October, 2010
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Britain and America seek different paths
The US and UK have similarities that go beyond speaking the same language: both had huge expansions in household credit;
Snap news
Breaking pre-market news on Wednesday,
- Rio Tinto to invest further $3.1bn in Pilbara mine — statement.
- BHP Billiton loses local government backing for Potash bid — report.
- Home Retail benchmark pre-tax profit tumbles 23 per cent;
BlackRock, Pimco, NY Fed coming after BofA, Bloomberg says
No sooner does Bank of America announce earnings than it gets hit with a significant threat of legal action from mortgage bond holders – including the New York Fed. From Bloomberg:
Pacific Investment Management Co.,
US commercial real estate hits recession low
All in the picture:
The CPPI declined another 3.3 per cent in August, bringing it down to 105.37. Moody’s adds some additional commentary:
This is the lowest recorded result since the beginning of the downturn,
Underwater mortgages and US housing
Thanks to Economix for directing us to these two impressive charts from the San Francisco Fed:
The charts show the dramatic rise in underwater mortgages throughout the US in the last ten years,
S&P 500 curiosity, du jour
Given Monday’s mini flash crash in the SPY S&P 500 ETF — one of the most traded securities in the United States –we thought the following datapoint might be worth flagging up.
Via LPL Financial:
Defence of the realm, shorted
British prime minister David Cameron has just finished unveiling fiscal cuts to the country’s armed forces at pixel time on Tuesday.
Quick highlights — British troops will finally leave their Cold War German bases in 2020,
Brazil, the clever currency warrior
Yes, Brazil’s finance minister coined the term in the first place.
But, if you’ve been following the currency war, the country’s actually proving to be one of its more curious combatants.
Exhibit A — Brazil’s just moved to toughen up a tax on foreign ownership of bonds issued onshore.
Mortgage multiplicity
Naked Capitalism — which has been producing boatloads on the mortgage mess — has something interesting. It’s a court filing made by Bank of America back in June.
Quick background — the filing has to do with Ocala Funding LLC,
Just like a giant secured loan to commodity producers…
Last week was London Metal Exchange week.
And it turns out, the topic of debate, according to Société Générale’s cross-asset research analysts at least, was nothing other than the upcoming splurge of physically-backed commodity ETFs that’s about to hit the market.
The Fed’s Lockhart brings out the big guns
What shape QE2?
Atlanta Federal Reserve Bank president Dennis Lockhart wants it BIG.
How BIG? This BIG:
Oct 19 (Reuters) – Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday that further easing by the Fed has to be large enough to help boost demand,
Goldman Sachs Q3 EPS beats at $2.98 per share
Number four in the big US bank earnings line-up is Goldman Sachs.
The company reported 2010 third-quarter earnings per common share of $2.98 on Tuesday, beating market expectations of $2.32 a share.
That Chinese rate rise [updated]
The market was a bit confused on Tuesday by the People’s Bank of China’s ‘surprise’ move to raise lending and deposit rates by 25bps this week. Here’s the announcement in Chinese:
Which roughly translates as ‘keep on not calling us a currency manipulator,
Bank of America posts Q3 adjusted net profit of $3.1bn
Part three of your third-quarter US bank earnings season is out.
On Tuesday, Bank of America announced a net loss of $7.3bn for Q3 2010, including a goodwill impairment charge on its card services biz of $10.4bn.
Yen is envy
Everyone laughed at the Bank of Japan when it prepared a big foreign exchange market intervention in September, against a strengthening yen.
Maybe we shouldn’t have. And maybe we should start watching what the BoJ’s example might inspire in the strengthening euro.
Markets Live transcript 19 Oct 2010
Markets Live chat transcript for the chat ending at 11:21 on 19 Oct 2010. Participants in this chat were: Neil Hume, FT Bryce Elder
NHHola
NHand welcome to Markets Live
NHFT Alphavill’s daily markets chat
Fresh horrors from the corporate finance lab
This is Jim Smart, the finance director of Premier Foods. He’s the lucky man charged with clearing up the mess from the group’s acquisition spree in the mid noughties, which turned a simple food producer into a corporate Frankstein — made up of companies bolted together through large debt infusions.
Dollar debasement in commodities, charted
Amazing to think that it’s taken some analysts nearly two years (if not more) to discover that commodity prices might be a little more influenced by fluctuations in the dollar than real hard fundamentals.
A year (and a bit) of Basel, recapped
Worthwhile reading on Tuesday — 22 pages of a Basel Committee on Banking Supervision report to the G20, on its financial reform activity since a 2009 Group summit told it to get cracking.
There are good summaries here of what Basel’s new global capital and liquidity rules will do,
Knowing your rights
From the FT, January 2010.
Ask shareholders which rights they treasure most highly and many say it is their right to pre-emption, which protects their holdings from being diluted by new share issues.
What then,
Don’t fight China, upgrade it, says JPM
The dash for trash has led JP Morgan’s emerging markets team to … China.
Seriously. The JPM analysts, led by Adrian Mowat, are upgrading China from underweight to neutral (for the first time since September 17,
China and the missing Treasuries
An amusing Bloomberg chart from last week:
The idea is that given the large additional asset purchases expected from QE2 and the ongoing Bank of Japan interventions, the US Fed and Japan could soon overtake China as the biggest holder of US Treasuries.
Fitch on how sovereign CDS helps fund deficits
Memo to financial regulators who want to ban or limit CDS:
Fitch Solutions finds that the liquidity of a sovereign’s credit default swap (CDS) is highly correlated with the level of the underlying bond yield.
Further reading
Elsewhere on Tuesday,
- Tracking (US) bank failures.
- How the NY Times is wrong about Japan.
- Rohatyn looks back, and sighs.
- We’re not China.
- The new expiring $100 bill?
- Weber and the battle for the ECB.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT
Analysis:
Investment – rainy day funds recast Up until three years ago, they were widely demonised as a possible threat to western security,
Snap news
Breaking pre-market news on Tuesday,
- Autonomy announces results two days ahead of schedule; says there has been no softening of demand — statement.
- Mike Ashley’s Sports Direct says SFO not to bring charges against company in JJB case — statement.
Sovereign debt watch – European edition
Not much to say, really. In fact one word sums it up — tightening.
From Bloomberg:
Just to put those graphics into some perspective, the Irish/German spread had come in 65bps in the past week,
Dispatches from Euroland
Forget central government debt, what about local?
Out today — a note by Morgan Stanley’s European economics team, led by Daniele Antonucci, discussing ‘non-central government liabilities and budgets.’
Here’s what they say:
Yes, we have no ECB bond-buying
Zero. Zilch, zip, zippo. Nothing — naught, nada. Nullity. In other words — the ECB’s government bond-buying programme didn’t purchase anything last week:
Having bought just €9m the week before (although a cool €1.3bn before that),
Citigroup posts Q3 2010 profit of $0.07 a share
Behold the second in your line-up of Q3 2010 US bank results.
Hot on the heels of JPMorgan on Friday comes Citi on Monday — and it’s a slight earnings beat, with net income of $2.2bn profit or $0.07 per diluted share,