Monthly Archives: February 2010

From the FT’s comment section:
Martin Arnold and Andrew Edgecliffe-Johnson: Man in the News: Guy Hands
Edward Luce: Forget bipartisanship Obama: shoot for the moon
Christopher Caldwell: Is Google now a monopoly?
Matthew Garrahan: Outside Edge: From Russia, with tweets
Editorial: No more Iceland brinkmanship
Editorial: Corporation tax
Editorial: Chasing mediocrity
Lex: The agenda-setting column on business and finance

James Mackintosh

Perhaps the pound is not doomed after all. Yesterday I wrote that Jim Rogers, co-founder with George Soros of the Quantum Fund, had warned that the pound could collapse “within weeks”.

It turns out he said nothing of the sort:

I did not issue this nor did I say any of it. I am trying to get it corrected. It is outrageous.

In his emails to me, Rogers also points out that a year ago he was quoted out of context, as he said at the time.

It seems Rogers has been sadly misused, and I can only apologise for passing on the press released comments – readers can draw their own conclusions on why it was issued.

Still, I wouldn’t go buying sterling because of this.

Kiran Stacey

The New York Times
Paul Krugman, Afflicting the afflicted
Roger Cohen, An eye for an eye
David Brooks, Not as dull as expected

The Guardian
Sahil Kapur, Healthcare summit: political theatre with tired script
Simon Jenkins, The Falklands can no longer remain as Britain’s expensive nuisance

The Times
Hugo Rifkind, I’m not crying for Cristina Fernandez de Kirchner
Antonia Senior, Now Google is Goliath it really must grow up
Paddy Ashdown, A military Rolls Royce, but a political car crash

The Telegraph
Con Coughlin, India and Pakistan must bury the hatchet for the Taliban to be crushed
Jeff Randall, Alistair Darling is a dead man walking

The Independent
Adrian Hamilton, Can we hold our slide to the margins?

The Washington Post
Charles Krauthammer, Toyota and the price of modernity

The Daily Caller
Anchorman, A history of false facts driving the story

From the FT’s comment section:
David Gardner: Israel’s perceived lawlessness hurts its cause
Martin Wolf: How unruly economists can agree
Michael Pettis: China is misread by bulls and bears alike
Michael Bordo and John Landon Lane: Lessons from the Fed’s past on heading for an exit
Editorial: Royal rewards
Editorial: Pressure grows for more Greek cuts
Editorial: Helping Zimbabwe
Global Insight: Peggy Hollinger, Paris goes CAP in hand – for now
Market Insight: Gillian Tett, ECB keeps lid on Greek bond data
Notebook: Jonathan Guthrie, TUC offers a clock watcher’s charter
Lex: The agenda-setting column on business and finance

James Mackintosh

Jim Rogers

EDIT: Please note that Jim Rogers denies making this comment. Please read this post for his response.

The pound could collapse “within weeks”, says Jim Rogers (right), co-founder with George Soros of the Quantum Fund which took down the pound in 1992 (he is also a currency trader, presumably short the pound).

“Other currencies aren’t strong and the Euro has real problems, with cracks much wider than Greece beginning to show,” Rogers continues, “but it’s the Pound that’s most vulnerable. In real terms, it’s already devalued against virtually every currency barring the Zimbabwean dollar and it’s especially exposed over the weeks running up to the UK election. In a basket of currencies, the Pound is potentially a basket case. And that will put Britain in an extremely bad position for the shakedown.”

It is worth pointing out that it is almost exactly 13 months since Rogers said this:

“I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

That isn’t to say he’s wrong; the British economic position is dire, the Bank of England might resume printing money, and both Labour and Conservatives are desperately avoiding spelling out cuts for fear that they will lose votes. But just because he’s a “financial guru”, doesn’t mean he’s always right, either.

James Mackintosh

Two numbers from the RBS results (for anyone who has forgotten, Royal Bank of Scotland is 82% owned by the taxpayer thanks to its bubble-fuelled expansion):

1. The tangible common equity ratio is 5.2%, up from 2.4% in 2008. In other words, its shares are more than 19 times leveraged. They were almost 42 times leveraged a year earlier, but still – not much of a cushion for the shareholders here. (For 2013 they want to keep the “leverage ratio”, which is based on the larger tier 1 capital rather than equity capital, below 20 times.)

2. Stephen Hester, chief executive, has set a target return on equity after the bank has been restructured of more than 20% in commercial banking, and of 15-20% in investment banking. Both numbers taken from the slide presentation (pdf).

Neither of these is compatible with building a safe bank: the high hoped-for returns to shareholders come only because the bank will be taking big risks through its leverage, even if those risks will be lower than in the past. Unless we can get rid of the too-big-to-fail problem, RBS will be putting out the begging bowl to taxpayers again come the next crisis. It is not even planning to be a safe bank.

For balance, here’s what Hester said in his statement (pdf):

RBS is being restructured and run to serve customers well, to be safe and stable and to restore sustainable shareholder value for all. That is our legal duty and it is our intention and desire. It is also the only way taxpayers will recover the support they have given us.

There are many bigger issues here, particularly the impact on the economy of lower bank leverage (slower growth, but less painful busts). But just in case you were thinking of voting for David Cameron in order to buy subsidised shares in RBS, be aware that it is far more of a gamble than any new “Tell Sid” campaign is likely to make clear.

As an aside, RBS mentions the risks to the economy from tighter regulation in its presentation, but at least accepts that moves are needed to remove hidden state guarantees:

Thrust of regulatory change is appropriate and considered
-Key 2010 issue is “calibration” and “timetable”. Absent some “give” on both, negative consequences to economic growth and industry returns

Key medium term issue is reform to remove implicit state subsidy in times of systemic crisis
-Will take years. Solution not in individual size or shape. Needs combination of safer banks (more capital, safer funding, better risk management), and transparent, predictable crisis resolution mechanisms (loss hierarchy, “Chapter 11″ for Banks)

Kiran Stacey

The Times
Keir Starmer, ‘Mercy killing’ is not the same as assisted suicide
Anatole Kaletsky, If Barack Obama fails today, we’ll all be swept away

The Guardian
Clancy Sigal, US liberals have lost their fire
Seumas Milne, This tide of anti-muslim hatred is a threat to us all
Larry Elliott, Neighbours from hell

The Telegraph
Jeremy Warner, ‘Forces of hell’? Sounds like business as usual
Edmund Conway, We must arm ourselves for class war

The Independent
Rupert Cornwell, Obama is still liked but he isn’t feared

The Washington Post
Kathleen Sebelius and Nancy-Ann DeParle, Let’s deal
E.J. Dionne, The next New Dealers

The Daily Caller
Mark Calabria, Housing problem was the bubble, not the bust

The Huffington Post
Steve Parker, Toyoda, Toyota, Congress and the FBI

The New York Times
Nicholas Kristof, Do toxins cause autism?

From the FT’s comment section:
Tim Harford: Listen to the bearers of bad news
David Pilling: South Korea is no longer the underdog
George Akerlof and Rachel Kranton: It is time to treat Wall Street like Main Street
Giles Wilkes: Make the Bank give credit where it is due
Gary Gensler: How we can stop another derivatives inferno
Editorial: Google’s size puts it in the searchlight
Editorial: Putting on a show
Editorial: Viktor’s choices
Global Insight: Tobias Buck, Israel beset by diplomatic own goals
Markets Insight: James Mackintosh, Show hedge funds a little love
Notebook: Jim Pickard, Gekko and the Money Men   
Lex: The agenda-setting column on business and finance

James Mackintosh

A lot of noise is being made in Britain about the use of UK passports in the assassination of a Hamas official in Dubai, allegedly by Israel’s Mossad secret service. Not much noise is being made about the actual assassination, which seems to be regarded as par for the course for Israel.

I don’t want to get deeply into the rights and wrongs of the killing. But it raises again the question of when it is acceptable for governments to break the law in friendly states. Governments have been doing a lot of lawbreaking in recent years, not just prompted by the so-called war on terror. Most recently, the illegal purchase by German secret services of Liechtensteinian and Swiss bank data and the subsequent planned purchase of that data by the British tax office – receiving stolen goods – added less serious crimes than the kidnapping and murder that had been going on.

(My view of the assassination: either 1. Israel is at war with the Palestinians, or at least the militant groups, in which case fair enough to kill them – but they should not be labelled as terrorists, if it is a war, or treated as terrorists by other states; or 2. it isn’t at war, in which case extra-judicial killing is just another word for state-sponsored murder, reducing Israel to the level of the terrorists. Either way, it seems unlikely that more tit-for-tat killings will make any serious difference to Israel’s security – particularly if they damage relations with allies, as Daniel Korski at the Spectator pointed out.)

From the FT’s comment section:
Martin Wolf: The world economy has no easy way out of the mire
Henry Siegman: For Israel, defiance comes at the cost of legitimacy
Grover Norquist: Why Republicans are rebounding
John Kay: Iceland should stand up to shameful bullying
Editorial: The conflict over Turkey’s riven soul
Editorial: Hands in the dock
Editorial: Dependent Britain
Global Insight: Geoff Dyer, Consequences of stronger renminbi dawn on US
Markets Insight: John Plender, Greece will not be fixed by populist measures
Notebook: Sue Cameron, Gus O’Donnell and the climate of fear   
Lex: The agenda-setting column on business and finance

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Politics, economics, high finance and morality – this blog addresses the issues being considered by the FT’s comment team, and their thoughts.

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Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

Lorien Kite is deputy comment editor, a post he took up in 2009 after four years as a commissioning editor on the analysis page. He joined the FT in 2000.

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