily high ‘home bias’ in Japan. But with the recent sell-off in the dollar, and the lack of any push-back by the G7 officials, we now believe that the risk to USD/JPY is biased to the downside, as the developed world will likely slow in coming quarters and risky assets come under some downward pressure. However, beyond this period, we are still expecting USD/JPY to drift back up, due to capital outflows.
Commodity and EM currency forecasts
As the developed world (US, Euroland and Japan) slows in the coming two quarters, there will be a bit of a wobble in the commodity currencies and the EM currencies. Our forecasts for the AXJ currencies remain unchanged, as they had already incorporated such a scenario.
Bottom line
Despite believing that the USD is grossly undervalued against the EUR and GBP, and may not be far from the ultimate trough against these currencies, we believe that the market will likely push the USD lower, until the G7 are provoked into threatening or conducting interventions. As the G7 are not yet in a position to intervene, the USD will likely keep weakening, even against the JPY.
taken from Morganstanley
jeudi 8 novembre 2007
how low can you go..
BNP Paribas chief currency strategist Hans-Guenter Redeker, the most accurate foreign-exchange forecaster last quarter in a Bloomberg survey, said the dollar may drop to $1.50 per euro by year-end. The median estimate of 42 strategists surveyed by Bloomberg is for the currency to end the year at $1.43. Among those surveyed last week, the forecast ranges from $1.42 to $1.50.
Free enterprise - too much room for financial speculation
Mr Sarkozy also attacked the “excesses” of Wall Street, saying the land of free enterprise gave too much room for financial speculation. FT
Istilah "free enterprise" sering digunakan sebagai deskripsi atas sistem kapitalisme anglo-saxon. Pemisahan kepemilikan (shareholder) dengan kepengurusan (managers) perusahaan mendorong berkembangnya "pasar saham".
Istilah "free enterprise" sering digunakan sebagai deskripsi atas sistem kapitalisme anglo-saxon. Pemisahan kepemilikan (shareholder) dengan kepengurusan (managers) perusahaan mendorong berkembangnya "pasar saham".
lundi 5 novembre 2007
Pasar masih tidak pasti
Menyusul krisis subprime mortgage yang meledak bulan agustus lalu, kini pasar masih terus menanti di tengah ketidakpastian. Ketakutan akan lebih banyak lagi korban masih menghantui para investor, sehingga perilaku berhati-hati masih terus akan terjadi dalam beberapa bulan ke depan.
Saham perusahaan asuransi dan perbankan (di AS) cenderung dihindari, mengingat sektor inilah yang paling terkena dampak krisis kredit perumahan tsb.
Citi shares were off 5 per cent to $35.96 in midday trade after falling 11 per cent last week, while the cost of insuring its bonds against default rose to record levels.
Sumber FT
Saham perusahaan asuransi dan perbankan (di AS) cenderung dihindari, mengingat sektor inilah yang paling terkena dampak krisis kredit perumahan tsb.
Citi shares were off 5 per cent to $35.96 in midday trade after falling 11 per cent last week, while the cost of insuring its bonds against default rose to record levels.
Sumber FT
BI rate tetap 8,25%
Seperti banyak diduga, Rapat Dewan Gubernur BI tidak akan menurunkan suku bunga acuan (BI rate) dari level 8,25%. Alasannya adalah ketidakpastian global dan ancaman minyak yang masih bisa ketahuan dampaknya pada fundamental ekonomi Indonesia.
Inflasi, dengan target 6 persen dalam satu tahun ini, sulit dicapai. Hingga bulan Oktober inflasi sudah mencapai 6,88 persen.
Inflasi, dengan target 6 persen dalam satu tahun ini, sulit dicapai. Hingga bulan Oktober inflasi sudah mencapai 6,88 persen.
Emerging markets = "irrational exuberance"
Alan Greenspans menyatakan China adalah pasar yang tidak rasional alias bubble. Greenspans juga dikenal karena ucapannya tentang "irrational exuberance" yang menggambarkan sifat spekulatif dari pasar modal.
Brazil, Russia, India dan China, atau disingkat BRIC mengalami rally penurunan indeks, setelah selama beberapa hari meningkat.
BRIC adalah singkatan yang pertama kali dikemukakan oleh Jim O'Neill, ekonom kepala Goldman Sachs Groups Inc., berbasis di New York.
Nampaknya, emerging markets, selama ini kebanjiran likuiditas dari modal yang berlarian akibat surutnya kinerja ekonomi AS dan negara maju lainnya.
Selengkapnya Bloomberg
Brazil, Russia, India dan China, atau disingkat BRIC mengalami rally penurunan indeks, setelah selama beberapa hari meningkat.
BRIC adalah singkatan yang pertama kali dikemukakan oleh Jim O'Neill, ekonom kepala Goldman Sachs Groups Inc., berbasis di New York.
Nampaknya, emerging markets, selama ini kebanjiran likuiditas dari modal yang berlarian akibat surutnya kinerja ekonomi AS dan negara maju lainnya.
Selengkapnya Bloomberg
dimanche 4 novembre 2007
Siapakah perusahaan terbesar di dunia?
PetroChina Co. baru saja melampaui Exxon Mobil Corp. sebagai perusahaan terbesar di dunia, diukur dari market value-nya. Perusahaan minyak china ini diperdagangkan pertama kali di Shanghai Stock Exchange.
Perusahaan ini bernilai (kapitalisasi pasarnya) $1.03 trillion, sedangkan Exxon dihargai $488 billion di pasar saham NY, atau New York Stock Exchange.
Meski begitu, banyak pula analis yang menyebut PetroChina adalah salah satu contoh betapa pasar sudah "terlalu banyak berharap" pada China. Dan karena valuasi di pasar modal berbasis pada ekspektasi, maka kapitalisasi pasar yang begitu tinggi pada PetroChina bisa saja mengarah pada "bubble".
Selengkapnya baca Bloomberg
Perusahaan ini bernilai (kapitalisasi pasarnya) $1.03 trillion, sedangkan Exxon dihargai $488 billion di pasar saham NY, atau New York Stock Exchange.
Meski begitu, banyak pula analis yang menyebut PetroChina adalah salah satu contoh betapa pasar sudah "terlalu banyak berharap" pada China. Dan karena valuasi di pasar modal berbasis pada ekspektasi, maka kapitalisasi pasar yang begitu tinggi pada PetroChina bisa saja mengarah pada "bubble".
Selengkapnya baca Bloomberg
Sampai kapan penurunan dolar?
US dolar diperkirakan baru akan menguat menuju 1,40 dolar per euro pada akhir Juni tahun depan, dan naik lagi menjadi 1,35 pada akhir 2008 (survey Bloomberg)
Mungkinkah ECB dan BoJ mengintervensi pasar?
Nilai tukar dollar terus kedodoran. US sendiri tak mungkin sanggup melakukan intervensi terhadap pasar. Depresiasi bisa ditanggulangi jika ada usaha bersama, dari negara-negara maju, untuk melakukan intervensi.
Masalahnya, ECB dan BoJ dipastikan tidak akan melakukan intervensi. ECB hanya akan melakukan intervensi jika dampak depresiasi USD sudah berdampak pada kenaikan inflasi secara signifikan. Ditambah lagi, Jerman justru menikmati kenaikan euro terhadap USD.
Sementara itu, BoJ juga enggan melakukan intervensi karena yen masih dinilai undervalued terhadap USD.
Nouriel Roubini, chairman RGE Monitor, memprediksi depresiasi USD akan berhenti setelah kira-kira 10 persen (sekarang baru 7 persen). Dan suku bunga the Fed diperkirakan akan bertengger pada 2,5 - 3 persen dalam satu tahun ke depan.
Masalahnya, ECB dan BoJ dipastikan tidak akan melakukan intervensi. ECB hanya akan melakukan intervensi jika dampak depresiasi USD sudah berdampak pada kenaikan inflasi secara signifikan. Ditambah lagi, Jerman justru menikmati kenaikan euro terhadap USD.
Sementara itu, BoJ juga enggan melakukan intervensi karena yen masih dinilai undervalued terhadap USD.
Nouriel Roubini, chairman RGE Monitor, memprediksi depresiasi USD akan berhenti setelah kira-kira 10 persen (sekarang baru 7 persen). Dan suku bunga the Fed diperkirakan akan bertengger pada 2,5 - 3 persen dalam satu tahun ke depan.
samedi 3 novembre 2007
Everybody hates the dollar
Dalam pasar finansial, selalu ada ketidakpastian. Namun, sekarang ini ada hal yang pasti dilakukan oleh hampir semua orang: menjual dolar (reuters).
Berikut adalah "draft" artikel yang dimuat KONTAN, 26 Oktober 2007
Babak Baru Euro versus Dolar
Oleh : A.Prasetyantoko
Baru-baru ini, sebagaimana dikutip oleh majalah Stern yang berbasis di Jerman, Alan Greenspan --mantan Gubernur Bank Sentral AS (The Fed)-- membuat pernyataan cukup mengejutkan. Menurutnya, mata uang Euro berpotensi menggantikan dolar AS (USD) sebagai cadangan devisa dunia.
Pernyataan ini terkait dengan makin merosotnya nilai tukar USD terhadap Euro akibat kebijakan penurunan suku bunga The Fed sebesar 50 basis poin, menyusul krisis subprime mortgage yang mengguncang pasar finansial AS pertengahan Agustus lalu.
Dengan trend penurunan suku bunga The Fed, yang diperkirakan masih akan terus terjadi, investasi dalam USD makin tidak menarik, sehingga terjadi migrasi investasi dari USD ke mata uang lain. Akibatnya, nilai USD akan terus merosot terhadap mata uang kuat dunia, terutama Euro dan Yen dalam kurun waktu ke depan.
Sejak kemunculannya di tahun 1999, Euro sudah diprediksi bakal menjadi mata uang alternatif. Kini, menguatnya nilai Euro mengundang kembali diskusi tentang signifikasi peran Euro sebagai mata uang utama dunia, menggantikan USD.
Hingga akhir September 2007, Euro terus mempertahankan posisinya di atas 1,400 per USD. Apakah dengan demikian Euro akan menggantikan USD?
Hingga akhir akhir 2006, posisi USD sebagai cadangan devisa dunia masih terlalu dominan, yaitu menguasi sekitar 66 persen, sementara Euro hanya 25 persen. Namun, dalam konteks transaksi perdagangan antar negara, Euro hanya kalah tipis dibandingkan USD, dengan proporsi 39 persen Euro dan 43 persen USD. Dengan kata lain, penggunaan USD dan Euro relatif berimbang dalam transaksi perdagangan dunia.
Dengan menguatnya Euro, proporsi penggunaan mata uang Euro dalam transaksi perdagangan dunia akan menguat. Di lain pihak, penguatan Euro terhadap USD tersebut akan berpotensi meningkatkan pertumbuhan ekonomi negara-negara di kawasan Uni Eropa (UE), sekaligus memperkuat dinamika industri dan kegiatan bisnisnya (ekspor).
Penguatan mata uang Euro terhadap USD juga tak bisa dilepaskan dari makin solidnya konsolidasi moneter di kawasan UE yang didukung oleh keberadaan Bank Sentral Eropa yang kuat. Kini, European Central Bank (ECB) telah menjadi institusi yang berpengaruh, tidak hanya pada level UE, tetapi juga bagi perekonomian dunia. Kebijakan-kebijakan ECB makin menjadi referensi bagi perekonomian global.
Tergantung pada Fundamental Ekonomi UE
Diskusi tentang mungkin tidaknya Euro menggantikan USD sebagai mata uang utama dunia, bukanlah sesuatu yang baru. Tahun 2006, National Bureau of Economic Research (NBER), sebuah lembaga riset ekonomi yang sangat berpengaruh di AS, menerbitkan sebuah kajian mengenai hal tersebut.
Kesimpulannya, masih belum terlalu menyakinkan. Salah satu alasanya, dua pertiga cadangan devisa dunia masih dalam bentuk USD. Namun, kajian tersebut juga memberi sinyal dimungkinkannya mata uang Euro menggantikan USD. Apa alasannya?
Pertama, perekonomian UE memiliki skala yang kurang lebih sama dengan perekonomian AS. Skala ekonomi diukur dari GDP maupun tingkat keterbukaan pada perdagangan luar negerinya. Kedua, Bank Sentral Eropa cukup solid dan dikenal sangat disiplin dalam hal inflasi. Ketiga, perekonomian EU tidak memiliki sejarah defisit perdagangan dan modal seburuk AS.
Pada tahun 2005, dilakukan survei terhadap bank-bank sentral dunia. Hasilnya, para responden mulai memikirkan alternatif penggunaan mata uang sebagai cadangan devisa dari dominasi USD. Bahkan, Brazil, Russia, India, and China sudah menggunakan komposisi euro cukup signifikan dalam cadangan devisa mereka.
Jika ditarik ke belakang, perdebatan tentang kemungkinan mata uang Euro menggantikan USD sudah terjadi, bahkan sebelum kemunculannya. Pada tahun 1997, seorang ekonom kawakan memprediksi, begitu Euro diluncurkan akan terjadi pengalihan investasi sebesar 1 trilyun USD ke mata uang baru tersebut. Sementara ekonom lainnya mengatakan, Euro akan segera sejajar dengan USD sebagai nilai tukar dunia.
Secara garis besar, ada dua pandangan tentang peran Euro dalam ekonomi global. Pandangan pertama mengatakan, peran Euro akan sangat ditentukan oleh skala dan kondisi fundamental ekonomi internal kawasan UE (internal view). Pandangan kedua lebih percaya pada faktor-faktor eksternal (external view), seperti penggunaan Euro dalam transaksi dunia maupun cadangan devisa.
Momentum menguatnya Euro terhadap USD kali ini, bisa menciptakan sinergi dari dua pandangan (faktor) tersebut. Dan jika konsolidasi tersebut bisa terjadi dengan cepat, bukan mustahil Euro akan menggantikan USD sebagai mata uang utama dunia.
Greenspan sendiri mengakui, meskipun penggunaan USD masih lebih banyak dibandingkan Euro dalam transaksi perdangan global, tetapi pada dasarnya tidaklah terlalu menguntungkan lagi mempertahankan mata uang USD sebagai mata uang utama dalam perdagangan dunia ("it doesn't have all that much of an advantage").
Selama ini, pernyataan Greenspan masih selalu menjadi referensi para pelaku pasar, sehingga para investor akan terpengaruh dengan semakin gencar mengalihkan investasinya pada Euro. Dan jika para pelaku pasar lebih “percaya” pada Euro ketimbang dolar, para otritas moneter di dunia juga akan mengikuti kecenderungan tersebut dengan memperbanyak proporsi Euro dalam cadangan devisa mereka.
Faktor lain yang tak kalah penting adalah faktor politik. Di beberapa negara di kawasan Timur Tengah, pengalihan cadangan devisa dari USD ke Euro makin gencar setelah terjadi konflik panjang antara beberapa negara di kawasan tersebut dengan AS. Tahun lalu, Iran menetapkan kebijakan mengalihkan cadangan devisanya dari USD ke Euro.
Dari berbagai faktor ini, kita tergoda untuk mengatakan, Euro bakal menggantikan USD sebagai mata uang utama dunia. Meski begitu, perekonomian AS tetaplah sebuah kekuatan yang tak boleh diabaikan. Mungkin saja langkah-langkah konsolidasi dalam mengatasi berbagai kesenjangan, terutama menyangkut defisit kembar (neraca perdagangan dan modal) serta berbagau gejolak yang menimpa pasar finansial mereka, bisa berjalan dengan baik. Sehingga, mata uang USD tetap mendominasi dalam perekonomian global.
Kita bisa terus mendeteksi pertarungan antara Euro dan USD tersebut melalui data-data seperti international reserves, international bonds dan foreign exchange markets. Dari ketiga pilar data tersebut, kita bisa memperkirakan babak-babak berikutnya pertarungan antara Euro dan USD yang makin seru ini.
Penulis adalah Partner pada Strategic Indonesia (SI), Jakarta.
Berikut adalah "draft" artikel yang dimuat KONTAN, 26 Oktober 2007
Babak Baru Euro versus Dolar
Oleh : A.Prasetyantoko
Baru-baru ini, sebagaimana dikutip oleh majalah Stern yang berbasis di Jerman, Alan Greenspan --mantan Gubernur Bank Sentral AS (The Fed)-- membuat pernyataan cukup mengejutkan. Menurutnya, mata uang Euro berpotensi menggantikan dolar AS (USD) sebagai cadangan devisa dunia.
Pernyataan ini terkait dengan makin merosotnya nilai tukar USD terhadap Euro akibat kebijakan penurunan suku bunga The Fed sebesar 50 basis poin, menyusul krisis subprime mortgage yang mengguncang pasar finansial AS pertengahan Agustus lalu.
Dengan trend penurunan suku bunga The Fed, yang diperkirakan masih akan terus terjadi, investasi dalam USD makin tidak menarik, sehingga terjadi migrasi investasi dari USD ke mata uang lain. Akibatnya, nilai USD akan terus merosot terhadap mata uang kuat dunia, terutama Euro dan Yen dalam kurun waktu ke depan.
Sejak kemunculannya di tahun 1999, Euro sudah diprediksi bakal menjadi mata uang alternatif. Kini, menguatnya nilai Euro mengundang kembali diskusi tentang signifikasi peran Euro sebagai mata uang utama dunia, menggantikan USD.
Hingga akhir September 2007, Euro terus mempertahankan posisinya di atas 1,400 per USD. Apakah dengan demikian Euro akan menggantikan USD?
Hingga akhir akhir 2006, posisi USD sebagai cadangan devisa dunia masih terlalu dominan, yaitu menguasi sekitar 66 persen, sementara Euro hanya 25 persen. Namun, dalam konteks transaksi perdagangan antar negara, Euro hanya kalah tipis dibandingkan USD, dengan proporsi 39 persen Euro dan 43 persen USD. Dengan kata lain, penggunaan USD dan Euro relatif berimbang dalam transaksi perdagangan dunia.
Dengan menguatnya Euro, proporsi penggunaan mata uang Euro dalam transaksi perdagangan dunia akan menguat. Di lain pihak, penguatan Euro terhadap USD tersebut akan berpotensi meningkatkan pertumbuhan ekonomi negara-negara di kawasan Uni Eropa (UE), sekaligus memperkuat dinamika industri dan kegiatan bisnisnya (ekspor).
Penguatan mata uang Euro terhadap USD juga tak bisa dilepaskan dari makin solidnya konsolidasi moneter di kawasan UE yang didukung oleh keberadaan Bank Sentral Eropa yang kuat. Kini, European Central Bank (ECB) telah menjadi institusi yang berpengaruh, tidak hanya pada level UE, tetapi juga bagi perekonomian dunia. Kebijakan-kebijakan ECB makin menjadi referensi bagi perekonomian global.
Tergantung pada Fundamental Ekonomi UE
Diskusi tentang mungkin tidaknya Euro menggantikan USD sebagai mata uang utama dunia, bukanlah sesuatu yang baru. Tahun 2006, National Bureau of Economic Research (NBER), sebuah lembaga riset ekonomi yang sangat berpengaruh di AS, menerbitkan sebuah kajian mengenai hal tersebut.
Kesimpulannya, masih belum terlalu menyakinkan. Salah satu alasanya, dua pertiga cadangan devisa dunia masih dalam bentuk USD. Namun, kajian tersebut juga memberi sinyal dimungkinkannya mata uang Euro menggantikan USD. Apa alasannya?
Pertama, perekonomian UE memiliki skala yang kurang lebih sama dengan perekonomian AS. Skala ekonomi diukur dari GDP maupun tingkat keterbukaan pada perdagangan luar negerinya. Kedua, Bank Sentral Eropa cukup solid dan dikenal sangat disiplin dalam hal inflasi. Ketiga, perekonomian EU tidak memiliki sejarah defisit perdagangan dan modal seburuk AS.
Pada tahun 2005, dilakukan survei terhadap bank-bank sentral dunia. Hasilnya, para responden mulai memikirkan alternatif penggunaan mata uang sebagai cadangan devisa dari dominasi USD. Bahkan, Brazil, Russia, India, and China sudah menggunakan komposisi euro cukup signifikan dalam cadangan devisa mereka.
Jika ditarik ke belakang, perdebatan tentang kemungkinan mata uang Euro menggantikan USD sudah terjadi, bahkan sebelum kemunculannya. Pada tahun 1997, seorang ekonom kawakan memprediksi, begitu Euro diluncurkan akan terjadi pengalihan investasi sebesar 1 trilyun USD ke mata uang baru tersebut. Sementara ekonom lainnya mengatakan, Euro akan segera sejajar dengan USD sebagai nilai tukar dunia.
Secara garis besar, ada dua pandangan tentang peran Euro dalam ekonomi global. Pandangan pertama mengatakan, peran Euro akan sangat ditentukan oleh skala dan kondisi fundamental ekonomi internal kawasan UE (internal view). Pandangan kedua lebih percaya pada faktor-faktor eksternal (external view), seperti penggunaan Euro dalam transaksi dunia maupun cadangan devisa.
Momentum menguatnya Euro terhadap USD kali ini, bisa menciptakan sinergi dari dua pandangan (faktor) tersebut. Dan jika konsolidasi tersebut bisa terjadi dengan cepat, bukan mustahil Euro akan menggantikan USD sebagai mata uang utama dunia.
Greenspan sendiri mengakui, meskipun penggunaan USD masih lebih banyak dibandingkan Euro dalam transaksi perdangan global, tetapi pada dasarnya tidaklah terlalu menguntungkan lagi mempertahankan mata uang USD sebagai mata uang utama dalam perdagangan dunia ("it doesn't have all that much of an advantage").
Selama ini, pernyataan Greenspan masih selalu menjadi referensi para pelaku pasar, sehingga para investor akan terpengaruh dengan semakin gencar mengalihkan investasinya pada Euro. Dan jika para pelaku pasar lebih “percaya” pada Euro ketimbang dolar, para otritas moneter di dunia juga akan mengikuti kecenderungan tersebut dengan memperbanyak proporsi Euro dalam cadangan devisa mereka.
Faktor lain yang tak kalah penting adalah faktor politik. Di beberapa negara di kawasan Timur Tengah, pengalihan cadangan devisa dari USD ke Euro makin gencar setelah terjadi konflik panjang antara beberapa negara di kawasan tersebut dengan AS. Tahun lalu, Iran menetapkan kebijakan mengalihkan cadangan devisanya dari USD ke Euro.
Dari berbagai faktor ini, kita tergoda untuk mengatakan, Euro bakal menggantikan USD sebagai mata uang utama dunia. Meski begitu, perekonomian AS tetaplah sebuah kekuatan yang tak boleh diabaikan. Mungkin saja langkah-langkah konsolidasi dalam mengatasi berbagai kesenjangan, terutama menyangkut defisit kembar (neraca perdagangan dan modal) serta berbagau gejolak yang menimpa pasar finansial mereka, bisa berjalan dengan baik. Sehingga, mata uang USD tetap mendominasi dalam perekonomian global.
Kita bisa terus mendeteksi pertarungan antara Euro dan USD tersebut melalui data-data seperti international reserves, international bonds dan foreign exchange markets. Dari ketiga pilar data tersebut, kita bisa memperkirakan babak-babak berikutnya pertarungan antara Euro dan USD yang makin seru ini.
Penulis adalah Partner pada Strategic Indonesia (SI), Jakarta.
Sektor Otomotif kedodoran
Sektor otomotif, meski tidak terkena dampak subprime mortgage, tetapi mengalami situasi sulit juga.
Pertama, kenaikan harga minyak yang hampir mendekati 100 dolar AS/barrel pasti akan memukul biaya produksi.
Kedua, gelombang pemogokan karyawan yang menuntut kenaikan upah dan kondisi kerja, menunjukkan persoalan serius dalam hal hubungan perburuhan.
Ford, U.S. Auto Union Agree on Contract, Avoid Strike
By Bill Koenig and John Lippert
Nov. 3 (Bloomberg) -- Ford Motor Co. and the union representing its 54,000 U.S. factory workers agreed on a new contract today, bringing a third labor deal to Detroit's automakers after more than three months of negotiations.
Ford and the United Auto Workers announced the four-year agreement in separate statements after bargaining for more than 36 straight hours through early today.
The accord means the second-largest U.S. automaker will avoid the strikes the union called before reaching agreements with General Motors Corp. and Chrysler LLC. Ford said its deal will create an independent trust to manage retiree health care, the centerpiece of the accords at GM and Chrysler.
``Our goals for this contract were to win new product and investment, to enhance job security and protect seniority -- and we made progress in all these areas,'' said UAW Vice President Bob King, who led the bargaining at Ford, in its statement.
Chief Executive Officer Alan Mulally sought a contract that would reduce labor costs for Dearborn, Michigan-based Ford, which lost a record $12.6 billion in 2006.
Details were withheld until a ratification vote by Ford's union members. About 66 percent of GM's production workers and 56 percent of Chrysler's approved their contracts.
The GM and Chrysler health-care funds will take billions of dollars of obligations off the companies' books and help close a compensation gap with Toyota Motor Corp. The Japanese automaker has passed Ford and Chrysler in U.S. sales and is threatening to overtake GM as No. 1 in the world.
GM agreed to provide $29.9 billion in funding and Chrysler $8.8 billion. The contracts also provided guarantees of future work at UAW-represented plants, with some of GM's commitments extending beyond the 2011 expiration date.
Strikes
GM reached its settlement on Sept. 26 after a two-day strike. Chrysler, the U.S. automaker owned by private-equity firm Cerberus Capital Management LP, came to an agreement with the union following a six-hour walkout on Oct. 10.
Chrysler, announced plans on Nov. 1 to almost double planned job cuts, five days after its workers ratified their UAW contract.
The company, which lost $680 million last year, will fire as many as 12,100 more employees through 2008, after saying in February that it would eliminate 13,000 positions over three years.
Ford may make additional job and spending cuts because of declining U.S. sales, three people familiar with the strategy said yesterday.
The company may pare additional hourly and salaried positions on top of 40,000 announced last year, two of the people said. Some departments may see budget reductions of as much as 25 percent, the two people said.
Soft Market
Deeper cuts are ``justified on the basis that the market is soft right now,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan. Ford's U.S. sales are down 13 percent this year, and the industry is headed to its lowest total since 1998.
Tom Hoyt, a spokesman for the Dearborn, Michigan, automaker, declined to comment on potential cuts..
Ford's inability to stop a 12-year slide in U.S. market share is threatening Mulally's plan to restore profit in 2009. Ford last year borrowed $23.4 billion to pay for cutting jobs and closing plants while investing in new cars and trucks to win back buyers.
The three automakers, all based in metropolitan Detroit, began negotiations in late July to replace contracts that were to expire Sept. 14. In June, Ford said it had 58,500 UAW employees. Its workforce has been shrinking because of buyouts.
To contact the reporters on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net ; John Lippert in Southfield, Michigan, at jlippert@bloomberg.net
Pertama, kenaikan harga minyak yang hampir mendekati 100 dolar AS/barrel pasti akan memukul biaya produksi.
Kedua, gelombang pemogokan karyawan yang menuntut kenaikan upah dan kondisi kerja, menunjukkan persoalan serius dalam hal hubungan perburuhan.
Ford, U.S. Auto Union Agree on Contract, Avoid Strike
By Bill Koenig and John Lippert
Nov. 3 (Bloomberg) -- Ford Motor Co. and the union representing its 54,000 U.S. factory workers agreed on a new contract today, bringing a third labor deal to Detroit's automakers after more than three months of negotiations.
Ford and the United Auto Workers announced the four-year agreement in separate statements after bargaining for more than 36 straight hours through early today.
The accord means the second-largest U.S. automaker will avoid the strikes the union called before reaching agreements with General Motors Corp. and Chrysler LLC. Ford said its deal will create an independent trust to manage retiree health care, the centerpiece of the accords at GM and Chrysler.
``Our goals for this contract were to win new product and investment, to enhance job security and protect seniority -- and we made progress in all these areas,'' said UAW Vice President Bob King, who led the bargaining at Ford, in its statement.
Chief Executive Officer Alan Mulally sought a contract that would reduce labor costs for Dearborn, Michigan-based Ford, which lost a record $12.6 billion in 2006.
Details were withheld until a ratification vote by Ford's union members. About 66 percent of GM's production workers and 56 percent of Chrysler's approved their contracts.
The GM and Chrysler health-care funds will take billions of dollars of obligations off the companies' books and help close a compensation gap with Toyota Motor Corp. The Japanese automaker has passed Ford and Chrysler in U.S. sales and is threatening to overtake GM as No. 1 in the world.
GM agreed to provide $29.9 billion in funding and Chrysler $8.8 billion. The contracts also provided guarantees of future work at UAW-represented plants, with some of GM's commitments extending beyond the 2011 expiration date.
Strikes
GM reached its settlement on Sept. 26 after a two-day strike. Chrysler, the U.S. automaker owned by private-equity firm Cerberus Capital Management LP, came to an agreement with the union following a six-hour walkout on Oct. 10.
Chrysler, announced plans on Nov. 1 to almost double planned job cuts, five days after its workers ratified their UAW contract.
The company, which lost $680 million last year, will fire as many as 12,100 more employees through 2008, after saying in February that it would eliminate 13,000 positions over three years.
Ford may make additional job and spending cuts because of declining U.S. sales, three people familiar with the strategy said yesterday.
The company may pare additional hourly and salaried positions on top of 40,000 announced last year, two of the people said. Some departments may see budget reductions of as much as 25 percent, the two people said.
Soft Market
Deeper cuts are ``justified on the basis that the market is soft right now,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan. Ford's U.S. sales are down 13 percent this year, and the industry is headed to its lowest total since 1998.
Tom Hoyt, a spokesman for the Dearborn, Michigan, automaker, declined to comment on potential cuts..
Ford's inability to stop a 12-year slide in U.S. market share is threatening Mulally's plan to restore profit in 2009. Ford last year borrowed $23.4 billion to pay for cutting jobs and closing plants while investing in new cars and trucks to win back buyers.
The three automakers, all based in metropolitan Detroit, began negotiations in late July to replace contracts that were to expire Sept. 14. In June, Ford said it had 58,500 UAW employees. Its workforce has been shrinking because of buyouts.
To contact the reporters on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net ; John Lippert in Southfield, Michigan, at jlippert@bloomberg.net
Top 10 payout lists
The top 10 list:
Estimated
Payout
Company CEO Year (mil)
==============================================================
Exxon Mobil Corp. Lee Raymond 2006 $351.0
Pfizer Inc. Hank McKinnell 2006 213.0
Home Depot Inc. Robert Nardelli 2007 210.0
Gillette Co. James Kilts 2005 165.0
Merrill Lynch & Co. Inc. Stanley O'Neal 2007 161.5
UnitedHealth Group Inc. William McGuire 2006 153.0
WellPoint Health Networks Leonard Schaeffer 2005 137.0
SouthTrust Bank Wallace Malone 2006 135.0
Morgan Stanley Philip Purcell 2005 94.0
Conseco Inc. Stephen Hilbert 2000 72.5
==============================================================
Source: Corporate Library
Estimated
Payout
Company CEO Year (mil)
==============================================================
Exxon Mobil Corp. Lee Raymond 2006 $351.0
Pfizer Inc. Hank McKinnell 2006 213.0
Home Depot Inc. Robert Nardelli 2007 210.0
Gillette Co. James Kilts 2005 165.0
Merrill Lynch & Co. Inc. Stanley O'Neal 2007 161.5
UnitedHealth Group Inc. William McGuire 2006 153.0
WellPoint Health Networks Leonard Schaeffer 2005 137.0
SouthTrust Bank Wallace Malone 2006 135.0
Morgan Stanley Philip Purcell 2005 94.0
Conseco Inc. Stephen Hilbert 2000 72.5
==============================================================
Source: Corporate Library
Para CEO yang gugur...
Charles Prince -- CEO Citigroup Inc : led at Citigroup to a $6.5 billion write-down and a 57 percent decline in quarterly profit.
Stanley O'Neal -- CEO Merrill Lynch & Co : an $8.4 billion write-down.
Detail about Prince
Prince graduated from the University of Southern California law school in 1975 and took a job at U.S. Steel Corp. In 1979, he joined Commercial Credit, where Weill became chairman in 1986.
After he took over Citigroup, Prince spent much of his first two years focused on cleaning up a slew of ethical and regulatory problems at the bank. Citigroup had already paid $400 million in the Wall Street stock research scandal.
He wrestled with issues including Citigroup's role in the collapses of Enron Corp. and WorldCom Inc., a scandal over its Japanese private bank, and a rogue bond trade that upended European markets.
Citigroup paid out more than $5 billion to resolve investigations. In 2005, the Federal Reserve barred it from big acquisitions for a year, but lifted the ban in April 2006 after Prince's campaign to clean up internal ethics bore fruit.
Prince turned his focus toward improving performance, and bolstering business outside the United States.
Stanley O'Neal -- CEO Merrill Lynch & Co : an $8.4 billion write-down.
Detail about Prince
Prince graduated from the University of Southern California law school in 1975 and took a job at U.S. Steel Corp. In 1979, he joined Commercial Credit, where Weill became chairman in 1986.
After he took over Citigroup, Prince spent much of his first two years focused on cleaning up a slew of ethical and regulatory problems at the bank. Citigroup had already paid $400 million in the Wall Street stock research scandal.
He wrestled with issues including Citigroup's role in the collapses of Enron Corp. and WorldCom Inc., a scandal over its Japanese private bank, and a rogue bond trade that upended European markets.
Citigroup paid out more than $5 billion to resolve investigations. In 2005, the Federal Reserve barred it from big acquisitions for a year, but lifted the ban in April 2006 after Prince's campaign to clean up internal ethics bore fruit.
Prince turned his focus toward improving performance, and bolstering business outside the United States.
vendredi 2 novembre 2007
Korban-korban berjatuhan
Merrill Lyinch led the fallers as the bank tumbled nearly 8 per cent, extending its drop over two days to 14 per cent
Among the fallers, Fortis dropped 4.4 per cent, Washington Mutual lost 7.4 per cent and Citigroup closed 2 per cent down after rallying from earlier losses.
Barclays was another prominent faller, dropping nearly 6 per cent when it was hit by rumours that it had approached the Bank of England for funding. The central bank later denied it had made any emergency loans.
Also hit hard were the specialist insurers of bonds and structured credit amid worries that they could be among the next casualties of the credit squeeze, triggering broader systemic problems. Ambac, a sector leader, dropped 20.5 per cent.
However, the broader US market rallied after early weakness with the S&P 500 index finishing 0.08 per cent up after a rally in technology stocks. In Europe, the FTSE 100 fell 0.8 per cent, making a loss of 2 per cent for the week.
Investors were pricing in 80 per cent odds of another US rate cut by the end of the year on futures markets.
Baca selengkapnya FT
Among the fallers, Fortis dropped 4.4 per cent, Washington Mutual lost 7.4 per cent and Citigroup closed 2 per cent down after rallying from earlier losses.
Barclays was another prominent faller, dropping nearly 6 per cent when it was hit by rumours that it had approached the Bank of England for funding. The central bank later denied it had made any emergency loans.
Also hit hard were the specialist insurers of bonds and structured credit amid worries that they could be among the next casualties of the credit squeeze, triggering broader systemic problems. Ambac, a sector leader, dropped 20.5 per cent.
However, the broader US market rallied after early weakness with the S&P 500 index finishing 0.08 per cent up after a rally in technology stocks. In Europe, the FTSE 100 fell 0.8 per cent, making a loss of 2 per cent for the week.
Investors were pricing in 80 per cent odds of another US rate cut by the end of the year on futures markets.
Baca selengkapnya FT
jeudi 1 novembre 2007
The Fed rate dan euforia pasar
Seperti yang diduga banyak pihak, The Fed menurunkan suku bunga sebesar 25 basis poin dari 4,75 - 4,25 persen pada hari Rabu 31/10/2007. Para investor beraksi dengan mengalihkan investasi dalam dollar AS ke mata uang lain (berdampak pada penurunan nilai tukar dollar AS) serta ke dalam bentuk investasi lain (bonds, saham). Indeks pasar melonjak, terutama di pasar saham/utang emerging markets, termasuk BEJ yang tembus 2,700 poin.
Meskipun, beberapa jam sebelum pengumuman The Fed, Commerce Department AS telah mengumumkan pertumbuhan ekonomi di kuartal ketiga sebesar 3,9 persen. Namun pasar tetap merespons secara negatif. Para pelaku pasar "tidak percaya" lagi pada kinerja perekonomian AS.
Dari sisi fundamental ekonomi makro, peningkatan harga minyak di pasar dunia yang sudah menyentuh angka tertinggi dalam kurun waktu puluhan tahun ke level 96$US/barrel pasti akan memicu laju inflasi. Jadi laporan peningkatan penyerapan TK hanya bersifat jangka pendek.
Di lihat dari sektor korporasi, masih akan banyak perusahaan yang mengalami kerugian sebagai dampak berantai dari "krisis kredit perumahan" yang meledak pada bulan Agustus lalu. Citigroup Inc. dan Merill Lynch & Co. mengalami kerugian signifikan akibat subprime mortgate.
Prediksi ke depan...
Meski The Fed sudah menegaskan tidak akan menurunkan lagi suku bunganya, tetapi investor masih berspekulasi akan ada penurunan lagi di bulan Desember/Januari.
Meskipun, beberapa jam sebelum pengumuman The Fed, Commerce Department AS telah mengumumkan pertumbuhan ekonomi di kuartal ketiga sebesar 3,9 persen. Namun pasar tetap merespons secara negatif. Para pelaku pasar "tidak percaya" lagi pada kinerja perekonomian AS.
Dari sisi fundamental ekonomi makro, peningkatan harga minyak di pasar dunia yang sudah menyentuh angka tertinggi dalam kurun waktu puluhan tahun ke level 96$US/barrel pasti akan memicu laju inflasi. Jadi laporan peningkatan penyerapan TK hanya bersifat jangka pendek.
Di lihat dari sektor korporasi, masih akan banyak perusahaan yang mengalami kerugian sebagai dampak berantai dari "krisis kredit perumahan" yang meledak pada bulan Agustus lalu. Citigroup Inc. dan Merill Lynch & Co. mengalami kerugian signifikan akibat subprime mortgate.
Prediksi ke depan...
Meski The Fed sudah menegaskan tidak akan menurunkan lagi suku bunganya, tetapi investor masih berspekulasi akan ada penurunan lagi di bulan Desember/Januari.
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