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An attempt at revival

This week…

Things in Turkey continued to be messy, as Erdogan’s stern view of protesters continues to spark new anger among the masses and sent the Turkish Lira falling. read Bloomberg
On Thursday, Erdogan re-iterated that he was losing patience with the protestors. Today, the government and its counter movement reached an agreement, while Germany delayed further EU accession talks with Turkey. read WSJ

In Greece, the doors of Hellenic Broadcasting Corp closed, sending 2,500 former employees out onto the streets. It is meant to be relaunched later this year in a slimmed-down version. read WSJ

In the UK, jobless claims dropped, suggesting that the recovery is well on its way (remember how we’ve been here roughly 700 hundred times now..?). read Bloomberg

And then there was Wednesday, when literally everyone with an audience called the bond bubble, for example Jim O’Neill (formerly of Goldman Sachs) and Bill Gross (Pimco)

Around the same time, Iraqi officials said the country was looking to increase its oil production by 29% in 2014 and 159% by 2020, showing that a) they can and b) they have buyers. read Emerging Frontiers

Then there was a new price fixing scandal [yes, there are still some products left]; this time in FX. read Felix Salmon

Meanwhile on Wall Street, notes on correlations with Japan: read WSJ

In Brussels, important issues like the size and curviture of bananas and cucumbers has been pushed aside as Washington’s lobbyists walked in to ensure EU privacy regulations wouldn’t get so strict that they could hurt US investigations overseas. read FT

Rupert Murdoch is divorcing Wendy Deng, could this be the actual reason for splitting News Corp? read New Yorker

The week ahead…

The G8 meet on the outskirts of London on Monday and Tuesday; anti-globalization protesters will ironically stick to central London, where they will follow a scavenger hunt-like course through the West end, mapped out here. Please refrain from buying condiments at Fortnum & Mason until the weekend, as you may otherwise be questioned about the social legitimacy of your job.

Otherwise, it’s going to be a Bernanke-dominated week – again – as the Fed is meeting and press conferencing. Although Bernanke tried to nullify the comments about an end of easing, saying that it would take “considerable” time until that would happen, everybody seems to think the US is going to turn the money tap off. read WSJ

Have a good one.

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Banker bonus debate: Why it’s always better to be Switzerland

After the EU’s policy proposal to cap banker bonuses last week, Switzerland voted in a referendum on a similar topic, regarding both [executive] salaries and bonuses. Surprisingly, the result leaned towards Brussels, with 68% voting in favor of new rules. On the one hand, that’s surprising because Switzerland is already losing business to places like Singapore that offer favorable tax rates to big multinationals like Trafigura, which could lead to a relocation of their headquarters. But on the other hand, the Swiss proposal gives more rights to shareholders and seems to encourage internal management of compensation as opposed to a blanket EU-one-will-fit-all-because-it-has-to policy (on the far side of the spectrum, Breakingviews suggests the introduction of tipping for services). read article 

On the same topic, George Osborne will launch a last lobbying effort on behalf of the City tomorrow, trying to mitigate the reach of the proposed rule to protect London’s financial district. Before that, the Eurogroup will begin meetings in Brussels today to discuss Cyprus’ bailout program.

Over in the USinvestors worry about the effect of new cuts and taxes on consumer spending, particularly in the light of a 3.6% slump in personal incomes in the beginning of the year weighing on household budgets. The government’s worries still lie with last week’s sequestationObama wants to get the issue resolved to move on to other policies, but Congress is currently just laughing in his faceread article

Elsewhere, China has pushed past the US and has become the world’s largest net oil importer, driven by America’s move into fracking and shale gas, as well as China’s rising demand for fuel. The analysis was derived from December data, when US net imports dropped to their lowest levels since 1992. read article

As for the week aheadJapan is poised to announce a current account deficit of JPY 768.5bn on Friday, according to ZeroHedge, which is the worst number ever recorded. Otherwise, all central banks of the rainbow are meeting this week, leaving plenty of room for statements on the currency wars.

Have a good week.

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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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T-1 month for Japanese election; $4.5bn settlement for BP

One election down, one to go: Japan is getting ready for December 16, when, rumor has it, the Liberal-Democratic Party will be re-elected over the incumbent Democratic Party of Japan. Over the past six years, Japan has elected a prime minister seven times. In between it was struck by disasters of all kinds. Shinzo Abe, leader of the liberal democrats, is determined to get the economy back on track, revisit US-Japanese relations and try not to go to war with China. Now there we have a reasonable approach to governing. Unfortunately, the world of money won’t have any of this. US hedge funds are increasingly betting against Japan’s corporate futuresays the Wall Street Journal, buying CDS’ for Sony, Panasonic, Nippon Paper Group and Kobe Steel.

In The Hague, Ante Gotovina and Mladen Markac have been released from prison after they had been charged with a 24 and 18 year prison sentence respectively for war crimes against ethnic Serbs during an offensive to retake Croatia’s Krajina region in 2011. read article

In the UK, some MPs have claimed that is is unlikely that £66bn poured into Lloyds and Royal Bank of Scotland will ever be recovered. Two weeks ago, Jim O’Neil, who is responsible for the two bank investments on behalf of the government, admitted that the purchase may not have been absolutely necessary at the time. This is angering all the anti-Keynesians who are chanting “we told you so”. Yet, the US Treasury managed to recover its bailout payments to AIG and actually sell the stake at a profit, maybe not all is lost. American public funds are going to be redirected towards the recovery of the housing marketsaid Bernanke yesterday. Today, the Federal Housing Administration reported that its insurance fund is running $16bn deficit for the year leading up to October. read article

Updating yesterday’s news of BP’s fine, the company has to pay $4.5bn in settlement charges. This includes an actual fine worth $1.256bn, the biggest penality of its kind in history. The Deepwater Horizon disaster let 4.9 million barrels of crude oil flow into the Gulf of Mexico. read article

Weekend reading:

– Lloyd Blankfein got America’s recovery all figured out, read article

– American oil and gas for everyone, read article

– Questions for and a defense of left-libertarianismread questionsread defense

– Making “fiscal history”: India’s tax reformread article

– reality HomelandPatraeus‘ affair, read article

Have a good one.

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China’s new lead, Europe’s new fall, BP’s new fine

China has completed its government reshuffle and named the new members of the Politburo Standing Committee, decreasing the number of members to seven and making Xi Jinping China’s new president. He will take over from Hu Jintao in March. But hopes of a reformed and more open China in the future, were diminished by the conservative selection of PSC members. The two contesters for positions in the PSC with the strongest background in political and economic reforms, were not elected; coincidentally, two positions on the committee disappeared… read article  Bloomberg’s guide to the PSC

Meanwhile, Europe, or at least the eurozone, is officially back in recession. With both France and Germany “growing” a grand total of 0.2% in the year’s third quarter, Europe’s German engine may be heading for contraction by year-end. That’s not rock bottom of course. After all, Germany could collapse, default on its debt or implode, but it may be one of the lowest points for Europe from an economic point of view. One of them. read article

Unfortunately, the corporate world doesn’t really look any better.

BP is about the receive the largest penalty the US Department of Justice has ever filed over criminal charges for the environmental disaster triggered by the Deepwater Horizon oil spill in 2010. The fine is so large, in fact, that the number has not been disclosed yet. To date, the prize for the biggest fine goes to Pfizer, sentenced to pay $1.2bn in 2009, after illegally promoting the anti-inflammatory drug Bextra. BP put $2bn aside for legal charges; rumor has it, it will have to pay up to $1.5bn, or if you want to believe the BBC between $3bn and $5bnread article

Over at Citigroup, shareholders have submitted an official proposal for the bank’s board to consider abreakup of its retail and investment banking divisions. Citigroup’s creation in 1998 went hand-in-hand with the creation of the Glass-Steagall act, making the merging of different banking operations possible.Sandy Weill, formerly Citi’s chairman, called for a repeal of the legislation in July, fueling debates about the bank’s future. Here’s some more firewood.

So long.

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US to be world’s #1 oil producer; Japan back in recession

The International Energy Agency, IEA, has announced that the US will overtake Saudi Arabia in terms of annual oil production as early as 2017. Older reports had seen Saudi Arabia up on top until at least 2035. According to the report, US daily output will amount to 11.1 million barrels, while Saudi Arabia will only achieve 10.6 million barrels. On the same terms, the US will surpass Russia by 2015. By 2035, when the report estimates the US production to fall and the Saudi production to rise again, 90% of Middle Eastern energy exports will go to Asiaread article read report

It is one thing if a natural disaster destroys a country’s growth prospects, it is another if it just happens. Japan’s Q3 GDP fell more than expectedslumping 3.5% instead of the expected 3.4% on an annualized basis. Back in recession, this is the worst performance of Japanese GDP since the 2011 earthquake and mostly attributed to poor export performance and declining consumer spending. The former, of course, is related to the crisis between Japan and ChinaChina’s exports, on the other hand, rose in October, adding to the positive trade balance. This could be Japan’s fifth recession over the past 15 years. read article

In post-election America, where corporate profits have hit lowest levels since 2009, and the politicized fiscal cliff issue is looming [and wasn’t there going to be a food crisis coming as well?], banks have been victorious. After a lot of back and forth, Wall Street’s lobbyists in Washington succeeded in postponing the implementation date of Basel III – indefinitely. The regulation that prescribes higher capital requirements was meant to come into action on January 1, 2013, but now the timeframe was deemed inappropriateJamie Dimon is dancing. To him, Basel III was “un-American” to begin with. In Germany, Basel III will indeed come into effect on New Year’s Day. The German Finance Ministry expects the US to phase Basel III into law over the course of 2013.

Greece beat budget targets for the first ten months of 2012! Now, that’s quite some news. The State Budget deficit totalled €12.3bn, instead of €13.6bn as targeted. Except.. well… this doesn’t include money spent (or lost) by government-owned enterprises. The full report the troika demands prior to the payment of the next bailout tranche, is also still in the making, while the €5bn debt repayment due date comes closer. Officials in Brussels have already announced that we shouldn’t hold our breath for a solution in today’s Eurogroup meetingIn sum:

…the endless Greek “will it be bailed out, won’t it” saga, which today enters yet another irrelevant phase with the latest Eurogroup summit where nothing is expected to be resolved (everyone is still waiting for the Troika report). The final outcome will likely be the much delayed funding of the €31.5bn tranche, but only after Germany pretends to kick and scream loudly and obstinantely, only to comply behind the scenes. After all remember: the Greek “bailout” is really just a bailout of Deutsche Bank.

I guess it is fair to say that some have finally and ultimately become disenchanted with the Greek crisis and will only use it to channel frustration over the rest of the ailing world economy. Fair enough, I’ve been doing that for months.

So long.

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China has big plans; Swiss-Greek deal on taxes

It’s a slow news day, ladies and gentlemen. The US, or at least the east cost, is covered in snow brought by Sandy‘s follow-up storm, and is otherwise in remission from the election. Sandy has hit the demand for gas, as well as the supply system of gas stations, so much that the price of crude oil slumped by 4.8% due to the sudden oversupply. The rebuilding and repairing works following the damages caused by the storm, will have a positive effect on the US economy that will be carried over into the new year, if you want to believe Morgan Stanley.

Alphaville takes the opportunity of this otherwise boring day for a comprehensive post on what is happening in China today. From the PSC (Politburo Standing Committee), “a group of ageing men with dyed hair and dark suits,” which decides on all major policies of the country, to the future commander in chief of China’s unnecessary massive army of 3 million people (active and reserve), this explains it all.

On the back of today’s Communist Party meeting, departing president Hu Jintao announced that per capita income would [have to] double by 2020. In 2010, the World Bank rated China’s gross national per capita income 121st in the world. At that point, it amounted to $4,260, less than 1/10 of that of the US. Hu also mentioned the necessity of financial reform and more democracy. It will be left to current vice president Xi Jinping to figure this out. read article

In Europe, both the Bank of England and the ECB met to change nothing, and French-Belgian bank Dexia quietly received a third bailout worth €5.5bn last night.

The Greeks voted in favor of the austerity package that gets them the €31bn from the troika, while protesters went crazy on the streets of Athens. New cuts include slashing pension benefits and salaries in the public sector by 5-35%, increase taxes on gas and cigarettes, increase contributions to state healthcare and increase retirement age from 65 to 67 year. read article

More interestingly, Greece is also working on a deal with Switzerland that is as overdue as it is ethically questionable. Under an agreement, Switzerland could collect taxes on undeclared money held in Swiss bank accounts by Greek citizens. Greek tax evasion totals around €28bn per year. So far, Switzerland also has bilateral tax agreements with the UK, US, Germany and Austriaread article

So long.

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China slows less badly, Russia gets even more say in oil

In all the mess, at least China seems to be doing betterAfter six quarters of downturn in the economy, the slowing continues in a much more positive fashion. Q3 GDP growth came in at 7.4%, as predicted by a Bloomberg poll, but lower than Q2 growth of 7.6%. Earlier this month, the World Bank cut its growth forecast for China from 8.2% to 7.7%. China’s national bureau of statistics expects full-year GDP growth to come in at 7.5%. But this wasn’t going to be just as bad, remember? Retail sales grew faster than ever (since March) and industrial production and fixed asset investments grew as well, both 0.3% from August. This is giving the PBOC some time to hold off on more QE.

Meanwhile in New York, someone tried to blow up the Fed with a 450kg car bomb. The bomb didn’t detonate, as its components were “never in working condition”. The FBI arrested a 21-year old man from Bangladesh, who had been in the US since the beginning of the year. The US Department of Justice stated that he will face charges over the attempted use of a weapon of mass destruction and providing information to al Quaeda. read article

After many rumors and much planning, BP is getting closer to completing the sale of its Russian oil business TNK. BP owns 50% of the shares in the company, which has been underperforming. The buyer, state-backed Russian oil company OAO Rosneft will pay $25m in cash and shares and create the largest publicly traded oil producer in the world. According to rumors, Rosneft is also looking to buy the remaining shares in the company for around $28m. read article

Back in the UKStarbucks is facing a parliamentary tax investigation. For all the revenue accumulated from your guilty-pleasure-purchases of super-diet-caramel-and-whipped-cream-non-fat-syrup-frappacinos in 2009, the coffee giant managed to avoid a tax bill totalling £1.2bn. And what was the master plan behind this scheme? As simple as this:

Starbucks had been telling investors its British unit was highly profitable while telling authorities the unit was loss-making, and thereby not liable for tax

Ha! MPs were not amused, as they fear public trust in the tax system (there is such a thing?) being undermined. read article

Otherwise, Greece has called for another 24-hour strike against austerity measures to commemorate the 700th EU summit for the saving of the union’s periphery that is taking place in Brussels today.

The same Greece which demands a 2 year, €30 billion extension from Europe to comply with reform, a move which Europe has not agreed to as while the core have said yes to more time, all have refused to fund Greece with any more money.

Hm. Awkward. More from that front tomorrow.

So long.

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Central bank center stage: Japan is riding the QE dragon

The Bank of Japan has locked step with the Fed and expanded its quantitative easing program by ¥10tn. It now amounts to ¥80tn, ot $1.01tn. The deadline for the policy program was extended to the end of 2013. The added ¥10tn, will be split 50:50 between short and long-term Japanese government bonds. As a result, the dollar rose against the yen and the Nikkai exploded upwards. read article

But Japan’s worries are not only domestically. After yesterday’s anti-Japan protests in China, forcing many factories to shut down, Japanese car manufacturer are getting ready to face the consequences. According to Bloomberg:

The collective market share of Japanese car brands, No. 1 among foreign nameplates in China since 2005, will probably fall to 22 percent this year, whil eGerman marques could increase their share to 22.5 percent, according to projections by China’s Passenger Car Association.

Nissan has the biggest plans in the country, with its China venture budgeting 50 billion yuan($7.8 billion) in investments to raise sales to more than 2.3 million vehicles in China by 2015 from 1.3 million in 2010. Toyota said this month it aims to increase Chinese deliveries to 1.8 million vehicles by 2015, more than double the tally last year, by adding at least 20 new models. Honda said in April it plans to double deliveries in the country over four years after being “too cautious” in its expansion.

The Bank of England confirmed to keep its rates and QE target steady for the moment. The current asset-purchasing program is capped at £375bn, but after yesterday’s inflation data came out, it is very possible for the target to be reset in November’s policy meetingread article

Meanwhile, the US is waiting for the announcement of an awful lot of housing data this morning.

Saudi Arabia is feeling socially responsible and wants to combat high oil prices, by adding some more to the market. It’s like oil-QE. The Saudi oil production amounts to 10 million barrels per day. read article

Otherwise, Goldman Sachs has found a new CFO to pay $15.8m annual remuneration to (final salary of departing David Viniar). With 12 years in the role, Viniar is the longest serving CFO on Wall Street. Harvey Schwartz, who will move into the new position in early 2013, is yet another one for the next-CEO-question-mark list.

And the fun fact of the day, according to the Telegraph, journalists rank higher than bankers in the least trusted professions (probably because bankers don’t trust journalists…).

So long.

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BP’s “culture of corporate recklessness”

 

There won’t be a news brief tomorrow, Thursday, 6 September 2012.

The story of the day is a commodities investigation roundhouse kick involving Shell, BP and Gazprom.

The US Department of Justice is charging BP with gross negligence and wilful misconduct in the case of the 2010 Deepwater Horizon disaster, upon which BP’s shares fell 3.95%. If gross negligence is proven, the fine could be up to $21bn according to the US Clean Water Act. BP, however, is only prepared to pay $15bn in total. The case is being heard in New Orleans, for the view, with unnamed lawyers of the Department of Justice saying the following in a leaked memo:

The behaviour, words and actions of these BP executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall. Yet they were condoned in a corporation engaged in an activity [deepwater drilling] that no less a witness than Tony Hayward [former BP chief executive] himself described as comparable to exploring outer space.

No hard feelings.

But really, Deepwater Horizon ruined the fun for everybody. Shell, which has spent the past seven years in preparations of oil drilling in the Arctic sea north-west of Alaska, struggled so much with government licenses and environmental groups that it led many other companies to turn their back to those waters. Even more hilarious, however, is that the license agreement that Shell ended up securing, allows the Noble Discovery Rig to drill 1,400ft deep. That is about 4,000ft ABOVE the predicted oil reservoir. Hmmm.

Lastly, the European Commission has launched an investigation into Russian state-owned Gazprom. The investigation regards market barriers that keep countries from diversifying their gas suppliesAccording to WSJ:

EU said the probe will look at Gazprom’s behavior in eight countries. Russia supplies 36% of the EU’s natural gas, but it is the effective sole supplier to Bulgaria, Estonia, Latvia, Lithuania and Slovakia. According to EU data, it also supplies 82% of Poland’s gas, 83% of Hungary’s and 69% of the Czech Republic’s.

But no worries, EU officials said there are no problems with Russian gas deliveries, as this isn’t likely to piss anyone off at all.

Re: yesterday’s US manufacturing data:
WSJ Real Time Economics shared a chart mostly composed of the words ‘expanding slower’ and ‘contracting faster’… read article

In Germany, where both the government and most banks are vehemently against a European banking union that would establish the ECB as a central monitor of all European banks, Juergen Fitschen, Co-CEO of Deutsche Bank has spoken out in favor of such a union, causing quite some turmoil at today’s Handelsblatt banking conference in Frankfurt. read article

Otherwise, Australia’s Q2 GDP came in at 0.6%, undercutting the expected [massive] 0.7% and European retail sales dropped by 0.2% from June, to -0.1%. This can mostly be attributed to the poor state of consumer confidence, which is worsened by increasing energy prices (hello, EU! (see above)) read article

So long.

 

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