MADRID | At Barclays Spain, analysts have spotted an oddity. They say that in the United States market participants seem to discount two elements that appear to be contradictory: on one hand, that the Federal Reserve will keep its expanding monetary policy going on for the time being, something that Ben Bernanke would have made clear last Monday; and on the other hand, that the US economy will grow above expectations. “but the…
NEW YORK | You are going to hear it more than often. It is called individual mandate: citizens required to purchase health insurance, or face a penalty. It is the Gordian knot of Obamacare, the new US Health law. And it is also the essence of both the Netherlands health system (it has been since 2006) and the Swiss (since 1994). In that regard, the US is trying to imitate…
By Luis Arroyo, in Madrid | In 2011, corporate profits in the US have been exceptionally high. According to the accounts of S&P 500 companies, or according to the national accountancy, business margins have risen more than ever before. However, the consensus on Wall Street says that they will continue to rise, so the PER rate (price per earnings) is still low: therefore, the stocks will go up like a shot. In…
LONDON | Investment professionals in the UK favour a more pleasant global economic outlook than in previous quarters, although the sector still remains cautious. The results from the latest Barings Investment Barometer showed Monday an increase in optimism, with concerns over the risk of a double dip recession reduced by almost two-thirds and number of advisers citing it as a major global macroeconomic challenge at just 10%, down from 28% in Q4…
NEW YORK | It could have been Hillary Clinton, one of the most well known US political figures; it could have also been Larry Summers, one of the most respected (and yes, also hated) figures in US economy; it may have even been Jeffrey Sachs, a very prestigious economist. But Obama has chosen a low profile candidate to the lead the World Bank: Jim Yong Kim, Dartmouth College president and…
NEW YORK | Respected subscribers, my inbox is on fire. Democrat’s Campaign managers Jim Messina and Jen O’Malley, Vice President Joe Biden… even Michelle Obama wrote me in the last two days. It is clear. Unofficial, but clear: Democrats campaign is on. And everybody agrees the main theme is going to be… The Economy. But there is going to be a whole of juicy political battles surrounding another subject, one…
Ouch. The US corporate sector accumulates 171 credit downgrades in the first quarter, the highest since the 2009. In the balance of revisions (upward/downward), the ratio is 0.69, far from the highs of 2011 when for each rating cut down there were two ratings changing upwards. In the sectoral breakdown, three areas stand out as having a low rate of upward/downward revisions: telecommunications, financials and non-cyclical consumption. In the opposite side, the…
By Luis Arroyo, in Madrid | A lengthy series of the risk premium spread (over capital or liquidity) between US Treasuries and BAA corporate bonds tells us several things: 1) that each time there has been recession (gray areas) this premium has picked up markedly; 2) the time it reached the highest point was in the last recession, up to 6%; 3) the 60-year average of this spread is 1.8%; 4) the current figure…
NEW YORK | There has been a lot of anxiety in the US with the European crisis, no doubt of that. The New York Times has published an enormous amount of editorials (not counting Krugman’s op-eds) complaining about Merkozy not increasing the firewall enough to contain contagion from Greece and saying that they were not putting any measures in place to tackle the lack of growth in the southern countries….
NEW YORK | Why has a letter in the New York Times sparked such a PR crisis for Goldman Sachs? In his ‘Why I am leaving Goldman Sachs’ article, Greg Smith, an executive director at the American investment bank, contended that the culture inside Goldman was “toxic” and that the bank routinely took advantage of its clients. This is powerful stuff, but the impact of the letter is way beyond just…