Posts from Wednesday Jan 20 2010

A ticking problem with the US national debt

Irritatingly, the various US national debt clocks that litter the web offer varying totals. The one above, from Oddhammer, provides one of the more conservative totals to what is formally called The National Public Debt Outstanding. Read more

Correction: China’s exports did not spike in December

Investors cheered earlier this month when it emerged Chinese exports rose for the first time in 14 months last December (and by 17.7 per cent year on year no less).

Unfortunately for the bulls, Standard Chartered’s Stephen Green on Wednesday poured cold water over the notion that the figures confirm a global recovery is under way. Read more

Kradbury – a ‘bad deal’

Remember those conspiracy theories about Warren Buffett being in league with Kraft to drive down the Cadbury share price?

They always seemed somewhat far fetched – and guess what? They were. Read more

What really drove Chinese commodity imports?

Remember how China was importing every commodity under the sun last year – quite inexplicably, considering exports were lagging throughout most of the period?

Sean Corrigan at Diapason Commodities has a theory to explain the phenomenon. As he noted in an email to FT Alphaville: Read more

US commercial real estate in good news shock

US commercial real estate prices, as measured by Moody’s, increased by 1 per cent in November. This is the first such increase in more than a year, according to the rating agency’s REAL Commercial Property Price Indices.

But it’s not an unmitigated positive. From the press release on Wednesday, emphasis FT Alphaville’s: Read more

Spot the odd one out

Related links:
Good banks, bad banks
– FT Alphaville
Banks’ coverage ratio capers cont. – FT Alphaville
Great Depression-esque bad debt at banks – FT Alphaville

Wells Fargo beats with Q4 net income of $2.8bn

Wells Fargo announced record full-year earnings on Wednesday on revenues of $22.7bn in the fourth quarter.

Net income for the group came in at $2.8bn or $0.08 per share versus analyst expectations the bank would lose one penny per share on revenue of $21.97bn. Read more

Morgan Stanley posts Q4 earnings of $0.14 a share

Another bank result, this time from Morgan Stanley, now the second major US bank to report a(n albeit lower-than-expected) profit so far this fourth-quarter earnings season.

Analysts expected the Morgan Stanley to post earnings of 36 cents a share on revenue of about $7.8bn, which means the company has missed expectations with that diluted EPS from continuing operations of 14 cents, and net revenue of $6.8bn. Read more

Lunch Wrap

On FT Alphaville Wednesday morning,

- BofA posts Q4 loss of $0.60 a share, net loss of $194m. Read more

BofA posts Q4 loss of $0.60 a share, net loss of $194m

Third on the list of big US banks to report fourth-quarter earnings is Bank of America.

The bank had been expected to lose 52 cents a share on revenue of $26.84bn, but looks to have missed those expectations, reporting diluted EPS of 60 cents a share on revenue (net of interest expenses) of $25bn. Read more

Junk-bond junkies party on…

Junk (bonds, that is) are back in fashion, as Manchester Utd football club proved this week – and ShortView’s John Authers notes on Wednesday.

In the second week of this year, $11.7bn in high-yield offerings came to the market, beating the record set in November 2006. Read more

Dear EU, your invoice is in the post

A message from the Greek Finance Minister (via Reuters):

GREEK FINMIN SAYS STATS SERVICE WILL BE MADE FULLY INDEPENDENT, BILL SENT TO EU Read more

Markets Live transcript 20 Jan 2010

Live markets commentary from FT.com 

Missing from the MPC minutes

Notably absent from Wednesday’s MPC minutes was any mention of the spread between gilt yields and Overnight Index Swap (OIS) rates.

The OIS is basically a proxy for the markets’ expectation of central bank rates. Which means the gilt yield-OIS spread is a way to sort of examine UK government bond yields while controlling for changing expectations of future interest rates. Read more

China property bubble: Real or imaginary?

It really seems to be a case of who you want to believe.

The highly opinionated investor Jim Rogers waded into the debate over Hong Kong’s sizzling property prices to warn on Tuesday that values in Shanghai and Hong Kong may fall after being driven higher by speculative demand. Read more

Digging deeper into the CFTC’s position limits

Energy analyst Olivier Jakob from Petromatrix has crunched through the CFTC’s proposals on position limits released last week.

His findings are worth flagging up because they differ to the consensus view that the proposals, if enforced, would be a benign influence on energy markets. Read more

A still slacking MPC

It is clear that inflation is likely to pick up markedly in the first half of this year, a message reinforced by this morning’s news that CPI inflation reached 2.9% in 10 December. The continuing pass-through of the earlier significant depreciation of sterling, while part of the necessary rebalancing of our economy, is offsetting to some extent the downward pressure on inflation from the large amount of spare capacity. And the rise in VAT back to 17.5% means that CPI inflation is likely to rise to over 3% for a while, or even higher for even longer were energy prices or indirect taxes to increase further. Although such price level effects do not constitute a continuing source of inflation, and hence should be temporary, they remain in the official measure of inflation for a full year. Provided monetary growth remains well under control – and remember that at present it is undesirably low – inflation should return to target in the medium term. I hope you will all remember that in both of the past two years inflation picked up as a result of temporary price level factors and then fell back, as the MPC had predicted.

That’s Bank of England governor Mervyn King, hastening to talk down the record rise in inflation announced on Tuesday. As FT Alphville noted then, the central bank chief looks set to have to write a letter explaining why inflation has overshot the BoE’s 2 per cent target. Read more

Penalties

As titles go it’s a bit unwieldy. But this piercing piece of analysis, by a City fund manager and member of the Manchester United Supporters Trust,  is creating something of buzz in the blogosphere:

ANALYSIS OF THE GLAZER BOND DOCUMENTS SHOWS MANCHESTER UNITED WILL HAEMORRHAGE OVER HALF A BILLION £ IN CASH IN THE NEXT SEVEN YEARS. Read more

An overseas sterling liability?

Recent developments at the Bank of England have provided ammunition to Britain’s considerable community of eurosceptics.

After all, argue some, had the UK been part of the eurozone it could not have quantitatively eased its way out of deflationary trouble. Right? Read more

Further reading

Elsewhere on Wednesday,

- Mind the gap in inflationRead more

Pink picks

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

Martin Wolf: Greek tragedy deserves a global audience
The Greek government has promised to slash its fiscal deficit from an estimated 12.7 per cent of GDP last year to 3 per cent in 2012, says the FT’s Wolf. Is it plausible that this will happen? Not very. But Greece is merely the canary in the fiscal coal mine. Other eurozone members are also under pressure to slash fiscal deficits. What might such pressure do to vulnerable members, to the eurozone and to the world economy? Read more

Snap news

Breaking pre-market news on Wednesday,

- Cadbury battle ends with midnight handshake – FT, publication of offerRead more

Overnight markets: Down

Asian stocks fell on Wednesday, dragging the MSCI Asia Pacific Index lower for the first time in five days, as stronger currencies threatened export earnings and China took steps to curb lending growth, reports Bloomberg.

Asian markets (Wed)
Nikkei 225 down -28.53 (-0.27%) at 10,736
Topix down -6.52 (-0.69%) at 943.24
Hang Seng down -283.75 (-1.31%) at 21,394 Read more

Citi reports $7.6bn loss

Citigroup tied a revival of its fortunes to its international business on Tuesday after reporting a $7.6bn Q4 loss that underlined the struggles of the domestic operations. Citi’s sixth loss in the past 10 quarters was amplified by the repayment of $20bn in federal bail-out funds last month. But even after excluding one-off items, the bank recorded a $1.4bn loss in the last quarter of 2009, and a  $1.6bn loss for the whole year compared with a $27.7bn loss in 2008. See FT Alphaville’s take.

Cadbury, Kraft agree deal

Cadbury and Kraft on Tuesday confirmed they had agreed terms for an £11.6bn ($19bn) takeover of the UK confectioner by its US rival. The move, which ends months of acrimony over Kraft’s hostile bid, values Cadbury at 850p a share. Cadbury’s share price rose 3.3% to 834½p in London as critics slammed the deal as a sell-out of a British icon. UK business secretary Lord Mandelson meanwhile threatened government opposition to any asset-stripping of Cadbury. See also FT Alphaville’s “Cadbury post-mortem” and Lex.

AIG, Metlife in talks over unit

AIG is in advanced negotiations to sell its American Life Insurance unit to rival MetLife for $14bn-$15bn, reports the WSJ. A deal would return $9bn to the New York Fed, which oversaw the AIG bailout in September 2008. The rest could be used by 80% government-owned AIG to repay bailout funds. A MetLife purchase of American Life, together with a public offering of another unit, American International Assurance, could net $45bn for taxpayers, said officials.

Credit Suisse to cut bonuses

Credit Suisse is to cut planned bonus payouts to senior UK staff by more than a third, becoming the first bank to pass on the bulk of a British supertax on banker bonuses. The move, together with an overall cut of 5% in the bank’s global bonus pool, follows last week’s news that JPMorgan’s Q4 compensation ratio fell from 37% to 33%. It also coincides with a pay overhaul at Citigroup, and contradicts  the consensus view that banks would absorb most of the controversial 50% supertax.

Goldman delays bonus news

Goldman Sachs will delay until next week the process of informing employees how much they will receive in year-end bonuses, reports the WSJ.  The investment bank, which has been under increasing scrutiny about its potential bonus payments, said it wants to release quarterly earnings before disclosing compensation details to staff. Goldman is scheduled to report Q4 results Thursday and is on track to report one of its highest-ever yearly profits.

IBM earnings surge on cost cuts

IBM said on Tuesday that its revenues barely grew in the final quarter of 2009, edging up 0.8% to $27.2bn. Even so, the US tech bellwether continued to report surging profits amid deep cost-cutting, capping the seventh consecutive year in which earnings per share grew by at least 10%. Its Q4 operating costs fell 5%, supporting a 9% increase in after-tax profits to $4.8bn.

King says G20 should lead IMF

G20 nations should develop voting procedures and “metamorphose” to become the governing body of the IMF to enhance its legitimacy and promote balanced world growth, Mervyn King, governor of the Bank of England, said on Tuesday night. Setting out his concerns that the global economic recovery has started to widen trade imbalances, King warned that protectionist forces would rise unless countries tackled unbalanced growth and misaligned real exchange rates.