Monthly Archives: October 2010

After enduring torments in George Orwell’s 1984, Winston Smith learnt to love Big Brother. After the midterm elections, which are also likely to be painful, Barack Obama should learn to love big business.

John Gapper

I admit to having been sceptical about Alan Mulally‘s chances of turning around the ingrained culture and under-performance of Ford when he was recruited from Boeing as chief executive in 2006. But Mr Mulally has been proving me wrong.

Ford’s third quarter results put the company on track to be free of net debt by the end of the year. More importantly, Mr Mulally’s internal restructuring appears to have placed it on a long-term growth path, rather than being a short-term fix.

A lot of conventional wisdom about the industry have been proved wrong recently, including the idea that it would be a disaster for any of the Big Three to go into Chapter 11 bankruptcy. Bankruptcy was the best thing that could have happened to GM. 

John Gapper

This weekend in Shanghai, I met Zhou Libo, China’s most popular stand-up comedian and, among other things, a judge on China’s Got Talent, which has just concluded its first season (the winner was a man who plays the piano with his toes).

Mr Zhou is the closest China has to a Jon Stewart, a comedian who draws his material from topical issues such as the rapid rise in house prices. He also does imitations of China’s political leaders, including Wen Jiabao, the premier. 

John Gapper

I spent a comfortable hour and a quarter today on the high-speed bullet train from Nanjing to Shanghai – a symbol of China’s technological progress and the extreme lengths to which it has gone to acquire western technology.

The journey on the service that opened this summer was fast, smooth and relaxing – starting from Nanjing’s newly upgraded station and ending on time in Shanghai. Although the trains did not quite have the same polish as the TGV service in France, the ambience was otherwise  similar.

China is building one of the biggest high speed rail networks in the world, having started with the Beijing-Tianjin line, built in co-operation with Siemens of Germany in time for the 2008 Olympics. 

China was introduced to its likely next leader this week when Xi Jinping was named to a top military post at the Communist party’s annual plenum. No one knows much about him and few are bothered.

John Gapper

On my visit to China with a group of journalists, I today visited Beijing Middle School 101 – a school at which 4,000 students up to the age of 18 prepare for university. It was a remarkable insight into the achievements and aspirations of China’s new generation.

I had expected to find intelligent and highly-motivated students, but what was more surprising was how immaculately many of the group of 30 students we met spoke English, and their thoughtful and open comments on Chinese society. 

John Gapper

I am in China this week and, on my first full day in Beijing, took a trip to the Great Wall at Mutianyu. While there, I saw the following customer service declaration on the cable car. It made this visitor happy:

Two years after the collapse of Lehman Brothers, regulators are working on ways to prevent it happening again. That means finding a way to wind down a complex, global financial institution safely, while making its shareholders and bondholders suffer enough to discourage reckless behaviour.

John Gapper

As one of the most successful pure-play online publishers, Nick Denton’s business model for Gawker Media is worth close scrutiny. Ben McGrath’s piece in The New Yorker contains some interesting data about his financial results:

As it is, given the thin margins of online publishing, Denton’s cultural impact greatly exceeds his revenues, which are somewhere on the order of fifteen to twenty million dollars a year. His ownership stake in the company is around sixty to seventy per cent, and every so often he attempts to consolidate by buying back shares that he has given to current and former employees. The rate he offered earlier this year would have put the company’s value at only thirty million dollars, or a fraction of what most analysts have estimated. 

Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.

The sixth session of the day is a keynote debate focusing on “The outlook for the world economy” with Mohamed El-Erian, chief executive of PIMCO, and Robert Rubin, co-chairman of the council on foreign relations. The debate is moderated by Martin Wolf.

5:00pm – Mr Wolf is making his concluding remarks, so that will conclude this blog. Thanks for following along.

4:58pm – Looking at the double-edged sword of the US savings rate, Mr Rubin calls a low savings rate a “deeply embedded cultural phenomenon” and says that unless the financial crisis had a deep and long-lasting impact on the culture of the US it will fall back to its historically low level.

4:53pm – Mr Rubin suggests it is in China’s interests to revalue its currency while its economy is doing so well because it will be best able to absorb any unintended shocks to its economy. 

Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.

The fifth session of the day is a panel discussion focusing on “Emerging market banks and their place in the world” with Chris Osborne, chief executive of Troika Dialog, Deven Sharma, president of Standard & Poor’s, and Min Zhu, special advisor to the managing director of the International Monetary Fund. The panel is moderated by Martin Wolf.

3:30pm – That’s a wrap for this panel. Up next, Mohamed El-Erian will debate Robert Rubin on the outlook for the world economy. Stay tuned.

3:22pm  - Mr Wolf summarises the discussion, concluding enormous financial sector growth in the emerging markets, and it will be traditional with investors lending to borrowers. Moreover, the challenge of managing the process of liberalisation will be huge because of the competitive pressure that local financial institutions will face. Echoing, Mr Jhu’s point, he says that emerging markets will benefit from the mistakes made by developed economies in the last 10 years. 

Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.

The third session of the day is a panel discussion focusing on “Examining the impact of regulatory reform” with Jaime Caruana, the general manager for the Bank for International Settlements, George Soros, chairman of Soros Fund Management, and Joseph Stiglitz, professor at Columbia University. The panel is moderated by Martin Wolf, Financial Times’ chief economics commentator.

12:20pm – On that note, the panel is breaking for lunch. The next session on risk and alternative investments begins at 1:30pm.

12:17pm – Quantitative easing can’t take the place of fiscal stimulus. This is one of the false ideas that has been left over from a paradigm that has failed, Mr Soros said.

12:13pm – Looking to equity markets, Mr Soros notes that corporations are in good shape with good earnings but are not investing. “That is a rather disappointing phenomenon,” Mr Soros said, casting blame on banks for failing to be reliable to businesses. 

Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.

The second session of the day is a panel discussion focusing on “Redefining the role of banking” with Gerald Corrigan, managing director of Goldman Sachs, Andrew Friedman, executive director of Deloitte financial services, and Harry Samuel, co-head of fixed income and currencies at RBC Capital Markets. Gillian Tett is moderating the panel.

11:00am – The panelists focused their discussion on the ideal size of banks, global regulation and the fate of small banks in the US. Mr Corrigan said that although banks now must be more transparent in their financial reporting and disclosure “it’s not entirely clear” that these regulations are at desirable levels yet. Moreover, he said that shrinking banks to bring them to a certain scale, as a way of avoiding the problem of “too big to fail” is “not a very elegant solution”. Mr Corrigan also explained that the aftermath of the financial crisis has brought a higher concentration with banks thanks to the large number of failures. Larger banks can still be a good thing, according to Mr Samuel, if they can successfully serve their markets and the economy at large without creating systemic risk. Ultimately, he said, it’s the quality of the regulatory regime, not the size of the bank, that matters the most. 

Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.

The first session of the day starts with a keynote address by Larry Summers, Barack Obama’s senior economic adviser, with a question and answer session following. Mr Summers called on the US to invest more aggressively in domestic infrastructure projects, calling it a “macroeconomic imperative” to capitalise on low borrowing and construction costs and the opportunity to spur demand.

10:11am – That concludes Mr Summers’ remarks. Now on to “Redefining the Role of Banking”.

10:04am – Mr Summers is asked about how to prevent populist rage leading to harmful protectionism. He acknowledges that there is plenty to be anxious about but says that in terms of protectionism things have not been as bad as one might have expected considering the economic backdrop. Also, he says that people have a tendency to “internalise credit and externalise blame” and that they tend to blame things like trade for their misfortunes. 

This week’s judgment that Jérôme Kerviel, the rogue trader, should repay the €4.9bn ($6.8bn) he lost to Société Générale is among history’s most ludicrous white-collar crime rulings, which is saying something.