I have written a column for the FT on Monday on the collapse of Lehman Brothers. Here are the first few paragraphs:

In Greed and Glory on Wall Street, Ken Auletta’s book about the last time Lehman Brothers collapsed, in 1984, Richard Fuld appears as the fierce, proud, introverted head of bond trading. Even at the end, after internal feuding had brought the firm to a halt, he resisted the idea that it had to be sold.

In the end it was sold to American Express and Mr Fuld later became its chief executive. He reformed Lehman as an independent bank in 1994 and never appeared to look back, defying the sceptics who said Lehman would always remain in the shadow of Wall Street firms such as Goldman Sachs.

Lehman changed because Mr Fuld insisted that it had to. He eliminated the internal arguments by relentlessly pushing the idea of teamwork. He expanded the bank’s operations, building up its asset management and equities operations to balance its powerhouse of bond trading.

But Mr Fuld never changed, not really. He was still the same dark, obstinate Lehman loyalist that he had always been – a man who never wanted his firm to be sold. And, in the end, Mr Fuld’s pride and obstinacy stood in the way of Lehman’s desperate efforts in the past half year to right itself.

You can read the rest here and comment below.

As an antidote to the property-related crisis sweeping over Lehman Brothers, I went over to the Javitz conference centre in Manhattan yesterday to learn about one property development that is not short of money.

It is Saadiyat Island, the mind-boggling $27bn project to develop an island next to Abu Dhabi in the United Arab Emirates. At about $1bn per square kilometre, the emirate is not stinting on Saadiyat.

I suppose the falling oil price may crimp the style of Abu Dhabi and its next-door emirate Dubai a little. But it is not stopping the creation of Saadiyat, which will not only have nine resort hotels along a 9 kilometre beach but a cluster of world-class museums.

Continue reading "No property crash so far in Abu Dhabi" »

My column in the FT this week is on Hank Paulson, the bail-out of Fannie and Freddie, and the dangers of endless intervention. It starts like this:

I do not know what plans Hank Paulson, the US Treasury secretary, has for the weekend. Bird-watching, perhaps. Whatever they are, may I suggest that he sticks to them?

Mr Paulson is a keen ornithologist but he is also an energetic intervener in financial markets and, when he has worked on weekends recently, the US taxpayer has paid dearly.

In March, it was a line of funding to steer Bear Stearns, the investment bank, into the hands of JPMorgan Chase. On Sunday, it was the bail-out of Fannie Mae and Freddie Mac, the quasi-public mortgage lenders, which could cost the US government $200bn or more.

It is only Thursday and, already, others seem to be preparing to interrupt his days of rest again.

The first is Lehman Brothers, whose shares fell sharply after the failure of its talks with Korea Development Bank aimed at gaining a capital injection to offset its mortgage-related losses.

You can read the rest here and comment below.

US supermarket chains are following their German and British counterparts in discovering the joys of small stores in cities. Both the New York Times and the FT have stories today about Wal-Mart and others following the example of Tesco’s neighbourhood stores.

There are good reasons why the neighbourhood grocery chain, which has been pioneered by Aldi’s US chain Trader Joe’s as well as Tesco’s Fresh & Easy chain in California, could pay off for US supermarkets.

As the Times article points out, there is an awful lot of pointless variety in the typical US supermarket, driven by the tendency of branded food companies to make 57 varieties of everything.

Continue reading "Small is particularly beautiful for Wal-Mart" »

Speaking as (free) customer of 23 and Me, the genetic testing company co-founded by Anne Wojcicki, the wife of Sergey Brin, the Google co-founder, I can see why it has just slashed its prices.

The New York Times reports this morning that 23 and Me is cutting the price for people who want to spit into a laboratory tube, send it off in the mail, and receive some genetic information about themselves.

Instead of $999 per test, the test price is now $399. Linda Avey, Ms Wojcicki’s co-founder, says that the privately-owned Silicon Valley company wants to entice more people to give it a shot, which would allow more interesting research applications:

“It’s all about numbers and having as many people enrolled as possible.”

Some readers may recall that I was offered a free genetic test while at the World Economic Forum earlier this year, along with my colleague Gideon Rachman. So I have some insight into whether it is worth doing.

Continue reading "Genetic testing’s chicken-and-egg problem" »

Hank Paulson’s effort to prop up Fannie Mae and Freddie Mac has various beneficiaries but few gain more than foreign investors.

One effect of the way the quasi-nationalisation is structured is that US institutions may well suffer more than foreign ones. In brief, it is good for overseas central banks and sovereign wealth funds but bad for US regional banks.

The exuberance in non-US markets this morning is a reflection of that fact. The government has had to step in to reassure foreign investors who have become huge buyers of agency debt, but has treated US equity holders harshly.

Continue reading "A US government bail-out of foreign investors" »

Lucy Kellaway has another take on business people and their families.

It seems that smokeless tobacco, of which I approve, is now all the rage.

A good time to buy shares in banks, or not?

The US government’s near- nationalisation of Fannie Mae and Freddie Mac leaves various questions unresolved. Hank Paulson, the Treasury secretary, recognised the biggest of these in his speech on the rescue on Sunday: whether they should become public or private entities in future.

“Government support needs to be either explicit or non-existent, and structured to resolve the conflict between public and private purposes. And policymakers must address the issue of systemic risk.”

He is right that a choice has to be made. Fannie was originally established in 1938 to buy and hold mortgages insured by the federal government through the Federal Housing Administration. The idea was to provide government backing so that low income families could afford to buy homes.

Continue reading "The diminished future of Fannie and Freddie" »

There are some assignments in in this job that can plausibly be described as work but feel more like a pleasant day out. I spent this morning, for example, sailing around New York harbour with Richard Branson, the founder of the Virgin Group, and his 26-year-old daughter Holly.

There were, admittedly, a few other people on the boat with us. In fact, there was a bevy of reporters and photographers to report on the launch of Sir Richard’s latest publicity stunt attempt to break a world record.

After taking a break from crossing oceans at high speed in boats (including one time when he sank) and attempting to circumnavigate the world in a balloon, he has returned to the fray. He and a crew that includes Ms Branson and her 23-year-old brother Sam will next week attempt to cross the Atlantic in a single-hulled sailing yacht in record time.

I must admit that I spent most of my time on board the 99-foot Teamorigin yacht taking in the New York sunshine and chatting to Ms Branson, a pleasant young woman who has just graduated from medical school in London and is taking a year off to learn about the Virgin business before resuming her training as a doctor.

Continue reading "Richard Branson and the public/private divide" »

They do things differently in Mountain View.

After years spent denying that it was working on its own internet browser, Google this week unveiled, ahem, its own internet browser. “It just happened to migrate from being false to being true,” Sergey Brin, Google’s co-founder, said airily.

Mr Brin, who had the dishevelled look of the true software engineer, spoke at a press conference at Google’s headquarters in the Silicon Valley town to unveil Chrome.

Chrome is free so I downloaded it and took a look. I concluded that it lacks some basic browser features and is not obviously better than the alternatives, notably Microsoft’s Internet Explorer and Mozilla’s Firefox.

You can read the rest here and comment below.