A weekly service provided by ENGLISH FOR BUSINESS for our clients and their staff. Focusing on business English, this site aims to help non-native English speakers master business and financial vocabulary and to become operational in professional meetings, negotiations and presentations.
Since 1994, ENGLISH FOR BUSINESS has been providing language training and coaching to business leaders and senior executives at some of the world's largest corporations.
In English, the adjective versatile refers to a human quality or a positive feature of an object. A company employee who is versatile can perform numerous functions and can easily adapt to changing circumstances. His or her versatility will be considered a strength and will be mentioned in future job or promotion interviews. A versatile employee is someone who can easily switch from one department to another without having to be trained to deal with his or her new responsibilities.
A Swiss army knife is an example of a highly versatile object. Not only is it a knife, but it can also be used as a screwdriver, a saw, a bottle-opener, a nail-file, a magnifying glass etc. Equally, a DVD (Digital Versatile Disk) can store data, music, video and photographs.
As if there wasn't already enough bad news coming out of the world of finance, the Financial Times reports that an alleged multi-billion-dollar financial scam in the United States could result in heavy losses for investors across the globe.
According to the FT, "Investors around the world were rushing to assess potential losses from what could be Wall Street’s biggest fraud – a multi-billion-dollar scheme allegedly perpetrated by investment manager Bernard Madoff."
The FT explains that "the case threatens to stoke fears among investors and encourage withdrawals from hedge funds struggling to raise cash to meet redemptions. At least one civil lawsuit had been filed....on behalf of Madoff investors seeking to recover money."
It appears that Mr Madoff had, for many years, run a Ponzi scheme, which, according to Wikipedia, "is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business...It usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises (and pays) requires an ever-increasing flow of money from investors in order to keep the scheme going.
Wikipedia points out that the "system is destined to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases. The scheme is named after Charles Ponzi, who became notorious for using the technique in 1903. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit investor naïveté."
The FT explains that "Bernard Madoff presided over the biggest alleged fraud in the hedge fund industry, thanks to an investment strategy that appeared to provide steady returns with almost no risk of loss....Slick marketing and a wide network of contacts brought Bernard L Madoff Securities dozens of the biggest investors in the industry, attracting well over $10bn – and possibly $17bn – from clients who are supposed to be some of the smartest in the world.
The FT reports that "Bernard Madoff began 2008 with a reputation for savvy investing and $17bn under management from 23 clients. He ends the year with his reputation in ruins amid allegations that he defrauded investors out of as much as $50bn over two decades....The story of how this secretive investment manager, a former chairman of Nasdaq, crashed and burned over several days in December has managed to shock an investment community already reeling from the implosion of the credit markets this year.
Bernard Madoff’s investment funds shared several points in common with high-profile fraud cases of recent years. The consistently high returns had previously aroused suspicions; there was a lack of third-party oversight; there was a very small accounting firm for the size of the operation; he had his own broker/dealer operation; there was a lack of clarity as to exactly what he was invested in."
With growing talk of recession and economic crisis, the term 'deflation' is also increasingly being used by commentators and the media. Most of us can define inflation relatively easily, but what exactly does 'deflation' mean ?
According to BusinessDictionary.com, deflation is : a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy.
Listen out for the following words and expressions in this presentation of market trends :
leading to; the odds; further downside; a bear market; mixed messages; to get long; an attempt at recovery; to recover; treacherous; choppy; a downward spiral; a bounce; undergoing; irrelevant; patterns; taking hold; better off; devastating; to take with a grain of salt; down-trends; bullish; time-frame; constricting; it's anyone's guess; cautiously; financials remain a mess; to pave the way for; upside; pointing lower; trapped; aware of; stay on the sidelines.
Many non-native English speakers incorrectly employ the expression 'at the end' instead of 'in the end'.
'In the end' is a synonymn of finally: "All 5 candidates were suitable for the position, but in the end we chose David, who had more experience of negotiating with Chinese companies." "We couldn't find suitable premises in the business district and in the end we decided to stay where we were."
At the end literally refers to the end of an event or a period of time. It DOES NOT mean finally. At the end is the opposite of at the beginning or at the start of, as the following examples illustrate: "At the end of the day, many English people go to the pub, before returning home." "At the end of my presentation a member of the audience asked a rather awkward question which I had difficulty answering and in the end I had to admit that I couldn't give him a clear answer."
Stakeholder is a rather fashionable term in modern business which can often be found in annual reports and company charters. Paradoxically, stakeholder has nothing to do with actually owning a stake in a company and the term should not be confused with shareholder.
According to BusinessDictionary.com, a stakeholder is a : Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions, objectives, and policies. Key stakeholders in a business organization include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Although stake-holding is usually self-legitimizing (those who judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different considerations. For example, a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees.
Watch the following comedy sketch about banking and the subprime crisis and listen out for the vocabulary highlighted in bold in the transcript below :
Transcript George Parr, you are an investment banker?
I am, yes.
And as such you have your fingers right on the pulse of the financial markets.
Yeah, very much so, yes.
And, during the summer,there's been... great deal of turbulence and.
Volatility in the market. Volatility. Tremendous, tremendous, yes.
Yes and what's caused that?
Well, you have to remember two things about the markets, and one is that they are made up of very sharp and sophisticated people, who are ... these, are the greatest brains in the world. And the second thing you have to remember is that the financial markets, to use the common phrase, are driven by sentiment.
What does that mean? What does that mean?
Well, things, let's say are just going along as normal in the markets, and then suddenly out of the blue, one of these very sharp and sophisticated people says "my God, something awful’s going to happen, we've lost everything, errr, my God, my God what are we going to do? What are we going to do?" errr,
shall I jump out of the window?
Shall I jump out of the window. In fact let's jump out of the window. We've lost. or
Sell. Sell, sell. Sell, sell.
Yes, Precisely. Yes. And then a few days later the same sophisticated person says, you know, I think things are going rather well, and everybody says well yes I agree with you. I think we're rich, we're rich.
Rich, buy, buy, buy. Buy, buy,yes.
And that is, that's what we call market sentiment.
But err, well yes, surely we are exaggerating just a bit aren't we?
Well I don't know, I mean, in August, in the middle of August this year when the market absolutely plunged in London. The well known city firm, err State Street Global Markets issued a statement in which it said, and I quote... "Market participants don't know whether to buy on the rumour and sell on the news. Do the opposite, do both, or do neither depending on which way the wind is blowing". Unquote.
Yes, this is the kind of rigorous analysis that companies will pay, will pay huge salaries for.
Huge, Yes, exactly and errr and few days later when the markets had gone up a little bit, the senior equities advisor on ABM, Amro Morgan said and I quote, "We're back to happy days again".
Well no price is too high for that. No. For that kind of mature wisdom. Certainly. Is it?
This is the reason these sorts of people are paid millions of pounds in bonuses.
Yes of course.
During this summer there have been actual causes behind the, the, the volatility in the market.
Yes. I mean specifically and especially in America, they're granting vast numbers of mortgages, errr to people who can't afford them. Yes. On properties which are diminishing in value. Yes, this is the so called sub prime, errr, errr, situation.
Sub Prime. Yes. How does that work in fact?
Well imagine if you can, let's say, an unemployed black man sitting on a crumbling porch somewhere in Alabama in his string vest and a chap comes along and says, would you like to buy this house before it falls down? And why don't you let me lend you the money?
And is this chap, who says this, is he a banker?
Oh no, no, no, he's a mortgage salesman; his income depends entirely on the number of mortgages he can arrange.
So his judgement to arrange mortgages is completely objective?
Completely objective, yes, absolutely.
And, and, and, what happens next?
Well then, this debt, this mortgage that is left, is taken and bought by a bank and packaged together on Wall Street with a lot of other similar debts.
Without going in too much detail about what is actually...
Without going into any detail, no it's far too boring. And so this is put into a package of debts and then it's moved onto Wall Street, and, then, this, this, this, it's extraordinary what happens then, that somehow,this package of dodgy debts. Stops being a package of dodgy debts and starts being a structured investment vehicle.
An, errr, S.I.V?
An S.I.V, yes. Exactly yes.
Yes, I see. And then someone like you, comes along and, and, and buys it.
And I buy it, yes and then I will ring up someone in Tokyo and say, look I’ve got this package, do you want to buy it? And they say, what's in it? And I say I haven't got the faintest idea. And they say how much do you want for it? And I say a hundred million dollars and then they say fine, and that's it. And that, that's the market.
And presumably this package, I mean that kind of thing can happen several times?
Oh it could. To the same package? Possibly yes.
And, and, and every time it does, of course then you, or someone like you, will get a fee and a mark up. And a profit. And, and, and so on?
Well you can't expect me to do it for nothing, it's hard work being, being...
In view of the fact that in these packages, there's a lot of dodgy debt, what is it about it that attracts the, financial, you know, risk takers?
Yes, well because errr, these hedge funds as they're called, which specialise in these debts, errr, they all have very good names.
You mean they're responsible companies? Oh no, no, no, it's nothing to do with the reputation; they have actually very, very good NAMES. The names they think up for them are very good. I'll give you an example. There's a very well known American Wall Street firm called Bear Stearns who have two of these hedge funds, which specialise in these, in these mortgage debts, and errr, they lost so much money, they lost so much in value that Bear Stearns announced that they would have to put in 3.2 billion dollars into one of the funds to try and keep it afloat.
3.2 billion dollars?
Yes, 3.2 billion, yes. And even then they said that investors couldn't get any money out of it, and they were going to let the other fund go. But, one of these funds was called high grade structured credit strategy fund and the other was called the high grade structured credit enhanced leverage fund.
Well that sounds very good, doesn't it? Very good. It sounds very trustworthy. Yes, in fact this is the magic of the market, what started off as loaning a few thousand dollars to the unemployed black man on the street in a string vest has become a high grade structured credit enhanced leverage fund.
I like the sound of it. It is good, it's sounds very trustworthy, I mean it's got good words in it. You've got words like high. High's good. High's good, better than low anyway isn't it. Yes absolutely. And structured is another good word. Very good. Enhanced.I love enhanced. Enhanced is very. I mean I’d buy anything if it said enhanced.
Absolutely, yes. It might have been different if it said Unemployed black man in a string vest fund, but, but, but, Yes, because then alarm bells might sound. Alarm bells… might ring.
But despite these all very plausible names surely the reality is, that the people that lent all this money, have been incredibly stupid.
Oh no, no,no, in reality what was stupid is at some point somebody asks how much money are these houses actually worth. That's stupid? I mean if they hadn't bothered to ask that question then everything would have gone on as perfectly normal, but they unfortunately they did.
I see, now you see that people are saying the crisis is likely to turn into a financial meltdown. I mean can that be avoided?
It can be avoided,provided that governments and central banks gave, give us, the financial speculators back the money that we've lost.
But isn't that rewarding greed and stupidity?
NO, no it's rewarding what the Prime Minister Gordon Brown called the ingenuity of the markets.
I see, and, and, and.
We don't, we don't want this money to spend on ourselves. We want this money just to go into the markets, so that we can carry on borrowing and lending money as if nothing had happened without thinking too much about it.
Yes, but, if the worst came to the worst, then you didn't get this money, what then?
Well then, there'd be another market crash, and then I would say to you, what people like me always say, it's not us that will suffer, it's your pension fund.
Stock markets around the world have recently fallen sharply as a result of the financial crisis and fears of a world recession. In spite of short-lived rebounds the downward trend continues with some shares plummeting to new lows. There is no shortage of vocabulary and idiomatic expressions to describe bear markets: to/a decline; to/a decrease; to/a tumble; to/a fall; to/a plunge; to be down; to/a fall; to/a drop, among other terms can all be employed to describe downward movements, not only in stocks and shares, but also in profits, consumer confidence, sales, temperatures, production, (un)employment, crime and so on. The degree or speed of the fall can be specified by using the following adjectives/adverbs* : slight/slightly (small); steady/steadily (regular); sharp/sharply or steep/steeply (large) and dramatic/dramatically. *These can equally be used to refer to upward trends
It remains to be seen how much further the markets will fall. Indeed, it seems that the bottom has fallen out of the markets, with some companies' shares almost worthless. Investors are hoping that the markets will soon bottom out, although few expect a recovery (vb. to recover) in the near future.
Watch the following video and listen out for the key vocabulary listed below.
to take steps to shore up unveiling (to unveil) stakes to follow suit objectionable crafting these plans (to craft) a rescue package home-owners to avoid foreclosure to the tune of a downturn to issue letters of credit rebounded on news of ... (to rebound) to abandon optimism
The severity of the current financial crisis is reflected in the language employed to describe the events that have unfolded over the past few weeks. The Financial Times, reporting on a European initiative to protect European banks, explains that 'the idea is to help bail out banks, not mop up toxic assets...It comes as governments on both sides of the Atlantique scramble to find ways to contain unprecedented stress in the global financial system.'
The FT also reports that the crisis is hitting other sectors of the economy : 'Manufacturers feel the pinch as woes spread from banking crisis'. The paper explains that governments are determined to shore up the global financial system which is undermined by 'a crisis of confidencethat has paralysed the interbank money market'.
The financial crisis has already taken a heavy toll, leading to 'a string of failures of weak financial institutions' and 'threatens to cause a full-blown credit crunch'
Listen to this interview about asset management and check the meanings of the words and expressions in bold.
baffling central thesis served the needs of tend to even though over time double digits drive down fat returns as the saying goes vivid hand you hopeless damning luck over skill genuinely look back over the past 10 years to spot 15 straight years abysmal accurately skillful credit crunch betting undermine it's been around undergoing witnessed to claim credit for it's all down to narrow that down so-called exchange traded funds low fees driver of change so on and so forth mimics over the long run the likelihood is turning to the skill set terribly skillful narrowed plausibly riding on the back of as we go ahead sovereign wealth funds wary of flack buying stakes in broader spread of retreating from putting aside come up with attractive proposition Would you care to...? accordingly lock in the return a punt coming back to overall sustainable investing mistreating sued turn out to be bogged down in a trade-off to beat the market aim for higher returns a backwater sensible to rely on to pick
Read the following Economist article and check the meanings of the words and expressions in bold.
If fund management is such an attractive business, why would large banks such as Citigroup and Merrill Lynch want to give it up? After all, with both groups facing write-offs related to the credit crunch, the steady revenue from asset management would have been a comfortable cushion.
But there is one big problem with being a fund manager: you have to beat the market. If you don't, intermediaries such as brokers and private banks will not select your funds. And regulators, at least in America and Britain, will get upset if they think you are stuffing your poorly performing funds down your clients' throats.
This has prompted a move in the Anglo-Saxon markets to separate the jobs of “manufacturing” (managing portfolios) and “distribution” (selling them to clients). In continental Europe and Asia fund management is still dominated by the big banks and insurance companies. In Italy, for example, 92% of assets are gathered directly by salesmen tied to, or employed by, the fund-management group; in Britain the proportion is just 14%.
Manufacturing may sound like the more attractive part of the business. Provided the company gets its performance right, its profits will go up exponentially: it costs little more to manage $2 billion than $1 billion. But firms that act as distributors still earn fees from fund management, by charging investors for the oversight of their portfolios or by taking commission on the funds they sell. At the same time they cut out much of the cost.
There are three main kinds of distribution. The first is simply to sell products managed by your own firm. The second is “open architecture”. This allows the client access to almost any fund manager on the market, or at least to all the managers who are willing to allow their funds to be offered on such a platform. For various reasons, some are not. For example, they may want to control the type of clients that own their funds, or limit the size of funds under management to avoid their performance being diluted. Or they may object to handing over part of the annual management fee to the distributor. “Some of the really interesting boutiques don't want to be on platforms and give away half their fees,” says Alan Bartlett of WestLB Mellon AM, a firm that specialises in identifying skilled fund managers.
Another problem of open architecture is the so-called paradox of choice. Retail investors can feel overwhelmed by the thousands of funds on offer, so they are inclined to choose names they recognise. This favours funds that spend a lot on marketing and advertising. As a result, clients may not choose the best (and almost certainly not the cheapest) funds. But there is nobody to steer them in the right direction, because giving clients individual advice is too difficult and too expensive.
The third sort of distribution is “guided architecture”. In this model, a distributor offers the funds of a restricted number of firms that it has pre-selected as being suitable for clients. This narrows down the choice for investors and offers a degree of stability to the fund managers involved.
The effect of the manufacturing-distribution split is that the retail market is becoming almost as institutionalised as the pension-fund market. Just as a pension-fund manager's ability to get business usually depends on winning over a handful of consultants, attracting money from the “high net worth” market (ie, the rich) depends on a manager's ability to convince an elite group of private banks. That gives the managers plenty of scopeto bandy about terms like alpha and beta in their presentations. “At least this means we can talk at the level we're accustomed to,” says one manager.
This opens up opportunities for boutique-style firms. “Groups like Citigroup and Merrill Lynch have got out of asset management and moved to open architecture; we, as an independent asset manager, are just what they are looking for,” says Jim Kennedy of T. Rowe Price. Outsourcing distribution allows fund managers to specialise in their area of expertise.
But there is a price to pay. Depending on outside distributors means the fund manager loses direct contact with the client. One industry veteran recalls how his firm used to maintain a department to deal with the letters from investors; now the correspondence has slowed to a trickle. The result may be less hassle but also a reduction in customer loyalty. There is a lot more “churn” (turnover of customer accounts) than there used to be. “These people [the distributors] have to do something to justify their fees,” laments one fund manager, and that something usually means switching to a new fund as soon as one appears to falter.
The recent decline in the fortunes of New Star, a British fund-management group, illustrates the danger. New Star was founded by John Duffield, formerly of Jupiter Asset Management, with the explicit aim of recruiting well-known individual fund managers. Its funds were popular with both retail investors and distributors such as financial advisers and private banks. But in 2007 performance faltered as the company became overexposed to the British property market. In the second half of the year fickle investors left in droves, withdrawing almost £2 billion from the group's funds. The company cut its dividend in the expectation of further withdrawals this year. In response, its shares fell by nearly a third. If you live by short-term performance, you can die by it too.
How do you feel about annual assessments ? Watch the following video extract from the BBC's The Office, which shows what happens when assessments are badly managed. Try to transcribe the questions that the boss reads to Keith.
Read the following article and look up the words in bold if necessary.
THERE is always a bright side. To date, the banks that have imploded as a result of the credit crunch have been largely domestic. It has been clear from the start which national authority is responsible for clearing up the mess. The remarkable rescue of Bear Stearns by the Fed over a single weekend is testament to what a determined regulator can achieve. If a large international bank went belly-up, things would be far murkier. “So far we've been lucky,” says the chairman of one national regulator. “There is no formal framework for solving a cross-border crisis.”
It may not be entirely down to luck: banks operating in just one country are more likelyto get into serious trouble than ones with an international spread of business. But the crisis may encourage more banks to diversify across borders, so the question of how the authorities would work together if a big bank were to fail will become more pressing.
When things are going well, dialogue is relatively easy. Bilateral relationships between home regulators (who have primary responsibility for supervision) and host regulators are generally healthy. In Europe, the Committee of European Banking Supervisors has been running a project for a handful of cross-border banks in which their principal regulators have formed supervisory colleges to share information and conduct joint inspections. There is much more of this sort of thing to come. In April European Union finance ministers signed an agreement to tighten up monitoring of the continent's big cross-border banks. American and British officials are keen to install a transatlantic watchdog.
Working out whose job it would be to save a border-crossing bank in trouble is far more contentious. Would taxpayers in a bank's home country stump up for the cost of rescuing its operations abroad?
“If a bank is systemically important at home, the authorities would have an incentive to intervene to ensure an orderly resolution, thereby also directly or indirectly supporting its operations abroad,” reckons Mr Borio of the Bank for International Settlements. Yet crisis simulations involving the supervisors of Nordea, a bank that has a substantial market share in four Scandinavian countries, suggest that co-ordination problems are thorny. “The exercises are great fun but have terrible outcomes,” says one observer.
In cross-border banking, institutions that are “too big to fail” are not the only problem. There are also those that are “too big to save”: big banks in small countries whose coffers could not cope with the cost of a bail-out. UBS and Credit Suisse, two Swiss banks with a sprawling international presence, are firmly in this camp. Swiss officials shrug nervously when asked what would happen if either of these two giants were felled.
And then there are those that might be described as “too small to fail”: banks that are not systemically important in their home market but wield lots of clout in foreign markets. Take a bank like Standard Chartered, which has its headquarters in London but makes its money in emerging markets. Would British taxpayers and regulators step in if the bank's operations in, say, Asia went wrong? Many countries in Eastern Europe have banking systems dominated by foreigners (see chart 11). The authorities in New Zealand, where much of the banking system is in Australian hands, require foreign branches above a certain size to incorporate locally and to appoint local boards.
Agreeing burden-sharing arrangements for cross-border institutions in advance is tough. Most regulators believe that decisions on funding and the like will have to be thrashed outwhen the time comes. But the cack-handed rescues of Britain's Northern Rock and Germany's IKB hardly inspire trust. In an industry where crises unfold at high speed and confidence is all, hoping for the best is not much of a strategy.
To turn out (to be) means : to prove to be To be up to (the job) means: to be capable of doing it To be heading (for) means : to go in the direction of/be destined to
Examples : "We were unsure whether Mike would be up to the job, but in fact he has turned out to be an efficient and motivated worker."
"This market was thought to be heading for a slump but it has turned out to be quite resilient."
Listen to this analysis of last week's US stock market performance. Key vocabulary, expressions and jargon are highlighted below.
"(it) capped-off a great week" "that forty-week moving average" prior level to be cautiously optimistic to the upside to break past to hold back two days in a row a daily time-frame "this inverted head and shoulders position" to outline a little bit of weakness a recovery the height of an upward objective "to stay focused on where the action is" "a lot of people are geting tripped up in this market" to soar past it doesn't make sense back and forth to regain control "sneaking higher" (to sneak) to hold above "we would likely expect to see" to generally be aware of "basically, a waste of time" "that's enough said about that for now" to grind higher reason for concern signs of trouble to breathe easy it turns out to be to fail to be taken by surprise "to give a bit of room (to)" a pull-back innocent until proven guilty the benefit of the doubt to reverse "too much of a good thing" the healthiest
Watch the video without looking at the transcript below. Watch it again while reading the transcript in order to be sure that you have understood everything. Check, in particular, the meanings of the vocabulary and expressions highlighted in bold.
Transcript Microsoft ended its tentative $47.5 billion bid for Yahoo! after negotiations between the companies broke down over the price. Microsoft wanted to pay around $33 per Yahoo! share, lower than the $37 the internet company insists each share is worth. Jerry Yang, the chief executive of Yahoo!, came under pressure fromdisgruntled investors who had been hoping for a sale.
Sprint Nextel, America's third-biggest mobile-phone operator, unveiled an alliance with Clearwire, an internet-service provider, to create a network based on WiMax, a technology that delivers fast wireless-internet access. Other companies, including Google, Intel and Time Warner, are investing in the venture. The deal may allow Sprint Nextel to steal a march on AT&T and Verizon Wireless. Its larger rivals are backing a different wireless technology that will not be ready for two years.
Countrywide Financial's share price took another dive, after an analyst advised that if Bank of America went ahead with its proposed $4.1 billion takeover of the stricken mortgage lender it would be saddled with massive writedowns. Although the analyst recommended it “completely walk away” from the deal, BoA gave assurances that it would proceed.
UBS announced it would cut 5,500 jobs by the middle of next year (2,600 of them in its investment-banking business) as part of an effort to repair its tattered balance sheet. The Swiss bank, which has written down $38 billion during the credit crisis, one of the largest sums of any financial group, also said it had sold billions of dollars of subprime debt at a discount to BlackRock, an asset manager.
Disney's quarterly net income rose by 22% compared with a year ago. Despite the economic slowdown, the company recorded brisk trade at its theme parks and resorts, where revenue increased by 11%. The weak dollar was said to help, by making it more expensive for Americans to travel abroad and cheaper for foreigners to visit the parks.
The price of oil pushed past $123 a barrel. Arjun Murti, an analyst at Goldman Sachs who three years ago forecast that oil would breach $100, estimated that prices could rise to between $150-200 a barrel within two years.
India's finance minister said that biofuels and speculators were responsible for soaring food prices and criticised the practice of converting land use from food to palm oil production. India has placed a ban on trading futures in some crops and is considering extending it to other commodities. Earlier, George Bush upset some Indian politicians by suggesting that the country's increasing prosperity was a factor behind rising prices.
HSBC on Monday predicted the US housing market downturn could last for at least another year as the banking group revealed it had set aside $5.8bn (£3bn) as a result of the credit turmoil in the first quarter.
The bank, one of the first to suffer from the meltdown in the US subprime mortgage market, said any recovery in the US housing market was unlikely this year.
”We don’t think this is a 2008 event, it’s a 2009 event,” said Michael Geoghegan, chief executive.
HSBC’s position as a large lender to US customers with poor and patchy credit histories means its results are closely watched by other banks looking for any signs of an improvement in the markets. Many bankers believe securities backed by US mortgages will only stabilise once US house prices stop falling.
The bank said its US business had set aside $3.2bn in bad debt provisions in the first quarter. This is double the amount it provided in the first three months of last year, but lower than the $4.6bn set aside in the fourth quarter of 2007.
About half the provision was for the bank’s mortgage book, while the remainder reflected increased defaults in its portfolio of credit cards and car loans.
The turmoil in the capital markets in the first quarter also affected HSBC’s investment banking division, which wrote off another $2.6bn against the value of debt securities held on its balance sheet. Nevertheless, first-quarter profits in the business were higher than they have been in the previous two quarters.
Despite the increased provisions, HSBC said total profits in the first quarter were higher than in the same period of 2007, helped by booming markets in Asia, the Middle East and Latin America.
Mr Geoghegan said the bank’s strong balance sheet had allowed it to win business from weaker rivals, and said it had no intention of following rivals such as Citigroup and UBS by selling assets.
“We’re well positioned to take business from others. We have no need to slim down,” he said.
In mid-morning trading in London, HSBC shares were up 15½p at 881½p.
Aside from the write-downs, HSBC’s investment banking arm reported strong growth in foreign exchange, interest rate trading and cash management as rivals reduced their risks and shifted business to stronger counterparties. However, it warned that this performance would not be sustained if the market turmoil continued.
HSBC also said it had benefited from a $2.7bn one-off gain in the quarter, reflecting the reduced value of the bank’s own debt, though much of this gain had been reversed as markets recovered in April.
Nevertheless, Douglas Flint, finance director, said the recent revival in the markets had not extended to more complex mortgage-backed securities.
“Though there was a contraction in credit spreads in the corporate and financial institutions space, there was not the same recovery in relation to asset-backed securities where there continues to be significant illiquidity,” he said.
TO BOTTOM OUT refers to the lowest point in a trend, particularly in the context of the financial markets. It can be used when describing inflation, sales and prices. To bottom out means that a downward trend has come to an end and that the trend will soon start to rise. In most cases, to bottom out is used to indicate that the worst is over and that share prices, for example, will bounce back, recover, rebound, or at least start to pick up. Indeed, when equity markets have been falling steadily over a period of time, analysts and commentators often refer to 'the bottom' of the market and the term 'bottom fishing' refers to the practice of buying shares which appear to have been oversold and which are therefore cheap in the eyes of some investors. Before beginning an upward trend, prices or sales can be described as being in a trough or at a low point. The opposite of to bottom out is the verb to peak. In many countries, consumer spending tends to peak in mid-December, in the run-up to Christmas and subsequently falls-off in January.
Watch this video while reading the transcript below. What do the words and expressions in bold mean ?
UBS made public a summary of an internal investigation into the mistakes that led itto write down a total of $38 billion, the most by any European bank hit by the subprime crisis. The company laid most of the blame on positions taken by its investment-banking arm. To rebuild its fortunes, the Swiss bank is reducing the size of its investment-banking business to refocus on its private-client base.
Other banks added to the list of woes stemming from the mortgage markets. Credit Suisse, UBS's rival, swung to a loss in the first quarter largely because it took SFr5.3 billion (around $5.0 billion) in writedowns. Bank of America said its first-quarter profit had fallen by 77% compared with a year ago, and that it would increase its provision for credit losses by $5 billion. Citigroup booked another $13 billion in writedowns and made a quarterly loss of $5.1 billion. And Royal Bank of Scotland said it needed to raise £12 billion ($24 billion), about a third of its market value, in a rights issue to help protect its core capital.
The Bank of England unveiled an initiative that will allow British banks over the next six months to swap high-quality mortgage-backed and other securities for Treasury bills for up to three years. The central bank estimated that around £50 billion ($100 billion) of such assets would be swapped at first.
Meanwhile, a survey from the British Bankers' Association found that the number of approvals for house purchases fell by 46% in the 12 months to March and was at its lowest since the series began in 1997.
In an effort to revive investor confidence, China reduced its stamp duty on share trading to 0.1% from 0.3%. The tax was increased in May 2007 to cool feverish stockmarkets. Since then the government has made fighting inflation its top priority, causing some to worry that economic growth will slow.
Read the following text. What do the expressions in bold mean ? We'll tell you next week.
I was at a loose end last Sunday afternoon. I could have called Jim; if I had invited him out for a pint he’d have come at the drop of a hat. But my argument with my boss had left a bad taste in my mouth. His remarks had been totally below the belt and I had had to bite my tongue to avoid saying something that I would have later regretted. When I told my boss that I was getting cold feet about the new project he came down on me like a ton of bricks. As I had got the job by the skin of my teeth I didn’t want to play with fire so I had kept the bad news about the prototype under my hat. Even if I had told him about the problems, he’d have told me to put a sock in it. I felt on edge, but I kept a stiff upper lip and anyway I didn’t want to rock the boat. So, if I had invited Jim out for a beer, I would have just talked shop and he’d have just told me to keep my chin up and would have probably added that I was making a mountain out of a mole-hill.
Finally, I realised how I could kill two birds with one stone. After picking the brains of a colleague who had already found himself in the same situation, I decided that I had to pull myself together and to take the bull by the horns. I arranged a meeting with my boss and our R & D team and I managed to twist their arms to bring along the Seldox reports, which they themselves had contributed to. The reports showed that the project was not exactly going like clockwork and it was clear that the company would go to the wall if we didn’t take steps to put things right. By taking this initiative I felt I was turning a new leaf - at last I was standing on my own two feet. Indeed, I had been sitting on the fence for too long, never daring to say what I really thought about the project or my boss’s unrealistic ambitions for the company. When he read the Seldox reports he put two and two together and realised that we would have to go back to square one. He was all ears when Jack Sebastian from the lab spoke about the risks that we would be running if we continued to stick our heads in the sand. The figures brought my boss down to earth, as it became apparent that we had a cat in hell’s chance of pulling the project off. Jack’s experience came in handy and it was his ability to call a spade a spade that won the day. I finally came to the point and told my boss that he was counting his chickens before they hatched by publishing over optimistic sales forecasts when we hadn’t even tested the product. Jack hit the nail on the head when he pointed out that, in a nut-shell, it all came down to marketing. My boss had his hands tied and being forced to take advice from others, rather than to give orders, he must have felt like a fish out of water. I had finally turned the tables on him. Before that, he had ruled with a rod of iron, but when he finally saw the light he had to take a back seat. If we had succeeded in saving the company it was thanks to good timing - we had struck while the iron was hot, the Seldox reports having just been published.
My colleagues and I were on cloud nine, but we continued to put our shoulders to the wheel so as not to lose our grip. As for the boss, he has looked a bit under the weather recently and I’m sure I’m in his bad books now.
If you are getting bogged down in a meeting you are talking for too long and in too much detail about a particular subject or item on the agenda. The result is that you are wasting time and failing to make progress. "We seem to be getting bogged down on this point. Let's move on to the next point before we run out of time."
It is the weakest link in the communication chain of many international companies. Conference calls can be a nightmare if the conditions condusive to clear comprehension are not met. While technological advances have improved sound quality, poor communication skills remain the underlying problem and root cause of most confcall communication problems. In many cases, confcall participants are aware of typical communication issues: participants speaking over each other, people joining a confcall halfway through without introducing themselves, contributors speaking too fast etc. Equally, many are frustrated by the lack of sensitivity of native English speakers towards non-native English speaking participants. The former often speak too fast, employ obscure idioms, jargon and slang and frequently express themselves as if they were chatting with their friends down the pub. Meanwhile, the non-native English speakers understand little of what is being said or, even worse, think they have understood when, in fact, they haven't. Equally, non-native English speakers may confuse and frustrate others due to their poor command of English, usage of 'false-friends' etc.
Based on numerous observations of international conference calls, our new service ENGLISHforCONFCALLS helps improve the quality of your conference calls by identifying linguistique problems or 'red-zones' which cause confusion, misunderstanding and frustration during conference calls. Created in association with YourEnglishSuccess!, ENGLISHforCONFCALLS is an advisory service designed for international companies for whom English is, or has recently become, the language for cross-border communication between different entities. ENGLISHforCONFCALLS consultants will observe your conference calls in order to identify potential and actual communication 'red-zones' such as poor English usage by non-native English speakers and obscure, unclear and poorly-expressed contributions from mother tongue English speakers.
ENGLISHforCONFCALLS consultants and conference call participants will then attend a debriefing meeting in order to draw up an action plan to resolve the 'red-zones'. This may involve language coaching for the non-native English speakers, but equally, it could recommend coaching mother tongue English speakers who employ unnecessary idioms or slang, who speak too fast and who generally lack awareness of the difficulties facing their non-native English speaking colleagues.
Listen to Julie Lenzer Kirk, president and CEO of Path Forward International Inc. as she lists the top five hiring mistakes that startup companies make.
Listen to Peter Pizzi, attorney and partner at Connell Foley LLP in Roseland, N.J., as he discusses the general guidelines for staying legal after leaving a company to start a related venture.
Listen to Kurt Carlson, an attorney from Wheaton, Ill.-based Stock, Carlson, Flynn & McGrath LLC, as he offers up advice on liability and business structure.
TO BAIL OUT (a company) This week, US investment bank Bear Stearns, on the verge of collapse, was bailed out when it was been bought by JP Morgan for a fraction of its former value, with backing of the US Federal Reserve. Last summer, two of Bear Stearns' hedge funds had to be bailed out, partly precipitating the first stage of the global credit crunch. So, to bail out a company - usually a financial institution - means to prevent it from collapsing following heavy losses. In 1995, Barings Bank was faced with financial collapse - bankruptcy - after the rogue trader, Nick Leeson, made huge losses. The Bank of England decided not to bail out Barings and the bank was eventually sold to ING for £1.
Watch this BBC television report which explains the background to, and the causes of, the current sub-prime mortgage crisis :
The US sub-prime mortgage crisis has lead to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded.
Read the following text about the sub-prime crisis. What do the words and expressions in bold mean ?
Traditionally, banks have financed their mortgage lending through the deposits they receive from their customers. This has limited the amount of mortgage lending they could do.
In recent years, banks have moved to a new model where they sell on the mortgages to the bond markets. This has made it much easier to fund additional borrowing,
But it has also led to abuses as banks no longer have the incentive to check carefully the mortgages they issue.
In the past five years, the private sector has dramatically expanded its role in the mortgage bond market, which had previously been dominated by government-sponsored agencies like Freddie Mac.
They specialised in new types of mortgages, such as sub-prime lending to borrowers with poor credit histories and weak documentation of income, who were shunned by the "prime" lenders like Freddie Mac.
They also included "jumbo" mortgages for properties over Freddie Mac's $417,000 (£202,000) mortgage limit.
The business proved extremely profitable for the banks, which earned a fee for each mortgage they sold on. They urged mortgage brokers to sell more and more of these mortgages.
Now the mortgage bond market is worth $6 trillion, and is the largest single part of the whole $27 trillion US bond market, bigger even than Treasury bonds.
For many years, Cleveland was the sub-prime capital of America.
It was a poor, working class city, hit hard by the decline of manufacturing and sharply divided along racial lines.
Mortgage brokers focused their efforts by selling sub-prime mortgages in working class black areas where many people had achieved home ownership.
They told them that they could get cash by refinancing their homes, but often neglected to properly explain that the new sub-prime mortgages would "reset" after 2 years at double the interest rate.
The result was a wave of repossessions that blighted neighbourhoods across the city and the inner suburbs.
By late 2007, one in ten homes in Cleveland had been repossessed and Deutsche Bank Trust, acting on behalf of bondholders, was the largest property owner in the city.
Sub-prime lending had spread from inner-city areas right across America by 2005.
By then, one in five mortgages were sub-prime, and they were particularly popular among recent immigrants trying to buy a home for the first time in the "hot" housing markets of Southern California, Arizona, Nevada, and the suburbs of Washington, DC and New York City.
House prices were high, and it was difficult to become an owner-occupier without moving to the very edge of the metropolitan area.
But these mortgages had a much higher rate of repossession than conventional mortgages because they were adjustable rate mortgages (ARMs).
The payments were fixed for two years, and then became both higher and dependent on the level of Fed intereset rates, which also rose substantially.
Consequently, a wave of repossessions is sweeping America as many of these mortgages reset to higher rates in the next two years.
And it is likely that as many as two million families will be evicted from their homes as their cases make their way throughthe courts.
The Bush administration is pushing the industry to renegotiate rather than repossess where possible, but mortgage companies are being overwhelmed by a tidal wave of cases.
The wave of repossessions is having a dramatic effect on house prices, reversing the housing boom of the last few years and causing the first national decline in house prices since the 1930s.
There is a glut of four million unsold homes that is depressing prices, as builders have also been forced to lower prices to get rid of unsold properties.
And house prices, which are currently declining at an annual rate of 4.5%, are expected to fall by at least 10% by next year - and more in areas like California and Florida which had the biggest boom.
The property crash is also affecting the broader economy, with the building industry expected to cut its output by half, with the loss of between one and two million jobs.
Many smaller builders will go out of business, and the larger firms are all suffering huge losses.
The building industry makes up 15% of the US economy, but a slowdown in the property market also hits many other industries, for instance makers of durable goods, such as washing machines, and DIY stores, such as Home Depot.
Economists expect the US economy to slow in the last three months of 2007 to an annual rate of 1% to 1.5%, compared with growth of 3.9% now.
But no one is sure how long the slowdown will last. Many US consumers have spent beyond their current income by borrowing on credit, and the fall in the value of their homes may make them reluctant to continue this pattern in the future.
One reason the economic slowdown could get worse is that banks and other lenders are cutting back on how much credit they will make available.
They are rejecting more people who apply for credit cards, insisting on bigger deposits for house purchase, and looking more closely at applications for personal loans.
The mortgage market has been particularly badly affected, with individuals finding it very difficult to get non-traditional mortgages, both sub-prime and "jumbo" (over the limit guaranteed by government-sponsored agencies).
The banks have been forced to do this by the drying up of the wholesale bond markets and by the effect of the crisis on their own balance sheets.
The banking industry is facing huge losses as a result of the sub-prime crisis.
Already banks have announced $60bn worth of losses as many of the mortgage bonds backed by sub-prime mortgages have fallen in value.
The losses could be much greater, as many banks have concealed their holdings of sub-prime mortgages in exotic, off-balance sheet instruments such as "structured investment vehicles" or SIVs.
Although the banks say they do not own these SIVs, and therefore are not liable for their losses, they may be forced to cover any bad debts that they accrue.
Also suffering huge losses are the bondholders, such as pension funds, who bought sub-prime mortgage bonds.
These have fallen sharply in value in the last few months, and are now worth between 20% and 40% of their original value for most asset classes, even those considered safe by the ratings agencies.
If the banks are forced to reveal their losses based on current prices, they will be even bigger.
It is estimated that ultimately losses suffered by financial institutions could be between $220bn and $450bn, as the $1 trillion in sub-prime mortgage bonds is revalued.
China Yangtze Three Gorges Project (TGP), as one of the biggest hydropower-complex projects in the world, ranks as the key project for improvement and development of Yangtze River. The dam is located in the areas of Xilingxia gorge, one of the three gorges of the river, which will control a drainage area of 1 million km2 , with an average annual runoff of 451 billion m3 . The open valley at the dam site, with hard and complete granite as the bedrock, has provided the favorable topographical and geological conditions for dam construction.
Peter Day looks at the role of innovation in business and how good ideas shape the future of technology. His guest is Sophie Vandebroek, chief technology officer at Xerox, the company we traditionally associate with the photocopier – who are also spearheading developments in many other areas including ‘smart document technology’. Sophie will be telling us about innovation, past, present and future at Xerox and how to create an environment where ideas can really flourish.
