Top 10 links to start the day: BHP job cuts, Singapore GDP contracts 16.9%; Roubini says banks insolvent
22nd Jan 09, 8:15am
This is a bit of an experiment. It's an edited version of my regular morning read-in of what's happened overnight and what I think is important, including my Top 10 news links. It doesn't take me long. I welcome any feedback below on whether you think it's useful on a regular basis.
- BHP Billiton announces it will sack 6,000 employees at a cost of at least US$0.5 billion. Australia is New Zealand's largest trading partner and this shows how quickly demand from China for iron ore and other metals is drying up. Here's the link to the Australian. The comment from Access Economic's Chris Richardson (a nice chap I knew from my time in Canberra) that Australia's budget is "buggered" is worth watching. Here's the link to The Australian
- Australian banks have been quietly building up their margins between deposits and mortgage rates, says Les Coleman in The Australian. . In New Zealand, there hasn't been the same growth in margins, but they certainly haven't fallen as much as the banks would have you believe.
- Oh the unintended consequences of public policy...Here's an excellent piece from Alan Kohler from Business Spectator pointing out the carnage going on between corporates and banks in Australia right now because of the government guarantees for bank bond issues. The banks have raised A$35 billion with these issues in the last month, sucking up the cash that had been available for corporate debt issues. Now the corporates are having to repay the loans they received from foreign banks exiting Australia and are having to go crawling to the Aussie banks to pay a juicy margin.
- There are countless reviews of Obama's inaugural speech. This one by Edward Luce at the FT captures the mood of a "bleak diagnosis".
- As if Apple guru Steve Jobs doesn't have enough problems, the SEC is now investigating his disclosures about his health after investors complained about the master's curious lack of detail and less than timely disclosure over his "complex" health issues, according to the WSJ.com.
- Singapore and Germany have warned their GDP will contract 2-5% and 2.25% respectively in 2009. This global recession just gets uglier and deeper by the day, complicating the Reserve Bank's efforts to revive our economy. Alan Bollard may wish now he had not declared the recession over last month. Here's the FT on Germany and here's the WSJ on Singapore. The line about seasonally adjusted Singaporean GDP falling at an annualised rate of 16.9%(!) in the October to December period is in the eleventh paragraph.
- Canada cut its official cash rate by 50 basis points to a record low 1% overnight, in the WSJ. A 100 basis point cut in our OCR to 4% next Thursday looks well and truly baked in. The risk now is for something bigger.
- A Tokyo professor who heads a government forecasting committee has warned that Japan faces its worst recession since World War Two (and they had a 10 year humdinger that lasted througout the 90s) and that it could last 3 years. Bloomberg carries this story, which was cited in a surprise drop in the yen against the US dollar overnight.
- I watch Nouriel Roubini, a New York University professor, pretty closely because he was one of the first to predict the Credit Crunch and the scale and sequence of events it created, including bank collapses and bailouts. He is now forecasting that US credit crunch losses could top US$3.6 trillion, which is much more than the US$1-2 trillion others have forecast until now. He says the US banking system is basically insolvent. Here it is in Bloomberg. Here's the audio. What does it mean for us? Buckle up. Our banks aren't insolvent, but they are dependent on foreign lenders for 30% plus of their funding.
- Here's a little statistic that blogger John Taplin has picked up on that's a cracker. Citigroup's compensation bill last year was US$30 billion. Its market capitalisation now is around US$15 billion. Who'd be an investment bank shareholder eh? Not many these days it seems...except for taxpayers.