By Derek Hunter
Showing posts with label Derek Hunter. Show all posts
Showing posts with label Derek Hunter. Show all posts
By Derek Hunter
In October 2014, China launched the Asian Infrastructure Investment Bank (AIIB) -- an Asia-focused, and less United States-dominated, version of the IMF, or World Bank. As one might imagine, the United States was skeptical of the AIIB and viewed it as an attempt to displace American economic influence in the region. But, as the Economist reports, the AIIB would help to quench the nearly inexhaustible demand for infrastructure investment in Asia. As more of the United States’ European and Asian allies opt to join the AIIB, it appears that it will become a financial force in Asia, with or without the United States.
By Derek Hunter
As Ukraine’s financial and
security situation deteriorated, it became clear that it needed additional
financial support, which it received through a $17.5 billion loan package from
the IMF. However, the terms of the IMF’s package require Kiev to persuade
private creditors to accept $15.3 billion in write-offs or deferred payments
over four years. Nonetheless, in ongoing negotiations private creditors like
Franklin Templeton have refused to take a loss on their Ukrainian bonds and only
offered to extend the maturity of the bonds but not write-off any principal
payments. As the New York Times reports, Ukraine’s finance minister launched the latest
salvo in these negotiations when he warned in a series of interviews in London
that private creditors should not “hold out” against a settlement.
By Derek Hunter
When a domestic
corporation becomes insolvent – whether in the United States or any other
developed country – a detailed set of laws spring into action. In the United
States, domestic bankruptcy law supersedes state causes of action, and
automatically stays creditor actions against the assets of the debtor. Then, a
collaborative process is imposed on the parties in which every creditor will have
voting rights, but ultimate decision-making rests with a neutral judge. Congress
and the courts are continually honing the bankruptcy process, but the need for
such a process has been evident for at least a century.
By Derek Hunter
Before the financial crisis, the consensus was that global bank behemoths would prosper from diversifying into emerging markets while maintaining their stable operations in developed countries. Institutions like Citigroup do everything from residential lending in Maryland to junk bond trading in India. But after the crash, and its regulatory backlash, that presumption is questionable at best. The Economist analyzes the weakening model of global banking institutions like Citigroup, and questions whether it can persist in the post-crisis regulatory landscape.
By Derek Hunter
The European Central Bank (ECB) announced on Thursday that it would begin its new quantitative easing program on Monday, March 8th. The markets have been anxious for the start of the ECB’s bond buying program, which has the potential to stimulate Europe’s stagnating economy. However, the ECB’s bond buying programs comes on the heels of the twelfth consecutive robust U.S. jobs report. As the Wall Street Journal discusses, the Euro is likely to approach parity with the U.S. Dollar as conditions in Europe continue to decline while economic indicators continue to point towards a steadily improving U.S. economy.
By Derek Hunter
A sign of how dire the Greek
debt crisis has become is its most recent debt reduction measure -- tax spies. Worthy
citizens and tourists alike will be recruited to engage in clandestine
collection, and these masters of economic espionage will then pose as customers
at suspicious stores. While Greece’s latest attempt to address its revenue
shortfalls might seem humorous, the country’s financial condition is not. As
the New York Times reports, a third bailout is all but a certainty if Greece is
going to avoid default, and Greece will need more than amateur tax spies if it
wants countries like Germany to accommodation a debt restructuring.
By Derek Hunter
A year ago one
U.S. Dollar would buy you thirty-three Russian Rubles; today you can get
sixty-six Russian Rubles for your Dollar. There has been many contributing
factors to Russia’s economic woes in 2014 and early 2015 -- some self-inflicted and some
out of its control. But
recently investors have questioned the independence of the Bank of Russia, as
its interest rates seem to rise and fall with the political winds, i.e., the
demands of oligarchs and Putin’s inner circle.
The Wall Street Journal discusses international investors lack
of confidence in the Bank of Russia, and the consequences for the Ruble.
By Derek Hunter
Early in the
financial crisis the Federal Reserve and Bank of Japan initiated a policy of
quantitative easing (QE), which is an extraordinary form of monetary policy
where a central bank purchases certain securities to infuse capital into the
financial system. By essentially printing money, a central bank hopes to stem
any deflationary risk, incentivize lending, and stimulate the economy. The
European Central Bank is finally hopping on the QE bandwagon as the Eurozone
risks falling into another recession. As The Economist explains, unlike in the centrally
controlled U.S. and Japanese economies, the Eurozone federation will face
unique economic and political challenges in implementing QE across several
different countries.
By Derek Hunter
President
Obama’s 2016 budget includes a one-time 14% tax on approximately $2 trillion of
so-called unrepatriated (or “trapped”) foreign earnings of large multinational
corporations. The proposal also includes a 19% tax on future foreign earnings,
with a sizable credit for foreign taxes paid, which will allow those earnings
to then be brought back to the United States with no additional tax due. The
importance of this proposal really cannot be overstated: TARP and the Obama
Stimulus of 2009 combined amounted to
$1.2 trillion, less than eligible U.S. corporate unrepatriated earnings under
this plan.
Check out the New York Times take on the Obama proposal.
By Derek Hunter
The G-20 Summit was held in
Brisbane, Australia over the weekend where world leaders discussed a uniquely
diverse set of issues. While the G-20 is comprised of the world’s largest
economies, and global economic policy always dominates the discussions, other
issues were prevalent this year. First, the continued isolation of Russian
President Vladimir Putin was obvious as he continues to support unrest in
Ukraine. Also, as a show of President Obama’s clout at the summit, a statement
on climate change was included in the final communiqué, despite Australian Prime Minister Abbott’s attempt to scrap it from
the official agenda.
The L.A. Times
reviews the unique issues discussed at this year’s G-20 Summit.
By Derek Hunter
In September,
Chinese e-commerce giant Alibaba listed on the New York Stock Exchange with
great fanfare, sending its IPO price up 67% since. If you thought that
excitement was overblown, well, you were wrong. This week more Alibaba news is
dominating Wall Street: first, Alibaba is planning a massive $8 billion bond offering, and second, U.S. hedge funds’ required quarterly disclosures reveal that every big name money manager from Daniel
Loeb to George Soros has taken a huge stake in Alibaba. Seems like Alibaba must
be the investment of the century, since all of Wall Street never gets an investment wrong.
By Derek Hunter
Several large banks agreed
to a $4.3 billion joint civil settlement with U.S., U.K. and Swiss regulators
on Wednesday over currency exchange manipulation by its traders. Similar to the
historic LIBOR settlements over the last few years, the six banks settled charges that they took
steps designed to boost their profits by manipulating one of the world’s
largest and most interconnected markets, sometimes at the expense of their
clients. In secret chat rooms, traders from multiple banks would disclose confidential
information to allow them to manipulate foreign currency prices and make a
profit for themselves.
BloombergView discusses what these traders did wrong, how it compares to the LIBOR
manipulation, and why this will not be the last we hear about these foreign
currency manipulators.
