Monday, 19 January 2009

Earlybird, Jan. 19, 2008

These are the headlines for Mon., Jan. 19:

U.S. -- Bank Nationalisations in the U.S. Are Very Likely (Reuters): Nice story by Reuters. The truth is, options other than state takeovers are running out. And clearly, if another round of bad corporate results comes in April or so, nationalisation shouldn't be seen as an abnormal outcome. Reuters writes: ''The U.S. banking system desperately needs capital. Estimates of the shortfall range from $700 billion to more than $2 trillion. That money will not come from the private sector as long as the pending losses are all but impossible to estimate.´´ Scary.

U.S. -- New York Times Seek Slim Investment (WSJ): Interesting story, because it plays two different realities. One, the grave situation that media vehicles may face if this recession begins to cut back on ad revenue. On the other hand, the growing relevance of Carlos Slim as a global dealmaker and the fact that he is flush with cash amid this crisis. Among the options being discussed for the potential investment is a preferred-stock issue, says the WSJ. Preferred stock carries no voting right but pays an annual dividend, in return for his investment. But, why Slim would loan money to the NYT if it isn't for anything else than that? Lending money to Citigroup or any of those banks could yield much nicer returns for a deal, I think.

BRAZIL -- Unions, Defying Labour Confederations, Sign Job, Wage-Cut Accords (Estado): We said last week that this could be the most likely scenario, because right now there is no guarantee that a macro-accord between employers and labour confederations will be forged before the end of the month. In the meantime, smaller unions are buying time by agreeing to a flexibilisation in labour rules, to work time and pay cuts in exchange for job stability. The number of companies with already-signed accords is significant: 130. A deep overhaul of Brazil's labour rules remains, in our view, necessary.

U.S. -- Venture Capital Funding Fall to Four-Year Low (WSJ): The crisis is forcing venture capital and private equity investors to rethink their business models. Venture-capital investment dropped 30 percent in the fourth quarter to its lowest level since 2005, signaling that confidence on start-up companies is waning and that the outlook for IPOs in the long term is nothing but awful.

MEXICO -- Banks Tussle For Small, Mid-Sized Lenders; Credit Costs Data Seems Contradictory (Universal): Banks say they are lending more money to companies than they actually do, and that they charge less in interest and fees than they actually do. Hoarding cash is one thing bankers have done well in the past months -- this story is so much against anecdotal evidence anywhere these days. If this was true, Mexico would be the only country in the world where banks would be extending credit to small customers. I don't buy that. Nonetheless, I read in a recent report that bancarisation levels in Mexico are less than half those of Brazil's (18 percent of GDP vs. 37 percent,) and that would suggest that the most capitalised banks would be willing to vie for increased market share even in spite of this crisis.

U.S. -- Obama Urges Hope as Economy, Job Prospects Get Uglier (WSJ): ''Keep the faith,´´ ''work harder,´´ are Barack Obama's mottos these days. But unless the role of the state, international policies and corporate ethics parameters are improved and reworked in a way that effectively restores citizen confidence, nothing will change.

CHINA -- Economy Probably Grew at Slowest Pace in Seven Years (Bloomberg): The resilience of China's economy has been seen many times throught the years. But the effect of a decline in China activity would be devastating for Asia and the emerging market world, as Bloomberg rightly points out.

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