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A report from India's Directorate of Civil Aviation given to the New York Times shows problems at most of India's airline companies. This includes a lack of enough pilots at Air India Express, shortage of engines and a lack of enough pilots at Kingfisher Airlines, two year delay in auditing the international operations of Jet Airways, not enough instructors for the Boeing 737 at SpiceJet, and investigations for Indigo that were never completed. According to the Center for Asia Pacific Aviation, the number of people taking flights in India has increased to 150 million in 2011, triple the number in 2004. Analysts and regulators believe that during this surge in demand for air travel the airline companies lacked enough pilots, flight trainers, safety experts, and maintenance engineers. One of the problems facing the industry is the severe price competition leading to losses at most of the airlines. The losses in the Indian airline industry range from $5 to $6 billion in the past 5 years, with expected losses of another $2 billion in 2012, according to Kapil Kaul, South Asia chief of the Center for Asia Pacific Aviation....

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With Republicans elected to a majority in both chambers of the state legislature and a Republican governor, Wisconsin is moving ahead with a sweeping plan to fix its budget deficit. Walker promised he would get public workers' compensation in line with other workers. He is now proposing a plan which will go to the legislature for swift approval that will simply go ahead and cut public employees benefits without negotiating. He says he doesn't have anything to negotiate with, because with the growing deficit he has nothing to give. His plan: limit collective bargaining for most state and local government employees to the issue of wages (instead of to many issues such as vacations, health coverage), require government workers to contribute 5.8% of pay to pensions, and have state employees pay at least 12.6% of health care premiums (instead of the 6% most pay today). The plan will save $30 million in the current budget and $300 million in the next budget. Republican leaders are saying the alternative is to lay off some 6000 state workers, and take away Medicaid coverage for thousands of children, which is a much worse alternative....

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A "Melt Up" rally in the U.S. stock market. A "Melt Up" rally is one that has precious little to do with economc fundamentals. Investors act in a herd mentality, in a mad rush by investors, after a late realization that there are gains to be made. The Standard and Poor's 500 stock index went up 63% since its March 9, 2009 low, and is up 22% for 2009. Yet a lot of money is still in low yielding fixed income assets. Three month Treasury bills yield 0.03%, and a negative yield where investors actually pay the government to safeguard their money. In January, $4 trillion were in money funds, they were recently at $3.339 trillion, according to Investment Company Institute. And this could lead to more money going into stocks, but some of it could go into emerging markets first. And the smart money may see the melt up continuing, as a sign to pull out. In any case without economic fundamentals, Farzad of BW, sees a multiyear bull market as remote, or ending up similiar to the meltup in early 2007 which ended in late 2008 with a market collapse....

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Audi faced similiar problems of unintended acceleration incidents that Toyota faces today. A "60 Minutes" segment by Ed Bradley in November 1986 showed Audi owners of the Audi 5000 sedan who said the cars suddenly accelerated. That show even showed an Audi 5000 moving on its own which later was shown to be due to an altered transmission for that shot. Even when it was shown in a 1989 government study that blamed driver errors especially because of the close placement of gas and brake pedals. This led to the report's recommendations to move the pedals apart, and install ashift lock mechanism which required a foot on the brake to shift the car into drive. Audi ran newspaper ads showing these findings but consumer fear had set in. It took Audi many years to recover, From 1985 to 1991 Audi U.S. sales dropped 84%, hitting a low of 12,000 annually and not reaching levels from before the crisis till 2000. Audi, a division of Volkswagen, is now expanding in the U.S. but the story has lessons for Toyota. This may explain why Toyota was quick to refute a story in ABC News on the acceleration issue. ...

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German banks hold $28 billion euros or $37 billion in Greek bonds according to Barclays Capital using IMF data. This debt is now rated as junk by Standard and Poor's since last week. Just one bank, Hypo Real Estate, now owned by the German government after a bailout has $10.5 billion of Greek bonds. This gives a new twist to what is happening in Greece, with Germany involved through the support its own banks would need if Greece defaulted and these bonds become worthless. Total debt holdings of Portugal, Italy, Ireland, Greece and Spain for example at Hypo Real Estate is $52 billion. France is also heavily involved through its banks. It has $67 billion in holdings, including $9 billion held by the Bank of France, according to Barclays. According to BIS data American banks hold $16.6 billion in Greek debt. Even the healthy large Spanish banks like Santander have their problems, with Santander having $64 billion of assets in Portugal, according to analysts at Nomura in London. In Spain most of the bad debt problems are concentrated in the midsize banks, but if Portugal were to take a hit then the large banks would be affected adversely....

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Concerns that the austerity cuts announced by Spanish prime minister Zapatero may not address the deeper causes of the financial crisis in Europe- taking on too much debt, government spending and the imbalances in the global economy. And the concern on the other side that even these small cuts and eventual larger cuts can squeeze domestic demand in countries with severe recession, weaken the tax base, test social cohesion, and dampen the prospects for recovery. Zapatero announced a 5% pay cut for public sector employees this year and a freeze for next year, cancelling index-linked pension increases, and cancelling a baby bonus tax break of 2500 euros, cutting back regional spending budgets, and postponement of infrastructure projects, all adding up to $15 billion in savings. This is intended to reduce the budget deficit to 6% of GDP from 11.2% in 2009. With Spain's unemployment at 20%, and the construction sector stalled, pain will be felt. Spain's large informal economy tied to tourism helps in this situation. Trade union Comisiones Obreras gave a muted response about a general strike saying that "it is the last thing this country needs at a time like this," after meetings with Zapatero. ...

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Shiller points out that statistical models used by economists can't quantify the risk of a double-dip recession. Confidence indexes show gradual trends so they too are poor at picking up the dangers inherent in the increasing levels of uncertainty and the increasing vulnerability of confidence in the economy. The potential of sudden events in derailing confidence is great. He cites the 10 percent drop in the U.S. stock market on May 6, as one example. And the potential of the BP oil spill creating havoc for the Gulf economy is another such event. Shiller says his definition of a douple dip recession looks at the long term, and doesn't see the short term as a way to correctly read the economic situation. He sees a douple dip recession as a rise in unemployment to high levels, and becomes sticky after that, only nudged down insignificantly. Before unemployment can be brought down a second recession occurs, and there could be years in between. Shiller's Buy-on-Dips stock Market Confidence Index prepared since 1989 shows a steady decline in individual investor confidence since 2009....

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Mercedes is seeing signifcant sales growth in China. It is Mercedes's third biggest market with sales of 100,000 cars compared to 67,000 in 2009. Daimler CEO Dieter Zetsche says that given no downturn in the world economy Mercedes-Benz cars should reach its target for return on sales of 10% by the second half of 2012. He predicted EBIT of 2.5-3 billion euros for 2010, and plans to boost expenditures for R&D in fuel efficient technology and capital investments in new vehicle models in the second half of 2010. Analyst Warburton at Sanford and Bernstein, writes that Mercedes is likely to pass 7% margins in the first half of 2010, and will get a boost from a weaker euro plus strong sales in China. The only question is, as Dieter Zetsche noted, prospects depend on no downturn in the global economy. China's economy is growing too fast to be sustainable growth and a property bubble is developing, and its not certain how long strong sales in China will last. There are other signs of a slowdown in the global economy. See global economy....

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In a strategic move to fill a gap in its competition with Tesco and Sainsbury in Britain, Wal-mart has decided to pay 778 million pounds for Denmark's Netto chain's 193 stores in Britain. Tesco has ben expanding with new store formats and has built a sizable presence with smaller stores. Customers in Britain like the advantages of shopping in smaller stores, with older customers or customers in small households preferring to buy often and as needed rather than make a long drive to a distant location for bulk purchases. Wal-mart in Britain was seeing its share of the grocery market at 17% slipping in relation to Tesco's 30% share. Efforts to open its smaller stores of 8000 square feet have run into tight zoning regulations and it has only 25 such stores so far. The Netto acquisition helps fills this gap. It still will not have the same quality of locations that Tesco and Marks & Spencer have, which are better centrally located, and in busy residential areas. It still is a much needed move into convenience retailig for the Asda business of Wal-mart....

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Chrysler has no new models in its product lineup except for the small Fiat 500 car and some product redesigns like the new 2011 Jeep Grand Cherokee. For about 2 years Chrysler has had liitle that is new to show buyers coming into its dealership showrooms. As competitors Ford and GM recovered sales after the 2008 crisis, Chrysler's sales have been dismal. A lot is dependent on how the new Jeep Grand Cherokee is seen by car buyers. Chrysler and Mercedes had essentially redesigned the Grand Cherokee by the time of the bankruptcy filing in April 2009 and Fiat's takeover. So even though it is presented as the new Chrysler, analysts say its not something Fiat's involvement created. What Fiat added is attention to some of the technical details, and working on the marketing aspects so that its off-road and on-road capabilities are presented in the best possible way to attract buyer interest, keeping price as close to sticker as possible. The question now is whether in Chrysler's difficult situation, the American car buyer will respond to the new Cherokee with interest. Sales peaked for the Cherokee at 300,000 in 1999 and dropped to 50,000 in 2009....

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Doctors face a 21% cut in the amount of Medicare payments for treating seniors having Medicare, though this cut will be delayed till 2011 under legislation in Congress. This issue goes back to 1997, when a budget law set spending targets, and stated that if they were exceeded formulas to reduce doctors payments would go into effect. The formulas seriously cut into doctor payments by Medicare in 2002, so the formula was put off. The result of this is that the cuts based on the formula now amount to 21%. The cuts are not expected to go through, but at the same time Congress has an headache on its hands with the growing deficit. In the Senate there is opposition to a $120 billion bill to extend long term unemployment benefits which lapsed in June 2010, for tax breaks, and other expenses. Senators want to pare down the bill's price tag, as $80 billon of this is unfunded and will be added to the budget deficit. For a primary care doctor in Washington state, Medicare pays about $95 compared to private insurers payment of $129, and a plan for state workers that pays $140....

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The Pirate Party, a party of digital activists favoring more transparency and sharing of information online has about 10% of voter support according to recent polls. The Pirate party concept started first in Sweden, but it is in Germany where it has gained political support. This party was founded in 2006 in an underground Berlin nightspot C-Base, where many digital activists gathered. In Sept. 2011, the German Pirate Party gained 9% of the vote, 15 of 249 seats in the Berlin state elections. This was repeated in the Saarland state elections, and now is likely to happen in elections in Schleswig-Holstein and North Rhine-Westphalia. These votes are coming at the expense of the Free Democrats and the Greens. The Free Democrats are hurt badly, and may not make the 5% of votes needed to win seats in North Rhine-Westphalia. The Greens are seen as part of the establishment, giving the Pirate party support from people thinking outside of the establishment. The polls show the Christian Democrats having voter support of 35%, Social Democrats 27%, Left 7%, Greens 14%, Free Democrats 3%....

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GM plans to bring 5 to 10 Cadillac models to China by 2016. It plans to build a factory for Cadillacs in China. Even as auto sales are slowing down in China in 2012, sales of luxury and premium cars are growing rapidly. Infiniti, Audi, BMW, Mercedes, Tata's Jaguar-Land Rover, and now GM are competing for sales to China's growing affluent class. According to IHS Global Insight, China's auto sales slowed to 2.5% growth in 2011, yet sales of premium car sales increased by 32%. With sales slowing in Europe and the U.S., car manufacturers are focussing on the luxury segment in China to boost profits. BMW's sales chief, Ian Robertson, says sales will slow in coming quarters from the 32% growth rate of 2011, but he still expects double digit growth for premium cars in future years. In making its large investments in China Ford executives said it expected a growth in China's car market of 5% over the next decade. BMW plans to increase production to 200,000 cars after opening its second plant in 2011, with capacity to ramp up to 300,000 a year....

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The protests for democracy continue in Syria in May 2011. On May 20 2011, 26 protesters are gunned down. The Assad government continues to crackdown on the protests. Friedman sees the events in Syria having wide reaching impact on the Middle East. He calls it a keystone nation because of relations with Iran, the Golan Heights, the Lebanese Shiite militia Hezbollah, the long border with Turkey, the border with Iraq, and Hamas relations with Syria. Compared to Egypt the international community has been for the most part silent in its support for the democracy protests in Syria. Friedman also asks the question about rival sects in Syria and other Arab countries and what happens afterwards. Would a post Assad period lead to people from rival sects putting aside differences and working together to build and sustain a democratic government. He says there is uncertainty but also that something deep down is coming to the top in the Arab world- that Arabs want to be full citizens of their countries with a voice in their government and in the way things are run in their countries. ...

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Raphael Minder points out one episode in the life of Emilio Botin that shows how intertwined Spain and Santander had become. During the period when Spain took EU help after the collapse of Bankia bank in 2012 there was pressure on Spain to take a full government bailout. Finance minister Guindos says it was Botin who called him at that time and told him: "You know what you have to do and I will back you up." Botin's advice to the Spanish government was to resist the pressure. Botin expanded what was a family bank based in Santander in Northern Spain, through a series of successful acquisitions. He had a rare intuitive sense for timing of acquisitions, going into Brazil around the time candidate Lula of the Workers Party was elected president, with considerable uncertainty about how financial markets would respond to the election. About a quarter of the bank's profit now comes from Brazil. Besides Brazil Santander has commercial banking presence in Britain and the U.S., taking a bank that had 20 billion euros in assets in 1998 to 1.1 trillion euros by 2013, which is about the value of Spain's GDP....

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George W. Bush, talks about his book on his father's presidency "41: A Portrait of My Father," at the Bush presidental library in College Station, Texas. This follows his book "Decision Points," on his own presidency. George W. says his father's accomplishments are overshadowed by the work of a transformative president (Reagan) who preceded him. The short period of four years in office also affects the assessment of the elder Bush. There is now greater appreciation of the work done in this period, especially the period when the Berlin Wall collapsed and the Soviet Union dissolved and the role played by the elder Bush in the transition. Bush describes the relationship with his father when he was president as one in which it was the comfort and help that counted for more than looking for any particular advice, especially as he admired his father. The elder Bush, 90, was in the audience. Remarkable for the longevity of the father-son pair compared to Adams and John Quincy, as Adams passed away 16 months after his son became U.S. president. And more so because his brother, Jeb Bush, is likely to run for president in 2016....

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ACE Ltd will acquire Chubb Corp. for $28.3 billion in cash and stock to form one of the largest property casualty insurers in the world. Conditions in this part of the industry are creating a surge in M&A activity as the capital bases of these companies have grown as a result of smaller hurricane claims since 2012 from individuals and business. More competition is reducing prices in the industry and lower interest rates are reducing investment income. Chubb is a well known name based in New Jersey and a large provider of homeowners' insurance to affluent Americans. ACE is in the personal insurance business, and the 2 companies have significant operations in providing insurance to midsize business. ACE shareholders will own 70% of the new company which will assume the Chubb name worldwide. ACE is led by Evan Greenberg, son of Maurice "Hank" Greenberg of AIG. He worked at AIG for 25 years before joining ACE in 2001, becoming CEO in 2004 and chairman in 2007. He expanded ACE in overseas markets, and added more lines of coverage. The company will be based in ACE's location of Switzerland....

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Sony announced that it was expecting a loss of 110 billion yen or $1.1 billion for the fiscal year ending March 2014. Sony also announced the sale of the PC Vaio computer business to Japan Industrial Partners, a decision he called "agonizing." Another change is splitting off the television business into a separate subsidiary. The projected full year loss includes $690 million in charges for restructuring the PC and TV business, including job cuts of 1500 in Japan and 3500 overseas by March 2015. Currently the mobile phone and Playstation videogame businesses are operated as separate subsidiaries. TV sales are improving in the 4th quarter 2013, increasing by 40%, and operating loss for TV's is down to $48 million for that quarter. Increases in sales of premium priced ultra high definition TV sets improved margins. For the full year TV business had a loss of 25 billion yen. This is the first sign of a change in the TV business. Playstation sales are expected to hit 5 million by March 2014. Overall Sony showed a net profit of 27 billion yen for the 4th quarter of 2013....

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Sheila Dewan provides analysis of the figures on household debt for the fourth quarter of 2013 put out by the U.S. Federal Reserve. U.S. households added $241 billion in debt in the 4th quarter 2014, increasing by 2.1%. It shows says Dewan, that American households were beginning to spend on homes and consumer purchases such as autos. Certain groups such as students and young people were restrained in spending by high levels of student debt. Debt increases were $152 billion for new morgages, $18 billion for car loans, and $53 billion for student loans up by 5.3%. Total household debt to income ratio went up to 130% by 2007, and has since declined to above 100% at the end of the 3rd quarter of 2013, going up again in the 4th quarter of 2013. Credit card debt showed only a small increase of 1.6% as households focussed in cutting credit card debt with high interest rates. Increases in credit card debt and in mortgage debt were shown to be for people with very high credit scores of above 720 in the Federal Reserve analysis, a sign of the caution exercized by households and banks following the overleveraging in 2008....

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Zhu Changhong plays a key role in investing China's $3.5 trillion dollars in foreign reserves. He is part of the management at China's State Administration of Foreign Exchange or SAFE, a division of the central bank. He maintains a low profile, yet he has played a critical role in shifting investment into Japanese and U.S. equities and bonds issued by the European Financial Stability Fund, reducing the risk exposure to U.S. Treasury's as the U.S. Federal Reserve changes monetary policy. From 45% of China's foreign reserves invested in U.S. government bonds, or $1.11 trillion, in June 2010, SAFE under Zhu's guidance reduced the allocation to 35%, or $1.14 trillon, in June 2012, according to a Wall Street Journal analysis. He has an interesting background. Coming from Anhui province, he studied physics at the University of Chicago, then shifted to life as a trader in financial markets at Allianz's PIMCO investment firm. After spending 20 years in the U.S., Zhu returned in 2009 as chief investment officer of SAFE. He was drawn back to China by another expatriate Yi Gang, a SAFE director who was an economics professor at Indiana University- Purdue University, Indianapolis....

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Intel Corp's overreliance on the PC market which is declining. About three fourths of Intel Corp. revenue is from the PC market. Intel stuck to its strategy of selling at higher margins to PC manufacturers and only gradually made the shift to smartphones and tablets. Intel was late to see the challenge from lower cost suppliers of chips for mobile phones and videogames. The quality of chips from these suppliers has improved to the point where they supply most of the chips worldwide for mobile phones and tablets. The late move into mobile devices has hurt performance of Intel. Net income declined to $2 billion in the 2nd quarter 2013, a 29% decline from the previous year. Revenue was down to $12.8 billion in the 2nd quarter, a decline of 5% from the prior year. Intel's new strategy is to pursue the lower end of the PC and tablet market with new chips planned for Dec. 2013 on notebook computers at prices in $300 range, and tablets in the $150 range. The new Intel CEO Mr. Krzanich is focussing on costcutting and other improvements....

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The new oil law allowing foreign oil companies to compete with Pemex passes the Senate in Mexico and now goes to the lower house. The legislation removes the 4 oil worker union's representatives from the 15 person Board of Pemex. The oil law now leaves only a 10 member board- five appointed by the government and five independent members approved by the Senate. Because past opening of investment by the private sector in state owned railways and telecom sectors has led to wealth passing into the hands of a few business owners and worsening competitiveness, there is concern in Mexico about how this law will be implemented so that it benefits Mexico and Mexicans through foreign investment in the oil industry. Leftist parties are pushing a bill in the lower house to allow a referendum on the oil law by 2015 if 1.6 million signatures are collected. Oil experts point to foreign investment in the Mexican oil industry as further enhancing the prospects of North American oil production in comparison to the position of Middle East oil producers, because of Mexico's large shale oil and gas reserves and the prospects for new exploration in deep waters. ...

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Nigeria's Excess Crude Account is down to $5 billion from a 2007 balance in the account of $20 billion, according to Mr Aganga, the Minster of Finance. About $27.5 billion has been spent from that account to cushion the impact of the global financial crisis. But this amount of spending also fuels corruption and misallocation of resources. The Revenue Watch Institute, which focusses on financial transparency in government says this drawdown leaves not enough money in the account to meet a new shock in oil prices or an economic crisis. Mr Aganga says he has no oversight on how the money is spent when it goes to the Nigerian states. He also said that "it is not my job," to address the lack of disclosure and the lack of financial transparency. Aganga is a former Goldman Sachs executive who was appointed finance minister in April 2010. He said that $8.2 billion was spent on improving the power sector. Yet most Nigerians know that the power supply is erratic and does not provide electricity to Nigerians for weeks at a time. Most Nigerians depend on the use of small generators for electricity....

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President Obama's proposal on Dec. 17, 2012, in the fiscal cliff negotiations sets the figure at which Bush era tax cuts are permandently extended at $400,000 instead of the $250,000 in earlier proposals. Speaker Boehner's Republican proposal was for a figure of $1 million. The $400,000 proposal would mean that the top tax bracket of 35% would increase to 39.6%. Currently the tax rate increases to 35% from 33% at the cutoff point of $388,500. The White House plan now cuts spending by $1.22 trillion over 10 years. $800 billion comes from cuts to programs, with half of these cuts in federal health care programs, $200 billion in programs like farm price supports, $100 billion in military spending, and $100 billion in other domestic programs over which Congress has control. The White House proposal also supports additional spending on infrastructure, extension of expiring unemployment benefits, protection of "vulnerable populations" such as the disabled and wounded veterans on Supplemental Social Security benefits in inflation calculations, and permanently stop expansion of the alternative minimum tax affecting the middle class. On business investment the president's proposal would make permanent the credit for corporate research and development....

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Only one in three Mexicans graduate from high school according to the OECD. Only about 4750 of Mexico's primary schools out of 99,400 give a full day of classes. The 1.4 million teachers union dominates the educational system and decides which teachers get hired or fired. Only union members can hold teacher positions and teachers are guaranteed lifetime positions. No testing or evaluation system is accepted by the union. A system unlike anything seen in other countries with strong teacher unions. The government of former president Calderon tried and failed to change this system. The new president Enrique Pena Nieto secured the cooperation of opposition parties to a 95 item agenda for change in Mexico. As one of his first steps he passed a bill in Mexico's Congress 360-51 changing the Mexican constitution to give the government powers over the hiring and firing of teachers, creating a new independent body for evaluation of teachers and requiring teachers to meet set standards. It also lengthens the schooling day to 6-8 hours from an average today of about 4 hours, half that in other industrializing countries such as S. Korea....