Death Star Economics



US payrolls estimate up; Twitter IPO rumors back

the ECB shook up Europe for a moment, with government debt yields falling to new lows under the soothing sound of disgruntled murmuring Germans. The ECB is ready for more [again], it says, but Germans on the policy committee are going to do everything to keep rates from tumbling. In ze mozerland, Economists are scared of a real estate bubble and argue that banks could use the freshly pressed money to bolster their equity capital, dragging the effect away from the real economy. read FT read Die Zeit

This morning…
The EU deficit report came out, showing that France, Spain and the Netherlands will breach deficit agreements, limiting countries to 3%. Italy got in just below at 2.9% (based on 2013 forecast). Because France and the Netherlands aren’t the real bad guys, and you can’t leave one standing alone in the rain (unless it’s Greece), all of them are expected to receive extensions for reaching their deficit goals. France got its waiver this morning. read FT read Reuters

Its jobs Friday in the US: nonfarm payrolls are seen up at 148,000 (almost double), with the unemployment rate unchanged at 7.6%. But stakes are high as the estimates vary within a range of 90,000 jobs added. March payrolls came in below estimates, for example, but jobless claims have been declining over the past weeks. After the jobs report, there will be April non-manufacturing PMI, which is expected to fall slightly to 54. Data releases begin at 8.30am EST. read WSJ

In the background, rumors of Twitter’s IPO are going wild after the company hired Morgan Stanley’s Cynthia Gaylor for corporate development, despite co-founder Jack Dorsey saying he was “not even thinking” about going public. read Bloomberg read Bloomberg (Dorsey)

On Monday, the UK will be out for the early May bank holiday.

Weekend reading…IvyConnect: is a ‘fascinating individual’ necessarily a douchebag? read Bloomberg
– the real culprits behind the Libor scandal are London broker nights, read WSJ
– ze Germans are gestuck with the Euro, read Bloomberg
– stripped off the alter ego: ex-Barclays CEO Bob Diamond takes the subway now, read NYTimes
– terrorism, conspiracy and the media, read New York Magazine

Have a good one.


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Letta new Italian PM; Apple profits drop for first time in decade

It was a dark day for the European economy, with April PMIs across the globe disappointed, except for France, which beat expectations and soared to four-months highs. China and Germany on the other hand, undercut expectations – Germany even fell below the magic mark of 50, to 48.8, the lowest level in six months. read Bloomberg

After all the united G20 talk of appropriate monetary measures, S&P said that there’s a 30+% chance that Japan will lose its AA rating. The reasoning: it’s great to have quantitative easing, stimuli and private sector involvement, but that strategy doesn’t work if all you do is print money. read Reuters

Meanwhile in Portugal, the government is planning to lower corporate taxes to attract business. Good timing. read WSJ

Right after close, the Twitter account of the Associated Press was hacked, posting a tweet about attacks on the White House. The Syrian Electronic Army claimed responsibility. read Alphaville read BBC

Otherwise, it was all about Apple. The tech giant posted first quarter earnings,showing that profits dropped for the first time in a decade in year-on-year comparison. Alongside quarterly results, the company also announced an expansion to its now $100bn share buyback program to return money to investors. read WSJ

This morning…
Italy is set to announce a new Prime Minister. The current candidates are Guiliano Amato (Prime Minister 1992-1993 and 200-2001), Matteo Renzi (Mayor of Florance) and Enrico Letta (center-left deputy leader), all of which are less crazy than Berlusconi and none of which have worked for Goldman Sachs. read Reuters
BREAKING: Enrico Letta set to become Italy’s new prime minister

In anticipation on next week’s ECB meeting, rumor has it the Mario Draghi is likely to cut another quarter of a point off current interest rates, as inflation rates are below target and the eurozone finds itself back in recession. read Reuters

So long.

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IMF joins Cyprus creditors; Fannie Mae records first profits in 6 years

There won’t be an update tomorrow, Thursday April 4th.

Yesterday…In the US, people are getting more nervous about the Fed’s spending spree. Eyeing over to Japan, that might be fair. Once again, it’s Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, who doesn’t beat around the bush when it comes to disliking monetary policy. read article

Fannie Mae, which received a total of $116.1bn in bailout finance from the US Treasury since the financial crisis, officially returned back to black. For the financial year 2012, the mortgage business recorded $17.2bn in profit. Finally. Although things are looking up, $84.7bn of its bailout package remain outstanding. read article

Speaking of earnings, the SEC has given companies the okay to announce earnings and other news via Facebook and Twitter, throwing off all those institutions (read banks) that blocked social networking sites for their employees. read article

Cyprus’ Minister of Finance resigned, saying he had done his deed in negotiating the bailout deal. In related news, the IMF stated today that it will pay €1bn of the total €10bn bailout package for Cyrpus, spread out over three years.

This morning…
there’s little to talk about. By 9.45am the most striking news were that Apple may release two new phones this year, and even that was a story from yesterday. read article

Spanish Prime Minister Mariano Rajoy is looking towards Brussels to get the growth in Europe going (good luck with that) and stop the austerity vise (even more luck for that), asking for countries in the position to do so to spend more to stimulate the economy. read article

So long.

Death Star Economics

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Currency wars – on land and on Twitter

There won’t be an update until Friday, 15 February 2013.

Today, there is a lot of opinion and analysis on North Korea’s third nuclear test; even China has joined in with the rest of the world in condemning the tests. 

The G7 have issued a statement telling the world they have not and will not target exchange rates as instruments to meet national fiscal targets, because they realize the negative impact it could have on economic stability. Assorted comments from across the globe loosely translated to a “well done on monetary policy, Japan,” sending the yen even lower, as Japanese official Haruhiko Kuroda, who could be in the running for the governor post at the Bank of Japan, said there could be more easing in 2013.

From a rather upset ZeroHedge:

In other words, let the FX wars continue and may the biggest balance sheet win, all the while everyone pretends nothing is happening.

Barclays has presented its restructuring plan “Project Transform” (seriously) this morning, cutting 3,700 jobs and £1.7bn in annual costs in a final effort to lift the bank out of crisis. read article

In the US, Twitter and American Express have launched a new service allowing Amex holders to buy products by sending a tweetTechCrunch explains:

Payments are made by tweeting a purchase hashtag, and retweeting the confirmation tweet from Amex within 15 minutes of receiving it. The product will be shipped to the account billing address synced with Twitter, and payment taken from your synced Amex account.

Hello 21st century. 

Elsewhere, Colgate-Palmolive will lose $120m (post-tax) as a direct result of Venezuela’s currency devaluation and the French company EDF Energy has knocked on the UK Treasury‘s door to guarantee [part of] the payment of three planned nuclear power stations across Britain, reviving a debate about the country’s future energy supply.

So long.

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The unexpected: A deal for Greece, a Canadian for the BoE

The Eurogroup has completed its first successful Greece-related meeting measured by the measurability of its results. In short: we got a deal. It’s not a haircut (go Germany!), but it’s not far from it. The deal finally releases the delayed €34.4bn bailout tranche. Before the money is wired down south however, Greece has to buy some of its debt back [i.e. buying outstanding bonds at a massive discount price]. The deadline is mid-December. Other changes in T&Cs are cuts of interest rates on debt from the first bailout and a €7bn payment of profits from Greek debt held by international creditors. Two that are especially hurt by these measures are Spain and Italy, whose interest on Greek bonds held is getting cut as well, while their own borrowing costs are much higher. Although the Eurogroup agreed to lift Greece’ debt:GDP target from 120% to 124% in 2020, it is meant to be below 110% by 2022. So maybe that’s when the world economy will be fully revived. The IMF refuses to free up new funds until the debt buyback is finalizedread article

Yesterday afternoon, the Bank of England appointed Mervyn King’s replacement. The bank’s new governor is Mark Carney, Harvard PhD and governor of the Bank of Canada and ex-Goldman Sachs (consult map below). I’m pretty sure William Cohan is about to write another book as you read this. A summary from Twitter.


– Peter Spiegel: Do I have this right? The British government just appointed a Canadian to head its central bank? #StillAColony?

– Matina Stevis: #eurogroup reporters gasp at #carney #boe announcement partly because there’s nothing to report on from here yet. #Greece

– [again] ZeroHedge: Oh, and dear Germans… Completing The Circle: Meet The US Ambassador To Germany

Carney, who previously also headed the Financial Stability Board, was approached about the job in April, as the FT reported then.

More detail on ZeroHedge’s comment including a map of how Goldman Sachs runs Europeread article

Next thing you know Jamie Dimon is in the run up as Treasury Secretaryread article

In the US, Mary Schapiro, head of the Securities and Exchange Commission, has been replaced by Elise Walter, who previously heading Finra, the Financial Industry Regulatory Authority. read article

In other news, ING repaid another €1.125bn to the Dutch government, including €375m interest, which saved the bank with a €10bn bailout. Following the latest repayment, ING stills owes €1.2bn plus interest.

Otherwise, the OECD slashed its 2013 growth forecast for developed economies. Back in May, the estimate was still at 2.2%. The revised forecast sees only 1.4% growthSouth Africa’s GDP grew at the slowest pace since the hight of the financial crisis in 2009, reducing to 1.2% on the back of decreasing mining output following massive strikes and lack of reformread article

So long.

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EU unemployment at 10.4%, India in the dark

The News Brief is going on holiday and will be back on Thursday, August 9, 2012.

Record unemployment and Zara Philips and Milton Friedman as trending topics on Twitter. I guess that’s the world we live in now.

June figures show EU unemployment at 10.4%, with youth unemployment at 22.6%. The eurozone has higher overall unemployment, reaching 11.2%, but is lower on youth unemployment, amounting to 22.4%, just as in May, which had been revised upwards. Germans may be pleased to know that inflation across the eurozone has remained steady at 2.4%.

But the extent of absurdity of EU stats only really becomes clear when considering Austria and Spain with 4.5% and 24.8% unemployment respectively. Many new jobless claims are coming out of France, where Peugeot and Alcatel-Lucent cut a lot of jobs in the past month.

There is not much to report on central bank action yet, except that the Fed is expected to do something, while the ECB has smashed all QE hopes when insiders said decisive action could take another five week. We’ll know more tomorrow.

Meanwhile in Italy, the police seems to have taken documents from Barclay’s Milan office in an investigation into the fixing of the Euribor (Euro Interbank Offered Rate) rate. I was wondering when this was going to happen…

And as all this is going on, India is left in the dark. Literally. You can be the largest democracy in the world all you want, but 670 million people without electricity due to a power grid failure, is kind of an issue. The power cut initially happened yesterday and was fixed before it all collapsed again today.

But back to the Olympics: After scaring the whole city for the better part of 2012, more or less all Londoners have disappeared from the streets. TFL said public transport usage was only up 4% from the norm. And suddenly, the golden games that were going to save this country’s poor economy, might slow it down even further, simply because nobody is here. Stell dir vor es ist London und keiner ist da… read article

Finally, to cheer you up, the most fun SEC filing ever: Manchester United filed for its $383m IPO (click link, scroll down).

So long.

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You know it’s bad when it impacts the Eurovision Song Contest

The most exciting thing that happened yesterday was Goldman Sachs joining Twitter – for real. The first three tweets regarded an official ‘hello’, shareholder support and the firm’s global sustainability report. Nicest bank out there.

David Cameron‘s ability to learn from public embarrassment seems to be limited. Just about a month after being shunned by European politicians in Brussels, Dave is back on the failhorse, trying to solve the crisis of a currency union his country is not a part of. Moreover, the UK is not exactly known for it’s pro EU statements, so the call for closer integration is a bit off. For this week’s one and only context: the UK is backing the idea of eurobonds as well. read article

All that is angering Mario Draghi of the ECB, who likes his [relative] freedom and independence from the European governments, which would be cut down with every inch of closer fiscal integration. read article

Some Credit Suisse research suggests that Germany spent around €600bn on the euro crisis thus far, which is approximately a quarter of its GDP. Understandable that Angela Merkel wants to keep borrowing at a low cost instead of pooling money via euro bonds.

In Greece, most recently compared to an angsty teenager, the polls show just how confused the country is. While 70%of Greeks allegedly want their country to stay in the eurozone, the party that is trying to accomplish the very opposite (Syriza) is leading the polls with 30%. Time to step back and reconsider? read article

Both Spain and Greece have told their contestants in the Eurovision Song Contest not to win, as the countries don’t have the money to host the event next year:

Perhaps Spain should have taken a lesson from Poland, which isn’t even running this year because holding the European champonships is apparently a headache enough. read article

For some weekend reading, the Economist’s leader advocating “a limited version of federalism [as] a less miserable solution…” Now that just sounds great. On the other hand, like I’ve said before, half-baked is better than not baked at all, right?

Have a good weekend.

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Suing countries

Yesterday, the ECB was all the rage, because it had said to stop supplying four Greek banks with liquidity. Those banks now have to turn to the Bank of Greece, where they could access liquidity at a much higher price. Alphaville explainshow it actually works. So really, the ECB is playing the role of the parent who lets you suffer because it knows what’s best for you: cutting the money supply for the ‘unnamed four’ is apparently just the ECB’s way of nudging Greece towards a restructuring of their banksGreeks withdrew €1.2bn from their bank accounts on Monday and Tuesday, which sounds a lot more than ‘0.75% of all deposits‘. As for the June elections, the leftist parties are set to win – again. Maybe this time they can actually form a government. read article

In France, Francois Hollande has chosen his cabinet. As neither he, nor his appointed prime minister, have ever held a ministerial office before, they got a couple of people with actual experience around. Well done. Unfortunately for the EU and Angela Merkel, the choice of foreign minister fell on Laurent Fabius, who campaigned against the EU constitution in 2005. “Potentially controversial,” says the FT, “potentially disruptive to getting out of the mess,” says I. read article

As of this morning, Spain is confirmed to have re-entered a recession in Q1 of 2012, resulting in Moody’s announcement to downgrade 21 Spanish banks within the next 12 hours. This is following the downgrade of 26 Italian banks on Monday night. read article

Meanwhile in the Netherlands… Geert Wilders is so worried about the successful ratification of the European Stability Mechanism (currently pushed back in virtually every country, due to panic), that he is planning to sue the Dutch state to postpone the vote. His case: the current caretaker government is not elected and shouldn’t get to have a say in anything that big. read Dutch article

Speaking of law suits against countries: Repsol is suing Argentina – yes, the country. Or in other words, a Spanish oil company is suing a Latin American government in a New York court for nationalizing energy company YPF. read article

McSweeney’s Ben Greenman helps us to grasp the number ‘two billion’ in a Statement from the chairman regarding recent losses.

Also, potentially due to certain recent headlines, there is a JPMorgan elevator gossip Twitter account now, and no, I don’t expect it to be as good as the GS original.

So long.

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And why wouldn’t Serbia want to join the EU right now…

Herman von Rompuy, the by far funniest looking European politician, was elected for a second term as president of the European Council. Kind of surprising that there was any kind of election considering the person in question is Belgian… Anyway, he will be in office until 2014, but can not be re-elected thereafter. read article

In other EU news, Serbia was confirmed as a candidate member country and the fiscal pact will be signed today [by all except the UK and the Czech Republic].

Relevant for everybody who’s using Twitter: the micro-blogging service has sold the rights to mine its data to two research companies, so expect super tailored ads in the near future… read article

Otherwise, we’re all looking forward to the outcome of the Russian presidential elections on Sunday. It’s a breath-taking race between Vladimir Putin and… wait IS there another candidate? read article

The Economist examines why SME should stand for ‘small-and-medium-sized-enterprises-hopefully-soon-to-be-massive’read article

New York City blog Gothamist finally got approved as official press by the NYPD. That’s interesting because it took more than 90 months for the application to go through. In 2008, it was rejected on the grounds that blogging wasn’t considered journalism. It was only in the year after that a law suit forced the NYPD to give out press passes to bloggers. Pretty late to jump on that train… read article

Have a good weekend.

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Tuesday, #27

It’s budget day in this fine country. Has anybody else realized that George Osborne looks like “the voice of London” Lewis Prothero in V for Vendetta? It’s too early to say much (because the man is still talking), but public sector wages are meant to rise 1%, while public sector debt will be reduced from £100m in 2012/2013 to £24m in 2016/2017. Follow #AS2011 on Twitter, if you care.

Today, Europe’s finance ministers are meeting to discuss future action of the EFSF (European Financial Stability Facility), something that was called “eindspel”, final [game for the euro], in the Dutch media. While Italy is worrying everyone again with its record high yields and €340bn debt that needs to be refinanced next year, Standard&Poor’s is putting more pressure on France and threatened to downgrade the country within the next 10 days (this is actually a rumor reported by French press, but it’s not exactly unlikely). And because of all that, the happy round of EU ministers need to approve of how to bolster the stability fund. Answer: public and private investors (as opposed to governments). read article

But all this rating business makes you wonder… should there be ratings for rating agencies by other rating agencies? Recursion, what? read article

Someone in or around Facebook leaked that the company is considering to go public in the near future to raise $10bn. That would bring its value up to $100m (for comparison, Google is valued at $190m). But considering how much Groupon talked about their IPO before anything happened, let’s just wait and see. Since 2011, Facebook has more than 500 shareholders and claims to have 800 million users. Reuters calls the recent interest in internet companies the new dotcoms: yay, let’s get a bubble to get us out of the burst!   read article

The Atlantic on new ideas and innovations that could revolutionize the world as we know it, if they’re being pursued. Personally, I want PARC’s uber-fast internet by tomorrow, and would even switch to MasterCard if they’d be offering the PayPass now. read article

So long.

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