Posts from June 2009

Judge rules Sir Allen Stanford must stay in jail pending trial

A federal judge on Tuesday ruled that Sir Allen Stanford, the Texan businessmen indicted on 21 counts relating to an alleged $7bn Ponzi scheme, will have to remain in custody until his trial.

The judge, David Hittner, agreed with prosecutors who had argued that the financier was a “serious flight risk” and could not be relied upon to appear in court if granted freedom on bail. Read more

Lex: Markets’ first half

The second quarter may well have marked the bottom. But it could also descend into infamy as the most deceptive three months in economic memory. Certainly all the talk of a second Great Depression has vanished. Equity markets are up by between a 10th and a third and data are better across a range of economic indicators.

Read the rest of this Lex noteRead more

The other emerging Europe crisis

The real-estate consultants BH2 have come out with an interesting take on a much less written about currency crisis potentially facing four countries in the west Balkans:  Serbia, Croatia, Macedonia and Albania.

You might ask, aren’t the Balkan economies too small to be a potential problem for Europe? There is that, but as the research arm of BH2 pointed out on Tuesday, all four of these nations are de facto euro economies. This is despite not being in the EU, and due to their practice of pegging their currencies to the euro. Read more

Wanted: Superhero to save the world

For anyone counting on China to pull the world out of recession this little graph from RBC Capital Markets might contextualise those hopes:

Global contributions to GDP - RBC Read more

Cigarettes: good for government coffers

So says Philip Morris, aka Altria, aka one of the world’s largest tobacco companies.

Michelle Leder of has the scoop, which she found by perusing a 74-page company slideshow filed with the SEC. From footnoted: Read more

US consumers not so confident in June, Conference Board says

Despite the prognostications of CNBC talking head Dennis “Uncork the Cristal” Kneale, US consumers aren’t feeling all that positive about the health of the world’s largest economy.

As Bloomberg reported on Tuesday, emphasis FT Alphaville’s: Read more

Somebody call the SFO

Some grim news for investors with Keydata Investment Services has just broken.

On Tuesday afternoon, administrators PricewaterhouseCoopers gave warning that “certain issues” had come to light – issues which mean a sale of the company as a whole may not be possible. Read more

Lex: The return of growth capital

Private equity firms are continuing their evolution into “alternative asset managers” by returning to their roots while simultaneously branching out into other areas such as mezzanine loans, property and infrastructure. But the transformation is not without its challenges.

The excesses of the past few years will not be unwound easily. Globally, estimates Preqin, funds are sitting on at least $400bn of dry powder — cash committed but not yet invested. How that gets spent will cause friction. In the absence of leverage to trump cash-rich trade buyers, general partners may take minority stakes or buy back debt instead, but their investors won’t necessarily like it.

 Read more

Structuring yourself for failure

Talk about aiming high, Bank of England.

The central bank’s deputy governor for financial stability Paul Tucker has given a speech on Tuesday about the social responsibilities of the banking sector and associated reforms. The centrepiece: banks must prepare themselves for an “orderly wind-down” in case they fail. Read more

Lunch Wrap

On FT Alphaville on Tuesday morning,

UK GDP fall/fail … biggest ever. Read more

Annals of unlikely financial forecasters, summer reading edition

Back in 2006 BBC petrol-head pundit Jeremy Clarkson wrote a book called And Another Thing: Vol. two: The World According to ClarksonIn it he refers to the work of Niall Ferguson, the writings of whom he appears very much inspired by.

The following little passage with regard to the US deficit duly follows (H/T Adam Joslyn) : Read more

Why not 666 years?

Capital Chronicle makes the point, on the back of the Madoff sentencing, that either the US Justice system knows more than the rest of us about the demographic time bomb threatening pensions or its sentencing system may be a touch detached from reality.

Bernie’s 150 years actually ranks just fourth in terms of the longest white-collar sentences handed down in the US, according to Forbes, who have compiled an automated picture gallery here showing us the Top Ten. Read more

Markets live transcript 30 Jun 2009

Live markets commentary from 

Investors go moo

From Bloomberg:

June 29 (Bloomberg) — Investors are moving in lockstep like never before, driving up stocks, commodities and emerging markets and risking a replay of last year, when they all plunged the most since World War II. Read more

Yell faces reality

What’s that we can hear from the Reading headquarters of Yell?  Why, it is the unmistakable sound of the penny finally dropping.

Here’s Tuesday’s “shock” statement from the heavily indebted directories company. Read more

UK GDP fall/fail … biggest ever

Year on year, that is: down 4.9 per cent. The UK economy has never before shrunk so much so fast.

2009 Q1 GDP  fell 2.4 per cent, according to figures just out, making it the biggest quarter-on-quarter fall since 1958. The decline significantly exceeds analysts’ expectations, which were for a 1.9 per cent fall. Read more

Sovereign CDS: Oh the irony of it all

It’s a sign of the times that Markit, which compiles the iTraxx and CDX European and US corporate CDS indexes, on Monday announced the launch of the first global family of sovereign credit default swap indices.

Historically, the trading of sovereign CDS was confined to emerging markets, reflecting credit risks associated with the government debt of these countries.  But, as Markit explains, an actively traded CDS market in industrialised sovereigns has emerged from the financial crisis and higlights growing investor concerns over the solvency of developed economies (witness the recent hysteria about Britain’s sovereign debt). Read more

The notional Taleb

Remember the clash between Janet Tavakoli and Nassim Taleb over a profile of the Black Swan man in GQ?

Tavakoli, of Tavakoli Structured Finance, highlighted a seeming error in the GQ article, which was penned by novelist Will Self. In it, Taleb was quoted as having “made $20bn for our clients, half a billion for the Black Swan fund”. Taleb claimed it was a misquote, Tavakoli still appeared suspicious of Taleb’s claimed returns. Read more

Bitchin’ over Bernanke

Along with Gordon Brown, Simon Cowell, Victoria Beckham and all those wonderful, “love-to-hate” figures, the chairman of the US Federal Reserve is an easy and tempting target for all manner of slings and arrows.

Alan Greenspan knew that, and his successor, Ben Bernanke, found it out all-too-quickly. Read more

More reward for failure

Now here’s something we don’t get to see every day, a chief executive carrying the can for very nearly bringing a large listed company to its knees through a series of ill-judged acquisitions at the top of the market.

Tuesday’s press release from Wolseley. Emphasis ours: Read more

Collateral damage at the ECB

Willem Buiter presents some interesting thoughts regarding the ECB’s one-year liquidity operation last week. What particularly strikes us is the following paragraph (our emphasis):

You may think that this implies that the cost to the banks of borrowing from the Eurosystem for a year – 1.00% – does not imply a subsidy, as the banks’ borrowing from the Eurosystem is secured against collateral. You would be right if the collateral consisted of German government bonds. My guess (I don’t have hard information) is that this was not the case, and that instead the borrowing banks stuffed the Eurosystem with the worst quality collateral they could put their hands on, subject to the constraint that a rating agency had rated it at least BBB-.  Given the well-established practice of Eurozone banks that are eligible counterparties of the Eurosystem in repos and at the discount window, to carefully structure collateral packages that just meet the letter of the ECB’s collateral eligibility requirements, I am happy that I am not responsible for vetting and verifying the credit risk present in the portfolio of that increasingly speculative, highly leveraged entity known as the Eurosystem.

 Read more

Further reading

Elsewhere on Tuesday,

– The paradox of strategic defaultsRead more

Pink picks

Comment, analysis and other offerings from Tuesday’s FT,

John Gapper: Victims have their moment but the suffering goes on
It was, taken literally, an absurd jail sentence: one of more than life, one reaching well into the grave. Yet Judge Denny Chin on Monday ignored the plea of Bernard Madoff’s lawyer to give him a shorter term on the grounds that, at 71, his life expectancy is about a dozen years and instead threw the sentencing book at him. The handing down of the 150-year sentence was a moment of breathtaking legal theatre. Read more

Snap news

Breaking pre-market news on Tuesday,

– Nationwide says house prices rose by 0.9 per cent in June — statementRead more

Madoff sentenced to 150 years

Cheers erupted in a Manhattan federal courthouse on Monday as Bernard Madoff was sentenced to 150 years in prison, the maximum possible jail term, for running a $65bn Ponzi scheme that devastated thousands of investors. The sentence came after an emotional hearing in which Madoff, 71, conceded he could offer no excuses for the decades-long fraud. The case leaves unanswered questions including what happened to the proceeds of the scheme and whether, as Madoff insists, he acted alone.

Enterprise in $3.3bn merger with Teppco

Enterprise Products Partners, a publicly traded oil and natural gas energy partnership, said on Monday it would merge with Teppco Partners in a $3.3bn deal to create a lower-cost pipeline and logistics group. Enterprise and Teppco are both structured as “master limited partnerships”, similar to real estate investment trusts. The general partners of both Enterprise and Teppco are owned by a company controlled by Dan Duncan, who will chair the merged partnership. Affiliates of Duncan’s Epco will also own nearly 30% of Enterprise’s limited partner units after the deal closes.

Porsche rejects VW’s stake bid

The tug-of-war over Porsche intensified on Monday when it rejected a bid from Volkswagen worth up to €4bn ($5.6bn) for half the German sports carmaker, saying the offer had been sent to the wrong address. Porsche said VW’s management last week sent an offer to chairman Wolfgang Porsche, proposing to buy a 49% stake in Porsche’s sportscar business. The company said the bid should have been sent to the executive board instead. It added that Porsche had also rejected the offer as it would have meant the immediate renegotiation of a €10.75bn credit facility.

GM close to Opel deal with RHJ

General Motors has stepped up negotiations with rival suitors to offload a stake in Opel, its European business, and could sign at least one MoU this week as talks with Magna International, the preferred bidder, have hit obstacles. RHJ International, the Belgian industrial holding company, has improved its earlier bid and China’s Beijing Automotive Industry Corp is expected to follow suit, while Italy’s Fiat expressed interest in Opel but offered no cash in its bid.

Buyout firms eye AIG’s Taiwan unit

Carlyle, Primus and MBK Partners may seek to buy Nan Shan Life Insurance, the Taiwanese unit of US insurer AIG, reports Bloomberg. KKR, Affinity Equity Partners, Cathay and Chinatrust have also asked AIG for information about the sale and may take part in a first round of bids scheduled for July 3. Nan Shan, Taiwan’s second largest life insurer, may fetch about $2bn.

Activists hit Towers-Watson deal

Corporate governance activists decried a merger of Watson Wyatt Worldwide and Towers Perrin, saying conflicts of interests could arise if executive compensation consultants are hired by the same managers to advise on human resources issues, reports Reuters. The merger, announced late Sunday, comes as US policymakers consider curbs on  executive pay and improving disclosure on the relatively small number of compensation consulting firms used by big US companies.