April, 2011
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Faltering in a stormy sea of debt
It is astonishing that Standard & Poor’s can say anything about the best-known debt class in the world that is deemed to add value,
Snap news
Breaking pre-market news on Wednesday,
- Bank of America to spin off private equity unit – FT.
- Bank of England minutes unlikely to show shift towards rate hike – Reuters.
- RBS to restructure investment banking team,
Further further reading
For the commute home, where your kids are tagging embarrassing pictures of you on Facebook,
- The Economist halts production for a month to let its readers catch up. (Or so says America’s finest news source.)
- The myth of the Fed’s “unprecedented”
When will tightening begin?
It seems the doves are turning the market tide.*
Given the problems immediately facing debt markets and the Fed — S&P, debt ceiling, end of QE2 — you might have missed that the market’s implied probability for the Fed’s eventual move toward tightening has shifted considerably in just the last week or so.
Recovering from muni defaults
There’s been plenty of hurly-burly lately over forecasts of default rates in the municipal bond market.
But what of recovery amounts, should muni bonds default?
Via Cate Long’s Muniland blog, a paper by RockFleet financial services (RF) argues that forecasts of “hundreds of billions”
The trouble with defining insider trading
Jonathan Macey, a law professor at Yale University, has an op-ed in Tuesday’s WSJ arguing that the SEC’s definition of insider trading is too strict and at odds with Supreme Court precedent. (Hat tip Stacy Marie-Ishmael.)
Using the ongoing Galleon case as an example,
The Glencore market-timing myth
There was a really interesting column penned by Matthew Lynn on Tuesday.
In a nutshell it argued that investors should be mindful of investing in a company known for its shrewdness when it comes to market-timing.
Throwing in the towel, renminbi edition
Lots of rubber-necking on the Uncle Sam-deficit section of global imbalances this week, not so much on the China-surplus side.
Let us correct that injustice.
From Stephen Gallo of Schneider FX on Tuesday:
‘Transitory’ in two graphs
Don’t get us wrong — what you see below doesn’t mollify our concerns about the Federal Reserve’s explanation for why commodity price rises will moderate.
But, courtesy of the NY Fed’s new blog, these graphs do shed some light on how the doves on the FOMC think about inflation expectations:
Ireland’s speculative mania
Some light reading for the long Easter weekend.
It’s the report by Peter Nyberg, former International Monetary Fund economist and senior Finnish government official, into the Irish banking crisis.
Live and lend loose, or, mortgages down under
A data point for the Australian housing bubble debate.
Bank of America Merrill Lynch analysts have a great report questioning how Australian banks calculate mortgage approvals. It’s been picked up by Macro Business,
Unfunded entitlements loom again
Ignore, for a second, Standard & Poor’s warning of political impasse on the US budget, or its talk of contingent liabilities like student loans and the financial system. That’s all short- to medium-term.
Heritage Oil & Jets
No slumming it for the executives of Heritage Oil.
Tuesday’s annual results statement from the FTSE 250 exploration company shows the company spent $43m last year on a private jet last year and wrote down the value of another.
Markets Live transcript 19 Apr 2011
Markets Live chat transcript for the chat ending at 11:30 on 19 Apr 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola Rabble NHwelcome to ML NHAV’s live markets chat
Citi’s Basel-dodging, capital-avoiding, accounting switch
Citi doing weird accounting manoeuvres? Perish the thought!
From the bank’s first-quarter results press release:
In the first quarter 2011, Citigroup transferred $12.7 billion of assets in the Special Asset Pool in Citi Holdings from HTM to trading.
At the outer edge of ratings territory
A few, final thoughts on the negative outlook for the USA from Jan Hatzius and his team at Goldman Sachs.
First they look at the somewhat confusing market reaction — Treasuries were remarkably resilient following the move by S&P:
Losing my (AAA) religion
Alright, it’s waaayyy premature. But we thought we’d show the below — from RBC in response to Monday’s S&P action — showing change in 10-year bond yields after losing a triple-A:
Better the quality collateral you know?
Not even an S&P warning over the state of the US debt pile has been enough to take the shine off US Treasuries.
On Monday, 10-year US yields actually ended up falling (after briefly rising) following the credit rating agency’s announcement:
Greek bank risk – another New Europe tour
Greece debt restructuring chatter => Greece CDS blows out => peripheral sovereigns blow out with it. Usual stuff.
What’s wrong with this picture?
We think there’s something missing. Actually a whole group of sovereigns has been more or less absent lately…
Hurdles to a Greek debt restructuring
Greek debt restructuring? Greek debt restructuring before 2013? Soft Greek debt restructuring?
There are so many variables to the debate — and so many officials talking about it — that it’s difficult keeping up.
Further reading
Elsewhere on Tuesday,
- Migrating ducks should beware of hedge funds.
- Y2K = QE2
- Fear mongering over the US budget deficit.
- Reasons to skip the Glencore IPO.
- Some leaking volatility.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Nicholas Economides and Roy Smith: Greece must meet its restructuring fate
It has been almost a year since the €750bn European Financial Stability Fund was created to bail out over-borrowed eurozone states,
Snap news
Breaking pre-market news on Tuesday,
- Tesco annual results below expectations; reveals six objectives for management team — statement.
- Novartis sales beat expectations — statement.
- Sony Ericsson posts surprise Q1 profit;
Further further reading
For the commute home, or while frantically dropping off your tax forms at the post office alongside the other procrastinators,
- There’s the word “transitory” again, this time describing the Q1 slowdown.
The junk rally and buyout bailouts, updated
Bloomberg Businessweek has an update on the latest refinancing efforts of Energy Future, previously called TXU and once known as The Biggest Leveraged Buyout of All Time.
Bought for $43bn by private equity groups KKR and TPG in 2007,
Bob Janjuah – told you so America
Nomura’s sceptical strategist Bob ‘the bear’ Janjuah is feeling very pleased with himself, following S&P’s decision to revise its long term outlook on the USA to “negative”.
As well he might.
Only last week Bob wrote the following:
EMs to IMF on capital controls: nice try
So much for learning to play nice.
According the Wall Street Journal on Monday morning, the tentative consensus on capital controls found last week has already unraveled (or was never there to begin with):