Death Star Economics



OMG, Japan is actually growing

US jobless claims came in higher than expected and housing data disappointed as well, raining on the American recovery 2013 parade and adding to the uncertainty over the future of the Fed‘s asset purchasing program. read New York Times
At the same time, those with disposable income seem to be working on a new housing bubble of sorts. read Bloomberg

Japan reported its economy grew in the first quarter of the year, leading to a 3.5% annualized growth leap and supporting Shinzo Abe’s approach since his inauguration in September. Most of the growth is attributed to private consumption. read Bloomberg

Meanwhile, Japanese companies prefer to look for opportunities elsewhere, for example the US, where a handful of corporates bought into the US shale gas market for several billion dollar. read Financial Times

Following the Bloomberg user data debacle, Citigroup has banned its fixed income traders from participating in Bloomberg chat groups to shield the banks from any security breaches. read Financial Times

This morning…
Lloyds Banking Group might just be short of fully returning into private sector hands, as the bank’s shares rose higher than the government’s cut-off point for a sale of 61.2 pence per share. Over the past weeks, David Cameron had reiterated that bailed out and partly nationalized institution shouldn’t stay government owned for longer than needed. read Reuters

Word got out that Qatar spent up to $3bn on supporting the Syrian opposition since 2011, the same year in which Libya’s rebels also received support, fueling rivalry over political influence between Arab countries. read Financial Times

Other than that, there is not much going on, time to get on the below.

Weekend reading…

Bangladesh, globalization and the price of your t-shirts, read New York Times
– from pork bellies to ruling the world – a brief history of the Chicago Mercantile Exchange, read Economist
gold bulls vs bears, read Alphaville
– Super Abe and the fight for a prosperous Japan, read Economist leader
– on the uselessness of asset management, read Harvard Business Review

Have a good one.


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Eurozone recession here to stay, UK gets ready for exit

David Cameron and his comrades of the Conservative Party published a policy draft for a referendum for a possible EU-exit of the UK. The draft says the referendum has to be completed by December 2017, given the Tories win the 2015 elections. I think the campaigning just began. read BBC

While the global “recovery” continues to force deficits to skyrocket and imports to slump, India has managed to become the outlier in the trend on Monday afternoon. Taking advantage of the low gold price, imports rose 138% since April 2012 to $7.5bn, or 18% of all imports, while the trade deficit hit 17.8bn. read Zerohedge

And of course the drama over Bloomberg‘s use of user data continued… read FT Alphaville

This morning…
there was a flood of data, with the German economy growing 0.1% from 4Q12 to the first quarter of 2013, undercutting the depressing estimate of 0.3% growth. The French economy contracted by 0.2% over the same period of time. read Bloomberg
Franco-German relations haven’t been great since Hollande got into office, but this morning’s result may just worsen the atmosphere of any policy discussion. The eurozone as such, contracted 0.2% in 1Q13. The recession continues…

Simultaneously, Mervyn “it’s-almost-his-last-day” King of the Bank of England raised the outlook for the UK economy [with lower inflation] and raised his eyebrows at eurozone performance, as well as the continental Financial Transaction Tax. read Guardian

Meanwhile, the US is preparing to become the model student again. The Congressional Budget Office is forecasting the deficit to fall as far as $378bn by 2015, much faster than anticipated. The 2013 forecast was cut by $203bn to an overall $642bn. read Reuters
And that is not all: Formerly the largest corporate debt market in the world, providing ample opportunity for the Michael Milken followers of the world to make money, China is going to take that spot within the next two years, according to S&P. Soon America will be debt and deficit free and flow with milk and vodka (we’re all grown-ups here). read Financial Times

In the kerfuffle over whether Jamie Dimon is allowed to stay in in his double-role as chairman and CEO of JPMorgan seems to be blowing over (much like Lloyd Blankfein expected), as fewer shareholders than expected are looking to back the leadership reform. Another bullet dodged for the industry. read Financial Times

And in case you’ve been in a good mood this morning, have a look at this: 10 Scenes from the ongoing global economic collapse (Zerohedge)

So long.

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Budget time in Europe; US DoJ investigates Moody’s and Fitch

It’s budget time again in the land they call Europe and the usual suspects pulled an all-nighter in Brussels yesterday, trying to come up with a convincing plan, covering 2014-2020. For the first time in its existence, the budget has actually been reduced. In some last minute action, yet another €12bn were slashed last night. With €960bn on paper now, €33bn less than the current budget measures and down from €1.047tn initially suggested, the plan has to be approved by all 27 EU member states. read article

Over in the US, the Department of Justice has looked [an inch] beyond the obvious and is now considering legal action against Moody’s. The matter at hand concerns defrauding investors. At this point, however, the investigation is in its infancy, as too many resources are devoted to the S&P case. According to WSJ, New York’s Attorney General Eric Schneiderman, sworn enemy of what’s left in the post-Lehman world, has also requested insights into Fitch‘s business.

In other news, China reported some positive trade data, with exports rising 25% and and imports rising 28.8% compared to next year, suggesting that the rest of the world has, in fact, not totally collapsed yet. Although…

Futures were delighted by the data, until someone pointed out that January 2013 had some five more working days than 2012 due to the calendar shift of the Chinese new year, and that adjusted for this effect exports were a far more modest 12.5% while imports rose only 3.4%. 

Following yesterday’s news from the European Central Bank, the FT has more details on the Irish debt deal, including the refinancing of €28bn of promissory notes. Meanwhile, Gavyn Davis gives a critical analysis of the ECB’s policy choices. The aftermath for Carney‘s parliamentary presentation can be found here.

And finally, Boeing is struggling with the “exploding battery fiasco”, seeing its orders collapse to only 2 from 150 a year ago this January. read article

Weekend reading:

– Michael Lewis‘ review of Greg Smith’s “Why I left Goldman Sachs“, read article

– Iceland‘s recovery, read article

– Too fast to fail, high-frequency trading and financial collapse read article

– Michael Bloombergmayor of London?, read article

Have a good one.

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Deutsche Bank profits from Libor fixing (maybe and also, duh!)

Whether any of today’s apparent top stories are actual top stories remains to be seen. There is Deutsche Bank’s profits from Libor trades (or not), ECB action (or not), and the suspiciously low Vix volatility index showing that all problems are solved (or not). Hm.

So the Vix hasn’t been this low in 5.5 years. Now that the US didn’t fall off the cliff, there’s hardly anything left to worry about… Is it going to stay like this? Of course not, there’s a debt ceiling on fire, spending cuts lying around and an earnings season to come. This merely seems to be a reflection of ‘stopping to care’ and ‘calming the f*uck down’. read article

Months after the Libor scandal unravelled and shook the City of London, the Wall Street Journal reported that Deutsche Bank recorded €500m in profits from trades linked to the notorious benchmark rate in 2008. In the worldwide rate-rigging investigation, the bank had not been charged with any fines yet. In response, Deutsche Bank emailed Bloomberg, outraged, saying trades relied on analysis and “not on any belief that the bank could inappropriately influence interbank lending rates.” Of all global players, Deutsche Bank has been bashed significantly less than other investment banks. Only in home-sweet-home Germany, where traditionally all social democrats hate the firm, things are a bit more difficult.

AIG decided against participating in a shareholder lawsuit against the US government for not being nice enough during the insurer’s $40bn bailout yesterday. The case is being pursued by former AIG CEO Maurice R Greenberg, whose Starr International Corporation used to be a shareholder of the insurance company. In short:

The suit contends the US government extracted too-onerous terms in its rescue package for AIG, and seeks about $25bn from the government. A federal claims court in Washington ruled in July that the case could proceed, after the US government sought to dismiss it.

In the background, Barack Obama has chosen his chief of staff Jack Lew as Treasury Secretary and the ECB is meeting to discuss this month’s policy decision, which are unlikely to result in anything new if you believe a Reuters poll. (Aha, there we go, nothing happened.)

So long.

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Venezuela on constitutional cliff – at least we have a name for it

The news bear little excitement today. Between both Europe* and US growing quiet and the first earnings season of the year kicking off, there’s not a whole lot going on.

*except for the worry about the economy at large, Merkel’s rule in Germany, the fear of a what would happen to Europe without Merkel’s rule of Germany, and the general worry about what the hell the ECB is doing now.

Sources close to the Bank of Japan told Reuters that more quantitative easing could be announced at the policy meeting in two weeks. The central bank is also likely to support Shinzo Abe’s 2% inflation plan.

A couple of days ago, it was still assumed that Hugo Chavez, president re-elect of Venezuela, would be sworn in on 10 January. Last night, Vice President Nicolas Maduro announced that the ceremony would be delayed, as Chavez needs more time to recover. The problem is as follows: if Chavez doesn’t get sworn in, then his VP can’t steer the boat until he as recovered fully. Barclay’s calls this a “constitutional cliff”, others call it anarchy waiting to happen. read article

Otherwise, the US will record the lowest level of oil imports in 25 years in 2014, says the US Energy Information Administration. Imports haven’t been this low since 1987. In November 2012, the International Energy Agency had predicted that the US could become the world’s largest oil producer as early as 2017. read article

Yesterday, Bloomberg reported on a secret division within Goldman Sachs that continued to engage in proprietary trading even though that will be (Future tense! Important detail.) forbidden under the Volcker rule, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Today, FT Alphaville is investigating this investigative journalism and explains why no wrong has been done (probably) and why we should look at pictures of cats insteadread article

So long.

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Monti set to resign, new stance on global internet regulation

On Saturday, Italy has crawled back to the center of attention of the eurozone blow-up. Mario Monti, the country’s unelected prime minister, announced his intended resignation following the approval of the Italy’s 2013 budgetThe FT summarizes:

The 2013 budget law is expected to receive parliamentary approval before the Christmas recess. Whether parliament is dissolved immediately and Italy heads into snap elections in early February – rather than in March or April as had been expected – depends on Mr Napolitano. The president could decide instead to ask for a vote of confidence in the government and appoint a provisional prime minister who would oversee the passage of key economic reform legislation still before parliament.

Last week Thursday, the Italian parliament faced turmoil, after Berlusconi’s party walked out of a vote on fiscal matters. Since then, rumors got louder that Silvio Berlusconi will try to return to office. He is currently being charged for relations with an underage prostitute and abuse of power (possibly related, but two court cases). In Italy, all legal charges are put on hold if an individual is running for a public office. Berlusconi had been convicted to four years imprisonment for tax fraud in October 2012, which was later reduced to one year and then to the prohibition from ever running for office again. Clearly, that has not worked out so well. But the left ranks before Berlusconi’s People of Freedom party in the polls. The Wall Street Journal spoke to Pier Luigi Bersanti, the current favorite according to said polls. read article

Japan is finding itself back in recession, after Q2 GDP was revised down from 0.1% growth to -0.1% (annualized and seasonally adjusted). Shinzo Abe, who is leading the opposition in the election on Sunday, wants unlimited monetary easing and more stimulus until the economy gets back on track. Expectations, however, point at another quarter of negative growth for the end of the year. read article

Meanwhile in Dubai, the Arab state delegation, supported by Russia and China, have proposed a

new regulatory framework for the internet. The opposition, simply put the Western world, is strongly in favor of the current regulation, which doesn’t regulate so much. read article

American and British financial regulators are working on a blueprint on how to deal with failing banks, or more specifically, failing G-SIFIs (global systemically important financial institutions). Once agreed, the new regime is meant to protect tax payers on either side of the Atlantic, while drawing on creditors and shareholders. read article

According to this Sunday’s New York Times Bloomberg is looking into buying the Financial Times, which also includes a 50% stake in The Economist. The other possible bidder is, of course, Thomson Reuters. The Financial Times Group is estimated to be worth around $1.2bnread article

So long.

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Randomly assembled bad news: EU data, US QE and Japan as a whole

In Germanyunemployment rose for the eighth month in a row, now amounting to 6.9%. Nevertheless, the rate is still around the lowest it has been in two decades. Economic confidence is rising in the eurozone, while consumer confidence has stuck to the same negative mark over the past two months. read article

Later today, we’ll get the weekly jobless claims from the US, still impacted by Sandy, expected to fall under 400,000.

There, the Fed is likely to continue its bond-purchasing program to jump-start the economy in 2013, while fiscal cliff negotiations continue in the background. The latest gossip: Erskine Bowles, former chief of staff to Bill Clinton and co-chairman of the 2010 fiscal commission, said a deal was unlikely to by struck before the end of the year.

In Japanconsumer spending shrunk the most (5.8%) in almost a year in October, with drops in TV and car sales. Some of Japan’s largest tech companies, Sony and Panasonic, have announced reductions of employee numbers and both recorded losses in Q3. read article

HSBC, which decided to abandon its Japanese retail banking business this year, is looking to do the same in South Korea. Since the 1990s, HSBC has tried to set foot in Korea, first with the attempted purchase of SeoulBank in 1999, then with a takeover bid for Korea First bank in 2005 (now owned by Standard Chartered) and finally with a $6bn bid for Korea Exchange Bank in 2008 that was renounced. read article

Argentina won its appeal case against having to pay $1.33bn to its bondholders by December 15. A new repayment strategy has to be agreed on in early 2013read article

The IMF called Kabul Bank a Ponzi scheme yesterday, after a group of individuals smuggled almost $1bn out of the country, sometimes in food trays of airplanes, to buy property in Dubai. Kabul Bank collapsed in 2010 and its bailout amounted to what was worth 5-6% of Afghanistan’s GDP. read article

So we have all these bad news, and just then, Bloomberg publishes survey results saying the world economy is in its best shape in 18 months, because China is likely to return to growth and the fiscal cliff is likely to be avoided… read article

So long.

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Spain runs out of money for the 87th time, China under pressure

Most of today’s bad news come from Spain, where Moody’s downgraded five regions, including Catalonia, the Scotland of Spain, that accounts for a fifth of GDP, questioning the effectiveness of Spain’s regional liquidity fund. So far €17.2bn have been drawn from the fund which is capped at €18bn, leaving little leeway to change much with the remaining €800m. Moreover, Spain is under way to accrue a budget deficit of 7.3% for this year. That exceeds the target set by the EU by one percent. The Spanish newspaper El Confidencial attributes the missed target to €10.5bn deficit in the country’s social security system. Wild guess: the money went towards unemployment benefits? read article

Chinese companies are facing pricing pressures due to what Bloomberg calls “the worst wholesale-cost deflation since 2009, signaling corporate earnings may deteriorate further and putting a damper on global inflation pressures.” If you are the rest of the world and believe in quantitative easing, this is a good thing, because it gives more room to stimulate growth by pumping money into the economy. If you’re China, it’s pretty shit. The country’s industrial output fell 6.2% YOY in August and wholesale prices dropped 3.6% in September, the biggest decrease since October 2009, the benchmark year for the post-Lehman inferno. read article

Yahoo reported earnings, for the first time under management of Marissa poster-child-for-mother-with-high-profile-career Mayer, performing better than expected overall, mostly on the back of the sell-off of its Alibaba stake, while actual revenue fell. Mayer wants to turn the business around by developing Yahoo’s mobile applications, catering to all of us smartphone users who need to check everything all the time and now there’s 4G as well woohoo! Yahoo shares rose on the promises. read article

In the final presidential debate in the US election, Romney and Obama played an expected blame game of “would you really want that man to be your Commander in Chief?!” According to European papers, Obama had the clear lead, while the American commentators are either less impressed or more confused than before. NYTimes CNN WaPo

So much for now.

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Destroying foreign relations – a how-to guide from today’s news


First things first. Today marks the 200th news brief and I’m pretty excited. In fact, I’m typing with just one hand, brushing dirt off my shoulder with the other. Anyway, thanks for reading (and promoting)!! And no, sorry, despite my awareness of pay-walled content, I will not buy all of you an FT subscription…

Besides this exciting piece of information, however, there is not that much going on. Today is a lot like yesterday in terms of expectations, suspense and the same news all over again. In addition, we have faltering foreign relations and the 9/11 anniversary.

The data du jour includes the US trade deficit, which is expected to rise by $1.9bn, reaching $44.8bn (official announcement at 830am EST/130pm GMT). Across the pond, the UK trade deficit, which has shrunk to £7.15bn, beating forecasts of £9bn and marked the lowest since February 2011. Most of it is attributed to ex-European trade involving oil and diamonds. It’s fine though, we’ll wipe our hands with all those notes.

Meanwhile, German finance minister Wolfgang Schaeuble took his time on the podium, speaking to the Bundestag, to proclaim that what is wrong with the world, is the amount of US public debt. From Reuters:

“Ahead of the election in the United States there is great uncertainty about the course American politics will take in dealing the U.S. government’s debts, which are much to high,” Schaeuble said.

But rather than concern for the global economy, the reason behind statements such as the above, may be that Tim Geither continuously points his finger at Germany. During his last visit to Europe, he made it very clear that Germany needs to step up its game and be proactive about the eurozone crisis, which includes agreeing to eurobonds.

Speaking of which, today marks the highest volume day of debt issuance in 2012 in Europe. Corporates borrowed €7.8bn, riding the risk-appetite wave after Draghi’s bond-purchase promise. read article

A a follow-up from yesterday: the Treasury has sold 554m shares in AIG. At $32.50 per share, that amounts to $18bnread article

Greece has set up a government working group to evaluate Germany’s outstanding reparations from WWII. Now we have two countries, two bailouts and a lot of bad relations. It’s like the prisoner’s dilemma on crack. read article

Something light, finally: Alphaville analyses how Markit was meant to be come the “iTunes of finance”, defeating both Bloomberg and Reuters as instant information providers, but failed miserably and embarrassingly in execution. read article

So long.


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Sharing enemies – Europe’s best back-up plan

Yesterday saw the new EU budget proposal, Goldman’s CEO doing some marketing and the UK’s official double-dip recession.

Re: EU budget

The commission wants to increase the budget by 6.8%, which has led to outrage – pretty much everywhere. There is a slight chance that it was a reverse psychology kind of trick to have the European players re-bond over a common enemy, but history shows that few things out of Brussels are just that strategic. Still, the Netherlands, Germany, the UK and France disagree strongly. That’s because the commission is the institution which can’t seem to get enough ofausterity in EU member states, while demanding higher allocationread article

Re: UK recession

The British economy contracted in Q1 of 2012, with GDP shrinking by 0.2%. It’s official, this is a double dip. DavidCameron had to step up to defend his proposed austerity measures and cuts, leading to Business Insider calling him a moron (something I’ve been doing for months). read article

Meanwhile, George Osborne, another moronic musketeer, continued to play the blame-game as told, saying it was all the eurozone’s fault. Of course. read article

But Osborne and CaMORON also get critiqued from their own people – for being too posh.

Goldman Sachs’ CEO Lloyd Blankfein sat around with Bloomberg sharing his views about the economy and not Greg Smith. Greg who? Yeah, that’s probably why. Anyway, well done, Jake Siewert, this was nice. Blankfein also claimed to be fiscally conservative and socially liberal, like about 95% of people I know who have received any sort of education in economics. If you’re one of them, read what the Onion has to say about itread article

Otherwise, Mario Draghi managed to mitigate the bitch fight between Angela Merkel and Francois Hollande by stressing the need of a proper plan for economics growth, which in Europe means to make it a treaty that takes 7,000 years to be ratified and then gets rejected by a country like Ireland in the last minute.

Here’s a whole array of European confidence indicators, including a reason to disregard consumer sentiment, because the last time people on this continent had a good feeling about anything was around the year 2000. view image

Also, this is Bank of America’s Who Makes the Car – 2012 report, with pretty pictures and everything. Yes, ze tshermans are in it and so are the Japanese, yet the picture has shifted. Eleven years ago, American companies supplied 54% of components, now it’s down to 34%. That may not be surprising, but unless they come up with a couple of good ideas fairly soon, the American car industry will have disappeared and Detroit will be lost to Canada.

So long.

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