CIT Group is on the ropes. It’s credit ratings were dropped into junk territory earlier in the week, a particular problem for a financial services company that needs that sense of confidence from its lenders to keep doing business. And then there is the practical aspect – if CIT has to borrow at very high rates, it can only lend at higher rates.
Why does this matter?
Supercalifragilisticexpialidocious. Oops, I mean macroprudential regulation. That mouthful of a regulatory concept puts one in mind of the neologism that was the hit song from the Mary Poppins movie.
The idea of macroprudential regulation has a lot of appeal, but it is devlishly hard to pull off. Essentially, it means stopping bad things in financial markets before they start. Regulators have to be prescient and have to look around the corner and be right about what happens next.
For the Federal Reserve, which likely will get expanded regulatory powers as the U.S. government tries to fix the system, it will mean re-evaluating its now discredited policy of casting a benign eye as asset price bubbles build. Instead, the Fed will have to try to stop them, which, as former Fed powerhouses including former chairman Alan Greenspan have made clear, risks wielding a sledge hammer that might derail the whole economy. As The Financial Times recently noted, it means going back to taking away the punch bowl before the party gets too wild.
Up to now, Fed officials generally said the central bank is incapable of indentifying bubbles and only has blunt instruments to deal with them. But the idea of cleaning up after a burst asset price bubble with easy monetary policy didn’t work this time. So remember the phrase macropudential regulation and look in the future for the Fed to try, difficult as it is, to identify bubbles as they inflate and then deflate them.
CSX Corp. is one of those companies that offers a good glimpse into the health of the U.S. economy. And based on their earnings earlier today, things aren’t great. They got hit with the double-whammy.
The volumes of product shipped across asset classes was pretty bad in the quarter – chemical volumes were down 20% year-to-year; emerging markets down 20% year-to-year; forest products off 29%; metals off 53%; fertilizers off 18%, and food products off 11%. The only category that wasn’t a disaster was agricultural products, which were off 2%.
Bad economic times have not diminished the desire of U.S. sell-side stock analysts for companies they cover to provide earnings guidance. No surprise here. Presumably as things head south in many industries analysts want more, not less, help from companies.
According to a survey of more than 100 sell-side analysts done by the Financial Relations Board and published in the magazine of the National Investor Relations Institute, 76% of analysts surveyed believe the stock market would punish the shares of companies that stop earnings guidance now. Also, 72% said they would be more concerned about the outlook of a company’s business if it suspended earnings guidance.
In today’s WSJ, former General Electric Co. CEO Jack Welch weighs in on women and work, and the so-called work-life balance. The piece carries the headline, “Welch: ‘No Such Thing As Work-Life Balance.’”
As I’m a working mother, you might assume I object to what he says. Not so – with one caveat at the end of this blog.
Jack says: “There’s no such thing as work-life balance. There are work-life choices, and you make them, and they have consequences.”
"Smoking Causes Ageing Of The Skin"
When it comes to delivering health messages in the United States, we tend to be very straightforward – perhaps too straightforward. We hear about obesity and being overweight and the message is how it leads to high-blood pressure and heart disease. Same goes with smoking: The message for years was that smoking was hazardous to your health. Or that is could cause complications for pregnant women. If we really want to get the health message to sink in, perhaps we need to think of it in terms of how it makes you look? That’s the approach taken in London, where I can across this discarded pack of cigarettes with the message: “Smoking Causes Ageing Of The Skin.” People might be more inclined to table smoking if they think about their skin becoming wrinkled and discolored…
Tell It To Al – A Newswires Blog
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