NEWS,23.08.2012

Global economy slips into dire straits

The eurozone is on track for its second recession in three years, China's once booming manufacturing sector is contracting at a faster pace than previously reported, and the United States is widely seen as struggling to keep up its pace of growth.Business surveys released on Thursday painted a global picture of economic malaise from Beijing to Berlin.The eurozone economy will shrink around 0.5% in the current quarter as the economic rot is even spreading through Germany, the region's largest and strongest economy, Markit's Purchasing Mangers' Index (PMI) suggested.It came on the heels of the HSBC Flash China manufacturing PMI falling to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.Growth in the United States manufacturing sector is also expected to have slowed in August. U.S. data due at 12:58 GMT."The indicators taken as a whole indicate a material slowdown in the pace of the world economy," said economist Philip Shaw at Investec.The eurozone composite PMI, which measures manufacturing and services together, was actually slightly better than a month earlier, nudging up to 46.6 and just pipping forecasts for it to hold steady at July's 46.5. But was still its seventh month in a row below 50, the dividing line between contraction and growth."August's flash eurozone PMI does nothing to challenge the notion that the single currency area is now firmly in recession," said Jonathan Loynes, chief European economist at Capital Economics.More worryingly, the downturn in smaller eurozone economies is clearly taking root in the core. The flash composite PMI for Germany fell to a three-year low, a fourth straight month of contraction.German economic growth slowed to 0.3% in the second quarter on a sharp drop in investment, adding to evidence that it can no longer be relied on to pull the eurozone out of a deep slump, data showed earlier on Thursday. "Another reminder that a chronic lack of economic growth in the eurozone will continue to impede efforts to bring the debt crisis to an end," Loynes said.The eurozone economy shrank by 0.2% in the three months to June, according to official data. Economists polled by Reuters last week predicted a similar outcome for the current quarter, with no growth until the start of next year. Falling demand from debt-ridden Europe, China's single biggest export market, has put the Chinese economy under pressure, with the ripples now being felt across the world."It's very hard to put a positive spin on anything within the (China) data. Bottom line - a very poor update," said Robert Rennie, chief currency strategist at Westpac Bank In Sydney.Japan said on Wednesday that exports slumped the most in six months in July as shipments to Europe and China tumbled. Exports from Taiwan, a key part of the global technology supply chain, fell for a fifth straight month in July and South Korea, home to major car makers, computer chip and flat-screen producers, recorded its sharpest export fall in July in nearly three years.Six consecutive quarters of slowing Chinese growth have also taken a toll on commodities markets, with falling prices and an uncertain outlook prompting miner BHP Billiton to shelve a $20bn expansion project in Australia."Today's PMI report is a clear reminder that the slowdown is not yet over and that the Chinese economy is still too shaky to recover without ongoing policy stimuli," said Nikolaus Keis at UniCredit. "The pressure on the Chinese authorities to further step up their policy accommodation is therefore growing."China has been fine tuning policies to keep growth on track without releasing curbs on the property sector.In contrast central banks in the developed world have slashed interest rates to near zero and injected trillions of dollars into the money supply in efforts to support growth.The European Central Bank is expected to cut rates by 25 basis points to a new record low of 0.5% when it meets next week, but analysts say that will do little to stimulate lending. The U.S. Federal Reserve is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the U.S. central bank's latest meeting suggested.

Venezuela Elections 2012: Chavez Has Money Edge In Presidential Race

Opposition candidate Henrique Capriles typically runs his presidential campaign by jogging through Venezuela's small towns, reaching out to supporters with both hands and climbing aboard the back of a flatbed truck to speak to hundreds of people.By contrast, President Hugo Chavez brings large sound trucks, a production team and a fleet of buses that carry supporters and government employees to plazas to cheer him on by the thousands.A little more than a month ahead of Venezuela's Oct. 7 election, Chavez enjoys clear advantages over his challenger in campaign funding and media access. While neither campaign has revealed how much it's spending, Capriles says he is in a "David vs. Goliath" contest, facing a well-financed incumbent backed by an even richer government."We're fighting against two checkbooks. There's no way to compete economically speaking," said Rafael Guzman, who is in charge of finances for the opposition coalition. He accused the government of using money from the state oil company, Petroleos de Venezuela SA, and a separate development fund, Fonden, to support Chavez's campaign and bankroll projects aimed at boosting his support.Chavez's allies say Capriles is being backed by business tycoons including fugitive bankers who have fled the country and oppose the president. Chavez's camp hasn't provided details of those accusations.The law does not limit individual campaign contributions, though Guzman says the Capriles campaign caps donations it receives at a maximum of 2,000 bolivars ($465), even though people can make many such donations. He said all have come from individuals, none from companies."We aren't receiving anything from businesses," Guzman said.So far, Capriles' campaign doesn't look like it's rolling in wealth. It has even taken to holding raffles, fundraising dinners and weekend street fairs selling used clothes and donated food.Judith Beltran recently browsed through stands selling landscape paintings, handbags, underwear and used baby clothes at Caracas' Petare slum, holding a bagful of clothes she'd just purchased."I came because they're selling everything cheap and also to help out Capriles," she said.Meanwhile, Chavez's face smiles down from innumerable billboards and signs festooned on lampposts throughout Caracas and other cities, far more than Capriles' campaign has managed.There's no spending limit on such advertising, but the law limits campaigns to just three minutes of paid TV ads a day, and Capriles' backers say there's no clear line between Chavez's campaign ads and the much more frequent government promotional spots showing the president doling out apartments to the needy.The law doesn't prevent Chavez from using his power as president to take over programming on all of the country's TV channels and radio stations for his speeches, something he does regularly.Chavez and his allies say he's merely governing, not wielding any campaign edge that could be considered unfair."Hugo Chavez's advantage (is) in his power of communicating with his people," his campaign manager, Jorge Rodriguez, said last month.Rodriguez on Wednesday also denied that Chavez has an edge in airtime, saying much of the coverage by private TV channels and radio stations favors Capriles.In a recent televised appearance for the opening of a state-run supermarket, Chavez tried to differentiate his roles as president and candidate. "I'm complying with an obligation to inform the public," he said."I am going to say what I'm going to say very carefully. It shouldn't be interpreted as campaigning," Chavez said. Chavez then responded to criticism by Capriles and other adversaries that he is giving away Venezuela's oil wealth through preferential deals with allies.Chavez's socialist party, for its part, insists it uses no public funds and gets its money from supporters. It held a raffle last week with prizes that included a new car, motorcycles and appliances. Some Chavez opponents called for electoral officials to investigate that raffle, saying public employees had reported that they were forced to buy tickets.Venezuelan election law requires candidates to provide detailed monthly financial reports to electoral officials, but the National Electoral Council generally doesn't publicly release financial figures during the campaign.Neither the Chavez nor Capriles campaign revealed how much money they've raised when asked. Chavez's campaign didn't respond to requests for comment, and officials in Capriles' campaign said it was unable to provide a figure.Venezuelan election law also prohibits campaign donations from government entities, foreign donors and companies that are contracted to provide public services.Venezuela is atypical in Latin America in that it doesn't provide public financing for campaigns or political parties, said Jennifer McCoy, director of the Americas program at the Carter Center. She has directed past election-monitoring missions in Venezuela and other countries."Because there's no regulated public financing, then that means that all of the sources of money are private or undisclosed, and so it's very difficult to assess how much each side is spending and where the money comes from," McCoy said in an interview during a visit to Caracas."I really have no idea how much each side is spending," she said, "but in terms of the opportunities particularly for the media presence and the opportunities for providing benefits to voters, certainly an incumbent government – and this incumbent government – has an advantage."The opposition has complained that Chavez has abused his presidential authority by taking over the airwaves, but the National Election Council has taken no action on the matter. Four of the council's five members are Chavez allies or widely perceived as favoring the president.Vicente Diaz, the one council member often openly critical of the government, said in an interview that a candidate such as Capriles is essentially running "against the state.""It's not fair," Diaz said, but added that "the popular will is respected, and the one who has the votes is going to win."

NEWS,14.03.2012.

Banker quits, calling firm 'toxic and destructive'

The Goldman Sachs Group, New York's lower Manhattan 

Goldman Sachs faced an unprecedented assault from one of its own after a banker published  a withering attack in the New York Times, calling the Wall Street titan a "toxic" place where managing directors referred to their own clients as "muppets." It was the latest blow for the storied investment bank, which has long supplied senators and cabinet secretaries to Washington but now draws comparisons to a "great vampire squid wrapped around the face of humanity.” In an opinion column in the Times, Greg Smith, who worked in equity derivatives, said Goldman had become "as toxic and destructive as I have ever seen it.” It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,'" Smith said. In the United States "muppet" brings to mind lovable puppets like Kermit the Frog, but in Britain, "muppet" is slang for a stupid person. Goldman Sachs issued a short statement in response:” We disagree with the views expressed, which we don't think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.” In a subsequent memo to staff, Goldman Chief Executive Lloyd Blankfein and Chief Operating Officer Gary Cohn said Smith's views were in the minority among his 12,000 fellow vice presidents around the world.” And, what do our people think about how we interact with our clients? Across the firm at all levels, 89% of you said that the firm provides exceptional service to them," they said in the memo. Goldman shares were down 3.7% in trading, on a day when broader markets were only slightly lower. The company, which sometimes lacks for defenders given the hits to its reputation in recent years, garnered at least some public support in response to Smith.” The many people we have dealt with there have all been exceptionally talented and high-grade, and never once have we had a negative experience in which we felt that they took advantage of us or didn't do what they said they would do," well-known fund manager Whitney Tilson said in a note. While Smith, who did not return calls for comment, carried the title of executive director, it was not nearly as illustrious as it might sound. Worldwide, Goldman has roughly 12,000 vice presidents and executive directors. That compares with 450 managing directors, the next rung up in the Goldman hierarchy and a job classification that Smith didn't achieve. Overall, the company has about 33,000 employees, meaning that 36% of Goldman's workforce carried a similar title as Smith. According to the British Financial Services Authority's register, he joined Goldman's UK unit a year ago. Johannesburg-born Smith attended universities in his home country and in the United States, where he received a degree in economics from Stanford University in 2001. He also interviewed to be a Rhodes Scholar in South Africa in 2002.While at student at Stanford he had a summer internship at Paine Webber in 1999 and a summer internship at Goldman in 2000. Upon graduating from Stanford in 2001, he landed a job at Goldman as a financial stock analyst. He most recently worked a vice president for Goldman Sachs Services Ltd.Though relatively little is known about Smith otherwise, a friend of Smith's who knows him from London and is connected to him on Facebook, said he was a man of integrity.” He’s always been very honest and open. I wasn't aware he had any of those views. He always seemed to be happy. He's always been very social," the friend said, speaking anonymously. In contrast, questions began to arise about accomplishments that Smith trumpeted in his op-ed piece. Smith spoke with pride about his success in competitive table tennis, but it is not clear how much success he actually achieved. The website Table Tennis Nation reported that Smith was a regular at a club in New York's Chinatown neighbourhood; though other players said he lacked serious competitive talent. Internally, Smith's op-ed piece was not necessarily well received by former colleagues. A trader, who knew Smith but not well, said the company, is telling staff that Smith is a disgruntled employee who is leaving because he didn't make managing director. This trader, who did not want to be named, says former Goldman colleagues are saying that Smith "wasn't very commercial," which means he wasn't producing the kind of sales the company wanted. Outside Goldman's London headquarters on Fleet Street, one company employee said with a shrug of his shoulders, "He worked here for 12 years apparently. Then, suddenly, he changed his mind." Goldman Sachs - fourth among investment banks last year based on fee-income rankings compiled by Thomson Reuters and Freeman Consulting - was once described as "a great vampire squid" in Rolling Stone magazine. The reference was to Goldman's the extensive influence in politics and business. A lawyer representing an Australian fund in a suit against Goldman over mortgage-backed securities said he may seek Smith's deposition to help bolster his case.” Part of Goldman's defence is everybody is sophisticated and everybody knew as much as we knew did," the lawyer, Eric Lewis, said. "But if you're calling your clients muppets - most muppets don't have the cranial capacity of Goldman.” In recent years the company has faced other high-profile incidents damaging to its image after the near-collapse of the global banking system in 2008.Earlier this month it was accused of a major conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, while being a significant shareholder in Kinder Morgan. One of its bankers, Fabrice Tourre - who referred to himself as "fabulous Fab" in emails - is still embroiled in legal claims in the United States after allegations that he duped buyers of a complex credit instrument. And two years ago, Chief Executive Lloyd Blankfein caused a media storm when he said that as a banker he was just "doing God's work," defending high banker pay and the role their institutions play in the economy. Paul Volcker, a former Federal Reserve chairman, called the Smith piece a "reflection of the change in market mentality over the last 15, over the last 20 years.” At an economics summit in Washington hosted by the Atlantic magazine, he said when Goldman went public in the 1990s and bought a large trading operation, "it became a trading organization and not customer oriented. Unsurprisingly, Smith's resignation letter captured the imagination of Twitter users. "Greg Smith" was a worldwide trending topic, meaning it had suddenly spiked in interest, while both that and "Goldman Sachs" were trending in the United States. Many of the commentators expressed surprise about the allegations in the piece, while others called for Smith to shed light on why he left the bank, or pointed out that he seemed to have been employed in a comparatively junior role. The letter also garnered mention on Facebook, which features pages like "Goldman Sachs Are Financial Terrorists.” As happens on the Internet in cases like this, near-instant parodies of Smith's letter cropped up. The most popular by far had Darth Vader of "Star Wars" fame resigning from the Empire via a letter similar to Smith’s.” To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead," the film franchise's dark lord wrote.