Good morning

The headlines:

  1. A republican defection.

    Link: whatever.

    Some of the republican representatives are “crossing the bipartisan line”.

    And again – I’ll say it. Whether there is a top tax rate of 36% or a top tax rate of 38%, we are talking about a Republican tax rate:

    And, well:

    The problem children were Reagan and Bush (the first).

    And since then, everyone is a Republican when it comes to taxing the rich.

  2. New Citigroup CEO gets serious.

    Link: the roof is on fire.

    After two months in the CEO seat, Michael Corbat is doing a fulsome job of cost-cutting in the emerging market space. Around 11,000 jobs – which isn’t really that much in the grand scheme of things, but the job cut will cost $1 billion.

    I believe that this is a TERRIBLE idea. And I would cast seriously suspicious glances at the spate of buy ratings from the so-called “independent” analysts.

    If we look at the logic here, the argument is that Corbat and advisors “have identified areas and products where our scale does not provide for meaningful returns”. So they cost cut themselves into the ground in the emerging markets. To focus on…what exactly?

    Emerging markets are the only space where there is economic growth; and expertise in emerging markets is cheaper than expertise in the first world*. And more to the point: who do you think is more experienced at dealing with economies in debt crisis? The emerging markets guys.

    So then why get rid of them? Rather fire the first world staff and outsource to the Asians, Africans and Latin-Americans. That’s a sensible cost cut. And not impossible either – does the geographic location of your back office staff really matter?

    When something isn’t making reasonable returns, you have options other than “shut-it-down”. Because that may look good for Q1 next year. But what about 5 years into the future when emerging markets are becoming what the US was in the mid-19th century?


    *It is one of my constant complaints.

That’s all for now.

Have a good day.