January, 2009
The Weekender
On FT Alphaville this week,
- Serial bubbles.
- “The IMF does not have enough money for what is coming.”
- Hyperinflation.
- ‘Pop’ goes the Treasuries bubble?
- Xstrata’s clause and effect.
CDS update: Fundamentally pessimistic
This CDS report was written by Markit’s Gavan Nolan
The great and the good met in Davos this week, and it was much documented that the overall mood was one of pessimism. Economic data from the US provided ample support for such a stance.
Buy like the Bank of England
If the Bank of England does start to buy up corporate bonds, as Mervyn King hinted last week, then those purchases are likely to target investment-grade non-financial issues, according to Morgan Stanley analysts.
Bank of England dresses for success
As if working at the BoE isn’t depressing enough, its female employees are now being told how to dress. For success, no less. Really.
The central bank reportedly held a “Dress for Success” day earlier this week,
Spot the odd one out
We’ll give you a hint: Dresdner’s chart of bank liabilities relative to GDP (Eurozone/G10) may be green for a reason.
*Update* As per comments below, Dresdner have gotten back to us, and there was indeed a mistake:
US Q4 GDP down 3.8 per cent
The world’s a depressing place when the biggest drop since 1982 is actually better than many expected…
Jan. 30 (Bloomberg) — The U.S. economy shrank less than forecast in the fourth quarter as a collapse in spending led to a buildup in inventories that will cause companies to retrench even more in the early part of this year.
Serial bubbles
Dresdner has some interesting charts out today, depicting bubbles — and lots of them. Specifically in housing and equities in the UK, US and Japan.
You can see from the charts that a characteristic of post-2000 housing bubbles in the US and UK is their lack of correlation with equity markets.
Lunch Wrap
On FT Alphaville this Friday,
- Pop goes the Treasury.
- Roche gets tough with Genentech.
- Clause and effect – the Xstrata rights issue.
- The IMF runs out of cash.
- Hyperinflation possible.
CDS report: Markets drift on poor economic data, Roche in the spotlight
European credit markets drifted wider on Friday morning, following poor economic data in the US and as investors feared the need government bailouts could prove bigger than expected, traders said. Expectations of weak fourth quarter GDP growth numbers for the US on Friday afternoon also weighed,
You can tell by the way I use my walk…
…I’m a euro financier, no time to talk.
At least that comes to mind as tensions run ever higher at this year’s Davos World Economic Forum.
On Thursday Turkish Prime Minister Tayyip Erdogan stormed out of a debate on the Middle East.
Markets live transcript 30 Jan 2009
Markets live chat transcript for the chat ending at 12:07 on 30 Jan 2009. Participants in this chat were: Neil Hume, FT (NH) Bryce Elder, FT (BE) NH:Good morning NH:and welcome to Markets Live
Hyperinflation is a possibility, say Morgan Stanley
That’s not in Zimbabwe by the way.
Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note.
The IMF runs out of cash
Guillermo Ortiz, the governor of the Mexican central bank said at Davos the other day,
The IMF does not have enough money for what is coming.
Turns out he’s right.
Whereas two years ago the viability of the IMF was coming into question because it simply wasn’t making any money (no one wanted a loan),
Clause and effect – that Xstrata rights issue
Now here’s an interesting market rumour:
Apparently corporate financiers at JP Morgan Cazenove and Deutsche Bank inserted a clause into the sub-underwritting agreement for Xstrata’s $5.9bn cash call.
Roche gets tough with Genentech
The patience of Roche has finally snapped. On Friday morning, the Swiss drug company launched a tender offer for the remaining 44 per cent of Genentech, the US biotech, it does not already own.
But here’s the twist:
Pop
Should this be worrying the Fed?
Treasury prices continue to plummet, yields are rising. Yesterday saw a record $30bn auction of 5yr notes sell at a much higher yield than forecast – demand has been worryingly thin of late.
Further reading
Elsewhere on Friday:
- The secrets of Stan O’Neal’s office revealed (or – what the hell made it so unusable for John Thain?)
- Where the finance gurus are putting their own money (as opposed to other people’s)
- The new two-part bank bail-out plan
- If you thought Steve Jobs presented “key-man”
Pink picks
Comment, analysis and other offerings from Friday’s FT,
George Magnus calls for an end to the sterling hysteria
It is hysterical to imagine that a debt default and currency crisis are likely, writes the senior economic adviser to UBS.
Snap news
Breaking pre-market news on Friday,
- Roche launches tender offer for Genentech – statement
- Henderson Group makes offer for New Star Asset Management – statement
- 3I Infrastructure reports cash balance of £429m,
Cuomo eyes return of Merrill bonuses
New York Attorney General Andrew Cuomo may demand the return of $4bn in bonuses paid by Merrill Lynch just before it was acquired by Bank of America, reports Bloomberg. Cuomo is also trying to determine what BofA chief executive Ken Lewis knew about the accelerated bonuses and about Merrill’s surprise $15bn Q4 net loss.
Senators bid to regulate hedge funds
Two senior US senators introduced legislation on Thursday to impose government oversight of hedge funds, reports the NYT. The legislation by senators Carl Levin (Dem) and Charles Grassley (Rep) was filed as the Obama administration prepared a broader legislative overhaul of the regulatory system,
Investor fury over Xstrata cash call
Xstrata faced an investor backlash on Thursday over plans by the Anglo-Swiss miner to structure a £4.1bn rights issue in a way that favours its top shareholder, the commodity trader Glencore, which holds 35%.
Lex: Xstrata ‘wins both ways’
Xstrata is beating most others in this year’s charge for the capital trough, notes Lex. The Angl0-Swiss miner’s two-for-one rights issue, at a 40% discount to the theoretical ex-rights price, establishes a benchmark that other miners,
Kuwaiti bank repays Madoff losses
The National Bank of Kuwait has fully reimbursed all its clients who lost money in the alleged $50bn Ponzi scheme run by New York broker Bernard Madoff, banking sources said. NBK paid about $50m to some 20 individuals who invested in Madoff feeder funds through its Swiss bank in December,
Ford to draw $10bn from credit lines
Ford Motor revealed Thursday it is drawing down $10.1bn from its credit lines from its banks amid “concerns about the instability of the capital markets”. Ford also reported a record $14.6bn full-year loss,
Merrill execs burned by Madoff
While most Wall Street firms have managed to avoid big losses over the alleged $50bn Ponzi scheme run by Bernard Madoff, prominent former top executives at Merrill Lynch have been hit, reports the WSJ.
Agencies give GE breathing space
The two top credit rating firms appear willing to give General Electric every opportunity to justify its triple A ratings, long after debt investors, equity analysts and even GE’s own executives have started to brace themselves for a downgrade.
Henderson nears deal to buy New Star
Henderson, the fund manager, is on the verge of sealing a deal to buy New Star, the troubled asset management group founded in 2000 by John Duffield, for £115m for a mix of shares and cash. The acquisition will follow the completion of the debt-for-equity swap agreed last month between New Star and its lenders.
Gala Coral hits at credit insurer
Gala Coral, the private equity-owned UK gambling group, has accused Euler Hermes, one of the world’s largest credit insurers, of “appalling behaviour” in withdrawing cover against unpaid bills to Gala Coral’s suppliers.