Posts from Monday Feb 8 2010

Feinberg on Blankfein: fail (maybe)

Here’s US pay czar Kenneth Feinberg, talking about Lloyd Blankfein’s $9m pay packet to Betty Liu on Bloomberg TV.

Yes, he thinks it’s excessive, but he’s cheered by the fact the package is made up of a very low base salary and long-term stock. Read more

The World Cup pairs trade (ex-Spain)

New research published by the Paris-based equity strategy team at Societe Generale suggests the common assumption that the (non-American) football World Cup has a positive economic impact on the host and winner countries is actually false.

Sure, the host usually sees improved GDP growth and subsequent stock market performance, but links between market performance and performance on the pitch are elusive. Read more

China’s metropoli bubble fear

We believe that we now have a bubble in many cities, particularly the big ones. The central government is trying to deflate these bubbles gently, rather than pop them. The fact that prices have been at these levels before suggests this can be accomplished, as it was last time. But this does not mean that the land market will not experience pain during 2010-11.

That’s Standard Chartered on the matter of Chinese land prices on Monday. Read more

Quote du jour, G7 ostrich edition

“The G7 countries are completely asleep at the wheel. I looked at the information they put out from their meeting I was absolutely shocked … they seem to show no awareness at all that much of Europe is facing a serious crisis and it’s not limited to Spain, Greece and Portugal, it’s also going to include Ireland. I think Italy is also very much in the line of fire. There’s a very serious crisis inside the Euro-zone.”

Former IMF chief economist Simon Johnson commenting to the BBC about the Euro-zone crisis on Sunday. Read more

“Nada de lo que está ocurriendo en el mundo, incluidos los editoriales de periódicos extranjeros, es casual o inocente”

Spain is the victim of an international conspiracy focused on destroying the country’s economic standing and via that the euro.

That’s the plain and simple view of the Spanish government, or at least its Development minister, Jose Blanco, according to an article in Monday’s Expansion newspaper — Spain’s premier financial daily. Read more

TrimTabs vs the Bureau of Labor Statistics (Round 2)

Last Friday’s non-farm payroll numbers provided the market with the Bureau of Labor Statistics’ seasonally-adjusted revisions.

For US investment research firm TrimTabs, which publishes its own competing jobs estimates, the dataset was always going to be particularly important. The firm has long maintained the bureau’s methodology is flawed and that recurrent revisions prove exactly how much. Read more

Spanish government cuts net debt issuance

Flashes out of Reuters on Monday suggest the Spanish Treasury has decided to cut the amount of money it will raise from the bond markets this year by 34 per cent:

RTRS-SPANISH TREASURY SAYS TO RAISE NET 76.8 BLN EUROS FROM MARKETS IN 2010, DOWN 34 PCT VS 2009. Read more

Lunch wrap

On FT Alphaville on Monday morning,

- Abbey, Bungle and Leicester. Read more

Some surprisingly disappointing global metrics

UBS produces a nifty global economic surprise series, which tracks the frequency at which global statistics beat or miss consensus expectations.

The more times the figures beat, the better the momentum. Read more

More bonus neurosis: Thain and how times have changed

He has been keeping a low profile since his ignominious exit from Merrill Lynch in early 2009. But who can forget John Thain, former Merrill Lynch CEO, of lavish-office-refurbishment fame.

Thain on Sunday was named chief executive of the CIT Group, the troubled financial company that emerged from bankruptcy in December under control of its primary creditors. Read more

Overheard in the Long Room

The members of FT Alphaville’s private forum, the Long Room, enjoy (and regularly engage in) spirited debate. Here’s a selection of what’s been said and posted just recently:

- Moorad Choudhry, head of Treasury at Europe Arab Bank, dismisses the notion that ‘speculators’ are to blame for Greece’s sovereign woesRead more

Markets Live transcript 8 Feb 2010

Live markets commentary from FT.com 

Abbey, Bungle & Leicester

Why is Santander considering a flotation of its operations in the UK? According to the spin in the weekend press, it is so that the Spanish bank can buy the 318-strong branch network that RBS is being forced to sell as a condition of the state aid it has received.

But can that really be the case? Surely, a bank as big as Santander could fund that from its internal resources? Read more

A different government view on CMBS

The United States Government Accountability Office published its report on the US government’s Troubled Asset Relief Program last Friday.

It’s a voluminous work, but definitely worth perusing if you have time as it offers some very interesting detail into the implementation of the Tarp and related programs thus far, as well as associated future risks. Read more

When G7 bond yields tell you nothing

UBS draws attention on Monday to the fact that widening G7 sovereign CDS spreads are as yet not being mirrored by rising bond yields.

That’s not to say that CDS are being mis-priced. There just happen to be other extenuating circumstances keeping yields low, according to UBS. However, in most cases the correlation you would expect to get between sovereign bonds has been decreasing over the course of the year. Read more

Bonus neurosis, revisited: Mine’s bigger than yours

After all the hoohah and wild reports about $100m pay-outs, Goldman Sachs on Friday made a big move against the backlash over its compensation practices, saying it would award chief executive Lloyd Blankfein a mere $9m stock bonus for 2009, far lower than his payouts in the boom years preceding the financial crisis.

In fact, Blankfein’s payout marks a painful 87 per cent drop from the $68m he received in cash, stock and options two years ago. That 2007 bonus stands as a record for a chief executive at a publicly traded Wall Street bank. Read more

Further reading

Elsewhere on Monday,

- Europe risks another global depressionRead more

Pink picks

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

Henny Sender: Obama push poses a threat to Goldman
The Obama administration’s push for a separation of banking and “speculative” financial activities, such as private equity investing, is raising questions about Goldman Sachs’ strategy for fending off competition from commercial banks, industry executives say.
Goldman addressed its lack of lending firepower by setting up funds in its private equity group that invested in loans and less senior “mezzanine” bank debt that are used to finance buy-out deals, people familiar with the matter say. Read more

Snap news

Breaking pre-market news on Monday,

- Xstrata full-year profit falls 41 per cent to $2.7bn – statementRead more

Overnight markets: Fluctuating

Asian stocks fluctuated on Monday, reports Bloomberg, as electronics makers fell on lower earnings, while commodity companies climbed after oil and metal prices increased.

Asian markets (Mon)
Nikkei 225 down -37.57 (-0.37%) at 10,020
Topix down -3.73 (-0.42%) at 888.05
Hang Seng down -56.50 (-0.29%) at 19,609 Read more

G7 addresses contagion fears

G7 finance ministers sought to reassure markets that debt contagion in southern Europe was under control, expressing confidence that Greece could bring down its debt levels without outside intervention, after equity markets tumbled on Friday amid fears the country would need a massive bailout from the IMF or eurozone. Concluding a weekend meeting in Canada, they also moved closer to agreeing on new bank levies and made the case for continued economic stimulus; see separate report.

Thain back, to head CIT

John Thain has been named chief executive of CIT Group, the troubled financial company that emerged from bankruptcy in December under control of its primary creditors. Thain’s appointment comes after his one-year stint as CEO of Merrill Lynch ended in its sale to Bank of America, followed by his own dismissal and news that he spent $1.2m to refurbish his office in 2008. He will receive a salary of $500,000 and 180,000 shares of restricted stock, worth $5.5m at current prices.

Santander eyes UK, US IPOs

Santander is considering following up the successful flotation of its Brazilian subsidiary last year with IPOs for its UK and US operations. The Spanish bank – which added Alliance & Leicester and the branches and deposits of Bradford & Bingley to its Abbey franchise in the last two years – began discussing a 2010 flotation of its UK business after the Brazil IPO raised $7bn in October. It is also considering floating its Sovereign Bancorp subsidiary in the US in 2011 or 2012.

Pension Corp in capital raising

Pension Corp, the specialist insurer set up by Edi Truell, is close to finalising a £600m fundraising amid a growing push by UK companies to offload their pensions liabilities. JPMorgan is co-ordinating the capital raising, which began in September with an initial target of £400m. The bank is not expected to add to the money it put in to buy a 5% stake in the company in 2008.

Slump hits Citi asset sales

The securitisation market’s failure to recover from its slump during the crisis is complicating efforts by Citigroup and other troubled financial groups such as AIG to sell unwanted assets and repair their balance sheets. Citi has opened talks with private equity groups and hedge funds over the sale of $3bn-worth of car loans,  and is believed to have offered to provide the buyers of the loans with finance for a few years after the sale.

BofA seeks new SEC deal

Bank of America will return to a New York court on Monday to learn if its settlement with the SEC will be approved by a judge who rejected an earlier deal. Six months after refusing to rubberstamp a similar deal between the SEC and BofA, US district judge Jed Rakoff will hold a hearing on the new settlement, in which BofA has agreed to pay $150m to wronged investors.

Toyota to recall Prius in Japan

Toyota has decided to issue a formal recall of its latest-model Prius petrol-electric hybrid in Japan, and may do the same in the US and other markets, after complaints about problems with its brakes. The decision, which could be announced as early as Monday, follows the recall of more than 8m other Toyota vehicles since November to fix accelerator pedals and floor mats with potentially dangerous defects.

Kirin terminates Suntory talks

Kirin Holdings said on Monday it had terminated talks with Suntory Holdings after Japan’s two top beverage makers were unable to agree on a merger to create the world’s fifth-biggest foodmaker, reports Bloomberg. Suntory wanted a ratio of about 0.9% of a share for each Kirin share in a new holding company, said a Suntory executive. That would have valued Suntory at Y892bn yen ($10bn) based on Kirin’s last closing price. The companies announced merger talks last July.

Geneva office for Brevan Howard

Brevan Howard, Europe’s largest hedge fund, plans to open an office in Geneva amid growing uncertainty over taxation and market regulation in the UK.  In a letter to clients obtained by the FT, Gunther Thumann, CEO of the UK-based hedge fund’s offshore holding company, said the fund would shortly open its Geneva office. The fund manager, which oversees just over $27bn, first told clients it was considering the move late last year.

SAP chief in surprise exit

Léo Apotheker, SAP’s chief executive, resigned on Sunday night in a management reshuffle at the world’s largest business software maker. The company said Apotheker – whose contract expires at the end of 2010 – would be replaced by Bill McDermott, head of field organisation, and Jim Hagemann Snabe, head of product development, in a joint-CEO structure. SAP gave no reason but the news follows an employee survey last September which revealed a dramatic loss of confidence in SAP’s top management.