Posts from Friday May 20 2011

The Weekender

This week on FT Alphaville,

– We asked, how do you say bail-in in Swedish? Read more

Further further reading

For the commute home, which for the moment remains firmly on planet earth,

– “Neither the vagaries of the modern fiscal cycle, nor net-present-value calculations over reasonably foreseeable futures, have lent themselves to the kinds of century-long patronage and persistence needed to definitively transform mankind into a space-faring species.” Read more

Goldman: psst… we’re to be subpoenaed

An old boss of ours used to stress the benefits of being “proactively reactive”, jargon we never fully understood until we read this story in Friday’s WSJ:

Goldman Braces for Federal Subpoenas Read more

Tech stocks: it’s about the economy, too

Most of the commentary about LinkedIn’s post-IPO pop has either focused on the long-awaited rush by investors into the social media space or, more generally, on an incipient tech bubble reminiscent of the late 1990s.

Doug Cliggott, chief US equity strategist at Credit Suisse and one-time Markets Live cohost, just sent us an email with his take on the differences between the tech sector then and now — and thinks the proper context is ever broader: Read more

Greek government hypocrisy, Fitch edition

Blah blah blah, we hate Fitch, blah, speculators boo, blah, from the Greek finance ministry on Friday (via Reuters):

“[The Fitch downgrade] overlooks the additional commitments already undertaken by the Greek government to meet its 2011 fiscal targets and speed up its privatisation programme,” the Finance Ministry said in a statement. Read more

It’s all falling apart for Greece on Friday…

First the Norwegians may decide they’re not playing ball with the €25m they’re due to give Greece.

And then Fitch Ratings throws in the towel on Greece’s BB+ rating. It’s now rating Greece B+, which shifts the country from the “non-investment grade speculative” bracket to a “highly speculative” one. Read more

US Markets Live transcript 20 May 2011

Live markets commentary from 

Reminder: US Markets Live starts in one hour

10am in New York, 3pm in London.

You know the drillRead more

Silver and short covering – a theory

John Kemp at Reuters has already written about how it wasn’t necessarily the froth in the market that caused the parabolic rise in silver over April:

 Read more

The extend and pretend exposé – coming to a bank near you

In March, the US Securities and Exchange Commission fired off a few letters asking a number of America’s regional banks to clarify their loan modification practices. In particular the SEC is reportedly looking into “troubled debt restructurings” (TDRs) which involve modifying existing loans’ terms.

Just to be clear, this particular form of ‘extend and pretend‘ is 100 per cent legal, though it’s governed by some fairly nebulous accounting rules and is meant to be reported. First though, look at those TDR growth rates. In a special report out on Thursday, Fitch Ratings says reported TDRs increased 48 per cent to $106bn in 2010. The mix, however, is the really interesting (and significant) thing. Read more

Markets Live transcript 20 May 2011

Live markets commentary from 

Moex to pay $1bn to BP over oil spill

Moex Offshore, one of BP’s minority partners in the Macondo well that ruptured in last year’s Gulf of Mexico accident, has agreed to pay the UK oil group $1.1bn to settle all claims between the two companies related to the disaster, BP announced on Friday. The FT reports that Moex Offshore and its affiliates had a 10 per cent interest in the well and were deemed to be liable for a commensurate portion of the costs. BP has so far set aside $41bn for the accident. The settlement excludes punitive damages – which BP does not believe will be payable – and fines, the company said in a statement. The agreement is not an admission of liability by any party regarding the accident, BP added.

Kindle e-book sales soar for Amazon says it is selling more e-books for its Kindle electronic reading device than paperback and hardback print editions combined, helping its book business to see its strongest growth in more than a decade, the FT reports. The news that the online retailer has sold more than three times as many Kindle books so far this year as in the same period of 2010 came as the Association of American Publishers reported that US e-book revenues had grown 146 per cent in March over the same month a year earlier. Amazon only released unit sales data rather than comparable revenue figures, and Kindle editions typically sell for lower prices than print titles. However, the data suggest it may be extending its leading market share in e-books following the release five weeks ago of a cut-price Kindle at $114 for customers willing to accept sponsored screensavers and other advertising.

Investors ending week in a more positive mood

Traders were adopting a bullish tack, confident that assets would be supported by continuing largesse from many of the developed world’s central banks should recent evidence of weakening growth persist, the FT reports. The FTSE All-World equity index was up 0.4 per cent, Asia had a mixed session, and the FTSE Eurofirst 300 was sporting gains of 0.7 per cent as financials and resources groups rallied. Commodities were firmer – WTI crude was up 1 per cent at $99.39 a barrel, copper was higher by 1.4 per cent to $4.11 a pound, and gold was up 0.7 per cent to $1,502 an ounce – while perceived “havens” such as the dollar, Swiss franc and Treasuries were a touch weaker. The yen was also losing ground against some of its peers after the Bank of Japan decided against further stimulus to support the economy, which last quarter slipped back into recession following the March 11 earthquake.

IEA urges Opec to increase oil production

Oil-producing countries have been warned to increase output to safeguard global economic recovery or face the threat of the release of strategic stockpiles of oil by western countries for the first time since 2005, the FT reports. The International Energy Agency urged the Opec oil cartel to step up output, saying there was a “clear, urgent need for additional supplies”. In a statement the IEA, the advisory body for western countries on energy, added: “We are prepared to consider using all tools that are at the disposal of IEA member countries.” These tools are limited to reducing demand for oil and drawing on strategic reserves held by member governments, which total 1.6bn barrels. Any decision to use these stockpiles would be taken by the IEA’s board, where all 28 member states are represented. Such a decision has only been taken twice before. Stocks were released in 1991 when western allies attacked Iraq in response to its invasion of Kuwait, which deprived the market of 4.3m barrels per day, and hurricane Katrina in 2005, which stopped 1.5m b/d of output

Tepco reports record $15bn loss

Tokyo Electric Power, operator of the tsunami-stricken Fukushima Daiichi nuclear plant, has reported a record Y1,247bn ($15bn) net loss as a result of the disaster, which wrecked four of the power station’s atomic reactors, the FT reports. The deficit for the financial year that ended on March 31, three weeks after the still-unresolved crisis began, was the largest ever recorded by a Japanese non-financial company. Tepco did not give an earnings forecast for the current year. Masataka Shimizu, Tepco’s much criticised president, formally announced his resignation at a news conference detailing the results on Friday. He had indicated previously that he would quit over the disaster, the worst radiological accident since Chernobyl in 1986. The head of Tepco’s nuclear division, Sakae Muto, also resigned. For more on the results see FT Alphaville.

LinkedIn stock soars 109% after IPO

An echo of 1990s-style dotcom euphoria reverberated around Wall Street as shares in LinkedIn soared on their debut, at one point valuing the business-focused social network at $11.6bn, the FT reports. The strong reception pointed to pent-up demand for the Facebook generation of young internet companies and is expected to be followed by a spate of initial public offers from other companies linked to the online social networking revolution. But it also drew warnings that a new internet bubble might be in the making, with investors rushing to pay prices far higher than a level that was considered extravagant only days before. At their high on Thursday LinkedIn’s shares were trading at $122.69, up 173 per cent on the $45 IPO price. At that price, it was valued at some $11.6bn, nearly quadruple its value at the beginning of the week when bankers put a price tag of $32-$35 on the shares.

Europe rushes to stake claim to IMF job

European policymakers are scrambling to stake the continent’s claim to provide the next leader of the International Monetary Fund, after the resignation of Dominique Strauss-Kahn as managing director, the FT reports. Mr Strauss-Kahn’s departure, announced late on Wednesday, followed increasing pressure from the US and other governments for him to step down after he was charged with sexual assault on a hotel maid in New York last weekend. On Thursday, Mr Strauss-Kahn was indicted on charges including attempted rape. He was granted bail of $1m in cash and a $5m bail bond and was expected to be released from custody on Friday. He denies the charges. Until his trial, he will be kept, at his own expense, under a 24-hour armed guard at a New York home rented by his wife. The IMF’s executive board, on which European countries hold just over 30 per cent of the votes, will probably appoint the next managing director within the next month or two, with candidates nominated by member countries. France’s finance minister Christine Lagarde is seen as a frontrunner.

Life on Pandora is challenging

While the market’s attention was focused on the pop in LinkedIn’s US debut, another recently listed stock was having trouble of a different sort.

On Thursday, shares in Copenhagen-based jewellery maker Pandora — which listed on the Danish market in October 2010 at a valuation of €5bn — closed down more 21.65 per cent at DKK 199: Read more

The tragedy of Tepco, yes it can get worse

The seemingly endless kabuki tragedy of Tepco lurches on, with Friday’s announcements that the utility behind one of the world’s worst nuclear contamination scares incurred Japan’s largest loss for a non-financial company ever. Meanwhile, Tepco’s president, Shimizu, has resigned to take responsibility(for the loss, mind you — not much said about taking responsibility for the nuclear debacle).

As Bloomberg reportsRead more

Further reading

Elsewhere on Friday,

– Remember when you could expense pretty much anything? Read more

Pink picks

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

Gillian Tett: Beware tail risks hanging over Treasuries
Three years ago, investors received a brutal lesson in why it can be risky for banks or other financial institutions to fund long-term holdings with short-term debt, writes the FT’s US managing editor. But could it be time for investors to relearn that concept now in relation to sovereign debt? That is a question hovering over the $14,300bn US Treasuries market as the political fight about US fiscal policy intensifies. Read more

Snap news

Breaking pre-market news on Friday,

– BP wins $1bn in Macondo payments from MOEX — statementRead more

UK fund raises lending hope

A new £2.5bn fund that will provide equity to hundreds of small and medium-sized businesses across the UK is being hailed as a key step to reviving much-needed bank lending in the sector, reports the FT. Five of Britain’s top banks have joined forces to create the Business Growth Fund, which will take stakes in companies with a turn­over of between £10m and £100m. Its purpose is to provide equity to businesses that are too big to attract the attention of so-called angel investors, and too small to access capital markets. But the fund is also expected to strengthen companies’ balance sheets to a point where banks feel more inclined to provide other forms of finance. An independent board will decide which companies to invest in and will put a representative on their boards.

Sarasin pushes Rabobank to sell stake

Executives at Swiss private bank Sarasin are pushing majority shareholder Rabobank of the Netherlands to sell its stake in a SFr3bn ($3.4bn) management buy-out, reports the FT. Joachim Straehle, Sarasin chief executive, said no formal negotiations had begun, though there had been informal talks. In the event of an agreement, Straehle told the FT, he was confident of securing funding for a deal from potential financiers in the Middle East, Asia and Switzerland. Rabobank, a mutually owned Dutch lender with its roots in the agricultural industry, has been a key crutch to Sarasin through the financial crisis thanks to its rare triple A credit rating.

Goodwin injunction partially lifted

A draconian injunction granting anonymity to Sir Fred Goodwin, the former chief executive of Royal Bank of Scotland, was partially lifted at the UK High Court on Thursday after details of an alleged relationship with a colleague were referred to in the House of Lords, reports the FT. Lord Stoneham, speaking on behalf of Lord Oakeshott, had used parliamentary privilege to argue that every taxpayer had a direct public interest in the events leading up to the near-collapse of RBS, survived the financial crisis only with a £20bn taxpayer bail-out. “So how can it be right for a super-injunction to hide the alleged relationship between Sir Fred Goodwin and a senior colleague?”, he said. “If true, it would be a serious breach of corporate governance… ” Justice Tugendhat at the High Court later varied the court order that had granted anonymity to Sir Fred, and said the injunction related to a “sexual relationship”. However, details of the alleged relationship and the name of the woman said to be involved were not permitted to be reported.

Bank of Japan holds fire

The Bank of Japan kept monetary policy steady on Friday, signalling that Thursday’s news of a much larger-than-expected economic slump in the first quarter did not change its view that growth will resume late this year, reports Reuters. In a surprise move, BoJ deputy governor Kiyohiko Nishimura dropped his proposal to loosen policy further with an expansion of the central bank’s asset-buying scheme. He proposed the move last month but was voted down by an 8-to-1 margin. As widely expected, the BOJ kept interest rates unchanged at a range of zero to 0.1% by a unanimous vote and maintained the Y10,000bn (£75.4bn) limit for its asset buying scheme, its main policy tool. The BoJ maintained its assessment that the economy faces strong downward pressure due to the March 11 earthquake, and indicated it stands ready to ease monetary policy further if the quake’s damage proves bigger than expected. Data on Thursday showed Japan’s economy shrank 0.9% in the first quarter from the previous quarter, for its second recession in three years.

LinkedIn soars on IPO

Shares in LinkedIn soared on their debut, at one point valuing the online social network at $11.6bn, the FT reports. The reception highlighted voracious demand for the “Facebook generation” of young internet companies and paves the way for a spate of similar IPOs. But it also raised concerns about a fresh internet bubble, as investors rushed to pay prices far higher than expected. At their peak on Thursday LinkedIn’s shares were at $122.69, up 173% on the $45 IPO price, a value of some $11.6bn, nearly quadruple bankers’ estimates of $32-$35 per share. The shares closed at $94.25, valuing LinkedIn at $8.9bn, or 36 times last year’s sales. Facebook is valued on private markets at about 32 times estimated sales. DealJournal examines LinkedIn’s “halo” potential – but, warns BusinessInsider, don’t overestimate its ‘network effects’.

Overnight markets: Mixed

Asian shares fluctuated on Friday as resources stocks fell on lower commodity prices, while Japanese utility shares remained under pressure amid Tokyo’s continuing struggle to contain the nuclear crisis in Fukushima, reports the FT.

As of 03:15 BST, the MSCI Asia Pacific index had inched up 0.1% with most Asian markets up between 0.2 and 0.6%. In Tokyo, the Nikkei’s rise was limited by the weaker utility sector as Tepco, operator of the Fukushima nuclear plants, slid more than 6% on reports it may report a record net loss of around Y1,000bn for the year to March 31. But Takeda Pharmaceutical advanced 0.7% as it completed a $13.7bn deal for Swiss drug maker Nycomed. Read more

Europe rushes to stake IMF claim

European policymakers are scrambling to stake the continent’s claim to provide the next leader of the IMF, after the resignation of Dominique Strauss-Kahn as managing director, reports the FT. Strauss-Kahn’s departure, announced late on Wednesday, followed pressure from the US and other governments for his resignation after he was charged with sexual assault on a hotel maid in New York last weekend. On Thursday, Strauss-Kahn was indicted on charges including attempted rape and granted bail of $1m in cash and a $5m bail bond. The IMF’s executive board, on which European countries hold just over 30% of votes, will probably appoint the next managing director in the next month or two, with candidates nominated by member countries. The US holds 17%. Officials from Europe, which has provided every managing director since the IMF started in 1946, argue the tradition should be continued, given difficulties facing western European economies.