Monday, October 31, 2011

Nabors CEO Eugene Isenberg's $100 Million Severance-Type Paymen

MarketWatch asks "Is Shareholder Capitalism Working?"  MarketWatch columnist David Weidner and Mean Street host Evan Newmark discuss Nabors CEO Eugene Isenberg's $100 million severance-type payment and discuss whether shareholder capitalism is still working. video 10/31/2011

Thursday, October 27, 2011

Act II of the Olympus Drama

From the Wall Street Journal, Olympus defends its deals, but the Chairman resigns and the Euro Zone Looks to Asia for bail out money. 

In this Asia Today video, we find that Japanese camera maker, Olympus, stands by four controversial acquisitions even as Chairman Tsuyoshi Kikukawa resigns.  The Journal's Isabella Steger and Mariko Sanchanta also discuss how the euro-zone leaders now look to Asia for money (we want your money but not your ethics):

4 minutes and 51 seconds, 10/27/2011

Act I

The first act of this drama was enacted a week ago when Olympus fired its CEO, Michael Woodford, who, in turn,  alerted the UK authorities of his findings about payments made by the Japanese camera maker in connection with the acquisitions. Mr. Woodford had hired an outside auditor to do a forensic investigation. In this October 18th interview, Mr. Woodford tells the FT's Louise Lucas why he has taken his concerns about the deal-making at his previous employer to the UK Serious Fraud Office.  Click through to view the FT video which is just over 10 minutes.

Saturday, October 22, 2011

Tom Hoenig Nominated to Be the Vice Chair of the FDIC


I do not know to what party Dr. Thomas Hoenig belongs, but he has been great on the FOMC (the Federal Open Market Committee that determines monetary policy.)  President Obama has nominated him to be the number two official at the Federal Deposit Insurance Corporation (FDIC) which guarantees bank deposits.  The FDIC also is one of the agencies that examines banks for soundness.

Tom Hoenig has been a staunch critic of the "Too Big to Fail" syndrome in American bank supervision.  He has been seemingly a Cassandra warning of the bubble in farmland prices.  Hopefully his arms will not be chained when he raises them to prays for policies to address the problem. 

On the FOMC, Hoenig has voted for raising rates.  Knowing that we are creating new bubbles rather than stimulating new investment in real projects creating real jobs, he has dissented from the prevailing majority.  What business owner in its right mind would invest in a risky business project when there is free money to lever up holdings of financial assets made risk free by the Bernanke put?  Why subsidize investment banking bonuses? And he has not kept quiet.  As Michelle Lucci pointed out over a year ago, "Kansas City Federal Reserve Bank President Thomas Hoenig has been recently speaking publicly about his desire for an increase in the federal funds rate, sooner rather than later, and also about his concern for community banks and the drag on earnings from commercial real estate loans."

Scott Canon at the Kansas City Star warns "Hoenig is ... a provocative selection to join [the FDIC's] board of directors."  Three cheers for President Obama on this one.  Even Ron Paul should be cheering. He would be available should a President Cain need a Fed Chairman.

Monday, October 10, 2011

Thomas J. Sargent and Christopher A. Sims Win the Nobel Prize for Economics

Rational Expectations and the Ability to Distinguish Cause and Effect Empirically

Macroeconomics has long been the theology of economics.  Sargent and Sims tried to take the common sense reality that it is what people expect in the future, not what we currently observe, that drives their decisions.  They developed a type of econometrics (the statistical modeling of economic reality) that would deal with expectations.  In the process they transformed macroeconomics, generally for the better.  This morning the Nobel Prize committee announced they won the Nobel Prize in Economics.

Today central bank credibility is central to economists' thinking about monetary policy.  Guess why.

One drawback of their revolution is that empirical and theoretical models became farther removed from what we can picture in our imagination.  The great oversimplification of the financial sector that Keynes introduced and Hicks the Younger systematized became more imbedded in economists mindset.  We need a revitalization of economists' imaginations to refertilize their mental pictures of the world.

Risks and opportunities for Brazil

Brazil's central Bank has cut interest rates from high levels.   Two weeks before Brazil's next interest rate decision it remains unclear whether the central bank will cut rates again.  In this FT video from October 7 2011, Zeina Latif, Latin America chief economist with RBS in São Paulo, explains to Jonathan Wheatley, deputy emerging markets editor, why although the crisis in Europe looks like an opportunity to cut rates there are multiple risks involved. (5m 24sec)

Friday, October 07, 2011

The September Jobs Report

The employment report that the Bureau of Labor Statistics (BLS) issues on the first Friday of each new month is among the most closely followed of all government statistical issues.  This morning's report showed payroll jobs were up by 103,000 sending bond markets down some more.  The Dow and European equities rose in response although the S&P 500 did not. 

The unemployment rate--9.08% in September-- has been little changed over the last five months.  Overall the BLS survey of households shows a million more Americans working than in August, 2010, an increase in the workforce of 400 thousand and a 2.2 million population increase.  The BLS survey of firms show an increase of 1.4 million jobs.

Last month's report painted a bleaker picture than revised data show.  Luca di Leo and Jeffrey Sparshott report on "Payrolls data for the previous two months were revised up by a total 99,000 to show 57,000 jobs were added in August and 127,000 jobs in July."

Good news for Wichita: aerospace employment is up yet another month.

Thursday, October 06, 2011

Bullish Baltic Dry?
September 28 2011: The Baltic Dry index, a measure of the use of the largest ships, has climbed sharply of late while all else is bearish.   In this video, FT investment editor, James Mackintosh,  analyses what this apparently bullish signal tells us about the outlook for the world economy. (3m 29sec)

Revalue or else?
October 5 2011: Back in 1971 Richard Nixon risked a trade war to force the rest of the world to devalue the dollar. The US Senate is considering a similar move to force China to revalue the renminbi. Here James Mackintosh, analyses why the world needs the Chinese currency to appreciate much further. (3m 59sec)