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| Market News: News Archive : Morning News Call Week ending |
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Oct 2, 2009
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FRIDAY, OCTOBER 2, 2009 CANADIAN EDITION
TOP STORIES
• American, BA warned by EU over proposed tie-up
• EU agency recommends Baxter's H1N1 flu shot
• GE looking at partnership or IPO for NBC Universal
• Wal-Mart sees slow U.S. business recovery
• Toyota chief laments weak dollar as profit-buster
BEFORE THE BELL
Toronto's main stock index may open lower on Friday, a day after its lowest close in more than three months, pressured by weak commodity prices. The investors would be closely following U.S. market, which is also set to open lower ahead of key monthly employment report. U.S. non-farm payrolls probably fell by the smallest number in a year to 180,000, according to a Reuters poll, after shrinking by 216,000 the prior month. But the jobless rate is expected to have edged up again to 9.8 percent, a 26-year high, after rising to 9.7 percent in August. Markets in Europe and Asia were down, with European shares hitting a four week low. Oil fell to trade at around US$69.69 a barrel. Gold fell below US$1000 an ounce.
STOCKS TO WATCH THIS MORNING
• Canadian Hydro Developers Inc. (KHD). The renewable energy company said on Thursday its board continues to recommend that shareholders reject Transalta's (TA) unsolicited offer.
• Canwest Global Communications Corp. (CGS). Paul Godfrey, CEO of the National Post, the money-losing flagship daily newspaper of Canwest, has lined up financial support to buy the daily newspapers owned by Canwest, the Globe and Mail reported on its website late on Thursday.
• CI Financial Corp. (CIX). The company on Thursday reported net sales of $35 million in September and said assets under management rose by 3.2 percent to $64.8 billion.
• Corel Corp. (CRE). The consumer software maker posted a drop in second-quarter profit on Thursday as its revenue slumped in what is described as a difficult economic environment.
• Magellan Aerospace Corp. (MAL). The aerospace components supplier said on Thursday its UK unit has reached an agreement with Airbus to make machined components for the centre wing box of Airbus' A350 XWB twin-aisle commercial aircraft.
• Pengrowth Energy Trust (PGF_U). The company said on Thursday it would cut its cash distribution by 30 percent starting in November so it could expand its capital expenditures and cut debt.
• QLT Inc. (QLT). The biopharmaceutical company said on Thursday it sold its U.S. unit to TOLMAR Holding Inc for up to US$230 million.
ANALYST RECOMMENDATIONS
• Hudbay Minerals (HBM) price target raised to $14.70 from $13; rating outperform at Blackmont
• Petro Andina Resources Inc. (PAR) price target raised to $13 from $12.50 at Raymond James
• Silver Wheaton (SLW) price target raised to $16.50 from $13.50; rating outperform at Blackmont
EXDIVIDENDS
• Bank of Nova Scotia (BNS). Amount US$0.4505
Note: All values in Canadian currency, unless otherwise stated
"This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund"
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INSIGHT
Comcast's talks with NBC Universal get thumbs down
Comcast Corp shareholders may be justified in thinking they're watching the repeat of a show they didn't like much the first time around.
The top U.S. cable service provider, blasted five years ago for making a US$54 billion bid for Walt Disney Co, is again in talks to buy a major media conglomerate. This time, negotiations center on a majority stake in
General Electric Co's NBC Universal, sources familiar with the matter said.
The news sent Comcast shares tumbling 7 percent on Thursday, dredging up fears that Chief Executive Brian Roberts is making a risky bet on a film and television business that has been hard hit by the recession and is going through seismic changes in the digital age.
"People are scared, they don't trust Brian, he's seen as an empire builder," said Glenn Greenberg of Chieftain Capital Management, which owns 29 million Comcast shares.
Greenberg pointed to Comcast's past acquisitions such as Adelphia in 2005 and AT&T Broadband in 2002 as examples of management paying too much.
According to the current talks, the sources said, Comcast would pay between US$4 billion and US$7 billion in cash and contribute its cable programming assets to take 51 percent of a new NBC Universal that is jointl owned with GE.
"The problem is that they have low credibility for overpaying for assets," said Greenberg.
Worries that Comcast has been hoarding cash to spend on a big media company have weighed on its shares, pushing valuations close to historical lows over the summer.
"Investors have long pressed Comcast for an aggressive return of cash to shareholders," said Craig Moffett, analyst at Bernstein Research. "An acquisition of a major content studio, even if consummated at an attractive price, is most decidedly not what Comcast investors had in mind."
To be fair, Comcast has been upfront with Wall Street and investors about its interest in acquiring more cable programming assets.
The talks with GE do not involve Comcast issuing any debt or equity, and do not involve boatloads of cash, as Chief Operating Officer Stephen Burke promised last month. "I don't think that means doing a big US$50 billion acquisition," he told investors when discussing Comcast's content plans.
NBC Universal is 80 percent owned by GE and 20 percent owned by Vivendi, which is widely expected to exercise an option to sell that stake this year.
The deal under discussion, according to the sources, would value Comcast's cable networks like E!, Golf Channel and Versus at up to US$7 billion. GE would own 49 percent of the new company -- which would hold all of
NBC Universal's film, television and theme park businesses -- though the idea is for Comcast to increase its stake over time.
"It's a more attractive structure than initially thought," said Chris Marangi, analyst for Gabelli & Co, a long-term holder of Comcast shares.
"It doesn't require the issuance of new equity and limits the amount of cash used so it's a more manageable transaction," he said, adding that Comcast appears to be getting a relatively good valuation for its cable networks.
Others on Wall Street are yet to be convinced, pointing to debt that the venture will be saddled with as part of the expected deal with GE. Comcast already has US$32 billion debt on its books.
Standard & Poor equity analyst Tuna Amobi downgraded Comcast's stock to 'sell' on Thursday, citing what he called "overhang of merger execution risk."
"With US$4 billion cash and US$32 billion debt, we are wary of significantly higher financial leverage under any deal permutation likely entailing sizable equity dilution," Amobi said.
--- Yinka Adegoke, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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Oct 1, 2009
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THURSDAY, OCTOBER 1, 2009 CANADIAN EDITION
TOP STORIES
• Cisco to buy video meetings firm Tandberg for US$3 bln
• Canada's Athabasca Potash CEO resigns
• Citi closes sale of Nikko Cordial to SMFG
• GM to close Saturn as sale to Penske collapses
• Russia's ARMZ in talks with Cameco on uranium mining
BEFORE THE BELL
Toronto's main stock index could open lower on Thursday dragged by softer oil prices, which pulled back from more than 5 percent gain on worries that a rise in U.S. crude and distillate stocks signaled weak demand. Wall Street is also set to open lower as investors await a flurry of economic data that could provide investors clues on the strength of an economic recovery. European shares were down as weakness from commodity stocks and banks outweighed gains from insurers. Asian shares fell, following Wednesday’s disappointing U.S. jobs and manufacturing data. Oil fell below US$70 a barrel while gold steadied above US$1000 an ounce mark.
COMPANIES REPORTING RESULTS
• Richelieu Hardware Ltd. (RCH). Expected to report Q3 earnings of 38 cents a share, according to Reuters Estimates
STOCKS TO WATCH THIS MORNING
• Athabasca Potash Inc. (API). The potash explorer said late on Wednesday its CEO Robert Boyd resigned, the latest development in a series of management upheavals at the company.
• Cameco Corp. (CCO). State-controlled Russian uranium miner ARMZ Holding is in talks with Cameco on possible mining joint ventures in Australia and Africa, the company's deputy head said on Thursday.
• Colossus Minerals Inc. (CSI). The explorer said on Tuesday it would raise $57.5 million through the sale of common shares to fund its Serra Pelada project in Brazil.
• Delphi Energy Corp. (DEE). The company said on Tuesday it would acquire additional natural gas and light oil assets and related infrastructure at Hythe, Alberta, primarily to boost production.
• InterRent Real Estate Investment Trust (IIP_u). The company said on Tuesday its CEO Michael Newman resigned and named Mike McGahan as his replacement.
• Nortel Networks Corp. (NRTLQ). The bankrupt telecom equipment maker said on Wednesday it plans to sell its global GSM business, as the company continues to auction off its assets.
• Progress Energy Resources Corp. (PRQ). The oil and gas company said on Wednesday it would offer $200 million principal amount of convertible unsecured subordinated debentures, and would use the net proceeds partly for exploration and development program and to reduce bank debt.
• TriStar Oil & Gas Ltd. (TOG) and Petrobank Energy and Resources Ltd. (PBG). The companies said the shareholders of TriStar approved the previously announced plan where all outstanding shares of TriStar would be acquired by PetroBakken Energy Ltd, the new company which would be formed and publicly listed after the arrangement goes through.
CORPORATE EVENTS
11:00 EnCana Corp. (ECA). Integrated oil conference call
14:30 Richelieu Hardware Ltd. (RCH). Q3 earnings conference call
ANALYST RECOMMENDATIONS
• Canfor Corp. (CFP) price target raised to $6 from $5 at Scotia
• Colossus Minerals Inc. (CSI) price target raised to $7.60 from $7.25; rating speculative buy at Canaccord Adams
• Sino Forest Corp. (TRE) price target raised to $21.50 from $18.75 at Scotia
• UR energy Inc. (URE) rating cut to sector perform from outperform at RBC
• Uranium Participation (U) rating cut to sector perform from outperform at RBC
EXDIVIDENDS
• Kingsway Intl Holdings Ltd. (KIH). Amount $0.02
• Transcontinental Inc. (TCLa). Amount $0.08
Note: All values in Canadian currency, unless otherwise stated
"This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund"
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INSIGHT
COLUMN - BofA's Lewis goes packing
Finally, the heads are rolling again on Wall Street.
The news that Ken Lewis is stepping down as CEO of Bank of America at the end of the year could be a sign that the boards of giant banks are holding executives responsible for their bad decisions, which nearly brought the world banking system to its knees. Indeed, it may be a bad omen for Vikram Pandit of Citigroup.
In the case of Bank of America, its board may have grown weary of seeing its chief executive make repeat appearances before Congressional panels to testify on the bank's controversial acquisition of Merrill Lynch.
The board also may hope that in pushing Lewis aside, it will be able to reach a settlement with the Securities and Exchange Commission over the failure to disclose the setting aside of millions of dollars in bonuses to
Merrill employees in advance of the shareholder vote on the merger.
With Lewis gone, U.S. Judge Jed Rakoff might be more willing to sign off on a deal. On a number of fronts, BofA will be better able to move forward with Lewis gone. Lewis himself will probably be better off -- there have been few photos of the CEO where he doesn't appear to be grimacing.
Lewis' decision has left the Charlotte, North Carolina-based bank with no obvious successor to fill his shoes. That's why his retirement won't take effect until the end of the year -- assuming a successor is named by then.
David Hendler, an analyst with CreditSights, says: "It's kind of surprising they don't have someone lined up. But this whole last year or two for Bank of America has been like a film noir."
A bad film noir, that is. Indeed, Lewis' departure will be welcome news to many shareholders, still smarting over the bank's ill-conceived deal for Merrill just as the financial system was melting down.
But he has left a messy succession process for Bank of America. Contrast BofA's situation -- where six internal candidates may be battling it out for the job -- with the orderly transition at Morgan Stanley, where John Mack is being replaced as chief executive by James Gorman.
The uncertainty over BofA underscores why Jamie Dimon was right to start the succession process early in presenting Jes Staley as a potential candidate.
In a note to employees, Lewis said that it "was my decision and mine alone" to leave the bank. That may be, but his departure will only serve to focus regulators' attention on the CEO of the other troubled banking
behemoth, Citi.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, is no fan of Pandit's. So much so, that Bair didn't even meet with Pandit during the summer while she was agitating for management changes at Citi.
The way things are looking, Lewis may soon have another golfing buddy with plenty of time on his hands.
--- Matthew Goldstein is a Reuters columnist. The views expressed are his own.
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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Sep 29, 2009
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TUESDAY, SEPTEMBER 29, 2009 CANADIAN EDITION
TOP STORIES
•CIC invests US$2 bln in Goldman fund and others
• Walgreen 4th-quarter profit slips
• Paulson mulls CIT and IndyMac merger - report
• UBS to sell Paine Webber but not yet - report
• U.S. firms oppose proposed short-selling rules - report
BEFORE THE BELL
Toronto’s main stock index could open lower on Tuesday on softer commodity prices. Wall Street is also set for a lower open as investors await data on home prices and consumer confidence, following solid gains in the previous session. The month-on-month S&P/Case Shiller index on U.S. home prices is expected to rise 0.5 percent, a third consecutive rise, with consumer confidence expected at 57.0, according to Reuters polls. European shares dipped after the previous session's sharp gains, dragged lower by commodity stocks, but financials offered support after BNP Paribas raised capital to shake off government influence. Asian shares rose as news of several multi-billion dollar takeover bids overseas boosted confidence in a global economic recovery. Oil dipped towards US$66.50 a barrel as a weak demand outlook was expected to be reinforced by weekly inventory data from the U.S.
STOCKS TO WATCH THIS MORNING
• Connacher Oil and Gas Ltd. (CLL). The company said on Monday it completed its annual turnaround at Pod One oil sands plant in northeastern Alberta, and was in the process of restoring normal operations and ramping up bitumen production.
• DHX Media Ltd. (DHX). The company on Tuesday reported 2009 earnings of 4 cents a share.
• Dia Bras Exploration Inc. (DIB). The company said on Monday two miners died in an accident on Saturday at its Bolivar mine in Chihuahua, Mexico. Dia Bras management is working with local authorities in the investigation of the accident, the company said in a statement.
• Premier Gold Mines Ltd. (PG). The company said on Monday it would make a private placement of up to $5.5 million and plans to use it for exploration programs.
CORPORATE EVENTS
17:00 Amica Mature Lifestyles Inc. (ACC). Shareholders meeting
ANALYST RECOMMENDATIONS
• Canyon Services (FRC) rating started with outperform; price target of $2.75 at Raymond James
• Nexen Inc. (NXY) price target raised to $24 from $23; rating equal-weight at Barclays
• Petrominerales (PMG) price target raised to $20 from $15.50; rating outperform at Blackmont
STOCKSPLIT
• Newfoundland Capital Corp Ltd. (NCCa). The company said on Monday it may conduct a 3-for-1 stock split if the company's shareholders approve it in a special meeting to be held on Nov. 13.
EXDIVIDENDS
• Laurentian Bank of Canada (LB). Amount $0.34
• Nova Scotia Power Inc. (NSI_pd). Amount $0.3688
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
COLUMN - An unhealthy privilege
When the U.S. dollar ultimately loses its status as the world's premier reserve currency it will be painful for all involved, almost certainly disorganized, and very possibly a very good thing.
World Bank President Robert Zoellick outlined the risks to the dollar's status in a speech in Washington on Monday.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options to the dollar," he said.
Zoellick went on to emphasize how choices in the United States on inflation, fiscal policy and financial system reform would help to influence the dollar's fate.
Quite true. The U.S. cannot simply devalue its way to competitiveness, nor can it appear to be inflating away its debts without risking a run on the currency. The Chinese and others would sell dollars or fail to buy up new debt if they felt the U.S. was behaving both cynically and irresponsibly.
China has good reasons not to force a crisis and devalue its holdings of dollars, but not immutable ones. The two nations are like two men trying to swim to shore while dragging a heavy box of gold, the difference being that the U.S. is tethered to the box while China is only holding on. If China decides the water is too rough it can let go, sacrifice its dollar holdings and swim for it. The United States is not so lucky.
"Exorbitant privilege" is a term coined by an understandably embittered French Finance Minister Valery Giscard d'Estaing to describe the fact that under the old Bretton Woods currency system the United States, unlike everyone else, could simply print dollars to cover current account deficits.
Bretton Woods is gone, but the arrangements which replaced it also tended to underwrite U.S. overconsumption, as purchases of U.S. dollars as reserves by other nations kept funding rates lower despite household or government profligacy.
"The United States is incredibly fortunate that the dollar enjoys this special status," Zoellick said. "When I work with countries struggling to pay for budgets or finance trade deficits, I reflect on how Americans do not spend a moment considering the unique advantages of being able to issue bonds and print money freely."
My best guess is that Americans will spend quite a few moments in coming years considering that unique advantage, and that while they will miss it, they should also be sorry they ever enjoyed the right to borrow freely and seemingly without consequence.
THERE'S NO "G20" IN "TEAM"
Of course the U.S. current account deficit has contracted massively, standing at about 3 percent of gross domestic product in the first quarter as compared to 6.5 percent of GDP in 2006. That's the result of plunging
global trade and steep falls in investment in the United States. And while the personal savings rate has jumped in the United States, which after all it had to since credit was no longer easy, the government has stepped up massively as a borrower, overwhelming households' efforts to save.
Barclays Capital calculates that the United States now needs to attract 46 percent of the world's net savings, i.e. the sum of all current account surpluses, as opposed to 54 percent before the crisis broke.
That 46 percent figure is an improvement, but it too is ultimately unsustainable. It's also arguably starving lots of other places of investment that could ultimately produce higher returns.
The newly empowered G20 group of nations has meanwhile resolved to rebalance the global economy, using peer pressure to force the irresponsible to shape up and the overly tight to start spending at home.
The world's central bankers and politicians just received an object lesson in what a good idea it is to have a bunch of reserves piled up against a bad day. Even putting China aside, responsible leaders in places like India will have a very tough time trusting in an international body to protect their own best interests. And because that body doesn't have any real power to compel, it will be ignored. That means that there is a good risk, G20 or not, that everyone is trying to simultaneously keep their currencies low and exports high.
The only body seemingly exempt from market discipline, the United States, is not going to be in a position to resume eating up everybody's exports. This is a recipe for very slow growth and for rising international economic tension. That doesn't make the changes proposed at the G20 a bad idea, but they are not sufficient and threaten to be a resolve-softening time waster.
So not so much as rebalancing but a re-basing of growth expectations. Look for continuing dollar weakness alongside that, with the real drama being not the decline but the rate of decline.
--- James Saft is a Reuters columnist. The opinions expressed are his own.
--- At the time of publication Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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Sep 28, 2009
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MONDAY, SEPTEMBER 28, 2009 CANADIAN EDITION
TOP STORIES
• Bombardier to supply 80 high-speed trains to China
• Xerox to buy Affiliated Computer for US$6.4 billion
• Abbott buys Solvay's drugs unit for 4.5 bln euros
• Johnson & Johnson buys 18 pct stake in Crucell
• Kraft set to launch hostile Cadbury bid - report
BEFORE THE BELL
Toronto's main stock index could extend its losses on Monday as commodity prices fall led by metals. Investors may also follow the rising M&A trend in the U.S., which indicates sunnier days for the economy. Wall Street is expected to open higher after three days of losses as more mergers encouraged investors into equities. European shares rose, paring earlier losses, led by the DAX after German Chancellor Angela Merkel won a parliamentary majority on Sunday. Asian stocks were down, led by Nikkei average after Japanese officials waved off any plans to stem the yen's rise. Oil slipped below US$66 a barrel, extending last week's 8.4 percent drop, as investors focused on high inventories and sluggish demand, shrugging off rising tension between Iran and the West. Gold was flat at US$991.30 an ounce after falling below US$990 an ounce earlier.
COMPANIES REPORTING RESULTS
• Vecima Networks Inc. (VCM). Expected to report Q4 earnings of 9 cents a share, according to Reuters Estimates
STOCKS TO WATCH THIS MORNING
• Bombardier Inc. (BBDb). The train maker’s Berlin-based unit, Bombardier Transportation, said on Monday its Chinese joint venture received a contract worth US$4 billion from the Chinese Ministry of Railways to supply 80 high-speed trains.
• Equinox Minerals Ltd. (EQN). Chinese-owned Chambishi copper smelter has started processing concentrate from Equinox Minerals unit Lumwana copper mine, initially rejected by another smelter after claims it contained uranium, a senior official said on Saturday.
• Patheon Inc. (PTI). Switzerland's Lonza and the Canadian drugmaker have extended an exclusivity and due diligence period for the Swiss group's takeover bid, the companies said on Monday. Lonza last month offered the Canadian company US$3.55 per share, or some US$450 million.
• Sprott Resource Corp. (SCP).The investment firm said on Monday it agreed to acquire Auriga Energy Inc through a newly formed subsidiary Acquireco by way of an exempt take-over bid in a deal of $3.5 million.
CORPORATE EVENTS
11:00 Vecima Networks Inc. (VCM). Q4 earnings conference call
ANALYST RECOMMENDATIONS
• Barrick Gold (ABX) price target raised to $56 from $55; rating buy at Genuity
• Cequence Energy (CQE) price target cut to $6.75 from $7.20; rating outperform at Macquarie
• Colossus Minerals (CSI) rating started with outperform; price target of $7.50 at Macquarie
• Corus Entertainment (CJRb) price target raised to $21 from $19; rating outperform at RBC
• Wescast Industries (WCSa) rating started with buy; price target of $4.75 at Genuity
EXDIVIDENDS
• AG Growth International Inc. (AFN). Amount $0.17
• Alaris Royalty Corp. (AD). Amount $0.07
• Altagas Utility Group Inc. (AUI). Amount $0.05
• Biomerge Industries Ltd. (TOT). Amount$0.03
• Bombardier Inc. (BBDb). Amount $0.0469
• Brompton Equity Split Corp. (BE). Amount $0.10
• Brookfield Asset Management (BAM). Amount $0.0469
• Cameco (CCJ). Amount US$0.0551
• Canadian Banc Recovery Corp. (BK). Amount $0.0625
• Cervus L P (CVL_u). Amount $0.09
• Killam Properties Inc. (KMP). Amount $0.0467
• Mccoy Corp. (MCB). Amount $0.01
• MKS Inc. (MKX). Amount US$0.125
• Mullen Group Ltd. (MTL). Amount $0.125
• Newalta Inc. (NAL). Amount $0.05
• Niko Resources (NKO). Amount $0.03
• Pareto Corp. (PTO. Amount $0.015
• Power Financial Corp. (PWF). Amount $0.35
• Prime Dividend Corp. (PDV). Amount $0.0625
• Progress Energy Resources Corp (PRQ). Amount $0.10
• Sentry Select Primary Metals Corp. (PME). Amount $0.05
• Sherritt International Corp. (S). Amount $0.036
• Shoppers Drug Mart Corp. (SC). Amount $0.215
• Silvercorp Metals Inc (SVM). Amount US$0.0182
• Superior Plus Corp. (SPB). Amount $0.135
• TransCanada Corp. (TRP). Amount $0.3509
• Transforce Inc New (TFI). Amount $0.10
• Uni-Select (UNS). Amount $0.1165
• Western Financial Group Inc. (WES). Amount $0.0107
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
Why Pittsburgh was a start: Christopher Swann
Einstein once defined insanity as trying the same thing over and over again and expecting different results. Skeptics are already arguing that leading nations are doing precisely this on global imbalances.
They have a point. The quest to rebalance world growth embraced by the G20 in Pittsburgh looks worryingly familiar.
The new Framework for Strong Sustainable and Balanced Growth, based on the draft communique, is hard to distinguish from the failed IMF Multilateral Consultation on Global Imbalances that was launched in 2006. After much fanfare and a year of negotiations the IMF produced nothing more than a series of hollow pledges.
According to this analysis the G20 has done nothing more than create another ugly acronym. But the doubters may yet be confounded. A more balanced global economy will now be easier to achieve.
The failure of previous efforts was not a result of the poor design of the negotiating framework. The IMF process was actually very well crafted. Like the new G20 plan, it aimed to harness the magic power of peer pressure.
By bringing together just a select group of lopsided trading nations the IMF process was set up to foster a collegial atmosphere and "frank" discussion. The Fund itself was meant to serve as an independent referee and keep track of progress.
A few tweaks might help make the process more effective. There is merit to the idea of adding "triggers." If current account deficits or surpluses rise over a certain level there would be automatic negotiations to bring delinquent countries back into line.
This could help to counteract the innate timidity of the IMF, which is understandably reluctant to chastise major shareholders.
Even so, the real problem with the IMF process was the lack of incentives. Major nations were aware of the dangers of imbalanced growth but did not feel sufficiently threatened to do much about it.
Two-thirds of Germany's economy growth came from net exports between 2000 and 2008. China and Japan were also benefiting. Meanwhile, the United States felt no pressing need to rein in its exuberant consumers.
The status quo was working well for everyone. The fact that this is no longer the case offers the main hope for change.
Enlightened self-interest alone should make the giant exporters more receptive negotiating partners. Even without international pressure, current account surplus countries have a strong incentive to refocus growth.
Despite the reviving global economy, Germany, Japan and China may all find it much harder to find customers for their exports. Many of the world's highest-spending consumers will be convalescing for some time.
At current rates of saving it will still take U.S. consumers more than five years to bring debt levels down to a more acceptable 100 percent of disposable income. Unemployment may still be close to 10 percent a year from now.
Other major sources of consumer demand in the run up to the crisis -- such as Eastern Europe -- are likely to take years to recover fully.
The weakness of demand confronts exporting nations with a stark choice -- boost domestic demand or put up with slow growth. This will offer a more powerful spur than any amount of peer pressure.
--- Christopher Swann is a Reuters columnist. The opinions expressed are his own.
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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(Please note Canadian quotes are delayed 15 min)
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