Watch out for this year's playmakers

By Alex Brummer, January 7, 2010

As world economic leaders seek to consign the great panic and recessions of 2007-09 to the dustbin of history this year, expect Jewish policy-makers and business people to be an important part of the story in 2010.

Many eyes will be focused on Ben Bernanke, the chairman of the Federal Reserve Board — America’s central bank — to see if and when he calls an end to the age of easy money.

Official interest rates at or near zero have been a critical factor in restarting global growth and assisting the banks as they seek to restore their balance sheets.

Fast recovering economies, especially those rich in natural resources including Australia and Canada, have already lifted borrowing costs as part of an effort to restrain future inflation.

But once Bernanke and the Fed move we can expect other central banks around the world, including our own Bank of England, to follow suit -- possibly in a co-ordinated way.

Many eyes will be on Ben Bernanke

Among the reasons why there has been a reluctance to raise interest rates is because of the warnings from the International Monetary Fund’s managing director Dominique Strauss-Kahn’s that if the stimulus, in the shape of low interest rates and expansive fiscal policy is taken away, the world could slip into a ‘double dip’ recession.

So, global policy-makers will be watching Strauss-Kahn and the IMF carefully to see when it signals the world upturn is sufficiently robust to put on the squeeze. On current trends one would expect this to happen ahead of the Spring meeting of finance ministers held in Washington in April.

Here in Britain, Gordon Brown will be anxious that the rise in interest rates is held off as long as possible so as not to damage any lingering chances Labour has of being re-elected.

Among those who will not need much convincing of the need to keep policy easy is the latest addition to the interest-rate setting Monetary Policy Committee American-economist Dr Adam Posen.

An expert on Japan’s lost decade of the 1990s Posen believes that the mistake made in Tokyo was that the monetary stimulus was not sufficiently muscular and sustained.

Rising interest rates, if and when they occur, could make life a little more difficult for Irene Rosenfeld, America’s most impressive female chief executive (of Kraft Foods), who is pursuing a softly, softly strategy in her efforts to acquire Britain’s iconic chocolatier Cadbury.

Rosenfeld’s £10bn bid, largely financed by borrowed money has been mocked as far too low for victory. It has also encouraged Cadbury boss Todd Stitzer to explore a ‘white knight’ deal with American competitor Hershey.

A rise in interest rates would raise the cost of Kraft doing a deal at a higher price and potentially could endanger the cheese slices to Toblerone group’s credit standing.

This could frighten existing investors in Kraft including Warren Buffett who has warned Rosenfeld against ‘overpaying,’

Another Jewish businessman who can expect his fair share of headlines in 2010 is Goldman Sachs boss Lloyd Blankfein.

It is my understanding that the Goldman boss is being blamed in Whitehall by the other bankers for the ‘bonus’ bidding war.

By setting levels so high Blankfein has provided a pretext for other banks to offer big bonuses so as to hang onto key staff. This is a theme which will come back to haunt bankers in early 2010.

In retail Sir Philip Green will remain worth watching when he returns from his annual sojourn at the Sandy Lane to his Marylebone Road HQ in central London. 2010 will be vital to his new project of enlivening the Bhs store format by adding boutiques from his other brands including his leading fashion enterprise Top Shop which is now going international.

It could also be the year when his marketing alliance with music impresario Simon Cowell begins to pay rich new dividends.

Elsewhere the battle among the grocers will be fierce with J Sainsbury, under the new chairmanship of David Tyler, seeking broad expansion into non-foods as it tries to take back market share from Tesco and currently leaderless Wm Morrison. Sainsbury will be hoping that there are no takeover distractions from its Qatari investors.

Natural resources shares have been among the big beneficiaries of the nascent recovery with China and Asia leading the way. Mick Davis’s Xstrata was distracted in 2010 by the need to rebuild its balance sheet but remains among the shrewdest and respected operators in the mining area.

Focus will also be on Xstrata’s biggest investor Swiss based Glencore (with 38 per cent of the equity) which is raising $2.2bn from international investors in convertible bonds prior to an initial public offering scheduled for 2011.

The fund raising and the prospect of an IPO could enable Glencore to buy back its Columbian coal mining business Prodeco from Xstrata at a likely price in excess of $2.5bn.
The enormous demand of the fast growing economies of Asia for natural resources should sustain the commodity price recovery story in 2010.
But that will only happen if the feared ‘double dip’ in global output can be averted.

Alex Brummer is City Editor of the Daily Mail

Last updated: 10:54am, May 18 2011