Posts from Wednesday Mar 30 2011

Lingering questions regarding Sokol’s resignation

By Cardiff Garcia and John McDermott

Sorry for the back-to-back press release based posts, but we think you’ll agree this is big news. And a mighty odd release it is, too. Brief commentary to follow: Read more

NY Fed to AIG: thanks, but no

So that’s that. Looks like $15.7bn just doesn’t go as far as it used to. Emphasis ours:

The Federal Reserve today announced that it has declined American International Group’s (AIG) offer to purchase all of the assets in Maiden Lane II LLC (MLII). Read more

Further further reading

For the commute home, where there is pent up demand for your arrival,

- Money helps you remember stuff you find boring. Read more

Bulls back in charge as global fears ease

Bourses were in good fettle on the lack of sentiment-sapping news emerged regarding the Fukushima nuclear power plant in Japan and as investors become increasingly inured to the fighting in Libya and civil unrest across the Middle East, reports the FT’s global market overview. The S&P 500 on Wall Street was sporting a 0.7 per cent gain, which left the benchmark just 1.2 per cent below February’s cyclical peak. A creeping bear market in US government bonds halted, though an auction of seven-year notes saw the highest yield since April, the same as two-year and five-year auctions earlier this week. 10-year yields were down 5 basis points to 3.44 per cent. West Texas Intermediate crude was down 0.5 per cent to $104.23 a barrel. Gold was dismissing a firmer dollar and is having one of its days when broader risk appetite is a support, gaining 0.3 per cent to $1,423 an ounce.

Dimon hits at new regulations

Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be “the nail in our coffin for big American banks”, reports the FT. Regulators are negotiating international capital standards for the biggest banks but Dimon warned that setting the new requirements too high, or allowing overseas banks to calculate their asset base differently, could disadvantage US banks and was already stifling economic growth.

Hedge funds feel repercussions of Japan’s quake

March was an “extraordinary” month of macro shocks, the chief executive of the world’s second biggest hedge fund told investors on Tuesday, reports the FT. The urbane Peter Clarke – who heads the $68bn Man Group – pulled few punches in a statement to the market preceding his company’s results in May. Man Group’s huge flagship $22bn quant fund AHL, which dropped as much as 4 per cent, is far from being alone in getting caught out.

James Murdoch promoted at News Corp

James Murdoch has been promoted to deputy chief operating officer at News Corp and chairman and chief executive of its international operations, confirming him as the family’s heir presumptive and setting the scene for a staggered handover of power at the $46bn (£29bn) media group, reports the FT. The move comes weeks after group run by 80-year-old Rupert Murdoch bought Shine, a TV production company run by his daughter Elisabeth, and amid signs that his eldest son Lachlan Murdoch becoming more involved in News Corp’s activities.

SK Telecom considers bid for Blockbuster

SK Telecom, South Korea’s largest wireless carrier, is considering bidding for bankrupt US video rental chain Blockbuster, in an effort to strengthen its content development, a person close to the company said, reports the FT. The unexpected move comes as the South Korean company is actively searching for opportunities to expand abroad to make up for stagnant growth at home. The country’s leading telecoms operator, which controls about 50 per cent of the domestic market, has been interested in developing software for mobile phones in recent years

US rediscovers appetite for M&A

US companies have returned to large strategic deal-making, helping to boost global mergers and acquisitions activity by 26 per cent in the first quarter, reports the FT. Thanks to a flurry of big deals, US M&A activity jumped 84 per cent to $267bn in the first three months of the year, compared to the same period in 2010. The US now accounts for almost half of global activity, up from about a third last year.

Google in pledge on users’ privacy

Google has pledged a raft of measures to improve the protection of the privacy of its users, including external audits of its handling of personal data for 20 years, under a landmark settlement with the US trade regulator, reports the FT. The internet company has also promised to obtain consumer consent for any increased sharing of data collected from its consumers and to study the protection of it.

Tepco to seek state support

The utility company at the centre of the worst nuclear accident in 25 years has said it would ask the Japanese government for financial support as it faced a prolonged battle to contain radiation leaks from the stricken Fukushima facility, reports the FT. It was the first time since the earthquake three weeks ago that Tokyo Electric Power had indicated it might not be able to fund the cost of the crisis on its own. Last week the company raised $25bn from three of Japan’s largest banks in emergency funding while saying that it had “sufficient liquidity”.

Takeovers in US local government?

Do you want the good news or the bad news first?

Good news, really? Fine then. Read more

Rally monkey declares mission accomplished for QE2

“I do think that our policies have contributed to a stronger stock market, just as they did in March of 2009,” he said, referring to the Fed’s initial round of quantitative easing.

He pointed out that since he signaled the Fed would likely unveil QE2 during a speech in Jackson Hole, Wy., that the Russell 2000 of small cap stocks is up 30%, even more than the 15% to 20% rise in blue chip indexes. Read more

Going small(er) in emerging markets

Fresh from our inbox, a chart and some commentary from State Street Global Advisors:

 Read more

Meme competition! Maestro edition

Like a caption competition, but better.

An idea shamelessly cadged off Henry Farrell at Crooked Timber, although since it’s in aid of kicking Alan Greenspan, why not? Read more

Outgoing Sigtarp punches Tarp goodbye

FT Alphaville was once told to always leave with a bang, not a whimper.

Similar advice has seemingly reached Neil Barofsky, the outgoing Sigtarp, who lambastes the implementation and legacy of the Tarp and Hamp programmes in a thundering NYT op-ed on Wednesday. Read more

Ratings don’t kill sovereigns, ratings users do

This week in messenger-shooting:

(Reuters) – The European Commission said on Wednesday it had some doubts and concerns about how credit rating agencies function, but said it had no comment on individual credit ratings of countries… Read more

Some intra-eurosystem inequality

The heart of Europe’s single currency union lies not in some grandiose parliamentary hall in Brussels, but in a little-known payment system platform with the unimpressive title of, “Target2“.

Just think of two eurozone banks. Imagine, say, Dublin Depository and Berlin Bank. Read more

Ireland — a double-size banking catastrophe

Commercial insurance payouts for global catastrophes in 2010 = $43bn.

Taxpayer insurance payouts for Irish banking catastrophes from 2008 onwards = $96bn. Read more

Taylor-fied of eurozone interest rate policy

*WARNING*

This is another dose of Taylor Rule-based eurozone interest rate hindsight. But it’s a dose of interest rate hindsight that comes with a bit of foresight too — given the market is positioning for a rate rise by the European Central Bank sometime this year. Read more

What price Saudi Arabia’s new special ‘blend’?

Answer: We just don’t know.

But it’s all very intriguing nonetheless. Read more

Markets Live transcript 30 Mar 2011

Live markets commentary from FT.com 

Six degrees of Spanish bank capitalisation

Why estimating the capital needs of Spain’s savings banks is so damn hard, in a single chart:

 Read more

Bernanke’s bet on food and fuel prices

Higher prices at petrol stations and grocery stores pushed consumer spending up 0.7 per cent in February as households faced growing pressure on their budgets, the FT reports. The core personal consumption price index, a measure of inflation favoured by the Federal Reserve, increased 0.2 per cent in February, the same rise as in January. The overall personal consumption price index, which includes food and energy prices, gained 0.4 per cent, the fastest rise since June 2009 and above the previous month’s 0.3 per cent increase. Federal Reserve chairman Ben Bernanke is hoping that those prices will be controlled in the long term. History backs him, but the size of the price increases is sorely testing that assumption, Bloomberg says.

Muni tax revenues reviving

State and local governments have seen tax revenues return to almost their pre-crisis peak, the WSJ reports. Receipts in 2010 rose to $1.29 trillion, 2.3 per cent below 2008′s total. The figures were not adjusted for inflation. Tax increases account for $12.3bn of the rise in revenue during 2010. However, the data demonstrate a divergence in the tax profiles of state and local administrations — with revenue rising much more strongly in the former than the latter, which rely on property tax revenues that continue to fall. Other problems are yet to come. 2012′s fiscal year begins in July, and will see the removal of around $150bn in federal stimulus from state budgets.

Insider trading charge for FDA chemist

The Department of Justice has filed criminal charges against a chemist working for the Food and Drug Administration over an alleged $2.27m scheme to trade on confidential information about drug approvals, says the FT. The criminal complaint, charged Cheng Yi Liang and his son, Andrew, with securities fraud, wire fraud and conspiracy charges relating to trades in shares of several pharmaceutical companies. The charges have hit the FDA in its most sensitive area, the WSJ observes. Pharmaceutical firms have long worried about the amount of secret corporate information shared with drug approval officials.

Corporate responsibility, Swiss style

Stäfa (Switzerland), 30 March 2011 – In the run-up to the profit warning of 16 March 2011 the responsible persons at Sonova failed to issue a timely Sonova-internal black-out period for trading in Sonova shares and options. As a result of this failure, there were trades that should not have taken place during that period. In addition, Sonova has issued its profit warning too late.

These findings are the result of an investigation carried out by a law firm upon a mandate issued by the Board of Directors of Sonova. Read more

Valeant makes $5.7bn hostile bid for Cephalon

Canada’s Valeant, the acquisitive speciality pharmaceutical company, is turning its sights on US drugmaker Cephalon, with a $5.7bn hostile offer to acquire the biotech company, reports the FT. The $73-a-share bid represents a 24 per cent premium over Tuesday’s closing price and 29 per cent over Cephalon shares’ 30-day trading average, Reuters says. The offer comes after a month of failed takeover discussions with the Cephalon board, Valeant said, adding that it would begin talking to the company’s shareholders next week, and that the offer may be raised if due diligence is allowed. Cephalon sees its patent on a leading product run out in 2012, leading Valeant to argue it can wring value out of the company by cutting spending, the WSJ reports.

Thirty-year clean-up at Fukushima

Engineers estimate that the Fukushima plant’s four stricken nuclear reactors will require three decades and $12bn to decommission, says Bloomberg. Shares in the plant owner, Tokyo Electric Power, plunged another 17 per cent overnight as the company revealed its CEO is now hospitalised, and speculation continued that government will nationalise it, the FT reports. Tepco’s stock is now at its lowest in five decades. The Japanese nuclear safety agency said on Wednesday that radioactive iodine levels in the sea outside the plant are now 3,355 times the legal limit, Reuters reports. Controlling leaks from the plant could take many months.

Nomura’s US investment bank head quits

Nomura has replaced the head of its US investment banking business with a Deutsche Bank veteran, in a sign of its struggle to make inroads on Wall Street, the FT says. Jim DeNaut, a senior oil and gas banker who joined Nomura from Deutsche last August, is taking over with immediate effect from Glenn Schiffman, who is leaving the bank after just one year at the helm of its New York operations. Nomura’s push into business outside Japan since 2008 has seen its US arm turn into profit in the last two quarters, but its important US wholesale arm remains loss-making. The bank’s US staff has tripled within a year. Nomura’s expansion is favouring employees at the expense of its shareholders: the bank has a 1 per cent return on equity, Lex notes.