What's Important in the Financial World (4/17/2012) Italy's Budget Miss, the Reinvention of Yahoo!

In what is likely to be a shock to the system of EU austerity negotiations, Italy will move its balanced budget goal from 2013 to 2014. Reuters reports that a document from the office of Prime Minister Mario Monti shows the altered goal. The news will rattle the global capital markets, which already are concerned about the financial future of Spain and Italy. Spain’s borrowing costs have soared, and a delay in Italy’s financial plans likely will cause it to suffer a similar fate. Even though regional financial ministers have set total bailout funds at $1 trillion, most experts believe this will be insufficient to ensure large aid packages to both Spain and Italy. The sovereign debt crisis just got a little worse.

Spain vs. Argentina

The war between Spanish oil company Repsol and the government of Argentine President Cristina Fernandez over controlling interest in YPF (NYSE: YPF) — the largest oil company in Argentina — has become an international political incident. Repsol rightly sees its interests as having been stolen. Its home nation now threatens the equivalent of economic war with the South American country. Repsol wants $10.5 billion for the stake that has been taken. Management has gone so far as to say the takeover “will not remain unpunished.” Spain’s industry minister, Jose Manuel Soria, has indicated his country will take trade action and probably sanctions against Argentina. But Argentina has more to fear than Spain. If other sovereign nations believe that the assets of their companies may be seized, Argentina could become a pariah as Venezuela did when it took over oil interests of several firms, which included those domiciled in the United States and United Kingdom. Trade with Venezuela has been affected ever since.

No Ford Electric Trucks

Ford (NYSE: F) said it will not produce electric-powered heavy trucks anytime soon. It already has begun to follow General Motors (NYSE: GM) and Nissan into the business of producing small electric cars. Ford says the cost of larger electric engines is too high to make them economically practical. Ford secretly may have another reason. The sales of electric vehicles have been awful. The Chevy Volt sold well below GM’s estimates last year. Fires in the batteries of the car pressed demand even lower. And consumers fear that the overall cost to buy and run an electric car may not be much better than a gasoline-powered one. People like the idea of helping the environment, until it costs them.

Yahoo!’s Reinvention

Yahoo!’s (NASDAQ: YHOO) new CEO, Scott Thompson, said, “We don’t need to reinvent who we are. We’re one of the leading media companies. But we do need to reinvent the experiences our users have.” He made the comment as he oversaw his first earnings call since joining the portal firm. The numbers were fairly good compared with expectations. He has an odd view of what reinvention is. Thompson said he will eliminate nearly 50 properties that are not essential to the company’s future. He has fired 2,000 people. Thompson also reported that Yahoo! will become, at its new core, an online media company. His description may not use the term reinvention, but it is hard to see his actions as anything else.

Douglas A. McIntyre