Word: banking
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...real problem behind the government's concerns about the ultimate fate of GM. The real concern is that what happens at the auto company sets a precedent for the next bailout of a large American non-financial company. The government has been able to stay away from completely restructuring banks by providing them with enough capital to work their way through piles of bad assets and tight credit. The process is not over. Major US banks may need tens of billions of dollars more in government assistance when the results of the "stress tests" of bank viability are finalized later...
...Lowdown: As the cofounder and first president of the European Bank for Reconstruction and Development, Attali won fame for calling the U.S. financial collapse as early as 2006 - giving him more credibility than the average soothsayer. However, many of his predictions range from the absurd to the, well... predictable. His belief that Israel must keep its status as a regional power in order to survive is not exactly rocket science, while his belief that a utopia of altruistic "transhumans" will emerge from the ashes of mid-21st century planetary warfare is a bit hard to swallow...
...Because of these issues, muni bonds don't seem particularly cheap even though munis now yield more than Treasuries. Indeed, Gary Strumeyer, head of capital markets at Bank of New York Mellon, says munis are no longer in the same rock-solid category as Treasuries, so it's not even a fair comparison. "Every investor needs to understand the many risks associated with purchasing muni bonds these days," he says...
...Once shy of making major foreign investments, Beijing has gone on the prowl for resources and underpriced assets across the globe. Cash-rich Chinese companies, backed by soft loans from state banks and re-energized by lower labor costs as jobs dry up, are descending on Central Asia, Africa and even Western Europe to snap up assets. State mining company Chinalco has tabled a $19.5 billion bid for British-Australian resources giant Rio Tinto. Beijing has launched a fund to buy distressed assets worldwide, inked a deal with Brazil's Petrobras and provided Russia with a $25 billion loan...
...CLSA analyst Chris Wood says that recent improvements in China's economy can be attributed partly to a surge in bank lending that began in November. This, he notes, could only happen in an authoritarian country such as China, where the government can - and did - order the banks to lend. "The bottom line is that if this was a purely capitalist system, [lending] would be slowing," Wood says. Stimulus spending over the next three months will continue to boost economic activity, Wood says, but the impact will start to wear off later in the year. Absent a recovery in China...