October, 2011
French bond blow-out, chart du jour [updated]
Things that happened in 1992:
Bill Clinton was elected US President
Queen Elizabeth II had an annus horribilis
The Maastricht Treaty creating the modern EU was signed
Britain and Italy crashed out of ERM (the former forever)
And it is fair to say that in those troubled ERM days,
Survival of the fittest at Evolution Group
A UK takeover saga…
18 October 2011
The Evolution Group PLC (“Evolution”) –
Offer Update
The board of Evolution notes the announcement by Aberforth Partners LLP on 17 October 2011, stating that it no longer intends to comply with its non-binding letter of intent regarding the recommended acquisition of Evolution by Investec plc (“Investec”).
More to the ETF volatility debate than meets the eye
On Wednesday, the US senate will hold a subcommittee hearing on exchange traded funds and their impact on market structure.
Three key questions the senators will be asking in the opinion of Nicholas Colas,
European bank compensation, comparing apples to oranges
Lines you don’t always expect to see in analyses of bank pay:
The data is presented at source in ways that are intended to make sure that things cannot be simply compared. We have taken all reasonable steps to ensure that the data is as coherent as possible.
Bank of America results: DOA or DVA? [updated]
Alright, Bank of America, you win. FT Alphaville thought Citi was the worst when it came to being obtrusive about taking gains on the deterioration of their own creditworthiness. Citi’s DVA of $1.9bn was “Liabilities at Fair Value Option”.
Goldmaarghn
No (overt) funny business with automatic credit spreads-related gains at Goldman… just rubbish markets and its second ever quarterly loss (-$428m) as a public firm:
Related link:
It’s going to be a miserable third quarter for banks,
EFSF leverage ahoy
The insurance option is apparently very much under consideration:
RTRS-MAIN IDEA FOR LEVERAGING EURO ZONE BAILOUT FUND IS TO USE IT TO GUARANTEE FIRST LOSSES ON NEW DEBT – EU OFFICIALS
RTRS-EFSF FUND COULD HAVE FLEXIBILITY TO ALTER THE SIZE OF GUARANTEES IT OFFERS ON AN AUCTION-BY-AUCTION BASIS
RTRS-DEGREE OF LEVERAGE WOULD NOT BE FIXED,
Markets Live transcript 18 Oct 2011
Markets Live chat transcript for the chat ending at 11:25 on 18 Oct 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT NHHola Rabble NHsorry technical SNAFU
How China’s currency system is like a giant ETF
As FT Alphaville has written before, China effectively manages four different price paths for its currency, the renminbi.
Critical for its future flexibility, however, is the exchange between the so-called offshore CNH and the onshore CNY market.
China still deciding where and how to land
China’s GDP growth for September came in at 9.1 per cent, compared to expectations of 9.3 per cent. But although skittish markets did not like it one bit, there’s not a lot of grist for the China bear mill in there. Industrial production and fixed asset investment both grew slightly faster than expected.
UK inflation above 5 per cent…
… in September.
From the ONS:
Consumer Price Indices
• CPI annual inflation stands at 5.2 per cent in September 2011
• RPI annual inflation stands at 5.6 per cent in September 2011
The headlines for the September 2011 consumer price indices are:
Eventually, French Spreads Fail (E.F.S.F.) — redux
Some nasty bond moves in the eurozone sovereign debt “senior tranche” at pixel time (also in CDS — chart via Markit)…
(DBR – Germany, FRTR – France, BELG – Belgium, UKIN – United Kingdom, included for solidarité)
Ten-year French government bonds have finally gone and done it – trading more than 100bps wider than German debt.
Further reading
Elsewhere on Tuesday,
- China’s latest currency — the Panbi.
- Life is short, Abacus CDO art is… also short.
- Surviving Silvio.
- Riegle-Neal, not Glass-Steagall (repeal)!
- Distressed investing – going long newspapers.
Pink picks
Comment, analysis and more from Tuesday’s FT,
Gideon Rachman: America must manage its decline
Recently I met a retired British diplomat who claimed with some pride that he was the man who had invented the phrase,
Snap news
Breaking pre-market news on Tuesday,
- Air France-KLM ousts CEO — statement.
- LVMH confirms 2011 guidance; reports 15 per cent revenue growth in Q3 — statement.
- Evolution Group continues to recommend offer from Investec as largest shareholder comes out against deal — statement and report.
Further further reading
For the commute home,
- Momentum (well, Goldman Sachs says it’s a good idea) building for NGDP.
- Bitcoin just keeps on declining.
- Data on the Occupy protests.
- Thoma on Spence and the global jobs challenge.
Slowdown and showdown in Harrisburg
Remember how Harrisburg filed for Chapter 9 bankruptcy?
Well, as we noted at the time, it’s important to be clear about what we mean by “Harrisburg”. A synechdoche is a slippery thing. Linda Thompson,
The FSA takes pre-emptive action on liquidity swaps
Bank of England: Hey, FSA guys, don’t mean to tell how to do your job, but pssst! look at “collateral swaps” ok?
FSA: Collateral swaps? Do you mean “liquidity swaps”? We don’t think even Dodd-Frank looks at those..
Einhorn: Wake up and short the Green Mountain Coffee
It’s not quite as bad as the New York Mets but after David Einhorn announced Monday he was shorting Green Mountain Coffee, the firm took a roasting:
The price of the erstwhile hedgie favourite has risen from $29.02 a year ago.
Wells Fargo feels the squeeze
Citigroup wasn’t the only US banking giant to report results on Monday.
Wells Fargo, America’s fourth biggest bank by assets and second biggest bank by operating income, also released its quarterly earnings statement.
The not so great European banking recap
Are you confused by the ‘facts’ and figures on the latest bank stress test?
These charts (click to expand) from Morgan Stanley’s Huw Van Steenis should help.
Using reported 2011 core Tier 1 capital,
Spreads and the Citi
Clearly, gaining $1.9bn in revenue from your own credit spreads blowing out must be the trophy asset for the A/W ’11 US bank earnings season…
Citigroup’s Q3 results, out on Monday (total revenue $20.8bn):
Markets Live transcript 17 Oct 2011
Markets Live chat transcript for the chat ending at 11:29 on 17 Oct 2011. Participants in this chat were: Joseph Cotterill, FT Lisa Pollack, FT Izabella Kaminska Neil Hume, FT JCHello
Bumi and the Bakries
Another twist in what was already an incredibly complex plot at Bumi Plc.
Nat Roschild’s shell company turned Indonesia coal play has abandoned an earlier deal with a company controlled by the Bakrie family.
Presenting G4SISS
Bold, strategic, reckless?
There are a number of ways to view G4S’s proposed acquisition of Danish rival ISS for £5.2bn.
It’s certainly bold. ISS is a bigger business than G4s – revenues of £8.55bn against £7.39bn — and G4S expects to deliver double-digit EPS accretion and double-digit post-tax ROIC within three years.
Further reading
Elsewhere on Monday,
- Rethinking the European Union in a time of crisis.
- Overconfidence bias in decision-making.
- Monetary policy in the face of oil shocks, a re-examination of Bernanke et al.
Pink picks
Comment, analysis, and other offerings from Monday’s FT,
Edward Luce: Show the Fed more forbearance
A few years ago, it would have been remarkable for any senior US politician to demand the head of the chairman of the US Federal Reserve.
Snap news
Breaking pre-market news on Monday,
- G4S to buy rival ISS for £5.2bn; to be part financed by £2bn rights issue — statement and statement.
- BP drops Gulf of Mexico claims against Anadarko following $4bn payment — statement.