Should Countries Stay or Go?

The big story today is the most recent decline in Facebook shares, which was prominently reported in the Wall Street Journal (WSJ) with “Facebook Investors Cash Out” (p. A1), in the Financial Times (FT) with “Investors defriend Facebook shares” (p. 1), and in the New York Times (NYT) with “Facebook Shares Hit New Low Amid Fear” (p. B1). Sounds pretty bad, right, when a new tech heavyweight drops almost 50 percent from its initial price? Things must be bad?

The dog that isn’t barking—at most maybe whining a little—is that the U.S. markets are actually doing really well. Yesterday brought them back to relatively high levels, as reported all the way back on page C4 of the WSJ with “Stocks Approach Multiyear Highs.” With the markets doing as well as that, maybe it is time to worry. The fear referenced in the NYT Facebook headline certainly has not shown up in the VIX, referred to as the market’s “fear index,” which the WSJ comments on with “The Fear Gauge Goes Quiet – Too Quiet” (p. C1). We have had a quiet August, and when September rolls in and everyone takes a fresh look at the world politics and economy, perhaps they won’t be as sanguine as they are now.

An interesting mix of stories today. Financial malfeasance makes all of the front pages again. “Bank Deal Rankles Regulators” on page A1 of the Wall Street Journal (WSJ) is about how the Standard Chartered settlement with New York State could derail other investigations and has annoyed British regulators. The Financial Times (FT) has “StanChart rallies as settlement welcomed” on page 1 and a follow-up story on page 15, “StanChart pays hefty price for ‘small errors’,” which makes many of the points I did yesterday about the speed of settlement and the magnitude of the fine with respect to what Standard Chartered admitted. The thrust of the article is that the bank was forced to settle quickly, regardless of the merits of the case, because of the effect uncertainty would have on its business and because of a reluctance to go head-to-head with the regulators. I am not so sure, but we will see. My bet is that more problems will show up.

The front page of the New York Times (NYT) has “No Criminal Case is Likely in Loss at Corzine Firm,” about the collapse of MF Global. Two interesting things here: first is the emphasis that, once again, there is no punishment of individuals for business disasters, and second is the personalizing of the story, even to the headline. Again, I would say this is a growing trend; personal accountability will become a much bigger part of the financial industry, especially at the risk end, and rolling heads will become a mandatory part of settlements. Corzine, of course, is still on the hook from both a civil and regulatory perspective—a point the article makes explicitly.

Europe, the Euro, and the Possible Failure of Political Integration

Europe, the Euro, and Political Integration

One of my favorite movies is Star Wars, for a number of reasons. The scene I am reminded of right now is the one where the Imperial stormtroopers stop Luke and Obi-Wan, and Obi-Wan uses a Jedi mind trick to make the troopers let them go.

The meta-story today is again the Paul Ryan candidacy and the presidential race. The Financial Times (FT) leads with “Obama uses heartland visit to launch first attack on Romney running mate,” the Wall Street Journal (WSJ) opens with “Presidential Race Snaps Into Gear,” and the New York Times (NYT) has a front-page picture and “Medicare Rises As Voters’ Issue in GOP Gamble.”

Other Ryan stories include “Everything Wall St. Should Know About Ryan” on page B1 of the NYT, which states that he actually may not be very pro-financial industry; “Ryan’s Record Shows Flexibility on Policy” on page A4 of the WSJ, which notes that Ryan voted for the Troubled Asset Relief Program (TARP), the Bush-era Medicare prescription drug benefit extension, and an early version of the auto bailout; and “Obama tries to harvest votes in Iowa” on page 4 of the FT, which has the subtitle “The president blames Paul Ryan for holding up the farm bill.”

Balancing Europe and the Euro

The media has focused a lot of its attention on Europe recently—and deservedly so. The meta-stories generally concern weakness in one country or another or the slow disintegration of hope for Greece. I wrote a couple of weeks ago about how I thought Europe would end up pulling itself together for political reasons—the fear of history, mostly—but I did not really delve into what would have to happen to make that the case.

In July, I spoke at the Commonwealth Live! networking tour. The conversations I had there, as well as the increasing sense that Europe is continuing to deteriorate, suggested that I should lay out how I see the evolution of the eurozone and how it might succeed or fail. This thought process will obviously adjust to conditions on the ground, and one reason for writing it down is to track the changes as we move forward.

The big story over the weekend and on Monday was the Paul Ryan vice presidential selection. The U.S. presidential race really started with that announcement. Yes, I know that we have had months of Republican primaries and you could argue that the race began when Romney wrapped up the nomination. But until this weekend we did not really know what the race would be about.