November 17th, 2009
03:00 AM GMT
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How do you find the right financial advice? First find the right financial adviser. CNN's Andrew Steven's reports.

In an special Web exclusive, an extended chat with John Gannon of the Financial Industry Regulatory Authority on sussing out the best financial adviser.

Filed under: Biz ClinicBusinessFinancial marketsInvestment


November 16th, 2009
02:12 PM GMT
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After only a year on the ground in Europe as a young twenty-something correspondent, I was thrust into coverage that one knew was not only historic but would have grand implications for years and even decades to come.

I landed in Berlin two days after the fall of the Wall, but was fortunate enough to cover the IMF/World Bank meetings the year before in the same city.  While the institutions are often criticized for not having their finger on the pulse, in this case they were well ahead of the curve on how events were going to unfold.

During those meetings, I ventured over to East Berlin to experience for myself the impact of the communist led economy.  On countless occasions I was approached with whispers in my ears to swap dollars for East German marks on the black market.  Border guards snapped photos of western visitors like me for their files knowing full well that this cat and mouse game was drawing to a close.  One could only describe the experience as grey – from the look on East German faces to the buildings themselves.  

That visit helped me draw a clearer “before and after” picture.  Immediately after the Wall fell, West Germans embraced their neighbors, welcoming them in from the cold.  That euphoria quickly faded when it came to paying the bill for reconstruction, welfare payments and years of double digit unemployment.

The political impact of the fall of communism has been well documented, but what has often been left out of the discussion is the economic domino effect that it triggered.  First and foremost, East Germans were not willing to accept the original 5-1 exchange rate for their currency, nor the 3-1 that was quickly offered.  They demanded parity and within two short weeks received it from German Chancellor Helmut Kohl.  The move cost a fortune (an extra $50 billion) but in an historic context, the Chancellor made the right call.

Events were transforming so quickly, governments had difficulty keeping pace with change: German monetary union, the first all-German elections and fast on its heels the creation of the European single market – project EC (for European Commission)
1992. 

Perhaps because we have the benefit of hindsight and experience, the leaders two decades ago seemed much better equipped, despite fears then of German dominance.  Chancellor Kohl, Francois Mitterrand and Margaret Thatcher were the forces to be reckoned with.  They were pushed and prodded along by European Commission President Jacques Delors who drafted up the blueprint for greater expansion of the EU. 

They were thinking big at the time, you could sense that from the summits we covered.  Despite internal fears and haggling that took place, they eventually delivered on their promises.  The Euro is now a major force in global currency markets; the EU is home is 27 countries (albeit with a tinge of expansion fatigue) and it is a market of a half billion consumers. 

Have reforms happened fast enough?  The answer is clearly no.  Is there an issue of illegal immigrants flooding in still through Eastern and Southern Europe?  Ask those who live in Malta, Spain, Greece and Italy.  And are the more mature economies of Europe adapting to increased competition after the lowering of trade barriers?  Candidly no.

But if one takes a step back, many who doubted the decisions in 1989 and the years to follow must now say the European response and development post the fall of communism has been much more successful than originally thought, minus the labor reforms which today still hold back opportunities for the next generation.

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November 15th, 2009
10:04 AM GMT
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SINGAPORE – The talk was about global rebalancing. U.S. President Barack Obama arrived in Asia on his first official tour, talking about a "rare inflection point in history". A time where "we have the opportunity to take a different path." A chance to rebalance the model where Asia consumers consume more and US exporters export more.

Chinese President Hu Jintao was among world leaders at the APEC summit in Singapore.
Chinese President Hu Jintao was among world leaders at the APEC summit in Singapore.

APEC leaders fully endorsed the strategy; virtually every economy in the world does. But look inside the APEC meeting in Singapore, and see the problems of turning this into reality. One of the biggest may be China.

More than two years ago, China began to allow its currency to appreciate against the dollar. By the time the financial crisis exploded, it had risen in value by about 20 percent. The crisis was the signal for China to freeze the exchange rate there at about 6.83 to the US dollar.

That was a year ago. Even China's Asian trade partners are now worried that the Chinese yuan is undervalued against the sinking dollar. So one of the key issues in Singapore was to put subtle pressure on China to unfreeze its currency.

Finance ministers talked about flexible exchange rates, the APEC leaders were expected to talk to about "market oriented" exchange rates - all aimed at prodding China to become a little more "market oriented" in its own exchange rates.

But by the end of the gathering, all reference to market-oriented exchange rates in the final statement from leaders had been erased. There had been debate behind closed doors between the U.S. and China about the statement. In the end China appears to have won out.

The message seem to be China will move only when its ready. And for all its newfound goodwill and push for re-engagement, there's not much the U.S. can do about that.

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Filed under: APECAsiaFinancial marketsMoneyUnited States


November 15th, 2009
07:23 AM GMT
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Singapore – Alphabet soup is on the menu everywhere here at the APEC summit. Acronyms, painful at the best of times, seem to be used continually by leaders, CEOs and politicians gathered in Singapore. Here’s a guide for those trying to follow the action.

APEC

Asia-Pacific Economic Cooperation, or APEC, consists of 21 member economies that account for more than half of global gross domestic product – the value of all goods and services a country produces. Members include power players such as the United States, Japan and China and developing nations such as Chile and Indonesia. A key part of the mission: achieving the 'Bogor Goals of “free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies.”

 Once famously described as"four adjectives looking for a noun,” APEC sometimes comes under criticism for being little more than a talking shop. Members have no treaty obligations and all agreements are non-binding. Still any event that puts Barack Obama and Hu Jintao in the same room is going to attract the world’s attention.

 ASEAN

The Association of Southeast Asian Nations or ASEAN has 10 member states, with a combined GDP of US$1.5 trillion. The group’s mission is to promote economic growth and regional stability. Barack Obama will be the first U.S. president to meet with the group’s leaders, including Myanmar’s Prime Minister Thein Sein. The Obama administration has adopted a policy of engaging Myanmar, also known as Burma, in hopes it will push the country toward democratic reforms.

 TPP

Until a few days ago, the Trans-Pacific Partnership or TPP was little known economic alliance formed between Chile, New Zealand, Singapore and Brunei. Now the U.S., Australia, Peru and Vietnam want to join, with the intention of using the TPP as a stepping stone toward the ultimate goal of free trade throughout the APEC region. This may be the first you have heard of TPP, but I doubt it will be the last.

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Filed under: APECAsiaBusinessenvironment


November 15th, 2009
02:48 AM GMT
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Singapore – The dirty secret of events such as the APEC CEO Summit is that they are usually scripted, bloodless affairs where any "news" is typically of the tightly choreographed variety.

Exxon Mobil’s Tillerson: Can science predict what will happen with climate change?
Exxon Mobil’s Tillerson: Can science predict what will happen with climate change?

So it was a welcome relief that the last session, devoted to the theme "The Shape of Things to Come," bucked that trend. The always provocative Kishore Mahbubani, author of "The New Asian Hemisphere," asked the panelists to speculate on an improbable version of the future.

Rex W. Tillerson, chairman and CEO of the Exxon Mobil Corp., talked at length about the harsh realities of creating and deploying new technologies for the world's growing hunger for energy. For his implausible vision of the future, he offered the following.

"Today, climate change issues so dominates energy policy… the implausible future may be climate change effects don't turn out the way we thought they would, that the climate models simply aren’t competent enough to predict the future.

"Perhaps the Earth has naturally occurring forces that bring it back into equilibrium, and the consequences don’t manifest themselves.

"Or alternatively, perhaps, none of the things we do to mitigate greenhouse gas emissions make any difference, that there are other factors in the climate system that are going to force a change to a warming planet regardless of what we do, which means the glaciers are still going to melt, sea levels are still going to rise, weather patterns are still going to shift."

That prompted a strong reaction from U.S. Commerce Secretary Gary Locke.

"I cannot accept the notion or find it implausible that we as human beings have no control over our destiny and that global warming is a natural phenomenon … or that it will suddenly reverse itself," he said.

"I find it implausible and I think unacceptable that we as human beings should simply do nothing about it or have no ability to control our destiny."

Perhaps Stephen Roach, chairman of Morgan Stanley Asia, summed up an unlikely future best: "The most improbable scenario that I could ever imagine... is what we've been through over the last year," he said.

"If you told anyone what we were about to go through the past year, they would have told you you're nuts.

"So we have lived through an improbable year and we must learn the lessons of this extraordinarily difficult period so that we never, ever have to go through it again."

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November 11th, 2009
09:06 AM GMT
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If you thought that lavish bonuses for the financial industry would be a welcome casualty of the current financial crisis, it is time to think again. The New York-based executive search and compensation consultancy, Options Group, put that notion to rest for us in a new report.

Watch CNN's Ali Velshi explain what underlies the return of big bonuses on Wall Street.

Options Group predicts bonuses at financial firms worldwide will increase by an average 40% this year, just months after many of these firms were teetering on the brink of disaster and begging for bailouts.

The report, released this week, says that managing directors in high-yield credit sales will see the biggest bonuses, along with those in commodity sales units. They’ve apparently had a heck of a year. In fact, it is an incredible turnaround in fortunes which came, of course, thanks to a life raft the size of Manhattan!

Still, how could it have happened so fast: A return so promptly to business and bonuses as usual? Interviewed on Monday’s edition of World Business Today, CNN’s Ali Velshi told me, “It’s unusual given the times we are in. It’s less unusual if you’ve been tracking how this market has been doing. When you look at the money these banks are making, they’ve actually made it on trading…. Buying things cheap and selling them high.”

Velshi also points out that many of the big banks making money now have paid back the taxpayer funds they borrowed, and taxpayers have made a profit on those transactions.

However, seven of the big financial firms doling out bonuses are not off the taxpayer’s hook. Their bonuses will reportedly be less handsome.

Velshi says, “Major profits have been taken at companies that have paid that money back… and they want to be free to pay their people. It’s quite a remarkable situation. You wouldn’t have thought six months ago we’d be talking about bonuses that were bigger than last year.”

Some analysts point out that financial firms will offer more in stock and defer more cash payments because of public pressure, and pressure from regulators to pay tie to long-term results rather than rewarding short term risk. That might placate those who believe excessive rewards for short-term risk helped cause the financial meltdown.

Professor Peter Morici, of the University of Maryland’s Robert H. Smith School of Business, says, “These bonuses show Wall Street is arrogant and insensitive. These bonuses were earned by investing cheap taxpayer funds, and the profits really belong to all Americans. This entire episode is an outrage.”

The U.S. Federal Reserve is planning to review the 28 largest banks to ensure compensation is not rewarding risk; however, global leaders have tried and failed more than once in the past year to agree on what constitutes excessive risk or excessive compensation.

“You only know it,” explained Barack Obama’s pay Czar Kenneth Feinberg a few weeks ago, “Once it’s staring you in the face,” and by then, of course, it’s too late.

So what’s the message here? Let’s just get used to it? The punch bowl is full once again on Wall Street. To paraphrase the much-maligned quotation attributed in London’s Sunday Times to Goldman Sachs chief Lloyd Blankfein, God’s work is being done. Phew!

So let’s just grit our teeth and pretend we haven’t learned a thing in the past year. There’s no need to wonder what’s going on now; no need to worry about what might be laying the groundwork for the next financial crisis. After all, we’ll know it, once we see it.



November 9th, 2009
02:48 PM GMT
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I've got my own piece of Berlin Wall stuffed away somewhere in my house. I had borrowed a hammer and chisel from a man at the wall and hacked off my very own piece.

West Berliners crowd in front of the Berlin Wall as they watch East German border guards demolish a section of the wall.
West Berliners crowd in front of the Berlin Wall as they watch East German border guards demolish a section of the wall.

It was a week after "Checkpoint Charlie" - a crossing point between Easy and West Germany - in Berlin had been thrown open, a week after a divided city and a divided Germany were reunited.

I had flown over from London with friends for a first-hand view of history. We arrived late on a snowy Friday evening, found a cheap place to stay and headed out into the night. Every bar, every cafe was packed with exuberant West Germans and uncertain East Germans. But everywhere we went, the air of German brother/sisterhood was palpable. Everyone was so positive. We were all Germans, they told us. It would be a seamless unification. Only a few people voiced their concern about how exactly this would work.

We stayed up all night, drinking and talking to Germans. In the morning we headed for the checkpoint ourselves. It was packed with people; all along the wall people were busy trying to knock it down. One other snapshot that still stays with me is the East Germans pulling overloaded shopping baskets full of consumer goods back across the dividing zone to their homes. Little things like washing up trays for the kitchen sink, boot polish, soft drinks. Anything, as long as it wasn't made in the German Democratic Republic.

We snatched a few hours sleep that afternoon and went back out into the night to join the party. The feeling of optimism was still burning.

Well, as history shows, reunification turned out to be much harder, more expensive and longer than anyone could have seen. A few months after the wall came down I visited the former East Germany working on a story about East Germany Inc. being up for sale. An enormous firesale of outdated factories and machinery. Buyers were only interested in the property, and as long as they could get rid of most of the workforce.

Fast forward to today. Think of another communist economy. And think of the difference. This economy is leading the world out of recession, this economy is, at the moment, one of the great hopes for global economic growth, this economy now lectures the U.S. on economic policy. This economy is China. Two decades ago this day, East German communism was finally put to rest. In China, it's going from strength to strength.

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November 6th, 2009
02:29 PM GMT
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LONDON, England - I always look forward to interviewing British Airways CEO Willie Walsh. No matter how much doom and gloom there is in the industry, the Irishman has a smile on his face and also has a positive spin on his airline going forward.

That was the case again early Friday when he did his normal round of recorded interviews in London as BA announced their latest results.

Yes, BA recorded a record pre-tax half-year loss for the six months to September, yes the airline faces possible strikes by cabin crew, yes oil prices are going up again, yes premium traffic is being hit hard, yes airlines make little money from the majority of those passengers that sit in the back half of the airplane - but Walsh still appears more optimistic then the heads of the other European legacy carriers.

Why, you ask. And with good reason: BA is in the midst of drastic cutbacks. It's mothballing planes (if only temporarily), cutting thousands of jobs (3,000 more announced Friday), delaying the delivery of new airplanes, wringing out hundreds of millions of dollars in costs.

Walsh says these aren’t just steps to get through the recession. He says short haul premium traffic has changed, for good, and BA needs to make "structural changes" to reflect that reality. If you have ever flown from London to Edinburgh or Paris to Amsterdam and wondered why people paid triple for the privilege of sitting in a seat no bigger than those in the rest of the single-aisle plane, companies have asked the same thing and decided to cut back. BA says that will not return.

What seems to be on the rebound is premium traffic yields (average price per passenger per mile). That is where BA makes its money. Of course its just recorded a record loss, so there is a long way to go, but if companies are willing to pay just a little more for a flexible business ticket, then as Walsh says, BA may be "bottoming out."

This, of course, could all go horribly wrong if cabin crew go on strike just before Christmas, which is entirely possible. Walsh didn’t smile when he reminded me that the union has not yet even balloted for a strike, much less announced a date to walk out (all because, believe it or not, of BA’s plan to cut the number of cabin crew on long-haul flights from 15 to 14).

Walsh has a challenging time ahead.

BA is known for its decent service, great Web site and friendly enough staff, but has to compete with the incredibly well managed and well financed Middle East airlines that are ever expanding.

On the other side, Ryanair is driving hard towards its goal of being Europe’s biggest airline that charges peanuts for flights, many of which compete on BA routes.

Meanwhile, Walsh has to battle unions, cut more costs, and deal with a huge pension deficit while trying to grow the business through its never-ending attempt to merge with Iberia and by increasing an alliance with American Airlines.

Can he keep smiling?

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Filed under: Air industry


November 6th, 2009
01:02 PM GMT
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Warren Buffett voted with his pocketbook this past week, investing $26 billion to purchase Burlington Northern Santa Fe. It is one of America’s oldest railroad networks and the backbone that helped build the country. 

The Oracle of Omaha - as Buffett is fondly referred to due to his Mid-Western roots in Nebraska - is also big on animal instinct.  The concept is simple: we all need to be aware to both survive and smell opportunity when it beckons.

In that spirit, Buffett is probably letting economists debate the merits of whether this is a V shaped recovery, a sharp downturn and straight line back to growth or a recovery that reflects a W, where the economy recovers, dips and bounces up and down for a few years. 

Maybe I am a child of the 1960s, but my fond recollection of those letters has more to do with the VW Beatle that headed to the beaches of California, not illustrations to guide economics.

In October, my three visits to the Middle East, which included Dubai, Qatar and Abu Dhabi during the Formula One festivities and the launch of our regional hub in the UAE capital, led me to put aside traditional economic research. 

Instead, I relied entirely on animal instincts and, going back to my Greek roots, I used the agora to get the latest reading of what was happening.  Bankers confidently said that the road show to raise $6.5 billion in Dubai would be well received.  The first portion of that offering was three times oversubscribed.

Businessmen noted that they felt the worst was over in the local property market and that foreign buyers had started to show interest again.  Colliers International released figures this week indicating that prices rose 7 percent in the third quarter, although they are down 47 percent on the year.  Again, the figure does point to a bottom being reached.

In Qatar, despite the bottom following out of the natural gas market (trading one-fourth the equivalent of crude prices right now), the economy is hardly suffering amid the “recession” as growth has reached 8.5 percent this year.  The greatest challenge is completing projects on time and allowing the market to catch up with all the construction.   

Finally, the Formula One race looks to be only a starting point for Abu Dhabi. I was surprised enough at the $40 billion officially spent to build up Yas Island and the infrastructure around it to host the circuit.  According to Economy Minister Sultan bin Saeed al Mansouri that is only the beginning.

He says that the Yas Marina complex will be a blueprint for future developments with an eventual commitment of $1 trillion dollars - for roads, power plants and rail links.  That is an eye-popping number that others within the government were, shall we say, shy to commit to, but it does give a sense of how the old economy will help build the new one and how the future won’t be measured by a V or a W in the region.



November 4th, 2009
02:56 AM GMT
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In this week in Job Quest, Les Young in Atlanta learns a new angle on networking, while Rodrigo Medina show us how small businesses in Barcelona are suffering.

Filed under: BusinessQuest Means Business


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