Posts from Friday Mar 4 2011

Further further reading

For the commute home, or while rocking out to Paradise City, or while shielding yourself from the November Rain, or while chasing your Rocket Queen, or while exercising Patience; and because you Don’t Cry, you Live and Let Die,

– Welcome to the jungle: Ex-G’N’R bassist starts wealth management firm. Read more

Death bonds’ unique risks

Victoria’s the Age newspaper on Wednesday published an interesting investigation into a bad life settlements investment by the Australian state’s quasi-SWF.

It alleges that it uncovered: Read more

Oil facilities on fire

Via Reuters on Friday:

An oil facility at Zueitina, south of the Libyan rebel-held city of Benghazi, has been damaged and was on fire, Al Jazeera said, showing a video of black smoke rising from an oil plant.

 Read more

Interesting, odd and odious sovereign debt ideas

Idea No. 1, from ECB board member Lorenzo Bini Smaghi:

More generally, this crisis has shown the vulnerability of public finances to volatile structures in the economy. In good times, volatile sources of income, such as those from the financial sector or the housing market, may overestimate the soundness of public finances, while the adjustment costs in the downturn may be enormous. A case in point is that of Ireland…

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Nicholas Levene: Has-Beano?

From the wire of the Serious Fraud Office, London on Friday:

Nicholas Levene has today been charged with offences of fraud, forgery, money laundering and false accounting,.   Mr Nicholas David Levene (DOB 23. 04.1964) has today been charged with 16 offences relating to an alleged investment fraud. He has been charged with: 11 offences of fraud by misrepresentation (s1 (2) Fraud Act 2006) two offences of possession of an article for use in a Fraud (s.6 Fraud Act 2006) two offences of money laundering (s.327 (1) (d) Proceeds of Crime Act 2002) and one offence of False accounting (s.17a Theft Act 1968). Read more

[Rolling updates]: Nonfarm payrolls up 192,000

We’ll continue to have updates as we make our way through the report, so keep checking back:

1) At a glance, a decent report, very close to expectations, and after upward revisions to December and January (each by close 30,000), here is what payrolls look like for the last six months: Read more

Algo trading and the Nymex

On Thursday, Reuters reported a very interesting new statistic.

The proportion of trade driven by computers on the New York Mercantile Exchange (owned by the CME Group). Read more

Navigating the Gaddafi asset freeze

Underlining the complexity of managing the Gaddafi financial asset freeze on Friday, HM Treasury has carved out an exception for any traders dealing with ‘non-Libyan financial institutions’:

(H/T Natsuko Waki of Reuters) Read more

Markets Live transcript 4 Mar 2011

Live markets commentary from 

The global economy is critically ill

It’s a SocGen double header on FT Alphaville this Friday morning.

You’ve had the apprentice (Dylan Grice) and now it’s time for the Dark Sith Lord (Albert Edwards). Read more

Mean-reverting US government bonds

Here’s an arresting chart from SocGen strategist Dylan Grice.

It shows gross interest payments as a share of US government revenues under two scenarios. Read more

Why Libya’s sovereign fund is being frozen

Austria was the latest country to freeze assets linked to the Libyan Investment Authority on Friday, FT Alphaville reports. Or more specifically — assets tied to Mustafa Zarti, who is the LIA’s deputy chief. And a close friend of Saif Gaddafi. Which tells you exactly why an asset freeze initially targeted at the Gaddafi family has now also brought down a sovereign wealth fund. Given the LIA’s size, liquidity, and counterparty exposure to several western companies, this is a big deal — and so far as we still know, an unprecedented occurrence in the land of SWFs. Read more

Goldman’s Blankfein to testify at insider-trading trial

One of the best-known executives on Wall Street could be picked up as a surprising government witness at the high-profile criminal trial of Raj Rajaratnam, the Wall Street Journal reports. People familiar with the matter have told the paper that Goldman Sachs’s CEO Lloyd Blankfein has agreed to testify on behalf of the US government at the upcoming trial of Rajaratnam, the billionaire hedge-fund manager and founder of the Galleon Group, who is facing 14 counts of securities fraud and conspiracy in one of the largest insider-trading cases of a generation. Another 26 defendants in the case have already pleaded guilty. According to the paper, Blankfein could establish an important link between information shared among Goldman board members and executives with the former Goldman director Rajat Gupta. Prosecutors are alleging that Rajaratnam obtained this inside information about Goldman in October 2008. A separate civil administrative proceeding filed this week saw the Securities and Exchange Commission allege that Gupta had passed along inside information about Goldman to Rajaratnam.

US payrolls preview

The consensus is pegging 180,000 as the magic number, with the unemployment rate ticking up slightly to 9.1 per cent. Via Bloomberg:

 Read more

WPP upbeat on 2011 as profit rises 34%

The world’s largest advertising group WPP reported a 34 per cent rise in net profits for 2010  as a strong recovery in emerging markets and the US helped boost revenues, the company said on Friday. Reuters reports that WPP, whose ad agencies include JWT and Ogilvy & Mather, posted fourth quarter organic revenue growth of 8.5 per cent, saying the solid performance had continued into January with revenue up over 8 per cent.  For 2011 the company said it expects like-for-like growth, which strips out the impact of acquisitions and currency moves, of 5 per cent and operating margins to rise 0.5 margin points to 13.7 per cent. According to the WSJ, WPP will lift the dividend pay-out ratio to around 40 per cent from 30 per cent over the medium term after paying a record dividend for 2010. Its interim dividend was raised by 15 per cent to 11.82 pence a share, bringing the total dividend for the year to 17.79 pence a share.

Upbeat traders eye jobs data and oil market

Jobs and oil: investors will need the ocular dexterity of Marty Feldman to keep a close eye on Friday’s two prime market catalysts, the FT’s global market overview reports. The always eagerly anticipated US payrolls numbers are set to provide the day’s crucial data point. They are due for release at 1330 GMT and consensus is for an increase of 185,000, according to Reuters. But throughout the global session, investors will also be wary of the oil price — now back above $115 a barrel — which will doubtless be driven by reports of fighting in Libya and civil unrest elsewhere in the region, with Friday usually the day when tensions are at their height. For now, though, the mood was upbeat, with the FTSE All-World index up 0.3 per cent and US stock futures marginally firmer. This was a carry-over from Thursday, when better-than-expected US data — and some handy geopolitical risk amnesia — helped spur a 1.7 per cent rally on Wall Street.

On the back of a (plain) fag packet

Attention, traders, brokers, entrepreneurs and financiers — there could soon be plenty more space to scribble things on the back of a fag packet.

Speculation is mounting that the coalition could announce – as soon as next week – plans for generic (or plain) packing for cigarette packs. Read more

ECB, after ‘vigilance’

Much musing — and some shell-shock in financial markets — on Friday over the ECB’s bold new direction, or as its Thursday statement asserts, its “strong vigilance”.

As FT Alphaville noted, the surprise suggestion on Thursday by ECB chief Jean-Claude Trichet of an April rate rise “went down a treat in the foreign exchange markets“, if not elsewhere. Read more

Further reading

Elsewhere on Friday,

– The barbarians are backRead more

Pink picks

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

Gavyn Davies: The ECB says “don’t tread on me!”
Only a major discontinuity in Europe’s financial markets can now prevent the European Central Bank increasing interest rates to 1.25 from 1 per cent next month, writes the FT columnist. The key question is whether this rate increase is just an isolated event, which proves to be mistaken and is therefore rapidly reversed – like the infamous quarter point rise announced by the ECB in July 2008, when the world economy was already in recession. Or does the ECB announcement definitively mark the low point for global policy rates? Read more

Snap news

Breaking pre-market news on Friday,

– WPP to increase dividend payout to 40 per cent of earnings; announces annual results- statementRead more

Windfall for HCA investors

Bain Capital, KKR, Bank of America and the brother of former US Senate majority leader William Frist are each in line to make nearly $3bn in the IPO of HCA from their $1.2bn investment in the 2006 leveraged buyout of the US hospital chain, reports the WSJ. The gain – about 250% over five years – would represent one of the largest ever from a private-equity deal. Ironically, the windfall could grow further under President Barak Obama’s health-care overhaul. HCA co-founder Thomas Frist Jr, older brother of Sen Frist, contributed $950m and received a nearly 19% stake in the newly private company. About 1,400 HCA executives also received equity. Sen Frist, Republican majority leader at the time, didn’t play a role. The IPO is set to price on March 9, adds Reuters.

S&P says turmoil could still spread

Every country in the Middle East and north Africa is vulnerable to contagion from the unrest that has hit countries such as Libya, Tunisia and Egypt, credit rating agency S&P warns in a new report, says the FT. The spread of protests from oil importers such as Tunisia, Egypt and Jordan to oil exporters such as Bahrain, Libya and Oman showed that oil wealth alone could not contain intense political pressures, S&P analysts said. The analysts also highlighted concerns about Iran’s threat to regional stability, in a report that followed ratings downgrades through the region. S&P cut its ratings on Tunisia, Egypt, Jordan, Bahrain and Libya this year citing heightened risks and placed all under review for further downgrades.

European banks brace for new tests

The second round of EU-wide bank stress tests will begin from Friday, when regulators provide banks across the 27-member bloc with details of economic scenarios that will be used to test whether they have enough capital, reports the FT. Aimed at reassuring investors and regulators that banks have enough capital and liquid assets to survive a crisis, the tests are the first key hurdle for fledgling regulator the European Banking Authority. The EBA said this week it would test banks against both a baseline and a very negative macroeconomic situation, as well as country-specific shocks such as property prices and interest rates. The scenario details will be unveiled shortly along with a sample of the banks involved.

Beazer chief to return $6.5m

The chief executive of Beazer Homes has agreed to return $6.5m in cash and forfeit restricted stock to settle allegations that he failed to reimburse the US home builder after an alleged accounting fraud forced the company to restate its earnings in 2006, reports the FT. The SEC action marks the first time the agency has clawed back money from a sitting executive without pressing fraud charges. It marks a push by the regulator to seek return of incentive-based pay as allowed under the 2002 Sarbanes-Oxley corporate governance law. Ian McCarthy, Beazer’s chief executive, settled the charges, filed in an Atlanta federal court on Thursday, without admitting or denying wrongdoing. The settlement comes amid a broader government effort to curb excessive risk-taking by executives. On Wednesday, the SEC proposed rules to allow the agency to ban awards to financial executives if it deems them excessive.

BP denies executives bonuses

BP will not pay bonuses for last year to any of the executive directors involved in the disastrous Gulf of Mexico spill, but the UK oil group has awarded partial pay-outs to two directors for meeting specific divisional targets, reports the FT. Bob Dudley, chief executive, his predecessor Tony Hayward and Andy Inglis, the former head of exploration and production who left BP last October, have all been denied an annual bonus for 2010 and no director will receive shares under the long-term remuneration plan from 2008-10, BP disclosed in its annual report. But Byron Grote, finance director, and Iain Conn, head of downstream, both received 30% of the full potential bonus payout for 2010 for reaching targets in their own divisions.

Blankfein to testify at insider trial

Goldman Sachs chief executive Lloyd Blankfein has agreed to testify for the US government at the coming criminal trial of Raj Rajaratnam, the hedge-fund titan facing insider-trading charges, reports the WSJ, citing people familiar with the matter. Prosecutors have charged Rajaratnam, the billionaire founder of Galleon Group, with 14 counts of securities fraud and conspiracy, in the biggest insider-trading case in a generation. 19 of 26 defendants in the case have pleaded guilty. The US would use Blankfein to establish evidence linking leaked information about Goldman with former Goldman director Rajat Gupta, said the people. Prosecutors have alleged Rajaratnam obtained inside information about Goldman in October 2008. In a separate civil proceeding filed this week, the SEC alleged Gupta passed inside information about Goldman to Rajaratnam. Gupta’s lawyer has said his client did nothing wrong

Bank of Moscow stake frozen

A London arbitration court has frozen a minority stake in the Bank of Moscow, in a sign that VTB’s battle for control of the municipal bank run by allies of Yury Luzhkov, the ousted Moscow mayor, is not yet over, reports the FT. The UK court had frozen a 3.9% stake in the Bank of Moscow held by Goldman Sachs after a minority shareholder close to the bank’s management filed suit questioning its acquisition by the asset management arm of VTB, the Russian state bank. The court is yet to issue a decision after hearing the merits of the case. The stake is key for pushing VTB’s overall share in the bank – Russia’s fifth-biggest by assets – above 50%. VTB last week acquired the Moscow city government’s 46.5% stake in the bank for $3.5bn.

Overnight markets: Up

Asian shares rose on Friday, helped by retreating oil prices and a firmer Wall Street close while the euro perked up after the central bank signalled a rate rise as early as next month, reports Reuters. Shares in Tokyo and Seoul rose by more than 1% after strong gains in US stocks as players bet that data due later on Friday will underscore steady recovery in the world’s largest economy.

The broader MSCI index of Asia-ex Japan stocks was up more than 1%, extending its weekly gains to more than 2%. Oil retreated from 30-month highs on profit taking after Venezuela pitched a plan to resolve the Libyan crisis, which markets greeted with scepticism. The pull-back in oil follows two days of strong gains that sent a key technical indicator to its most overbought level in more than five years for Brent crude. Read more

Moelis inks Sumitomo pact

Moelis, the independent US investment bank, has agreed an alliance with Japan’s Sumitomo Mitsui Banking Corporation to provide services to Japanese clients, reports the FT. In an internal announcement, Moelis this week said it had agreed a non-exclusive partnership with Sumitomo, and its Nikko Cordial brokerage unit, to co-operate on providing global investment banking services to Japanese companies. The alliance should allow Moelis to tap into Sumitomo’s relationships with corporate Japan. Sumitomo, through Nikko, has been expanding investment banking operations globally, taking aim at Nomura, the market leader in advising Japanese companies on dealmaking. Sumitomo Mitsui Financial Group, which owns SMBC, is Japan’s second-largest bank by market value.