Mike Mayo at CLSA has set his sights on JPMorgan on the eve of the bank’s annual investor conference.
In a new note (via NYT DealBook) he takes aim at JPM’s expansionary policy in a “Japan-lite” environment, particularly in Europe. The US branch expansion plans look a bit last century, and how can they be so confident US housing is bottoming, anyway? Read more
For the commute home,
– S&P downgrades Greece to selective default — cue the pending follow-up by other rating agencies and a delicate period for funding Greek banks at the ECB… Read more
The seventy richest members of China’s National People’s Congress accumulated more wealth last year than the combined net wealth of the US President, his cabinet, all 535 members of the US Congress and the nine Justices of the Supreme Court, Bloomberg reports. The NPC delegates earned $11.5bn in 2011, compared to the $7.5bn worth of America’s top officials, according to findings from the Hurun Report. The riches of some NPC delegates reflect Jiang Zemin’s push a decade earlier to include more entrepreneurs within the body’s ranks. It also shines a light on growing social inequality in China, WSJ Wealth Report writes.
BP is close to a $14bn settlement with lawyers for victims of the Gulf of Mexico oil spill, reports Bloomberg citing three people familiar with the matter. The settlement amount would tap funds from cash BP has put aside for out-of-court settlements. Any deal would not affect up to $17.6bn of federal fines that may be imposed over the disaster. Separately Transocean has announced a $1bn charge for the Macondo well explosion, suggesting it is preparing to settle, the FT adds.
German MPs have given Chancellor Angela Merkel a sweeping majority in favour of the second Greek bailout package, the FT reports. Opposition Social Democrats and Greens joined Ms Merkel’s Christian Democrats and her Free Democrat junior partners to pass the package by 84 per cent of votes cast, despite Merkel herself remarking that she had sympathy for those who saw Greece as a “bottomless pit”. Merkel’s own coalition votes were enough to deliver a majority, an important symbol amid rising divisions within Ms Merkel’s own cabinet about the merits of a Greek default.
Elpida, the Japanese chipmaker, has filed for bankruptcy protection on $5.56bn of debt, Reuters reports. It is the largest Japanese corporate failure in the post-war period. The strong yen and weak chip prices had weighed on Elpida, which increased capital spending in order to catch South Korean and Taiwanese rivals. Elpida’s core DRAM chip business has also taken hits from consumers’ move from PCs to tablets. “We never imagined the yen would become this strong,” the company’s president told a Tokyo news conference, according to the WSJ.
HSBC pays top executives outside the UK almost twice as much as their British-based colleagues, contributing to a steep rise in costs in the bank’s annual results, the FT says. Underlying pre-tax profits fell six per cent, while total expenses rose 10 per cent. Hiring in key emerging markets has pushed wage costs up. Senior employees known as “code staff” received an average of $1.2m in salaries and bonuses in the UK last year, compared with $2.3m for similar level staff overseas. HSBC’s cost-efficiency ratio has risen to to 57.5% from 55.2%, the WSJ adds. However, pre-tax profit rose 31 per cent at the bank’s commercial lending unit as it stole market share from weakened European lenders.
Olympus has appointed a new board including a chairman linked to its largest creditor, Sumitomo Mitsui, the FT says. Yasuyuki Kimoto, a former Sumitomo director, would become chairman, the scandal-hit camera-maker said. Hiroyuki Sasa, an Olympus executive officer, would be promoted to president. A former executive of another of Olympus’ creditors, Bank of Tokyo-Mitsubishi UFJ, became a board member, says the Daily Telegraph. Foreign shareholders who say they seek a clean slate for Olympus have attacked the continued influence of the company’s creditor banks.
Has Greece CDS been triggered? The question’s finally been posed to Isda’s determination committee and is currently pending:
Well, some people do confuse “tutorial” and “satire” in Wall Street, Liar’s Poker etc
As the FT’s Kara Scannell reports on Monday, Michael Douglas is doing anti-insider trading PSAs for the Feds. Here’s a taste: Read more
Fifteen banks are signatories to the UK’s Code of Practice on Taxation.
BANK OF AMERICA/MERRILL Read more
Now, it’s not as if we’ve ever done frivolous speculation here on FT Alphaville. Plus, possibly the successor mystery is overblown: everyone knows Warren Buffett’s successor will have been at Berkshire Hathaway forever, that person will be loved by the board, and the whole thing is really about BRK’s ability to operate with enormous amounts of investor trust and goodwill (to go with its insurance goodwill, haha), etc.
But… Read more
Or, the Goldilocks Ltro — euro bears edition.
Too much liquidity, the euro jumps — but then falls. Too little, it just falls. Anyway, that’s the interesting view from the friendly bears over at Morgan Stanley. Read more
Yes, “L-troh”. So ubiquitous is the ECB’s three-year liquidity op getting that we’re turning the acronym into a word. Like Nato or Isda. So sue us!
With the second three-year Ltro on Wednesday, the release from the burden of the acronym has come just in time for another bout of guesswork on how ‘big’ it will be, and just what the ECB’s funding will be used for. Read more
Live markets commentary from FT.com
[Updated with Stratfor response below]
Talk about the paranoid discussing the paranoid… Read more
It’s all about discount rates.
Jeremy Grantham’s latest (and longest) letter to investors starts with a Shakespearean twist: 10 tips styled as “Investment Advice from Your Uncle Polonius”. We won’t go into it here because we didn’t consider it to be his most compelling writing — and besides, TBI have already illustrated each point. Read more
Citi analysts have attempted to explain the Portugal enigma, which they note now has the country’s 10-year bonds trading at some 1,000 basis points above Bunds.
The reason, Jurgen Michels and team say, is simply that the country is not on a sustainable fiscal path: Read more
The FT’s Global Market Overview reports that trading is cautious on Monday morning with many risk assets retreating marginally from recent highs. The FTSE All-World index closed on Friday at its best level in seven months, having rallied 11 per cent so far in 2012 as hopes for a Greek debt bail-out deal appeared to be realised and after economic data, particularly out of the US, have shown signs of improvement. But the global equity barometer is dipping 0.5 per cent at the start of the week as a couple of factors weigh on sentiment. First off, talk is building in the market that rising oil prices may be a drag on worldwide growth. Brent crude is down 1 per cent to $124.23 a barrel, but it still sits less than two bucks shy of its most expensive mark since the summer of 2008 as fears mount that supplies could be disrupted if the west takes further action against Iran’s nuclear ambitions. Analysts are becoming concerned that the struggling European economy is especially vulnerable to this higher cost. Reuters reports that stock index futures are currently indicating a negative open for US markets, with equities down 0.1 to 0.5 per cent.
Intel expects its next-generation microprocessors to go on sale eight to 10 weeks later than initially planned, according to Sean Maloney, executive vice-president of Intel and chairman of Intel China. In his first interview to discuss Intel’s business in China, Mr Maloney told the FT that the start of sales of machines equipped with Ivy Bridge – the 22nm processor set to succeed Sandy Bridge in notebooks this year – had been pushed back from April. Mr Maloney said the adjustment was not caused by a lack of demand but came because of the new manufacturing process needed to make the smaller chips. Separately, the FT reports that Europe’s first smartphone containing chips from Intel is to be launched later this year by Orange, the mobile operator, as the US chipmaker pushes into the home territory of its UK-based rival Arm Holdings for the first time.
The Obama administration is coming under growing pressure to cool petrol prices by releasing emergency stocks of oil. However, critics say this would be the wrong response to the wrong problem at the wrong time. Oil prices climbed to a nine-month high of $125 a barrel on Friday, raising fears of a new oil shock that could endanger economic recovery, according to the FT. The immediate trigger was a report by the UN’s nuclear watchdog saying that Iran had significantly increased production of higher-grade uranium over the past six months. The oil price surge has increased speculation that the US and its allies could repeat the co-ordinated release of crude stockpiles they undertook last summer to compensate for lost supply from Libya. The move led to an 8 per cent price fall.
The world faces the threat of “global gridlock” as the number of cars surges from 1bn to a projected 4bn by 2050, Bill Ford, Ford Motor’s chairman and head of the US carmaker’s founding family, will warn on Monday. Mr Ford will use a keynote speech at the Mobile World Congress conference in Barcelona to outline the company’s proposal for a future of connected cars and intelligent transport systems, which he will argue is essential to avoid a future marred by crippling congestion, reports the FT. As record numbers of people buy cars – especially in developing countries such as China and India – the concept of mobility pioneered by industry founders such as his great-grandfather Henry is under threat, Mr Ford will argue. Ford’s “blueprint for mobility” will call for greater co-operation between rival carmakers, governments and mobile phone companies to create a transport network in which pedestrians, bicycles, cars and commercial and public transport are part of an interconnected system.
The FT reports that BP is close to a possible settlement of tens of thousands of damages claims arising from the trial over the 2010 Deepwater Horizon disaster, it emerged on Sunday afternoon when a judge agreed to postpone the trial over the accident for a week to allow more time for negotiations. In a joint statement, BP and lawyers representing an estimated 116,000 private sector plaintiffs said they were “working to reach agreement to fairly compensate people and businesses affected by the Deepwater Horizon accident and oil spill”. The trial, which had been set to start in New Orleans on Monday morning, is now scheduled to begin in a week’s time, on March 5.
HSBC awarded its chief executive £5.9m in bonuses and longer-term incentives for 2011 as the bank revealed a 6 per cent fall in underlying pre-tax profit for the year, the FT reports. Stripping out a $3.9bn gain on the value of the bank’s own debt, pre-tax profit fell by $1.2bn to $17.7bn as a robust performance in its faster-growing markets was offset by a sharp rise in costs. Total expenses jumped about 10 per cent to $41.5bn as HSBC hired more staff across key emerging regions and took action to reshape its business. HSBC, which said last year that it would shrink its overseas presence, closed or sold 16 businesses in 2011 and a further 3 so far this year. Shares in HSBC slipped 0.9 per cent to 569.7p in a weker London market. They had advanced strongly in the run-up to the results.
Elsewhere on Monday,
– Wading through the Greek bond exchange offer. Read more
Comment, analysis and more from Monday’s FT,
Wolfgang Munchau: Greece really needs a year to prepare for total default
We are now going to go through the motions but Greece will default, one way or the other, writes the FT’s Munchau. The question is when and how. Paul Krugman observed in his New York Times blog that Greece was trapped between an austerity programme that forever aggravates the debt problem, and a default that will not be feasible until the country reaches a primary surplus – a budget surplus after payment of interest on debt. This is not expected to happen until 2013. As a result, he wrote, the Greek political establishment would have no choice but to wait and see. This is right, but it could do more: it could prepare for a total external default next year. Read more
Breaking pre-market news on Monday,
— HSBC “gains traction” – statement Read more