Death Star Economics



Cypriot capital controls, EU templates and Japanese QE

Cyprus‘ President Nicos Anastasiades announced that the country’s banks are going to stay closed until Thursday (again: which Thursday…) and that capital controls will be put in place until it all blows over. read article

The new head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, threw everyone for a loop by saying the private sector contribution in Cyprus (i.e. the haircuts) would lead future EU bailouts by example. He retracted the comment later on. Thanks for that.

The MSCI Emerging Markets Index has had the worst first quarter since 2008, lagging behind industrial economies most since 1998. Ongoing QE programs (see below for Japan) are cited as a reason in favor of developed markets. read article

Presumably not for the same reason, the BRICS nations are planning their own version of the World Bank. read article

Meanwhile, China is finding itself in a public health crisis, with rotten ducks floating down rivers in the southwestern Sichuan province and 11,000 dead pigs being fished out of Shanghai’s water supply system. read article

Otherwise, a 17 year-old British kid has sold its bedroom-developed app Summly to Yahoo for $30m. read article

This morning…
there’s not a whole lot going on except digesting overnight news, because most people, including myself, got nothing but chocolate eggs on their minds.

New Bank of Japan Governor Haruhiko Kuroda is already warming up the printers, saying the BoJ will consider buying five-year+ bonds. The next policy meeting is next week, April 3-4.

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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Spain still doing its thing, US economy improving

We’re riding high on the Spanish bailout-request rumors that nobody seems to have grown tired of yet. Highest of all: Spain itself. The country sold a pile of debt as all average yields went downThe FT reports that the country is very very close, closer than ever before, to picking up the phone and calling Brussels to request a bailout. Again. Or still. You know what I mean.

Somewhat unexpectedly, RBS fell into the center of the Libor mess, as the bank suspended Jezri Mohedeen, head of European and Asia-Pacific rates trading. He is the first member of senior management that RBS is sending home to investigate the bank’s involvement in the rate fixing scandal. RBS suspended four traders last year for the same reason. After Barclays was fined £290m as part of the investigation, RBS’ fine is likely to go into the millions as well. This is following the collapse of a deal with Santander regarding the sale of 316 RBS branches.

In other legal news, the American Civil Liberties Union is set to sue Morgan Stanley over selling risky mortgaged to African-American homeowners. According to the NYTimes:

In the lawsuit, filed on Monday, the A.C.L.U. claims that Morgan Stanley is culpable for predatory loans made through the New Century Financial Corporation because the investment bank lent billions of dollars to New Century, a now-defunct subprime lender, and pressured it to make troublesome loans to African-American borrowers who could not afford them.

Ouch, ouch, ouch, so much bad PR…

Meanwhile in California, Marissa Mayer is doing what she was hired for. Over all the discussion as to whether or not she is going to be a horrible mother or CEO or both, Mayer lured Google’s Vice President of Partner Business Solutions into signing a $60m contract with Yahoo. He will start his job as Yahoo’s COO before January 22, 2013. read article

But that’s not the only slap in the face for Google. The FTC, the US Federal Trade Commission, is orchestrating a case against the internet giant, which is edging towards completion as it seems. Allegations regard antitrust violations and complaints about unfair practice towards competitors are piling up in the FTC’s mail room. Google’s latest run-in with the law was a $22.5m settlement payment for bypassing the privacy setting of Safari-using customers. EU regulators aren’t too far off either, pressuring Google over its data protection and privacy policies. read article

Yesterday’s release of US retail figures suggested an upswing in consumer confidence, as the index grew faster than expected. In addition, Citigroup reported better earnings than expected ($1.06 per share, as opposed to $0.99), despite a 88% fall in income, as well as Goldman Sachs, topping estimated earnings per share by $0.57 on an $8.35bn (estimated $7.18bn) overall revenue. All this is supporting the recovery of US stocks, after last weeks abysmal performance. read article

In terms of European dataeurozone inflation was steady at 2.6% between August and September, undercutting the findings of a Reuters economist poll.

Tonight, Mitt Romney and Barack Obama meet again, this time, hopefully, for a better [read actual] debate.

So long.

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Food crisis in the US, beer war in Asia…

While London is drowning and the rain drags down retail profits, the US continues to face a heat wave that causes futures prices of corn and soy to soar. Last week, conditions in Iowa, Illinois and Nebraska were officially called a “severe drought”, leading to a 50% price hike. If the weather continues in similar fashion next week, the drought could end up being worse than the one in 1988, which is labeled the most expansive (not expensive, though that’s probably a fair assessment as well) drought in recent history. The Midwest produces 75% of the American soy and corn output. Food crisis anyone?

Sort of on topic, Heineken has made a $4.06bn takeover bid for Asia Pacific Breweries, the producer of Tiger beer. Asia Pacific Breweries was set up by Heineken and Fraser & Neave in 1931; each companies holds a 50% stake in the joint venture. Earlier this week, Thai Beverage had made a bid for 22% of Fraser & Neave’s shares. You may be thinking, ‘What? How can the Asian market be lucrative for beer (…)?’ Well, for Heineken, this is really about Europe, which is its key market but where revenues are continuously declining.

Both Germany and Finland have approved the Spanish banking bailout; Finland has previously reached a collateral agreement with Spain. Today, there will be a conference call between the members of the Eurogroup to finalize the bailout proposal. Spain won’t recover just from that, of course. The latest to join the outcry for a bailout is Valencia, which can’t service its debts.

And while the FSA is planning to investigate even more banks with regards to the Libor scandal, those already in the dog house, decided on some group settlement action, much along the lines of Barclays’ $453m settlement. Although it is unclear which banks are considering paying a fine, the group could include Citigroup, HSBC, Deutsche Bank and JP Morgan. read article

Straight talk from HSBC’s Head of Compliance for Latin America, John Root, who apparently started pointing out compliance leaks in 2007:

“What is this, the School of Low Expectations Banking? (‘We didn’t go to jail! We merely signed a settlement with the Feds for $10 million!’)” read article

Weekend reading

– More option on Marissa Mayer’s motherhoodread article

– White collar crime 2.0, read article

– Six policies favored by economists and turned down by politicians, read article

– More on proposition 6 (see above), legal pot would be as cheap as tea, read article

– North Korea’s economic reformsread article

– From sprint to marathon, growth in the emerging marketsread article

– … and who is to blame, read article

Have a good one.

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If it’s not rates, it’s drugs: a new banking scandal

Today’s headlines refreshingly deviate from previous days, with HSBC’s involvement in money laundering and financing drug trafficking, terrorism and everything else that is bad. Surely, the paranoia behind and intensity of the bank’s investigation isn’t helped by the Libor scandal, which in itself isn’t helped by the financial crisis or Occupy Wall Street or all those bad-banker stories (Hello, Greg Smith, hello, Bruno Iksil…) that have been around lately.

Also, the IMF has slashed global growth forecasts in appreciation of the sticky molasses that is the world economy right now. The new forecast for 2012 is growth of 3.5% globally, with the eurozone shrinking by 0.3%. The UK, so it says, will only expand by 0.2% this year. This comes as inflation hits a 32-month low of 2.4%.

That links nicely to the decline in foreign direct investment in China, which is down almost 7% or $12bn from last year. The FT debates whether slower growth is the right way for the country. read article

The US unemployment rate, which hasn’t undercut 8% in 41 consecutive months, which could change monetary policy with regard to additional quantitative easing. The Keynesians, mostly Paul Krugman of course, are jumping up and down crying out to leave the inflation rate alone to stimulate job creation. read article

Marissa Mayer has been appointed CEO of Yahoo. She was previously an executive and spokesperson for Google. She is the company’s fifth CEO within four years. For feminists Mayer may just become a poster child: head of a tech/internet company and pregnant when she got the job. That’s right, Mayer may only stay with Yahoo over the summer, as she’s expecting a child in October. But that’s just marginally interesting, because with its search business continuously losing ground and its online ad share declining to 9% this year, Yahoo’s future is a little bit all over the placeread article

Otherwise, German investor outlook for the coming 6 months (ZEW index) is down and Moody’s downgraded 13 Italian banks, including the country’s largest lenders.

So long.

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How to break up with a bank

You have probably already read it somewhere. Goldman Sachs is having a bad day. Greg Smith quit his job as executive director and head of US equity derivatives business in EMEA by handing in his notice writing an article in the New York Times. That’s a reasonable reaction, isn’t it? I’m considering a full page in the FT when I quit my job. Just, you know, to keep people in the loop.. so much gets lost when you update your LinkedIn headline.

Here’s a chart showing the correlation between seniority and the right to bitch about your job (thanks, Alphaville). Anyway, all in all, this is kind of a PR-punch in the face and Goldman is a globally trending topic on Twitter. Good luck to Jake Siewert, who just took the job as global head of corporate communications. His new-job-premise might actually be on par with that of Mario Draghi.

(There’s a lot a Star Wars jokes going around about this, including “Why I am leaving the empire, by Darth Vader” on the Daily Mash and tweets like this one by Daniel Drezner: “When I joined the Sith, the mission was all about bringing peace and order to the galaxy…” #startofanakinskywalkeroped.)

OtherwiseGreece was upgraded to B- by Fitch yesterday (that was easy…), Yahoo is suing Facebook over these patents and the UK is looking into issuing 100-year bonds (let’s call them infinity bonds, sounds much cooler) to service its public debt without having to think about tomorrow. That’s what I’m looking for in a government.

The Economist ranks cities by competitiveness: #1 New York (check), #2 London (check)… see chart

Also, there is a 6.1 earthquake in Japan, but no tsunami warning. read article

So long.

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Wednesday, #47: tech and comparative data

The eurozone inflation rate fell from 3% in November to 2.8%. Combined with the expected decrease in consumer spending over the coming months, this leads the way for more interest rate cuts by the European Central Bankread article

Yahoo, in re-enacting the struggle of the Belgian government, fired its CEO Carol Bartz in September and now its interim CEO Tim Morse. Next one in line, Scott Thompson, current president of PayPalread article

Just inMicrosoft is suing UK retailer Comet for [allegedly] selling fake Windows Vista and Windows XP recovery CDs. My question, [as I don’t know anyone who has ever actually BOUGHT such CDs] how many could they possibly have sold? read article

More tech news that make me really happy: Soundcloud, Berlin-based audio stream platform, got $50m Series-C funding from über-venture fund Kleiner Perkins Caufield & Byers (Zynga, Twitter, Groupon…) and GGV Captial. Congrats, congrats. You should all use their site.

And once again, Denmark is taking the ‘country that is best at things’-prize home. Congratulations, I am not surprised. The opponent in this battle was the US, beat in the shadow of the Peltzman effect regarding entrepreneurship and intergenerational income mobilityread article

This Christmas, the friendly security staff at Stansted Airport pointed out to me that marmalade is a liquid, or rather, a ‘non-solid’. I had to go back out and check my bag in properly. It was annoying and embarrassing, mostly because I like to think I’m a very efficient flyer. Freakonomics feels my pain: read article

So long.

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