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A cash crunch, a downgrade, and making fast food pay

March 25: Just another depressing day for Greece and Ukraine, plus, a high-stakes takeover could unite your Timmies and your KD


 

MORNING-PLAYBOOK-STORYYesterday we took a look at economic crises rocking Brazil and Venezuela, so today, spare a thought for our usual suspects (and their lenders), Greece and Ukraine, whose fortunes just seem to keep on crashing before our eyes.

A default for Ukraine is “almost certain”, according to Moody’s, which downgraded the country’s credit outlook again to negative, and the second-lowest rate. The country, which has received waves of IMF emergency funding and was begging for more foreign aid earlier this week, had economic problems even before the war. But now, its GDP is contracting dramatically, with the foreign minister telling Bloomberg the GDP may have shrunk by 10 per cent in the first quarter alone. In Greece, the news is a lack of breakthroughs in negotiations and a raid on the public coffers to try to keep the lights on.

In the U.S., the Fed is mulling a new cybersecurity team to try to reinforce bank security—a problem the New York fed chair says “keeps her up at night”—as the Brazilian company 3G, which owns Burger King and Tim Hortons, is apparently in talks to buy up Kraft foods, putting it further on the road to being a global food giant. More on that below.

In Canada, the TSX/S&P Composite index saw a broad-based, 100+ point rise yesterday, as oil inched up above $47, but the loonie inched downward, ending the day balanced just under 80 cents. Today, the Bank of Canada’s governor, Timothy Lane, will give a general speech in Kelowna, B.C., and the U.S. will see durable-goods numbers. Yanis Varoufakis is also in London to give a speech on the Greek economy, and Brazil announces its current account balance, both of which could offer developments for coverage of countries on the edge.

First we take Tim Hortons, then we go for Kraft. The Brazilian company, which owns just over half of Restaurant Brands International (which combines Tim Hortons and Burger King), has apparently set its eyes on yet another prize. Less than a year after Timmies, and two years after they snatched up the ketchup giant Heinz (with the help of Warren Buffett), 3G is apparently eying up the prepared-foods megabrand behind Oscar Mayer, Maxwell House Coffee, Kraft Dinner and many, many more. The news is being reported via unnamed sources from most of the business press, and comes after rumours they were looking to eat up Campbell Soups. Kraft could go for around $40 billion, the New York Times suggests, more than $3 billion over its latest market valuation, and the idea would presumably be to turn around the brand’s sinking sales. Changing tastes have rocked American fast- and prepared-food producers, as McDonald’s can tell you, as customers look for healthier and fresher food and, last year, Kraft’s profits fell to $1 billion—a drop in profits of more than 60 per cent.

Greece is desperately scrounging for cash. Let’s just say it: Everything about the story of Greece right now is an utter mess. While there was the appearance of political movement earlier this week, with Tsipras meeting German Chancellor Angela Merkel in Berlin to try to reset the emotional meter to “civil” (previous status: near-homicidal), there’s been no apparent progress in negotiations, and Greece’s running tally of payment deadlines is clicking ever closer to financial disaster. Previously, the government was insisting it had the cash for debt payments and civil salaries; it has since reversed course. The Greek government is also supposed to be submitting still-vague reform proposals to unlock its bailout cash, but, even under the best of circumstances, that would take several days to negotiate. In the meantime, the government is pooling cash from all areas of the state, including the metro service, water and electricity utilities, the budget for hospital supplies and health care workers’ salaries, and EU subsidies due to Greek farmers. At the same time, its creditors appear to be trying to cover their exposure in case things really do hit the fan, including putting in capital controls to try to limit the flight of cash, and putting limits on exposure to Greek treasury bills. The problem with that, as the FT points out, is that even if Greece can roll over its short-term loans, the limits may result in a sudden halt to foreign holders rolling over the bills, exacerbating the country’s cash flow still further. Amid this utter mess, take a break from the politics and the stereotypes today and spare a thought for young Greeks, who face 50 per cent unemployment and will have to mop up the mess. If they’re still there, that is: Many of the best and brightest are leaving the country, which could further limit the country’s ability to rebuild, or even pay back its mountain of debt.

What happens if we were totally, utterly wrong? This week, Maclean’s business editor Jason Kirby takes stock of what happens when some of our biggest assumptions about the global economy—that China’s economy is the next king, that America’s time is finishing, and that the supply of oil is dwindling—suddenly look flimsy. China’s political power may still be front and centre, but, as we saw yesterday, the country’s rapid growth is slowing, alongside a massive housing bubble, as the U.S.’s oil tanks are full to bursting and it looks to be one of the main engines of the global economy. I’ll let him take it from here: “Think of it as the Big Unwind. Three of the most deeply held beliefs that had come to underpin our understanding of the global economy, and which shaped everything from public policy to investment strategies over the last 10 to 15 years, are uncoiling right before our eyes.”

How to make busking pay. You play loud, fast and fun—and you play on nights before weekends or holidays, when people tend to be a little tipsy and, therefore, more loose with their cash. This sweet blog about the price of jamming in San Francisco comes via the FirstFT, and it lays out some of the strategies for playing for cash. Another big rule? Location, location, location. That’s something London’s venerable tube buskers know first-hand, with some buskers using multiple mobile phones to beat the city’s elaborate busking-regime in order to get the best-paying places, according to this Intelligent Life story on life as a “tunnel mole.”

Need to know:
TSX: 15,081.26 (+124.05), Tuesday
Loonie: 79.99 (-0.02), Tuesday
Oil (WTI): $47.47, Wednesday (6:45 a.m.)


 

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