Posts from Friday Jan 15 2010

Rosenberg’s ‘Not So Great Depression’

Gluskin Sheff’s David Rosenberg has taken umbrage with the term ‘The Great Recession’ to describe the current global economic malaise.

According to the seasoned economist, it’s quite clear what we experienced last year was not a recession but a depression. That said, it was definitely not another ‘Great Depression’. Read more

Save our FX leverage!

Pop quiz, FX hotshot.

There’s a bomb in your market. Once your position hits 200:1 leverage, your trade is armed. If your trade drops below your stop-loss, it blows up. What do you?  Read more

(Principal) Forgiveness at JP Morgan

Watch those JPM charge-off numbers, they are very much skewed by various mortgage modification programs. From the fourth-quarter earnings presentation:

Prime and subprime mortgage delinquencies impacted by foreclosure moratorium, extended REO timelines and trial modifications.

 Read more

Is the CFTC trying to restrict physical traders after all?

Thursday’s CFTC proposals on position limits in the energy markets were largely seen as a ‘light touch’ by industry voices. This is because, quantifiably speaking, they set loose limits that hardly went beyond those already enforced by exchanges in the form of accountability limits.

The CFTC also confirmed the new rules would only affect about 10 larger traders, who could probably seek exemptions anyway. That said, in historical terms, the limits would have prevented the likes of Amaranth, the USO and UNG amassing the sort of positions that skewed the markets in previous years. Read more

Lunch Wrap

On FT Alphaville Friday morning,

– From Obama to Europe with love. Read more

JPM posts Q4 earnings of 74 cents a share, net income of $3.3bn

JP Morgan kicked off the fourth-quarter US investment bank earnings season (well, excluding the Federal Reserve) on Friday, with a sound beat of analysts’ expectations. Though, we should note, JP Morgan CEO Jamie Dimon was himself not impressed with the bank’s numbers.

Analysts had expected the bank to report Q4 earnings of 60 cents a share, up from the 6 cents reported in Q4 2008, and net income of about $2.57bn. Attention, however, was focused on whether the bank would increase its dividend — seen as an indicator of management expectations’ of future income. Read more

A ‘London loophole’ for FX

The CFTC has had a busy week. On Thursday the regulator unveiled details of how it plans to curb excessive speculation in the energy market.

Earlier on Wednesday, meanwhile, it revealed proposals for the spot FX market — an area that has until now escaped the scrutiny of regulators due to its over-the-counter status. Read more

Markets Live transcript 15 Jan 2010

Live markets commentary from 

Shiseido’s ‘Monet’ deal

Investors loved the news on Friday that Japan’s largest cosmetics group, Shiseido, has made its biggest overseas acquisition yet, with a deal to acquire Bare Escentuals, a US-based specialist in mineral makeup, for $1.7bn.

Applauding Shiseido’s stated ambitions to expand its global presence, investors sent the company’s shares up as much as 8.1 per cent in the Asian morning to Y2,099. Read more

Sayonara to the Pru

UK insurer Prudential has decided to suspend new life insurance sales in the Japanese market after eight years, a move which comes even though its business there would not be considered bad by any standards.

Pru started operations in Japan in 2001, and saw new business annualised premium equivalent, which reflects sales, rise 21 per cent year on year in the nine months to December. Read more

Dεfαult risk

A CDS curio for you on Friday: in addition to hitting another record high, the term structure of Greek CDS has inverted, indicating that the market now believes there’s a higher probability of a default in the short-term than in the longer term.

It’s quite a change from just a week ago, as you can see from the below: Read more

Another one for the Aim Hall of Shame

H/T to reader Real Limey for this.

Background: Shares in Meldex were suspended in December 2008 as the Cambridge-based drug company told investors it was “seeking to clarify its trading and working capital position”. Read more

From Obama to Europe with love

It’s been nearly 24 hours since US president Barack Obama unleashed details of his bank levy on Wall Street. That means we are starting to get some estimates from analysts on the cost of the tax, which would begin on June 30, 2010, and is based on a percentage of banks’ liabilities less insured deposits.

The FCRT, aimed at recouping bailout monies from US banks, applies to financial companies with more than $50bn in assets, but intriguingly, also affects foreign banks with significant US subsidiaries. Read more

Further reading

Elsewhere on Friday,

– How bankers (really) thinkRead more

Pink picks

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

Insight: Gillian Tett – Britain’s unsavoury debt mire
Which country experienced the biggest jump in debt, relative to gross domestic product, over the past decade? A year ago most investors might have said America, writes the FT’s Tett. And these days, countries such as Iceland, Dubai or Greece tend to spring to mind, in connection with deadly debt burdens. However, if McKinsey consultants are to be believed, the real leverage giant – at least among the big western economies – is actually the UK. Read more

Snap news

Breaking pre-market news on Friday,

– Hershey said to be accelerating efforts to prepare Cadbury offer – BloombergRead more

Overnight markets: Mostly up

Asian stocks mostly rose on Friday as a better-than-expected revenue prediction from Intel boosted technology companies, countering declines by steelmakers and energy producers, reports Bloomberg.

Asian markets (Fri)
Nikkei 225 up +63.05 (+0.58%) at 10,971
Topix up +4.60 (0.48%) at 963.061
Hang Seng down -52.57 (-0.24%) at 21,664 Read more

Obama vows to recover cash

Barack Obama slammed “obscene” bank bonuses on Thursday, as the US president announced a levy on big financial institutions to recoup some costs of the financial crisis. “We want our money back and we’re going to get it,” Obama said, criticising big banks for trying to “return to business as usual” with “risky bets to reap quick rewards”. Aides said the levy would recover at least $90bn from 50 top institutions, including US subsidiaries of foreign banks and insurers as well as US banks. See more FT analysis here, and FT Alphaville’s take here and here.

ECB holds rates, warns governments

The ECB on Thursday issued a blunt warning to high-borrowing governments that they risked a backlash from markets as it escalated the pressure on Greece to bring its public debts under control. Jean-Claude Trichet, ECB president, warned Greece it would receive “no special treatment.” Speaking after the ECB left its main interest rate unchanged at a record low of 1% for the eighth consecutive month, he also went further than before in warning that indebted eurozone countries risked “rapid changes in market sentiment”.

Slim moves to consolidate

Carlos Slim, the world’s third richest man, has launched a $24.6bn bid to consolidate his telecoms empire. América Móvil, Slim’s Latin American mobile phone operator, is planning a takeover of the fixed-line phone groups he controls and on Wednesday announced an all-stock offer for Carso Global Telecom, a holding company that controls Telmex and Telmex Internacional. Slim already controls Carso. Some analysts said the move suggested that Slim was seeking to secure cost savings through consolidation.

Shiseido buys Bare Escentuals

Shiseido, Japan’s biggest cosmetics maker, has agreed to acquire Bare Escentuals for about $1.7bn in cash to expand outside a shrinking domestic market, its largest-ever acquisition, reports Bloomberg. The offer values the US cosmetics maker at $18.20 a share, 43% more than Thursday’s closing price. Shiseido aims to raise the proportion of overseas sales to 50% by 2017 from 38% last fiscal year as falling wages and an aging population sap demand at home.

IDC sounds out likely buyers

Interactive Data Corporation, the $2.4bn financial information company majority owned by Pearson, is sounding out potential buyers. Pearson, which owns the FT, is prepared to consider options including a sale, said people familiar with the situation. At IDC’s current market cap, Pearson’s 62% shareholding is worth about $1.5bn. IDC would fit with financial data groups such as Bloomberg, McGraw-Hill and Thomson Reuters, although a sale to a rival might face competition hurdle.

Intel strong quarter boosts sector

Intel boosted the technology sector on Thursday, predicting a better year after Q4 growth in sales of its chips was almost double the norm. The chipmaker beat analysts’ expectations with profits of $2.3bn, 875% higher than a year ago, when Intel made $234m amid the recession and a failing order book. Intel’s strong “holiday” quarter augurs well for PC makers, software companies and other chipmakers at the start of the US tech earnings season.

Direct bids highlight Treasuries

Dealers are bracing themselves for more volatility around the sales of US Treasuries after a marked increase this week in direct buying of debt from the Fed, bypassing the Wall Street banks that underwrite bond issuance. The rise has sparked talk that a large investor or several institutions are seeking a large position in US Treasuries. This week, the direct bid for the sale of $21bn in 10-year Treasury notes was 17%, far above the recent average of 7.4%. See also FT Alphaville, here.

Citi to cap cash bonuses

Citigroup will cap cash bonuses for staff at below $100,000. The move is aimed at defusing public anger at Wall Street pay but could make it difficult for the US bank to retain talent. The 2009 bonus pool at Citi, in which the US government has a 27% stake, would be in line with the one in 2008 – relatively low compared with other years. Like rival banks, Citi will also pay a large part of bankers’ and traders’ bonuses in stock, limiting the cash portion to less than $100,000.

Ross, Branson, mull bid for Rock

Billionaire investor Wilbur Ross on Thursday said he was “quite possibly” interested in teaming up with Richard Branson’s Virgin Money to bid for state-owned bank Northern Rock, reports Reuters. Ross, who was part of a Virgin-led group that bid for Northern Rock in 2008, said that the recent acquisition by Branson’s Virgin Money of a small provincial bank would help in the process, as it had paved the way for Virgin’s entry to UK banking.

US goes for ‘light touch’ energy rules

Long-awaited rules to limit speculation in energy markets revealed by US regulators on Thursday have fallen short of the crackdown feared by commodity traders. After months of debate on new regulations for commodity markets, the Commodity Futures Trading Commission proposed firm caps, or “position limits”, on the number of futures and options any trader can hold in US crude oil, gasoline, heating oil and natural gas. But bankers said the changes would allow most trading to continue unaffected.

BC to raise $8.4bn fund

BC Partners, the UK-based buy-out firm, plans to start raising about €5.8bn ($8.4bn) for leveraged buyouts this year, the biggest test of investor appetite for such funds since Lehman Brothers collapsed in 2008, reports Bloomberg. BC, founded as Baring Capital Investors  in 1986 is turning to investors after spending more than 70% of the €5.8bn-pool it raised in 2005. It will start raising the fund in the latter part of the year, said managing partner Charlie Bott.

Banesto augurs ill for Spain’s banks

Banesto, the subsidiary of Spanish bank Santander, on Thursday heralded bad news to come in the sector by announcing a 28.2% fall in 2009 net profit, the first Spanish bank to release full-year results. The fall in net profit, to €559.8m ($812.3m) from €779.8m in 2008, was largely due to higher bad loan provisions after the collapse of the domestic housing bubble and a deep recession. Banesto executives said the bank was out-performing rivals and had set aside an extra €100m in voluntary generic loan loss provisions in the fourth quarter.

China kills HK share-buy plan

A proposal by Chinese authorities to allow mainland citizens to buy shares listed in Hong Kong has been scrapped, marking the official end of a proposal that once gave high hopes to investors in the territory. The State Administration of Foreign Exchange, or SAFE, a body under China’s central bank which announced the scheme in 2007, said the proposal was one of 19 no longer valid because they had expired. Safe also annulled 36 documents saying they had been replaced by new regulations.