Posts from Monday Jul 6 2009

Goldman Black Box heist latest

Courtesy of Reuters.

18:30 06Jul09

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CDS report: Spreads widen as investors await earnings season

This CDS report was written by Markit’s Gavan Nolan

Credit spreads on both sides of the Atlantic widened today as investors await earnings season with trepidation. Last week’s US jobs report has knocked investor confidence, and those predicting a V-shaped recovery are finding it harder to justify their positions. The Markit iTraxx widened today to 118bp, over 3.5bp (3.1%) wider than yesterday’s close and continuing the widening trend. The HiVol and Crossover indices widened by similar amounts in percentage terms. Read more

It’s like Christmas Eve

…and here’s the evidence – Monday’s most actives’ on the London Stock Exchange.

9186.jpg Read more

Woof. Britain’s sleepy accounting watchdogs

The financial press is regularly castigated for its failure to spot problems before innocent people get burnt. But what happens when the press does spot a big problem and alerts all concerned?

Witness the MG Rover saga. Read more

In defence of EMH

Marco Annunziata, chief Economist at UniCredit Group, has fired a couple of rounds at critics of efficient markets hypothesis, including Soc Gen’s GMO’s  James Montier and the FT’s  Gillian Tett.

He says simplistic attempts to throw EMH out of the window will not help improve our understanding of financial markets or strengthen institutions to limit the risk of future crisis. Read more

Lex: Samsung

Does the upbeat second quarter earnings forecast from Asia’s biggest technology group signal a broader tech recovery?

As the country’s biggest exporter, what is good for Samsung Electronics is good for Korea – and the prospect of a fivefold increase in consolidated operating profit from the first quarter is indubitably good. (Compared with a year ago, however, Samsung’s $1.7bn to $2bn projection is roughly flat.) It is a fair bet Samsung will deliver on its promises.

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Lunch Wrap

On FT Alphaville Monday morning,

– Fixing China’s fixed asset investment data? Read more

On fixing China’s fixed asset investment data

You would think China would not need to exaggerate numbers associated with its startling stimulated investment boom.

But the analysts at Standard Chartered nevertheless present a compelling case for that suggestion — specifically with regards to fixed asset investment. Read more

Markets live transcript 6 Jul 2009

Live markets commentary from 

Trebles all round! FSA fights deflation

The new plans reflect the FSA’s determination to change behaviour and address concerns that firms are repeatedly failing to improve standards (e.g. in relation to mis-selling to consumers and market misconduct). They will also ensure that fines better reflect the scale of the wrongdoing and that any profits made from the breaches are clawed back.

So declared London’s financial regulator on Monday. Read more


A statement Monday morning:


Smug LLP – Markets Live at 11am

Yep, H&M Capital Management are getting a re-brand…

Stocks were headed sharply lower in London on Monday, with thin volumes exacerbating price movements. The miners were under pressure, along with insurers and a few second-line financials. Read more

The Great Goldman Black Box Heist

There’s a film in here somewhere.

Straight-to-DVD, perhaps. But a film nevertheless. Read more

In Memoriam, Coffee Republic

Back in the boom years –  October 2006 to be precise –  a couple of property developers took control of Coffee Republic after ousting chairman and founder Bobby Hashemi.

They had big plans for this underperforming company. Read more

The culpability of central bankers?

(H/T Sean Corrigan of Diapason Commodities).

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Latvia’s lenders will even take your soul

If this Reuters’ “odd” story is to be believed, Latvian bankers will accept pretty much anything as collateral these days – including intangible and hard to value assets like, erm, your immortal soul:

RIGA (Reuters) – Ready to give your soul for a loan in these difficult economic times? In Latvia, where the crisis has raged more than in the rest of the European Union, you can. Read more

Further reading

Elsewhere on Monday,

– “Did someone try to steal Goldman Sachs’ secret sauce?” Read more

Pink picks

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

Wolfgang Münchau: Liquidity injections alone are not enough
Monetary policy’s various guises from near-zero short-term interest rates, to massive liquidity injections, to quantitative easing and its relatives have so far had no traction in this crisis. While the global economy is no longer shrinking at quite the speeds seen at the beginning of the year, it is still trapped in a bad recession. Read more

Snap news

Breaking pre-market news on Monday,

– Cattles says it will not make coupon payment on £400m 7.125 per cent bonds due 2017 — statementRead more

Banks reinvent securitisation to cut capital costs

Investment banks, including Goldman Sachs and Barclays Capital, are inventing schemes to reduce the capital cost of risky assets on banks’ balance sheets, in the latest sign that financial market innovation is far from dead, the FT said. The schemes, which Goldman insiders refer to as “insurance” and BarCap calls “smart securitisation”, use different mechanisms to achieve the same goal: cutting capital costs by up to half in some cases, at the same time as regulators are threatening to force banks to increase their capital requirements.

Lex on “not so smart” securitisation

Those clever investment bankers are at it again – and regulators should be watching them closely, according to the FT’s Lex column, which opines that “it was surely only a matter of time before banks tried to apply their financial innovation skills to finding ways of profiting from the very crisis that misuse of those skills brought about”. While on one level such initiatives might be welcomed as industry practitioners try to find a market solution to their own problems, reducing the need for taxpayer-funded bail-outs, danger lurks ahead, Lex said.

Wall Street gears up to trade California IOUs

Wall Street is gearing up to trade the registered warrants – de facto IOUs – issued by cash-strapped California, which last week declared a fiscal emergency amid a legislative stalemate over how to close a $24bn budget gap. Hedge funds, municipal bond investors and other institutions are all interested in trading the warrants, which are transferable and pay an annual rate of 3.75 per cent,  the FT said. California has so far issued $53m of IOUs, and if the budget impasse persists,  could issue more than $3bn worth by the end of July for payments such as tax refunds, welfare and vendor bills.

CBI calls for ‘alternative to redundancies’ in UK

The CBI,  a top UK business lobby group, is urging the government to adopt an “alternative to redundancy” scheme this autumn that it said could stem job losses as unemployment heads towards three million, the FT said. The employers’ organisation’s plan is aimed mainly at companies that have hung on but are running out of cash for wages. In a report published with Siemens, the engineering group, the CBI said that levels of employment legislation had reached a “tipping point”, having added £70bn to business costs since 1998.

Saudi fund eyes £700m UK real estate deal

An investment manager part-owned by the Saudi royal family is planning to invest a chunk of its assets in UK and US commercial property, according to Prince Faisal bin Salman bin Abdulaziz, its chairman.For Jadwa Investment, commercial real estate was, with natural resources, the most appealing investment opportunity, Prince Faisal told the FT  in an interview. The fund is targeting a £700m ($1.1bn) commercial property transaction in the UK in collaboration with European property investor CIT. Property specialists said only one transaction of that scale was under way: a portfolio being sold by insurance group Aviva, for which CIT is bidding.

UBS to shake up US brokerage

Oswald Grübel, UBS’s chief executive, wants to shake up the top managerial ranks of the embattled bank’s brokerage business in the US after deciding against a sale, the FT reported, citing people familiar with the matter. UBS has repeatedly considered a sale of its US wealth management business, which consists mainly of the Paine Webber unit acquired in 2000 for $10.8bn, and held unsuccessful talks with Morgan Stanley, among others, late last year.  As part of his determination to fix and expand an operation that has been hampered by underperformance and a long-running battle with US tax authorities, Mr Grübel is said to be looking for a new leader for the US operations.

Canary Wharf to be casualty of Nomura shift to City

Nomura is in exclusive talks to move its UK business, including teams acquired from Lehman Brothers, into an office development in the City of London, the FT reported. In the largest office deal in the square mile since 2005, the Japanese investment bank is to move its 4,000 UK employees into Watermark Place, an office being built on the Thames. Nomura has decided to move back to the City because it sees the area as better for clients and staff.

Private equity deals are ‘not riskier’

Academic research has cast doubt on the link between private equity ownership and a higher failure rate for companies, in a finding that could be useful in the buy-out industry’s battle against proposed regulation, the FT said. A study by the Credit Management Research Centre at Leeds University Business School and the Centre for Management Buy-out Research at Nottingham University of 8m private companies in the UK found that private equity deals done after 2003 were no more likely to fail than other companies, after adjusting for leverage and other factors.

Exporters squeezed by euro strength

The strength of the euro is forcing European companies to step up cost-cutting to compete with rivals from the US and elsewhere amid fears that it could slow their recovery when demand picks up, the FT reported. Economists are concerned that, even when demand recovers, the strong currency will penalise European groups, many of them reliant on exports.

Broker-banker marriage hit by breaches of trust

The financial industry’s vaunted belief in trust and long-term relationships is being challenged by research showing that before the crisis US mortgage brokers fed loans of deteriorating quality to the banks they did most business with, the FT reported. By questioning the prevailing wisdom that dealing with well-known counterparties is more fruitful and less risky than venturing into new relationships, the academic study puts in doubt one of the banking sector’s most enduring beliefs: “know your customer”.

US futures brokers fear new capital rules

US futures brokers could be forced out of business if Washington regulators push forward with a plan to increase capital requirements by at least 25 per cent, Newedge, one of the biggest companies in the sector has warned. The proposal by the Commodity Futures Trading Commission seeks to increase to 10 per cent from 8 per cent the amount of money that a broker must set aside from its own funds to cover unforeseen losses by its clients or as a result of its own trading activities.