Posts from Friday Sep 10 2010

Same day options — no thanks

A tip of the stetson to Bloomberg for alerting us that the CBOE has formally asked the SEC for permission to list options with expiry dates of one to four days.

From the CBOE’s filing, here is how this will work (emphasis ours): Read more

BP: not good enough for FTSE4Good

A slap on the wrist for BP on Friday,  from index compiler FTSE:

(Reuters) – BP is to be evicted from the FTSE4Good ethical investment index due to its Gulf of Mexico oil spill, index compiler FTSE said on Friday, as BP said it would delay its third-quarter results due to the challenges of accounting for spill costs. Read more

Testing the sovereign-bank loop

As we watch for signs of reawakening European sovereign fears, here’s an interesting pair of charts to ponder, courtesy of Markit:

And as Markit credit data analyst Lisa Pollack observes, they’re the relics of a certain basis trade. Read more

2010: the year of collateral

Since the Lehman crisis, collateralisation has never really been the same.

On the one hand more attention than ever is being paid to the quality of collateral being pledged by institutions; and on the other hand, more collateral than ever is being sought. Read more

More reasons to kill the old

A companion piece, of sorts, on the merits of killing the old.

Morgan Stanley’s analysts recently made a diverting little demographic case against deflation ever entrenching itself in the West. While this did happen in Japan, they said, that was because the Japanese are just too damn old to get themselves out of the pickle. Old people also effectively dictate Japanese politics into the bargain. But demographic deflation can’t happen here. Read more

And you thought we were bearish

How best to summarise this long, depressing outlook on the global economy by Nouriel Roubini and Ian Bremmer? We’ll give it a shot.

First, no matter who you are, you are too optimistic: Read more

Bonds, breaking for the Swiss border

Tinned food? Check. Bunker? Check. Emergency smokes? Check.

Rolex watch, Toblerone, fondue kit, cuckoo clock? Check. Read more

On the basics of how to tax banknotes

As documented by FT Alphaville, Willem Buiter has a thing for negative interest rates.

Most recently he’s been touting the idea again, this time in an opinion piece for the Wall Street Journal. Read more

Vale and potash: ‘I (only) half believe them’

The Chinese – and more specifically, Sinochem – gained a respite this week from frenzied counter-bid speculation surrounding BHP Billiton’s hostile bid for PotashCorp, following a $1.75bn bond issue by Brazilian mining giant Vale.

The mid-week debt issue switched the focus of bid rumours, triggering speculation that the Brazilian miner could be considering acquisitions in the fertiliser sector – possibly even a counter-offer to BHP’s hostile $38.6bn bid for PotashCorp, reports the FTRead more

Delta One is the HOT new area for banks

FT Alphaville has written about the rise of Delta One and equity derivative divisions before.

But here’s further proof that banks are now increasingly setting themselves to profit from their Delta-One departments — divisions like the one Jerome Kerviel at SocGen worked forRead more

Markets Live transcript 10 Sep 2010

Live markets commentary from 

Happiness is a warm desk and ‘firm culture’ at Goldman

Surely it couldn’t be the money that makes people happy? The blogosphere is alternatively bemused and cynical about the results of an online survey posted by careers consulting site which found – surprise surprise – that Goldman Sachs is the best financial firm to work for, drawing a “prestige score” of 8. 397.

Buy-out group Blackstone came a close second, with a prestige rating of 8.312 followed narrowly by JPMorgan with a score of 8.272. Read more

AIG wins ICBC deal for AIA expansion

AIA has struck a distribution deal with Industrial and Commercial Bank of China, the country’s biggest lender by market value, as the Asian arm of AIG moves to consolidate its position as the leading foreign life assurer in China, reports the FT. The bancassurance agreement, which was signed this week and could be announced as soon as Friday, comes as AIA is pressing on swiftly with plans to float on the Hong Kong stock exchange by the end of November. It’s a rare spot of good news for foreign insurers looking to break into Asia — AXA’s bid to gain total control of its Asian business is stuck in limbo, says the WSJ.

When Cushing syndrome strikes…

The WTI super-contango is back, which incidentally also implies the inevitable return of so-called ‘Cushing syndrome‘ –  a term nicely coined by JBC Energy, as it happens.

On Thursday, US inventory data showed that Cushing stocks — the delivery point for WTI futures —  fell last week by 330,495 barrels to 37.6m, but there is reason to suspect further builds are imminent, according to the JBC Energy analysts. Read more

Funds of hedge funds under spotlight

The SEC is investigating whether funds of hedge funds are properly managing client money, identifying around a dozen firms for questioning, according to the WSJ. The so-called ‘sweep exam’ could also take in advisers focused on private equity and pension funds, with the initial probe already having taken in firms overseeing $100m to $15bn in assets. The exam’s also a way for the SEC to garner knowledge of hundreds of hedge funds which haven’t been under its spotlight before, thanks to the advisers’ connections.

Buyout interest in Foster’s wine — but no bids

KKR and TPG have both said they are potentially interested in the wine business of Australian brewer Foster’s, but neither has so prepared a bid, sources have told Reuters. Cerberus was the mystery firm that saw a $2.5bn offer rejected by Foster’s this week, however, said sources. Both KKR and TPG have prior experience in managing alcoholic beverages businesses, which may count in taking over the depressed earnings of Foster’s wine business — opening the possibility of a consortium of private equity firms going after it.

What has caused the Rightmove? (updated)

This share price spike in Rightmove, the UK’s leading property search website, has caused some head scratching in the Square Mile on Friday morning.

 Read more

Calling all cash, please report to Deutsche Bank

Deutsche Bank is set to roll out a $11.4bn share offering in order to shore up its regulatory capital and increase a stake in Deutsche Postbank, Bloomberg reports. While the offering has been pencilled in for next week, confirming it depends on whether Deutsche can get financing commitments for it from other banks. Even so, it’s no coincidence the deal comes as global regulatory chiefs prepare to meet in Basel to approve a set of new capital and liquidity measures, the FT says — and indeed, Germany is still holding out hope for concessions from Basel on reducing capital requirements, the FT adds. But plenty of other European banks also need to grasp the recapitalisation nettle, observes FT Alphaville.

The great European bank rights issue guessing game

If you’re wondering who might follow the lead of Deutsche Bank and tap its shareholders for cash this table should help.

Source Merrill Lynch: Read more

Harvard endowment fund underperforms

Respectable, not spectacular. The Harvard endowment has posted an 11 per cent increase in its $27.4 portfolio, the NYT reports. The return follows last year’s 27 per cent plunge in the endowment’s value — marking a turnaround for chief executive Jane Mendillo — but that’s still below the 12.3 per cent median return of large endowments, and also below the DJIA’s 18.9 per cent return over the same period, the WSJ reports. The endowment’s 9 per cent weighting of real estate in its portfolio helped drive a negative 2.7 per cent returns on ‘real assets’, too. But Harvard’s dropped talks on selling stakes in real estate to China’s sovereign wealth fund, Bloomberg reports.

SEC zeroing in on Lehman accounts

The SEC’s investigation of Lehman Brothers’ pre-collapse accounts is focused on whether the bank’s executives failed to mark down a huge portfolio of real estate assets acquired in their takeover of an apartment developer, says the WSJ. While the investigation is heating up on both sides — the SEC has revved up questioning of ex-Lehman employees, while former executives have hired more lawyers — the possibility of civil charges remains uncertain. Plus — the SEC simply doesn’t have prior experience in conducting this kind of probe into accounts, argues Yves Smith at Naked Capitalism.

Goolsbee for top White House adviser post

President Obama has promoted Austan Goolsbee to head the White House Council of Economics Advisers, administration sources have told Reuters. Goolsbee is already chief economist on the President’s Economic Recovery Board, making this something of a continuity move amid intense pressure over the Obama administration’s economic policy, says the NYT. Intense indeed — fully two-thirds of voters polled in a recent survey said we’re already in a double-dip recession, Felix Salmon observes.

Microsoft’s Elop heads to Nokia

Stephen Elop, Microsoft’s head of business, will become Nokia’s next chief executive after the Finnish cellphone maker ditched Olli-Pekka Kallasuvo, according to the FT. The change follows months of mounting unrest among Nokia investors over the group’s plunging share price and its failure to come up with a high-end smartphone good enough to compete with the Apple iPhone. Investors had been calling for more US experience in Nokia’s team to resolve the problem — and they’ll also need his skills in change management, the WSJ says. Shares in Nokia were up 5.8 per cent at the European open, reports Reuters.

Where have all the direct bids gone?

Thursday’s US 30-year Treasury auction proved more telling than might have been expected.

As Reuters reported (our emphasis): Read more

Guest post: Michael Stumm on FX trading leverage

The chief executive of OANDA, Michael Stumm, discusses the recent US regulatory crackdown on outlandish leverage ratios offered to currency speculators.

– – – – – – Read more

Further reading

Elsewhere on Friday,

– Wall Street’s psychic. Read more

Pink picks

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

Philip Stephens: Europe heads for Japan-style irrelevance
If Europe feels small it is because the EU’s leading members are much diminished, writes the FT’s Stephens. When national leaders are confident, they are ready to promote the Union. When, as now, they are in trouble they look for scapegoats – Brussels is one of them. Consider Japan’s absence from the world stage. Although it has recently been overtaken by China in global rankings, Japan remains an economic powerhouse. Yet it has long been more or less invisible in debates on world affairs, meekly accepting the role of a taker, rather than a shaper of change. Read more

Snap news

Breaking pre-market news on Friday,

– Nokia appoints Microsoft’s Stephen Elop as its new CEO — statementRead more

Vale denies PotashCorp plan

Vale has issued $1.75bn in bonds amid speculation that the Brazilian mining group may be considering acquisitions in the fertiliser sector, reports the FT. The miner denied reports it was in talks to acquire Canada’s PotashCorp and said it would use the money for general corporate purposes. Analysts say Vale could afford to counter BHP Billiton’s $39bn hostile bid, rejected by PotashCorp in August, but question whether such plans are in the works. The Australian reports that Canada’s prime minister Stephen Harper on Thursday said his government would “thoroughly analyse” concerns over a foreign takeover of PotashCorp. The WSJ meanwhile says America’s SEC is investigating possibile broader involvement in an insider trading case it brought last month over BHP’s PotashCorp bid.

KKR, TPG, eye Foster’s wine

Leading private equity groups, including KKR and TPG, are working on potential bids for Foster’s wine assets after the Australian company rejected a A$2.7bn ($2.5bn) offer from US buy-out group Cerberus, reports the FT. Foster’s declined to say who was behind the failed approach for its Treasury Wine Estates arm, but a person close to the situation confirmed media reports that the mystery bidder was Cerberus, and said groups including KKR and TPG were preparing similar bids. Analysts told The Australian newspaper that suitors will have to bid at least A$3.1bn for Treasury Wine, and may also need to team with another buyer willing to take the beer division.