Death Star Economics

Icon

ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

OMG, Japan is actually growing

Yesterday…
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.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , ,

US payrolls estimate up; Twitter IPO rumors back

Yesterday…
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.

Filed under: news brief, , , , , , , , , , , , , ,

Spain turns to stimuli, as Merkel points to two-tier Europe

Yesterday…
Spain’s unemployment rate rose to a new high of 27.2%, possibly marking the final point that austerity measures haven’t work in this case or simply don’t work at all (hello, Keynesians). Between January and March, almost 240,000 people lost their jobs. read BBC
Following the announcement, Mariano Rajoy announced the government would lay low on cuts and tax hikes, as even though the deficit has shrunk, the country is doing miserable. Stimulus for everyone! read WSJ

The UK dodged the bullet on a triple-drip recession, reporting first quarter GDP growth of 0.3% from the previous quarter

This morning…
Angela Merkel stirred the European debate with remarks about the potential impending rate cut by the ECB. Merkel pointed out that country’s like Germany actually needed a rate increase, while other country’s required further easing, underlining the divide between functional and dysfunctional Europe.

In Italy, coalition building is underway. Prime Minister-to be Enrico Letta said the conservatives would have to work out a compromise regarding the property tax that Berlusconi promised to get rid off before joining the coalition.

Today, the US is announcing first quarter GDP growth, which is expected to come in at 3% from the final quarter of 2012. Over the next three months, this number will be revised three times, once due to the change in government statistics in late July. read WSJ

In Japan, consumer prices have fallen fastest in two years in March, which doesn’t really come as a surprise considering all the excess liquidity in the system. Prices fell 0.5% on the year, slightly more than expected. read Bloomberg

Weekend reading:
Italy’s new heads of state – an evalution, read The Economist
– meet Janet “anti-inflation” Yellen, possibly the next head of the Fed, read NYTimes
– why the city of Los Angeles is suing Deutsche Bank, read Businessweek
real bad boys smuggle dairy, read Bloomberg

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , ,

Portugal could need second bailout (to pay for the first)

This morning…

the Eurogroup is meeting in Dublin; on the menu: stop messing around with bank stress tests (i.e. tighten measures) and the bailout schemes of Portugal and Ireland. Some say even if Portugal was granted an extension of its bailout repayment, it could potentially face a second collapse and thus a second bailout. Ireland is looking in the same gloomy direction. According to the FT:

Lisbon’s bailout is due to come to an end in July 2014 and the extension of maturities of its bailout loans is intended to smooth its full return to markets. But it has to raise €14,1bn next year and €15bn in 2015, whereas before the crisis it was typically raising €10-€12bn a year. Ireland is also facing a big financing challenge. It needs to refinance €20bn per year from 2016-20, which is about 12 per cent of the country’s projected economic output for this year.

Thus, the world is quiet in anticipation of next week’s news country of choice. It might be early days for Slovenia, so maybe it’ll drift back to Cyprus or Italy.

Meanwhile, Japan will officially enter the Asia-Pacific trade talks this summer, which are currently held between Canada, Mexico, Australia, Chile, Peru, Singapore, Malaysia, Vietnam, Brunei and the US. read article

Weekend reading…
– The Economist on Margaret Thatcher‘s legacy, read article

– William Cohan on the revolving door between Wall Street and the White House, read article

Climate change may double turbulence on transatlantic flights, read article

– The Winklevoss twins are all over bitcoin, read article

JPMorgan explains why you should avoid investment banks, read article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , ,

Obama ready to cut social security for budget deal

Yesterday…
it was all about central banks: the Bank of Japan expanded its asset purchasing program to JPY7tn per month, which will increase the Japanese monetary base to JPY270tn – double – by early 2014. read article

Both the Bank of England and the ECB left their policies alone. Mario Draghi shared mixed views of the European economy, saying it was to benefit from improving financial markets sometime soon, while bank lending was negative and needed encouraging. Interest rate cuts are possible again.

This morning…
we’re waiting for US non-farm payrolls, expected to show 190,000-200,000 jobs added in March (according to Bloomberg and Dow Jones respectively), as opposed to 236,000 in February, with a steady unemployment rate of 7.7. read article

President Obama is willing to cut social security spending to finally get a budget deal together, the White House announced this morning. The new proposal would see cuts worth $1.8tn over the next decade and will piss off a lot of Democrats and unions. read article

Weekend reading…
women and Wall Street (again) read article
– why the French are an un’appy folk, read article
– the deal with interest rates, read article

Have a good weekend.

Filed under: news brief, , , , , , , , , , , , , , , , ,

Cypriot banks re-open, German unemployment higher

Yesterday…
word got out that UK banks Lloyds and Royal Bank of Scotland, both backed by tax money, needed to raise an additional £9bn in correspondence to capital requirements set by international banking regulators. The additional cash needs to be on the balance sheets (£3bn for Lloyds, £6bn for RBS) by the end of this year. read article

This morning…
Cyprus is making history by being the first EU country to impose restrictions on capital flows, “with limits on credit card transactions, daily withdrawals, money transfers abroad and the cashing of cheques.” The withdrawal limit seems to be €300 per day, while transfers of more than €5,000 will require central bank approval. read article

German unemployment rose by 13,000 people, as opposed to an expected drop, while German 10-year bunds dropped to their lowest yield since early August 2012 (1.255%).

Meanwhile in Asia, the Bank of Japan has already exceeded its self-imposed limit on asset purchasing limit (well done) and South Korea cut its 2013 growth forecast from 3% to 2.3%.

Easter reading… – a list of people who are investigating JP Morgan, read article
– what extremely successful people were doing in their 20s, read article
– greatness of nations: India vs China, read article

Happy Easter, have a good one.

Filed under: news brief, , , , , , , , , , , , , , , ,

Cyprus rejects Russia, EU deadline looming

Cyprus… failed to reach a deal with Russia, as reported very early on this morning, but is said to discuss an EU solution in parliament today. That would include a bailout program for Cypriot bank Laiki, splitting it into a ‘good’ and ‘bad bank’. Jobs would be saved and deposits under €100,000 would be guaranteed, the rest would go towards the bank’s dark side. Besides this proposal, the parliament has six others to discuss. read article

Yesterday…

The US House of Representatives voted to prevent the government from shutting down by the end of the month and supported Paul Ryan’s budget proposal. This means that both government agencies and programs will stay in place until the end of the fiscal year on September 30. Ryan’s budget on the other hands, cuts taxes, healthcare and social costs to lower the budget over the next decade. It is expected that the Democrats’ counter example of a plan will be passed in the Senate today. This has brought us nowhere. read article

In some last minute action, Blackstone, together with Southeastern Asset Management, is considering a bid for computer company Dell. Silver Lake Partners and founder Michael Dell have put in their bid in Feburary, but the official deadline is only todayread article

This morning…

German business confidence, measured by the IFO index, reported a slump after a 10-month high in February. Surprising or not, this is hardly a sign that even Germany is going under, and is following a lower manufacturing PMI as well. read article

Finally, family traits: Raj Rajaratnam’s brother has been accused for insider tradingread article

Weekend reading…

– how Obama is trying to solve the Israel-Palestine conflict, read article

– next up in Venezuelaread article

– Nicholas Sarkozy and elderly women, read article

– Cyprus cartoonsread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , , ,

Judgment day for J.P. Morgan

There won’t be an email on Monday and Tuesday of next week, 18/19 March 2012.

Today, the London Whale Senate hearing starts in DC, led by John McCain and including testimony from former CIO Ina Drew who left the firm in May 2012. The allegations include a failure to appropriately report on the $6bn trading losses, misleading regulators and investors. read article

Following the Fed stress testBank of America is set to buy back $5bn of shares and $5.5bn of preferred stock, while J.P. Morgan will buy back $6bn in common stock. Goldman Sachs will also be allowed to repurchase shares, but overall the Fed seems worried about J.P. Morgan‘s and Goldman‘s capital structures: the banks will have to submit revised capital plans by September. read article

The British Parliamentary Commission on Banking Standards (PCBS) stated that the UK didn’t need a ban on proprietary trading, mirrored from the American Volcker rule. The Commission suggested capital requirements as alternative tools and cited the difficulty of defining proprietary trading appropriately. Future BoE Governor Mark Carney agrees as well. read article

After months of investigations and grounded fleets, Boeing’s Dreamliners could be back in the air “within weeks”. The spontaneously igniting batteries have been replaced and “only” need approval from the Federal Aviation Administration to be ready for take-off. Japanese authorities remain skeptical and declined to put a date on when the Dreamliners could fly again. Either way, Boeing doesn’t have the capacity to replace batteries in all 50 active planes simultaneouslyread article

While the EU-US trade agreement is in the works, Japan has entered negotiations for a similar deal for Pacific nations. read article

Meanwhile, Greece, or rather the Hellenic Republic Asset Development Fund, is selling gas and gambling companies as part of its privatization campaign. Get in there while it’s cheap. read article

Last night, Samsung launched its latest smart phone in the Radio City Music Hall in New York. A review from All Things D, here.

Weekend reading:

– the America we used to know, read article

– the US is more energy self-sufficient, except China wants to own all their natural gas fueling stationsread article

– when hedge funds get personal: the Herbalife background storyread article

 Have a good weekend.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Fed stress test: why the world is better now than in 2008

Today’s headline story is the results of the Fed’s annual bank stress test – and how Goldman Sachs and Morgan Stanley would be torn to pieces in the unlikely event of a loss of cabin pressure. If unemployment was to soar to 12.1%, while both housing prices and the stock market collapsed by 20+% and 50+% respectively, Goldman alone would suffer a loss of up $20bn (which is by far not the biggest in the report…), while Morgan Stanley’s tier one capital ratio would be slashed to 5.7% (from 13.9%). That’s the story you’re fed on the front pages. Both these banks have passed the Fed’s stress test however. The official source itself seems much happier with the results:

Despite the large hypothetical declines, the aggregate post-stress capital ratio exceeds the actual aggregate tier 1 common ratio for the 18 firms of approximately 5.6 percent at the end of 2008, prior to government stress tests conducted in the midst of the financial crisis in early 2009.

Aha! Nothing to see here, move along. read full unbiased report 

In the US, it’s jobs Friday, with a projected 160,000 jobs added, up 3,000 from January’s rate. From WSJ:

The trend isn’t important necessarily to see where we’ve been, but to project where we might go – and especially for the markets, when the unemployment rate might fall to a level at which the Federal Reserve feels comfortable to start winding down its massive bond-buying programs.

In China, February exports increased almost 14% more than the median estimate by 21.8%, indicating stronger global demand. At the same time, imports fell to their lowest rate in 13 months, suggesting that no, China is indeed not done recovering.

Otherwise, there is a lot of analysis of yesterday’s central banking action, which left rates unchanged across the board. The consensus seems to be that it is not a question of economic recovery, but rather a question on waiting to see what happens without a new round of easing. Stay tuned for the summer.

Weekend reading
– meet Mr Jones, Dow Jones, of Alma, Arkansasread article

– European horse meat sales are upread article

– just as we thought we were past this: is financial risk rising again? read article

– management consulting for the Poperead article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , ,

Budget cuts and peripheral misery

Today at midnight (Saturday morning in the old world), the US is facing the much discussed spending cuts, decreasing government spending by €85bn until the end of the federal budget year in September. Maybe it’s time to depart from discussing the sheer possibility of this scenario. If you believe Bernankethe pain will be close to intolerable, slowing the economy down by 1.5%. The Congressional Budget Office estimates a 0.6% decrease in GDP. If you believe Fortunecompany earnings are strong enough to allow ignoring the issue. Without a budget fix, the automatic cuts will continue in the following financial year. read article

And things aren’t pretty in Europe’s periphery either. First, numbers out of Spain showed that Spanish corporations faced the largest decrease in earnings ever recorded in Q4, including Bankia’s €19.2bn net loss. Meanwhile in ItalyBersani rejected all rumors regarding coalition talks with Berlusconi. Over in Greece, 2012 revenue targets were missed and the burden of unpaid taxes increased, causing skepticism in Brussels, where the next loan instalment, worth €2.8bn, can be withheld if Greece’ financial report is not satisfactory. At the same time, the IMF, usually in bed with the EU, was more positive, saying Greece had collected more taxes recently and could avoid a further reduction in government salaries.

We shouldn’t forget, however, that despite the mess that is Southern Europe (oh yes, I made that generalization), there are still countries out there that want to join the union and currency. Poland, for example, which originally wanted to have the euro by 2012, is now discussing meeting all criteria (the same criteria that Greece met once…) by 2015read article

In India, Q4 GDP growth dropped to 4.5%, as the government announced a more pro-business deficit-reducing budget for the coming year. read article

Otherwise, Andrew Mason removed from his position as CEO of discount firm Groupon, which recorded losses in the last two quarters of 2012. In his own words:

After four and a half intense and wonderful years as C.E.O. of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention.

Weekend reading

– The “Because I Can” attitude of senior managementread article

– Dear Banker, this is how we’ll pay you in the futureread article 1 read article 2

– the European Union and Ricardian equivalenceread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , ,

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 213 other followers

%d bloggers like this: