By Andrew Hill of Lombard.
We’re privileged to welcome to the World Economic Forum, the distinguished writer and thinker, Professor Holden Caulfield, 76-year-old president and founder of Rye Introspective LLP. Mr Caulfield has taken as his theme today “Goddam Money: It Always Ends Up Making You Blue as Hell”. Holden – the floor is yours. Read more
On Friday, Dennis Gartman of the Gartman Letter directed our attention to the following chart from this month’s Forbes Magazine:
A development in the delicate balancing act that is US financial reform:
NEW YORK (Reuters) – The Obama administration is considering exempting U.S. Treasuries from its proposed new tax on banks in order to prevent disruption in the world’s most important funding market, market sources said. Read more
Expectations were running particularly high on this number — analysts were forecasting US growth to have picked by 4.6 per cent in the fourth quarter on an annualised basis, up from 2.2 per cent in the third.
Well the US Bureau of Economic Analysis has now confirmed the number was even better than that — coming in at 5.7 per cent in the quarter. Read more
If it’s possible to add drama to the crisis over Greek bonds, Hong Kong-based research house Gavekal makes a good effort on Friday, with a note that begins:
A few days ago, a friend expressed to us the opinion that the 300bp spread on Greek bonds would be like the 300 Spartans of Thermopylae: the unbreachable line which would prove to be Greece’s salvation. As it turns out, 300 proved to be more of a Maginot line. However, the fight currently going on in the bond markets could, like Thermopylae, prove to be a battle that changes the world… Read more
On FT Alphaville Friday morning,
- European CDS is going Grεεk… Read more
Live markets commentary from FT.com
After showing some signs of fatigue towards the end of 2009, UK house prices perked up in the first month of the new year, according to the latest survey from Nationwide published on Friday.
In fact, they increased 1.2 per cent month-on-month in January, which was the largest increase since August and the ninth rise in a row. (To put those figures in a little bit more context, the month-on-month move in the final four months of 2009 was 0.5 to 0.6 per cent). Read more
Remember when Samsung products were the ones you bought when you couldn’t afford a Sony?
Once derided as the poor, copycat cousin of the glamorous Japanese electronics giants, Samsung Electronics — the flagship of South Korea’s largest chaebol or conglomerate — is lauded by Lex on Friday for seemingly dragging the country out of its slump “all on its own”. Read more
Greek CDS has been sky-high in recent weeks, reaching yet another record on Thursday.
If that isn’t enough to send jitters through the market, here’s something which is. Read more
“Throughout history, rich and poor countries alike have been lending, borrowing, crashing and recovering their way through an extraordinary range of financial crises….”
That quote comes from Carmen M Reinhart and Kenneth Rogoff’s book “This time is Different – Eight Hundred Years of Financial Folly”. Read more
With the term-structure of Greek CDS having inverted two weeks ago – indicating the market thinks there’s a higher probability of a default in the short-term than in the longer term – we note that curves for other European peripherals are now also beginning to flatten. Is inversion next on the agenda?
For every one of those rare non-critical – or even neutral – comments in the media about Goldman Sachs, there seem to be at least three or four negative takes, with varying degrees of relevance and/or humour.
But Michael Lewis’s spoof memo to Goldman CEO Lloyd Blankfein from a mythical “Goldman trader” about winning the PR war, running on Bloomberg on Friday, gets top marks. Read more
Last month FT Alphaville mentioned that sovereign CDS liquidity for developed countries had overtaken that of emerging markets. Within developed countries, however, we’re now seeing more and more of a divergence, as Europe struggles with its peripheral problem:
That’s European CDS liquidity at about 9.3 — lower than the circa 9.5 level reached during the week of Lehman Brothers collapse in 2008, according to Fitch Solutions. As a reminder, the lower the CDS liquidity score the more market uncertainty, in contrast with actual CDS. Read more
Elsewhere on Friday,
- How to bail-out Greece.
Comment, analysis and other offerings from Friday’s FT,
Martin Wolf: Britain’s strategic chocolate dilemma
Briefly, during Kraft’s takeover bid for Cadbury, I thought the UK might proclaim a “strategic chocolate” doctrine. Fortunately, that did not happen, writes the FT’s Wolf. Less fortunately, if history is any guide, the Cadbury takeover is quite likely to be a flop. If so, the winners will be Cadbury’s shareholders, the advisers for both sides and those who arranged the loans. The right question, then, is not about chocolate. It is about the market in corporate control itself. Read more
Breaking pre-market news on Friday,
- Nationwide says UK house prices rose by 1.2 per cent in January – statement. Read more
Asian stocks slumped on Friday, following down US stocks amid concerns about the impact of the Greek bond crisis, Toyota’s recall of millions of vehicles and the US economic outlook
Asian markets (Fri)
Nikkei 225 down -129.94 (-1.25%) at 10,284
Topix down -7.66 (-0.84%) at 906.66
Hang Seng down -158.18 (-0.78%) at 20,198 Read more
The EU signalled on Thursday it would not let Athens’ mounting debt crisis jeopardise the eurozone, even as Germany and France played down suggestions they had already formulated an emergency rescue plan. EU officials said Greece would receive last-resort emergency support, if necessary, in an operation involving eurozone governments and the European Commission but not the IMF. They spoke as escalating investor anxiety drove Greek bond yields up to a record 7.25%. See separate FT report here.
JPMorgan Chase is launching a global business aimed at selling loans and commercial banking services to multinational companies, pitting the US bank against Citigroup and HSBC. The creation of the global corporate banking unit, which has not been announced, will see JPMorgan invest substantial resources and hire about 300 bankers. The unit will initially focus on fast-growing economies such as China and will be headed by Greg Guyett, JPMorgan’s Japan head.
Ben Bernanke on Thursday won another four-year term as Fed chairman after a US Senate confirmation vote revealed the greatest dissent since voting on the position began more than 30 years ago, with 30 senators, both Democratic and Republican, voting No and 70 voting Yes. The vote was not the knife-edge that had been widely expected, but Bernanke now faces a struggle to preserve some of the Fed’s regulatory responsibilities.
Arriva, one of the UK’s big five bus and train groups, is in early-stage talks with France’s state-owned rail operator, SNCF, about a tie-up that could create one of the world’s largest public transport companies. SNCF has approached Arriva about injecting all or part of the Keolis public transport business – in which it is the controlling shareholder – into the UK group in return for an equity stake. Such a deal would create a group with annual sales of €6.5bn (£5.6bn).
Private equity groups were expected on Thursday to acquire three mid-sized UK companies in separate deals worth a combined £900m-plus, as the buy-out market shows signs of a revival after a two-year hiatus. CPA Global, the legal services group, Xafinity, the pensions administrator, and Survitec, a safety equipment maker (see separate report), are set to announce takeovers as early as Friday, respectively by buy-out groups Advent International, ICG and Warburg Pincus.
Warburg Pincus will on Friday announce the £280m acquisition of Survitec, the UK maker of safety and defence equipment. Unlike deals in the credit bubble era, however, the US buy-out group is financing less than half the price of Survitec with debt, compared with at least 80% debt levels some years ago. Warburg said the deal was being financed conservatively to leave room for Survitec to expand through acquisitions in the US and Asia.
The UK’s FSA watchdog is to extend its scrutiny of bank executives to those at overseas holding companies with “significant influence” over UK banks and brokers, amid its efforts to tighten the industry’s governance. The City regulator said it also planned to “strongly encourage” banks to appoint board-level risk officers and establish board-level risk committees, as recommended by Sir David Walker in his review of bank governance last year.
ING, the Dutch bank and insurer, on Thursday lodged a legal challenge against EU restrictions preventing it from offering customers the best deals in EU markets in which it has more than 5% market share. The move comes ahead of the group’s Q4 results on Feb 17, and prompted speculation that its earnings may require explanation. But ING, which received €10bn in state aid in the financial crisis and is set to divest its insurance operations on orders from EU regulators, said cited a Friday deadline for filing appeals.
BHP Billiton has expanded its presence in the market for potash and other agricultural fertiliser ingredients, with a deal to buy Canada’s Athabasca Potash for C$341m ($320m). The deal builds on BHP’s acquisition of Anglo Potash in 2008 for C$284m and follows iron ore miner Vale, which this week announced a $3.8bn deal for Bunge’s Brazilian assets, which centre on phosphate mines used for fertilisers.
3i, the UK’s oldest private equity group, said on Thursday that its financial strength had been restored after last year’s debt crisis. 3i said its net debt was £643m, down from £1.9bn a year ago, and it was ready to do deals again. 3i failed to complete any new deals in the last nine months of 2009, when it invested only £249m, down from £841m the previous year. But Michael Queen, CEO, said its “pipeline for new investments has strengthened”.
A Philadelphia real estate developer has sued the Citizens Bank unit of UK bank RBS for $8bn, claiming the bank jeopardised a $700m project to redevelop a steel-plant site by reneging on financing commitments, reports Reuters. O’Neill Properties argued that Citizens Bank, using an “artifice” of sham defaults, tried to collect on about $180m of loans because of RBS’s own liquidity crisis. O’Neill is seeking $4bn for damages allegedly arising from Citizens’ actions, plus $4bn of punitive damages.