Death Star Economics



China slows, Greece set to grow again

Over the weekend…
Venezuela has elected a new President, after re-elected Hugo Chavez died in early March after long illness. Nicolas Maduro is the man Chavez singled out as a worthy candidate himself, and the election result may have been driven my emotions more so than politics. read article

This morning…
China reported Q1 GDP growth, which came in lower than expected. Year-on-year, the country’s economy grew at a rate of 7.7% in the first three months of 2013. Prior estimates had suggested 8%; Q4 2012 came in at 7.9%. Again, we are facing a week of panic over the Chinese slowdown. read article

Otherwise, troika officials are arriving in Portugal today to assess the country’s austerity plans and post-bailout progress. Simultaneously, the body, composed of the EU, the ECB and the IMF, released a report claiming that Greece could return to growth next year. read article

The week ahead…
will bring us the first batch of earnings from New York-listed corporates, including a bunch of banks like Citigroup, Bank of America and Goldman Sachs, and tech companies Google, Microsoft and IBM.

The Italian parliament will try to elect a new President in the coming days. Officially, the process to find Giorgio Napolitano’s successor begins on Thursday, but it is expected to last a couple of days.

So long.


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The sequester is back, as is Europe’s political madness

In the US, the chaos that is the national budget and the cuts thereof is picking up in newsworthiness again. Yesterday, President Obama tried to guilt Republicans into agreeing with his proposal, which didn’t achieve all that much. New estimates say the sequester could chop 0.5% off this year’s GDP and destroy 700,000 jobs. Others say that besides the overall effect, the demand side won’t feel the $85bn spending cuts. read article

Something that won’t suffer cuts is medical research, generally a positive thing, with the billion dollar research project Brain Activity Map (BAM), the first neurological project of its kind, starting in a couple of weeks. read article

As of today, Bulgaria is without government, after the country protested against austerity measures, utility prices and corruption. In next steps, a caretaker government will be formed, before official elections sometime in Springread article

In other European news, Italy’s center-left Democrats are trying to build a coalition government with Mario Monti to fight the good fight against Berlusconi, while Mariano Rajoy of Spain said the Spanish economy was seeing “no green shots or recovery in any shape or form.

Also from Spain, the government is imposing a yield limit on regional government bonds to combat the country’s overall debt burden. The new limit will be set at 100 basis point above government debt, a benchmark that Catalonia has long passed. read article

In other news, Microsoft has abandoned Hotmail, phasing out the emailing service by this summer. All 350 million users (seriously, who still uses Hotmail??) will be moved to, which already has 60 million users of its own. read article

So long.

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Dell brings buyouts back; Obama fails to strike deal

It’s a very AmUrica-centric news day, so let’s start with…

TWENTY-FOUR point four billion dollars. That’s what it will cost founder Michael Dell (who currently holds 14% of the firm) and Silver Lake Partners to buy the computer business. That makes Dell the largest leveraged buyout since 2007. read article 

Microsoft, which counts Dell as one of its largest clients, provided a $2bn loanBut according to WSJ:

Despite its participation, Microsoft isn’t getting board seats or operational control. What it is getting, apparently, is a wink and a nod that Dell won’t start shipping equipment running Android, for instance… The danger there is that, by limiting its technology options, Microsoft’s involvement ultimately damages Dell’s long-term prospects.

In other deal news, US media company Liberty Global is going to buy Virgin Media for £10bnread article

Also in the US, we’re more or less back to the old spiel: after Obama proposed a teeny-tiny cuts/tax package to delay the sequester (automatic spending cuts on 1 March), Republicans rejected the idea out of tradition. The whole thing just looked too much like additional tax increases to them. If all else fails, the sequester will slash $85bn from federal spending until February 2014 – not exactly a health fix for the US economy. read article

The US Department of Justice has added a price tag to the S&P mis-rating case: the mortgage securities in question, which received inappropriate ratings between 2004 and 2007, caused losses of more than $5bn. The awkward side to it: the lawsuit has brought to light that S&P analysts danced around to “Burning Down the House” and said they would “rate every deal. It could be structured by cows and we would rate it.” So far, it is unknown whether S&P employees are just really big fans of the Talking Heads. read article

Otherwise, Europe is waiting for Godot the ECB‘s and Bank of England’s meetings tomorrow and RBS was fined $325m by the CFTC in relation to the Libor scandal, while Silvio Berlusconi is winning ground against Italy’s Democratic Party in the polls. read article

So long.

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Across the board disappointing results: Japan’s deficit, Apple’s earnings, S Korea’s GDP

Over the past weeks, Japan has done a lot to try and convince the rest of the world of its [return to] well-being, but no distraction really did the job. And now this: Japan’s 2012 trade deficit hit JPY6.93tn ($78.27bn), the highest ever reported. Reasons are poor performance of its largest companies, rising fuel costs, the strength of its currency and the whole argument with China over the Senkaku Islands in the East China Sea. read article

South Korea’s 2012 GDP underperformed, recording the weakest growth figures since 2009. The country’s very own central bank had forecast the economy to grow 3% over the whole year – the actual number game in at 2%. To blame is the eurozone crisis, among other things, weakening demand for export products, which account for 50% of the South Korean economy. read article

The US House of Representatives approved a short-term extension on America’s borrowing spree, answering the question of whether the US will be able to pay its bills in the near future. This has bought some time to come up with a budget proposal to solve all problems – and without raising taxes, if you believe Paul Ryan, Chairman of the House Budget Committee. read article

The timing of the extension means the debt limit will be revisited after two other fiscal deadlines. Many members of both parties have said they want to revise of replace across-the-board spending cuts set for March 1, and they will need to renew funding by March 27 if they want to prevent a partial government shutdown. They are far apart on how to achieve both goals.

According to Reuters, the US Treasury will need the remaining $16.4tn the country is legally allowed to borrow until early March.

In Davos, Angela Merkel shows patience, saying that she was going to listen to David Cameron‘s complaints to work out the best possible solutions under which the UK would stay in the European Union. Wise words, after all, the UK’s vote would be helpful on her European budget proposal. Barack Obama also urged Britain to stop messing around and stay in the union. In the background economists polled by Reuters say that there is a 60% chance the UK will lose its AAA rating, which it has held since 1978, in the coming 12 months.

In other news, Apple announced earnings last night, showing the weakest increase in sales in 3.5 years, and the most disappointing profit growth since 2003. Since the shares of the world’s largest public company hit $700 in September, the price has fallen by 27%. Other technology companies like IBM, Google and Netflix did well and beat expectations in Q4 of the last year. Microsoft will report earnings tonight. read article

So long.

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More bank scandals, more economic trauma

Wherever you look, today’s favorite scandal is still Barclays, mostly because CEO Bob Diamond said he would reveal “potentially embarrassing details about Barclays’ dealings with regulators if he comes under fire at a parliamentary hearing on Wednesday.” I’m thinking party pictures and strippers. Next thing you know, Diamond quits, effective immediately. Bloomberg’s Nick Dunbar already dubbed him the Republican candidate for 2016.

But speaking of manipulative banks… JP Morgan has been subpoenaed twice in the past couple of weeks because they may or may not have inflated electricity prices in the USread article

Since yesterday’s atrociously bad ISM data, showing the rapid decline of the American industrial manufacturing sector, today continues in the same fashion. British construction activity fell to its lowest levels since December 2009, aka that really bad year, last month. Overall, the Global Manufacturing PMI has sunk to a three-year low, with manufacturing output falling in the US, UK, eurozone, China and Japan in June, says Markit. More QE in the US and UK can be expected shortly. Not even Brazil is doing well anymore, after a better than expected first quarter of the year, forecasts aren’t looking great.

Europe is not doing much otherwise, which I guess is a good sign, but here and there the possibilities of referenda on the EU membership are getting more real. In the Netherlands the situation is very political and contingent on voter support of extremist parties, such as Geert Wilders’s PVV, which presented its campaign program including a separation from the EU today, leading two of its parliamentarians to quit. read Dutch article read English article

In the case of the UK, the idea of a referendum is less surprising, because they like to pretend that they knew the European Union was a bad idea from the start. The prime minister’s opinion is a little muddled in his awful attempt of being diplomatic, but I still have a bit of a Cameron-appreciation-moment anyway, as he said

I don’t believe leaving the EU would be best for Britain. Nor do I believe that voting to preserve the exact status quo would be right either.”

Naturally, this only adds on to the constant back-and-forth in his agenda.

Also, Microsoft has admitted defeat in the online advertising battle with Google. At least sort of. In 2007, Microsoft bought AQuantive for $6.3bn, allegedly its most expensive acquisition. Now, the unit is being written down by $6.2bn. Since the acquisition, Microsoft’s internet business is meant to have recorded operating losses of $9bn. Ouch.

So long, and for the AmUricans, happy 4th of July.

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Easter trend: $1bn deals

It was just another Easter Monday, and then Facebook bought Instagram for one billion dollars. Well done, Instagram: it’s series A funding in February 2011 valued to company at $20m; 14 months later, Facebook’s acquisition values the business at 50 times as much. Can you share graphs with Instagram? read article

More interesting than the investment in this hipstertastic photo-sharing tool, however, are the parallels to the Google-YouTube deal in 2006, says the FT. read article

Another $1bn deal ($1.056bn): Microsoft bought a portfolio of 800 patents from AOL. Others bidding for it were the usual suspects (Google and Facebook), but also Amazon and eBay. Weird. read article

Otherwise, the OECD CLI (composite leading indicator) points upwards! Not exactly in a steep angle, but up is up, meaning that the OECD countries could possibly maybe see some growth at some point in the not too distant future. read article

Having said that, the IMF still sees the eurozone contracting in 2012, disregarding the increase in exports (+1.6% since January) that Germany is parading around this morning. read article

All other numbers coming out of Europe today (found here) are kind of depressing, with the exception of Switzerland’s unemployment rate of 3.9%.

Want to make $12 a second? Become a CEO. Another analysis round of executive pay. read article

Nathan Heller has an article in the New Yorker‘s Books section, describing and analysing the way we (assuming ‘us’ to be younger than 45 just for a minute) live: alone. But it’s not depressing, au contraire, it’s hilarious. Some, including myself, think it’s technology’s ‘fault’ that single life is to accessible and comforting, but the psychologists cited in the article don’t exactly agree. It’s too bad that this article only touches upon care for the elderly though, and no other areas such as tax policies or real estate.. Anyway, still a good read. read article

So long.

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Let’s boycott tzatziki

Yesterday, Ireland announced to hold a referendum regarding the EU fiscal pact. In an act of gratitude, I think they could have let this one slide, but that’s just me…

The Dutch voted in favor of the bailout package for Greece, but reserved the right to publicly bash them. Mark Harbers, Dutch liberal politician, said it loud and clear:

“… it can still go wrong in Greece, because there are Greek people living there. No one can blame us for not having any trust in them anymore.”

About a week ago, the Greek consumer protection organization Inka called for a boycott of all German and Dutch products. Why? Because it helps against austerity and default, stupid. read article

In the night from Monday to Tuesday, the Occupy London camp in front of St Paul’s was cleared by the police (really like the headline in the Sydney Morning Herald: London peels off occupiers). Today, the Guardian reads this:

 “I was sorry that the City of London tore down an oasis of political speech.”

Mark Greif, the author, writes this while is is not actually in London. He hasn’t been to the happy camp side ever since it popped up and generally seems to prefer writing about the US ‘occupations’. Kind of funny. read article

Planet Money asked three LSE economists why middle class jobs are disappearing and what that means (never mind their solution, it’s not exactly a breakthrough). read article

Otherwise, Microsoft has released Windows 8 for public testing and Apple has announced a new iPad for March.

So long.

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Wednesday, #47: tech and comparative data

The eurozone inflation rate fell from 3% in November to 2.8%. Combined with the expected decrease in consumer spending over the coming months, this leads the way for more interest rate cuts by the European Central Bankread article

Yahoo, in re-enacting the struggle of the Belgian government, fired its CEO Carol Bartz in September and now its interim CEO Tim Morse. Next one in line, Scott Thompson, current president of PayPalread article

Just inMicrosoft is suing UK retailer Comet for [allegedly] selling fake Windows Vista and Windows XP recovery CDs. My question, [as I don’t know anyone who has ever actually BOUGHT such CDs] how many could they possibly have sold? read article

More tech news that make me really happy: Soundcloud, Berlin-based audio stream platform, got $50m Series-C funding from über-venture fund Kleiner Perkins Caufield & Byers (Zynga, Twitter, Groupon…) and GGV Captial. Congrats, congrats. You should all use their site.

And once again, Denmark is taking the ‘country that is best at things’-prize home. Congratulations, I am not surprised. The opponent in this battle was the US, beat in the shadow of the Peltzman effect regarding entrepreneurship and intergenerational income mobilityread article

This Christmas, the friendly security staff at Stansted Airport pointed out to me that marmalade is a liquid, or rather, a ‘non-solid’. I had to go back out and check my bag in properly. It was annoying and embarrassing, mostly because I like to think I’m a very efficient flyer. Freakonomics feels my pain: read article

So long.

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