The newly appointed Vice President and Treasurer of the World Bank was the Chief Risk Officer at Lehman Brothers when they went bankrupt in 2008.
Antoncic had been with them since 1999...so how much did she know about the underlying asset quality of the bank's assets before they imploded...she can't say she didn't know what was going on...can she?
World Bank Group President Robert B. Zoellick said...“Known for her forthrightness, I am delighted Madelyn is taking up this important role. She brings to the Bank an extensive background in the financial industry and a demonstrated record of leadership, innovation, and integrity.”
Antoncic holds a Ph.D. in Economics and Finance from New York University. As treasurer she will be responsible for maintaining the World Bank's high standing in financial markets and for managing an extensive client advisory, transaction, and asset management business.
It's a zany world out there across the big pond...
Thursday, 30 June 2011
Sunday, 15 May 2011
A new Eurozone stress test... Denmark shuts its borders to immigration...
On 11 May, Denmark shocked the European Union (EU) by announcing it will install permanent stations along its frontiers to curb crime and illegal immigration. Control booths will be erected at crossings to Germany and Sweden and in harbors and airports.
This contravenes the spirit of the 1985 "Schengen Agreement" — a free-travel system that has removed compulsory passport controls between many internal borders in Europe. The Schengen Area currently consists of 25 states, all but 3 of which are members of the European Union; the non-EU members being Iceland, Norway and Switzerland.
The system has been under pressure recently with the EU Commission considering reintroducing national border controls in the face of a flood of North African immigrants. The agreement in Denmark was made to meet demands from the government's nationalistic ally, the Danish People's Party, and is expected to be approved by Parliament.
With the Arab Spring in which conflagrations blew up in Algeria, Libya and Egypt, Mediterranean border nations like Greece, Italy, Spain and Malta have also complained that the 27-nation EU has dumped its immigration issues and the costs of dealing with illegal immigrants on their backs.
Coupled with recent economic fissures appearing inside the EU and aversion by some states to come to the rescue of fellow members, the bailouts of Greece, Ireland and Portugal have already dealt a crushing blow to the euro. Spain's fate looks sealed too. With the Denmark butterfly now flapping its wings, this could be a harbinger of a wider European fragility.
Nationalism looks to be increasingly asserting itself on both the ecoonomic and social fronts...the liberal fabric of Europe is be about to be sorely tested...
This contravenes the spirit of the 1985 "Schengen Agreement" — a free-travel system that has removed compulsory passport controls between many internal borders in Europe. The Schengen Area currently consists of 25 states, all but 3 of which are members of the European Union; the non-EU members being Iceland, Norway and Switzerland.
The system has been under pressure recently with the EU Commission considering reintroducing national border controls in the face of a flood of North African immigrants. The agreement in Denmark was made to meet demands from the government's nationalistic ally, the Danish People's Party, and is expected to be approved by Parliament.
With the Arab Spring in which conflagrations blew up in Algeria, Libya and Egypt, Mediterranean border nations like Greece, Italy, Spain and Malta have also complained that the 27-nation EU has dumped its immigration issues and the costs of dealing with illegal immigrants on their backs.
Coupled with recent economic fissures appearing inside the EU and aversion by some states to come to the rescue of fellow members, the bailouts of Greece, Ireland and Portugal have already dealt a crushing blow to the euro. Spain's fate looks sealed too. With the Denmark butterfly now flapping its wings, this could be a harbinger of a wider European fragility.
Nationalism looks to be increasingly asserting itself on both the ecoonomic and social fronts...the liberal fabric of Europe is be about to be sorely tested...
Tuesday, 10 May 2011
China cracks down on Unilever...for daring to raise prices.
On May 6, the Chinese Government declared it will fine Unilever RMB 2 million (US$ 308,000) for announcing in the media its intention to raise prices on a range of its consumer products. Apparently this had led to hoarding.
The National Development and Reform Commission, China’s top economic planning agency, said in a statement sales on some products surged 100 times above "normal" levels. The government has stamped its authority to control inflation as a top priority and the central bank stated on May 3 “stabilizing prices and managing inflation expectations are critical.”
The NDRC reminded China’s Price Law disallows operators from fabricating and distributing information about price increases, raising prices collectively and pushing up prices excessively. Consumer prices in China jumped 5.4% in March, the biggest increase in 32 months, exceeding the government’s 4% full-year target every month this year.
It's interesting how Unilever could respond to this in the long term as it also confronts the rising trend of commodity price. Shackled by pricing constraints, it may have to put the China business model under the microscope. To stay competitive and serve this growing market, does it need to evaluate and source from another low-cost manufacturing location within SE Asia or India? Capped and/or diminishing profit margins are not the basis of sound sustainable businesses.
The National Development and Reform Commission, China’s top economic planning agency, said in a statement sales on some products surged 100 times above "normal" levels. The government has stamped its authority to control inflation as a top priority and the central bank stated on May 3 “stabilizing prices and managing inflation expectations are critical.”
The NDRC reminded China’s Price Law disallows operators from fabricating and distributing information about price increases, raising prices collectively and pushing up prices excessively. Consumer prices in China jumped 5.4% in March, the biggest increase in 32 months, exceeding the government’s 4% full-year target every month this year.
It's interesting how Unilever could respond to this in the long term as it also confronts the rising trend of commodity price. Shackled by pricing constraints, it may have to put the China business model under the microscope. To stay competitive and serve this growing market, does it need to evaluate and source from another low-cost manufacturing location within SE Asia or India? Capped and/or diminishing profit margins are not the basis of sound sustainable businesses.
Thursday, 21 April 2011
Standard & Poors Cuts USA Sovereign Credit Rating to "Negative" from "Stable"
The US ratings agencies, long discredited for kow-towing to the major Wall Street investment houses, as they led a race to the bottom in terms of assigning ratings to sophisticated and complex instruments they themselves were not able to fully understand, finally peered over the fiscal precipice on Monday with Standard & Poors opening the first salvo to admonish the US sovereign credit rating. It cut its long-term outlook on the US to "negative" from "stable." The revision sparked fears that Uncle Sam could soon surrender his coveted "AAA" rating, the cornerstone of "reserve currency" status.
I've always seen these firms as lagging indicators to the machinations in the real economy. Look at what happened in the Eurozone with Greece, Ireland and Portugal. They were late...as usual...in recognising the gargantuan sovereign fiscal risks. Maybe they don't see it as part of their remit anymore to stand up to and ruffle governments' feathers before fiscal road accidents happen. It used to be said the role of the Federal Reserve was to take away the punch bowl just as the party got swinging...with the independent ratings agencies jousting alongside in tandem. However, the pressure within these agencies to search for new sources of income compromised their high ethical standards in the quarterly earnings pressure-cooker that is Wall Street.
For most of 2011, long-term bond yields have been in a trading range between 4.375% and 4.65%. Despite the upward trajectory of QE2 money printing, an endless stream of Treasury bonds issuance and foreign buyers starting to make noises about US fiscal irresponsibilty (Brazil, Russia and China) and the Government's ability to repay, yields have remained stubbornly low.
But interest rates will have to go higher soon...the Treasury has to offer attractive yields to appeal to these overseas buyers to buy ever higher volumes. In February, PIMCO, led by bond king Bill Gross, a conservative bond stalwart, announced its exit from the US treasury market completely. That's akin to Burger King declaring they no longer will use beef in their burgers.
The opportunity to short the treasury bond market is not far off, with yields near the lowest points and pricing near the top of their trading ranges. QE2 ends on 30th June and will open up uncertainty as the market addicts develope cold turkey. Where else can one find the grease to ramp up the markets? A lucrative ETF, ProShares UltraShort 20+ Year Treasury (symbol NYSE: TBT) is a good proxy to brace for a decline in treasury prices, gaining 2% for each 1% fall in price.
I've always seen these firms as lagging indicators to the machinations in the real economy. Look at what happened in the Eurozone with Greece, Ireland and Portugal. They were late...as usual...in recognising the gargantuan sovereign fiscal risks. Maybe they don't see it as part of their remit anymore to stand up to and ruffle governments' feathers before fiscal road accidents happen. It used to be said the role of the Federal Reserve was to take away the punch bowl just as the party got swinging...with the independent ratings agencies jousting alongside in tandem. However, the pressure within these agencies to search for new sources of income compromised their high ethical standards in the quarterly earnings pressure-cooker that is Wall Street.
For most of 2011, long-term bond yields have been in a trading range between 4.375% and 4.65%. Despite the upward trajectory of QE2 money printing, an endless stream of Treasury bonds issuance and foreign buyers starting to make noises about US fiscal irresponsibilty (Brazil, Russia and China) and the Government's ability to repay, yields have remained stubbornly low.
But interest rates will have to go higher soon...the Treasury has to offer attractive yields to appeal to these overseas buyers to buy ever higher volumes. In February, PIMCO, led by bond king Bill Gross, a conservative bond stalwart, announced its exit from the US treasury market completely. That's akin to Burger King declaring they no longer will use beef in their burgers.
The opportunity to short the treasury bond market is not far off, with yields near the lowest points and pricing near the top of their trading ranges. QE2 ends on 30th June and will open up uncertainty as the market addicts develope cold turkey. Where else can one find the grease to ramp up the markets? A lucrative ETF, ProShares UltraShort 20+ Year Treasury (symbol NYSE: TBT) is a good proxy to brace for a decline in treasury prices, gaining 2% for each 1% fall in price.
Sunday, 20 March 2011
2011 Japan Earthquake, Nuclear Accident and Economic Implications
The sixth largest earthquake ever recorded at 9.0 on 11 March in northern Japan and the ensuing tsunami plus nuclear accident at the Fukushima Daicchi is a potential game-changer to the current fragile global economic stability.
With facts still foggy a week after the event, it is not inconceivable fear starts to take over. After all, in the nuclear industry "perceptions" are everything (aka Three Mile Island 1979, Chernobyl 1986). Already some multinational companies have chartered private jets to evacuate their overseas staff from Japan.
This radiation threat can zigzag but I see the economic picture taking shape in the following direction:
1. The world watches rivetted by this destruction in an advanced economy. One reactor may be so catastrophically damaged it contaminates the whole site so rendering the permanent complete shutdown of the entire electricity generating complex. Immediate energy shortages cascade to a grinding slowdown for industries served in the local area. It will take weeks to play out.
2. Japan is a major world player. The smooth cash flows in the global economic system to this financial centre will be disrupted as Japan rethinks the rebuilding programmes for this region which will probably take several years. Initial estimates are this area generates 3% of the national output. Just-in-time manufacturing and logistics patterns can screech to a halt if there are no alternative networks available and the implications can be heavy for domestic exporters and multinational companies. For the financial players, global money movements can be disrupted as their interest rate sensitive strategies and carry trades in the country start to morph into something completely unexpected in an uprooted Japanese landscape. Already we saw drastic and unexpected G7 intervention in the yen this week.
3. Should Japanese exports plunge and imports rise for the reconstruction efforts, Japanese money flows will tend to stay onshore within Japan. They may find they cannot participate in the US Treasury auctions of which they are the world's second biggest holder. US Treasury yields will therefore start to notch up and this can have ominous implications for bondholders and governments in their debt-servicing interest payments.
4. With money ebbing away from the US Treasury auctions, already magnified by fiscal crises in Western Europe PIGS countries, questions will be raised whether another round of quantitative easing be required after the end of June. The current rising oil price due to north African tensions (another potential game-changer in Middle-East oil dynamics) does not help. Is the groundwork being "justifiably" prepared for QE3 based on this Japan crisis?
5. There could be spill-over effects into the enormous derivatives arena. This is a fast-changing financial landscape for the international big boys and any changes in the economic assumptions that underpin these assets can quickly turn them toxic.
6. Everything changes. Faster than you can believe.
The baseline is starting to shift this week. We cannot foretell whether the resulting market turbulence (Nikkei down 16.5% in two days, worst performance since 1987 crash) was just a temporary hiccup or the harbinger of bigger moves to come over the the next two months, as the economic consequences of the guargantuan task ahead for the world's leading creditor nation are digested. Japan recovered relatively quickly from the 1995 Kobe 6.9 earthquake.
After the stunning market rebounds over the last two years, it may be time to hit the sidelines by paring down the non-core holdings and move to cash.
With facts still foggy a week after the event, it is not inconceivable fear starts to take over. After all, in the nuclear industry "perceptions" are everything (aka Three Mile Island 1979, Chernobyl 1986). Already some multinational companies have chartered private jets to evacuate their overseas staff from Japan.
This radiation threat can zigzag but I see the economic picture taking shape in the following direction:
1. The world watches rivetted by this destruction in an advanced economy. One reactor may be so catastrophically damaged it contaminates the whole site so rendering the permanent complete shutdown of the entire electricity generating complex. Immediate energy shortages cascade to a grinding slowdown for industries served in the local area. It will take weeks to play out.
2. Japan is a major world player. The smooth cash flows in the global economic system to this financial centre will be disrupted as Japan rethinks the rebuilding programmes for this region which will probably take several years. Initial estimates are this area generates 3% of the national output. Just-in-time manufacturing and logistics patterns can screech to a halt if there are no alternative networks available and the implications can be heavy for domestic exporters and multinational companies. For the financial players, global money movements can be disrupted as their interest rate sensitive strategies and carry trades in the country start to morph into something completely unexpected in an uprooted Japanese landscape. Already we saw drastic and unexpected G7 intervention in the yen this week.
3. Should Japanese exports plunge and imports rise for the reconstruction efforts, Japanese money flows will tend to stay onshore within Japan. They may find they cannot participate in the US Treasury auctions of which they are the world's second biggest holder. US Treasury yields will therefore start to notch up and this can have ominous implications for bondholders and governments in their debt-servicing interest payments.
4. With money ebbing away from the US Treasury auctions, already magnified by fiscal crises in Western Europe PIGS countries, questions will be raised whether another round of quantitative easing be required after the end of June. The current rising oil price due to north African tensions (another potential game-changer in Middle-East oil dynamics) does not help. Is the groundwork being "justifiably" prepared for QE3 based on this Japan crisis?
5. There could be spill-over effects into the enormous derivatives arena. This is a fast-changing financial landscape for the international big boys and any changes in the economic assumptions that underpin these assets can quickly turn them toxic.
6. Everything changes. Faster than you can believe.
The baseline is starting to shift this week. We cannot foretell whether the resulting market turbulence (Nikkei down 16.5% in two days, worst performance since 1987 crash) was just a temporary hiccup or the harbinger of bigger moves to come over the the next two months, as the economic consequences of the guargantuan task ahead for the world's leading creditor nation are digested. Japan recovered relatively quickly from the 1995 Kobe 6.9 earthquake.
After the stunning market rebounds over the last two years, it may be time to hit the sidelines by paring down the non-core holdings and move to cash.
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