Maybe what we need has arrived: A Chinese new year to make things happen. The Year of the Dragon, which came in on Jan. 23, is supposed to be lucky. Things are supposed to happen and stuck energy is to get moving. It may sound New Age, but it’s really old age: With China a major holder of U.S. debt, it would behoove us to pay better attention to its ancient culture.
Considering how many things were derailed last year, we need a fire-breathing dragon to heat things up. Exhibit A: The never-ending European debt crisis. Every time I pick up the Financial Times, headlines blare that Germany and France are threatening Greece, which seems to respond using the Socratic method. It’s the same story over and over.
Closer to home, we have our own problems with the U.S. debt reduction debate. And like Europe we have the regulatory debate: Dodd-Frank rules still are being hammered out. This puzzles me — wasn’t the Congressional deadline for regulators last summer? And why are there still ongoing negotiations on this? Slowing down the rule finalization only causes uncertainty for banks and businesses that need to move ahead.
As it is, corporations are holding onto cash not seen for decades at a time of record profits. According to the FT, “US corporate profits are higher, as a share of gross domestic product, than at any time since 1950.” The total amount of cash held by U.S. corporations adds up to $1.73 trillion, almost as large as Canada’s GDP. This frustrates the government because it wants companies to invest in themselves and hire workers. But since the credit crunch in 2008, it appears many companies are stashing money under the mattress.
Something else stuck is the U.S. Congress, which has all parties frustrated, business concerned and rating agencies, the only firms seemingly making moves, downgrading sovereigns everywhere. It also angers the general populace.
And 2011 took its toll on global mergers. All three potential exchange mergers have died: TMX/LSE killed by Canada; ASX/SGX killed by Australia; and Nyse/DB killed by the European Commission. Not only exchanges are being thwarted. The proposed Glencore/Xstrata merger now is threatened by the Xstrata board, which is worried Glencore — those crazy commodity traders — will have too much power.
Then, of course, in a holding pattern is the stock market, at least in the United States, which ended the year around the same level it came in at in 2011 (see “Equities look for new pastures in 2012,” by Assistant Editor Michael McFarlin). The stock market had a promising January 2012, but that was the same story last year. The Dragon year might be different with interest rates holding (we’re told by the Fed) and some growth in the job market. In fact, as of Feb. 10 we’re almost surpassing last year’s high.
One thing we certainly hope will get unstuck is MF Global client segregated funds (see "MF Global shortfall less" as well as futuresmag.com for breaking news updates). This marks month five that funds haven’t been returned in full to MF Global clients. We continue to hear the same stories: Small introducing brokers closing because of the failure to return segregated funds, hedgers like farmers and ranchers stepping away from using the futures markets, commodity trading advisors taking a performance hit because of lost funds and many larger IBs in trouble because they didn’t move clients out when they heard of MF’s problems, figuring the funds would be safe as they always have been. Let’s hope for MF Global clients that 2012 is a true Year of the Dragon, and not a Year of the Drag On.