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Posts from December 2009
Newspapers, especially American newspapers, like to think that they check facts, giving their readers information that can be considered fair and accurate.
The real world, of course, is more complicated. The “truth” can be an ephemeral thing, subject to revision. That’s especially so when “facts” collide with “confidence,” or when the real story doesn’t quite mesh with legal necessities. Read more
Economist and commentator Andrew Smithers (of Smithers & Co) — famed for some of the decade’s more bearish (yet accurate) calls — leaves us with a very clear cut view on for 2010.
In short, while stocks remain overvalued, there’s no reason at all to buy bonds. As his his latest World Market Update surmises (our emphasis): Read more
On FT Alphaville on Tuesday morning,
- Moody’s downgrades Greece to A2. Read more
The Organisation of Petroleum Exporting Countries meeting in Luanda, Angola, agreed on Tuesday to leave oil output curbs unchanged, while calling for greater compliance with existing output targets — a signal the cartel currently believes the market to be well supplied.
One of the big debate points in Luanda, however, focused on how quick demand recovery in OECD countries would be in 2010. Remarks from Opec’s opening address highlighted the main issues as follows (our emphasis): Read more
In addition to the difficulty of converting temporary mortgage modifications into permanent ones, one of the big question marks hanging over the US Treasury’s Home Affordable Modification Plan is the redefault rate. That is, the percentage of homeowners who redefault on their modified mortgage.
FT Alphaville has mentioned before that in cases of severe negative equity, it might make more sense for a homeowner to make a couple of Hamp-reduced interest payments on his or her mortgage and then walk away. The US Treasury hasn’t given an official default rate for the programme yet, but figures like 25 per cent and 50 per cent have been bandied about. Read more
FT Energy Source, FT Alphaville’s sister blog, has provided ample coverage of the 2009 Copenhagen Climate summit, but we would like to draw readers’ attention to one particular fallout: the associated slump in European Union carbon allowance prices following the meeting’s conclusion last weekend.
On Monday, front-year carbon prices fell to €12.45 — the lowest the contract has traded since April, according to analysis from industrial energy advisor Utilyx. The move was connected to the conference producing only a non-binding Accord, instead of any broad compulsory targets. Read more
(…but the natgas-fire is so delightful.)
They’re calling it the ‘storm of the decade‘ in the United States. Read more
Central bankers, as Alan Greenspan learnt to his regret, need to look like they have a plan B.
And so does the Bank of England. Combative MPC member Adam Posen on Tuesday morning seems to be dropping strong hints that something could be cooking over on Threadneedle Street. Read more
FT Alphaville wrote in October 2008 that, by and large, banks’ holdings of synthetic corporate CDOs had yet to be written down. Fast forward to December 2009, and it looks like the same might still be true for the majority of those holdings.
Recall that synthetic CDOs are not backed by tangible collateral (RMBS, CMBS and the like) but by CDS contracts which reference such collateral. In this case, CDS on corporations. Read more
Elsewhere on Tuesday,
Comment, analysis and other offerings from Tuesday’s FT,
Philip Stephens: It’s too late to take the politics out of banking
The storm may be raging about them, but bankers have been locked in a contest to say something truly silly, writes the FT’s Philip Stephens. A year that began with a threatened collapse of the international financial system thus draws to a close with a reminder of why governments cannot again trust the future of their economies to the self-styled titans of finance. Read more
The 6am Cut, along with the rest of FT Alphaville, is taking a short break over the festive period. We will return, refreshed, on Monday Jan 4. In the meantime, call in to the main site to see our special Seasonal video and various posts-of-the-year. Thanks for reading us over the past year – and thanks for all your comments.
Merry Christmas and Happy New Year. Read more
Macarthur Coal, the world’s biggest exporter of pulverized coal, is poised to bid for Gloucester Coal to add mines in Australia ahead of a forecast rise in coal prices, reports Bloomberg. Macarthur is expected to announce its offer on Tuesday, and is set to sell a 25% stake to Noble Group for the Singapore-listed company’s 88% holding in Gloucester and stakes in three other mines. Read more
China’s Sinochem has cut its takeover price for Nufarm by 8% to A$2.6bn ($2.3bn) after a lengthy due diligence process into the Australian agricultural chemical group’s finances. In cutting its cash price from A$13 to A$12 a share, the Chinese group risks losing the backing of Nufarm’s board which said on Tuesday it had not been able to clarify the terms and conditions of the revised offer. The fact that Nufarm did not reject the revised bid outright suggests Sinochem is not out of the game, said analysts. Read more
Asian stocks rose on Tuesday, reports Bloomberg, as the weaker yen boosted the earnings outlook for Japanese makers of electronics and cars and after metal prices advanced.
Asian markets
Nikkei 225 up +139.85 (+1.37%) at 10,323
Topix unchanged 0.00 (0.00%) at 632.00
Hang Seng up +243.38 (+1.16%) at 21,191 Read more
Dubai World on Monday failed to reach agreement on a suspension of its $22bn debt repayments after a day of talks with more than 90 banks, reports The Times. The state-owned conglomerate insisted that negotiations had been constructive and that the group would set out a comprehensive proposal for restructuring the debt “within weeks”. Instead, negotiations focused on information-sharing between the group and its creditors, with both sides stressing that the restructuring would be long and complex. Read more
The FBI is probing a computer-security breach targeting Citigroup that resulted in a theft of tens of millions of dollars by computer hackers who appear linked to a Russian cyber gang, reports the WSJ. The attack was aimed at Citi’s Citibank subsidiary, which includes its North American retail bank and other businesses. However, Citi denied any breach of its systems, or losing any money, and said the idea of an FBI investigation was untrue. The WSJ, meanwhile, said it was not clear whether the thieves gained access to Citi’s systems directly or through third parties. Hackers also assaulted two other entities, at least one of them a US government agency. Read more
Ford Motor is set to announce further progress in the next next few days on talks to sell its Swedish Volvo brand to China’s Zhejiang Geely Holding Group. While a final deal had yet to be settled, the two sides were close to agreement on some key aspects, said people close to the talks. Protection of intellectual property rights and the future of Volvo’s Swedish and Belgian plants were among remaining issues. Ford named Geely in October as its preferred bidder for Volvo. Read more
Sanofi-Aventis, the French pharmaceuticals group, has agreed to buy Chattem, a US consumer healthcare company, in a $1.9bn cash deal that will hasten its diversification away from prescription medicines. Sanofi will pay $93.50 a share for Chattem, pushing Sanofi from the sixth to the world’s fifth largest consumer healthcare group by revenues. The offer was at a 34% premium to Chattem’s closing stock price on Friday. See also FT Alphaville on the deal. Read more
The European arm of collapsed US investment bank Lehman Brothers is hiring bankers and paying generous bonuses in London, as it recruits middle and back office staff to help administrators PwC check millions of transactions that must be reconciled with clients and trading partners. A judge overseeing Lehman’s US bankruptcy in New York last week approved an extra $50m in bonus pay-outs to some 230 derivatives traders working to unwind the dead bank’s $10bn portfolio. Read more
Chinese banks will raise as much as Rmb500bn ($73bn) from capital markets next year in the wake of this year’s lending boom. In the first official confirmation of the imminent fund-raising effort, Li Fuan, acting director-general of the China Banking Regulatory Commission, said in a speech that China’s listed banks are likely to issue Rmb300bn-400bn in equity or bonds in 2010. In addition, Agricultural Bank of China would raise Rmb100-200bn from its IPO, expected next year. Read more
Hong Kong’s leading shareholder activist, David Webb, has issued a stinging critique of the market regulator’s unprecedented decision to restrict retail investor participation in UC Rusal’s $2bn IPO. Hong Kong’s SFC securities regulator on Friday approved Rusal’s IPO plan but insisted on a minimum upfront investment of HK$1m ($129,000). The regulator will also require the Russian aluminium group to be traded on the Hong Kong stock exchange in blocks of 200,000 shares, making it too expensive for most small investors. Read more
General Motors on Monday named Chris Liddell, Microsoft’s former chief financial officer, as its finance chief and a vice chairman. GM’s former CEO, Fritz Henderson, was forced to resign earlier this month amid criticism of his management policies. The search for his replacement is expected to result in an external appointment, although Ed Whitacre, the company’s chairman and CEO, said last week that internal candidates would also be considered. Read more
BAA has won its appeal against the UK’s Competition Commission, although it is unclear whether the airport operator will have to sell airports in London and Scotland. In March, BAA was ordered to sell three of its seven UK airports: Gatwick, Stansted and either Glasgow or Edinburgh. But BAA, owned by Spanish infrastructure group Ferrovial, accused the Competition Commission of an “intolerable conflict of interest” due to a panel member’s links to a potential buyer. Read more