China's European Concerns

According to David Gosset,Director of the China Europe International Business School,you have a lot of worries in China about the European Union and Euro-zone.China wants them to succeed in order to counterbalance the U.S.
The big story for the business world for the next 5-10 years is the Chinese growth in consumer demand,which will shape global business.The EU has failed to lift restrictions on China,damaging its credibility in the Asian powerhouse.Europe has joined the U.S. in criticising China's failure to allow its currency to appreciate enough,resulting in trade imbalances.
On Saturday,December 25,China made a surprise hike in interest rates to cool off growth and prevent inflation.The move had only a brief,minor effect on global markets,if any-perhaps restraining them a bit.
The China Europe International Business School is located in Shanghai.Granting MBA degrees,it was officially established as an independent business school in 1994.

Cushman CEO Sees No Big Real Estate Bubble

Glenn Rufrano,CEO of global real estate firm Cushman&Wakefield,has confidence there isn't a dramatic real estate bubble in China.Real estate is growing in China,but the potential there is dramatic.He has comfort the Chinese authorities are gonna be ahead of the bubble risk,and the market will sort the rents out.
Cushman&Wakefield will absolutely see a profit this year.They are planning to hire 800 workers in Asia,Australia,the Americas and Europe.At the appropriate time,they may have an initial public offering.
Cushman&Wakefield are commercial real estate brokers and consultants.With offices worldwide,they deliver integrated solutions in listing,management and finance to landlords,tenants and investors.

World Ponders Leading Diplomat's Legacy

Today the thoughts of many around the world are dwelling on the loss of Ambassador Richard Holbrooke,U.S. Special Representative for Afghanistan and Pakistan.Mr.Holbrooke died Saturday at age 69 after a total of more than 24 hours of surgery to repair his circulatory system at George Washington University Hospital in Washington.The hospital has a specialty of treating high-ranking U.S. officials such as former Vice-President Dick Cheney.
CNN correspondent Nick Robertson said Mr.Holbrooke's level of knowledge of history was what he brought to bear.His persuasive powers and ability to be tough with tough leaders in a diplomatic way were remarkable.
Mr.Holbrooke was last in Afghanistan in late October.He had been helping with a report on the conflict in the region to be reviewed by President Barack Obama and his advisors shortly.The seasoned ambassador was a central figure in the development and implementation of the administration's AfPak regional strategy.Young Americans were dying and being wounded in Afghanistan,Mr.Holbrooke stated,so they deserve our best effort.
Richard Holbrooke was a close friend of Secretary of State Hillary Clinton and her husband former President Bill Clinton.He was widely admired both at home and abroad,despite-or perhaps because of- an intensity which could be off-putting.
Please also see a tribute to Mr.Holbrooke in my Extra Content blog,which you may click on in the right-hand column.

Qatar Jubilant Over World Cup

Qatar will host the first major sporting event in the Arab world as the 2022 World Cup makes its way to the Gulf state.A joyous crowd greeted the news in Doha,the Qatari capital last week.It was apparently a surprise to all,while Russia had been expected to win its bid to host the 2018 World Cup.
Qatar got a 66 out of 100 points by the technical evaluators,while the U.S. received a perfect score.Frankly,Qatar was considered a high-risk choice.Still,its plan to dismantle the stadiums after the event and rebuild them in less affluent nations could only have enhanced Qatar's appeal.Generosity went a long way,and the world's wealthiest nation in terms of per capita income took the great honor of hosting the world-entrancing football matches.
Credit Suisse estimates Qatar's income to be 109,000 dollars per capita.
Because it is classified as an Asian nation,Qatar's win means China cannot host the World Cup now until 2030 at the earliest.Qatar is located between Bahrain and the United Arab Emirates on the Persian Gulf,with Saudi Arabia to the west.
Credit Suisse(CS)

European Tour Ends In Dubai

The Dubai World Championship ended the golf year for the European Tour this past weekend.Only the heat reminded one it was a desert location.The Jumeirah Golf Estates Earth course has no sand to speak of-just the ordinary bunker sand.The rest of the course is grass,trees and wood chips,with a lake to cool things off visually.
Ironically,the golfer from the coldest country,Robert Karlsson of Sweden,did the best in Dubai,winning the tournament in a second playoff with England's Ian Poulter.Poulter faltered when his first shot landed in the wood chips.After a lackluster second shot,he then made an error when he dropped his ball on top of its marker,incurring a one-shot penalty.
It was Karlsson's 11th career victory and Sweden's 6th win of the season.Overall winner of the Race to Dubai,as the European Tour is also known,was Germany's Martin Kaymer.Karlsson was awarded a golden scepter for a trophy.
Sponsors of the tournament included DP World,Emirates Air and Rolex.
Jumeirah Golf Estates has an oasis ambiance,with grass and trees throughout the luxury development.There are four golf courses.

Prince Alwaleed Buys GM Shares

Prince Alwaleed bin Talal of Saudi Arabia has purchased shares of the newly relisted General Motors stock.A 1% stake in GM was acquired by the prince's holding company for about 500 million dollars.Kingdom Holding Company cited GM's global brand and strength in India and China as reasons for the purchase.The prince had been considering the acquisition for some time before last week's initial public offering.
Prince Alwaleed is also a major investor in Citigroup.He said that,under Citigroup CEO Vikram Pandit,things have stabilized and we are beginning to look at growth.Citi has 2 trillion dollars in assets in 120 countries,and Vikram has surprised the market by doing a good,meticulous job.
Saudi Arabia is booming,and Dubai is trying to find its bottom.They aren't there yet,but Dubai has a good infrastructure,Prince Alwaleed observed.
General Motors(GM),Citigroup(C)

SAP's View of the Asia-Pac

Business software titan SAP has a Q4 pipeline that looks strong in the Asia-Pacific region.They're seeing continued strength across Asia right now.
SAP thinks it has every reason to be confident in the future.Business is strong across Asia.India and China are seen as being their two favored children.It's a rising tide right now,and it's going to lift SAP up.
The Oracle v. SAP trial is a storm in a teacup.It's more noise from their bitter rival than anything else,in the opinion of Steve Watts,President of SAP Asia-Pacific-Japan.
Oracle is suing SAP for copyright infringement,fraud,breach of contract and intentional interference.SAP has admitted to a mistake by a subsidiary,and offered to pay Oracle 40 million dollars,but Oracle rejects that amount as insufficient.

Cruise Ship Vulnerability:Remembering The Achille Lauro

In October 1985,four Palestinian terrorists hijacked the Italian cruise liner Achille Lauro in the Mediterranean Sea off the coast of Egypt,riveting the world's attention.They demanded that Israel release 50 Palestinian prisoners.
Among the liner's 400 passengers and crew was a disabled American,Leon Klinghoffer,69.The terrorists killed him and dumped his body and wheelchair overboard in one of the most brazen atrocities in the history of the Middle East.To this day,the event is recalled with considerable emotion.
After a two-day ordeal,the terrorists agreed to surrender to Egypt in exchange for safe passage.An Egyptian jet took off with the terrorists,but U.S. Navy F-14 Tomcat fighters forced the escape plane to land in Sicily,where Italian troops arrested the hijackers.
In August 1997,the Palestine Liberation Organisation reached a settlement with the Klinghoffer family.
The Achille Lauro memory came back when the cruise liner Carnival Splendor became stranded off of a Mexico terrorized by drug gangs this week.
Carnival Corp(CCL)

Please Note

I am preparing some historical context on cruise ship vulnerability.It should be available within thirty minutes.

Scoping The Rare Earth Issue

Chinese dominance of rare earth metal production,and its alleged hoarding of the materials,has drawn the attention of governments and businesses worldwide.There are 17 of the metallic chemicals,which are essential to the manufacture of sophisticated national security and consumer products,such as precision weapons and important information and automotive technology.
Matt Gerthner,senior China analyst at Stratfor,says what is really scaring people is these shortages in the short term.It takes several years to ramp up production of the strategic substances.In the long term,these concerns may start to peter out,since rare earth is found in other places besides China.
Japan has been concerned about access to the metals because it has a territorial dispute with China,but China's monopoly is not forever,Mr.Gerthner believes.
For instance,Japan has recently entered into an agreement with Vietnam to discover and produce the elements.
China has had problems reigning in illegal rare earth mining,which often leaves an enormous black footprint of environmental degradation.In North America,a Vancouver,B.C. firm,Rare Element Resources,Ltd.,is seeking to develop a rare earth mine in Wyoming.
Rare Element Resources,Ltd.(REE)

Newsletter Editor Favors Hong Kong

Mark Skousen,PhD,editor of the subscription newsletter Forecasts&Strategy,is in a bullish investing mood.Dr.Skousen is fully invested now.He likes the low interest rate and low inflation environment,as well as the Federal Reserve's easy money policy.It's an opportunity to take advantage of a unique situation,in his view.
Dr.Skousen favors the iShares Hong Kong exchange-traded fund,among others.Hong Kong is the center of growth in Asia,he points out.The fund is trading at only fifteen times earnings,so he thinks it's a good buy.It also pays a 3% dividend,the economist notes.
Mark Skousen was a CIA economic analyst from 1972-75,and has taught at Columbia University.A frequent guest on business television,he started his newsletter in 1980 and has written more than 24 books.
iShares Hong Kong fund(EWH)

Inside Russian Banking

VTB is Russia's second largest bank.It is selling a 10% stake in itself for three billion dollars.The government is ready to accept owning less than a majority stake now in Russia's largest companies,making such sales possible.
The Russian banking sector has recovered substantially.VTB went from a two billion loss in 2009 to a two billion profit for 2010.
Still,because of a lack of confidence in global growth,the Russian loan book is only growing at 5.5%.Basically,there is a lack of demand,a lack of confidence in the industrial sector in Russia.
As for new global capital requirements for banks,Russian regulations on capital were always more conservative than in the West,so that won't be a problem for Russian banks.They were already holding plenty of capital in reserve.
Andrei Kostin is CEO of the Russian bank VTB.

China Dominates Rare Earth Metals

Please note that this week,in addition to this post,two other posts of global interest have been published in the Extra Content blog.One deals with NATO ally Greece's debt crisis resolution program.The other explores the nature of Chinese naval power in the Asia-Pacific region.You may visit Extra Content by clicking on the link in the right column.
Speaking in Brussels last week,Chinese Premier Wen Jiabao was in a defensive mode.He said Europe shouldn't join the call for China to release its currency,the Yuan,from tight control.The problem wasn't with the Yuan,but with the U.S. dollar,Mr.Wen remarked.He also claimed China wasn't using rare earth metals as a bargaining chip with Japan.
There is considerable concern about China's control over the world's rare earth metal supply.China produces more than 90% of the world's rare earth metals.It has cut exports of the metals by 75% this year.The U.S. is considering filing a complaint with the World Trade Organization over possible Chinese hoarding of the metals.
Rare earth metals are used in everything from tanks to iPhones and hybrid cars.The U.S. has only one rare earth metal mine.It could take 15 years for the U.S. to restart its rare earth metal supply chain.There is a bill before Congress to do just that.

HPQ Selects German Executive

The Hewlett-Packard board has chosen Leo Apotheker to succeed former CEO Mark Hurd as of November 1.Mr. Apotheker resigned as SAP chief executive earlier this year when SAP didn't renew his contract,having underperformed in license growth.
A speaker of five languages,he is known for traveling most of the year to visit customers.HPQ is said to need the high growth,high margin software business to augment its slowing hardware enterprise.Seen as a software guy who doesn't understand hardware,Mr.Apotheker is expected to lean on other executives until he gets up to speed.
The new CEO,a native of Germany who has been living in Paris,said software is the glue that will tie HPQ's parts together.HPQ is in a good position to advance in every software area.He will be spending time listening to the company's various stakeholders.
Investors didn't respond well to the selection,knocking the stock down after the announcement.They had been looking for an internal appointment.

Bahrain's Approach To Business

Bahrain seeks to be an oasis of calm in the Gulf region and the global economy.Iran is its very big neighbor,and Bahrain's view is that for the region to remain stable,Iran must remain engaged with the world.
Because Bahrain's financial sector was diversified,it actually added jobs during the financial crisis.It focuses on insurance,not just banking.
Bahrain is building upon what successes it has:oil,financial services and manufacturing.Tourism,health care and so on fill in the gap.
Bahrain thinks it provides the best value proposition for your business.They live in an environment that is competitive.A steady,stable,prudent approach is better for them than a flash in the pan.
The ratings agencies have reaffirmed their support for what Bahrain is doing.Real estate prices have stabilized there.They are O.K. in Bahrain,according to the Crown Prince,Shaikh Salam bin Hamad al Khalifa.

Which Markets To Favor

With regard to the stock market,YCMNET Advisors thinks break-out talk is a little premature.Michael Yoshikami,President and Chief Investment Strategist of the firm,is not excited,but cautiously optimistic.He thinks we should start throwing out the idea that certain months are good ones for the market.In 2011,Dr.Yoshikami thinks equities will outperform fixed income.
He does think we're gonna see us in the midst of a very sluggish,slow recovery.YCMNET is looking at Indonesia,Malaysia,Singapore and China-with caution toward China because of valuation.They also favor U.S. companies active in those markets.
YCMNET Advisors was named by Barron's magazine as one of their Top 100 Independent Financial Advisors for 2010.President Michael Yoshikami,PhD,CFP,is a frequent guest on business television.His firm is located in Walnut Creek,California.

A Chinese Angel Investor

Lee Kai-Fu is founder of Innovation Works,an incubator concentrating on start-up firms in the mobile internet and cloud computing spheres.About 800 million Chinese use cell phones-the largest market for the devices in the world.There are few profitable mobile phone companies in China yet,Mr.Lee points out;everybody is just starting out.He thinks that's the perfect time for his group to get involved.
Mr.Lee,49,is the former head of GoogleChina,having left before Google's recent squabble with the Chinese authorities.He feels there are plenty of opportunities in China,and few restrictions.There are probably certain areas that his group chooses not to get into,but those are only a small percentage.
Mr.Lee speaks perfect English,having studied and taught computer science in America.He saw that there were few options for Chinese companies to secure venture capital.Through his efforts,115 billion dollars has been raised to assist the new firms.

Indonesia and East Asia

Indonesia's bonds are selling well,based on the country's economic growth and market access.Its longer term bonds won't be affected even if interest rates are raised.Q2 growth was 6.2,up from 5.7.They're optimistic of reaching 6.3% in 2011.The main driver of August inflation was electricity rates.They're confident of about 5% inflation by maintaining food stocks and so on.
They think inflation is manageable,once food prices can be stabilized.Indonesia favors growth over inflation worries.They continue to see Asia as the growth market:China,Korea and other ASEAN neighbors and India-also Russia and the Middle East as new markets.The East Asia region,including Australia and New Zealand,is growing together.It's a complementary growth pattern based on agreements,Indonesia's trade minister,Mari Pangesta,pointed out.

Global Growth Faces Hazards

David Wyss,Global Chief Economist at Standard&Poor's,notes that 9% growth has been average for China for the past 30 years.Now its trading partners are slowing down.Falling end demand and rising commodity prices will slow China's growth.In the U.S.,there is a 30% chance of a double dip recession,with housing being much worse than expected.So far,we haven't seen the Chinese consumer growing fast enough to sustain 9-10% GDP growth by themselves.
In Europe,you've got stellar German growth,but the rest are looking pretty sick.The European Central Bank was very late off the block in lowering interest rates.The price correction hasn't gone as far there as it has in the U.S.Southern Europe will want lower rates,but Northern Europe will want higher,Mr.Wyss points out.
Chinese companies have been reporting their Q2 earnings.Industrial and Commercial Bank of China saw a 38% rise in profits,while Bank of China reported a 27% climb,and PetroChina 4%.Multinational firms are counting on robust Chinese growth to get them through the tough days.China reported good manufacturing results on Wednesday.

China's Formidable Qualities

China is a country full of driven and ambitious people,in the view of Donald Feigenbaum of The Eurasia Group.Scale is something that China,with its huge population, has going for it.They want to compete in technological developments such as high speed rail and green energy.They are looking to attack any sector tied to the economy.
On the other hand,it is harder for China to engage in basic innovation.And China is not the first country to have an industrial policy.Having one doesn't mean they'll succeed across the board,Mr.Feigenbaum pointed out.
Many observers feel China is experiencing a mid-cycle slowdown.Some of this is self-imposed,to prevent the economy from overheating-particulary the property market.

China's Strategy Turns Slightly

China has begun buying quantities of Japanese government bonds recently.According to Yifan Hu,Chief Global Economist at Citic Securities,China's overall strategy is:
1.Buy more commodities.
2.Make direct investments in natural resources.
3.Buy Treasuries and European bonds,as well as some Japanese bonds-but that's not a trend.The U.S. dollar will still be relatively strong,at least in the medium term.U.S. growth will still be better than Japan's,with their aging population and other problems,so Treasuries will still be bought.As well,China cannot afford to harm the U.S. economy,which would happen should she suddenly stop buying Treasuries.
Ms.Hu doesn't expect high Chinese export numbers,with the U.S. and European economies being slow.The tightening talk by Beijing has been toned down.The Chinese currency,the Yuan,has started to appreciate again.This is bound to instigate more calls by U.S. politicians for retaliatory action to be taken against China,whose trade advantage is linked to the rising Yuan.

HSBC Sees Steady Growth

British bank HSBC's profits have doubled.Peter Wong,CEO of the bank's Asia-Pac division,says that this year the growth is quite sustainable.The loan growth has not had its full impact yet.Hong Kong is definitely a pocket of strength.So are Malaysia,Singapore,mainland China,India and Australia.Over the next couple of years,European GDP will be pretty low,affecting China,but China will still have a GDP of 10% this year and 8.5-9% in 2011.
HSBC has done a lot of background work to list in mainland China's stock market.China says it is a high priority.HSBC continues to build 15-20 branches a year in China.In India,they are gonna buy RBS assets,but mainly HSBC is growing organically.In China,HSBC has invested in ICBC and Ping An Insurance.
HSBC is very cautious in its mortgages.Customers do not pay more than 15% of their income.HSBC's portfolio is quite secure.
If Hong Kong continues to increase,it will form a bubble.It is stable for now,in Peter Wong's estimation.
HSBC Holdings,plc(HBC)

Haunted By The Nikkei

The specter of Japan's most popular stock average,the Nikkei,hovers over the minds of U.S. officials and investors alike.The Nikkei reached its peak of around 40,000 in 1988.For 22 years,it has failed to even get close to that level again.It's only at about 9500 now.Is that to be the fate of Western markets as well following the financial crisis?
James Bullard,President of the Federal Reserve Bank of St.Louis,says deflation is not the main economic scenario for the U.S.All the same,core inflation has drifted below 1%.We're on the low side.The Japanese situation has been very difficult for them to get out of.Mr.Bullard calls for a plan to have significant easing.If the economy continues to recover,we can all forget about it,but a big shock to the economy could cause the Japanese situation here.Japan is a big,industrialized country;they're like us.The Fed's interest rate targeting can create this outcome.Low inflation plus low rates can cause deflation.
The academic community takes this risk seriously.Mr.Bullard is still an inflation hawk,but that's not where we are now.If we promise to stay at 0% rates for 10 years,it's gonna be Japan all over again.At some point,the strategy has to shift.In that situation,deflation,ordinary stabilization methods are shut down.You're in this environment where inflation can be too low,and you have to deal with that.Quantitative easing can work.It's important to do contingency planning for all outcomes,the Federal Reserve Bank President James Bullard believes.

Stress Tests Considered Success

The stress testing of Euro-zone banks is generally considered to have been a success,restoring confidence to world markets.Despite skepticism from some economists as to the toughness of the tests,the Committee of European Banking Supervisors insists the tests were more severe than the U.S. stress tests of last year.The Euro-zone tests postulated a once in twenty years scenario,while the U.S. tests postulated a once in seven years scenario.The Euro-zone tests were based on a double dip recession,with a 20% stock plunge and four notch downgrade of credit ratings.
Among the 91 banks tested were HSBC,Lloyd's,Deutsche Bank,Commerzbank,Unicredit,Santander and National Bank of Greece.All but seven of the 91 banks passed,most of the failures being Spanish savings banks,as well as Germany's Hypo Real Estate Bank and Greece's ATE Bank.The national authorities are in close contact with these banks to assess the results and implications,in particular in terms of the need for recapitalization,the CEBS said.
On Tuesday,Deutsche Bank reported good earnings and made positive remarks on its outlook.German unemployment came in at 7.7%,while U.S. unemployment is at 9.7%.

IMF Addresses Today's Concerns

The International Monetary Fund,an autonomous UN agency,has been addressing the issues of the day recently.On the topic of trade imbalances,Managing Director Dominique Strauss-Kahn said not even full appreciation of the Chinese currency,the Yuan,will solve the total imbalances.Other measures are also necessary to achieve that:
1.Improve domestic demand in Asia.Asia is a global economic powerhouse.A country shouldn't hide behind its currency.
2.Maintain a strong focus on foreign investment.
3.Manage currency reserves.
4.Institute capital controls,if necesssary.
China has been bitterly criticized of late by German businessmen for hindering foreign companies,as well as by General Electric CEO Jeff Immelt.In response,China insisted foreign businesses were being treated fairly.
With regard to Friday's release of Euro-zone bank stress test results,IMF First Deputy Managing Director Joseph Lipsky hoped for broad coverage by the tests,transparency and remedial action as needed.We need a realistic scenario that provides stress and gives some good insight into the strength of the banking system.All the preconditions for the test that were needed are being fulfilled.
Mr.Lipsky wouldn't assume that any central bank is out of ammunition for dealing with the financial crisis.He doesn't fear for the political independence of the central banks,either.

Euro-zone Crisis Management Update

The Euro-zone is attempting to deal with both the global financial crisis and the regional debt problem,while closely monitoring for signs of inflation.The European Central Bank is holding interest rates steady for the time being.Jean-Claude Trichet,ECB President,said he expects the Euro-zone to grow at a moderate pace.The ECB will adjust liquidity as appropriate.We will continue to see moderate price developments.Inflationary pressures over the medium term will remain contained.
Mr.Trichet urged deficit cuts to consolidate recovery from the financial crisis.
As for the Euro-zone debt crisis,John Taylor,a professor at Stanford University,thinks there's expectation that,down the road,Greek debt will be restructured.It could be quite orderly,changed without a lot of problems.It's quite likely.
In a further unfolding of the debt crisis,Moody's credit rating agency has just downgraded Portugal's sovereign debt.The U.S. market didn't respond to the news,absorbed in the initially positive earnings reports.
Moody's Corporation(MOC)

Australian Mining Tax Reduced

The new Australian government has reached agreement with mining companies on the Mineral Resources Rent Tax,which had generated controversy and ultimately brought down the government of former Prime Minister Kevin Rudd.New Prime Minister Julia Gillard said the agreement will maintain Australia's standing as an attractive and competitive business destination.She believes they've struck the right balance between corporate and public interests.The tax on iron ore and coal was reduced from 40 to 30%,and the threshold levels were raised,bringing the number of companies subject to the tax down to 320 from 2500.
The Australian dollar rose 0.25 when the agreement was reached.Shares of the two biggest mining firms in the country,BHP Billiton and Rio Tinto,also rose on the news.The dispute had lasted for two months.Peter McGuire,Managing Director of CWA Global Markets,said Ms.Gillard acted very decisively and quickly to turn this thing around.The reality is that Australia is resource-based,and mining is the number one headline,Mr.McGuire explained.
Rio Tinto(RTP),BHP Billiton(BHP)

Lagarde Confident In Euro

Christine Lagarde,the French finance minister,thinks political leaders will have to take a helicopter view of things for the good of our economies.The Greek population and government are really demonstrating a commitment to deliver.They are doing it.The work is being done.The Greeks are taking it much more seriously than the markets feared.
Solving the debt crisis is a joint effort of the International Monetary Fund,the Euro-zone and the European Central Bank.The Euro can absolutely survive.This whole thing was built on the back of wars.In the 1960s,Europe decided they had to build something better,Ms.Lagarde said in her excellent English.
At least a minority of citizens are not going along with the new fiscal regime. Protests have erupted this week in Spain and Greece,with rioting in Athens and a rail strike in Madrid.

Citigroup Back To Basics

Citigroup CEO Vikram Pandit says they are back doing what they should be doing.The economic imbalances are still there.Until the market sees credible plans for dealing with all these things,you're gonna have volatility.He believes you're gonna get real financial reform,and that's good.We've got to take a long term perspective on derivatives reform.Longer term,a safer system will benefit all of us.
Corporations need loans.The question is,how do you fund them?You've got to have a deposit base to fund them.That's the main business of a bank.Frankly,proprietary trading isn't core to Citi's business.They'll still be able to commit capital to work for their clients' behalf under the proposed Volcker Rule,although not for Citi's own behalf.
The volume of work is lower today,but Citi is doing the same work they've always done.As for the European debt crisis,the Euro's here to stay.The European Central Bank and others are making an appropriate response to the crisis.On stress tests of European banks,Mr.Pandit thinks anything you can do to put some of the questions and the issues behind us is good.The stress tests of U.S. banks restored confidence,Vikram Pandit observed.
Citigroup does business in more than 100 countries.Almost 50% of its business is non-U.S.,with nearly 35% of it in the emerging markets.

Defining Financial Reality

Asia in general is the strong point of the global economy,says Michael Yoshikami,Chief Investment Strategist at YCMNET Advisors.He's thinking investors are getting over their initial panic over Greece.Not everything is going wrong,though Europe is essentially seen as an economy that's going to be struggling for years and years.He doesn't think the U.S. and China are gonna destroy each other.They're gonna work together to succeed.
If you're in a trading range,you watch for opportunities now that every thing's been trashed.There's way too much concentration on BP;Exxon Mobil and Chevron have some promise as investments.You have to get away from seeing the market as reality.The market is reaction plus sentiment.The economic fundamentals are reality,Mr.Yoshikami believes.
BP plc(BP),Exxon Mobil(XOM),Chevron(CVX)

Citigroup's Emerging Markets Strategy

Geoffrey Davis of Citigroup Global Markets says the concern of Europe is now whether the global market will go into a double dip.Citi tends to think that will not be the case.What people worry about in the emerging markets is too much growth-but these are better concerns to have.
China is not Citi's favorite.Property prices may come down and interest rates may go up.Taiwan,South Korea and Russia are among their favorites.These are a good buying opportunity over the next 6-12 months.
Citi has downgraded their European outlook.The worst case scenario for a global double dip would be a big rise in U.S. unemployment or a major slowdown in China.That's what Citi would be looking for.In that case,you would go more into cash.Having already seen an 18% pullback in the emerging markets,however,Citi thinks investors should be looking another way,Mr.Davis noted.
China has indeed begun reigning in bank lending and real estate prices,fearing an overheated economy.The latest report shows a big jump in exports from China.

Chinese Workers Get Raise

Workers at the huge Fox Conn electronics factory in mainland China will reportedly be getting a 30% salary increase.The factory has been troubled by a cluster of worker suicides lately.There have been 12 attempts at suicide,10 of them successful.Terry Gou,Taiwan's wealthiest man,owns Fox Conn,which does work for tech titans Apple,Hewlett Packard and Dell.
Asked why there were so many suicides at his plant,Mr.Gou replied that he didn't know why.Each individual had a different story.There are 300,000 workers in the vast factory.One of them said he works 12 hours a day,with two hours off for lunch.He described it as a boring job and said some workers have romantic problems,but he didn't think that was enough to cause suicides.One victim's family has been protesting outside the factory for more than three months,determined to continue until they are satisfied.
Mr.Gou bowed in a public apology for the tragic events at his enterprise.He spoke in a humble tone of voice,seeming genuinely concerned.Fox Conn has been criticized as being a sweat shop,and workers at a Honda plant have been complaining about poor wages.
Mental health has been much in the news in China in recent months.In addition to the worker suicides,there have been a series of brutal attacks on children,resulting in many deaths.

Billionaire Sees Stagflation Ahead

Billionaire Wilbur Ross of W.L.Ross&Company notes that the real problem Greece has is the extent of its debt,which has reached 13.7% of Gross Domestic Product.On the tax side,people in Greece don't pay tax.The government only gets 3-4% of what it is owed.There's not an easy way to pull out of the European Union.The frugal Germans are bearing the price for the sins of the people of the South.A whole lot of things could be reformed,but how do you get it through the legislature?
Estonia has cleaned itself up pretty well.At best,these countries will have stagflation without big government spending;the economy will weaken.They have to start cutting,even though it will be painful and slow.You have over-leveraged states in Europe trying to prop up the over-leveraged consumer.The thing that's dangerous for us is more the question of the Euro versus the dollar.We already had an imbalance of trade with Europe.
Mr.Ross doesn't see the U.S. going back to a recession,though the debt problem will probably cut basis points off its GDP and that of China and others. U.S. Treasury Secretary Timothy Geithner will be meeting European leaders on the way home from China to discuss the debt issue.

Shanghai Develops Its Exchange

The Shanghai stock exchange is a growing proposition.It recently introduced stock index futures to its offerings,although it has only one-fifth of the volume of the New York exchanges and still needs a completely convertible currency.Shanghai is seeking to become a global financial center by 2020,and many new skyscrapers and apartment blocks have been built there in the past few years to support that ambition.
Dr.Fang Xinghai,Director General,Office of Financial Services,Shanghai Metropolitan Government,admitted that the Shanghai stock market is still largely closed to outsiders,but it is being opened up gradually.It will be a market of global size.Although it is not open yet,you can still call it a global financial center.The first logical step would be to open up the outflow capital account,so that their savings may be used more efficiently throughout the world.
The British bank HSBC has expressed an interest in selling shares in Shanghai.Initially,it was just financial companies who wanted to list there.Later,manufacturing firms,telecoms and consumer companies all expressed an interest.Even now,the Shanghai exchange is among the leaders in commodities futures,Mr.Fang asserted.

IMF Helps Stabilize Greece

John Lipsky,First Deputy Managing Director of the International Monetary Fund,says the 110 billion Euro aid package to Greece will restore financial stability and set the stage for renewed growth in the Greek economy.The European Union authorities have agreed to create a stabilization mechanism in conjunction with an IMF program where help is asked for and needed.
There's no question that the Greek adjustment program is a difficult one,Mr.Lipsky admitted,but it was designed by the Greek government and approved by Parliament,and the majority of Greeks support it.A combination of high debt,high deficits and a lack of competitiveness had reached a big proportion in Greece.
The IMF constitutes a revolving fund from its 186 member countries.The U.S. pays about 17% of the fund.It is replenished whenever it is used.There are no program negotiations with Spain or Portugal at this time,John Lipsky stated.
The IMF is an autonomous UN agency which promotes international monetary cooperation,currency stabilization and international trade.

NYSE/Euronext Sells Indian Stake

NYSE/Euronext has sold its 5% stake in the National Stock Exchange of India to Temasek,a Singaporean sovereign wealth fund,for 150 to 180 million dollars.The stake is part of a growing trend of foreign investment in robustly-growing India.India's central bank said the economy will grow at least 8% in the current fiscal year,which began April 1.
The National Stock Exchange has 1470 listed companies,with a combined market capitalization of about 1.3 trillion dollars as of March 1.NYSE/Euronext had purchased the stake in NSE in January 2007.At the same time,Goldman Sachs had purchased its own 5% of the Indian exchange.
Wisdom Tree Investments offers an India exchange traded fund,EPI,which includes 126 profitable companies,according to the firm.It is a fundamentally weighted fund,meaning allocation to the holdings is determined by their success.

Asking Much of China

Pete Fisher,a Vice-President at BlackRock,the world's largest money manager,thinks we're getting to the point where China has to tighten their policy.He fears we'll have more friction,but he's hoping we won't.He's worried about too much hype.We can over-hype how much we can get out of Chinese exchange rate hikes when they do occur.It would cool down their economy.We don't want China to have inflation or a bubble.
What a revaluation of the yuan may not do is affect our trade relations,Mr.Fisher points out.It's terrific for the world economy for China to have cerated all this wealth over the past 20 years.We've got to be careful not to expect too much from what they've accomplished.
BlackRock isn't afraid of the long end in bonds.Mr.Fisher believes the economy is gonna do O.K.,but not brilliantly.BlackRock thinks if the economy is gonna do O.K.,that's gonna mean a sideways movement in interest rates,attractive to investors at the long end.Some analysts have been warning investors that the long bond will collapse under inflationary pressure.

Believing In The Bull

Michael Yoshikami of YCMNET Advisors believes in the current bull market.He thinks there's still money to move into it.There's some risk in it,but he doesn't think you want to sit this one out.Sentiment is gonna get the individual investor in.Market sentiment is still pretty negative,but the news is not as bad as people think,and that's gonna drive the market.
Mr.Yoshikami thinks unemployment is the biggest risk.If the numbers stay at 9-10% and the stimulus unwinds out of the system,that's gonna hurt.For now,all the negativity is starting to go away.The retail investor is starting to feel panic at having waited so long to get back in.You're gonna continue to see confirmation of the uptrend.
He really doesn't think the Greek debt problem is resolved.He thinks they're just pushing the ball forward.There's not gonna be a default,but,long term,it kicks the can down the road,in Michael Yoshikami's opinion.

Shanghai Expo Drawing Near

The Shanghai World Expo,a major business event,will soon begin.The expo runs from May 1,2010 till October 31.It's theme is "better city,better life."China carried out a 45 billion dollar makeover to enhance Shanghai's reputation as a trade and transport hub.Hundreds of factories and thousands of families were moved to make way for the expo,including a shipyard with 10,000 workers.
The 162 countries participating spent varying amounts on their pavilions.Saudi Arabia spent 162 million dollars,followed by Japan at 140 million,France,at about 70 million,and the U.S. at 60 million-privately raised.Some 70 million visitors are expected.One Chinese man,Xu Wei,said it was not a trade fair,but an excellent chance to impress the Chinese people.They have to come here.It's a must.

Yahoo Embraces Arab World

Yahoo is moving into the Arab world in a big way.The company has purchased Maktoob,the Arabic version of Facebook.Maktoob is based in Jordan.Arab use of the Internet is up 1,000% since the year 2000.Maktoob reaches one out of three Arab users of the Internet.It is available in 22 Arabic countries with a total population of over 300 million people.
The acquisition of Maktoob is part of Yahoo's emerging markets strategy.Maktoob's vision is to be at the center of people's online lives.Less than 1% of Internet content is currently in Arabic.
Saudi Arabia is one of Maktoob's top two countries.Over five million Saudi women alone are active on Maktoob.

Euro-zone Confidence Improving

Ian Cheshire,CEO of Kingfisher,the world's third-largest home improvement retailer behind Home Depot and Lowe's,says they're seeing consumer confidence improve in the Euro-zone.They're not seeing big numbers.Kingfisher's sales were up one percent.Most people are waiting for unemployment to at least top out.There's a slight sense of wait and see,Mr.Cheshire noted.
To respond to the situation,Kingfisher is keeping very flexible in its supply chain.There's been a huge increase in shipping rates from Asia,necessitating the flexibility.Kingfisher is also focused on innovation in a flat market.People are going for bold patterns in wallpaper and the green trend.
You get big shocks,sudden spikes in business,Mr.Cheshire explained,and you have to be able to react.The first half of this year looks pretty tough.At best,we're looking for a second-half recovery,in Ian Cheshire's view.

Singapore Expects Solid Growth

Leo Yip of the Singapore Economic Development Board is expecting 4.5-6.5% growth this year,in tandem with the rest of Asia.That's exciting for us,he said.We think Singapore can play a role in companies expanding their Asian footprint.Singapore has excellent connectivity.It sits in the center of rising Asia,a global business city with a business infrastructure.As Asia rises,Asia is gonna demand more and more products and services that suit its own tastes.Singapore provides companies an excellent way to test those products and services for Asia.
We see the growth of Asia as a medium to long term trend,Mr.Yip explained.Singapore presents those companies with a useful proposition.We encourage companies to have a medium to long term Asian strategy.Singapore offers companies a place to integrate their Asian operations,in Mr.Yip's opinion.

Greek Crisis Looking Better

At least for the moment,the Greek debt problem seems to be closer to resolution.German Chancellor Angela Merkel praised Greece for reigning in spending in a remarkably short time.If necessary,she said,they will defend their euro together.Dominique Struass-Kahn,Managing Director of the International Monetary Fund,believes the problem is unlikely to spread.Half of Greece's outlay had been for public sector wages and benefits.Big cuts to that spending have led to rioting,to which police responded with tear gas and batons.
Greek finance minister George Papaconstantinou said they took some difficult measures to show their determination.There is absolutely no question that they will meet this year's target.It's not just a Greek problem;it's a bigger problem.The unrest is normal and expected when they have such difficult reforms.It is encouraging that opinion polls are broadly supportive of the government.The biggest deficit they face is a credibility deficit,in Mr.Papaconstantinou's opinion.

A Morgan Stanley Analysis

Henry McVey,Chief Investment Strategist at Morgan Stanley,thinks Germany's in pretty good shape.The UK may be the next problem.There's tension between high leverage and sustaining growth in Europe.What's really a risk-free asset?The U.S. is gonna be somewhat of a safe haven.Treasuries haven't sold off,and the dollar has rallied.
Mr.McVey still thinks most of the emerging market currencies are a good bet.They've been owning some high yield growth stocks outside the U.S. such as Nestle.A lot of the most levered companies are pretty expensive right now.
I don't think the sovereign debt issue is going away,Mr.McVey said.It's a multi-year issue.It's tough medicine to bring down your leverage.It's the first time in the capital markets that Asian inflation exceeds that of the developed nations.There's more stress to come for the pound and the euro,Mr.McVey predicted.

A Complex Recovery

Europe accounts for 29% of U.S. exports and 8% of U.S. revenues.That is why the Eurozone debt crisis is such a concern across the Atlantic.The domino effect is much on the minds of financial leaders in America.
Spain contributes 12% to the Eurozone economy,while Greece yields 3%.The fiscal problems in Spain are not as bad as in Greece,says Nariman Behravesh,Chief Economist at IHS Global Insight.Spain is in the second year of a recession,with 20% unemployment.The big question is,what are they reasonably gonna do?None of the countries has come up with a credible debt reduction program.A Greek default has to some extent been priced in the market,but a Spanish default could split up the Eurozone.That has not been priced in.We're talking about a multi-speed recovery,a "LUV" recovery,with Europe being the L;the U.S. being the U;and Asia being the V,in Mr.Behravesh's opinion.
Greek Prime Minister George Papandreou announced a second round of budget cuts yesterday.The first round prompted rioting.Without the promise of cuts,Greece would not receive aid from its neighbors or the International Monetary Fund.

Asia Crucial To Portfolios

A combination of U.S. and international equities are recommended by Michael Yoshikami of YCMNET Advisors.You can use exchange-traded funds for exposure to individual countries.Go for tailwind industries such as services and tech-services that can spread across borders,such as IBM provides.Overall,Gross Domestic Product growth is gonna be less,so you need to be more selective about how you invest,Mr.Yoshikami cautioned.Watch out for stagflation,buffering your portfolio with commodities exposure.Invest in Asia-but not just China,he added. As financial regulation increases in the West,Asian institutions may capitalize on the situation.Strict reforms can stifle innovation and entrpreneurship.Hong Kong had more initial public offerings last year than New York.It stands to benefit even more as the West struggles with the aftermath of the financial crisis,in YCMNET's view.

Debriefing From Davos,Part 2:Jean-Claude Trichet

Participating in a dialogue at the end of the recent World Economic Forum in Davos,Switzerland,Jean-Claude Trichet,the outspoken president of the European Central Bank,said that at the outset of the financial crisis we had a financial sector that was extraordinarily fragile,but we also had imbalances that were accumulating.He fully agrees with U.S. officials that a strong dollar is in the interest of the U.S.,and also in the interest of Europe.In the very long run,he could imagine other solutions.
The future is not written,Mr.Trichet remarked.It depends on whether the Doha round on world trade is a success or not.We have an immense stake in whether Doha is a success.We need to have the most lucid public opinion that there is a superior interest in that,the European central banker feels.
Wearing a charcoal suit,green shirt and blue tie,the elder statesman of European finance noted that he is not being complacent in any respect.We have to work tirelessly for a system that is more resilient,to be sure;that our people's opinion is lucid and enlightened,Mr.Trichet spoke rapidly and candidly at the Davos forum.

Debriefing From Davos

Attending the recent World Economic Forum in Davos,Switzerland,Duncan Niederauer,CEO of NYSE/Euronext,shared some of what he learned there.He said he was taking away from Davos that companies' futures are improving.The worst is definitely behind us,but people are still saying are we doing the right things collectively and collaboratively.In the meetings I've been in,Mr.Niederauer recalled,I said it's key to get the financial leaders and the regulators together.Then you can put the foundations together for a healthy economic recovery.Separating banks' proprietary trading from customer activities is virtually impossible,in my opinion.
Mr.Niederauer,who wears an "autism speaks" lapel pin,sees robust initial public offerings at NYSE over the next six months.

Big Debt,High Cost

Greece is paying a high price for its national debt.Interest on one bond rose from 6.2 to 6.6%in three or four days.If unable to pay the interest,Greece would go into default.Nonetheless,Prime Minister George Papandreou denies Greece will have to be bailed out by the European Union.
In a TV address,Mr.Papandreou warned of massive budget cuts and higher taxes.There will be cuts in wages and spending in the public sector.Greece is under heavy EU pressure to defend the euro by reducing its deficit.It needs over 50 billion euros just to finance its deficit.One citizen remarked that people are angry and anxious about what will happen tomorrow.So are the governments of Spain,Portugal and Ireland,which face similar,if lesser,budgetary dilemmas.

China's Growth

The latest figures show that China's Gross Domestic Product rose 10.7%.Apartment sales in Beijing support this data,with people signing up to reserve unbuilt units.China's 580 billion dollar stimulus program is judged to have been the most effective in the world,with the spending concentrated on advanced infrastructure.China is on track to overtake Japan as the world's second-largest economy,behind the United States.Nonetheless,Chinese earnings are only a fraction of the West's.More than 150 million Chinese earn a dollar a day.
The International Monetary Fund has just raised its global growth forecast for 2010 by 0.8% to 3.9%.The U.S. is projected to grow 2.7%.The IMF says that the global financial system remains fragile.Fiscal policies need to remain supportive.

Microsoft Sticks With China

Microsoft CEO Steve Ballmer said it's clear the company is gonna operate in China.China ought to be a source of growth.Intellectual property protection is very bad there,however;it is abysmal.It's got to change.China has laws on the book,but it's important that they be enforced.If we're gonna create jobs in the U.S.,we're gonna have to export our ideas to China.
Cyber attacks won't be stopping Microsoft.Cyber attacks and occasional vulnerabilities are a fact of life,Mr.Ballmer observed.Microsoft has a whole group of people that respond to them in real time.
Microsoft sees business conditions as still being relatively flat.Fifty percent of capital expenditure goes into IT.There's been a little bit of a rebound in the consumer front.There are glimmers of hope in B2B,but it's still tough,the Microsoft executive noted.

NASDAQ's Upward Trend Line

Robert Greifeld,CEO of NASDAQ/OMX,a global exchange company,says they certainly feel the trend line for initial public offerings will continue upward for 2010.On a relative basis,he thinks the feeling is better than it was in January 2009.We know a number of tech companies are filing for IPOs,Mr. Greifeld revealed,and we feel good about that.NASDAQ has a strong appeal for the younger firms,many of them Asian.We will be part of a virtuous cycle in 2010,Robert Greifeld believes.One unifying theme:the businesses we are in are highly scalable.They have incremental revenue with very little incremental cost.
I cannot speak for Dubai,Mr.Greifeld cautioned,but in conversations they have expressed their support for what we're doing.Equities trading volumes on NASDAQ Dubai rose by 30% in 2009 to 3.10 billion shares,from 2.39 billion shares for 2008.Equities derivatives have also traded on the exchange since November 2008.Dubai Gold Securities,which are Shariah-compliant,were listed in March of 2009.

Fighting For His Navy

Very few British troops remain in Iraq.About 100 Royal Marines and sailors are still training the Iraqi navy to protect oil facilities.The Iraqi navy is starting from a low baseline,says Admiral Sir Mark Stanhope,KCB,OBE,First Sea Lord,commander of the Royal Navy.Sir Mark,57,attired in desert fatigues and a black beret,was assessing this training mission in country recently.
At the same time,Sir Mark is fighting to preserve the Royal Navy.Budget hawks in the British government have it in their sights.Sir Mark argues that,if you're going to have aircraft carriers and submarines,you need support vessels to sustain them as well.That's what a first rate navy is all about,in his view,and he wants Britain to have a first rate navy,the admiral insisted.It's a sentiment British shipyards will be echoing enthusiastically,along with other contractors in the defence industry.