(MENAFN- ProactiveInvestors - UK) 08:22
Dimon Says Euro Zone May Not Survive Without Change in Direction
Here is the opening of this common sense assessment by one of the contemporary world's most successful bankers, written for Bloomberg:
The euro region could break up if political leaders don't get to grips with the discontent that's spurring support for populist leaders across the continent, JPMorgan Chase & Co. Chief Executive Dimon said he had hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn't happened, and if nationalist politicians including France's Marine Le Pen rise to power in elections across the region 'the euro zone may not survive,' Dimon, 60, said in a Bloomberg Television interview with John Micklethwait.
'What went wrong is going wrong for everybody, not just going wrong for Britain, but in some ways it looks like they're kind of doubling down,' Dimon said in the interview Wednesday at the annual meeting of the World Economic Forum in Davos, Switzerland. Unless leaders address underlying concerns, 'you're going to have the same political things about immigration, the laws of the country, how much power goes to Brussels.'
Officer Jamie Dimon said.
Dimon's remarks on Europe were unusually pessimistic, coming in a wide-ranging interview in which he also criticized regulations that he said stunt economic growth. But he reiterated optimism for President-elect Donald Trump. Minutes later, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein also expressed concern about Europe, telling CNBC that leaders are facing a backlash in the midst of a long, complicated process to create an economic bloc.
David Fuller's view
Many people have said this for some time, including in this service, but Jamie Dimon's view will attract more attention.
Eurozone leaders provide a classic example of arrogant groupthink. They speak mainly to each other, in the comfort of their palatial headquarters in Brussels and Strasbourg, financed by beleaguered taxpayers, and agree that they know what's best. Yes, 'they're kind of doubling down,' as Dimon says.
Just Like In the 1980s, Theresa May Faces Chaos From Militant Unions. And Just Like Margaret Thatcher, She Must Not Flinch
Here is a latter section of this significant column by William Hague for The Telegraph:
Philip Hammond has rightly warned the EU that 'we will do whatever we have to do'. So, in addition to pursuing trade agreements around the globe, what could we actually do, to convince the world that we have good enough plans for them to start buying pounds?
Here are five ideas:
1. Establish Free Ports. My very talented successor as MP for Richmond, Yorkshire, Rishi Sunak, has pointed out how Free Ports could bring a major boost to the economy, manufacturing and the north. This would allow goods to be imported, manufactured and re-exported without any duties or taxes because they would not officially enter the UK. The jobs created could run into tens of thousands, and the merchandise handled into hundreds of billions of pounds.
2. Give tax incentives to key global industries. Special tax relief for the film industry has been a huge success: major new studios have been built in Britain, over 200 films a year are being made here and we have 260,000 jobs thriving on the back of them. Every £1 of tax relief is meant to bring £12 back into the economy. We could give similar carefully targeted incentives to other creative, scientific and high-technology businesses, helping aerospace, biotechnology and others to see the UK as especially attractive.
David Fuller's view
Philip Hammond's comment that 'we will do whatever we have to do' was the perfect response to the EU, and from a former Remainer who previously sounded very pessimistic.
Here are my brief responses to William Hague's five ideas:
'Establish Free Ports.' I had not thought of this but it makes sense to me.
'Give tax incentives to key global industries.' I would favour across the board tax cuts which could be revenue neutral or even positive if the UK economy grew sufficiently as a consequence. Special tax relief did create a booming film industry in the UK and helping the scientific and high-technology businesses is certainly a very good idea since they represent the future. However, less glamorous industries are also important for a diversified economy and why cherry pick? We do not want to create unnecessary resentment and damage other contributing industries.
This item continues in the Subscriber's Area where a PDF of William Hague's article is also posted.
Email of the day
On Monday's Markets Now:
I just wanted to say how much I agreed with the subscriber email 2 yesterday on the 'huge difference' you & Eoin make with your service.
Give me the Markets Now over Davos any day of the week.
The financial services industry needs more people with competence & integrity like Iain Little & Bruce Albrecht. David Brown's laser sharp intellect ( & I suspect more 'right brained' judgement) knocks spots off so many of the city talkers I come across.
I would have really enjoyed the 'pub' afterwards but I had to be home early. I find it best not to irritate my wife by getting home too late & the dog is always there waiting for his walk.
With best regards
David Fuller's view
Thank you so much. It was good to see you again, looking so well, and I enjoyed our chat as we were approaching the Club. There is no better audience than veteran subscribers and I learn something new at every session of Markets Now.
I sympathise with your wife and patient dog, and am sure your early arrival back home was welcomed.
Behind China's Bond Selloff, a Risky Twist on the Repo Trade
This article by Shen for the Wall Street Journal may be of interest to subscribers. Here is a section:
As much as 12 trillion yuan ($1.73 trillion) in bonds—or 19% of the country's $9 trillion bond market—could be subject to such repurchase agreements, according to an estimate by Shui Ruqing, president of bond clearing-house China Central Depository & Clearing Co., cited last month in China's influential Caixin Magazine. Traders say the deals are so opaque that even estimates are hard to make.
Banks sometimes use the 'dai chi' agreements to move risky assets temporarily off their books during earnings periods or audits, the people said. Brokers like Sealand typically use them to borrow quickly and flexibly—leveraging their investments many times over, they said.
Until last year, Chinese financial regulators had largely ignored the practice, beyond saying they opposed it during a bond-market crackdown in 2013. But the informal nature of dai chi also meant the trades could be difficult to enforce when conditions worsened.
'Because it's not really an official business, agreements aren't legally binding,' said the executive who had bought bonds from Sealand.
Sealand's problems became apparent on Dec. 15, when the southern China-based company announced that two of its traders had forged dai chi agreements worth 16.5 billion yuan ($2.4 billion), a move that market participants interpreted as meaning the broker didn't intend to honor the deals.
The amount was more than five times what Sealand had declared in its Sept. 30 financials as its financial assets under official repurchase agreements, and more than seven times its disclosed bond-holdings.
Eoin Treacy's view
China has developed extraordinarily quickly from a closed backwater into a massive financially significant hub. While the pace of development has been blistering the evolution of regulatory standards of governance has been much more moderate. The single party system where cronyism, nepotism and the modern equivalent of simony combine to ensure just about anything is permissible, provided your social standing is within the correct circle, and only exacerbates the situation.
Goldman, Citi Beat Estimates as Trading Buoys Wall Street
This article by Dakin Campbell for Bloomberg may be of interest to subscribers. Here is a section:
Citigroup Chief Executive Officer Michael Corbat and Goldman Sachs CEO Lloyd Blankfein have been cutting costs and restructuring management to adjust to stricter capital requirements and a revenue downturn since the financial crisis. Goldman Sachs's 2016 revenue was the lowest in five years, though investors and analysts are speculating the firm's trading operations could be one of the biggest beneficiaries of Trump's policies.
'The benefits from higher interest rates, accelerating capital deployment and historically low credit costs have been evident throughout the large-cap U.S. bank earnings releases,' Marty Mosby, an analyst at Vining-Sparks IBG, said in a note. 'The fundamental story remains intact.'
Eoin Treacy's view
Bond trading profits are dominating headlines among the major banks but hide the fact that most have seen their businesses contract over the last few years as the high cost of complying with regulation bit into the size and scope of their businesses.
Pot Industry Exhales (a Little) After Trump's Attorney General Pick Testifies
This article by Polly Mosendz for Bloomberg may be of interest to subscribers. Here is a section:
Dayton said Sessions "may be against marijuana policy reform, but he is not stupid. He knows that these cannabis laws are hugely popular, not just among Americans in red and blue states, but with his boss who campaigned in favor of these laws."
While his responses, on their face, were hardly a coup for the cannabis industry, Sessions didn't morally condemn pot smokers either.
"The United States Congress has made the possession of marijuana in every state, and distribution of it, an illegal act," he testified. "If that ... is not desired any longer, Congress should pass a law to change the rule."
The Drug Policy Alliance, an organization opposed to the war on drugs, called the testimony "wishy-washy at best." The group's senior director of national affairs, Bill Piper, added: "It is clear that he was too afraid to say the 'reefer madness' things he said just a year ago, and that's progress. But he made it clear throughout the hearing that he will enforce federal law."
Eoin Treacy's view
While a good many politicians have made statements condemning cannabis use 'evolution' of their views on the topic are increasingly required as an ever increasing number of states legalise recreational or at least medical use. That has created a bull market in supply of the herb, not least because it grows like a weed. Wholesale prices have contracted considerably as operations initiated following Colorado's legalisation reach commercial scale. That has resulted in mixed performance for the related shares.