What's Important in the Financial World (7/19/2012)

The skepticism about Spain from international capital markets investors has returned. The yield on 10-year notes rose to 6.95% post auction today. The yield has risen again for several reasons. Spain’s central government reported that the nation’s bank and real estate problems were not being resolved, but are getting worse. Germany said that Spain will be liable for the problems of its own banks. And thousands of protestors took to the streets in protest of austerity measures, which have only increased as the nation tries to gain favor with its rescuers. While Spain has demonstrated that it can knuckle under to requests for more cost cuts, the market has come to believe that its crippled economy cannot yield more treasury receipts, and therefore its deficits will rise. That, more that the balance of factors, will keep yields high.

Soybeans and Corn at Record Highs

The worst U.S. drought in more than half a century has pushed the prices of soybeans and corn to record highs. Although the American economy has been largely free of inflation, the costs of these two crops could change that in certain sectors. Reuters reports:

Chicago Board Of Trade August soybeans rose 1.56 percent to $17.10-3/4 a bushel, a record high for the contract, while November soybeans, the most actively traded contract, rose 1.34 percent to $16.41-3/4 a bushel.

Spot corn rose 1.19 percent to $8.04-1/2 a bushel, surpassing the previous high of $7.99-3/4 a bushel set back in July, 2011.

The effect will ripple from corn to ethanol and cattle prices as energy and feed costs increase. Soybeans also are used for feed and a number of consumer products.

Yahoo! Layoff Rumors

Speculation has grown that the only effective way for Yahoo!’s (NASDAQ: YHOO) new CEO to improve its prospects on Wall St. is to make another large round of employee cuts. In many analysts’ opinions, the portal company still has too many people. The Wall Street Journal made this analysis:

Excluding contractors, 2011 revenue per average employee was $1.4 million at Facebook and $1 million at Google. At Yahoo, it was $316,000.

Because Yahoo!’s revenue problems may take years to solve, even with the engineering and product skills of chief executive Marissa Mayer, she has very few ways to impress investors short term. Among these would be a sale of either Yahoo!’s position in China e-commerce firm Alibaba or in the U.S. company’s shares in Yahoo! Japan. Neither alters the fact that Yahoo!’s core advertising business is in trouble. The temptation to balance that may well be through another round of firings — something that most of Mayer’s predecessors have done already.

Douglas A. McIntyre