Posts Tagged ‘Lehman Brothers’
And The Award For The Most Creative Excuse For Joining Currency Wars Goes To…
Monday, 13 May 2013 17:08
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Submitted by Alexander Gloy of Lighthouse Investment Management,

… the Bank of Israel!

On Monday, Bank of Israel cut interest rates in a surprise decision to 1. (Read more…)5% from 1.75%.
Also, they are done with watching the Shekel strengthen against the dollar:

“Beginning this year, and in coming years, the Bank of Israel will purchase foreign exchange in order to offset the effect of natural gas production on the exchange rate.”

Hilarious! The BoI tries to ‘justify’ entering the global currency wars with natural gas production. A top contender in Central Banking Oscar’s for “Most creative excuse for FX manipulation”!
The Q&A brought up a critical question (not the kind of soft balls lobbed at ECB and the Fed by corrupt and incompetent journo’s):

Q: “According to your policy, you only purchase foreign exchange when the exchange rate deviates from fundamental economic conditions or when there are disorderly markets. The production of natural gas is a real economic factor which is fundamental and long-term. Why offset its effect through foreign exchange purchases?” 
A: “Natural resources are a blessing for Israel’s economy. However, international experience shows that sometimes the discovery of natural resources can have negative effects on the economy, often referred to as ‘Dutch diseases’. The goal of the policy announced is to offset these detrimental effects.”

The rate cut and announcement of FX interventions apparently could not wait for another 2 weeks, until the next scheduled meeting, fueling speculation something more sinister was going on. From the Q&A:

Q: “The last time the Bank of Israel made an inter-meeting rate decision was after the collapse of Lehman Brothers, at the height of the global crisis. In two weeks you were scheduled to decide on interest rates in any case. What do you know that did not allow you to wait?”

 

A: “Recently, crucial information became available which was the basis of the decision. Central banks reduced interest rates and continue large scale quantitative easing. These intensified the appreciation pressures on the shekel.”

Infamously, the BoI last year bought a position in Apple stock (around $550) and suffered deep book losses. Apparently they haven’t learned anything and will continue to play in “longer-term assets with higher expected returns”:

”The foreign exchange reserves are invested in liquid assets so that they can be utilized in times of crisis. The foreign exchange flows which will accumulate as a result of this policy will be invested in longer term assets, with higher expected returns.”

What kind of assets are those? With fixed income, your return is known at time of purchase. Talking about “expected returns” means anything but fixed income, or things like equities, commodities, private equity or hedge funds. Good luck!

You got to love the fact central bankers are beginning to believe in the bubble they helped to create!

What’s next – the Swedish Riksbank entering currency wars due to the discovery of a large number of blonde au-pairs?

 

 

    



 
Frontrunning: May 8
Wednesday, 08 May 2013 06:25
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  • Pentagon Plans for the Worst in Syria (WSJ)
  • Russia and US agree to Syria conference after Moscow talks (FT)
  • Hedge Funds Rush Into Debt Trading With $108 Billion (BBG)
  • Detroit is the new “deep value” – Hedge funds in search of distress take a look at Detroit (Reuters)
  • Commodities hedge funds suffer weak first quarter (FT)

    • (Read more…)

  • But… but… Abenomics – Toshiba posts 62% decline in Q1 net profit (WSJ)
  • Americans Are Borrowing Again but Still Less Than Before Freeze (WSJ)
  • Man Utd announce Alex Ferguson to retire (FT)
  • Asmussen Says ECB Discussed ABS Purchases to Spur SME Lending (BBG)
  • Benghazi Attack Set for New Review (WSJ)
  • Belgium Says 31 People Arrested Over $50 Million Diamond Theft (BBG)
  • Brazilian diplomat Roberto Azevêdo wins WTO leadership battle (FT)
  • Bangladesh Garment Factory Building Collapse Toll Reaches 782 (BBG)

 

Overnight Media Digest

WSJ

* America’s credit crunch is easing.

* Airlines’ restructuring has produced a sharp reduction in service that is curtailing traveler choice and some local economies even as it improves the industry’s health.

* The Dow Jones Industrial Average closed at 15056.20, piercing another record threshold as investors’ fear of missing out on the rally has replaced potential concerns about the risk of a selloff.

* Bangladesh’s factory disasters spotlight poor working conditions there. But for apparel retailers seeking better standards – without giving up low-wage workers – prospects aren’t much better elsewhere in the developing world.

* Investors faced little resistance in their months-long campaign to push the Japanese currency within one yen of 100 to the dollar. Covering that last bit of ground is proving much harder.

* China’s trade swung to a surplus in April after showing a small deficit in March as exports posted a better-than-expected rise – but analysts cautioned that the 14.7 percentage growth in exports during the month may have been a bit too good to be true.

 

FT

Qatar has sounded out International Airlines Group about becoming the largest shareholder in the British Airways parent by buying a 12 percent stake held by Spanish lender Bankia.

Santander and three private equity companies are making plans to list the Spanish bank’s U.S. auto finance business in the coming months.

Proxy firm Glass Lewis called for JPMorgan Chase & Co investors to vote in favour of separating the roles of chairman and chief executive.

Portugal raised 3 billion euros in its first new bond issue since asking for an international bailout.

Car sales in the UK rose by almost a third last month in what was their best April since before the financial crisis.

Swiss bank Credit Suisse has appointed its UK investment banking head as vice chairman of its EMEA investment banking department.

 

NYT

* A project to create a plant that glows in the dark, potentially leading the way for trees that can replace streetlamps, has been denounced for tinkering with genes.

* Governance for Owners, an obscure London firm, may determine whether Jamie Dimon keeps his dual role as chief executive and chairman of JPMorgan Chase. The firm has been tasked with voting the shares of the bank’s largest shareholder – the asset management behemoth BlackRock

* The Chinese government said trade figures for April showed some improvement, but weren’t strong enough to pull the nation out of its economic quagmire.

* New York’s top banking regulator has begun an investigation into pension-advance firms, the lenders that woo retirees to sign over their monthly pension checks in return for cash.

* Senator Marco Rubio disputed a Heritage Foundation analysis released Monday that found the legislation offering a pathway to citizenship would produce a “lifetime fiscal deficit” of at least $6.3 trillion.

 

Canada

THE GLOBE AND MAIL

* Declaring that “American democracy has been hacked,” former U.S. vice president Al Gore told a Toronto audience that his countrymen needed to wake up to the special interests that have a grip on the levers of power in the U.S. Congress and are able to block legislation on a range of policy issues including his signature cause, global climate change. (http://link.reuters.com/mys87t)

* The National Research Council, which gave Canada canola and the atomic clock, will now be taking its scientific cues from Canadian industry as part of a makeover of the country’s flagship research labs. (http://link.reuters.com/vus87t)

Reports in the business section:

* WestJet Airlines Ltd is heading to the runway with an expanded fleet, raising concerns that the surge in capacity will lead to a renewed industry price war. (http://link.reuters.com/wus87t)

NATIONAL POST

* Two years after its funding was slashed by Italy’s debt-laden government, the Toronto-based Italian language daily newspaper Corriere Canadese suspended operations after more than 58 years. (http://link.reuters.com/zus87t)

* Toronto city council has overruled Mayor Rob Ford and his executive by voting to have a debate on controversial transit taxes and fees at some point this week. A coalition of councillors led by Toronto Transit Commission Chair Karen Stintz managed to scrape together the necessary two-thirds’ support to seize a matter that had been deferred by the executive committee. (http://link.reuters.com/dys87t)

FINANCIAL POST

* British Columbians are free to elect the government they want, but in the end extreme views on pipelines will moderate, Asim Ghosh, the Chief Executive of Husky Energy, one of Canada’s largest oil companies, predicted on Tuesday. (http://link.reuters.com/gys87t)

* The fight over TransCanada Corp’s proposed Keystone XL project probably will be repeated as companies build more conduits to carry oil and gas to U.S. markets, the former chief pipeline safety regulator Brigham McCown said. (http://link.reuters.com/nys87t)

 

China

CHINA SECURITIES JOURNAL

- Average wholesale prices of 18 vegetables in 36 big Chinese cities fell 5.4 percent between April 29-May 5 from the prior week. Egg retail prices slipped 0.4 percent from a week ago while pork wholesale prices dipped 0.6 percent, data from the Ministry of Commerce showed.

SECURITIES TIMES

- Air China Ltd , Asia’s second-largest airline by market value, and its subsidiary will jointly buy 100 aircraft, it said in an exchange statement on Wednesday.

SHANGHAI SECURITIES NEWS

– China’s entrepreneurial hub of Wenzhou has submitted to the local finance authorities a proposal to regulate private lending. Some of the proposed measures include making it mandatory for individuals and private companies to register lending of above 2 million yuan ($325,000) and 5 million yuan respectively.

– Four banks in Jiangsu province that are planning to list saw their net profit rise over 10 percent in 2012. But their non-performing loans have also surged, with Jiangyin Rural Commercial Bank and Jiangsu Wujiang Rural Commercial Bank posting a 177 percent and 159 percent jump in bad debts respectively.

CHINA DAILY

– Privately-held wealth on the Chinese mainland hit 8- trillion yuan in 2012, with more than 700,000 individuals now holding 10 million yuan or more in investable assets, more than double the number at the end of 2008, according to a report by China Merchants Banks and U.S. consulting firm Bain and Co.

– China’s solar panel exporters see tougher times ahead as the European Union moves closer to imposing punitive duties on Chinese exports. Industry officials said Chinese firms will lose their competitive edge over European counterparts if they are slapped with duties of above 20 percent.

SHANGHAI DAILY

– Pudong New Area’s environment watchdog is investigating an industrial zone in Hangtou Town after about 300-meter stretch of a river there turned blue. Pictures posted by residents online showed blue sewage was being discharged from rain water pipes into the river. Some amount of oil slick was also found on the surface of the water.

– China has ordered greater scrutiny of bond sales by local government finance vehicles with higher levels of debt, people with knowledge of the matter said. The National Development and Reform Commission, which approves bond sales by local government firms to finance projects, will more strictly review application for debt with debt-to-asset ratios exceeding 65 percent.

PEOPLE’S DAILY

- The implanting of early rice in China is estimated to rise 1.13 million Mu from last year to 87.61 million Mu this year.

 

Corporate Finance

* Qatar has approached International Airlines Group , the owner of British Airways and Iberia, with an informal offer to become the company’s largest shareholder by buying the 12 percent stake held by Spain’s nationalised lender Bankia, the Financial Times reported.

* Lehman Brothers Holdings has put the Ritz-Carlton, Kapalua Resort, a 54-acre luxury condo and hotel resort in Maui, Hawaii, on the block as it continues to sell off its real estate holdings to pay off creditors, said two sources familiar with the deal.

* Generali’s private bank BSI attracted bids below its estimated 2.3 billion Swiss francs ($2.42 billion) book value, four people familiar with the situation said.

* Credit Suisse investment banker Sebastian Grigg has been appointed vice chairman of the bank’s EMEA investment banking department after having spent six years at the helm of the company’s UK investment banking team.

* John Paulson’s gold fund lost 27 percent in April amid a big sell-off in the commodity, bringing the total year to date loss for the under $1 billion fund to 47 percent, a source familiar with the fund said.

 

Fly On The Wall 7:00 Am Market Snapshot

ANALYST RESEARCH

Upgrades

Ametek (AME) upgraded to Buy from Neutral at Citigroup
IAMGOLD (IAG) upgraded to Buy from Hold at Canaccord
Lowe’s (LOW) upgraded to Buy from Neutral at ISI Group
lululemon (LULU) upgraded to Buy from Neutral at Sterne Agee
Myriad Genetics (MYGN) upgraded to Buy from Neutral at Mizuho
Orion Marine (ORN) upgraded to Outperform from Market Perform at FBR Capital
Trex Company (TREX) upgraded to Buy from Hold at BB&T
U.S. Auto Parts (PRTS) upgraded to Buy from Neutral at Roth Capital

Downgrades

Bed Bath & Beyond (BBBY) downgraded to Cautious from Neutral at ISI Group
CA Technologies (CA) downgraded to Perform from Outperform at Oppenheimer
Calavo Growers (CVGW) downgraded to Equal Weight from Overweight at Stephens
Comerica (CMA) downgraded to Underperform from Neutral at RW Baird
Douglas Dynamics (PLOW) downgraded to Neutral from Outperform at RW Baird
Emerson (EMR) downgraded to Market Perform from Outperform at Bernstein
IDEX Corp. (IEX) downgraded to Neutral from Buy at Citigroup
Plains All American (PAA) downgraded to Neutral from Outperform at Credit Suisse
ValueClick (VCLK) downgraded to Equal Weight from Overweight at Stephens
ValueClick (VCLK) downgraded to Hold from Buy at Cantor
tw telecom (TWTC) downgraded to Perform from Outperform at Oppenheimer

Initiations

Bonanza Creek (BCEI) initiated with an Outperform at Northland Securities
Carter’s (CRI) initiated with a Neutral at Piper Jaffray
Children’s Place (PLCE) initiated with a Neutral at Piper Jaffray
Eaton (ETN) initiated with an Outperform at Bernstein
Spirit Airlines (SAVE) initiated with a Buy at Buckingham
Travelers (TRV) initiated with an Outperform at Raymond James

HOT STOCKS

Berkshire Hathaway (BRK.A) agreed not to take stake larger than 25% in DaVita (DVA)
Pioneer Southwest Energy (PSE) received buyout offer from Pioneer Natural Resources (PXD)
Whole Foods (WFM) announced two-for-one stock split
Statoil (STO), Exxon Mobil (XOM) to sanction the Julia oilfield development in Gulf of Mexico
Trinity Industries (TRN) formed $1B leasing JV and long term capitalization of TRIP
WebMD (WBMD), Icahn entered agreement on board appointment
Talisman Energy (TLM) announced agreement to exit Poland

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Cognizant (CTSH), Delek Logistics (DKL), Kinross Gold (KGC), Demand Media (DMD), SandRidge Energy (SD), Live Nation (LYV), DaVita (DVA), Symantec (SYMC), WebMD (WBMD)

Companies that missed consensus earnings expectations include:
Vista Gold (VGZ), Marathon Oil (MRO), Zillow (Z), JBT Corporation (JBT), C.H. Robinson (CHRW), Primerica (PRI), URS Corporation (URS), Williams (WMB), Electronic Arts (EA)

Companies that matched consensus earnings expectations include:
American Water (AWK), KapStone (KS), Williams Partners (WPZ), ACADIA (ACAD), Onyx Pharmaceuticals (ONXX)

NEWSPAPERS/WEBSITES

  • Samsung (SSNLF) now faces a new, enviable Apple-like (AAPL) challenge: a mammoth pile of unspent, accumulated cash. The company said its cash and cash equivalents grew to nearly $40B at the end of March. After stripping out debt, their net cash position is $28.5B, the Wall Street Journal reports
  • America’s credit crunch is easing. In all, some $713B in credit flowed to U.S. households and non-financial businesses last year, double 2011′s $336B, according to the Fed. But that’s still a fraction of the $2.2T in credit that lifted American consumers and businesses in 2007, the Wall Street Journal reports
  • With the inflation rate about half of the Fed’s 2% target, the central bank is facing a major test and some experts wonder whether it will eventually need to increase its already aggressive bond buying program, Reuters reports
  • Target (TGT) is rolling out a service that combines social networking and discounts to attract shoppers into its physical stores. The company’s program relies on shoppers using their Facebook (FB) accounts, and they can only redeem the offers they choose in Target’s U.S. stores, not online, Reuters reports
  • Air China, Asia’s largest carrier by market value, plans to add 100 Airbus SAS (EADSY) planes to help meet rising travel demand, Bloomberg reports
  • Global iron ore supplies will expand faster than demand over the long term, lowering prices and reducing volatility of the raw material used to make steel, says BHP Billiton (BHP), Bloomberg reports

SYNDICATE

Apollo Global (APO) announces offering of 21.1M Class A shares by holders
Apollo Global (APO) files to sell 15.8M Class A shares for holders
Armada Hoffler (AHH) 16.525M share IPO priced at $11.50
Brookfield Infrastructure (BIP) 5.677M share Spot Secondary priced at $37.75
Cobalt (CIE) files to sell 50M shares of common stock for holders
Colfax (CFX) 10M share Secondary priced at $44.25
Isis Pharmaceuticals (ISIS) files to sell common stock
Javelin Mortgage (JMI) announces public offering of 6M common stock shares
Pulaski Financial (PULB) announces $10M “at-the-market” equity offering
Resolute Energy (REN) files to sell 13.25M shares of common stock
Tornier (TRNX) files to sell 7M shares in common stock
Vantiv (VNTV) 38.6M share Secondary priced at $23.75
Webster Financial (WBS) files to sell 8.75M shares of common stock for holders

ACTIVIST/PASSIVE FILINGS
Carl Icahn raises stake in Herbalife (HLF) to 16.48% from 15.55%
40 North Industries reports 5.01% passive stake in Mattress Firm (MFRM)

    



 
Gold And Silver Bullion Coin And Bar Shortages Continue
Friday, 03 May 2013 15:33
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Today’s AM fix was USD 1,476.50, EUR 1,124.95 and GBP 949.34 per ounce. (Read more…)  
Yesterday’s AM fix was USD 1,456.00, EUR 1,106.22 and GBP 935.07 per ounce. 


Cross Currency Table – (Bloomberg)

Gold rose $8.10 or 0.56% yesterday to $1,466.80/oz and silver finished + 0.68%.

Physical demand for coins and bars internationally continues and is
the strongest since the immediate aftermath of the Lehman Brothers
collapse on September 15, 2008, and the consequent global financial
crisis.

Government mints, refiners and bullion dealers internationally are
reporting demand as high as in the aftermath of the Lehman crisis. 

Brokerages are seeing nearly all buyers and little or no sellers
which is making for a tight market with rising premiums. At GoldCore,
sellers have been people liquidating unallocated positions and opting
for taking physical possession or the increased safety of allocated
accounts. 

Higher prices will be needed by bullion owners in order to
incentivise them to sell – prices that will likely be significantly
higher.    

Most physical owners are buying for the long term and will not sell
in the coming months even when prices recover. If prices rise to back
above $1,600/oz, some physical gold might come back into the market and
alleviate the supply issues. 


Gold in USD, 1 Year – (Bloomberg)

However, we believe that this may be a long term structural supply
demand issue in what is a very small physical bullion market, that will
only be alleviated by much higher prices and indeed higher premiums.

It is difficult to generalise regarding premiums as there are so many
products and so many regions but in general terms, prices on nearly all
small coins and bars are rising and on average there have been 1% to 2%
rises in the premiums on popular one ounce gold coins and bars. This
means that one ounce coins and bars can cost some $14 to $28 more than
they did prior to the price falls. 

The percentage increase in premiums in the silver market is even
higher and there are more delays and unavailability of silver coins and
bars with popular formats such as Eagles and Maples now almost difficult
to secure. We acquired a large number of Silver Eagle Monster Boxes
yesterday which we expect to have sold by the close today.

Today, return of capital is of far more importance than return on capital.


Gold in Euros, 1 Year – (Bloomberg)

Gold and silver bullion coins and bars are important in this regard
as they are not about making a capital gain per se rather they are about
wealth preservation.

Given we are in an era of competitive currency devaluations, there is
also the real possibility of making significant capital gains.

Of fundamental importance is the fact that gold and silver coins are
not ‘investments’ rather they are a safe form of money and an important
form of financial insurance that everybody should own.

With the risk of a global depression remaining very real, people need
to own the financial insurance that bullion coins represent. Bullion
coins are like health insurance in that you should own them but hope you
never have to use them.

The biggest benefit of owning gold coins either in your personal
possession or allocated in secure vaults internationally is that they
will always retain a value unlike paper assets and currencies which have
considerable counter party risk today – as was seen in the deposit
confiscation in Cyprus.

NEWS
Gold ticks up, heads for second straight weekly gain – Reuters

60 killed as gold mine collapses – Irish Independent

Asian Stocks Rise With Metals; Dollar Weakens Before Jobs Data – Bloomberg

Arizona governor vetoes bill making gold, silver legal tender – Reuters

COMMENTARY
Italy should use its gold reserves to force a change in EMU policy – The Telegraph

Gresham’s Law Proves Gold And Silver Are Remarkably Undervalued – Seeking Alpha

Comprehensive Guide To Investing In Gold – GoldCore

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