Nearly two years after the bankruptcy of Lehman Brothers early cause of the global financial crisis, Pacific Investment Management Co. plans to present to the market a new product that will offer protection to investors against market crashes by over 15%. Pacific Investment Management Co, or PIMCO, manages one of the largest bond funds in the world, led by renowned investor Mohammed El-Erian. Estimates of Morgan Stanley’s analysts indicate that in the second quarter demand for hedging against such disasters caused fivefold increase in trade in credit derivatives, speculating that the market volatility. Attempts to protect against a new crash helped to increase the relative price of most “bearish” Credit derivatives to its highest levels for the past two years. This shows that investor psychology has not yet recovered from the bankruptcy of Lehman Brothers on September 15, 2008, deletion of 20.3 trillion. dollars from global stock markets and caused the freezing of credit markets. “We all begin to understand that the road to recovery will be quite long and quite painful,” said William Cunningham, chief investment strategist at the Department of the Boston-based State Street Corp, managing two trillion. dollars. “Things are fragile and vulnerable in a way that is unmatched in history,” he added.
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The latest rating of the banking sector, led by the British magazine Banker, confirmed that an increasing part of the strongest banks in the world are based in developing countries, led by those in Asia. The two most profitable banks in the world in 2009 were Chinese, as a fall in the top 20 three Chinese banks – ICBC, China Construction Bank and Agricultural Bank of China, respectively first, second and 14th place. ICBC profit of last year amounted to nearly 25 billion dollars, followed by $ 20 billion for China Construction Bank and around 7 billion dollars for Agricultural Bank of China, Reuters reported. The third most profitable bank in the world in 2009, Goldman Sachs is a positive financial result of 19.8 billion dollars. After it with 18.9 billion dollars ranks British Barclays, which is the most profitable among banks in Europe. Profits of the top banks in 1000 are four times higher compared to 2009, but their return is still significantly below its pre-crisis levels by 2007. At the same time among the big losers in 2009 to rank a number of European banks led by Anglo Irish Bank, which tops the list of losers banks with a loss of 18.5 billion dollars. It is followed by the financial division of General Motors – GMAC, which was largely owned by the U.S. government last year with a loss of 10.3 billion dollars. Thirdly, Citigroup stands with a loss of 8.4 billion dollars. Bank of America at the same time has surpassed its competitor JPMorgan, becoming the safest bank in the world. Classification is based on the cost of capital tier (Tier 1 capital).
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Most business managers who are faced with global forces shaping the business environment also believe that their ability to shape the future is minimal. And a law that can do very little to alter the demographic trend or a major change in consumers’ minds. However, they may react to these forces, or better yet, can expect them to their advantage. What is usually done is that most of them ignore them, risking their entire business, says Quarterly McKinsey. Business history is full of examples of companies that have missed significant developments such as the digital era and the music industry. However, history offers brilliant examples in which companies have caught the forces behind the global business scene, and used them to protect or develop their businesses. It did so many companies – from insurance to energy producers, and responded to growing concerns of the public about climate change. This made and Wal-Mart, by introducing new technology to automate the management of stock, which has made huge savings for themselves and their suppliers.
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How exactly equal bank bonuses? New European Union rules require that only part of bankers bonuses, retention of another, and others may even need to be returned. Therefore, according to calculations of Reuters Breakingviews, the present value of the bonus of $ 1 million may be less than 800 thousand dollars, write a blog published by Reuters Hugo Dixon and George Hay. The starting point must be how much money it will take a banker in the cache. The new rules require 40 to 60% bonus to postpone the payment within 3 to 5 years. Moreover, half of the bonus paid immediately should not be in the form of cash. This means that you can get at most 30% of the amount in cash. For bankers with big bonuses, however – those over $ 1 million, you should have deferred consideration of over 60 per cent. Therefore, a maximum of 20% or 200 thousand dollars from $ 1 million bonus will be received immediately in cash. The next step is to calculate how much you can get a banker in the future. In the above case this means deferred bonus of 600 thousand dollars, half of which can be paid in cash. This amount, of course, must be discounted considering the risk of withdrawal of bonus due to poor performance, and postpone payment. Assuming a 5 percent risk of withdrawal of bonus each year and if you put a discount rate of 4 percent over the present value of money over a period of five years bonus declined from 300 to 213 thousand dollars.
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The Spanish government denies comments that will resort to the rescue plan of the European Union (EU) and International Monetary Fund (IMF) to support the euro value of 750 billion dollars. It was not long ago, however, when the Greeks radiated such unconvincing denials, writes Wall Street Journal, reiterating that the budget deficit of Spain was 11.2 per cent of GDP. Not only the Government of Spain has a problem with funding, but also the majority of businesses and financial institutions in the country who are avoiding the international capital markets, said Francisco Gonzalez, president of BBVA – second-largest bank in the country. Spanish banks are burdened by bad loans to the sector of construction and real estate. As a result, European Central Bank (ECB) is increasingly becoming their lender of last (and only) instance. Advocates accuse the state government incentives for restrictions stifled economic growth and undermine investor confidence in the ability to refinance the country maturing debts. According to them the price at which government funding is high because it does not hold enough. Budgetary constraints, which in the case mean Madrid experience deficit be reduced to a still impressive 9.8 percent in 2010, however, are not the reason for the spread record in the Spanish government bonds compared with baseline Germany.
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After rating agency Standard & Poor’s “lowered its assessment for Greece and further exacerbate the crisis, increased criticism of the Agency. But how do they work? What authority have? And who controls them?
Branch of rating agencies is not too large and in practice the market is dominated by three companies: Standard & Poors, Moody’s and Fitch. Reviews of these private companies headquartered in New York respecting the financial markets of the world. Their task is to evaluate the securities of banks and government loans. For example, when a country needs fresh money, issue bonds and government agencies assess the likelihood that country fails to return the borrowed money. In other words it comes to assessing the creditworthiness and risk for investors who provide capital.
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For this purpose, the agencies have their own evaluation system – Triple A is the best estimate, but everything below the triple B, practice is rubbish. The agencies claim that their ratings are nothing more than opinions with free nature. Financial markets, however, take these evaluations very seriously.
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In Italian television news is a top issue: the crisis in Greece. Journalists also vigilantly monitor the delicate situation in Portugal and Spain. The financial situation in Italy itself, however, remains in the background. “People are desperate and this is very dangerous,” said an elderly Italian, who read a newspaper Milan Square Cruising Markanti activities. He teaches finance at the University of Bari and paints a picture of Italian bad future: “People live day to day, politicians too. They look to cope with what lies ahead tomorrow but not long-term task for the renovation budget. The media is not informed enough. Almost no one knows at what risk we are exposed today said the teacher from the University of Bari.
Taxation feet of clay
According to news concern, because Italy’s tax policy is based on illusions in the economy. If the government in Rome not quit this country will lead to a condition which is Greece. Certain financial and economic experts in Italy strongly reject such grim forecasts. Among them was Giacomo Vachiago economist as saying Italy can not be compared with Spain and Portugal: “Italy has less external debt in comparison to those two countries and the Italians have traditionally invested their savings in local government bonds, thus supporting the liquidity of the country. This is a kind of protection,” says economist Vachiago.
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The European Commission may approve compensation for air-companies, which lose every day $ 250 million, news agency Reuters, citing sources at the ongoing extraordinary meeting in Madrid of Transport Ministers of the EU. It involved the Bulgarian Minister Alexander Tsvetkov. His colleagues who could not freely fly to the Spanish capital involved in conferencing. “However, safety will be the main factor that will affect any resumption of air traffic in Europe. Because of this and our main concern primarily relates to safety and prevention,” said Spanish Minister of Transport Jose Blanco, whose country holds the rotating presidency EU. International Air Transport Association (IATA) called before the meeting to take steps to restore air traffic severely impaired due to volcanic ash cloud, which closed a number of European airports. Some European airlines have already condemned European governments on how they have reacted to the effects of volcanoes in Iceland. In Germany, the airspace above and which remains closed today, airlines do not hide their dissatisfaction and concern about losses. The two companies – Lufthansa and Air Berlin, insist on mitigation of restrictions on air traffic. “We want policy makers and responsible authorities to evaluate the situation to be put back into traffic and minimize losses for Germany’s economy “said spokesman airline Air Berlin Hans Christoph Noak said on Radio correspondent in Berlin.
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The Chaos in air transport which caused the volcanic ash from Iceland, is comparable to the period after September 11, 2001 when terrorists blew up two airliners into towers in New York and the Pentagon building, news agency Reuters. According to Bloomberg agency for the aviation industry losses from unrealized flights could reach $ 1 billion for the week. Will severely hurt the economy of Iceland. Calculations of the International Air Transport Association (IATA) show that air transport lost $ 200 million per day from paralyzed traffic. Besides the loss of revenue, airlines have additional costs because of diversion of passengers waiting in their service and aircraft forced to stay at different airports. According to the Association of European Airlines (AEA) extending volcanic ash all over Europe will cost the aviation industry over 100 million euros ($ 135 million) per day. Blockade at airports affected over 10 million passengers. One day stay costs around 30 million euros per Air France-KLM, a British Airways – 25 million but on Finnair – 2 million. Stopping of the traffic today cause weakening of the shares of airlines in the European markets. U.S. airlines have not yet reported estimates of expected losses from canceled flights to Europe. Only on Saturday, April 17 in Europe have been canceled 17 000 flights and 337 of the planned transatlantic lines, European airlines have managed to make only 55, showed the latest data of IATA. Exact amount of losses from the stay of the aircraft to be calculated, but it is clear that the Icelandic volcano tourism will hit the country more than twice. The ash devastated the island nation’s budget and local government will be forced to seek additional funds for recovery from disaster. Most affected will be tourism, which has 13% share in gross domestic product (GDP) of the country. And given that the GDP of Iceland fell by 6.5 percent last year, while per capita income declined by 20% volcanic ash will cause another severe blow to the country.
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The Germans are outraged that have to pay the debts of Greece. Politicians exploit these feelings without having to bother to explain to people the whole truth, says the publication of the newspaper Suddeutsche Zeitung, quoted by Radio Deutsche Welle. Reality has little to do with clichés. Worse is that the Germany government totally failed in its mission to inform and calm just Germans the truth about what is highly indebted to Greece for the common currency, responsibility and interests of Germany. Silence continued so long that finally Luxembourg Prime Minister Juncker seemed forced to take over the role of educator.
No money – no jobbery
In an interview on the radio Juncker said what chancellor Merkel suppressed. He explained that no European taxpayer and at least Germany should be afraid for their money. In the event that Athens asked for money, she will get a loan, which will be quite normal to pay interest. Germany Government may even benefit from such a loan, since it would take the money market at much more favorable conditions than those under which they grant to the Greeks. And not only Germans could allocate money to Athens. No, we should help all countries in the euro area, the burden will be distributed in accordance with a special key.
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