Posts from Friday May 21 2010

Of reform, US bank ratings, and repo

Sweeping US finance reform is on the verge of being enacted into law, after Senate approval of a final bill. Which means further curbs on too-big-to-fail banks…

…and that is likely to mean ratings danger for large US financial institutions. Read more

The shorts are innocent and bonds are not safe havens

Len Welter, Chief Technology Officer, at Data Explorers — which monitors short positions — is not convinced short positions had anything to do with driving the current equity sell-off.

According to him, analysis of institutional flows indicates that there were six times as many longs as shorts in the market throughout most of last year, as well as leading up to May. Read more

CDS liquidity update: Focus on European sovereigns

Markit’s Gavan Nolan wrote this piece

Markit CDS for GISPI Read more

Dear BoE, where does money come from?

Currently doing the rounds on the interweb is the Bank of England’s answer to a curious freedom of information request from one Mr. T. Cuff.

Mr. Cuff, who submitted his request via email on April 15, appears to have wanted to know the answers to the following basic questions: Read more

So far, it’s a bad start to America’s trading day

A grim open for US markets on Friday, after earlier European gloom. Flashes, via Reuters:

RTRS-S&P 500 DOWN 10.77 POINTS, OR 1.01 PERCENT, AT 1,060.82 AFTER MARKET OPEN Read more

A collateralised eurozone debt obligation?

Here’s a different way to look at the European sovereign crisis.

According to the credit team at Credit Suisse, the entire eurozone may actually be a gigantic collateralised debt obligation (CDO). Read more

Oh, the humanity! (updated)

Britain’s FTSE 100 very briefly fell below the, er, ‘psychologically important’ 5,000 barrier on Friday, for the first time since November 2009:

 Read more

Swiss franc intervention cost a billion a day in April

The Swiss Central Bank has just released its monthly statistics — things which are likely to attract plenty of interest, given recent rumours of central bank currency intervention.

The raw data is available hereRead more

On the edge of a deflationary precipice…

Albert Edwards agrees with the depressionistas at RBS.

Amid the recent euro-related turbulence, the SocGen bear says not enough attention has been paid to the rapidly vanishing core CPI inflation rates in the US and the eurozone. And it should be because Edwards reckons were are only one cyclical mishap from joining Japan in outright deflation. Read more

Markets Live transcript 21 May 2010

Live markets commentary from 

Short China now!

“Conventional minds are a disaster at profound turning points in economic history”: as Hugh Hendry, the uber-bearish – and highly successful – founder of London-based hedge fund Eclectica Asset Management once observed.

Well, it’s always nice to see an investor put his money where his mouth is. Read more

Dell shares dip despite jump in profits

Shares in Dell fell as much as 5 per cent in after-hours trading on Thursday, in spite of a 52 per cent jump in first-quarter net income, after the computer maker reported a thinner profit margin and warned of a coming seasonal slowdown in purchases by large businesses. The FT reported that the company’s earnings rose to $441m, or 22 cents a share, and revenue climbed 21 per cent to $14.9bn, paced by a 25 per cent boost in sales to big companies. Net income before severance and facility closure costs and amortisation of intangible assets rose 20 per cent to $584m or 30 cents a share, topping analyst expectations.

Bank Grεεkery, the preview

Mark your calendars.

A slew of Greek banks will be reporting first-quarter earnings next week. Read more

Citigroup didn’t fully disclose on ‘Jackson’ CDO

Citigroup sold a series of mortgage-linked securities without disclosing the short position of Morgan Stanley in the products, sources close to the deal tell Bloomberg. Marketing documents for the $205m Jackson Segregated Portfolio, however, don’t say who picked up the underlying mortgage bonds. Bloomberg reports Morgan Stanley helped select the bonds for the deal, which was underwritten by Citigroup in 2006, exactly because it was private. Six of the seven series of Jackson bonds later defaulted and cost investors more than $150m of losses.

German EuroTarp vote, a primer (updated)

A large H/T to Marc Ostwald of Monument Securities for this:

a) The Bundestag (lower house) vote is expected at 10 GMT (11 AM London, 12 PM Berlin), the Bundesrat (upper house) follows and should be completed latest by 12 GMT.

 Read more

White House accuses BP of ‘falling short’

The Obama administration on Thursday accused BP of having “fallen short” of commitments to keep public and government officials fully informed of data and information surrounding the Deepwater Horizon oil spill in the Gulf of Mexico. The FT reports that in a letter to Tony Hayward, chief executive, the secretaries of the Department of Homeland Security and Environmental Protection Agency said it was “imperative” that the oil company “promptly provide” the government with the results of internal corporate investigations and other data pertinent to the gulf disaster.

Frantic selling abates as euro rises

European stock markets suffered more selling on Friday, the FT reports, although signs were emerging that the recent frantic flight from risk that culminated in a 4 per cent tumble for Wall Street overnight was starting to abate. The FTSE All-World equity index was down 0.2 per cent and commodities were rallying as bargain hunters gambled that the recent financial turmoil, and fiscal troubles in the eurozone, would not derail global growth.

BA reports record £530m annual loss

British Airways has unveiled its worst annual losses in more than two decades after an economic downturn that has seen airlines around the world plunge into the red, reports the FT. The UK flag carrier reported a pre-tax loss of £531m for the 12 months to the end of March, its largest loss since it was privatised in 1987. Although the loss overshadows the £401m deficit BA suffered in the previous financial year, it is some £40m lower than what many analysts had forecast.

The invisible (BaFin) ban

While it has helped to trash stock markets and launch screaming terror over further political risk in the past couple of days, just how, exactly, is the German ban on naked CDS coming along?

Err… Read more

Let’s all go on a euro booze cruise

Calais in France may have found a rival in the euro itself, when it comes to the world’s top booze cruising ‘locations’, reports FT Alphaville. Two notes on Friday, for example, stress the case for the rise of the euro-funded carry trade.
 Read more

Friday rumourtrage

Some pre-weekend RAW for your delectation. (The usual caveats and wealth warnings apply).

There are  rumours of a bid approach for IT services group Logica following on from Friday’s story in the Daily MailRead more

Forget the shorts, issuance is slaughtered

Another side-effect of recent market volatility: the death of corporate credit issuance.

 Read more

Protective headgear not required

At least for the moment.

In spite of Wall Street’s late sell-off, the FTSE 100 is only indicated 30 points lower at the open on Friday: Read more

A quick guide to ECB intervention

With all the wild swings in the euro, speculation that the European Central Bank could intervene in one way or another, is running rife, reports FT Alphaville. There are two ways that could be done. The first is by making verbal statements such as ‘A too weak euro is extremely bad for the eurozone, Schweinhund’ (minus the Schweinhund bit, probably). The second is by actually intervening in the currency. Read more


On Thursday the Vix shot up above 45. So what?, you might say. The Vix was over 80 just a year-and-a-half ago, after the Lehman Brothers collapse. That’s true, FT Alphaville reports, but as Vix and More pointed out in a Thursday post, excluding Lehman, the index has only gone above 45 a few times before.  Read more

Further reading

Elsewhere on Friday,

– Ride, watch, pop: What to do with bubbles.  Read more

Pink picks

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

Romano Prodi: A big step toward fiscal federalism in Europe
When the euro was born everyone knew that sooner or later a crisis would occur, writes Prodi, a former prime minister of Italy and president of the European Commission. We are now at a crossroads. The only alternative to greater co-ordination of economic policies is dissolution of the euro. This would be a cataclysmic blow to the European project and, for Germany, particularly devastating. Read more

Snap news

Breaking pre-market news on Friday,

– British Airways reports annual loss before tax of £531m; targeting revenue growth of 6 per cent and break-even at pre-tax profit level in current financial year – statementRead more

Vodafone in talks over Egypt unit

Vodafone is in early-stage talks about selling its controlling stake in Vodafone Egypt, the country’s second-largest mobile phone operator, in a deal that could be worth £3bn, reports the FT. Telecom Egypt, the country’s leading fixed-line phone company, has approached Vodafone about buying the UK group’s 55% stake in Vodafone Egypt. People close to the matter said the talks began about one month ago, but Telecom Egypt said it was ‘not aware’ of the talks.

US firms face tax hike on deals

Partnerships including private equity, venture capital, real estate and oil and gas firms were on Thursday facing the renewed prospect of higher taxes on profits from deals, after Democrats included the measure in legislation to go before Congress from next week, reports the FT. Max Baucus, who chairs the Senate finance committee, and Sandy Levin, chair of the House ways and means committee, are proposing to tax 75% of these partnerships’ “carried interest” at the ordinary income rate of about 35% from 2013.