Deep Recession in Scotland

Scotland has performed significantly worse than any other country in UK. That's why I wanted to analyse a country that at a first impact may not sound attractive, but which in fact, counts a lot for the results of the UK as a whole.
The country faced a deep financial downturn which affected particularly the financial services. The performance of Scotland affected the Overall results of UK during the year. Many jobs have been cut during this year and 2008 and many others are expected to be cut in the next year. Predictions shows that the Scottish economy will contract by 4.9% this year, compared to 4.6% spread all over the UK. The slowdown of the Scottish economy was also due to the fact that the banking crisis affected the main two banks in the country RBS and HBOS.

Media Analysis:

Reuters, started to describe the news by bringing the opinion of Ernst & Young Scottish ITEM club. The article shows which sector has been mainly affected during the recession period, such as the banking system. Moreover, it explains how Scotland could adjust the situation rather than a change to the fundamental structure of the economy, by shifting toward more export activity. In addition, the article reports a sentence from ITEM saying "the low level of Sterling presents a real opportunity at the moment for Scottish businesses to expand their market share and to help offset the impact of depressed domestic demand" Which in my opinion is crucial at the moment for Scotland having the Sterling navigating at a low level. Furthermore, the article stated the unemployment rate, it also took in consideration a poll made by Ipsos Mori Scotland, which found that 42% of people thought unemployment was the most important issue facing the country, with 37% thinking that the economic situation was the biggest concern. The Poll showed also political influence by the Scottish National, Conservatives, Labour and Liberal Democrats Parties whether to vote for a referendum on independence.

The article from BBC News, stated which sectors were mainly affected in Scotland by the recession which significantly underperformed compared to the rest of the UK, such as financial services, business services, hotels and catering services. The article gave the same indications as the one from Reuters at some stage. But the interesting point of the article is the job losses prediction for the next year of 3,000 as bank restructuring continues, which particularly in the financial services the number reached 4,300 jobs lost already in the last 15 months. the output in the financial sector shrank by 8.4% last year compared with he rest of Britain 0.8%.

The Independent, had a really short article about the news. It only stated the main figures, with an explanation from the Ernst & Young. Unfortunately the article did not give any author's opinion on this, so this was not really an interesting article to read for a Scottish citizen.

My conclusion regarding this news is that Scotland's unemployment rate has reached very high levels compared to the other neighbour countries and there is no doubt that more pain has yet to come. The country will have a slow recovery, but it will depend heavily on the financial services especially the RBS and HBOS. But I believe personally that the country should play on the fact that the sterling at the moment is weak which is a rare thing, this may lead to a good exporting strategy by the private sector.

Sources:
Reuters:
http://www.nytimes.com/reuters/2009/11/29/business/business-uk-britain-economy-scotland.html

BBC News:
http://news.bbc.co.uk/1/hi/scotland/8383970.stm

Independent:
http://www.independent.co.uk/news/business/news/scottish-recession-will-continue-deep-into-2010-predicts-ernst--young-1830365.html

Dubai struggles on debt payments

Dubai yesterday shocked investors by asking for a debt stand-still of $59 billion from its state owned holding Dubai World, which focuses on real estate activity and that has developed some of the world's most extravagant real estate projects and constructions. Dubai's debt problem derives from a property boom that occur ed during these years which brought the world's tallest building as well as the extravagant palm beach island. But despite these incredible constructions we can see how all this led to significant hangover too. Western investors trust has been shaken by this announcement, who during the global financial downturn turned to the oil-exporting gulf region especially Dubai in search of help.


Media analysis:

After having read several Reuters articles regarding the matter, I chose to analyse an article that looked forward to the problem, which explained how Dubai may need help from its neighbour city Abu Dhabi. It refers to a power shift from Dubai to Abu Dhabi. The author asks rhetorical question such as "whether Abu Dhabi will bail out Dubai and at what price? . It explains the role of Abu Dhabi which is the capital city of UAE, and the seat of most of its oil wealth and the largest of the seven self-governing emirates by size. All these factors took a back seat during the last decade as Dubai undertook incredible building projects in the real estate sector in order to become the financial hub of the country as well as the most attractive city for tourism. The author analyses how Dubai needed the help of Abu Dhabi even before the market crash, lending $15 billion to Dubai, and it will need help especially now by admitting it can't meet the debts of Dubai World. All this is playing in favour of Abu Dhabi's ambition to unify UAE policies and laws, and to build a strong image of the political power in that region. Therefore the article analyses the situation also from a political point of view. Explaining how Iranian pressure regarding the nuclear weapon activity are concerning not only Abu Dhabi, but Washington too.

Bloomberg took a different approach to the news. The article went straight to the point, focusing on the bond issue and how the debts in bonds decreased from the crash of the real estate sector in Dubai in 2008. It took into account how this stand-still from Dubai World has deeply affected the western markets since the big global financial downturn. However, it took many opinions from different analysts, in order to compare and contrast, also with the crisis that affected Argentina in 2001. But the Author here did not really try to explain or actually give a possible solution or future perspective of the problem. It just explained the news in analytical and detailed way with basis points and numbers.

The Wall Street journal and FT gave a sensation to be the most shocked newspaper. Caring especially about their markets and banks involved such as; HSBC, RBS and Barclays. The undertook the approach just to explain how it has affected investors and how it was unfair to them. In an era where Dubai has attracted overseas financial companies in order for them to operate with relative freedom like in western countries and low tax barriers. This led me think on how such a country with such a significant resources of oil can have such debts?..Well, this is what the two articles transmit to the reader.

In my point of view, the Reuters article was the best to understand the overall situation which brought to this collapse of Dubai. I may add that the speed in how Dubai has built and created all these incredible infrastructure and buildings was too good to be real and stable. And that even though a country is rich for its natural resources, this does not mean that building in a rush brings a fast stable economy, especially if the foundation or root is sand. However, I think that at the end the neighbour Abu Dhabi will not want to see Dubai to sink. So a significant help will be on the way soon.

Sources:

Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRsjlClzl500

Reuters:
http://uk.reuters.com/article/idUKTRE5AP2S220091127?pageNumber=3&virtualBrandChannel=0

WSJ and FT:
Printed copy

India; diversifies its reserves from the Dollar

Shouldn't India and the other developing countries (Brazil or China) keep their reserves in the U.S. Dollar currency? what motives made India buy such a significant amount of gold?

Well, these questions arose since India is going to buy $6.7 billion of gold from the IMF. of course, the news turned up the markets of commodities all over the world, launching a big signal of alert to the U.S. currency and to other countries that keep their reserves under the American currency. In fact, as the Dollar is just getting worse, and unemployment rate reached its peak of 10% in U.S. Many countries that hold their reserves in U.S. Dollar are starting to look around for alternatives, and right now the most attractive and profitable way is the purchase of Gold.

Media Analysis:

Let's start from Bloomberg which it explains the situation best. Firstly, it points out questions on how and why is the gold becoming so attractive in the last period and why is not the dollar being the main starring of the situation. It then explains in four detailed key points the possible solutions and motives for why gold is coming back to attention during the last years. Another thing that i liked about the article is that it did not concentrate on the amount of the deal, but regarding its efficiency and its symbolic signal that it is sending towards the market and other countries. Furthermore, it reflects about the fact that this purchase of gold will probably trigger a bidding war to buy gold from the IMF. Bearing in mind that the lending institution is now back with fresh liquidity to help the nations that seek it more, forecasting which country will be next in buying gold. In other words, the article is attempting to say that a gold revival has begun. Especially for the Asian countries that expects the American dollar to appreciate in value.

Moving to the Wall Street Journal, here it states a similar point which is the significant shift away from the U.S. Dollar holdings. As we all may know the article then starts to give analyst's opinion regarding the matter. They focus on the fact that this strategy made by India is a type of asset diversification strategy. But also putting Indian Finance Minister statements. He explains that the American dollar is still a preferable currency, and that it will still be a significant part of the foreign exchange holdings, as most of India's external debt is in dollars"
In addition to the Bloomberg article, here numbers and data are given. Stating the effect had from the purchase of gold by India to the market boosting the prices of gold up. Having a record in the New York Mercantile Exchange at $1.084.30 per ounce.
Moreover it does here as well make predictions of who will be the next buyer countries like China or Russia would be the probables. I would recommend this and the previous article for financial readers.

The Economist article, sees the move made by India as a cultural move. Meaning that in the country the use of gold is high; from necklace, anklets and other pieces. however, it does explain briefly in two paragraphs the main points of the deal though very shortly. It might be attractive to fast-readers than financial readers.

My conclusion is that both the WSJ and Bloomberg have focused on the main key points of the deal, but personally, I would choose the Bloomberg article due to its smooth way of writing and transmitting its probable expectations from the Indian deal.
I then think think that the Indian Finance Minister have made an intelligent strategy by buying gold, as i think probably that in the close future a big currency will fall dramatically, and by buying gold it has shown that they are not completely dependent from the trend of the U.S. Dollar. And that diversification is a main factor for Asian central banks in order for them to find a different way which gold seems for now being the right way of doing that.

Sources:

-Bloomberg:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ae2wslm0YHgc

-WSJ:
Printed copy

-Economist:
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14816649

Tough deal for Kraft

Hmm..how many times did we buy at least a bar of Cadbury when we had our brakes?!..yeh the world is struggling to come out of this crisis, but the chocolate lovers who might be stressed managers of big firms already did!
Kraft made a $16 billion offer then rejected in September to acquire the British company Cadbury and the deal for Kraft is becoming very uncomfortable for the board and for the shareholders.
As shown from the recent results of Cadbury, the company has performed quite efficiently in terms of profitability and revenue during this year. Which might attract many big names of the sector such as Nestle or Hershey, but Kraft is the only interested in the bid.

Media Analysis:

The Wall street Journal analyses the deal from the prospective of Kraft. It writes about the fears of the Kraft's' shareholders that would overpay the deal and this in fact led to the its shares to drop by 4%. It also gives an overview of Kraft's performance over the past years. Considering the operating margin which fell to 12.9% last year from 21% in 2002. Having difficulties with steady growth this would mean a cost reduction will be on the horizon and that fresh plans needs to be addressed in order to revive the growth. It also underline the effect of commodity price in the cost cut made to improve margins.

On the other hand, Blopmberg in my opinion gives a better overall view of both companies situation. It starts with analyzing the numbers as often occurs with Bloomberg's articles. Then analysts opinion are brought to give different views from different perspectives. For instance, analyst stated "Kraft will probably raise their bid by as much as they can straight up, and walk away if its not good enough for investors" which shows how confident Cadbury shareholders are towards the British company. Adding "that Cadbury investors may seek 850 pence to 900 pence a share" which is 23% above the offer value based on Kraft's closing share price on last Friday. Another analyst sees it differently. He thinks that "the estimate share price that investors seek is from 840 pence to 875 pence, believing that there is a growing possibility that the deal will not happen. Explaining the possible scenario "is that Kraft is the only bidder and that will need to raise the initial offer made of $16 billion, and that there is a chance to believe that Cadbury will still be independent due to shareholders rejection"
The article continue to give a better understanding than any other article that I found explaining also reasons why Cadbury shareholders should keep their shares even if there would be a "short-term pain".

The last article that I have found is the Timesonline, which isn't very long and does just give a short explanation of the whole situation of the bid. Showing just facts and figures of both companies. But also stating at the end that the offer will probably be rejected by Cadbury due to the low premium that Kraft will offer after the first offer made in September.

My opinion is that this bid needs to fail. The history of Cadbury to Britain has been important I think. And as many other flag company that has been sold this will not help the image of "made in the UK" to expand and grow as expected from many people as they wish to, like the "made in China or Italy". Selling off this kind of name and brand away won't help the workers of the company too to find a job right now in this period of recession.


References:

-Wall Street Journal: Printed copy

-Bloomberg
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avyHZqpeV4S8

-Timesonline
http://business.timesonline.co.uk/tol/business/

Low Dollar, high Euro

The Euro again has crossed the $1.50 barrier for the first time after 14 months. the news has been perceived as negative chance for the Euro-zone to recover rapidly from the last recession. Raising concerns about the strength of the common currency and its impact on the export market.

starting from the Wall Street Journal, the news was given in the front page, with the stating title "as dollar slides, fears rise". A comprehensive title which gives the idea of the problem, if there is one. However, the writer focuses its first comments on how the ECB President and the finance minister were trying to lower Euro and pushing for a higher dollar, thing that markets have largely ignored. The writer carries on by giving a "scary" situation of the dollar compared with other currencies. It does explain in detail all the numbers and facts about matter, but it does not give a clear idea or a probable solution regarding ways of helping the dollar to rise.

On the other hand, the Economist article gives a much more friendly approach to understand the dollar situation. It states the reason of why the dollar is in such a situation and what are the possible motives t such as "risk aversion" that contributed to this constant decrease of the dollar. In addition, it refers also to the countries like China and Russia that keep their reserves under the U.S. currency that are complaining about the continuous declines of the dollar and that there might a possibility for these country to shift these reserves in another currency.

The most pessimistic article was the one from the Financial Times. Saying that the fall of dollar will affect the Euro-zone more than expected. Especially in the long term which will affect the European industries and their imports. In this period of crisis which is affecting the more developed countries the message from the main media should be I think a bit less dramatic.

My recommendation to these articles, is definitely to read and enjoy the Economist's point of view due to its clear way of explaining the matter.The message from the other articles is a bit complex and get you out of the main points in my point of view. People should be informed in a less pessimistic way while getting out from a recession that we just had.

Sources:

-The Wall street Journal, printed copy

-The Economist
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14686307

-Financial Times, Printed copy

Big bonuses...the Return!

After reading the news this week I've asked myself whether the big bankers have really felt the crisis? Wondering if the word "humility" has ever been taught in their minds. Goldman Sachs especially, has taken the attention of the financial media after reporting a significant profit in the last quarter. of course, media and not only were divided regarding the big compensation plan that big banks will give to their employee at the end of the year, focusing with attention to Goldman. While the world's recovery seems to see the light at the end of the tunnel, Goldman seems to be much further enjoying already their bonuses in a "Hawaiian island".
Even though Goldman has performed extremely well after crisis that affected the global financial system even better than its prime competitors, it is not realistic that after the biggest financial crisis in recent history one of the biggest investment bank gives a $20 billion in compensation. The comments of the CEO Blankfein and chief financial office of Goldman was that "Due to the extremely well performance throughout the crisis of our employees they deserve this kind of compensation to keep them happy to be with us". Adding that "we are very aware of what is going on in the world". The question to ask here is "Were you aware before the crisis commenced"? Obviously, politicians and general public view disagree towards this type of compensation, (bearing in mind the help Goldman received by the taxpayers during the crisis when it needed government's help) Making them reflecting about how such paychecks can bounce back so quickly despite the good profit made.

Media analysis:

The Wall Street Journal reflects its view by showing the whole situation with detailed numbers stating Goldman's comments and external points of view. it referred to the good moment of wall street which helped Goldman to build assurance on its performance. Despite stating that it has played a role in causing the meltdown which then has been helped by the government and also despite the regulatory scrutiny of Wall Street's pay culture.

Reuters explained especially the way it got to earn those big big profits. and how Goldman will distribute the compensations despite the general critical view. It also wrote who will get the biggest payouts from Goldman, such as currency, commodities and fixed income traders. In addition, it stated as well as the Wall Street Journal the donation made by Goldman to the charity Goldman foundation of $200 millions.


Bloomberg's point of view was the most "interesting" article to read. In fact, the writer was clearly against this exaggerated compensation. His analysis is very critical about the matter and i think that rarely you can read such a criticized article. The writer pointed out in 5 points on how the amount of the compensation should be spent instead. And I think that the 5 points made were absolutely fair either for the general reader and for the shareholder right. He explains how the CEO of Goldman should move towards a believable behaviour. He then admits that Goldman was the only one in paying back the help $10 billion made by the government, which main competitors did not yet pay back like Citygroup and Bank of America. to conclude his point of view he ended up saying "The pay culture may change on the rest of Wall Street. Not at Goldman Sachs".

My conclusion is that Bloomberg's writer was definitely the most exciting to read due to his critical view and opinion about the matter and how wall street is not reacting as it should to this matter. Although The Wall Street Journal and Reuters gave a balanced opinion in regard giving many exterior opinion about the fact, whereas the Bloomberg's did not. It depends from which kind of readers we have in front, But personally I'd o for the Bloomberg's view due to his passion that put in his article.


REFERENCES:
-Reuters site:
http://www.reuters.com/article/financialsSector/idUSN1531732720091015

-Bloomberg site:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6arFvXkIf_8

-Wall street Journal printed copy

Steady Interests rates

A crucial key element for the future growth are the Interests rate. The importance of the impact in whether the ECB or BOE should increase or decrease the interests rates fundemental during this period of a recovering economy. The news is which is not surprising is that both ECB and BOE kept the their rates steady (1% ECB, 0.5% BOE)

on Thursday at the news conference which took place in the wonderful city of Venice, the ECB President Trichet announced the unchanged interests rate at 1%. The Wall Street Journal talked about the issue on its second page of the printed copy on Friday. The journal wrote that Trichet transimts stabilizing signs, but warns on being reliable on this fact. It also stated analysts' opinion who think that the interests rate will not raise before the first quarter of 2010.

the CNBC site published the news on Thursday. the approach taken is a bit different. It states that another competitor channel of information, which was a poll made by reuters that 82 analysts declared that expectations were met by Trichet's decision. Surprisingly, CNBC was the only source saying that Reserve bank of Australia (member of G20) was the only and first central bank to raise rates after the recession. Of course, CNBC gave many experts analysts opinion in regard, which in fact the way generally it conducts its news by giving opinions from experts. In addition, it shows that demand from banks to the ECB fell to 75 billion from 442 billion in June, which made declare Trichet that a hope that banks are starting to stay on their legs and searching for reliable ways to get cash instead on depending just from ECB's cash. Trichet answered also a question regarding euro's role as a pricing currency, he said "we are not campaigning for international use of Euro".


In conclusion, my analysis is that the Wall Street Journal's article covers the whole situation, as well as the BoE decision. Therefore giving also a more opinionated view of the situation from the writer and make it interesting to read. Wheras on the CNBC article on the internet it clearly shows a more analysts' view having then no view from the writer.

References:

- The Wall Street Journal (Printed source)

- www.cnbc.com/id/33221133