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2024-11-01 | Bloomberg | Where Would Obamacare Be With Romney at the Wheel? | With President Barack Obama invoking Mitt Romney to defend the Patient Protection and Affordable Care Act this week in Boston, it’s worth considering what U.S. health-care policy would look like today if Romney had won the presidency a year ago. The answer: very different in many important ways, but frustratingly similar in others. A Democratic Senate would probably have blocked efforts to repeal Obamacare, leaving Romney to halt or reverse the law through executive action. As promised, he would have found a way to issue waivers from Obamacare to states so that they could pursue their own health-care reforms. But at the end of the day, Obamacare would still be the law, partisan gridlock would still cast its shadow over the policy-making process, and President Romney’s executive actions would be the source of myriad legal challenges from the law’s supporters. Let’s consider each of these actions separately. First, thwarted by the Democratic-controlled Senate, Romney would have issued an executive order suspending the establishment of the Obamacare exchanges, freezing funding for implementation of the law and creating broad exemptions from the individual mandate. He also would have suspended or rewritten any regulations issued by the Obama administration that had the potential to increase health insurance costs, displace patients from their existing health insurance coverage, or restrict choices for consumers. Keeping Insurance One benefit of this executive action would have been that no American would need to worry about losing their existing health insurance coverage. That’s because Romney would have reversed an Obama regulation that is forcing many Americans off their existing plans and onto new (and probably more expensive) plans that met the law’s requirements. This regulation strips protected status from a health plan that makes even routine changes, such as changing a yearly out-of-pocket maximum or tweaking co-pay amounts. Second, using his executive authority to limit the law’s impact, Romney would have stuck to the core of his defense of the Massachusetts health-care reforms and his opposition to Obamacare: Each state should have the freedom and flexibility to pursue the health-care reforms that work best for its citizens. And the plan that works best in a state like Massachusetts is probably doomed to fail in a very different state or as part of a reform plan at the federal level. This was ultimately what Romney found most offensive about the health-care law -- the imposition of a one-size-fits-all federal plan onto states that should instead have been empowered to explore their own health-care reforms. As president, Romney would have used waivers from the law and other executive authority to give states the ability to pursue reforms that both expand coverage and lower costs. These waivers would, in many ways, strike at the heart of the law. And while this freedom and flexibility might result in some liberal states going as far as adopting single-payer systems, Romney believed that our federal system should encourage this kind of experimentation in health-care reform. The best models would succeed, while the worst ones would fail. Finally, Romney would have recognized that while states should take the lead on reform, there were some federal reforms that were needed to improve on the pre-Obamacare status quo. He often spoke of these reforms while campaigning: ensuring that individuals purchasing their own health insurance would receive the same tax benefit as people buying it through their employers, providing protections for those with pre-existing medical conditions, and lowering costs through the interstate purchase of health insurance and medical-liability reform. Romney’s priority would have been to address the continuing rise in health-care costs, as a predicate to expanding access to coverage. Political Cover Republicans don’t all agree on the need for these reforms, or on how they ought to be carried out. (There are, for example, some Republicans who do not believe that medical-liability reform should be carried out at the federal level.) That’s largely why Republican congressional leaders have preferred to focus their attention on repealing Obamacare -- where we broadly agree -- rather than on the disagreements that come with any effort to replace the law with new reforms. Even if Romney had become president, these internecine disagreements would probably have interfered with his ability to advance a coherent and unified package of reforms. One year after the 2012 presidential election, and in the midst of Obamacare’s rocky implementation, it’s tempting for those of us who supported Romney to say “I told you so.” But it’s more important for us to find common-sense ways to work together to deal with a law that is so clearly broken. That’s why President Obama’s speech this week in Boston was so disappointing. It wasn’t about apologizing for the law’s poor implementation, offering to work with Republicans to deal with its shortcomings, or even comparing Obamacare to Romney’s reforms. It was nothing more than an attempt to use Romney’s success in reforming health care in Massachusetts as political cover for staying the course on Obamacare. It was the clearest illustration yet of an administration trying to defend the entirety of a law that has become, in many ways, indefensible. Things wouldn’t have been perfect had Romney been elected - - after all, Obamacare would probably still be the law. But at least our health-care system would be headed in the right direction and toward reforms that would lower costs, expand choices for patients, and allow those who were happy with their health-care plans to keep them. And those are results that Obamacare can’t deliver. ( Lanhee Chen is a Bloomberg View columnist and a research fellow at the Hoover Institution at Stanford University. He was the policy director of Mitt Romney’s 2012 presidential campaign. Follow him on Twitter at @lanheechen .) To contact the writer of this article: Lanhee Chen at lchen301@bloomberg.net. To contact the editor responsible for this article: Christopher Flavelle at cflavelle@bloomberg.net . |
2024-09-10 | Bloomberg | Austrian Banks' East Europe Asset Quality Uncertain: IMF | Austrian bank assets in eastern Europe , the former communist bloc where they are the biggest lenders, may be in worse shape than reported because of shortcomings in data, the International Monetary Fund said. Figures show that about a sixth of the loans of Austrian banks in central, eastern and south-eastern Europe are officially 90 days overdue. The ratio is worsening, and even that number may gloss over the true level of impaired debt, the IMF said in a report published today. The three biggest banks in Austria and eastern Europe are Erste Group Bank AG (EBS) , Raiffeisen Bank International AG (RBI) and UniCredit Bank Austria AG. “Bank asset quality on a consolidated basis is deteriorating and is difficult to assess with full confidence owing to shortcomings in data,” the Fund said in the Financial Sector Stability Assessment, an exam it gives member states every five years. “Loan provisioning may be inadequate in some countries” such as Romania, Hungary, Croatia and Slovenia, it said. While Austria accounts for just 3 percent of the euro area’s economy, it is significant beyond its size for the economies to its east. Its banks that set up operations there have piled up lending to the tune of 326 billion euros ($432 billion). The risk that the expansion may trigger large bank rescues has weighed on Austrian debt costs in some periods, while tighter rules imposed by Austrian authorities have caused concerns that the region may face a credit crunch. Capital Buffers While their capital ratios have improved over the last five years, Austrian banks continue to lag their euro area peers and are bolstered by state aid that will eventually have to be repaid, the IMF said, echoing warnings from the Austrian central bank. Regulators should consider imposing dividend restrictions, the IMF said. “There is no room for complacency in the current environment, and Austrian banks will need to build stronger capital buffers above regulatory requirements,” the Fund said. Erste sold new shares in July to help repay support it got from Austria in 2009. Raiffeisen still relies on 1.75 billion euros of state funding to prop up its capital reserves and is resisting pressure to sell new shares and scale down dividends. Quality Concerns The economic crisis triggered a series of downturns and burst real-estate bubbles across emerging Europe starting in 2008, giving rise to concerns at the IMF and other international lenders about asset quality and data accuracy. Published figures may understate bad loans because they don’t classify all debt as distressed if a borrower defaults on one liability. Banks may also report loans as performing even if they have been restructured, the IMF said, adding that bringing together bank regulation under the auspices of the European Central Bank may yield better data. “Upcoming bank asset quality reviews by the ECB should provide a more robust basis for assessing the strength of the balance sheets of Austrian banks and the policy responses that may be needed,” the IMF said. Nationalized banks Hypo Alpe-Adria-Bank International AG, Kommunalkredit Austria AG, KA Finanz AG and Oesterreichische Volksbanken AG (VBPS) will cause further “significant, though manageable” cost for Austrian taxpayers, the IMF said. Setting up a bad bank for Hypo Alpe and allowing KA Finanz to operate without a banking license could speed up wind-down. Austria should speed up the creation of a bank resolution authority and it should be funded by the bank levy, the IMF said. Its existing deposit insurance plan, a fragmented and unfunded program that has failed to prevent bailouts, should be replaced by a single pre-funded option, the Fund said. To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-11-06 | Bloomberg | ING to Speed Up Reorganization After Revised Deal With EU | ING Groep NV (INGA) , the biggest Dutch financial-services company, will complete its reorganization two years earlier than planned after winning regulators’ permission to combine its Japanese insurance unit with European operations in a 2014 initial public offering. Under its agreement with the European Commission, ING will accelerate the sale of its European insurance and investment management activities by two years to the end of 2016, the Amsterdam-based company said today. The deadline to sell more than half of ING Life Japan was extended by two years to the end of 2015 after the company failed to find a buyer. The stock reached a five-year high. “The positive news is they found a solution for Japan,” said JanWillem Knoll, an Amsterdam-based analyst at ABN Amro Group NV. “Now they can sweat the bad assets out rather than being a forced seller.” Knoll has a buy rating on the shares. Since taking over in October, Chief Executive Officer Ralph Hamers, 47, has cut ING’s stake in its U.S. insurance unit to about 57 percent and reached a deal with the Netherlands on how the nation will sell U.S. mortgage bonds it took over in a 2009 bailout. ING today reported third-quarter profit excluding one-time items that was in line with analysts’ estimates. The shares rose as much as 6.5 percent to 9.88 euros, the highest value since Oct. 15, 2008, before ING’s first bailout. The stock was up 4.4 percent to 9.68 euros as of 3:59 p.m. in Amsterdam and has increased 37 percent this year. Net Income Net income dropped 85 percent to 101 million euros in the third quarter from a year earlier, after a 950 million-euro writedown on the sale of its South Korean life insurance unit, ING reported. Profit excluding one-time items rose 5.6 percent to 891 million euros, compared with the 899 million-euro estimate of analysts. ING is paying the Netherlands 1.13 billion euros in state aid received in 2008 with interest today, a step toward resuming dividend payments to investors. It will make a subsequent payment in March and a final reimbursement by May 2015. “We look to pay the next one on the due date next year,” Chief Financial Officer Patrick Flynn told reporters on a call today. “Thereafter we’ll see what the lay of the land is. Our ambition would be to exit the state as fast as possible whilst maintaining prudent capital ratios.” ‘End Phase’ ING got a 10 billion-euro capital injection from the Dutch government in 2008 and transferred the risk on 21.6 billion euros of U.S. mortgage assets to the state in 2009. The rescue was approved by EU regulators on the condition that the company sells its global insurance operations and returns the financial aid with a premium and interest. With progress made in recent weeks, ING is “advancing further into the end phase” of its transformation, Hamers said. Underlying pretax earnings at ING’s European insurance unit rose to 136 million euros from 10 million euros a year earlier, helped by cost cuts. A sale of the Japanese unit was precluded by its complex structure, Flynn said, as it consists of separate corporate-owned life insurance and variable annuity businesses folded into one legal entity. Japan Unit The Japan unit made an operating profit of 161 million euros in the first nine months of the year, ING said in a presentation today. The company stopped selling variable annuities -- products offering guaranteed benefits that a provider generates through investment returns -- in Japan in 2009 and about 90 percent of the portfolio will run off by 2019, releasing capital. Preparations to sell stakes in the European and Japan operations, to be named NN, in an initial public offering in 2014 are progressing well, ING said. The Japanese unit may make the business more attractive to investors, Flynn said. Cor Kluis, an analyst at Utrecht, Netherlands-based Rabobank International, said the revised plans may increase his price estimate on ING’s stock by 10 cents. Kluis recommends clients buy the shares and currently has a price target of 10 euros. While working through the restructuring, Hamers has to deal with struggling European economies, including a recession at home. Sluggish Economy The European Commission, the European Union’s executive arm, yesterday cut its forecast for euro-area growth. Gross domestic product in the 17-nation currency bloc will rise by 1.1 percent in 2014, less than the 1.2 percent forecast in May, according to the forecast. The commission also lowered its 2014 economic forecast for the Netherlands, citing weak domestic consumption that will only gradually pick up in the course of next year. Pretax profit excluding one-time items at ING’s banking operations fell 0.6 percent to 1.1 billion euros, beating the 1.03 billion-euro estimate of six analysts in a Bloomberg survey. The bank set aside 552 euros for bad loans in the third quarter, less than the 608 million-euro estimate of analysts. Loan-loss provisions, while lower than the previous quarter, are expected to remain high in the foreseeable future, Chief Risk Officer Wilfred Nagel said today. To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-10-09 | Bloomberg | BlackBerry Is Said to Warm to Idea of a Breakup | BlackBerry Ltd. (BB) is more open to a breakup of the company amid concerns that Fairfax Financial Holdings Ltd. (FFH) may be unable to line up funding or partners for a $4.7 billion buyout, a person with knowledge of the matter said. Companies such as SAP AG (SAP) , Cisco Systems Inc. (CSCO) and Samsung Electronics Co. (005930) , which were approached last week by BlackBerry advisers, have indicated they’re only interested in parts of the company, people familiar with the discussions said. A breakup would let parties bid for BlackBerry’s most valuable pieces, such as its patents or enterprise network, said the people, who asked not to be identified because the talks are private. “If you break up the company, you’re going to get more than the company is worth right now,” said Sachin Shah , a strategist in special situations and merger arbitrage at New York-based Albert Fried & Co. Whether Fairfax’s bid is successful or not, “breaking it up sounds more appetizing for all involved,” he said. BlackBerry has been soliciting rival bids after agreeing last month to a tentative $4.7 billion offer from Fairfax, its largest shareholder. Under that pact, BlackBerry has until Nov. 4 to consider other proposals while Fairfax and a group of investors conduct due diligence and line up financing. Investors have grown increasingly concerned the current deal will fall apart, with the stock trading 10 percent below Fairfax’s $9-a-share offer. Losing Ground The smartphone maker was pushed to consider selling itself after years of losing market share to Apple Inc.’s iPhone and devices powered by Google Inc.’s Android. Even as BlackBerry’s smartphones lose favor with consumers, its corporate services and patents could prove more enticing. The patents alone are worth as much as $3 billion, according to analyst estimates. For now, the only public offer for BlackBerry is from Fairfax. The investment firm’s chief executive officer, Prem Watsa , stepped down from BlackBerry’s board in August in order to put together his bid. Watsa hasn’t named any of the other members in his buyout consortium, and while the group is seeking funding from Bank of America Corp. and BMO Capital Markets, no financing deal has been announced. Alberta Investment Management Corp. and Canada Pension Plan Investment Board, two of Canada’s largest pension funds, have both said they would consider joining a bid for BlackBerry, though neither has committed to the idea. SAP, Cisco Seeking to spark a bidding war for the smartphone maker, BlackBerry’s advisers have been reaching out to its technology partners to gauge interest, the people said. SAP, Cisco and Samsung aren’t interested in making an offer for the whole company, though they may consider individual parts, they said. SAP is evaluating whether parts of the company, including its enterprise business, may be attractive, one of the people said. The enterprise division securely manages fleets of smartphones, including BlackBerrys, for business customers. Intel Corp. (INTC) doesn’t want to bid for all or part of the company, though it wouldn’t rule out evaluating the company’s patents, said a person familiar with the chipmaker’s thinking. Jim Dever, a spokesman for Walldorf, Germany-based SAP, declined to comment, as did Cisco’s John Earnhardt and Intel’s Robert Manetta. Chenny Kim, a spokeswoman for Samsung, said her company has ruled out a bid for all of BlackBerry. BlackBerry’s complete portfolio of smartphone and wireless network patents is worth about $1.6 billion, according to Steven Li, an analyst at Raymond James Financial (RJF) in Toronto. Christopher Marlett, CEO of MDB Capital Group, a patent-focused investment bank, estimates the portfolio could fetch $2 billion to $3 billion. Enterprise Business The enterprise network, meanwhile, could be worth $550 million to $1.1 billion, said Li, who rates BlackBerry (BBRY) the equivalent of a hold. Its value may depend in part on how quickly BlackBerry’s subscriber base declines. The company’s customer base slipped to 72 million in June from 76 million in March. Since then, BlackBerry has stopped disclosing a number. The phones themselves are unprofitable and a buyer may just shut down that business, so that operation isn’t considered an asset, Li said. BlackBerry biggest asset may be its cash, which it had $2.6 billion of at the end of August. Reuters reported last week that a number of technology companies, including Cisco, Google, Intel and SAP, were in talks with Waterloo, Ontario-based BlackBerry about a sale. Shares Gain Speculation that a rival bid may emerge has helped drive up the stock more than 5 percent in the past three days. Still, it remains down 32 percent this year and have fallen about 95 percent from its 2008 peak. The shares closed at $8.11 in New York. BlackBerry’s latest outreach follows earlier attempts to find buyers. Before announcing in August that it was formally considering takeover bids, the company’s bankers spent almost a year canvassing potential acquirers, people with knowledge of the matter said at the time. JPMorgan Chase & Co. (JPM) and RBC Capital Markets quietly contacted would-be bidders and found little interest in the whole company, especially among private-equity firms, the people said. Paul Rivett , president of Toronto-based Fairfax, declined to comment on the sale process today. Lisette Kwong, a spokeswoman at BlackBerry, said the company’s board is working with independent financial and legal advisers to conduct “a robust and thorough review” of its strategic options. “We do not intend to disclose further developments with respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives,” she said. Leo de Bever, the CEO of Alberta Investment, said this week that the bidding process has been unusual and that BlackBerry will probably be broken up. “It’s the most bizarre sales process I’ve seen in a long time,” he said in an interview. “We’re looking at it, but nobody’s come to us with a proposal that makes any sense.” To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net ; Jeffrey McCracken in New York at jmccracken3@bloomberg.net To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net ; Nick Turner at nturner7@bloomberg.net ; Pui-Wing Tam at ptam13@bloomberg.net ; Jeffrey McCracken at jmccracken3@bloomberg.net |
2024-04-15 | Bloomberg | Fannie Mae Warns Servicers on Mortgage Insurance Agreements | Fannie Mae , the government-owned finance company, told mortgage servicers to halt a practice that could help them avoid repurchasing flawed home loans. In a notice to banks today, the company said servicers are prohibited from entering into loss-sharing or indemnification agreements with mortgage insurers. The deals help servicers avoid having their policies revoked. The arrangements “compromise mortgage insurance coverage” and are “generally inconsistent with protecting Fannie Mae’s interests in mortgage loans,” the Washington-based company said in its notice. Fannie Mae’s smaller rival, Freddie Mac of McLean, Virginia , sent a similar warning on April 1. Fannie Mae and Freddie Mac, which are operating under federal conservatorship, rely on mortgage insurers to help ferret out bad loans. When an insurer rescinds a policy, it triggers a loan-repurchase request to the lender from the government-sponsored enterprises. Companies including Milwaukee-based MGIC Investment Corp. (MTG) sell insurance on home loans, paying lenders if the loans go into default. After three straight years of losses, the $759 billion industry has been investigating more loans for flaws that might allow them to revoke policies. MGIC said last year it had settled with a lender to halt rescissions in return for a payment. Freddie Mac and Fannie Mae, which own or guarantee more than half of all U.S. home loans, require lenders to buy insurance on mortgages that have small borrower down payments. To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net . |
2024-03-28 | Bloomberg | Your Rights Are Wrong If They Cost Too Much: Terrence R. Keeley | The raging budget battle in Washington is among the most momentous in U.S. history. It primarily pivots on two questions: What benefits are Americans entitled to and how do we pay for them? The first is the hardest. Richard Trumka , president of the AFL-CIO federation of labor organizations, recently said Governor Scott Walker ’s effort to roll back collective- bargaining rights in Wisconsin violated Article 23 of the United Nations Universal Declaration of Human Rights. Article 23 specifies all workers are entitled to remuneration that ensures an existence worthy of human dignity. The UN’s Declaration, which was adopted in a moment of moral rectitude and clarity following World War II, does much more than promise Wisconsin’s public employees dignified work. It states every human being -- 7 billion and counting -- is entitled to food, clothing, housing, medical care, free elementary education, social security, unemployment insurance , “just and favorable work conditions,” regular paid vacations, and the benefits of cultural and scientific advancement. All of these rights are laudable, but fewer than one in eight humans actually possesses them. How do we guarantee one person what seven others can’t have? Shouldn’t universal access to essential needs, like food and shelter, take precedence over the partial expansion of others, like paid vacations and cultural benefits? $90 Trillion The forward curve looks even worse. Unless Americans find an additional $90 trillion for currently mandated Medicare, Medicaid and Social Security benefits, no more than one in 10 may meet the UN’s standards by this century’s end. Rights need to be prioritized if we are to achieve them. Some -- such as life, liberty and the pursuit of happiness -- are inherent to the human condition. Known as natural or inalienable rights, they must be actively thwarted not to thrive. Others -- like education, retirement benefits and medical care -- depend on the goodwill and solidarity of others. These so-called statutory or alienable rights must be actively striven for. Without collective effort, they die. Statutory rights evolve. King Hammurabi’s code -- the most ancient recorded law, dated about 1700 B.C. -- set out 282 rules for Babylonian citizens. One entitled victims of faulty home construction to put their builder’s sons to death. Arbitrary Taxes In 1215, the Magna Carta prohibited arbitrary taxes and instituted due process for Britain’s landed gentry; until then, the British monarch could do whatever he wished. In 1791, Americans gained 10 highly coveted rights , including one to keep and bear arms. It took another 75 years before slavery on American soil was prohibited, however, and a half-century beyond that before women were allowed to vote. Unlike natural rights, alienable rights tend to collide with one another. Article 17 of the UN’s Declaration states no person may be arbitrarily deprived of his or her property. Presumably, this means no Western or Asian wealth may be expropriated even if it is used to build water-filtration plants in Africa , providing thousands of people with clean water. Many public workers in the U.S. have guaranteed retirement benefits that are funded by private workers who have no comparable safety net. Is that right? Without higher taxes, Americans younger than 40 will have no assets left in the Social Security Trust Fund to pay for their benefits, even though they paid Social Security taxes all their lives. Surely that’s wrong. Chinese Surge Medicare and Medicaid costs are set to quadruple in the decades ahead, from about 5 percent to 22 percent of gross domestic product by 2080. If American children are to have the same benefits as their grandparents, either the U.S. economy must grow as fast as China ’s or tax rates levied to provide those benefits must quadruple as well. Given how hard it is to determine which rights are wrong, perhaps we should place the budget debate back-to-front. That is to say, maybe we should focus on the second question first, determining the amount of federal revenue the American economy could reliably generate without stifling economic growth. Then we could decide which public services to prioritize. Rights -- alienable and inalienable, natural and statutory |
2024-01-31 | Bloomberg | Canada Nov. Gross Domestic Product Report (Text) | The following is the text of the Nov. GDP report released by Statistics Canada. Real gross domestic product grew 0.3% in November, following a 0.1% rise in October. Most major industrial sectors increased production in November. Goods production increased 0.6% while the output of service industries rose 0.1%. Manufacturing and mining, quarrying and oil and gas extraction were the main contributors to the November increase. Wholesale and retail trade, utilities as well as transportation and warehousing services also rose. Construction and the public sector (education, health and public administration combined) were unchanged. In contrast, accommodation and food services and the finance and insurance sector decreased. Manufacturing output expands Manufacturing output expanded 0.7% in November following a 0.9% decrease in October. Durable goods production rose 0.9% in November, on the strength of primary metal and transportation equipment manufacturing. Conversely, machinery manufacturing declined in November. Non-durable goods manufacturing increased 0.5%. Growth in chemical, petroleum and coal products, as well as food manufacturing outweighed declines recorded by manufacturers of plastic and rubber products, beverage and tobacco products, and textile, clothing and leather products. Mining, quarrying and oil and gas extraction increases Mining, quarrying and oil and gas extraction increased 0.8% in November. Oil and gas extraction grew 0.8%, on the strength of crude petroleum extraction. Natural gas production decreased. Mining excluding oil and gas extraction rose 1.6% in November. An increase in non-metallic and, to a lesser extent, metallic mineral production outweighed the decline in coal mining. Support activities for mining and oil and gas extraction fell 0.5% in November, mainly because of a decline in drilling services. Wholesale and retail trade rise Wholesale trade rose 0.7% in November, mainly on the strength of the wholesaling of machinery, equipment and supplies, and petroleum products. On the other hand, the wholesaling of food, beverage and tobacco products declined. Retail trade (+0.6%) increased for a third consecutive month in November. Motor vehicles and parts dealers were the main contributors to the growth. Retailing at electronics and appliances stores and furniture and home furnishings stores also increased. In contrast, declines were recorded at miscellaneous store retailers, and clothing and clothing accessories stores. Construction is unchanged Construction was unchanged in November. A decline in residential building construction was offset by increases in non-residential building and engineering construction as well as repair works. The output of real estate agents and brokers decreased 1.1%, as activity in the home resale market declined. Other industries Utilities increased 1.4% in November, owing to higher demand for electricity. Transportation and warehousing services increased 0.4%, mainly as a result of increases in rail and truck transportation, which benefitted from the strength in overall production in November. Support activities for transportation also increased, while pipeline transportation declined. Accommodation and food services declined 0.9% in November, in parallel with a decrease in the number of overnight travellers to Canada. Chart: Main industrial sectors’ contribution to the percent change in gross domestic product, November 2012 ( http://www.statcan.gc.ca/daily-quotidien/130131/cg130131a003 - eng.gif) Note to readers Revisions Revised monthly national gross domestic product (GDP) by industry data covering the period January 2007 to October 2012 are released today. These changes are part of a comprehensive revision to the Canadian System of National Economic Accounts. Periodically, monthly national GDP by industry data undergo historical revisions broader in scope than the regular revisions undertaken on an annual basis. These historical revisions are reserved for incorporating updated international national accounting concepts as well as classification updates and methodological and statistical improvements. This release incorporates such changes back to January 2007. This release also incorporates the new input-output account benchmarks for reference year 2009, released on November 19, 2012. Revisions covering the period January 1997 to December 2006 are planned for release in September 2013. Volume measures The monthly GDP by industry data at basic prices are chained volume estimates with 2007 as the reference year. This means that the data for each industry and each aggregate are obtained from a chained volume index multiplied by the industry’s value added in 2007. The monthly data are benchmarked to annually chained Fisher volume indexes of GDP obtained from the constant-price input-output tables up to the latest input- output tables year (2009). For the period starting with January 2010, the data are derived by chaining a fixed-weight Laspeyres volume index to the prior period. The fixed weights are 2009 industry prices. This approach makes the monthly GDP by industry data more comparable with the expenditure-based GDP data, chained quarterly. All data in this release are seasonally adjusted. For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends ( http://www5.statcan.gc.ca/bsolc/olc-cel/colc-cel?catno=11-010 - X201000311141&lang=fra). For more information about monthly national GDP by industry, see the National economic accounts ( http://www.statcan.gc.ca/nea-cen/index-eng.htm ) module on our website. To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-12-19 | Bloomberg | Allstate Bets on Home Insurance as Stock Rally Withstands Sandy | Allstate Corp. (ALL) Chief Executive Officer Tom Wilson is poised to expand the homeowners’ insurance business that he shrunk by more than a million policies in the last four years to reduce risk and boost shareholder returns. Wilson, 55, is working to improve customer loyalty after a consolidation of Allstate agencies and rate increases led to defections in recent years. He’s also seeking to differentiate the insurer from other carriers by focusing on customer service. “We’re on the glide path to get that business to where it earns a decent return,” Wilson said in an interview this month in his office in Northbrook, Illinois , where Allstate is based. “I haven’t declared victory yet, but I think we’re about ready” to stop shrinking and expand again. Allstate has been buying reinsurance, raising prices and limiting sales in vulnerable areas to guard against higher claims costs from severe weather. That strategy helped the insurer cushion losses from Sandy, the October storm that battered the U.S. Northeast. It’s also helped fuel a 51 percent rally in the stock price this year and is leading the company to its biggest profit since 2007. “Sandy made management look very good” to investors, Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said in a phone interview. “The loss was a lot less than what it could have been historically.” The storm and other natural disasters in October cost Allstate $1.08 billion before taxes and after reinsurance recoveries. That compares with $857 million for Hurricane Ike in 2008, which led to $12.5 billion in industry losses. Industrywide, Sandy could cost twice as much, according to catastrophe modeler Risk Management Solutions Inc. Sandy Response Allstate’s customers complained to regulators in half of one percent of the more than 78,000 claims the insurer has logged in New York since Sandy through Dec. 13, according to data compiled by the Department of Financial Services. That ranks the insurer 15th among 24 companies tracked by the state. Allstate had about 6 million policyholders for its namesake brand of homeowners’ coverage at the end of September compared with 7.3 million four years earlier, according to data on its website. In New York and New Jersey , two of the states hardest- hit by Sandy, the policy count dropped by more than 20 percent since the middle of 2006. “We’ve done the risk reduction for the most part already” and now are thinking about how to “shift into growth mode,” said Matt Winter, who leads the unit that sells the insurer’s namesake brand of auto and home coverage. Car Insurance The shrinking homeowners’ business has put pressure on Allstate’s more-profitable car-insurance segment. As the insurer stopped protecting some homes, customers who had bundled both types of coverage chose to buy their auto policies elsewhere, Wilson has said. “When you tell 1.2 million customers, ‘We’re sorry, we can’t provide you insurance anymore,’ if they have their auto insurance with you, they typically are not happy about it,” Wilson said this month at an investor conference. Sandy also presents challenges. The storm flooded the garage and basement in Debra and Billy Dong’s home in the Gerritsen Beach neighborhood of Brooklyn , destroying the boiler, washer, dryer and years of Christmas decorations. The couple estimates damage is at least $50,000. Allstate sent them a check for about $7,600 to cover damage to their roof, garage door, windows and other parts of the home, they said. They don’t have flood insurance, which is typically underwritten by the federal government rather than companies like Allstate. Repeated Calls Three separate adjusters have been assigned to their claim since the storm, they said, and repeated calls to their agent’s office weren’t answered. The couple said they wouldn’t choose Allstate again after paying the insurer for three decades, including the latest annual premium of almost $2,000. “If I’d put that money in an account, I’d be sitting pretty,” Debra Dong, a public school teacher, said this month in an interview at her home. Wilson praised the company’s response to Sandy and said that Allstate representatives were among the first to arrive in affected areas after the storm and are proactive about asking customers if they have claims. At the same time, the insurer can’t be responsible for paying for flood damage that it doesn’t cover, he said. Allstate has had fewer complaints as a percentage of claims than some competitors, including State Farm Mutual Automobile Insurance Co., Hartford (HIG) Financial Services Group Inc. and Travelers Cos. (TRV) , the New York Department of Financial Services data show. The measure for the three companies is below 0.6 percent of claims. Allstate’s Record Wilson’s company spent on average 8.7 days between when a claim is reported and an inspection in New York, compared with 10.4 days for Travelers, 12.7 for Hartford and 18.8 for State Farm, DFS data show. Reporting companies have different mixes of business, which can affect response times. Allstate has closed 68 percent of claims in New York, compared with 53 percent for Hartford, 59 percent for State Farm and 77 percent for Travelers, the regulator’s data show. “You tend to polarize your customer base” after large events like Sandy, said Newsome, the Sandler O’Neill analyst. “If you pay a claim well in a disaster, then people are immensely grateful and tend to be extremely loyal.” Companies can also alienate clients who feel they are mistreated, he said. Investors missed that Allstate’s efforts to mitigate risk were already in place last year because the industry losses from Hurricane Irene , tornadoes and other severe weather were so large, said Josh Shanker, an analyst at Deutsche Bank AG. Sandy helped reinforce that the company was less exposed, said Shanker, who raised his rating on the company to buy last year when it was trading for less than $27 a share. Earnings Outlook The insurer’s earnings will probably more than double to $1.86 billion this year from last, according to the average estimate of 12 analysts surveyed by Bloomberg. The stock had climbed 86 percent to $41.35 through yesterday from a three-year low in September 2011. It closed at $40.15 in New York on Oct. 26 before Sandy struck. “There’s not as much upside as there was 15 months ago,” said Shanker. “But it feels a whole lot less risky.” To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-11-20 | Bloomberg | Deutsche Bank to Cut Jobs at Sal. Oppenheim Wealth Manager Unit | Deutsche Bank AG (DBK) , Germany ’s largest bank, is in talks with employee representatives on reducing headcount at its Sal. Oppenheim unit as the wealth manager will use more services offered by its parent. The company will eliminate overlap between Sal. Oppenheim and Deutsche Bank over the next 15 months which will affect a “significant” number of jobs, the Cologne, Germany-based division said today in an e-mailed statement. Deutsche Bank will seek to avoid forced firings, it said. Global banks are letting staff go to reduce costs as clients shy from trades amid Europe ’s debt crisis and as stricter capital rules make some business unprofitable. Deutsche Bank said Oct. 30 it will complete the majority of a targeted 1,993 job cuts, including 562 in asset and wealth management, throughout the bank by year-end. It has said staff cuts will exceed its initial targets. Almost 500 jobs at Sal. Oppenheim will be cut by Deutsche bank through the end of the first quarter of 2014, Sueddeutsche Zeitung reported today on its website, citing several unidentified people familiar with the matter. Parts of Sal. Oppenheim, such as public funds, will be integrated into Deutsche Bank, according to the statement. The unit will focus on private clients and certain institutional customers, as well as expanding its custodian bank business in Luxembourg and Cologne, the company said. To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-03-27 | Bloomberg | China Pacific Insurance Profit Rises 16.3% on Premium Growth | China Pacific Insurance (Group) Co.， the nation’s third-biggest insurer, said profit rose 16.3 percent last year as premiums expanded. Net income climbed to 8.56 billion yuan ($1.3 billion), or 1 yuan a share, from 7.36 billion yuan, or 0.95 yuan a share, a year earlier, the company said in a statement to the Hong Kong stock exchange today. That compared with the 7.85 billion yuan median estimate of 10 analysts surveyed by Bloomberg News. Gross written premiums reached 87.9 billion yuan, an increase of 41.7 percent compared with a year earlier, according to the statement. The company expects growth in gross written premiums to slow to more than 15 percent this year. The previous “explosive growth” in life insurance is ending as a result of urbanization, higher per capita income and the improving social security system, among other factors, the company said in its statement. Still, the life insurance business will continue to maintain rapid growth, it said. Chairman Gao Guofu boosted premium income last year at pace 10 percentage points faster than the industry average to defend the company’s shrinking market share. Net investment income was 16.95 billion yuan, an increase of 33 percent over the previous year, even as the benchmark Shanghai Composite Index fell 14 percent. This was due to an increase in interest and dividend income, the company said. Dividend income was 2.72 billion yuan, up from 832 million last year. -- Henry Sanderson , Zhang Dingmin. Editors: Andreea Papuc, Nerys Avery To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-12-21 | Bloomberg | Merck Lowers Price of Isentress Drug for State AIDS Programs | Merck & Co. (MRK) reduced the price of AIDS drug Isentress for U.S. state programs that provide antiviral medicines to lower-income people who have limited or no insurance. The price cut will happen on Jan. 1 and be effective through the end of 2013, the Whitehouse Station , New Jersey drugmaker said in a statement today. The company isn’t releasing the amount of the reduction, Pamela Eisele, a Merck spokeswoman, said in a telephone interview. Merck is the sixth drug company to provide additional discounts for state AIDS programs in recent months, said Murray Penner, deputy executive director for the National Alliance of State and Territorial AIDS Directors, a nonprofit group in Washington. While the state AIDS drug assistance programs serve 200,000 people, as of Dec. 15 there were 4,333 people in 12 states on waiting lists who qualify yet haven’t received assistance because of budget limitations, he said. “With the economy the way it is there are many more people without jobs and many more people who are qualifying for the programs,” Penner said in a telephone interview. “The need has ballooned.” The other drugmakers offering enhanced discounts are Johnson & Johnson (JNJ) ; Bristol-Myers Squibb Co. (BMY) ; Gilead Sciences Inc.; Boehringer Ingelheim GmbH; and ViiV Healthcare, a venture between Pfizer Inc. (PFE) and GlaxoSmithkline Plc, Penner said. Also today, the U.S. Food and Drug Administration approved Isentress for use in children ages 2 to 18. The medicine has been approved for use in adults since October 2007. To contact the reporter on this story: Robert Langreth in New York at rlangreth@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-08-05 | Bloomberg | Asian Stocks Tumble 10% From May High on Economic Growth Concern | Asian stocks tumbled, with the regional benchmark index falling more than 10 percent from its May peak, as concern the world economy is weakening sparked an equities rout that drove the Standard & Poor’s 500 Index to its worst slump since February 2009. Sony Corp., a Japanese exporter of consumer electronics that earns half of its revenue in the U.S. and Europe, slumped 5 percent in Tokyo. Toyota Motor Corp. (7203) , the world’s largest carmaker, retreated 3.2 percent. BHP Billiton Ltd. (BHP) , the biggest global mining company and Australia’s No. 1 oil producer, sank 4.8 percent as commodity prices dropped and the nation’s central bank slashed the country’s economic growth forecast. “It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the U.S. debt- ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.” The MSCI Asia Pacific Index slumped 3.6 percent to 126.12 as of 7:48 p.m. in Tokyo. Just 34 stocks advanced on the benchmark of 1,018 companies, the lowest number since October 2008, according to data tracked by Bloomberg. The measure is headed for 7.8 percent decline this week, amid concern the U.S. economic recovery will stall after growth slowed in manufacturing and service industries and employment cooled in the world’s biggest economy. Weekly Drop The week’s drop is the biggest weekly decline since October 2008, when credit markets froze following the collapse of Lehman Brothers Holdings Inc. The gauge is down 10 percent from its May 2 high, a decline that some analysts say signals a “correction.” Japan ’s Nikkei 225 (NKY) Stock Average and South Korea’s Kospi index both sank slipped 3.7 percent. India’s Sensitive Index slipped 2.2 percent in Mumbai. Hong Kong ’s Hang Seng Index slumped 4.3 percent, the biggest plunge since November 2009, while China ’s Shanghai Composite Index dropped 2.2 percent. Australia’s S&P/ASX 200 Index plunged 4 percent after the Reserve Bank of Australia slashed its 2011 economic growth forecast to 2 percent from its previous estimate of 3.25 percent. The central bank raised the outlook for inflation as delays in coal production, risks to global financial markets and subdued consumer spending delay a rebound. ‘May Get Worse’ U.S. options prices soared the most in four years as investors scrambled to buy protection against greater stock- market losses as worsening economic data sent stocks to the longest losing streak since the bull market began in March 2009. “The latest weakness in stocks is the product of global investors coming to the conclusion that global growth is no longer getting incrementally better and may even get worse,” said Angus Gluskie , who manages about $350 million at White Funds Management in Sydney. “The moves this week reflects the mental capitulation of investors from hope to pessimism, and each day’s fall is only reinforcing the negative outlook.” Exporters dropped on concern demand from the U.S. and Europe, the two biggest markets for Asian companies, will decline. Sony Corp. (6758) , the maker of Bravia televisions and PlayStation game consoles, dropped 5 percent to 1,828 yen in Tokyo. Toyota Motor slipped 3.2 percent to 3,040 yen. Samsung Electronics Co., South Korea’s No. 1 exporter of consumer electronics, fell 3.9 percent to 789,000 won in Seoul. Li & Fung Ltd. (494) , the biggest supplier of toys and clothes to retailers including Wal-Mart Stores Inc., dropped 4 percent to HK$12.04 in Hong Kong. Global Rout Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. In New York yesterday, the S&P 500 tumbled 4.8 percent to an eight-month low of 1,200.07, erasing its 2011 gain. The Stoxx Europe 600 Index sank 3.5 percent to 243.16 in London , the biggest decline since May 2010. The global rout, which has wiped out more than $4.5 trillion from market values worldwide since the selling began on July 26, has made stocks “extremely oversold,” Marc Faber, publisher of the Gloom, Boom & Doom report, said on Bloomberg Television. The MSCI Asia Pacific Index fell 5.8 percent in the last three trading days, its biggest such decline since March 15, amid growing concern the U.S. economy may be heading for another economic recession as consumption remains weak amid the nation’s high unemployment rate. U.S. Jobs The U.S. Labor Department said yesterday that initial claims for unemployment insurance payments fell last week to a level that shows limited improvement in the labor market of the world’s biggest economy. Applications for jobless benefits dropped 1,000 in the week ended July 30 to 400,000, the fewest in almost four months. Employers added 85,000 workers in July, economists project a Labor Department report to show today, failing to reduce a jobless rate that’s holding above 9 percent. Gauges of raw material producers and energy companies led the decline among the 10 industry groups in the MSCI Asia Pacific Index after commodity prices slumped. BHP dropped 4.8 percent to A$38.12. United Co. Rusal, the world’s No. 1 aluminum producer, tumbled 12 percent to HK$9.25 in Hong Kong. Glencore International Plc, the world’s largest- listed commodity trader, slumped 8.9 percent to HK$51.40. Cnooc Ltd. (883) , China’s biggest offshore oil producer, decreased 5.9 percent to HK$15.54. Rio Tinto Crude oil for September delivery fell 5.8 percent to $86.63 a barrel in New York yesterday, the lowest settlement since Feb. 18. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum lost 1.9 percent. Rio Tinto Group, the world’s second-biggest mining company by sales, also declined 6 percent to A$72 in Sydney after posting first-half profit that missed analyst estimates as costs and currency gains in Australia and Canada hurt earnings. Of the 402 companies in the MSCI Asia Pacific Index that reported earnings since July 11, 176 beat analyst estimates, while 132 fell short, according to data compiled by Bloomberg. Billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. (1) and Hutchison Whampoa Ltd. (13) slumped after reporting earnings that missed estimates. Cheung Kong, Hong Kong’s second-biggest developer by market value, declined 6.2 percent to HK$112.20. The company said yesterday first-half net income almost tripled to HK$33.3 billion ($4.3 billion). That compares with the average estimate of HK$34.9 billion in a Bloomberg survey of five analysts. Hutchison Whampoa, Li’s biggest company, slumped 8.3 percent to HK$82.90 after posting first-half profit that also missed analyst estimates as a loss at its Australian mobile- phone unit eroded gains from utilities and energy. The MSCI Asia Pacific Index lost 5 percent this year through yesterday, compared with drops of 4.6 percent by the S&P 500 and 11.8 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13 times estimated earnings on average, compared with 12 times for the S&P 500 and 9.9 times for the Stoxx 600. To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net ; Shani Raja in Sydney at sraja4@bloomberg.net. To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net . |
2024-10-10 | Bloomberg | Summary of Economic Reports by Federal Reserve District Banks | Following is a summary of U.S. economic conditions as reported by the 12 Federal Reserve district banks in the central bank’s latest regional survey, known as the Beige Book. The Federal Reserve Bank of Atlanta prepared the latest report. Information was collected on or before Sept. 28. Boston: “Reports from business contacts in the First District indicate the region’s economy is expanding at a modest pace. Most retail and manufacturing contacts report sales or revenue gains from a year earlier, although the manufacturers say growth is slower than earlier in the year and some have seen actual declines. Consulting and advertising firms are generally upbeat, with results depending on specific client industries. Residential real estate contacts note increases in sales and only small changes in median sale prices. Commercial real estate leasing activity has slowed somewhat, while investment conditions remain positive. With the exception of a consulting firm that has expanded recently and a manufacturer citing especially strong growth, responding firms are doing only modest hiring. While contacts in most industries mention the upcoming election, so-called fiscal cliff, and Europe as risk factors increasing uncertainty, it is only in commercial real estate leasing that respondents say current activity levels are measurably damped by such concerns.” New York : “Economic activity in the Second District has held steady since the last report. Prices of finished goods and services have generally been stable. The labor market has shown further signs of softening, as fewer business contacts report that they are adding workers, and a major employment agency describes hiring activity as sluggish. Retailers, including auto dealers, note some leveling off in sales activity following increases. Tourism activity has generally held steady at a high level, though there were some indications of softening in mid- September. Residential real estate markets have shown further signs of improvement. Office markets have shown some signs of slackening, but industrial markets have picked up modestly. Finally, bankers report increased loan demand, except on consumer loans, steady to tighter credit standards, and lower delinquency rates on commercial loans and mortgages.” Philadelphia: “Aggregate business activity in the Third District has continued to improve - growing modestly - since the previous Beige Book. A couple of sectors grew faster than the average, while a few declined slightly. Manufacturing activity declined somewhat, although a slight increase in new orders may presage a turnabout. Retail sales growth has continued at a modest pace since the last Beige Book, while auto sales have continued to increase at a strong pace. Lending volumes at Third District banks have continued to grow modestly, and credit quality has continued to improve. Sales of new homes have slowed since the previous Beige Book period, while brokers report strong growth in sales of existing homes (from previously low levels). Commercial real estate contacts reported less leasing activity and continued weak demand for new construction. Service-sector firms reported mixed results with stronger tourist visitation, a slowing defense sector, and modest growth across most other service sectors. Price pressures have changed little since the last Beige Book.” Cleveland : “ Business activity expanded in the Fourth District since our last report, although the rate of growth remains modest. On balance, manufacturing output rose. In the real estate sector, nonresidential construction picked up, while reports on single-family housing starts were mixed. Sales of existing family homes increased. Retailers and auto dealers saw a modest improvement in sales during August and September on a year-over-year basis. Shale gas activity continued at a robust pace, while coal production fell below prior-year levels. The slowdown in freight transport volume, which began in the second quarter, has abated. And the demand for business and consumer credit moved slightly higher. ” Richmond: “Fifth District economic activity improved modestly since our last report. Most manufacturing contacts reported activity firmed somewhat. Port activity continued to expand. Retailers reported that sales grew on balance, and non- retail firms cited marginal revenue expansion. Lending activity improved somewhat, although most applications continued to be for refinancing. Residential real estate activity continued to strengthen; however, areas of weakness remained in the District. Tourism contacts reported healthy bookings as the summer season ended. Commercial real estate reports were mixed for private- sector projects and weaker for government-related projects. Labor market reports were also mixed, with accounts of modest increases in employment along with major layoffs and hiring freezes. Price changes were generally small in the manufacturing and services sectors in recent weeks.” Atlanta: “Sixth District business contacts described economic activity as expanding slowly in September, and most expect little change in the near term. Most retailers cited slow sales growth while auto dealers continued to experience strong results. Hospitality reports remained largely positive, with the exception of cruise-lines. Residential brokers and builders signaled that housing conditions continued to improve in many parts of the District as sales and prices of new and existing homes slightly increased compared with a year ago. Commercial development continued to improve, led by multifamily construction. Manufacturers indicated that new orders had softened while production levels only mildly increased. Bankers saw improvements in demand for overall loans, particularly those for housing purchases and refinances. Payrolls expanded modestly on net, and firms noted some deceleration in input prices, while wages remained relatively unchanged. ” Chicago: “Economic activity in the Seventh District continued to expand in late August and early September, but again at a slow pace. However, contacts remained guardedly optimistic that conditions would improve; noting that at least some of the uncertainty surrounding the outlook was likely to be resolved following the November election. Growth in consumer spending was little changed, while business spending increased at a slower rate. Manufacturing activity edged lower, and growth in construction moderated. Credit conditions continued to improve gradually. Cost pressures increased some, due in large part to higher food and energy prices. The drought led to an earlier start than normal for the harvest, and corn and soybean prices moved down a bit.” St. Louis : “Economic activity in the Eighth District has expanded at a moderate pace since our previous survey. Recent reports of planned activity from manufacturing and services contacts have been positive. Residential real estate market conditions have continued to improve moderately, while commercial and industrial real estate market conditions have continued to be mixed. Overall lending activity at a sample of small and mid-sized District banks increased slightly from mid- June to early September. Agricultural conditions in the District have generally improved since our previous report.” Minneapolis: “The Ninth District economy expanded modestly since the last report. Increased activity was noted in construction and real estate, consumer spending, tourism, and professional services. Energy and mining were steady at high levels, while agriculture varied widely, with crop farmers generally in better condition than animal producers. Meanwhile, activity slowed slightly in the manufacturing sector. Labor markets tightened somewhat. Overall wage increases remained subdued, although stronger increases were reported in some areas. Price increases were generally modest.” Kansas City : “The Tenth District economy expanded at slightly slower pace in late August and September compared to earlier in the summer. Consumer spending slowed somewhat, manufacturing growth was more subdued, and transportation firms reported flat conditions. Growth in commercial real estate activity slowed marginally, but remained on a positive trend. Residential sales and construction continued to grow at a solid pace. Drought conditions hurt agricultural production, though farm incomes were generally healthy due to higher crop prices and insurance programs. Energy activity remained solid, and bankers noted steady loan demand, better loan quality, and increased deposits. Prices rose moderately, but wage pressures were contained outside of a few skilled positions.” Dallas : “The Eleventh District economy expanded at a moderate pace over the past six weeks. Energy activity remained strong, and construction and real estate activity picked up as housing demand strengthened. Demand for business services improved slightly, and transportation services activity continued to expand. Reports on manufacturing activity were mixed. Growth in retail and auto sales slowed over the reporting period, but Eleventh District sales continued to outperform the national average, according to respondents. Lenders noted steady loan demand. Agricultural conditions improved slightly. Price and wage pressures were modest over the reporting period, and employment levels continued to edge up. Many respondents across industries said continued uncertainty about upcoming elections was clouding outlooks.” San Francisco : “Economic activity in the Twelfth District grew at a modest pace during the reporting period of mid-August through late-September. Upward price pressures remained limited overall, and upward wage pressures remained muted. Sales of retail items rose slightly, and demand for most business and consumer services gained further on net. District manufacturing activity edged up. Agricultural output was mostly steady, while activity continued to trend up for providers of energy resources. Home demand in the District showed continued signs of improvement, and demand for commercial real estate was mainly stable. Financial institutions reported overall loan demand was unchanged or up somewhat on balance.” To contact the reporter on this story: James Tyson in Washington at jtyson@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-06-21 | Bloomberg | BofA May Sell Part of CCB Stake to Bolster Capital | Bank of America Corp. (BAC) may sell some of its $21 billion stake in China Construction Bank Corp. (939) to bolster capital before new international standards take effect, said three people briefed on the plans. Bank of America, the biggest U.S. lender by assets, wants to keep about half its CCB shares so it can remain a strategic investor in the world’s second-biggest bank by market value, said two of the people, who declined to be identified because the plans are private. CCB led declines among Hong Kong-listed Chinese banks today. “This is obviously a forced sale -- it’s a big chunk of a valued enterprise in an attractive place in the world,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management, with $465 million in assets, including Bank of America shares. “It’s a relatively poor time to be selling because the Chinese stock market hasn’t done well recently.” Selling the shares could help Bank of America raise capital to comply with tougher minimums that may be imposed by regulators as they try to prevent a repeat of the 2008 financial crisis. The Basel Committee on Banking Supervision is considering plans that may include a surcharge on the largest lenders, people briefed on those talks have said. Ties That Bind Shares of CCB dropped 3 percent in Hong Kong as of midday trading break, extending its decline this year to 8.3 percent. Still, that values the Beijing-based company at about $205 billion, a more than threefold increase from its market capitalization at the time of its October 2005 initial public offering in Hong Kong. Bank of America, which began investing in CCB before the IPO, owned 25.6 billion shares valued at $21 billion as of March 31, the Charlotte, North Carolina-based lender said in a May regulatory filing. The stake, which is the U.S. bank ’s largest holding by market value, equals about 10.6 percent of CCB’s Hong Kong-listed shares, according to Bloomberg data. A lockup period in which Bank of America is prohibited from selling most of its shares expires in August. “It’s a strategic relationship and it will continue to be one for a long time,” said Larry DiRita, a spokesman for Bank of America. Yu Baoyue, a spokesman for CCB, declined to comment. The U.S. bank may decide to divest more holdings, with the sale taking place later this year, the people said. Asset Sales Bank of America has been selling assets including its Balboa insurance unit, First Republic Bank and holdings in BlackRock Inc. to boost capital and focus on core clients. The firm can build capital through earnings and doesn’t need to issue stock, Chief Executive Officer Brian T. Moynihan , 51, said last week. Capital surcharges on the largest banks may crimp lending and drive off investors from financial firms, he said. China Construction Bank had annual profit growth of 33 percent since 2007 and is forecast to increase net income by 23 percent this year, according to analysts surveyed by Bloomberg. Bank of America was the second-biggest shareholder in CCB at year-end, trailing only the Chinese government’s 59 percent stake in its Hong Kong shares, according to Bloomberg data. Temasek Holdings Pte is the third-largest investor with a 7 percent stake. CCB has 240.4 billion shares outstanding in Hong Kong and 9.6 billion yuan-denominated shares listed in Shanghai. Bank of America fell 8 cents to $10.60 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 21 percent this year, the worst performance in the 24-company KBW Bank Index, as housing-related costs weighed on results. ‘Chunk of Gold’ “People are focused on Bank of America getting beyond its legacy issues, and this happens to be a nice chunk of gold they have that can help them get there,” said Jonathan Hatcher, a credit strategist at Jefferies & Co. in New York. Potential buyers of the CCB stake may include sovereign wealth funds, particularly if the bank needs to sell all its holdings, said Charles W. Peabody, an analyst at Portales Partners LLC with a “buy” rating on Bank of America. The company would raise about $10 billion in regulatory capital if it sold all its CCB stock, he said. Under former CEO Kenneth D. Lewis , Bank of America paid $3 billion for a 9.9 percent CCB stake in 2005 before the Chinese bank’s IPO. The U.S. lender later exercised an option to buy an additional 11 percent, paying $9.2 billion. The firm sold its initial stake in CCB in May 2009, reaping a pretax gain of $7.3 billion, as loan losses mounted amid the recession. Last year, the bank sold rights to buy 1.79 billion CCB shares to Temasek, Singapore ’s state investment company. Foreign Investors Investors including Bank of America, Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc have trimmed about $20 billion in holdings in Chinese lenders since 2009. Chinese regulators consider a single foreign holding of at least 5 percent with a lockup period of at least three years a strategic investment. A lockup on 12.4 billion Hong Kong-listed Agricultural Bank of China Ltd. (1288) shares held by investors including Standard Chartered Plc (STAN) and Qatar Investment Authority expires next month. The Chinese bank’s listing raised $22.1 billion in the world’s largest initial public offering in July 2010. Kuwait Investment Authority, which owns 1.9 billion Agricultural Bank shares, said in May it won’t sell its stake when the lockup ends, according to managing director Bader Al- Saad. ‘Overhang’ Agricultural Bank shares, which have gained 18 percent since listing, fell 3.5 percent to HK$3.85 in Hong Kong today. “The overhang on lockup expiration, slower economic growth and tighter regulatory requirements are all uncertainties driving investors away from China banking shares,” said Patrick Pong, a Hong Kong-based analyst at Mirae Asset Securities HK Ltd., who rates CCB “hold”. The central bank this week raised lenders’ reserve requirements to a record to drain cash from the economy after inflation rose to the highest in almost three years in May. The banking regulator is seeking to impose higher capital adequacy ratios on lenders and have them assign more risk-weighting to property and local government financing vehicles loans. At Industrial & Commercial Bank of China (601398) Ltd., the world’s largest lender by market value, Goldman Sachs is the largest foreign investor with 10.1 billion shares held at the end of last year, according to ICBC’s annual report. To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net ; Christine Harper in New York at charper@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-02-22 | Bloomberg | Gillard Set for Australian Leadership Showdown as Rudd Canvasses Support | Julia Gillard staged a political coup in June 2010 to become Australia’s prime minister and clung to power two months later, assembling a one-seat majority after the closest election since 1940. Her biggest leadership test may come next week. Kevin Rudd , 54, announced his resignation as foreign minister after 1 a.m. on a visit to Washington yesterday, saying he would consult with colleagues and reveal his decision before parliament resumes Feb. 27. He said the “overriding question” for the Labor party is who is best placed to defeat opposition leader Tony Abbott at the election, due in 2013. Tensions escalated after remarks by Gillard, 50, in an interview last week set off a public spat between supporters of the two, by reviving debate over her toppling of Rudd. At stake for Labor is survival of an administration that’s unveiled unprecedented taxes on natural resources and fees to address climate change -- an agenda Gillard calls “nation-changing reform” that has proved unpopular with voters. “The challenge is on,” said Tim Harcourt, a fellow in economics at the Australian School of Business in Sydney who has served under both Labor and Liberal-National coalition governments. “Rudd is saying that I was elected by the people and I deserve to finish my mandate.” Setting Vote Gillard, Australia ’s first female prime minister, is scheduled to hold a news conference at 9:30 a.m. Sydney time in Adelaide today. Sky News reported she will announce a leadership vote to be held on Feb. 27, without saying where it got the information. “The sooner it comes, she’ll maximize her votes,” former Labor lawmaker Graham Richardson said on Sky. The prime minister has “the confidence of the vast majority of members of the government,” Bill Shorten , minister of workplace relations, told reporters in Melbourne yesterday. Wayne Swan , the Treasurer who backed Gillard’s takeover in 2010 and became her deputy prime minister, said in a statement Rudd had wasted opportunities in office from 2007-2010 with “dysfunctional decision making” and a “demeaning attitude” toward colleagues. Australia’s dollar and government bonds were little changed immediately after Rudd’s move. The so-called Aussie declined later as stocks dropped worldwide after reports indicating weakness in European and Chinese output. The currency fetched $1.0637 as of 8:18 a.m. in Sydney, compared with $1.0676 at 6 p.m. yesterday. Ten-year government bond futures climbed to 95.905 from 95.85 yesterday, according to the Sydney Futures Exchange. Election Risk Independent lawmaker Tony Windsor , on whose support Labor relies to maintain its majority in parliament, said that “all bets are off” if the leader is changed, raising the risk of an early election. A federal vote isn’t due until 2013. Attorney General Nicola Roxon, speaking with the Australian Broadcasting Corp., joined Communications Minister Stephen Conroy and Environment Minister Tony Burke in publicly backing Gillard since Rudd’s resignation. “There is one overriding question for my colleagues and that is who is best placed to defeat Tony Abbott ,” Rudd said in Washington. He is yet to leave the city, ABC TV reported today. Abbott’s Liberal-National coalition led Labor by 46 percent to 32 percent in a Newspoll survey conducted Feb. 10-12 of 1,141 people with a margin of error of plus or minus 3 percentage points. Amateur Boxer “The poison will continue regardless who emerges” as Labor’s leader, Abbott said in an interview on ABC TV today. “The Labor party is hopelessly divided.” Abbott, 54, a former amateur boxer, called for an early election. The opposition chief has said Australians cannot afford the carbon tax enacted by Gillard and highlighted that the nation recorded its worst job growth in 19 years in 2011. Australia’s economy even so has outperformed peers under Labor. The nation’s 5.1 percent unemployment rate compares with the 7.9 percent average for advanced economies last year. Gross domestic product growth in the two quarters through September was the strongest since 2007. The performance hasn’t healed Labor’s splits. Rudd, in Washington for meetings with U.S. officials after attending a Group of 20 gathering in Mexico , said he resigned because Gillard had failed to “repudiate” attacks by colleagues including Simon Crean, a former Labor leader who is minister for Australia’s regions. Infighting Intensified After Rudd said in a Sky interview broadcast Feb. 19 that he’d changed the autocratic style that helped lead to his downfall, Crean said he had “either got to put up or shut up.” The infighting intensified after Gillard declined in an interview with ABC television to specify whether she knew her staff was preparing, two weeks before Rudd’s overthrow, a victory speech that she subsequently delivered. “I am totally frustrated by this needless distraction,” Labor lawmaker Sid Sidebottom, who said he supports Gillard, said in a telephone interview from Tasmania before yesterday’s resignation by Rudd. “Everyone has a right to challenge, but they have to do it in the caucus, instead of boring Australian people, frustrating their colleagues, and spoiling a good story of legislation and reform.” Rudd cut short a trip that was to take him to London and Tunis for meetings on Somalia and Syria. ‘Use the Stage’ “Politics is about theater and Rudd certainly used the most of his opportunity to use the stage,” said Michael McKinley, a professor of global policy at the Australian National University in Canberra. “It’s not normal for a democratic foreign minister to resign his position from Washington.” Rudd himself said the leadership speculation had become “little better than a soap opera,” and warned that business confidence could be at risk. Peter Anderson, chief executive officer of the Australian Chamber of Commerce and Industry , said this week that “we need to make sure that there are as few distractions introduced as a result of our own domestic politics as possible.” Gillard, a former labor lawyer born in the U.K. who emigrated to Australia when she was four after contracting bronchial pneumonia, has sought to keep focus on her administration’s policy initiatives, flagging a health-insurance overhaul and review of education policies in recent days. Unfinished Business One unfinished measure is a 30-percent tax on coal and iron-ore profits, which still awaits Senate approval. Mining companies including BHP Billiton Ltd. have warned the measures will hurt investment and job growth in the nation, which has seen its exports led by Chinese demand for its natural resources. Rudd, a Mandarin-speaking former diplomat, in office had sought a bigger mining tax that prompted a slide in his approval ratings, and retreated on climate-change proposals. In the past week, he highlighted as achievements during his tenure that Australia stayed out of recession during the global financial crisis and his government prevented “mass unemployment.” One option for Rudd is to undertake two challenges to win the leadership, a strategy pursued successfully by Labor predecessor Paul Keating , when he ousted Prime Minister Bob Hawke 20 years ago. Historical Precedent While Keating lost the first challenge to Hawke in June 1991, he secured 44 votes to Hawke’s 66, enough to convince Labor party powerbrokers he had widespread support, according to Michael Gordon , author of the Keating biography “A True Believer.” Keating moved to the backbench, leaving his supporters to criticize and undermine Hawke, and six months later struck again, winning the leadership by 56 votes to 51. Had Keating polled fewer than 40 votes in the first ballot, according to Gordon, Labor powerbrokers were emphatic that he wouldn’t have received another chance and would have had to leave politics. Australian bookmaker Sportsbet.com.au, which says it’s the nation’s largest online betting agency by revenue, is offering to return A$1.33 on every A$1 bet that Gillard will win a leadership contest, and A$3.15 for Rudd. “If the race is a sprint, we’re backing Gillard, but if it turns out to be a marathon, Rudd’s chances will increase significantly,” Haydn Lane, a spokesman for sportsbet.com.au, said in a statement. To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net ; Michael Heath in Sydney at mheath1@bloomberg.net To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net |
2024-08-30 | Bloomberg | Bank of America, Barnes & Noble, Boeing, Eastman Kodak: U.S. Equity Movers | Shares of the following companies had unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 4 p.m. in New York. Bank of America Corp. (BAC) lost the most in the Dow Jones Industrial Average , slipping 3.2 percent to $8.12. The Federal Deposit Insurance Corp. objected to the lender’s proposed $8.5 billion mortgage-bond settlement with investors. Barnes & Noble Inc. (BKS) rose 15 percent, the most since May 20, to $13.13, the most intraday since May 20. The largest U.S. bookstore chain posted a smaller loss in the first quarter, helped by demand for its Nook e-reader, and forecast a $150 million to $200 million sales boost after the liquidation of competitor Borders Group Inc. Boeing Co. (BA) climbed the most in the Dow Jones Industrial Average, adding 2.2 percent to $66.03. The planemaker approved development of an upgraded 737 with more fuel-efficient engines after winning 496 order commitments from five airlines for the latest variant of the world’s most widely flown jetliner. CoreLogic Inc. (CLGX) surged 29 percent, the most in the Russell 1000 Index, to $11.35. The seller of property and credit data hired Greenhill & Co. to help consider options including a sale. Corinthian Colleges Inc. (COCO) gained 21 percent, the most since June 2, to $2.27. The for-profit education provider was raised to “buy” from “hold” at Gabelli & Co., which cited a “compelling value” and said with some “tweaking” most of the company’s programs are likely to meet U.S. Department of Education debt-to-income guidelines. Dollar General Corp. (DG) increased 5.8 percent to $35.76, the highest price since its initial public offering in November 2009. The biggest dollar-store chain in the U.S. said sales in 2012 will rise as much as 14 percent, up from a previous forecast of no more than 13 percent. Family Dollar Stores Inc. (FDO) climbed 4.2 percent to $51.06. Eastman Kodak Co. (EK) gained 12 percent to $3.40, the highest price since June 30. The 131-year-old camera company, which is seeking to generate cash from its intellectual property, has signed confidentiality agreements with numerous potential buyers of its patents it put up for sale last month, Chief Executive Officer Antonio Perez said. Limelight Networks Inc. (LLNW) rose 5.7 percent to $2.62, the highest price since Aug. 8. The software maker sold its EyeWonder advertising unit to DG Fastchannel, Inc. (DGIT US) for about $66 million in cash. Monster Worldwide Inc. (MWW) surged 21 percent to $9.91 for the biggest gain in the Standard & Poor’s 500 Index. The world’s largest online-recruiting company was “overdue for a bounce” after other Internet companies including professional- networking firm LinkedIn Corp. (LNKD US) have surged in recent weeks, said Douglas Arthur, an analyst at Evercore Partners Inc. in New York who rates the stock “equalweight.” LinkedIn rose 6 percent to $87.49. PulteGroup Inc. (PHM US) rose 7.1 percent to $4.95, the highest price since Aug. 5. The largest U.S. homebuilder by revenue was raised to “buy” from “neutral” at Ticonderoga Securities. The 12-month share-price estimate is $6.50. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-03-07 | Bloomberg | ABN Amro Group Acquires Dutch Commercial-Banking Assets From RBS | ABN Amro Group NV, the Dutch lender nationalized in 2008, is taking over some of Royal Bank of Scotland Group Plc’s commercial-banking activities in the Netherlands to bolster its position in its home country. The segments include corporate finance, equity brokerage and capital structuring, and employ about 70 people, Amsterdam- based ABN Amro said in an e-mailed statement today. ABN Amro isn’t paying for the businesses, part of a unit that RBS (RBS) is ending worldwide, said Joop Wijn, an ABN Amro boardmember. With the transaction, ABN Amro is getting back some of the assets RBS acquired from the Dutch bank’s predecessor five years ago, Wijn said. RBS, Spain ’s Banco Santander SA (SAN) and Fortis bought ABN Amro in 2007 for about 72 billion euros ($95 billion) in the world’s biggest banking takeover. A year later, Fortis ran out of funding, and the Netherlands bought its Dutch banking and insurance units and its stake in ABN Amro Holding NV. “The people we spoke to said it feels like coming home,” Wijn, who is responsible for commercial banking at ABN Amro, said in a telephone interview. The takeover is a “signicant expansion of ABN’s merchant banking team.” The Dutch bank anticipates growth, he said. RBS, Britain’s biggest government-owned lender, said in January it would cut about 3,500 jobs at its investment-banking division and sell or close the unprofitable cash-equities, mergers-advisory and equity-capital-markets divisions. To contact the reporter on this story: Andrea Snyder in Washington at asnyder5@bloomberg.net To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net |
2024-09-21 | Bloomberg | BlackBerry Is Seen Mimicking Palm’s Decline | BlackBerry Ltd. (BBRY) reported a more than 40 percent plunge in sales and vowed to cut a third of its workforce, raising concern that it’s on the same downward spiral as Palm Inc., though without prospects for a last-minute buyer. The company said yesterday that it’s eliminating 4,500 jobs and recording an inventory writedown of as much as $960 million for the fiscal second quarter. BlackBerry expects to report a net operating loss of as much as $995 million in the period and sales of $1.6 billion -- about half the $3.03 billion that analysts had estimated, according to data compiled by Bloomberg. The bleak results sent BlackBerry shares tumbling 17 percent and drew comparisons to Palm, another smartphone pioneer that fell out of favor with consumers. Like BlackBerry, that company attempted a comeback with a new operating system -- only to see it fizzle with shoppers. Palm was able to entice Hewlett-Packard Co. (HPQ) into buying it in 2010, though that didn’t save the product line from being discontinued. “It reminds me very much of Palm,” said Keith Lam, managing partner with Red Sky Capital Management Ltd. in Toronto. “HP tried to catch a knife buying Palm and it didn’t work out. So I’m not sure why anybody would step in here. These numbers are extremely bad.” BlackBerry shares fell to $8.73 at the close in New York yesterday, marking the biggest one-day drop in more than two months. The stock has declined 26 percent this year, bringing its market value to $4.6 billion. Sale Process BlackBerry said last month that it was forming a special committee to evaluate its strategic options, including a potential sale of the company. Finding a buyer may not be easy, though. JPMorgan Chase & Co. and RBC Capital Markets spent close to a year quietly canvassing potential acquirers without success, people with knowledge of the matter said last month. BlackBerry also has hired accounting firm PricewaterhouseCoopers LLP to evaluate the company for potential buyers, according to two people with knowledge of the move. The company put out its financial results a week before their scheduled release, aiming to get the news out of the way and show that it was charting a course toward recovery. In a concession that it has failed to gain traction against Apple Inc. (AAPL) ’s iPhones or Google Inc.’s Android devices, BlackBerry is narrowing its focus to the market for corporate users. Still, that decision may not be enough, Lam said. The revamped BlackBerry 10 lineup, the linchpin of the company’s comeback plan, hasn’t sold as well as analysts had estimated. Customers such as Morgan Stanley are holding off on committing to new devices, concerned about BlackBerry’s future. Nail in Coffin “That’s the nail in the coffin,” said Lam, whose firm manages C$220 million ($214 million). While Red Sky was a BlackBerry investor, it’s getting rid of its stake because of the results, he said. “There’s no point anymore.” BlackBerry’s $1.6 billion in revenue would be its lowest quarterly sales since 2007, when smartphones were a nascent market. Back then, the iPhone had been out for less than three months, and Google’s now-dominant Android operating system was still in the development phase. Chief Executive Officer Thorsten Heins was counting on the BlackBerry 10 phones -- introduced in January to good reviews -- to reverse a sales slide, return the company to profitability and make the brand hip again. Instead, its market share continues to slide and BlackBerry remains in the red. The Canadian company said it will record revenue for sales of 3.7 million smartphones last quarter, mainly from earlier BlackBerry 7 devices. In all, 5.9 million smartphones were sold through to customers in the period, including ones shipped to carriers earlier, the company said. Z10 Flop The inventory writedown is mostly for the Z10 touch-screen device, which was seen as the company’s flagship model and chief iPhone competitor. BlackBerry also introduced two phones this year with physical keyboards, the Q10 and Q5. The adjusted second-quarter net loss will be as much as $265 million, or 51 cents a share, BlackBerry said. That compared with the average analyst estimate of 16 cents. The latest job cuts follow a move to eliminate 5,000 jobs last year, part of an effort to save $1 billion in operating costs. BlackBerry had 12,700 workers as of the end of March, the last time it disclosed a number. BlackBerry is the biggest spender on research and development among publicly traded Canadian companies, according to data compiled by Bloomberg. That makes its employee base important for the nation’s economy. ‘Knock-On Effects’ “Even if they aren’t all in Canada , the knock-on effects could be significant over the coming months,” said Terrence Connelly, principal at hedge fund Contingent Macro Advisors LLC in Lafayette, California. The inventory writedown, meanwhile, extends a streak of similar charges. The company took a pretax expense of $485 million in December 2011, a second charge of $267 million the following March and a third writedown of $335 million in June 2012. Still, BlackBerry continues to offer new products. Earlier this week the company introduced the Z30, a model with the company’s largest screen yet. The device goes on sale in the U.K. and Middle East starting next week. A team of accountants and lawyers from New York-based PricewaterhouseCoopers have been working at BlackBerry since August, said people familiar with the process, who asked not to be identified because the contract hasn’t been made public. The smartphone maker previously hired Perella Weinberg Partners LP as an adviser -- alongside its bankers at JPMorgan - - to help explore its options, a person familiar with the decision said earlier this month. Fairfax Financial Holdings Ltd. (FFH) , BlackBerry’s largest shareholder, has talked to Canadian pension fund managers to try and build support for a takeover deal, according to a person with knowledge of the discussions. However, he hasn’t made much progress, the person said. “It appears the only option BlackBerry has is to ultimately sell itself,” said Neeraj Monga, an analyst at Veritas Investment Research Corp. in Toronto. “But it seems nobody’s stepping up to the plate.” To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net |
2024-03-04 | Bloomberg | Dow Climbs to Five-Year High as Fed Bets Offset China | U.S. stocks rose, sending the Dow Jones Industrial Average to its highest level since 2007, as speculation the Federal Reserve will continue stimulus measures overshadowed concern over spending cuts and China’s economy. Airlines rallied while industrial and energy stocks fell as oil dropped to its lowest level since December. Yahoo! (YHOO) Inc. jumped 3.5 percent after an analyst at Barclays Plc raised his rating on the company. Homebuilders advanced as D.R. Horton Inc. and Ryland Group Inc. rose at least 3.2 percent. Google Inc. (GOOG) jumped 1.9 percent to a record, while Apple Inc. (AAPL) retreated 2.4 percent to its lowest level in more than a year. The Standard & Poor’s 500 Index rose 0.5 percent to 1,525.20 at 4 p.m. in New York , after falling as much as 0.4 percent earlier. The Dow Jones Industrial Average gained 38.16 points, or 0.3 percent, to 14,127.82, its highest level since October 2007. About 6 billion shares exchanged hands on U.S. exchanges today, 4.4 percent below the three-month average. “Excluding this quarter, which will be impacted by the sequester, the economy probably strengthens as the year goes on,” Michael Mullaney, chief investment officer at Boston-based Fiduciary Trust Co., which manages $9.5 billion, said by telephone. “The Fed is going to be our friend for an extended period of time, and as the old adage goes, don’t fight the Fed.” The bull market in U.S. equities is entering its fifth year this month after the S&P 500 surged 124 percent from a 12-year low in 2009 amid better-than-estimated corporate earnings and three rounds of bond purchases by the Fed to keep interest rates low and stimulate the economy. The S&P 500 has climbed 6.9 percent this year and is trading at 2.6 percent below its record of 1,565.15 reached in October 2007. The Dow is less than 0.3 percent from its high of 14,164.53. Fed Stimulus Stocks rose as Federal Reserve Vice Chairman Janet Yellen said the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program. “Turning to the potential costs of the Federal Reserve’s asset purchases, there are some that definitely need to be monitored over time,” Yellen said today in a speech in Washington. “At this stage, I do not see any that would cause me to advocate a curtailment of our purchase program.” Equities fell early in the trading day as China ’s services industries expanded last month at the slowest pace since September. The non-manufacturing Purchasing Managers ’ Index fell to 54.5 in February from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said. A reading above 50 indicates expansion. Budget Cuts Automatic cuts in U.S. federal spending, half of which are in defense programs, went into effect March 1 following a congressional impasse. The government will reduce spending by $1.2 trillion over the next nine years, including $85 billion in this fiscal year. The budget cuts, known as sequestration, will cause a 0.6 percentage-point reduction in economic growth this year, the Congressional Budget Office has estimated. Even as President Barack Obama phoned Democratic and Republican legislators over the weekend, Obama’s aides and congressional leaders signaled the budget reductions would continue for weeks, possibly months. Both sides indicated that revisiting the reductions would begin after they resolve a confrontation over legislation that’s needed to keep federal agencies running beyond March 27, placing a premium on avoiding a government shutdown. Airlines Rally A Bloomberg gauge of U.S. airlines rallied 4.1 percent to 44.93, its highest level in more than two years. Industrial and energy companies in the S&P 500 declined. Crude prices briefly fell below $90 a barrel for the first time in 2013 on growing speculation that demand growth is slowing in China. Delta Air Lines Inc. surged 5.6 percent to $15.65, its highest level since February 2008. The Atlanta-based carrier increased the lower end of its guidance for unit revenue to 4.5 percent from 4 percent. United Continental Holdings Inc. climbed 5.3 percent to $28.82 and Alaska Air Group Inc. added 4.1 percent to a record $54.53. Caterpillar Inc. (CAT) , the biggest maker of construction and mining equipment, retreating 1.8 percent to $89.75 for the largest decline in the Dow. Cliffs Natural Resources Inc. erased 5.8 percent, the most in the S&P 500, to $23.78. Joy Global Inc., the maker of underground mining equipment, slid 3 percent to $60.18. Best Buy Consumer discretionary companies in the S&P 500 rose 1 percent to a record. Best Buy Co. surged 3.6 percent to $17.77 and Target Corp. jumped 3.6 percent to $66.44, its highest level in more than five years. An S&P group of homebuilders rallied 2.3 percent as all 11 members advanced. D.R. Horton climbed 3.2 percent to $23.24, while Ryland Group added 3.5 percent to $36.95. The KBW Bank Index (BKX) rose 1.2 percent to 54.79, as 22 of its 24 members gained. Capital One Financial Corp. rallied 2.4 percent to $53.12 and Citigroup Inc. added 2 percent to $42.94. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 8.8 percent to 14.01. The gauge has tumbled 22 percent in 2013. Yahoo (YHOO) jumped 76 cents to $22.70, its highest level since July 2008. Anthony J. DiClemente, equity analyst at Barclays, raised his rating on the company to overweight from equalweight, noting that Yahoo’s minority stakes in Alibaba Group Holdings Ltd. and Yahoo Japan Corp. are not fully reflected in its shares. Google, Apple Google, the operator of the world’s largest search engine, advanced $15.31 to a record $821.50. The stock has rallied 16 percent this year. Chief Financial Officer Patrick Pichette said last week the company wants to keep money on hand in order to be able to invest quickly when needed. Apple (AAPL) fell for a fourth day to its lowest level since January 2012, sliding $10.42 to $420.05. The shares have tumbled 40 percent since setting a record in September, amid concern that the company’s growth is being hurt by higher production costs and stiffer competition from rivals such as Samsung Electronics Co. Investors are looking to Chief Executive Officer Tim Cook to demonstrate that Apple has more blockbuster products in the pipeline to reignite sales. Hess Corp. rallied 3.5 percent to $68.84. The oil company targeted by Paul Singer ’s Elliott Management Corp. will exit energy trading, marketing and retail businesses to focus on exploration and production, according to a statement today. The company also plans to buy back as much as $4 billion in shares. Warren Buffett AutoNation Inc. (AN) increased 1.8 percent to $44.24. The largest U.S. retailer of new cars and trucks said that total retail vehicle sales climbed 6 percent in February. Warren Buffett , who built Berkshire Hathaway Inc. into a $250 billion company with funds from insurance units, said in his annual letter to shareholders on March 1 that low interest rates create “dim prospects” for the industry that fueled his firm’s growth. The billionaire also said other CEOs who held back investment last year because of doubts about the economy missed an opportunity. The future of the U.S. has been uncertain since the country’s Declaration of Independence in 1776, he wrote. “American business will do fine over time. And stocks will do well just as certainly,” Buffett said. “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it,” he said, referring to Vice Chairman Charles Munger. To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net ; Sarah Pringle in New York at springle1@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-03-27 | Bloomberg | Kazumasa Iwata Joins Kuroda Naysayers as BOJ to Meet: Economy | Former Bank of Japan (8301) Deputy Governor Kazumasa Iwata, an advocate of expanded stimulus, joined economists predicting the bank’s new chief Haruhiko Kuroda will fail to meet his deadline for a price target. “It’s impossible to achieve 2 percent inflation in two years,” Iwata, 66, president of the Japan Center for Economic Research , said in an interview yesterday. Even five years won’t be easy, he said, as the economy is expected to weaken following a planned sales tax rise. The comments add to skepticism over whether Kuroda can accelerate an end to 15 years of deflation through more easing, with former Morgan Stanley Chief Global Economist Stephen Roach saying yesterday he’s “not convinced” it can work. Those doubts are yet to take hold among investors, with the yen weakening for a second day and bond yields at a 10-year low on bets the central bank will add to stimulus next week. “It’s hard to believe something that hasn’t happened in the past two decades will happen so quickly,” Yasuhide Yajima , chief economist at NLI Research Institute Ltd., an affiliate of Nippon Life Insurance Co., Japan’s biggest life insurer, said in Tokyo. “Even if the BOJ pumps cash into the economy and everything goes smoothly, the government still needs to implement a strategy to boost growth.” The yen dropped 0.3 percent to 94.73 per dollar as of 2:52 p.m. in Tokyo, extending its fall of almost 9 percent since the start of the year. The Nikkei 225 Stock Average (NKY) closed 0.2 percent higher, while the yield on the benchmark 10-year note was at 0.515 percent, the lowest since June 2003. Iwata said Kuroda risks a reversal in the yen if he fails to meet expectations at the BOJ’s next scheduled policy meeting on April 3-4. Meeting Expectations Kuroda yesterday reiterated his pledge to do “whatever it takes” to end falling prices, telling lawmakers that he wants to achieve 2 percent inflation in two years. He said the BOJ will consider combining its monthly bond purchases and asset purchase fund, as well as buying more debt with longer maturities and scrapping a rule that limits the scale of bond buying. He has also suggested bringing forward open-ended asset purchases planned for 2014. Iwata said that the market is expecting open-ended purchases to start from May, adding that failure to implement any of the “list” of policies risks causing disappointment. “Not only investors, but also corporate executives and consumers need to believe,” that things are changing, he said in his office overlooking Tokyo’s Imperial Palace. Toyota Motor Corp. agreed this month to pay its employees in Japan the biggest bonus in five years as the world’s largest automaker expects its net income to triple this fiscal year. Market Bubble Iwata joins skeptics including Atsushi Mizuno, a former BOJ board member, who said in an interview this month that Kuroda will hit a “wall of reality” because more bond purchases would escalate risks of a market bubble. Even Prime Minister Shinzo Abe’s economic advisers have expressed skepticism on the chance of the BOJ reaching its goal. Koichi Hamada, a retired Yale University professor, said this month that failing to reach the 2 percent price target will be acceptable so long as the economy heals after emerging from its third recession in five years last quarter. Only three of 15 economists surveyed this month by Bloomberg News were “very” or “somewhat” confident the BOJ will get 2 percent inflation within two years. Deputy Governor Kikuo Iwata, who is unrelated to Kazumasa Iwata, told lawmakers yesterday that resigning would be the best way to take responsibility for failing to meet the target. Still, some economists think the goal is achievable. “If the yen keeps weakening, that will boost stock prices, buoy sentiment and help boost demand in the economy,” said Kazuhiko Ogata, chief Japan economist at Credit Agricole SA. (ACA) in Tokyo. “Abe will probably compile a stimulus package to offset the negative impact of raising the sales tax.” Sales Tax The tax is set to increase to 8 percent in April 2014 and 10 percent in October 2015 from the current 5 percent. Japan’s consumer prices excluding fresh food haven’t advanced 2 percent for any year since 1997, when the tax was last increased. Iwata, who was deputy governor from 2003 to 2008, was cited earlier this year as a potential candidate to lead the BOJ by economists including Credit Agricole ’s Ogata. With Kuroda’s selection for governor, the current leadership is “probably the best team to achieve the price target,” Iwata said. Elsewhere in the Asia-Pacific region, Vietnam ’s economic growth slowed in the first quarter, while consumer confidence in South Korea climbed, reports showed today. Indonesian Finance Minister Agus Martowardojo was approved by a commission yesterday to become the next central bank governor and awaits endorsement by the parliament. France and the U.K. will publish final fourth-quarter gross domestic product data, while Spain and Russia will report inflation figures. In the U.S., data on mortgage applications and pending home sales are due. To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net ; Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
2024-11-19 | Bloomberg | Thailand Growth Slows as Weak Overseas Demand Hurts Exports | Thailand ’s growth slowed in the third quarter as cooling global demand hurt the nation’s exports, even as signs of a recovery in China and the U.S. signal the economy may have bottomed. Gross domestic product increased 3 percent in the three months through September from a year earlier, after expanding a revised 4.4 percent in the previous quarter, the National Economic and Social Development Board said in Bangkok today. The median of 13 estimates in a Bloomberg News survey was 3 percent. Prime Minister Yingluck Shinawatra extended fuel subsidies and introduced wage increases after last year’s floods to spur domestic demand and offset falling exports. The central bank unexpectedly cut its benchmark rate last month as “insurance” against uncertainties, even as some policy makers in the region signal growing confidence about growth prospects next year. “We’re pretty upbeat on Thailand for 2013,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said in a Bloomberg Television interview. “We’ve got these government subsidies and policies which are boosting household incomes, and that will certainly support private consumption,” he said, adding that an improving global economy will also help lift Thai exports next year. The Thai baht rose 0.1 percent against the U.S. dollar as of 10:16 a.m. in Bangkok. It was one of the top gainers last quarter among the 11 most-traded Asian currencies tracked by Bloomberg. The benchmark Stock Exchange of Thailand Index gained 0.2 percent. Local Demand Southeast Asia’s growth will remain resilient over the next five years as stronger investment and private consumption reduce dependence on exports for expansion, the Organization for Economic Cooperation and Development said in a report yesterday. Expansion in most Asian economies will probably rebound in 2013, Asian Development Bank President Haruhiko Kuroda said last week. Thailand today said the economy will grow 5.5 percent this year, compared to an earlier prediction of 5.5 percent to 6 percent. The agency forecast GDP will increase 4.5 percent to 5.5 percent in 2013, and inflation will average 2.5 percent to 3.5 percent, compared with 3 percent this year. “We expect local demand to grow at a satisfactory level next year,” Arkhom Termpittayapaisith, secretary-general of the state planning agency, said at a media briefing today. “We need to focus on boosting exports.” Exports may grow 5.5 percent this year and 12.2 percent next year, the agency forecast today. Minimum Wages Yingluck’s government raised minimum wages nationwide in April and announced another round of increases from the beginning of 2013. More than 2 trillion baht ($65 billion) in investments in infrastructure and water-management projects is planned over the next seven years to boost growth and prevent a repeat of last year’s flood disaster, which killed more than 700 people and cost the economy an estimated 1.4 trillion baht. The central bank last month lowered its GDP forecast for next year to 4.6 percent from 5 percent, while maintaining its prediction for this year at 5.7 percent. Governor Prasarn Trairatvorakul said the unexpected cut is not a signal that interest rates are on a downward trend and that monetary policy space should be used “wisely” because of uncertainties ahead. “We do think the Bank of Thailand will reverse its recent rate cuts in 2013,” Circosta said. “Particularly from mid-2013 onwards, when the global economy starts to look a bit clearer and the inflation picture starts to get a bit more worrying.” Thailand’s overseas shipments unexpectedly climbed for the first time in four months in September, and the government said it expects export growth to accelerate in the last three months. Nissan Motor Co., Japan ’s second-largest carmaker, this month announced a plan to invest 11 billion baht to build a second factory, while Toyota Motor Corp. said it expects sales in Thailand to increase 72 percent this year to a record. Thailand’s economy, the biggest in Southeast Asia after Indonesia , grew 1.2 percent last quarter from three months earlier, compared with a revised 2.8 percent increase in the previous period. The median forecast in a Bloomberg News survey was for a 0.3 percent decline. To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-07-09 | Bloomberg | Best-Ranked Bank OCBC Cautions on China Crunch: Southeast Asia | Oversea-Chinese Banking Corp. (OCBC) , Southeast Asia ’s second-largest lender, says banks doing business in China will have to be more prudent with liquidity to weather any future crises. The credit crunch that started in mid-June is temporary and caught some lenders by surprise, OCBC Chief Executive Officer Samuel N. Tsien, 58, said in a Bloomberg Television interview with Haslinda Amin in Singapore yesterday. A money-market liquidity squeeze in China will probably cut the country’s credit growth by about 750 billion yuan ($122 billion) as its central bank continues to crack down on excessive lending, a Bloomberg survey shows. Tsien has focused on expansion in China, Taiwan and Hong Kong to offset waning profitability in the lender’s home market of Singapore. In China, “liquidity is something that cannot be counted on for certain,” said Tsien, who heads Asia’s strongest bank, according to rankings compiled by Bloomberg Markets in May. “You have to be prepared to have adequate liquidity to fund your assets.” Shares of OCBC rose 0.5 percent to S$9.92 as of 9:48 a.m. in Singapore trading. The benchmark Straits Times Index gained 0.39 percent. Money Supply China’s State Council, headed by Premier Li Keqiang , pledged on July 5 to improve the effectiveness of financial support for the economy, saying a misallocation of capital is hampering the restructuring of the economy. It vowed to maintain a reasonable supply of money and credit and reiterated that it will follow a “prudent” monetary policy stance. The country’s regulators are forcing trust funds and wealth management plans to shift assets into publicly traded securities, robbing property developers and local-government finance vehicles of so-called shadow banking funds. These central bank measures are aimed at reining in companies that borrow from banks and then lend those funds in the shadow market, Tsien said. They do not target the banks or the economy, he said. The country’s overnight repurchase rate , which measures mainland China’s interbank funding availability, dropped to 3.25 percent yesterday from a record 13.91 percent on June 20. It remains above the average 2.92 percent over the past year. Banks, which earlier borrowed short-term and lent long-term to make profits from their excess liquidity, are now lending short-term, said Tsien, explaining they are doing this to have funds immediately available if required. That’s why overnight rates have remained higher than average, he said. Good Liquidity OCBC’s liquidity in China is “extremely good” because it mainly lends to state-owned enterprises, which depend on local lenders for most of their funding, said Tsien, who became CEO in April last year. That has helped his bank maintain yuan loans at less than 50 percent of deposits, below the 75 percent limit prescribed under commercial banking law in the country. “We are more cautious,” said the Shanghai-born Tsien, who was president and chief executive officer of Hong Kong-based China Construction Bank Asia Corp. before joining OCBC in 2007. “But having said that, the sector that we’ve been focusing on in China has always been in the top end of the market.” The greater China region, which includes the mainland, Taiwan and Hong Kong, accounted for 7.2 percent of OCBC’s profit before tax last year, compared with 6.7 percent in 2011, company filings show. Shrinking Margins Despite OCBC’s expansion abroad, more than 60 percent of its revenue comes from Singapore, the least-profitable lending market in Southeast Asia. The bank’s net interest margin, a measure of lending profitability, has shrunk for 15 consecutive quarters on a year-over-year basis, according to data compiled by Bloomberg. Tsien also said Singapore’s banks had enough safeguards to limit excessive mortgages to any one individual, even without the latest round of measures introduced by the Monetary Authority of Singapore to cool the property loan market. Starting June 29, the framework requires that lenders take the borrower’s total debt into consideration when granting property loans, the authority said. Home loans shouldn’t exceed a total debt servicing ratio of 60 percent and those that do will be considered “imprudent,” it said. The exceptional cases where banks lent beyond that limit to individuals would be in “single-digit percentage points,” Tsien said. OCBC was ranked the world’s strongest bank for two years until 2012, when it was overtaken by Qatar National Bank SAQ, according to Bloomberg Markets, which based its assessment on criteria including capital, non-performing assets and cost efficiency. To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-04-10 | Bloomberg | U.S. 10-Year Note Yield Falls Below 2% on Europe’s Debt | April 10 (Bloomberg) -- Treasury (USGG3YR) 10-year yields fell below 2 percent for the first time in almost a month amid speculation the European sovereign-debt crisis is worsening as yields on Spanish and Italian bonds rose. Treasury securities remained higher after the U.S. sold $32 billion of three-year notes, with the class of bidders that includes foreign central banks taking 40 percent of the debt, its largest share since August. The notes drew a yield of 0.427 percent, compared with a forecast of 0.424 percent in a Bloomberg News survey of 10 of the Federal Reserve ’s 21 primary dealers. “It’s definitely a risk-off day,” said William O’Donnell , head U.S. government bond strategist at Royal Bank of Scotland Group Plc’s RBS Securities in Stamford , Connecticut , one of the primary dealers required to bid at the auctions. “We think it’s going to continue. The return of European stress has legs.” The yield on the current three-year note fell three basis points, or 0.03 percentage point, to 0.41 percent, at 5 p.m. in New York , according to Bloomberg Bond Trader prices. The 0.375 percent securities maturing in March 2015 rose 3/32, or 94 cents per $1,000 face amount, to 99 29/32. The yield on the benchmark 10-year note fell seven basis points to 1.98 percent, touching the least since March 7. The yield hadn’t traded below 2 percent since March 12, the day before the Fed raised its assessment of the U.S. economy in its March 13 policy statement. Market Stress An index of U.S. financial conditions is signaling a slowdown after having crossed over toward indicating growth on March 9. The Bloomberg U.S. Financial Conditions Index has held below zero since April 6, after the Labor Department said the economy added 120,000 jobs in March, less-than-forecast. The measure fell to minus 0.27 after rising as high as 0.24 on March 19. The index touched minus 12.7 during the financial crisis in October 2008. At today’s auction, the 40 percent awarded to indirect bidders compares with an average of 37 percent for the past 10 sales. Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 7.8 percent of the notes at the sale, compared with an average of 10.5 percent for the past 10 auctions. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.36, compared with an average of 3.37 for the past 10 sales. Auction Watch “Rates have come down quite a bit and investors haven’t deserted the auction,” said Suvrat Prakash , an interest-rate strategist in New York at BNP Paribas SA, a primary dealer. “Investors are taking a bit of a pause after the long rally, but there was a lot of strong participation. The next few auctions should go well.” The Treasury is selling $66 billion in notes and bonds this week. It’s due to auction $21 billion of 10-year securities tomorrow and will sell $13 billion of 30-year debt on April 12. Three-year notes have lost 0.1 percent this year, compared with a 0.4 percent loss for Treasuries overall, according to Bank of America Merrill Lynch indexes. Trading volume declined yesterday, with about $166 billion of Treasuries changing hands through ICAP Plc, the world’s largest interdealer broker, the lowest for a full-day since March 26. Volume reached $439 billion on March 14, the highest since August. The average in 2012 is $251 billion. Yield Differences The gap between Spanish and German 10-year yields widened to 4.28 percentage points, the most since November, after Spanish Prime Minister Mariano Rajoy ’s unexpected announcement yesterday that he would cut an additional 10 billion-euros ($13 billion) in education and health spending failed to ease concern in the bond market that the nation may become the fourth euro member to need a bailout. The Fed has purchased $2.3 billion of mortgage and Treasury debt in two separate rounds of asset purchases intended to stimulate the economy, known as quantitative easing. “There’s renewed concern about Europe, there’s evidence the economy may be succumbing to higher gasoline prices and a higher expectation of a Fed QE3 operation,” said David Coard , head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. Crude oil for May delivery rose to as high as $102.96 a barrel on the New York Mercantile Exchange , and is up. Profit Outlook U.S. corporate profit growth stalled in the U.S. last quarter as companies from McDonald’s Corp. to 3M Co. saw gains in the world’s largest economy eroded by a slump in Europe. Earnings at Standard & Poor’s 500 Index companies, excluding financials, are seen gaining 0.6 percent in the first and the second quarter from a year earlier, according to analysts’ estimates compiled by Bloomberg, the slowest growth rate since 2009. The central bank on March 13 reiterated its previous statement that economic conditions would probably warrant “ exceptionally low ” interest rates at least through late 2014. It has kept its target rate for overnight bank loans to a range of zero to 0.25 percent since December 2008. The Fed bought $4.76 billion in Treasuries maturing from April 2018 to November 2019 in its second open-market operation as part of its plan to lower borrowing costs known as Operation Twist. Earlier it purchased $1.84 billion of notes due in February 2036 to May 2041. The central bank is replacing $400 billion of short-term debt in its portfolio with longer-term Treasuries to limit borrowing costs and counter risks of a recession. The 10-year yield has plunged by more than 40 basis points in the 15 trading days since reaching an almost-five-month high of 2.40 percent on March 20. “The 2.40 was a number of things,” said Gary Pollack, head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, which manages $12 billion. “Resolution on Greece , more optimism on the economy as well as the reduced probability of a QE3. All of those three things have turned, and that’s why you saw a 40-basis-point rally.” To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net ; Cordell Eddings in New York at ceddings@bloomberg.net To contact the editor responsible for this story: Paul Cox at pcox16@bloomberg.net |
2024-08-29 | Bloomberg | Record Farm Profit Amid Drought Raises Questions of Aid | A projection that U.S. farmers will make a record profit amid the worst drought in more than five decades shows that government help for producers can be scaled back, critics say. Higher prices and crop-insurance payments will outweigh losses from dry conditions, propelling aggregate farm profits to $122.2 billion this year, up 3.7 percent from 2011, the U.S. Department of Agriculture forecast yesterday. “It’s compelling evidence that what started out as a basic safety net has become a program that is essentially guaranteeing business income,” said Craig Cox, head of agriculture and natural-resource programs for the Environmental Working Group, a Washington-based advocacy organization that opposes many farm subsidies. Federal crop insurance dates to the Dust Bowl droughts of the 1930s. The program and subsidies were boosted in 2000 as lawmakers sought to use them as a way to avoid near-annual disaster-aid appropriations that the Congressional Research Service says cost taxpayers $68.7 billion from 1989 to 2009. This year the USDA has declared natural disasters in more than 1,800 counties in 35 states, or more than half of the country’s total, mostly because of the dry, hot weather. Futures prices for corn surged 57 percent since mid-June through yesterday. Soybeans were up 31 percent and wheat 40 percent. Crop Sales The sale of crops this year will result in an estimated $222.1 billion for farmers, up 6.7 percent from the year before, according to the USDA projections. Receipts from livestock and livestock products will total $165.8 billion, down 0.1 percent. Farm-related income, a category that includes government-backed crop-insurance payments, will be up 32 percent to $34.5 billion, while other federal subsidies will rise 6.3 percent to $11.1 billion, the USDA said. Some agricultural sectors are faring better than others. Corn and soybean producers will see record income, buoyed by high prices for farmers who have crops and insurance for those who don’t. Meanwhile, milk receipts will fall 11 percent and livestock income will stay flat as dairymen and ranchers deal with feed costs that will jump 13 percent, the USDA said. The differences among producers argue for a robust insurance program, said Bob Young, chief economist for the American Farm Bureau Federation , the largest U.S. farmer group. Corn Crop “If you’re one of the lucky guys with something to sell, you’re OK,” Young said yesterday in an interview. “If you’re the guy who was expecting 180 bushels and you got 20, you need something to help with your costs.” This year’s corn crop, the country’s most valuable, will total 10.779 billion bushels, 17 percent smaller than last year, the USDA said this month. Under the crop-insurance system, the government covers about 60 percent of premium costs. It shares profits with private insurers some years and covers part of the payouts in disaster years. Because the programs are commonly based on average yields over 10 years, future payouts will be lower in drought-struck areas. Agriculture Secretary Tom Vilsack said in an e-mailed statement that while “strong farm income” will help many farmers and ranchers through the drought, “it is important to remember that thousands of farm families, particularly livestock and dairy producers, continue to struggle.” Vilsack repeated his call for Congress to pass a new farm bill that will provide “more certainty” for agricultural producers. Farm Bill Phone calls and e-mails seeking comment from Debbie Stabenow of Michigan , the Democratic chairwoman of the Senate Agriculture Committee, and Republican Representative Frank Lucas of Oklahoma , Stabenow’s House counterpart, were not returned. A plan that would provide $383 million in aid to livestock producers, who aren’t covered by government-backed insurance, has stalled in Congress, as have efforts to pass a bill governing agricultural policy for the next five years, before current law expires Sept. 30. Both the House Agriculture Committee and the U.S. Senate have approved bills that would eliminate about $5 billion in annual subsidies paid directly to farmers while boosting other support programs, including insurance, by smaller amounts. New subsidies are needlessly extravagant in a time of record deficits, according to Josh Sewell, a policy analyst for the Washington-based group Taxpayers for Common Sense. Essentially, government programs are eliminating the element of risk from agriculture, he said. “Agriculture’s been on a big run of record or near-record profits for years,” he said. “What we have now isn’t a safety net, it’s a springboard toward profits.” In July, when his panel approved its farm bill, which contains new funding for insurance programs, Lucas called the legislation “a balanced, reform-minded, fiscally responsible bill that underscores our commitment to production agriculture and rural America.” To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net |
2024-12-10 | Bloomberg | Obama-Boehner Talks Stuck on Refusal to Move on Budgets | President Barack Obama and House Speaker John Boehner have three weeks to resolve their differences before more than $600 billion of spending cuts and tax increases start taking effect. Here are questions and answers on what the fiscal dispute is about and what each side is demanding in the talks: What’s the latest in the negotiations? Obama and Boehner, an Ohio Republican , met privately at the White House yesterday. Representatives for both men issued identical statements that provided no details and said that “the lines of communication remain open.” Publicly, they still disagree on taxes, spending and the debt ceiling. Boehner said Dec. 7, before his meeting with Obama, that he had “no progress to report.” Are there any signs of progress toward an agreement? A few. In the past week, more Republicans, including Senator Bob Corker of Tennessee , have said they would be willing to allow tax rates to increase for top earners, meeting Obama’s demand. Boehner and White House Press Secretary Jay Carney each didn’t answer directly late last week about the possibility of setting the top rate between the 35 percent Boehner wants and the 39.6 percent level Obama seeks. Boehner later issued a statement saying his opposition to rate increases “has not changed.” Democrats, including Senator Charles Schumer of New York , say they’ll talk about spending cuts after Republicans concede on tax rates. Who created this situation? Congress and Obama did. In 2010, they extended the George W. Bush-era tax cuts for two years, meaning that tax breaks on income, capital gains , dividends and estates will lapse at the end of this year. In 2011, as part of a deal to raise the U.S. debt ceiling, they set up $1.2 trillion in spending cuts to occur over nine years, starting in January 2013. In 2012, they extended a two-percentage-point reduction in the payroll tax through Dec. 31. That confluence of events, known as the fiscal cliff, and the possibility of a recession caused by inaction are designed to pressure Congress to act on taxes, spending and the budget deficit. If the fiscal changes are so bad, why can’t Congress stop them? It can. Lawmakers want to. They disagree on how to do it. All sides want to continue the tax breaks on income of individuals up to $200,000 a year and married couples’ income up to $250,000 a year. Republicans, who control the House of Representatives and oppose tax-rate increases, see the tax-and- spending changes as leverage to push Obama to cut spending on programs such as Medicare and Medicaid. Democrats, who control the Senate, favor higher tax rates for top earners and fewer cuts in social programs and entitlement spending. Doing nothing would reduce the deficit. What’s wrong with that? The worry, lawmakers say, is that the combination of tax increases and spending cuts would reduce the deficit too quickly and spur a recession. They’re trying to replace the short-term deficit reduction scheduled for 2013 with more gradual changes over the next decade. What have Republicans offered? Boehner announced a $2.2 trillion proposal Dec. 3 that called for $800 billion in new revenue through a rate-lowering, base-broadening overhaul of the U.S. tax code. He would reduce entitlement spending by $900 billion and other spending by $300 billion. He would save $200 billion by changing a government inflation measure that would affect tax brackets and slow increases in Social Security benefits. Are Republican leaders proposing an $800 billion tax increase? Yes. Republican aides said the $800 billion revenue increase would be scored conventionally, which means that it wouldn’t rely on economic growth caused by the tax plan itself. They haven’t provided details about what tax breaks would be curbed. Obama and congressional scorekeepers would define that as a tax increase. Previous Republican proposals have relied on fees and other non-tax ways of raising revenue. What does Obama want? The president wants $1.6 trillion in tax increases over the next decade. He has proposed $600 billion in spending cuts, about $350 billion of which would come from health-care programs. He also counts the $1 trillion in spending cuts Congress passed in 2011, $800 billion in savings from winding down the wars in Iraq and Afghanistan and $600 billion in interest savings, according to senior administration officials. Leaving aside the administration’s call for measures to boost short-term economic growth, which could take the form of tax cuts or spending increases, this would result in $2.4 trillion in spending cuts and $1.6 trillion in higher taxes. What’s the $1.6 trillion in taxes Obama is talking about? The administration’s plans call for a two-stage tax increase that would raise taxes by $1.6 trillion over 10 years. Right now, they want to let the 2001 and 2003 tax cuts expire for top earners. That would push the top tax rate on capital gains to 23.8 percent, the top rate on ordinary income to 39.6 percent and the top rate on dividends to 43.4 percent. The plan would reinstate limits on personal exemptions and deductions. What comes in stage two? By Aug. 1, the administration wants Congress to pass a plan that would enact the rest of the administration’s tax agenda -- about $600 billion in higher taxes. What the administration has proposed in its budget beyond the immediate rate increases is about $1 trillion in tax increases and about $360 billion in tax cuts. That’s a net tax increase of more than $600 billion. Some of the increases would make it more difficult for U.S.-based companies to defer taxes on income earned overseas. The cuts include a permanent extension of a tuition tax credit and the credit for corporate research. The biggest increase would reduce the value of top earners’ tax breaks by requiring them to take such breaks as if they paid taxes in the 28 percent bracket. Will taxes really rise by $1.6 trillion? It’s doubtful. Obama’s plans include taxing dividends as ordinary income and higher estate taxes. Senate Democrats didn’t endorse the president’s version earlier this year when they passed a bill extending most of the tax cuts. Why is Obama insisting on a tax rate increase? He says that’s the only way to get the amount of revenue he wants without affecting 98 percent of taxpayers or hurting charities. Obama’s budget, though, includes more than $750 billion in limits on tax breaks, and there are other ways to further broaden the tax base without raising rates that he hasn’t proposed. “We are not going to simply cut our way to prosperity or to cut our way out of this deficit problem that we have,” he said in a Bloomberg Television interview Dec. 4. “We’re going to need more revenues. And in order to do that, that starts with higher rates.” What’s included in Obama’s spending cuts? The biggest item in Obama’s $350 billion in Medicare and Medicaid cuts would save $137 billion by requiring drugmakers to provide Medicare with the same rebates as they provide for low- income Medicaid patients. Obama would save an additional $45 billion by cutting reimbursements for post-acute care, such as rehabilitation hospital services and home-health calls for recovering surgical patients. What do Republicans want on spending? Ideally, they want the plan advanced by House Budget Committee Chairman Paul Ryan , a Wisconsin Republican, to provide subsidies to Medicare patients to buy private insurance, and turn Medicaid over to states by providing them with block grants. In the future, Congress would designate a set amount for an individual’s coverage, which over time could fall behind the pace of rising health costs, meaning more out-of-pocket expenses for beneficiaries. Short of that, Republicans have talked about ideas such as raising the Medicare eligibility age. What else might Democrats accept on spending? Senator Dick Durbin , an Illinois Democrat, said he might reluctantly support a proposal to charge high-income seniors more money for Medicare. “We’d have to have some specific down payments now, recognizing that we would then have to continue to work to see if we can come up with even better ideas to reduce health care costs over the long term,” Obama said in the Bloomberg interview. Would both parties cut the deficit by the same amount? They are close. Measured by the same yardstick, Obama wants $2.2 trillion of deficit reduction and $200 billion of stimulus spending. Republicans want $2.2 trillion of deficit reduction. Those come on top of the $2.4 trillion from already enacted cuts, war savings and interest savings. Is the debt ceiling part of the negotiations? Yes. The U.S. will reach the $16.4 trillion debt ceiling this year, and Treasury can use so-called extraordinary measures to extend the deadline until at least mid-February, according to the Congressional Budget Office. Republicans say they want spending cuts equal to the size of a debt-limit increase. The administration wants to remove the requirement that Congress pass future increases. Why does Obama want to change the rules on debt-limit votes? In 2011, the U.S. came within days of default because Congress wouldn’t raise the ceiling without spending cuts. Treasury Secretary Timothy F. Geithner says Congress shouldn’t be able to use the debt limit as a political weapon, especially because the borrowing pays for past decisions of Congress and the administration. Is Congress really going to allow that? It’s unlikely. Republicans in the House and Senate see the debt limit as their leverage to force the administration to cut spending. Does anything have to happen before Dec. 31? The alternative minimum tax, a parallel tax system created to ensure that wealthy individuals couldn’t use loopholes to avoid taxes, is scheduled to affect about 28 additional million households for tax year 2012, up from about 4 million otherwise. Without legislation to prevent that, the Internal Revenue Service has said it would delay tax filing scheduled to start in January until at least late March for more than 60 million filers. Action isn’t required, though the consequences of inaction would be quick and severe. Who would see the brunt of failure to address the AMT? Because the AMT claws back the benefit of the state and local tax deduction, it disproportionately affects people in high-tax states. If Congress does nothing, about half of New Jersey households would pay the AMT, up from 6.4 percent in 2010. What happens if the U.S. goes “over” the cliff? The Congressional Budget Office projects that the economy would go into recession in the first half of 2013 if the tax increases and spending cuts occur and aren’t retroactively resolved. How will markets react if no agreement is reached by Jan. 1? If history is a guide, stock markets have reacted negatively to past hiccups before recovering. The Standard & Poor’s 500 Index declined 0.5 percent in three minutes on Nov. 29, erasing an earlier rally, after Boehner said “no substantive progress” had been made toward a deal. Bond markets gained last week on pessimistic news. The benchmark 10-year Treasury note yields rose less than one basis point, or 0.01 percentage point, to 1.62 percent last week, according to Bloomberg Bond Trader data. Today the yield was 1.60 percent, down two basis points, or 0.02 percentage point, at 8:39 a.m. New York time. What is sequestration and how does it work? Sequestration is the official name for the automatic spending cuts, half of which would be in defense programs. The cuts are across-the-board, giving agency officials little discretion on how to achieve them. Defense programs would face a 9.4 percent cut and most other agencies would be cut by 8.2 percent, the administration said earlier this year. Is it really a cliff or is it more of a slope? A slope may be a better metaphor. Most of the effects -- the higher income tax rates and the spending cuts -- would occur gradually during 2013 and not deliver an immediate $600 billion economic shock. To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-12-21 | Bloomberg | U.S. FCC Adopts Rules for Web Service by AT&T, Comcast | U.S. regulators banned Internet service providers led by AT&T Inc. and Comcast Corp. from blocking or slowing Web content sent to homes and businesses, while allowing mobile phone companies to put limits on traffic. The Federal Communications Commission approved the so- called net-neutrality rules by a vote of three to two today. Supporters argued that Internet providers, which also own some of the content they deliver online, may interfere with videos and services owned by others such as Google Inc. The agency also affirmed that providers may charge subscribers based on how much data they consume. The pricing issue has become more important as companies including Netflix Inc. stream movies and other data-hungry content over the Web. “Today’s decision will help preserve the free and open nature of the Internet while encouraging innovation, protecting consumer choice and defending free speech,” President Barack Obama said in a statement released today by the White House. The rules create “a strong and sensible framework” that “protects Internet freedom and openness,” FCC Chairman Julius Genachowski , a Democrat appointed by Obama, said before the vote. “We’re adopting a framework that will increase certainty for businesses, investors and entrepreneurs.” Commissioner Meredith Atwell Baker , one of two Republicans to vote against the regulations, called the rules an overreach. ‘Inhibiting’ Network Evolution “There is no factual basis to support government intervention,” she said. “The majority’s approach will inhibit the ability of networks to freely evolve and experiment.” Senator Mitch McConnell of Kentucky, the Senate’s Republican leader, called the vote “a first step in controlling how Americans use the Internet.” Representative Fred Upton , a Michigan Republican who is to become chairman of the Energy and Commerce Committee when Congress convenes next year, said he would work “to strike down the FCC’s brazen effort to regulate the Internet.” Genachowski proposed the net-neutrality rules in September 2009, and debate has expanded to involve Congress, courts and companies. Net neutrality is the idea that cable and telephone companies must treat all Web content equally by not interfering with the information their subscribers access on the Web. Google, Amazon Google, Amazon.com Inc. and Dish Network Corp. have said FCC rules are needed so that the telecommunications companies that deliver their content, such as electronic maps and online television shows, don’t favor the Internet service providers’ own online products or those of partners that pay for higher speeds. Comcast, for example, will own movies if its purchase of NBC Universal is approved by government officials. Google rose $8.01 to $603.07 as of 4 p.m. New York time in Nasdaq Stock Market trading. Amazon gained $1.46 to $184.75. Internet carriers Comcast, Verizon Communications Inc. , Verizon Wireless and Time Warner Cable Inc. said rules may make it difficult to manage the growing traffic on their networks, and would limit investment in new Internet capacity. Comcast increased 32 cents to $22.25 in Nasdaq Stock Market trading. Verizon climbed 20 cents to $34.94, while AT&T dropped 6 cents to $29.07 in New York Stock Exchange composite trading. Verizon is “deeply concerned” with the FCC vote, which “appears to assert broad authority for sweeping new regulation,” Tom Tauke , the company’s executive vice president of public affairs, policy and communications, said in an e- mailed statement. ‘A Workable Balance’ Comcast Executive Vice President David L. Cohen said in a statement that the rules “appear intended to strike a workable balance between the needs of the marketplace for certainty and everyone’s desire that Internet openness be preserved.” The compromise passed by the agency appears to provide certainty needed for job creation, “though a final view must await a careful reading of the FCC’s order,” Jim Cicconi , AT&T senior executive vice president, said in an e-mailed statement. Stephen Wozniak , the co-founder of Apple Inc. who traveled to Washington from his home near San Francisco to attend today’s FCC vote, told reporters after the meeting that the FCC should have passed more restrictive rules. For example, Internet-service providers may block online consumers from receiving movies streamed by Netflix , forcing users to watch movies owned by the telecommunications and telephone companies, Wozniak said. “Every normal person in the United States knows this,” he said. ‘Fail in Court’ The rules leave intact a system that lets carriers charge more when users consume large amounts of data, which will help Internet-service providers to upgrade and maintain networks, said Rebecca Arbogast , an analyst at Stifel Nicolaus & Co. in Washington. Subscribers who consume content that requires large amounts of data to deliver, such as movies and online gaming, may bear part of the burden of increased access fees, said Craig Moffett , a New York-based analyst at Sanford C. Bernstein & Co. “The FCC does not have the legal authority to issue these rules,” Robert McDowell , the other Republican commissioner at the FCC, said during the meeting today. “This new effort will fail in court.” The rules drew criticism from Republicans in Congress. Texas Senator Kay Bailey Hutchison , the top Republican on the Senate Commerce Committee, said in an e-mailed statement she would ask Congress to revoke the rules, calling them “an unprecedented power-grab by the unelected members” of the FCC. ‘Nationalizing the Web’ “The FCC is effectively nationalizing the Web,” Republican Representative Marsha Blackburn of Tennessee said in an e-mailed news release today. She said the FCC was exhibiting a “hysterical reaction to the hypothetical problem of anti- competitive online behavior.” Democrat Jay Rockefeller, a senator from West Virginia who chairs the Commerce Committee, in a statement called the decision “a meaningful step forward.” Some groups said the agency didn’t go far enough. The FCC vote was a “squandered opportunity to enact clear, meaningful rules to safeguard the Internet’s level playing field and protect consumers,” Craig Aaron, managing director of the Washington-based advocacy group Free Press, said in a statement. To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net . |
2024-01-05 | Bloomberg | Slovenia’s Triglav Insurer Targets $78 Million Profit for 2012 | Zavarovalnica Triglav (ZVTG) d.d., Slovenia’s biggest insurance company, said it expects net income to advance to 60.6 million euros ($78 million) this year from an estimated 54.4 million euros last year. Gross-written premiums will drop to 984 million euros in 2012 from an estimated 989 million euros in 2011, the Ljubljana- based company said in an e-mailed statement today. To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net |
2024-07-24 | Bloomberg | Bank of America Adds Rose, de Weck to Board Amid Overhaul | Bank of America Corp. , the second-biggest U.S. lender by assets, expanded its board by naming former Wall Street bankers Clayton Rose and Pierre de Weck as directors. Rose, 54, a former JPMorgan Chase & Co. (JPM) executive, is a professor of management practice at Harvard Business School, Bank of America said today in a statement. De Weck, 63, was chairman and global head of private wealth management at Deutsche Bank AG (DBK) and held senior posts at UBS AG and a predecessor of Citigroup Inc., the Charlotte , North Carolina-based firm said. Bank of America, led by Chief Executive Officer Brian T. Moynihan , has overhauled its board since August as members retired. Additions included former Deloitte LLP Chairman Sharon Allen. Today’s appointments boost membership on the board to 15. “The management team and I look forward to working with these two experienced leaders,” Moynihan said in the statement. Rose joined Harvard in 2007, Bank of America said. He spent about 20 years at New York-based JPMorgan, where he headed the investment banking and equities businesses, according to the statement. He created a course at Harvard called “Managing the Financial Firm” and has lectured in another called “The Moral Leader,” according to Harvard’s website. Published case studies for the university include “JPMorgan Chase & the CIO Losses,” “Barclays and the Libor Scandal” and “What Happened at Citigroup.” Deutsche Bank Rose sits on the board of XL Group Plc (XL) , the Dublin-based insurer and reinsurer and previously lectured at Columbia University, Bank of America said. De Weck worked for Frankfurt-based Deutsche Bank until he retired last year, Bank of America said. He sat on the boards overseeing chemicals firms Clariant AG and Rhodia SA. In January, Bank of America named Arnold Donald, the ex-chairman of tabletop sweetener company Merisant Co., and former PepsiCo Inc. treasurer Lionel Nowell III to the board. In August, the lender added four directors, including Allen and executives from the defense, health care and pharmaceutical industries. Profit rose 63 percent in Bank of America’s second quarter, aided by higher investment-banking fees and a surge in equity trading results. Shareholder equity slipped as the company’s bond portfolio took the biggest hit from rising interest rates among top lenders. To contact the reporter on this story: Donal Griffin in New York at dgriffin10@bloomberg.net To contact the editor responsible for this story: Christine Harper at charper@bloomberg.net |
2024-10-01 | Bloomberg | Romney Pitches Broader Message to Voters Before Debates | Mitt Romney , who a top aide predicted months ago would get an Etch A Sketch clean slate for the general election, is broadening his message and moderating his tone to reach out to swing voters in the run-up to the first in a series of presidential debates this month. The Republican presidential nominee spent much of the year stressing his support of tax cuts for all, self-deportation of illegal immigrants and the undoing of President Barack Obama ’s health-care law. Now, he’s highlighting a recast message as he seeks votes from middle-income earners, Hispanics, women and fence-sitters of all backgrounds. Romney’s campaign wants to sway undecided voters and those who back Obama yet harbor reservations about him. “This is a very close race,” Kevin Madden , a campaign adviser, told reporters on a conference call today, adding that the campaign would also be reaching out to “a number of voters out there that may be registering some measure of support” for Obama “that’s very soft.” “The reason that these voters right now are undecided is that they’ve watched President Obama for the last four years, and they haven’t concluded he’s worthy of their support right now,” Madden said. In the coming weeks, he added, the campaign will “lay out the important choice that these voters face on these big issues that they care about.” Resetting Race It’s the culmination of a process that top Romney strategist Eric Fehrnstrom foreshadowed earlier this year as the former Massachusetts governor pushed to clinch his party’s nomination. Fehrnstrom said in a March 21 CNN interview that Romney could reset the race in the fall, like the Etch A Sketch child’s toy for making drawings and quickly erasing them with a shake. Since then, Romney hasn’t reversed any of his positions, as his Republican primary rivals and Democrats who branded him a “flip-flopper” said he would. Yet as he readies for the Oct. 3 debate against Obama, he’s stressing elements of his agenda that might appeal to a broader swath of voters. The tax-cut issue offers one example. Romney has campaigned since February on a proposal to reduce income-tax rates across the board by 20 percent, arguing that doing so would help create jobs by allowing employers to keep and invest more of what they earn. Lately, he has highlighted the benefits of the plan for middle-income people and emphasized that he isn’t looking to hand more tax cuts to the wealthy. Middle-Income “There should be no tax reduction for high-income people,” he said Sept. 24 on the CBS program “60 Minutes.” “What I would like to do is to get a tax reduction for middle- income families.” Romney went further as he campaigned Sept. 26 in Westerville, Ohio , saying that no one should anticipate a substantial tax reduction, because his plan would be financed by curbing or eliminating targeted tax breaks. “By the way, don’t be expecting a huge cut in taxes, because I’m also going to lower deductions and exemptions,” he told voters in a gym at Westerville South High School. Two days later in Philadelphia, Romney told donors that while everyone would benefit from his tax plan, the wealthy would sacrifice more to pay for it. Marginal Rates “My view is to lower the marginal rates, get marginal rates down for everybody,” Romney said at a fundraiser at the Union League Club, where contributors giving as much as $50,000 munched on a breakfast buffet. “At the same time, lower deductions and exemptions, particularly for people at the high end, so we keep the current progressivity of the code.” Romney and campaign aides have said his tax plan would be revenue-neutral -- any reductions in money coming in to the U.S. Treasury would be offset by corresponding increases elsewhere -- and that the middle class and small businesses will get a net tax cut. Yet they won’t answer who would shoulder a net increase to finance it. The shift in emphasis comes as Romney trails Obama in public polls both nationally and in states that have supported candidates from both parties, and may reflect what surveys show is opposition to cutting taxes for top earners. While some of Romney’s aides have signaled they will retool their message for the closing weeks of the race to clarify the choice for voters, there’s little evidence of major changes. ‘One Umbrella’ Romney’s messages “all fit under one umbrella,” senior adviser Ed Gillespie told reporters on the call today. “We cannot afford four more years like the last four years.” Still, the former Massachusetts governor, who has mostly steered clear of foreign policy, does plan to speak more about the topic in the coming days, particularly sharpening his attacks on Obama’s policy in the Middle East. The president is “leading from behind and reacting to events in the Middle East and North Africa, rather than shaping them,” Madden said. “ Governor Romney will lay out a stronger vision for American foreign policy, based on the strong leadership that we need to shape events and protect American interests.” Romney is ready for debate questions about his branding of 47 percent of Americans as government-dependent “victims” who pay no income tax and won’t vote for him, Gillespie said. “We believe the voters will see and appreciate the fact that what Governor Romney’s talking about would improve the quality of life for 100 percent of Americans,” Gillespie said. Romney and Obama, after debating on Oct. 3 in Colorado at the University of Denver, will face off on Oct. 16 at Hofstra University in Hempstead, New York , and on Oct. 22 at Lynn University in Boca Raton , Florida. Each debate begins at 9 p.m. Washington time. ‘Retarget’ Message The recalibration of Romney’s campaign has intensified since the secretly recorded May remarks were published last month. “Romney, like most nominees, has attempted to retarget his message toward the political center, and that has accelerated ever since the ‘47 percent’ comments surfaced,” said Dan Schnur , who worked on Arizona Senator John McCain ’s 2000 Republican presidential bid and directs the Jesse Unruh Institute of Politics at the University of Southern California. While Obama, who faced no primary opposition, has had all year to move to the middle, Romney “has five weeks and three debates to talk to the center of the electorate,” Schnur said. Health-Care Law Romney is also altering his tone on another issue on which polling shows him to be out of step with public opinion. A Bloomberg National poll conducted Sept. 21-24 found that only about a third believe the 2010 health-care law Obama pressed to enactment should be repealed, as Romney promised during the Republican primaries, while a majority said it should be retained. Two in five said the measure “may need small modifications,” and another one in five said it should be “left alone.” While Romney often says in interviews and campaign appearances that he will repeal the law, he has recently begun speaking more about parts of it he would keep and mentioning the Massachusetts measure that mirrors its approach and that, as the state’s governor, he helped enact in 2006. In a Sept. 9 interview on NBC’s “Meet the Press,” Romney said he isn’t proposing “getting rid of all health reform.” “There are a number of things that I like in health-care reform that I’m going to put in place,” he said. “One is to make sure that those with pre-existing conditions can get coverage.” What he didn’t say is that the health-care proposal he offered in his presidential campaign guarantees such coverage only for those who have obtained insurance policies in the past. Massachusetts Plan Romney last week held out the Massachusetts health-care law -- which, like the national measure, requires that everyone purchase health insurance -- as proof that he cares about people. “Don’t forget, I got everybody in my state insured,” Romney told NBC in a Sept. 26 interview. “One hundred percent of the kids in our state had health insurance. I don’t think there’s anything that shows more empathy and care about the people of this country than that kind of record.” Romney has also softened his immigration stance since the primary campaign. In that race, he berated fellow Republicans for proposing to allow illegal immigrants or their U.S.-raised children any chance to stay in the U.S. and seek legal status. At a Sept. 20 forum in Miami, sponsored by the Spanish-language television station Univision, Romney attempted to explain his call for “self-deportation” for illegal immigrants. “I’m not in favor of a deportation -- mass-deportation effort, rounding up 12 million people and taking them out of the country,” Romney said. “People decide if they want to go back to the country of their origin and get in line, legally, to be able to come to this country.” To contact the reporter on this story: Julie Hirschfeld Davis in Boston , Massachusetts at 1890 or Jdavis159@bloomberg.net. To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net . |
2024-02-21 | Bloomberg | Citigroup Stakes, U.S. Mutuals, EFSF Bonds: Compliance | Citigroup Inc. (C) , the third-biggest U.S. bank by assets, will let managers of its hedge funds own part of the business ahead of rules that limit shareholders’ cash in the unit, Chief Operating Officer John Havens said. Employees in the Citi Capital Advisors division, or CCA, will get a “significant” stake in managing the funds, Havens said in an interview. This will increase, he said, as New York- based Citigroup withdraws its own money and attracts outside investors to comply with the Volcker rule, which restricts deposit-taking banks from making bets with their own capital. Havens and Chief Executive Officer Vikram Pandit , 55, are seeking to replace the company’s cash in CCA with funds from outsiders as regulators draft the Volcker rule’s final language. The proposed rule would prohibit banks from owning more than 3 percent of hedge funds and private-equity funds and from investing more than 3 percent of Tier 1 capital in the funds. Former Morgan Stanley (MS) executives Jonathan Dorfman and James O’Brien run CCA, which managed $18.2 billion in private-equity, venture-capital and hedge funds, Citigroup said in August. Citigroup had at least $5 billion in the funds, a person familiar with the matter said in May. The company also invested about $800 million of its money in internal private-equity and hedge funds in the third quarter, according to a November regulatory filing. Attracting external capital would help Citigroup withdraw its money without forcing the closure of funds that hold mostly company cash. Citigroup didn’t provide details about how it would divest its ownership of the hedge-fund unit. For more, click here. Compliance Policy U.S. Mutuals May Struggle to Stay Afloat Under Fed Dividend Rule Mutual savings banks say they will have difficulty retaining capital, attracting investors and even staying afloat under a new Federal Reserve rule requiring depositors each year to approve a dividend waiver. In short, mutual bank managers say, the new rule may make it less attractive to invest in mutual holding companies -- the entities that own the typically small, consumer-service oriented banks. That could lead to decreased capital, pressure to convert to an all-stock company and ultimately, the absorption of community-oriented mutual holding companies into big-name banks. Mutual banks are thrifts whose majority owners are depositors and whose minority owners are public shareholders. For decades, the former Office of Thrift Supervision allowed a mutual holding company to waive its yearly dividend -- which meant the holding company could avoid a large tax bill, provide investors assurance it could meet its income-to-dividend test and retain and attract public shareholders, who contribute real capital to the institution and receive the dividend instead. Under the Dodd-Frank Act, the Federal Reserve now helps to govern mutual banks. Under an interim Fed rule, a mutual holding company can no longer waive the dividends it owes itself unless a majority of the bank’s depositors vote to allow the waiver. The new requirement is in effect even as the Fed reviews comments on it. In the comment letters, mutual bank managers point out that most depositors won’t understand the waiver issue and will probably reject it. Ultimately, the managers warn, the dividend- waiver issue could erode their capital levels and scare away investors. For more, click here. Turkey Proposes Laws for Bank Regulator Chiefs, Insider Trading The Turkish government will allow the heads of the banking regulator and the fund which insures deposits and manages failed banks to serve a second term in office, according to draft legislation submitted to parliament yesterday. Tevfik Bilgin ’s six-year term as chairman of the Ankara- based banking regulator will end in April. Sakir Ercan Gul, who has headed the Istanbul-based Savings Deposit Insurance Fund since February 2010, will complete his term at the end of this month. Separately, Turkey will introduce tougher penalties for manipulation of financial markets and insider trading, Sabah newspaper reported, citing a draft for a new capital markets law. The law foresees jail sentences of between three and six years for those found guilty of insider trading or spreading false information and then profiting from it, Sabah said. The new law will include more specific definitions of the kind of publications, including material from the Internet, that are subject to it, Sabah said. That may lead to penalties for foreign institutions that have written reports recently that affected markets, the newspaper said, without specifying them. Compliance Action UBS Turning Whistle-Blower in Libor Probe Pressures Rivals UBS AG’s (UBSN) decision to become first-confessor as regulators probe the alleged manipulation of interest rates will ratchet up the risks for other banks that set the benchmark for $360 trillion of securities worldwide. The bank is seeking to insulate itself from the biggest possible fines from the investigation by turning itself in to regulators before its competitors to gain leniency, lawyers said. The plan still leaves the Zurich-based lender vulnerable to lawsuits from clients and raises the potential antitrust penalties for its competitors. UBS, already facing scrutiny of its internal controls after posting a $2.3 billion loss from unauthorized trading last year, is trying to shorten the probe against itself by cooperating. Its disclosure to regulators that employees colluded to rig the London interbank offered rate is likely to renew calls for regulators to overhaul the way firms set the rate. UBS disclosed in a July filing it had got conditional immunity from the U.S. Justice Department in its probe of Libor. In February, the bank said it received similar immunity from the Swiss Competition Commission. Spokesman Richard Morton declined to comment on the lender’s leniency agreements. By making the first disclosure to regulators, the lender will make it harder for competitors including JPMorgan Chase & Co. (JPM) and Citigroup Inc. to claim similar protection. UBS’s competitors could face higher penalties for not coming forward earlier, said Steven Francis, a regulatory lawyer at Reynolds Porter Chamberlain in London. Brian Marchiony , a London-based JPMorgan spokesman, and Jeffrey French , a spokesman for Citigroup in London, declined to comment on the investigations. Libor is derived from a survey of banks conducted daily for the British Bankers’ Association in London. For more, click here. U.K. FSA Is Reviewing Cross-Border Allegations in Libor Probe Britain’s Financial Services Authority is investigating “significant cross-border allegations in regards to Libor.” Tracey McDermott, the regulator’s acting head of enforcement, publicly disclosed the probe for the first time in a speech in London today. The U.K. regulator is probing whether banks’ proprietary- trading desks exploited information they had about the direction of Libor to trade interest-rate derivatives, potentially defrauding their firms’ counterparties, two people familiar have said. The U.K. FSA is investigating whether banks’ Libor submissions reflected their actual cost of borrowing and is scrutinizing market data for potential anomalies, another person familiar with the investigation said. The watchdog is scanning e-mails between bankers for code words that could be used to manipulate Libor, a person familiar with the case has said. For more, click here. European Sovereign Bond Protection Facility Launched, EFSF Says The European Financial Stability Facility said it has launched a program that will be able to provide partial insurance for sovereign bonds of a euro-area nation. The European Sovereign Bond Protection Facility would offer insurance certificates for newly issued debt. The certificates would give the holder an amount of fixed-credit protection of 20 percent to 30 percent of the principal amount of the sovereign bond, the EFSF said. The partial risk protection is designed to be used primarily under precautionary programs and is aimed at increasing demand for new issues of euro-area nations and lowering funding costs, the EFSF said. The program is one of two leveraging mechanisms in development and must be requested in order to be used. Bristol Myers Squibb Gets Subpoena for Abilify Information Bristol-Myers Squibb Co. (BMY) said it received a subpoena from the U.S. attorney’s office in New York asking for information about sales and marketing of its second-best-selling drug, Abilify, used to treat schizophrenia and other mood disorders. “It’s not possible at this time to assess the outcome of this matter or its potential impact on the company,” the New York-based firm said in a filing Feb. 17 with the U.S. Securities and Exchange Commission. The subpoena was received last month. The Abilify antipsychotic drug generated $2.8 billion in revenue in 2011, second after the blood thinner Plavix in the company’s portfolio, according to data compiled by Bloomberg. Laura Hortas, a company spokeswoman, declined to comment on the subpoena beyond the company’s statement. Courts Expert Networker John Kinnucan Charged; Barnetson Pleads Guilty John Kinnucan, the Broadband Research LLC founder who said he refused to secretly record a money manager in a nationwide U.S. probe of insider trading, was charged with participating in a securities fraud scheme. Kinnucan, 54, was charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud and two counts of securities fraud in a federal complaint unsealed Feb. 17 in federal court in New York. He was arrested at his home in Portland, Oregon, on Feb. 16, and is being held in jail, according to the Federal Bureau of Investigation. He was scheduled to appear before a federal magistrate in Oregon Feb. 17, the U.S. said. Kinnucan used “financial incentives,” and other inducements to persuade public company insiders to reveal their employer’s secrets, Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting the case, said in a statement. Kinnucan allegedly paid one source of illegal tips $27,500 and invested $25,000 in the business of a second source. He also provided inside information to his clients on the understanding they’d use the tips to execute transactions, according to the statements in a criminal complaint filed in U.S. District Court in New York. In the complaint, prosecutors said that between 2008 and 2010, Kinnucan allegedly obtained nonpublic information such as quarterly revenue numbers from co-conspirators who worked at publicly-traded companies such as F5 Networks Inc. (FFIV) , Sandisk Corp. (SNDK) and Flextronics International Ltd. (FLEX) Ellen Davis , a spokeswoman for Bharara’s office, declined to comment on Kinnucan’s arrest. The U.S. Securities and Exchange Commission also brought a parallel civil case against Kinnucan Feb. 17 in a complaint filed in Manhattan federal court. Nathaniel Burney, a New York lawyer who has represented Kinnucan, said in a phone interview last week that he is no longer his defense lawyer and declined to comment further on the matter, citing attorney-client privilege. Kinnucan said in a Feb. 14 e-mail that he was representing himself. Separately, former SanDisk Corp. executive Donald Barnetson pleaded guilty Feb. 17 to participating in a securities fraud scheme with Kinnucan. Barnetson, 37, pleaded guilty in federal court in Manhattan Feb. 17 to one count of conspiracy to commit securities and wire fraud. He faces as long as five years in prison and was ordered released on $50,000 bond. Lee Flanagin, a spokesman for Milpitas, California-based SanDisk, said Barnetson left the company in early 2011. The criminal case is U.S. v. Kinnucan, 12-MAG-424, and the civil case is SEC v. Kinnucan, 12-CV-1230, Southern District of New York (Manhattan). For more, click here, and click here. Iran Starts Trial in $2.6 Billion Bank Fraud Case, Press TV Says Iran started the trial of 32 people charged with involvement in a $2.6 billion banking fraud, the biggest in the country’s history, Press TV reported, citing Prosecutor General Abbas Jafari-Dolatabadi. The trial opened in the Islamic Revolution Court in Tehran Feb. 19, with Jafari-Dolatabadi saying the defendants are part of “a well-organized group which has conducted criminal actions in the guise of an investment company to undermine the economic security of the society,” Press TV said. The defendants, who weren’t identified, were involved in efforts to provide forged documents to get loans with the aim of buying state-owned companies that were being privatized and to open up letters of credit to transfer large amounts of money abroad, Press TV said, citing the indictment. Owners of the Aria Investment Development Co., which is at the center of the controversy, allegedly bribed managers of banks to get loans and letters of credit, the report said. The company has more than 35 affiliates that are active in diverse business activities, it said. The equivalent of $2.6 billion was withdrawn from the country’s banking system and deposited in a personal account, Press TV said. Interviews/Speeches Tilman Says Dodd-Frank and Volcker Rules Won’t Help Leo Tilman, president of L.M. Tilman & Co., talked about risk strategies and corporate behavior, as well as his views on the Volcker rule. He spoke with Tom Keene on Bloomberg Television’s “Surveillance Midday.” For the video, click here. Bloomberg’s Cohan Says Arbitration Doesn’t Work Bloomberg columnist William D. Cohan said arbitration on Wall Street “is all a fiction.” Cohan talked with Bloomberg’s Ken Prewitt on Bloomberg Radio’s “Bloomberg Surveillance.” They were joined by Gerard Cassidy , an analyst with RBC Capital Markets. Cohan is a Bloomberg View columnist. The opinions expressed are his own. For the audio, click here. Comings and Goings Citigroup Appoints New Japan Markets Head After Libor Suspension Citigroup Inc. appointed a new head of its Japanese markets business as Chief Executive Officer Vikram Pandit seeks to rebuild in the country after receiving the third regulatory punishment in seven years in December. Suneel Bakhshi was appointed president and CEO of Citigroup Global Markets Japan, according to a statement on the New York- based bank’s website. Bakhshi is currently chief risk officer of Citigroup’s commercial bank, according to the statement. Bakhshi is taking over duties from Brian Mccappin, who the bank said in December would resign after the unit was banned for two weeks from trading tied to the London and Tokyo interbank offered rates. Citigroup staff attempted to improperly influence the rates, the Japanese Financial Services Agency said. The bank was also suspended from soliciting sales of certain products to retail customers after failing to fully explain their risk. Citigroup said Mccappin would resign after regulators announced the ban, and apologized to customers in a statement in response to the FSA’s allegations. James “Jamie” Forese, head of Citigroup’s securities and banking unit, said in an internal memorandum obtained by Bloomberg News that Bakhshi has held several senior positions in trading, banking, and risk management during his 30-year career at Citigroup. Danielle Romero-Apsilos, a spokeswoman for Citigroup, confirmed the memo’s contents. Shuntaro Higashi, the unit’s interim president and CEO, will continue as chairman of the business, according to the statement. To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net. To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net . |
2024-10-20 | Bloomberg | Health Rules Prod U.S. Hospitals to Form Networks for Care to Trim Costs | Hospital chains such as Community Health Systems Inc. (CYH) may get as much as $1.9 billion in bonuses by forming joint ventures to improve care and cut medical costs under regulations released by the Obama administration. The U.S. Department of Health and Human Services issued final rules today for so-called accountable care organizations for the elderly and disabled, a centerpiece of the health-care law designed to save as much as $940 million in three years. Savings would be shared between providers and the government. Participants can keep more savings after reaching targets, and will need to meet about half as many quality measures as first outlined in March. The delayed rule marks a victory for hospitals, clinics and large doctors’ practices that have lobbied to alter draft regulations they viewed as too burdensome and financially risky. “We heard loud and clear that the proposed rules didn’t create a strong business case, and we felt those comments were credible,” said Jonathan Blum , director of Medicare. “We’ve worked hard to adjust the financial model.” The government projected as many as 270 organizations would participate in the program aiming to coordinate care for large groups of Medicare patients. The government said in its regulatory filing that it “made significant modifications to reduce burden and cost” for participants, including increased potential bonuses and letting hospitals and doctors participate without risk of financial loss. Insurer Concern “The new rule is an easier pill to swallow, but still difficult for most systems to fully digest,” said Dan Mendelson , chief executive officer of Avalere Health LLC. “ACOs will get to keep more of the upside profits from effective cost control --including savings from reduced re-hospitalizations -- and there are fewer quality metrics and many of the industry’s legal concerns appear to have been addressed.” Taxpayers may lose money on the program. The government said in its regulatory filing that in “extreme scenarios,” the effort could cost Medicare as much as $1.1 billion in its first three years, or yield as much as $2 billion in savings. Physician-owned groups and rural providers will also be able to get $3.5 million in financial support to make upfront investments in information technology and staff. The payments would be recovered from any future savings the organization achieves. Quality Standards An ACO’s potential reward will depend on its performance on almost three dozen quality standards. Other changes include a flexible start date in 2012, providing a list of likely patients up front and expanding participation to include rural health clinics and organizations where specialists provide primary care. Health-care providers won’t be required to pay back the government if they don’t hit savings targets. In its filing, Medicare rebutted a study by the American Hospital Association that found start-up costs for accountable care groups could be as much as $11.6 million. The association conducted its study before the government had proposed rules for the organizations, regulators said. A 2008 study by the Government Accountability Office found that physician groups participating in an earlier Medicare experiment in coordinated care spent about $555,000 to start up and had about $1.2 million in annual operating costs. The GAO study is a better predictor of costs for the accountable care program, regulators said. Voluntary Program Congress declared participation in the Medicare ACO program to be voluntary, making it important to design the initiative to appeal to providers while trying to ensure patient care wasn’t sacrificed to meet savings targets. Thomas Scully, who managed Medicare under George W. Bush and is senior counsel at Alston & Bird LLP, said Medicare officials “did their level best to respond to the criticisms and get the thing rolling. I think there’s still plenty of interest out there.” Blair Childs, senior vice president at Premier, an alliance of 2,700 not-for-profit hospital systems, said many would pursue joint ventures because of the simpler federal requirements and reduced risk in the rule. “I think we’re going to see a lot of systems step up and do this,” he said. The final rules make government antitrust reviews voluntary, a change from the original agreement between the Justice Department and the Federal Trade Commission issued in March. The first accord said any physicians’ group with more than 30 percent market share in its local area was required to submit to some form of review. The final agreement keeps the original proposal’s provision that any group with 30 percent or less market share and approved as an ACO by Medicare will be considered legal. Hospitals Unsure Trade groups for hospitals said the change makes the ventures more appealing. Still, “it remains to be seen how many hospitals will find these changes to be motivating enough to enter the program,” said Linda Fishman, senior vice president for policy for the American Hospital Association in Chicago. Insurers and employers criticized the change, saying it could lead to higher health costs. “Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently,” said Karen Ignagni , president and CEO of America’s Health Insurance Plans in Washington. Efficiency Model The program is modeled after integrated health systems such as the Cleveland Clinic that deliver more efficient care. Those providers panned the proposed rules as overly prescriptive. Hospitals complained that setting up the joint ventures as the government originally envisioned would have required as much as $11.6 million in initial investments for a 200-bed hospital. Investor-owned hospital systems, represented by the Federation of American Hospitals, had criticized requiring antitrust reviews before companies could participate, saying it would be “a significant deterrent” to participation. The Obama administration considers the ventures essential to reducing the growth of spending for the federal health insurance program, which accounts for 15 percent of the U.S. budget and is projected to increase with the retirement of Baby Boomers and increased use of medical services. The government would waive some antifraud statutes for qualifying groups, including laws that forbid doctors from referring patients only to hospitals and other providers with which they have financial stakes. Insurance groups, among other critics, are concerned the creation of market providers that dominate local markets could suppress competition and drive up costs. To contact the reporter on this story: Carol Eisenberg in Washington at Ceisenberg1@bloomberg.net ; To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg. |
2024-07-23 | Bloomberg | Muni `Race to Bottom' May Cost $1 Trillion, Former Los Angeles Mayor Says | U.S. cities and states may need more than $1 trillion of federal assistance in the next three years to stave off financial failure, former Los Angeles Mayor Richard Riordan said. Local governments are in a “race to the bottom” and U.S. taxpayers will inevitably be called on to bail them out, Riordan said in an interview at Bloomberg News’s Los Angeles office. The federal government should make pension, health-care and school reform a condition of receiving the aid, he said yesterday. “It’s not just L.A., it’s not just California, it’s all over the country, you’re going to see all these entities become totally insolvent,” Riordan said. “I think the federal government has to come in and have a list of what the states have to do to be saved.” Riordan envisions incentives modeled on President Barack Obama ’s “Race to the Top” aid to school districts. To receive funds, state and city officials should be prodded to cut public- employee pension benefits, renegotiate union work rules and add charter schools to improve student performance and save on costs, he said. Riordan said the need for federal help will be unavoidable and when it comes Obama will have to demand concessions from unions. “I think he would have zero chance of getting reelected if he didn’t,” Riordan said. States, recovering from the longest recession since the Great Depression, have projected budget deficits of $116 billion for fiscal 2011 and 2012, according to a report last month by the National Governors Association and the National Association of State Budget Officers. Pension Funds State public-employee pensions are underfunded by $438 billion and estimates using different accounting methods suggest a number as large as $3 trillion, according to an April report from the American Enterprise Institute for Public Policy Research. States can’t count on the federal government for more aid, Erskine Bowles , co-chairman of the National Commission on Fiscal Responsibility and Reform, said at the governors association meeting in Boston this month. Investors won’t keep buying municipal debt to help cash- strapped cities and states finance operations, Riordan said. The 80-year-old Republican, who predicted insolvency for Los Angeles by 2014 in a Wall Street Journal commentary in May, said the city will have to declare bankruptcy to reduce its pension and health-care obligations to public employees. Politicians understand they won’t succeed in raising taxes to dig out of deficits, Riordan said. “If a government can’t sell bonds, they might as well close the door,” Riordan said. “If you can’t do that, you’re out of cash, you’re out of business.” Borrowing Costs Los Angeles paid a higher yield on $1.16 billion in short- term notes issued three weeks ago than it did on similar debt a year earlier, Riordan said. The notes were sold at yields of 0.55 percent to 0.85 percent, and underwriter J.P. Morgan Securities bought $252 million of the securities after buyers balked, City Administrator Miguel Santana said in a July 2 memo. California may experience similar difficulty in coming months when it seeks to borrow, Riordan said. He said he supports Republican Meg Whitman for governor in November over Democrat Edmund G. “Jerry” Brown. Riordan served as the mayor of Los Angeles from 1993 to 2001. Prior to entering public service, he started a law firm, Riordan & McKinzie, which was acquired by Los Angeles-based Bingham McCutchen in 2003, and private-equity company Riordan, Lewis & Haden, in 1982. ‘No Out-Sized Risk’ Los Angeles faced a financial crisis in April after the Department of Water & Power withheld a payment to the city and Controller Wendy Greuel said the nation’s second-largest metropolis by population would run out of cash in a month. Mayor Antonio Villaraigosa , a Democrat, has said Los Angeles will not declare bankruptcy as long as he is mayor. Some investors and analysts say odds of a wave of municipal defaults is low. “Even in a Draconian scenario such as the Great Depression, we believe that there is no out-sized risk in the municipal bond market,” Bijan Moazami , an insurance analyst with FBR Capital, said in a July 20 research note. To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net ; Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net. Richard Riordan, former mayor of Los Angeles, speaks during an interview in Los Angeles on July 22, 2010. Photographer: Jonathan Alcorn/Bloomberg Richard Riordan, former mayor of Los Angeles, speaks during an interview in Los Angeles on July 22, 2010. Photographer: Jonathan Alcorn/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-05-21 | Bloomberg | KidsPeace Files Bankruptcy Blaming Government Cuts | KidsPeace Corp., the owner of a nonprofit psychiatric hospital for teenagers in Pennsylvania , filed for bankruptcy blaming government spending cuts. The company will try to use bankruptcy to reduce its bond debt to $24 million from $51.3 million and to trim pension obligations that may exceed $100 million, according to an affidavit filed today by Chief Executive Officer William R. Isemann. KidsPeace owes creditors more than $100 million and has assets valued at less than $50 million, according to its Chapter 11 petition in U.S. Bankruptcy Court in Reading, Pennsylvania. The company was financially sound until 2008, Isemann said in court papers. “In more recent years, however, the debtors, like many other organizations in their field, have faced increased challenges,” he said. The U.S. federal and state Medicaid program, which provides health insurance to poor children, cut reimbursement rates. The program is the company’s biggest source of revenue. States that send troubled teens to the hospital and other facilities also cut back, the company said in court papers. Orphanage Roots KidsPeace, based in Orefield, Pennsylvania, traces its roots to an orphanage founded in 1882. The company and its eight units have more than 750 employees, including nurses, doctors and teachers. The 96-bed hospital provides inpatient psychiatric care to children and adults 21 and younger. The company’s juvenile-justice program in Minnesota and residential treatment centers in Pennsylvania, Maine and Georgia serve children with a variety of psychiatric disorders. Revenue was $119.9 million and expenses totaled $124.5 million last year as KidsPeace posted a loss of $3.1 million, according to court papers. The case is In Re KidsPeace Corp., 13-14508, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Reading). To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net To contact the editor responsible for this story: Stephen Farr at sfarr@bloomberg.net |
2024-10-01 | Bloomberg | U.S. Fiscal Feud Sees No Heroes as Voters Assess Blame | The partial shutdown of the U.S. government for the first time in 17 years has become a contest of who is wearing the cleanest dirty shirt. President Barack Obama said Republicans who control the U.S. House are risking the economic recovery to derail the Affordable Care Act, even though it was upheld by the Supreme Court and ratified by his re-election. “You can’t shut it down,” Obama said yesterday of the health insurance program that begins enrollment today. Some Republicans said they will continue to try to do so, while still lacking enough Senate votes to get such a measure through Congress or overturn a certain presidential veto. “I don’t want to shut the government down but I also want to protect my constituents from this law,” said Representative Richard Hudson, a first-term Republican from North Carolina. “So I’ll do whatever it takes.” Americans haven’t identified any heroes in the budget fight so far, akin to how Bill Gross , founder of Pacific Investment Management Co., referred to the U.S. bond market during the financial crisis as the “cleanest dirty shirt,” because the securities were the best only when compared to how bad the alternative options were. While polls show Americans so far only blame Republicans slightly more than Democrats, they overwhelmingly oppose undermining the law known as Obamacare by shutting down the government or resisting an increase in the country’s debt limit, according to a Quinnipiac University poll released today. Shutdown Gap By a margin of more than three to one -- 72 percent to 22 percent -- Americans oppose Congress “shutting down major activities of the federal government,” the poll found. By 64 percent to 27 percent, voters don’t want Congress to block an increase in the nation’s $16.7 trillion federal borrowing limit. Overall, a majority of Americans, 58 percent, is opposed to cutting off funding for the insurance program that begins enrollment today. Thirty-four percent support defunding it. “Unlike 1995, the public isn’t assigning more blame for a possible shutdown to one side,” said Andrew Kohut, the founding director of the center, referring to the last shutdown when Americans by 19 percentage points blamed Republicans more than Democrats. “This may be a measure of how much more polarized we are these days compared to then,” Kohut said, adding that if the shutdown causes economic pain, such as job losses, Republicans will likely pay more of a price for causing it. Only 10 percent of Americans approve of the job Congress is doing, according to the CNN poll, a record low for that survey. Obama’s approval rating was 45 percent in the September Bloomberg National Poll. Anti-Democracy Steve Jarding, a lecturer at Harvard’s Kennedy School of government and Democratic consultant, said Republicans have gone so far as to argue “against representative government.” “Let’s just shut it down and eliminate it,” he said. “That line of thinking went out about the time of the Articles of Confederation.” The latest poll figures signal a voter dissatisfaction that may lead to a 2014 election where “it’s a pox on both their houses, throw all of them out,” Jarding said. The current fight is “way beyond the issues. It’s not about what’s good for the country. It’s 100 percent politics.” Concern that a shutdown would stunt economic growth sent stocks lower, trimming the biggest quarterly gain since the start of 2012, and the yield on 10-year Treasury notes traded at an almost seven-week low. Markets React The Standard & Poor’s Index (SPX) 500 fell 0.6 percent to 1,681.55 at 4:19 p.m. in New York. All 10 main industries in the S&P 500 dropped, with consumer goods, oil and gas and financial shares falling the most. Some of the political back-and-forth is intramural, as a split emerges among Republicans over the shutdown strategy. “It is hard to see an advantage for the GOP,” said Terry Holt, a Republican consultant and informal adviser to House Speaker John Boehner of Ohio. “People expect their politicians to be practical and they see all this posturing as just more politics as usual. Voters know we oppose Obamacare and know we would get rid of it if we could. There is little advantage left in pursuing it.” “We should use the leverage we have in the debt-ceiling fight to get back our economic arguments, low taxes and growth policies. It’s too bad we are wasting that opportunity,” Holt said, referring to the approaching battle over raising the nation’s borrowing limit. Treasury Secretary Jacob J. Lew has told lawmakers that measures to avoid breaching the debt ceiling will be exhausted by Oct. 17. Going Back Republicans have been in this place before, selecting between a choice and an echo. It has created internal fissures that have roots in the primary campaign in 1964 that led to the nomination of Senator Barry Goldwater of Arizona. He went on to lose in a landslide to Lyndon Johnson, carrying only the Deep South states of South Carolina, Georgia , Alabama , Mississippi and Louisiana, plus his own state. Supporters from those states help to form the foundation of the party leading the House today, said Curtis Gans, director of the Center for the Study of the American Electorate at American University in Washington. Gans, who has studied turnout and voting patterns for more than three decades, said Goldwater won the nomination because his campaign’s grassroots organization was able to defeat the Republican establishment candidate, New York Governor Nelson Rockefeller. Tea Party Sentiments such as limiting the power of the federal government in favor of the states that Goldwater tapped into can be seen in the Tea Party activists today, Gans said. “Goldwater lost in a landslide but those people stayed as part of the Republican Party,” Gans said. Phyllis Schlafly, whose book entitled “A Choice Not an Echo” became Goldwater’s campaign slogan in 1964, said the current fight is a reprise of the one from half a century ago. “I think the fight we are in is another ‘choice-not-an-echo’ fight,” she said. “That means a battle between the Republican establishment and the grassroots.” Those so-called grassroots activists also are the most angry at government, according to the Pew poll released yesterday. In that survey, anger at government was the highest since the center began asking the question in 1997. Among those who called themselves conservative Republicans, 41 percent said they are angry at the federal government, compared with 26 percent of all Americans. That explains in part Boehner’s dilemma. The most animating force in his party is the one that holds the most animus toward the federal government. “Some of these guys just want to check the box -- ‘I shut down the government’ -- so it’s mostly political theater at this point,” Holt said. “Now we’ve voted more than 40 times and we’re shutting down the government over Obamacare -- what are we replacing it with? That’s the ultimate problem, because we’re not offering an alternative.” To contact the reporter on this story: Michael Tackett in Washington at mtackett@bloomberg.net To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net |
2024-01-17 | Bloomberg | Pictet Says Swiss Money Managers May Move Abroad Over EU Access | Swiss money managers may relocate businesses abroad if the Alpine nation fails to negotiate better market access to the European Union, said Nicolas Pictet, chairman of the Swiss Private Bankers Association. “It’s urgent and important that Switzerland focuses on guaranteeing external market access for its financial industry,” Pictet told reporters today in the Swiss capital, Bern. Otherwise “we will see more and more relocations and our financial center will gradually decline.” The Swiss government neglected competitiveness and better market access in its negotiations with the EU over financial and tax matters, according to Pictet, who is also a managing partner at Geneva’s biggest bank, Pictet & Cie. While EU directives on investor protection have “noble aims,” they present barriers to firms in countries outside the bloc, he said. The association’s 12 members, which include Pictet and Lombard Odier & Cie., have added 234 jobs in Switzerland over the past three years, a 5 percent increase. That compares with a 22 percent boost, or 444 posts, overseas, said Pictet, adding that cross-border wealth management provides more than half of the “added value” created by banks in the Swiss economy. Switzerland will later this year draft a new financial services law focusing on investor protection, which mirrors an EU directive. To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-08-10 | Bloomberg | Julius Baer Said Near Deal to Acquire Merrill Non-U.S. Units | Julius Baer Group Ltd. (BAER) , the Swiss money manager established in 1890, is nearing an agreement to acquire Bank of America Corp. (BAC) ’s Merrill Lynch wealth management businesses outside the U.S., according to two people with knowledge of the matter. An announcement may come as early as Aug. 13, said the people, who asked not to be identified because the matter is private. Julius Baer said June 19 it was in talks to buy the Merrill Lynch units, which may be valued at $1.5 billion to $2 billion, the people said. The two parties are negotiating the final details and the deal could still fall apart, they said. Jan Vonder Muehll, a spokesman for Zurich-based Julius Baer and Sara-Louise Boyes, a London-based spokeswoman for Merrill Lynch wealth management, declined to comment. Baer, which bought ING Groep NV’s Geneva-based wealth business in 2009, is seeking acquisitions to boost its 178.8 billion francs ($183 billion) of managed assets as a global crackdown on tax evasion pushes customers to repatriate funds from offshore accounts in Switzerland. The Merrill Lynch purchase may make the bank the third-biggest Swiss wealth manager after UBS AG and Credit Suisse Group AG. Julius Baer fell 0.4 percent to 35.43 Swiss francs in Zurich trading yesterday. The stock has declined 3.6 percent this year, cutting the bank’s market value to 6.96 billion francs. Ideal Time The Merrill Lynch units outside the U.S. manage about $80 billion of assets, one of the people said. The business has clients in Europe , the Middle East and Africa, plus high-net- worth customers in Latin America and Asia, outside Japan. “We’re absolutely at the bottom in market valuation terms, so in that respect it’s an ideal time to buy a private-banking business,” said Ray Soudah, head of MilleniumAssociates AG, an advisory firm for banking mergers based in Zurich and London. Julius Baer bought a 30 percent stake in Brazilian wealth manager GPS Investimentos Financeiros e Participacoes SA and acquired Macquarie Group Ltd.’s Asian private-client business last year. Baer lost out to Safra Group last November to buy a controlling stake in Basel, Switzerland-based Bank Sarasin & Cie. AG. The acquisition of the Merrill Lynch units would mean that Julius Baer has almost doubled assets under management from 129.1 billion francs at the end of 2008. Transaction Details Buying private-banking franchises requires approvals in different regulatory jurisdictions, meaning the details of the transaction will probably be honed in the coming months, one of the people said. Bank of America Chief Executive Officer Brian T. Moynihan , whose firm is the second-biggest U.S. lender by assets, has unloaded foreign businesses to focus on selling more services to existing customers. He has sold more than $50 billion in assets and businesses since taking over in 2010, including Canadian and European credit-card units, to bolster capital before stricter international rules take effect. To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net ; Jacqueline Simmons in Paris at jackiem@bloomberg.net ; Aaron Kirchfeld in London at akirchfeld@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-07-19 | Bloomberg | Kagan to Weigh Recusal From Health-Law Challenges on `Case-by-Case' Basis | Elena Kagan told Republicans on the Senate Judiciary Committee that, if confirmed to the U.S. Supreme Court, she would decide on a case-by-case basis whether to recuse herself from considering challenges to the new health- care overhaul. Kagan, who as U.S. solicitor general represents the Obama administration in high court arguments, said she has had almost no role in the government’s response to a suit challenging the health-care law filed by states. Judiciary Committee Republicans pressed her to say whether as a justice she would disqualify herself. “I neither served as counsel of record nor played any substantial role” in the case, Kagan wrote to Senator Jeff Sessions of Alabama and other Republicans on the panel. “I would consider recusal on a case-by-case basis, carefully considering any arguments made for recusal and consulting with my colleagues and, if appropriate, with experts on judicial ethics.” More than 20 states, led by Florida, oppose the health- care law signed by President Barack Obama in March. They say the federal government lacks the authority to require almost all Americans to purchase a health insurance policy or pay a fine if they don’t. Kagan said that while she attended “at least one meeting” of administration officials where the litigation was “briefly mentioned,” she was never asked her views on the case or reviewed any government court papers in the dispute. The Judiciary committee will vote tomorrow on Kagan ’s nomination to the Supreme Court, in time for her to be confirmed by early August. That would allow two months before the beginning of the next court term on Oct. 4. Kagan, 50, was nominated by Obama on May 10 to replace Justice John Paul Stevens , who retired from the nine-member court. Kagan formerly was dean of Harvard Law School and worked for four years in President Bill Clinton ’s White House as a lawyer and policy adviser. To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net |
2024-09-24 | Bloomberg | German Business Sentiment May Wane as Recovery Slows | German business confidence probably fell from a three-year high in September as a global slowdown damped the country’s export-driven recovery. The Ifo institute will say its business climate index , based on a survey of 7,000 executives, eased to 106.4 from 106.7 in August, the highest since June 2007, according to the median of 36 forecasts in Bloomberg News survey. Ifo releases the report at 10 a.m. in Munich today. After expanding at the fastest pace in two decades in the second quarter, data show Germany’s economy is losing momentum. Factory orders unexpectedly declined in July and manufacturing activity eased for a second month in September. Even so, the Bundesbank said this week the recovery “remains intact” as companies including truck maker MAN SE raise profit forecasts. “Companies have reached the high plateau of the recovery and from up there you can only look down,” said Andreas Scheuerle , an economist at DekaBank in Frankfurt. “That’s not a catastrophe and no reason to sing the blues. The slowdown doesn’t come as a surprise.” The euro has gained five percent against the dollar in the last two weeks to trade at $1.3339 today. Ifo’s measure of executives’ expectations will decline to 104 from 105.2, the survey of economists shows. The gauge of the current situation will probably rise to 108.7 from 108.2. That would be the highest since May 2008. Slowing Recovery Weaker growth and low inflation in the U.S. prompted the Federal Reserve to signal this week that it may embark on a second wave of unconventional monetary stimulus to support a recovery. Expansion in the world’s largest economy will ease to 2.5 percent next year from 2.7 percent this year, according to another survey of economists. The Bundesbank predicts Germany’s economy, Europe’s largest, will grow 3 percent this year after it expanded 2.2 percent in the second quarter. German companies are looking east to boost profits. SAP AG’s co-Chief Executive Officer Bill McDermott said on Sep. 3 the software maker aims to make China “a second home” as local companies seeking management tools and real-time business intelligence will provide “limitless growth.” Car Exports Bayerische Motoren Werke AG , the world’s largest maker of luxury cars, said on Sep. 16 it plans to add models and start a vehicle-leasing business in China to help boost its presence in the world’s biggest auto market. Car exports from Germany to China tripled in the first half of the year to 128,000, the Federal Statistics Office said on Sep. 21. That exceeds the 122,000 cars shipped to China in 2009. Germany’s strength contrasts with the weakness in some periphery euro-area countries that have been hit by the region’s sovereign debt crisis. Ireland’s economy shrank 1.2 percent in the second quarter, a report showed yesterday. The premium investors demand to hold Irish and Portuguese government bonds over their German equivalents rose to records this week. Even as export growth slows, Germany’s recovery may be bolstered by rising consumer spending. To help fill orders, companies are adding staff. Daimler AG , which raised its 2010 operating forecast on July 27, has taken on 1,800 temporary workers, while Volkswagen AG , Europe’s largest car maker, will offer permanent employment to 400 short- term hires. Unemployment dropped for a 14th month in August, pushing consumer confidence to an 11-month high in September. Germany’s HDE retail association yesterday raised its 2010 sales growth forecast to 1.5 percent from zero. “We can assume that private consumption is falling into step as impulses from foreign trade are weakening,” said Jens Kramer , an economist at Nord LB in Hanover, Germany. “The economy is doing well. We won’t see an output slump.” To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net. To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net |
2024-03-16 | Bloomberg | Morgan Keegan Loses Dismissal Bid in $8 Billion Fairfax Suit | Morgan Keegan, the brokerage being sold to Raymond James Financial Corp. (RJF) , lost its bid to be dismissed from an $8 billion lawsuit brought by Canadian insurer Fairfax Financial Holdings Ltd. Fairfax, in its 2006 lawsuit, accused investors of conspiring with analysts and researchers to spread false rumors and drive down Fairfax’s stock price in a so-called bear raid. New Jersey Superior Court Judge Stephan C. Hansbury in Morristown ruled today that there was more to the case than whether Morgan Keegan’s analyst reports were free speech protected by the U.S. Constitution’s First Amendment. “There’s more to this case than the statements made in a couple of reports,” the judge said. “It seems to me an innocent truthful statement could be part of the conspiracy,” he said. The suit once included as defendants the hedge funds SAC Capital Advisors LP, Third Point LLC and Kynikos Associates LP. The remaining defendants, including New York hedge fund Exis Capital Management Inc., have argued the case doesn’t have enough connection to New Jersey to allow Fairfax’s anti- racketeering counts, which allow for tripling the $8 billion in claims. Toronto-based Fairfax brought other claims in the suit. September Trial Hansbury said he will schedule a trial for September. Bruce Collins, a lawyer for Morgan Keegan, told the judge he will file another motion before then to get his client dismissed. Collins declined to comment on the ruling after the hearing. Fairfax, which owns stakes in Canadian and U.S. insurers, said in its complaint that the hedge funds coordinated with stock analysts so the funds could profit through short sales, selling borrowing shares in anticipation of making money by replacing them with cheaper shares after the price dropped. The company’s $8 billion damage claim is based on allegations that the hedge funds ’ actions depressed Fairfax’s credit ratings , diminished its ability to make acquisitions and reduced the amount it could raise in debt and equity offerings, according to court papers. On Jan. 17, Memphis, Tennessee-based Morgan Keegan asked Hansbury to dismiss it from the suit because the negative Fairfax reports by its analyst, John Gwynn , were protected speech. Collins argued Gwynn’s reports were protected opinions and that Gwynn wasn’t saying Fairfax engaged in fraud. ‘My Estimates’ “All he’s saying is, ‘I’ve got my estimates, you’ve got yours,’” Collins told Hansbury during the hearing. Fairfax also said the hedge funds coaxed Gwynn into giving them his negative Fairfax reports before they were published. Morgan Keegan fired Gwynn in 2008 for disclosing research on Fairfax to selected clients before publication, the brokerage said at the time. He has since died. Fairfax said Gwynn misrepresented the company’s finances in his reports, including its reserves for claims. “Morgan Keegan was part of this conspiracy,” James Stricker, a lawyer for Fairfax, told Hansbury. “They fired John Gwynn for illegal tipping.” Christopher Brett Lawless, a former analyst at Fitch Group Inc. who was sued by Fairfax, also lost a bid to be dismissed on First Amendment grounds. “There’s no evidence of an actionable false statement by Lawless,” Anthony Enright, one of his lawyers, told the judge. “Lawless didn’t have one dime to gain or lose from the performance of Fairfax. He’s not a hedge fund.” Enright didn’t immediately respond to a phone call seeking comment on the ruling. The case is Fairfax Financial Holdings Ltd. (FFH) v. SAC Capital Management LLC, L-2032-06, Superior Court of New Jersey, Morris County (Morristown). To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, at tweidlich@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-04-12 | Bloomberg | Banco Espirito, Roche, Philips: European Equity Preview | The following companies’ shares may have unusual moves in European (SXXP) trading. Stock symbols are in parentheses. The Stoxx Europe 600 Index increased 0.7 percent to 254.43. The Stoxx 50 Index (SX5P) gained 0.6 percent to 2,385.18. The Euro Stoxx 50 Index (SX5E) , a benchmark measure for nations using the euro, rose 0.9 percent to 2,341.36. Banco Espirito Santo SA (BES) : Portugal’s biggest publicly traded bank by market value plans to sell as much as 1.01 billion euros ($1.3 billion) in stock to existing shareholders to increase its capital ratios and buy out its partner in an insurance unit. The shares fell 0.3 percent to 1.17 euros. Roche Holding AG (ROG) : The world’s biggest maker of cancer drugs called its $51-a-share bid for Illumina Inc. (ILMN US) a “more than reasonable starting point for negotiations” in a letter to the San Diego-based company’s shareholders. The shares decreased 0.4 percent to 154.30 Swiss francs. Royal Philips Electronics NV (PHIA) : The maker of electronic toothbrushes and patient-monitoring systems said Steve Rusckowski, the chief executive officer of the company’s health care unit, will leave the company on April 30 to become president and CEO of Quest Diagnostics Inc. (DGX US). Philips will replace Rusckowski with Deborah Disanzo. The shares dropped 0.4 percent to 13.76 euros. To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-06-27 | Bloomberg | Euro Strength Sustained in Widest Libor Gap Since 2009 as Greek Vote Looms | Euro bears driving the region’s shared currency to its first two-month loss in a year are facing rising interest rates, bullish bets in futures markets and Angela Merkel’s determination to keep the 17-nation bloc intact. The euro slid 4.2 percent since April as mounting concern that Greece would default drove Prime Minister George Papandreou to change finance ministers amid a push for 78 billion euros ($110 billion) in austerity measures to tap more financial aid. The yield on 10-year Italian bonds rose to a record relative to German bunds last week and Spanish yields approached an all-time high on speculation the crisis will spread. The bears are confronting the resolve of German Chancellor Merkel and French President Nicolas Sarkozy to defend the currency and the widest gap between euro and dollar money-market rates in about 2 1/2 years as German economic growth outpaces the U.S. BNP Paribas SA sees the euro at $1.55 by year-end, with Commerzbank AG saying it may advance to $1.50 before weakening. “The political desire to keep monetary union alive continues to be overwhelming,” said Audrey Childe-Freeman, the head of European currency strategy in London at the private-bank unit of JPMorgan Chase & Co., the second-biggest U.S. lender by assets. “If we get the debt crisis more under control and we see more momentum in the global economy, the environment will become more supportive for the euro.” Rate Signal The difference between the three-month euro interbank offered rate, that European banks say they see each other charging over the period, and the corresponding London rate for dollar loans, has increased to 128 basis points, the most since January 2009. The gap widened this year as the European Central Bank began raising interest rates, while the Federal Reserve kept borrowing costs at a record low. Hedge funds and other large speculators are betting on a gain in the euro versus the dollar, figures from the Commodity Futures Trading Commission in Washington show. So-called net longs, or bets on a rise, were 29,771 on June 21, compared with a net-short bet as recently as January, according to the data. Net longs reached 99,516 in May. European Union leaders vowed last week to prevent a Greek default as long as Papandreou wins the backing of parliament this week for the proposed budget cuts. Merkel said in Brussels on June 24 that there was agreement within Europe for a new aid program for the nation. ‘Important Decision’ “This is an important decision that says once again we will do everything to stabilize the euro overall,” she said, after backtracking a week earlier on German demands that bondholders be forced to shoulder a “substantial” share of a new Greek bailout. China will keep investing in Europe’s sovereign bond market, Premier Wen Jiabao told the British Broadcasting Corp. in an interview yesterday, saying the purchases “show our confidence in the economies of Europe and the euro zone.” The euro strengthened 5.7 percent against the dollar this year, behind only the 12 percent gain by the Swiss franc. Most of the common currency’s gain occurred in the first quarter as ECB President Jean-Claude Trichet indicated in March that higher interest rates were on the way and EU leaders established a permanent rescue mechanism for the region. The euro is little changed versus the greenback since March 31. Trichet Concern The shared European currency fell 0.8 percent last week to $1.4188, and weakened 0.3 percent versus the yen to 114.13. The euro has advanced 2.2 percent this year against a basket of nine other developed-nation currencies as measured by Bloomberg Correlation-Weighted Indexes. The euro was little changed at $1.4199 at 8:54 a.m. in New York. European leaders are struggling to contain the debt crisis that began in Greece when Papandreou’s Pasok party, elected in October 2009, discovered the budget deficit was more than twice as big as the previous government had disclosed. A 750 billion- euro backstop crafted by the EU and International Monetary Fund more than a year ago failed to stem concern that more euro-area governments would struggle to finance record budget deficits. Trichet said on June 22 in Frankfurt that risk signals for financial stability in the euro area were flashing “red” as the crisis threatens to infect banks, posing “the most serious threat to financial stability in the European Union.” Italian, Spanish Bonds Investors are demanding higher yields to hold the bonds of Italy and Spain , while the Greek 10-year yield gap over bunds, Europe’s benchmark sovereign securities, climbed to a record 15.43 percentage points on June 17. The Italian-German spread climbed to 2.16 percentage points on June 24, the most since the euro’s introduction in 1999, and the Spanish 10-year yield difference widened to within 13 basis points of a record. Bond yields of Portugal and Ireland, which also sought bailouts, rose to all-time highs versus German debt last week. Standard & Poor’s cut Greece ’s credit ranking on June 13 by three levels to CCC, the lowest debt grade for any government. The ratings company said the nation is “increasingly likely” to face a debt restructuring. “The worst for Greece is definitely not behind us,” said Stephen Jen, a managing partner at SLJ Macro Partners LLP in London. “The Europeans and International Monetary Fund have done things to buy time, but they’ve bought time without a plan. I see a new low in the euro later this year.” Fed Forecast The median of 50 analyst estimates compiled by Bloomberg shows the euro will end the year at $1.41, little changed from last week’s close. Deutsche Bank AG, the world’s biggest currency trader, says the euro has set its 2011 high and low and will trade between $1.30 and $1.50 through Dec 31. “There have been distinct forces capping the euro on the upside this year, and distinct ones capping it on the downside,” Caio Natividade, the London-based head of foreign- exchange derivative strategy for Deutsche Bank, said in a telephone interview. The slowing U.S. recovery has also provided support for the euro. The Fed lowered its full-year growth forecast last week, saying the economy will expand 2.7 percent to 2.9 percent versus a range of 3.1 percent to 3.3 percent estimated in April. The Bundesbank said on June 10 that German gross domestic product will rise 3.1 percent in 2011, up from a 2.5 percent increase predicted in February. ‘Euro Resilient’ Trichet said on June 9 that the ECB may boost rates next month even as he damped investor expectations for the pace of future increases amid slowing forecasts for inflation. European policy makers raised the main refinancing rate a quarter percentage point to 1.25 percent in April, the first increase in almost three years. The ECB’s benchmark will be 2 percent by the first quarter of next year, according to the median of 27 economist forecasts compiled by Bloomberg. The Fed, whose target for overnight loans between banks has been a range of zero to 0.25 percent since December 2008, won’t raise the rate to 0.5 percent until the first quarter, a separate median survey showed. “The reason the euro is resilient is that the ECB doesn’t seem to be affected by all the events in Greece,” said Ulrich Leuchtmann , head of currency strategy in Frankfurt at Commerzbank, Germany ’s second-largest lender. “This is a strong signal as it shows ECB policy is independent of what’s happening in the crisis-hit countries.” Leuchtmann said the euro will probably climb to $1.50, before weakening to $1.45 by year-end. Greece Vote The first session of a three-day debate in Greece on new budget cuts is scheduled to begin today. A vote is expected on June 29. An implementation law, which provides the technical details of how the five-year plan will be applied, is also due to be discussed and approved by the deadline of June 30. Merkel said at the June 17 press conference in Berlin that she “would like to have a participation of private creditors on a voluntary basis” for more Greek aid, what Sarkozy said was a “breakthrough.” The two signaled a reconciliation between German calls for investors to help rescue Greece with warnings from the ECB and France that compulsory participation risked triggering the euro area’s first sovereign default. “This whole Greek fiscal drama is going to be resolved in a manner that is going to be positive for the euro,” said Mary Nicola , a foreign-exchange strategist at BNP Paribas in New York. “The fact that Germany has made a concession, and a debt swap deal has been ruled out, is a huge positive.” To contact the reporters on this story: Liz McCormick in New York at emccormick7@bloomberg.net ; Lukanyo Mnyanda in Edinburgh News at lmnyanda@bloomberg.net To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net ; Dave Liedtka at dliedtka@bloomberg.net |
2024-01-26 | Bloomberg | Europe Stocks Climb to Five-Month High; Stoxx 600 in Bull Market | European stocks advanced, climbing 20 percent from the September low and entering a bull market, after the U.S. Federal Reserve signaled it may keep interest rates low through 2014 and a report said Greece’s creditors will make a new offer for a debt-swap deal. Commodity shares led gains, with BHP Billiton Ltd. (BHP) and Rio Tinto Group adding at least 3 percent. Nokia (NOK1V) Oyj, the world’s biggest maker of mobile phones, rallied after smartphone shipments beat estimates in the fourth quarter. Petropavlovsk Plc (POG) jumped 11 percent after reporting a 24 percent increase in 2011 gold production. The Stoxx Europe 600 Index added 1.1 percent to 257.86 at the close in London as Fed Chairman Ben S. Bernanke made the case for a third round of asset purchases. The benchmark gauge has rallied 20 percent from its low on Sept. 22 amid signs that the U.S. economy is recovering and speculation that the euro area will contain its debt crisis. Analysts describe a bull market as a gain of 20 percent from the most-recent low. “Bernanke is saying he’s ‘all in’ as long as the recovery isn’t any stronger,” said Henrik Drusebjerg, a Copenhagen-based strategist at Nordea Bank AB, who helps oversee $230 billion. National benchmark indexes advanced in all 18 western European markets today. The U.K.’s FTSE 100 Index rose 1.3 percent, France’s CAC 40 Index added 1.5 percent and Germany ’s DAX Index gained 1.8 percent. Monetary Accommodation U.S. policy makers are “prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate- consistent rate,” Bernanke said yesterday after European markets closed. Bond buying is “an option that’s certainly on the table,” he added. The Fed also extended its pledge to keep interest rates low through at least late 2014. Orders for U.S durable goods rose 3 percent in December, exceeding the 2 percent growth estimate in a Bloomberg News survey of economists. Orders advanced for a third month boosted by demand for aircraft, autos and business equipment. Initial jobless claims for unemployment insurance payments climbed by 21,000 to 377,000 in the week ended Jan. 21, up from an almost four-year low in the prior period, Labor Department figures showed in Washington. The median forecast of 47 economists in a Bloomberg News survey projected 370,000. Credit Default Swaps The cost of insuring against default on European corporate debt fell to the lowest in five months. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies dropped 29 basis points to 607, the lowest since Aug. 17, according to JPMorgan Chase & Co. prices at noon in London. In Greece , private creditors will submit a new offer with an average interest rate of 3.75 percent on bonds issued as part of a debt restructure, Kathimerini reported, without saying where it got the information. Institute of International Finance Managing Director Charles Dallara will make the proposal when talks with Greek officials resume in Athens today, the newspaper said. Italian bonds advanced as the nation sold its maximum target at an auction of zero-coupon and inflation-linked debt. Shares of mining companies rallied the most of any industry group in the Stoxx Europe 600 as copper climbed to the highest level since September. Mining Companies, Steelmakers BHP Billiton , the world’s largest mining company, advanced 3.3 percent to 2,199.5 pence. Rio Tinto Group, the third biggest, rose 4.9 percent to 3,893 pence. Anglo American Plc (AAL) , the third-largest copper producer, climbed 3.1 percent to 2,737 pence after saying iron-ore output increased 5 percent in the fourth quarter, while copper volumes jumped 10 percent. European steelmakers rallied. ThyssenKrupp AG gained 4.5 percent to 22.14 euros. ArcelorMittal added 3.8 percent to 16.72 euros. Salzgitter AG advanced 6.8 percent to 48.67 euros. Nokia climbed 2.7 percent to 4.17 euros after selling more smartphones last quarter than projected. Nokia sold 19.6 million smartphones that can handle tasks such as video calls and showing movies, the Espoo, Finland-based company said today. Analysts had predicted sales of 18.5 million smartphones. Nokia reported a net loss of 1.07 billion euros ($1.4 billion), or 29 cents a share, because of a 1.1 billion-euro impairment loss on its location unit. Sales declined 21 percent to 10 billion euros. Petropavlovsk, which mines gold and iron ore in Russia , rose 11 percent to 772 pence after setting a 680,000 ounce production target for 2012. Production in 2011 rose 24 percent to 630,100 ounce, the company said in a statement today. A gauge of European banks gained 1.5 percent. National Bank of Greece SA rallied 18 percent to 2.41 euros. Raiffeisen Bank International AG (RBI) and Erste Group Bank AG (EBS) climbed 12 percent to 27.25 euros and 7.6 percent to 17.25 euros, respectively. KBC Groep, EasyJet KBC Groep NV (KBC) jumped 9.7 percent to 15.44 euros after De Tijd reported the Belgian lender is close to an agreement to sell its Polish banking unit Kredyt Bank. De Tijd said Spain’s Banco Santander SA is the most likely candidate for the takeover, De Tijd reported without saying where it got the information. EasyJet Plc (EZJ) , Europe’s second-biggest discount carrier, rose 10 percent to 445.5 pence after revenue jumped almost 17 percent to 763 million pounds ($1.2 billion) in the first quarter ended Dec. 31. Logitech dropped 12 percent to 6.58 Swiss francs after cutting its forecasts for sales and operating income, citing a weaker euro and decreased demand for products such as web cameras and remote controls. The company changed its sales forecast for the fiscal year ending March 31 to $2.3 billion, with operating income estimated at $60 million. Logitech, which also produces gaming devices, in September cut its forecast for full-year operating profit to about $90 million on sales of about $2.4 billion. To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-07-23 | Bloomberg | Apple Growth Seen Pausing as IPhone Buyers Await Model | As iPhone fans await the release of a new model, they are delaying purchases and may cause Apple Inc. (AAPL) , the world’s largest company by market value, to post its slowest sales and profit growth in more than two years. With a redesigned model probably arriving by October, analysts estimate that sales of iPhones -- Apple’s biggest source of revenue -- slid in the fiscal third quarter from prior periods. While analysts predict that the next iPhone will be the best-selling smartphone yet from Cupertino, California-based Apple, the purchasing delays will probably weigh down results until the device hits stores. “People are waiting,” said Andy Hargreaves , an analyst at Pacific Crest Securities in Portland , Oregon. Apple will sell about 25.4 million iPhones, he estimates, compared with 35.1 million in the previous quarter. “It’s going to be bad now, but great later.” A similar slowdown occurred ahead of last year’s iPhone 4S release in October, causing Apple’s shares to slide when the company reported profit that fell short of analysts’ estimates for the first time since 2003. The stock slipped 0.1 percent to $603.83 at the close in New York. Apple hasn’t said when it will unveil a new iPhone, and has given no details about plans for the product. Yet the dip in unit sales underscores how speculation about Apple’s plans, including a slew of websites dedicated to publishing rumors about new devices, can lead potential buyers to sit on their wallets while waiting for a new product. ‘Tech-Savvy’ “Customers are increasingly tech-savvy and they want to have the latest and greatest,” said Anthony Scarsella , the chief gadget officer at Gazelle.com, a website that buys and sells used iPhones and other consumer electronics. He said people wind down trading in their iPhones about four to six months ahead of an iPhone release. “It’s something we definitely see year after year.” Tomorrow, Apple will probably report profit grew 35 percent to $9.86 billion, according to the average of analysts’ estimates compiled by Bloomberg. Sales are projected to rise 31 percent to $37.3 billion. While that kind of growth would outpace gains by most of Apple’s technology peers , it would be the company’s slowest since 2009. Apple is preparing to overhaul the look of the iPhone and has placed orders with suppliers for screens that are bigger than phone’s current 3.5-inch screen, people with knowledge of the matter said in May. Jim Ferrer, a commercial insurance broker in San Francisco , is among those waiting for the next iPhone. He bought the first model -- known just as the iPhone -- when it was released in 2007 and has held on to it ever since. ‘Many Changes’ Ferrer considered getting the iPhone 4S, and then decided to delay the purchase when he saw that the newest model may be lighter and have a stronger processor that will make applications run faster. “There are so many changes that keep coming out that I want to make sure I get the right one,” he said. “Then I’ll stick with it.” Ferrer browses the Internet several times a week to check out the latest rumors about the next iPhone. Another potential barrier to near-term sales is a weak global economy that’s crimping consumer spending , as well as changes by carriers including Verizon Wireless that extend how long a customer must wait to get a subsidy for a new device, said Pacific Crest’s Hargreaves. Apple also is facing competition from rivals including Samsung Electronics Co. (005930) , which according to NPD Group is the world’s biggest seller of smartphones. Samsung released the Galaxy S III phone in May. Shares Gain Still, Wall Street analysts have a history of underestimating Apple’s results. The company’s earnings have exceeded average estimates every quarter except one since at least 2003, according to data compiled by Bloomberg. Investors are shrugging off concerns about Apple’s quarterly results and are instead looking ahead to the next iPhone, according to Gene Munster , an analyst at Piper Jaffray Cos. So far this year, Apple’s shares have risen 49 percent. After conducting a customer survey, Munster says more than 80 million iPhones will be sold when the new model is released. Munster said iPhone sales may be better than many analysts are projecting in the fiscal third quarter, in part because of demand in China, where the device went on sale in January and is now Apple’s second-largest market behind the U.S. After Verizon Wireless said last week that it activated 2.7 million iPhones in the period, Morgan Stanley analyst Katy Huberty said Apple’s unit sales of the smartphone may top 31 million. Twitter Mentions Even so, anticipation for the next model probably curbed second-quarter results to some degree, Munster said. The term “iPhone 5” is mentioned on Twitter Inc.’s website about every 11 seconds, he said. “It’s already having some impact,” Munster said. Delayed iPhone purchases will have their biggest effect on Apple’s financial results during the current quarter, which ends in September. Toni Sacconaghi , an analyst at Sanford C. Bernstein & Co., said last week that Apple is likely to provide an “unusually conservative” outlook for the period. Besides sporting a larger screen, the new iPhone will probably have a thinner body and a more powerful processor, according to Munster and other analysts. They also say it will work with the faster so-called long-term evolution wireless networks being rolled out by carriers such as Verizon Communications Inc. (VZ) and AT&T Inc. (T) IPad Cushion Any third-quarter drop in iPhone sales also may be partially balanced out by iPad purchases, according to Horace Dediu, a former analyst at phone-maker Nokia Oyj (NOK1V) who now publishes industry research at Asymco.com. In addition to individual customers, schools and companies are buying the leading tablet computer, he said. “There will be a significant story there,” he said. Apple’s earnings reports have consequences for the broader market. The company, which also makes the iPod music player and Mac computers, accounts for more than 12 percent of the valuation of the Nasdaq Composite Index (CCMP) , meaning fluctuations in its stock price can influence pension funds, mutual funds and other investments tied to the benchmark index. Anticipation for the next iPhone is global. Alok Jain, 34, a software developer in Bangalore, India , said he’s waiting for the next model and has encouraged several friends to hold off as well. “There have been a couple of instances in the past few months when friends came up to me and said, ‘This 4S looks appealing,’” Jain said. “And my advice was, ‘Wait until the iPhone 5.’” To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net |
2024-08-01 | Bloomberg | Syrian Crisis Costs Lebanon $150 Million in Exports, NNA Reports | Lebanon has lost more than $150 million in exports through its land crossing with Syria since the beginning of the year, state-run National News Agency said, citing Khaled Farshoukh, head of the Export Development Council. Farshoukh said 40 percent of Lebanon’s exports travel through Syria, the country’s only land access, the news agency reported today. The last few months have seen the sharpest drop in exports, with the number of trucks crossing the border falling to 50 from about 300 a day, he said. Exporters are having a hard time finding trucks willing to carry goods across Syria, where an uprising against President Bashar al-Assad has made the roads unsafe, he said. “This has raised transport fees by about 50 percent,” the news agency quoted him as saying. “Many insurance companies have refused to issue policies on trucks, while some have raised their fees more than ninefold.” To contact the reporter on this story: Donna Abu-Nasr in Beirut at dabunasr@bloomberg.net To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net |
2024-05-31 | Bloomberg | Russia Stocks Drop to 5-Week Low as Crude Slumps, Banks Retreat | Russian equities fell to a five-week low, extending a fourth-straight monthly drop as crude oil tumbled and the nation’s biggest lenders declined. The Micex Index (INDEXCF) retreated 0.8 percent to 1,350.48 by 11:41 a.m. in Moscow, poised for a 2.5 percent drop in the month. Financial stocks led the declines among industry groups along with utilities, losing 1.2 percent on average. Crude, Russia ’s main export earner, declined 0.8 percent to $92.90 a barrel in New York , heading for a third weekly decline after U.S. stockpiles climbed to the most in more than 80 years. OAO Sberbank, the nation’s biggest lender, tumbled 1.1 percent to 98.82 rubles, while VTB Group dropped 1.7 percent to 4.48 kopeks. Russia’s economy will probably expand 2.3 percent in the second quarter, according to the median estimate of 9 economists in a Bloomberg survey. That’s less than the forecast of 2.5 percent a month earlier. “There’s Russia fatigue in the market,” Bruce Bower , a partner at Verno Capital in Moscow, which manages about $200 million in assets, said by phone. “Commodity prices have come down, which presents a risk for Russia.” Total fund outflows from Russia in the week ending May 29 reached $267 million, compared with $652 million from Brazil , Sberbank CIB said in an e-mailed note today. Putin’s Stimulus The nation’s economy grew at the weakest pace since 2009 in the first quarter as the euro area’s longest recession hurt demand for commodity exports, federal data showed on May 17. Russia’s central bank kept its main interest rates on hold for an eighth month in May. President Vladimir Putin “has asked for stimulus measures and I think we’ll see a move soon,” Verno’s Bower said. “In the second half of the year we should see a rate cut.” The U.S. economy expanded less than previously estimated in the first quarter and more Americans filed claims for unemployment insurance last week, reports showed yesterday. The Micex tumbled the most in a year on May 23, the day after U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates. OAO Moscow Exchange, Russia’s biggest bourse, increased 0.6 percent to 53.80 rubles after first-quarter net income rose 21 percent to 2.56 billion rubles. The stock is poised for a 20 percent advance in the month, the most on the Micex. Lowest Valuation The volume of shares traded on the Micex was 31 percent below the 30-day average, while 10-day price swings subsided to 29.35. Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5.1 times its 12-month estimated earnings and has lost 7.1 percent this year, compared with a 10.3 multiple for the MSCI Emerging Markets Index, which has dropped 4 percent in the period. The dollar-denominated RTS Index (RTSI$) added 0.6 percent to 1,359.11. The Russian Volatility Index tumbled 2.5 percent to 24.74. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. rose 0.2 percent to 89.82 yesterday. To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net |
2024-05-10 | Bloomberg | Yen Breach of 100 Per Dollar Foreshadows More Weakness | (Corrects scale of yen move in fourth paragraph) The yen is poised to weaken even further versus the dollar after breaking a key support level at 100 for the first time in four years, trading patterns show. The Japanese currency will pass through support at 101.69 per dollar before completing a so-called triangle pattern in the range from 103.32 to 104, according to Bank of America Corp. A fall to 104 would be the yen’s lowest level since October 2008. A triangle pattern is formed when upper and lower trend lines intersect. Bank of America has a year-end forecast of 105. “As we’ve broken out from the triangle, it’s a resumption of a larger bull trend and should have enough energy that we get a run up to the 103 or 104 area,” MacNeil Curry , chief rates and currencies technical strategist in New York at Bank of America, said in a telephone interview. “You tend to see very strong moves transpire at the end of a triangle pattern.” The yen dropped 1.6 percent to 100.59 per dollar as of 5 p.m. in New York after falling as much as 1.7 percent, the biggest drop since April 8. It earlier appreciated as much as 0.4 percent. Japan’s currency fell 0.8 percent to 131.21 per euro. The 100-per-dollar level was a key bearish point because it represented a so-called 50 percent Fibonacci retracement between its high of 75.35 in November 2011 and a decade-low of 124.14 in 2007. Bond Purchases Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low. In this and other forms of technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a currency, security or index. Support refers to the lower boundary of a trading range, where buy orders may be clustered. Analysts drew the yen’s 50 percent Fibonacci retracement at the 100-per-dollar level because that price represented half of the currency’s losses against the greenback from 2007 to 2011. The yen has weakened 14 percent this year, the most among the 10 developed-nation currencies monitored by Bloomberg Correlation-Weighted Indexes. The Bank of Japan increased monthly bond purchases on April 4 to exceed 7 trillion yen ($696 billion) at BOJ Governor Haruhiko Kuroda’s first policy meeting in charge, exceeding the 5.2 trillion yen forecast by economists in a Bloomberg News survey. It also suspended a cap on some bond holdings and dropped a limit on debt maturities. Policy makers maintained the unprecedented plan at an April 26 meeting and predicted inflation will almost match their target in two years even after a report highlighted deflation’s grip. Inflation Goal Kuroda told reporters after the second April meeting that policy adjustments would be made if necessary and the bank will keep its stimulus until stable 2 percent gains in consumer prices are realized. “We’re opening up the door to look at 105 in the next few months, and 110 by end of year seems perfectly reasonable,” Alan Ruskin , global head of Group of 10 foreign-exchange strategy in New York at Deutsche Bank AG, the biggest currency trader in a Euromoney Institutional Investor Plc (ERM) poll, said yesterday in a telephone interview. The yen erased an earlier advance versus the dollar yesterday after U.S. applications for unemployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4, the least since January 2008, Labor Department figures showed. Economists forecast 335,000 claims, according to the median estimate in a Bloomberg survey. The average over the past month was the lowest since before the last recession began. ‘Dollar Strength’ “Across the board, we’re seeing dollar strength, not just yen weakness, which should push dollar-yen even higher,” Curry said yesterday. Japan ’s currency extended gains and accelerated beyond 100 after a Treasury auction of $16 billion in 30-year bonds produced a lower-than-forecast yield. While Kuroda’s April 4 announcement spurred speculation that domestic money managers would seek higher yields in the U.S. and other markets, Japanese investors cut holdings of overseas debt for a sixth-straight week in the period ended April 19, the longest streak since January 2010, Ministry of Finance data show. The MOF is scheduled to report the data, covering the past two weeks, today. The yen will be at 104 per dollar at year-end, according to the median of 55 economist estimates compiled by Bloomberg. Of those polled, 41 saw the currency at 100 yen per dollar or weaker. To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-06-12 | Bloomberg | Cnooc 52% Discount to Woodside Shows Julius Baer China Bargains | This month’s tumble in China Shenhua Energy Co.’s Hong Kong shares dragged valuations to 73 percent below global peers. Cnooc Ltd. (883) , China’s largest offshore oil producer, sells at a 52 percent discount to Woodside Petroleum Ltd., while Ping An Insurance Group Co. trades at its lowest level versus net assets in 11 weeks. Economic growth concerns have made Chinese shares traded in Hong Kong the world’s worst performers in June, creating “opportunities” to buy for Bank Julius Baer & Co. and Schroders Plc. The Hang Seng China Enterprises Index’s 6.7 percent slump this month has brought the average valuation of its 40 stocks down to 10 times estimated profit, the lowest level since March 2009, data compiled by Bloomberg show. “Where the valuation gap is starting to widen, we’ll be looking to take advantage of that,” Lee King Fuei, a Singapore- based fund manager at Schroders, which oversaw $331 billion worldwide as of March 31, said in an interview. “Selectively, opportunities are starting to appear.” Julius Baer favors Shenhua, the listed unit of China’s biggest coal producer, Cnooc and Ping An, the nation’s second- largest insurer, said Alan Lam, an analyst in Hong Kong at the bank, which has about $322 billion in client assets worldwide. The Hang Seng China gauge has fallen this month by the most among 91 global benchmark indexes tracked by Bloomberg on concern the central bank will keep raising interest rates to slow inflation. The People’s Bank of China has boosted borrowing costs four times since the start of 2010. Some shares have also slumped amid fraud allegations against Sino-Forest Corp. and Chaoda Modern Agriculture (Holdings) Ltd. Buffett’s BYD The Hong Kong index, whose constituents are known as H shares, has tumbled 9.5 percent from this year’s high on April 11, approaching the 10 percent retreat some investors term a correction. A 28 percent drop by Angang Steel Co. led declines, followed by a 25 percent plunge in BYD Co., the Chinese carmaker backed by Warren Buffett. China’s Shanghai Composite Index slumped 11 percent in that period. Beijing-based Shenhua Energy retreated 8.2 percent this month in Hong Kong. Cnooc, also based in Beijing, has lost 5.1 percent, while Ping An is down 7 percent. Shenhua shares are valued at 13.1 times estimates for 2011 earnings, according to the average of 29 analyst projections compiled by Bloomberg. That compares with an average ratio of 29 for Chinese coal producers and 48 for global peers, according to data compiled by Bloomberg. Lower Valuations Cnooc trades for 10.2 times estimates for this year’s profit, down from 13.7 as of Dec. 31, and lower than the multiple of 21.4 for Woodside, Australia ’s second-biggest oil and gas producer, data compiled by Bloomberg show. Ping An, based in the southern city of Shenzhen, trades for 3.6 times estimated net assets, or book value, the lowest level since March 29, the data show. “We are positive on Chinese big-caps and state-owned enterprises, rather than small caps,” Julius Baer’s Lam said in an interview. The H-share gauge is dominated by state-controlled companies. The measure’s five biggest companies including China Construction Bank Corp. and PetroChina Co. account for about 46 percent of the index. Recent declines in Chinese stocks are “a reflection that global investors are panicky about global economic prospects and worried about Chinese monetary tightening and its slowdown effects on the real economy,” Schroders’ Lee said. Slowing Growth The World Bank lowered on June 7 its 2011 growth forecast for the world economy to 3.2 percent from a January estimate of 3.3 percent, to reflect Japan ’s earthquake and political unrest in the Middle East and North Africa. China’s growth will slow to 9.3 percent this year from 10.3 percent in 2010, the bank said. The nation’s customs bureau reported on June 10 a $13.1 billion trade surplus for May that was smaller than the $19.3 billion estimate from a Bloomberg News economist survey. Exports rose 19 percent last month, lower than the 20 percent gain predicted by economists and down from April’s 30 percent. Besides raising borrowing costs, China’s central bank has also boosted the reserve-requirement ratio for banks 11 times to cool inflation. Consumer prices climbed 5.3 percent in April from a year earlier, after rising 5.4 percent in March, the most since July 2008. “If China’s tightening continues, we may see more companies experiencing financial difficulties, and eventually revealing the true story of their books,” Alex Au , Hong Kong- based managing director of Richland Capital Management Ltd., which oversees $300 million of assets, said. “When there is a lot of liquidity, companies can always find money to fill a hole and hide any problems in their books. But if they cannot find more money, the problem will come to the surface.” Legal Action Chaoda, a vegetable producer that is based and has its primary listing in Hong Kong, overstated the size of some farms in China, Next Magazine reported on May 26. The company told its lawyers to take legal action against the magazine over its “false and untrue” allegations, Chaoda said in a June 3 exchange filing. Muddy Waters Research, a firm founded by short seller Carson Block, said in a report published June 2 that Sino- Forest’s disclosures of land holdings don’t match Chinese city records. The company’s Toronto-listed stock plunged 75 percent since then. Sino-Forest, a Hong Kong- and Mississauga, Ontario- based operator of tree farms, said in a June 6 statement the report was inaccurate and defamatory. Greenheart Group Ltd., a unit of Sino-Forest, has tumbled 46 percent this month in Hong Kong trading, while Chaoda lost 20 percent. The city’s benchmark Hang Seng Index (HSI) sank 5.3 percent. Prone To Fraud The U.S. Securities and Exchange Commission began an investigation last year into the use of reverse takeovers, where a closely held firm becomes public by purchasing a shell company that already trades. The SEC cautioned investors in a June 9 bulletin about buying stakes in companies that gain listings through so-called reverse mergers, saying they may be prone to “fraud and other abuses.” The Bloomberg Chinese Reverse Mergers Index of U.S.- listed stocks has fallen 45 percent this year. The “probability” for accounting concerns among Chinese companies should be less in Hong Kong than in the U.S., Julius Baer’s Lam said. That provides a “buying opportunity in selective stocks,” he said. To contact the reporters for this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net ; Weiyi Lim in Singapore at wlim26@bloomberg.net. To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-03-18 | Bloomberg | Canada February Consumer Price Index Report (Text) | The following is the text of Canada 's consumer price index report for February released by Statistics Canada. Consumer prices rose 2.2% in the 12 months to February, following the 2.3% increase posted in January. Energy prices rose 10.6% during the 12 months to February, after posting a 9.0% increase the previous month. Gasoline prices continued to increase in February, rising 15.7%, after recording a 13.0% increase in the 12 months to January. Excluding gasoline, the Consumer Price Index (CPI) rose 1.6% in the 12 months to February, compared with a 1.8% increase in January. On a seasonally adjusted monthly basis, consumer prices held steady from January to February, after a period of seven consecutive monthly increases. The transportation index, which includes gasoline, increased 0.2% in February, a slower rate of growth than the 1.0% increase observed in the previous month. The food index rose 0.2% in February, following a 0.4% increase in January. The clothing and footwear index posted a decline of 0.1%, after falling 1.2% in January. 12-month change: Increases in six of the eight major components On a year-over-year basis, prices increased in six of the eight major components of the CPI in the 12 months to February. The largest increase occurred in the transportation component, where prices rose 5.1% in the 12 months to February, after a 4.8% increase in January. In addition to higher gasoline prices in the 12 months to February, consumers paid 4.0% more in passenger vehicle insurance premiums. They also paid more for air transportation but less for the purchase of passenger vehicles. Shelter costs rose 2.2% in February, matching the increase in January. Homeowners' replacement cost increased 3.5% in the 12 months to February. Consumers paid more for electricity as well as for fuel oil and other fuels. However, the mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, continued to decrease. Consumers also paid less for natural gas. Food prices went up 2.1% in the 12 months to February, identical to the increase in January. Food purchased from stores increased 2.0% in February. Prices rose for bread, unsweetened rolls and buns as well as for confectionery. Consumers paid 2.6% more for food purchased from restaurants. Prices for household operations, furnishings and equipment increased 1.7% between February 2010 and February 2011. Within this component, higher prices were recorded for several items, notably for child care, domestic services and Internet access. Prices for health and personal care advanced 2.0% in February, on the heels of a 1.8% rise in January. Consumers paid more for dental care and non-prescribed medicines, while prices for prescribed medicines fell. For clothing and footwear, prices declined 2.0% in February, following a 2.4% decrease in January. Consumers paid less for women's clothing and children's clothing. The recreation, education and reading price index decreased 0.3% in the 12 months to February, after increasing 1.6% in the previous month. Traveller accommodation was among the main contributors to this decrease. In February 2010, when Vancouver was hosting the Winter Olympics, prices for hotel rooms were much higher than they were in the same month this year. Consumers also paid less for travel tours in February 2011 compared with February 2010. The provinces Consumer prices rose in every province between February 2010 and February 2011. Drivers faced double-digit price increases for gasoline in all provinces except Manitoba. In the 12 months to February, the largest increases in consumer prices were observed in Nova Scotia and Newfoundland and Labrador. In those provinces, fuel oil and other fuels are used more extensively for home heating. In Ontario, consumer prices rose 2.5% in the 12 months to February, after advancing 2.9% in January. More than half of the 0.4 percentage point decrease can be attributed to a smaller year-over-year increase in electricity prices in February compared with January. Electricity prices increased 1.1% in February, much less than the 10.4% increase recorded the month before. Gasoline prices rose 18.3% in Ontario following a 15.6% increase in January. Consumers in Ontario also paid more for passenger vehicle insurance premiums. Consumer prices in Quebec increased 2.2% in the 12 months to February, following a 2.1% increase in January. Prices for gasoline rose 15.8%. Prices for fuel oil and other fuels also increased. Prices in British Columbia went up 1.8% in the 12 months to February, following a 2.3% increase in January. Consumers paid 12.6% more for gasoline and 7.8% more for food purchased from restaurants. Conversely, consumers paid less for traveller accommodation. In Alberta , prices rose 1.2% in February, following a 1.0% increase in January. Consumers in Alberta paid 15.3% more for gasoline. Electricity prices also rose. The Bank of Canada's core index The Bank of Canada's core index advanced 0.9% in the 12 months to February, following a 1.4% rise in January. The seasonally adjusted monthly core index fell 0.1% in February, following a 0.1% increase the previous month. Note to readers The Bank of Canada's core index excludes eight of the Consumer Price Index 's most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; heating oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers' supplies) as well as the effects of changes in indirect taxes on the remaining components. To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-08-18 | Bloomberg | What If What You ’Survived’ Wasn’t Cancer? | You’re feeling fine when you go for your annual physical. But your mammogram looks a little funny, or your PSA test is a little high, or you get a CT lung scan and a nodule shows up. You get a biopsy, and the doctor delivers the bad news: You have cancer. Because you don’t want to die, you agree to be sliced up and irradiated. Then, fortunately, you’re pronounced a “cancer survivor.” You’re glad they caught it early. But maybe you went through all that pain for nothing. For decades, the reigning theory has been that the earlier a cancer is spotted and treated, the less likely it is to be lethal, because it won’t have time to grow and spread. Yet this theory infers causality from correlation. It implicitly assumes that cancer is cancer is cancer, even though we now know that even in the same part of the body , cancer is many different diseases -- some aggressive, some not. Perhaps people survive early-stage cancers not because they’re treated in time, but because their disease never would have become life-threatening at all. This isn’t just logical nit-picking. Thanks to widespread screening, the number of early-stage cancers identified has skyrocketed. In many instances -- including types of breast, prostate, thyroid and lung cancers -- more early diagnoses haven’t led to proportionate decreases in mortality. (New drugs, not early detection, account for at least two-thirds of the reduction in breast-cancer mortality.) The cancers the tests pick up aren’t necessarily life-threatening. They’re just really common. So more sensitive tests and more frequent screening mean more cancer, more cancer treatment and more cancer survivors. “We’ll all be cancer survivors if we keep going at the rate that we’re going,” says Peter Carroll , the chairman of the department of urology at the University of California at San Francisco and a specialist in prostate cancer. Distracting Doctors In a well-intended effort to save lives, the emphasis on early detection is essentially looking under the lamp post: Putting many patients who don’t have life-threatening diseases through traumatic treatments while distracting doctors from the bigger challenge of developing ways to identify and treat the really dangerous fast-growing cancers. “Physicians, patients, and the general public must recognize that overdiagnosis is common and occurs more frequently with cancer screening,” argues a recent JAMA article by the oncologists Laura J. Esserman (a surgeon and breast-cancer specialist), Ian M. Thompson Jr. (a urologist) and Brian Reid (a specialist in esophageal cancer). They argue for limiting the term “cancer” to conditions likely to be life-threatening if left untreated. That’s going to be a tough change for a lot of people to swallow. For patients and the rest of the public, getting tested offers a sense of control, encouraging an almost superstitious belief that frequent screening will ward off death. (A few years ago, when the actress Christina Applegate was making the talk-show rounds urging young women to get breast MRIs, my own oncologist told me he was getting calls from women who thought the tests would not merely detect but prevent breast cancer .) Early detection of non-life-threatening cancers also produces a steady supply of “ cancer survivors ,” who work to support cancer charities and make their efforts look successful. There’s an entire industry devoted to celebrating “ breast cancer survivors ” in particular, and many women are heavily invested in that identity. It offers a heroic honorific as a reward for enduring horrible treatments. A term originally coined to remind cancer patients that their disease need not be fatal has become a badge of personal achievement. Fearing Mistakes Physicians, meanwhile, fear making a mistake. It seems safer to treat someone who doesn’t really need it than to miss something potentially fatal. But, warns Esserman , director of the Carol Franc Buck Breast Care Center at UCSF, “the cancers that grow and spread very quickly are not the ones that you can catch in time with screening.” If anything, emphasizing early detection misdirects research and funding. “We have to come up with better treatments, we have to figure out who’s really at risk for those and figure out how to prevent them,” she says. “We’re not going to fix it with screening.” There are plenty of scientific unknowns. Take the commonly diagnosed breast cancer called ductal carcinoma in situ, which accounts for about a third of new U.S. diagnoses, 60,000 a year. In these cases, the cells lining the walls of milk ducts look like cancer, but they haven’t invaded the surrounding breast tissue. DCIS was a rare diagnosis before the introduction of mammograms, which are highly sensitive to milk-duct calcifications, and the JAMA article labels it a “premalignant condition” that shouldn’t even be called cancer. Arguably, a lot of women who think of themselves as “breast cancer survivors” have survived treatment, not cancer. Yet oncologists who identify DCIS have been surgically removing it (and in many cases the entire surrounding breast) for 40 years, so it’s hard to know how dangerous it actually is. “Since we really don’t know the true natural history of DCIS we do not know if DCIS always progresses to invasive cancer or not,” says Colin Wells , a radiologist at the University of California at Los Angeles specializing in breast imaging. “There are some reasons to think not, but this needs to be worked out” with further research. If DCIS does spread to invade breast tissue, the question remains whether that cancer threatens to go beyond the breast, becoming lethal if untreated. By contrast, we do know that a lot of prostate cancer isn’t dangerous. Autopsy studies show it’s quite common in older men who die from unrelated causes. “Out there in the street, if you remove the prostates in men over the age of 50, 30 to 40 percent would have some kind of cancer,” Carroll says, “most likely, low grade and low volume.” Distinguishing Tumors Thanks to more sensitive tests, he notes, the prostate “cancers we’re detecting today are totally different than the cancers we saw two decades ago. And our ability to distinguish these tumors is much better. We have the wherewithal now to be able to tell a patient that your cancer is highly likely confined to your prostate, of small volume, slow growing, and something that may not need immediate treatment at all.” Carroll has more than 1,000 patients under “active surveillance,” getting regular PSA tests, imaging and biopsies. Only about one in three turns out to need treatment within five to 10 years. (An additional 10 percent opt for surgery simply because they get tired of all the tests or can’t take the anxiety.) The program is also working, Carroll says, to “decrease the burden of testing,” ideally by eliminating the need for repeated biopsies. Prostate cancer illustrates the cultural barriers to abandoning what Esserman calls today’s “scorched earth policy.” Despite the widespread awareness that many prostate cancers aren’t life-threatening, many physicians are determined to find and treat it any time a PSA score comes in a little high. “I saw a gentleman this week who had had 12 biopsies, no cancer, and they said there must be cancer in there and they did 24,” says Ian Thompson of the University of Texas Health Science Center at San Antonio , who is one of the JAMA authors. A prostate-cancer diagnosis is still terrifying to patients and their families. Thompson describes many of his conversations with patients -- and especially with their wives -- as “talking them off the ledge.” When he tells patients they’re likely to be fine without immediate treatment, they often worry how they’ll explain the good news to their children or neighbors. People expect a cancer diagnosis to entail trauma. Although Carroll thinks calling slow-growing prostate tumors “cancer” is important to encourage vigilance, Thompson wants to change the nomenclature, using the term IDLE (indolent lesions of epithelial origin) to describe low-risk cases where waiting isn’t likely to make a difference. Just using the word “cancer,” he argues, creates unnecessary suffering. “The number of people that will die from those slow-growing prostate cancers is really low,” he says, but the unacknowledged costs of giving them a cancer diagnosis are huge: “the person who can’t sleep for two weeks before his next test results, and all the follow-up biopsies and all the lost wages, and the people who can’t get life insurance because they now have a new cancer diagnosis, the person whose firm says, ‘Well, we’re concerned you have cancer and therefore you can’t be promoted to this job.’” It’s a compelling case, but changing the vocabulary finesses the fundamental cultural issue: the widespread and incorrect belief that “cancer” is a single condition, defined only by site in the body, rather than a broad category like “infectious disease.” Someone doesn’t develop “cancer” but, rather, “a cancer.” How frightening that diagnosis should be depends on which one. (Virginia Postrel is a Bloomberg View columnist. She is the author of “The Future and Its Enemies,” “The Substance of Style” and the forthcoming “The Power of Glamour.” Follow her on Twitter at @vpostrel .) To contact the writer of this article: Virginia Postrel at vp@dynamist.com. To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net . |
2024-07-06 | Bloomberg | MGIC Discriminates Against Mothers on Paid Leave, U.S. Says in Lawsuit | Mortgage Guaranty Insurance Corp., the largest U.S. provider of mortgage insurance , was sued by the Justice Department for allegedly refusing to provide insurance for loans to women on paid maternity leave. The insurer violated the U.S. Fair Housing Act by discriminating based on sex and familial status, David Hickton, the U.S. attorney in Pittsburgh, said in a complaint filed today in federal court. The lawsuit seeks a court order to stop MGIC from further discrimination and unspecified damages. “It defies belief that, in 2011, any institution would discriminate against a mother for legally and properly taking leave after the birth of a child,” Hickton said in a statement. Underwriters at MGIC refused to provide insurance for a mortgage for a mother of three, who was seeking to refinance a home she jointly owns with her husband in Wexford, Pennsylvania , until she returned to work full time, according to the complaint. The woman, Carly Neals, filed a complaint with the U.S. Department of Housing and Urban Development. After an investigation, HUD found that there was reasonable cause to believe illegal discrimination had occurred, according to the complaint. Katie Monfre, a spokeswoman for MGIC in Milwaukee , didn’t immediately return a call after regular business hours. The case is U.S. v. Mortgage Guaranty Insurance Corp., 05- MC-02025, U.S. District Court, Western District of Pennsylvania (Pittsburgh.) To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-11-22 | Bloomberg | ING to Cut 60 Asia Commercial Banking Jobs by End of June 2013 | ING Groep NV (INGA) , the biggest Dutch financial-services company, will eliminate 60 jobs at its commercial bank in Asia by the end of June as part of its three- year plan to reduce costs by 460 million euros ($590 million). The company cut 13 jobs across six countries in Asia in the past week and will make the remaining reductions in the first and second quarters of next year, Mark Newman, chief executive officer of ING’s commercial bank in Asia, said yesterday in an e-mail to employees reviewed by Bloomberg. “This measure taken at ING Commercial Banking Asia is the result of a strategic business review to ensure our business remains competitive,” Eileen Lau, a Singapore-based spokeswoman for ING, said by e-mail. The company employs 850 people at its commercial bank in Asia, she said. The Dutch firm said on Nov. 7 it will eliminate 1,350 insurance jobs by 2014 and another 1,000 in commercial banking to make the savings by 2015. Third-quarter net income dropped 64 percent to 609 million euros from 1.69 billion euros a year earlier, the Amsterdam-based lender said in a statement that day. To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-09-20 | Bloomberg | Why the NFL Should Let Players Smoke Pot | “Me, personally, I didn’t like painkillers,” says Nate Jackson, a former tight end for the Denver Broncos. “I just medicated on my own. Most players do that.” Football is a violent game. If you play football, you will experience pain. If you experience pain, you will seek ways to alleviate it. So, what are your options? Well, you can get painkillers from your team’s medical staff, though some are circumspect about just handing them out. And, anyway, a lot of players don’t like the way prescription painkillers make them feel — queasy, sluggish, out of it. They prefer to self-medicate. They prefer to smoke pot. Jackson didn’t really start self-medicating with marijuana until he got to the National Football League. He didn’t need to. “In college, my body felt great. I would hurt for a day after the game but the pain wasn’t that bad,” he told me. “In the NFL, these guys are grown men. Just the normal occupational reality is slamming yourself into other humans at high speed, so your body hurts. It hurts and it’s misaligned.” You can read all about Jackson’s six seasons in the NFL in his fantastic new memoir, "Slow Getting Up." Jackson adores football, but he is also fully aware of the sport's inherent violence and destruction -- “Pads and helmets crack, creating a frightening symphony of future early onset dementia,” he writes -- and his book is about the personal compromises you have to make to love a game that hates you back. Tucked in between Jackson’s stories of life on the NFL margins is this miniature op-ed article: However you feel about marijuana, players bodies belong to themselves. They’re the ones getting pounded week in and week out, doing permanent damage to themselves for our entertainment. (Also, yes, their enrichment, though it’s worth remembering that the average NFL career lasts three years. Meanwhile, players’ health insurance continues for five years after their careers end, at which point they’re on their own, trying to find a carrier willing to insure someone who crashed into 300-pound men at full speed for a living.) “It should be up to guys how they manage their lives off the field, especially with something as innocuous as marijuana,” says Jackson. Of course, the NFL is about as likely to legalize marijuana -- even in states where it’s already legal -- as it is to hang flags from players’ waists. But before we completely dismiss Jackson’s proposal as a fully baked delusion, keep in mind that in the coming years millions of dollars will be pouring into research into both the medicinal benefits of marijuana and the question of how to make football less dangerous. Already, there are studies that have shown that, in addition to numbing pain, pot might also help protect the brain from injury. An ingredient in marijuana apparently may neutralize the neurotransmitters that are released after severe head injuries and that cause cell degradation. This is from a 2002 study in a scientific journal called Trends in Molecular Medicine: Get it? Neither do I, really. I am sure about one thing, though: Playing professional football is a lot more hazardous to your health than smoking marijuana. In a story for the website Deadspin, Jackson described the aftermath of a near-decapitation at the hands of linebacker Willie McGinest: Football is a violent game. If you play football, you will experience pain. If you experience pain, you will seek ways to alleviate it. Should the NFL really get to decide how? (Jonathan Mahler is a Bloomberg View columnist. Follow him on Twitter. ) |
2024-08-05 | Bloomberg | Spanish-Language El Clasificado Balances Print Growth With Online Push | Growing up in East Los Angeles, Martha de la Torre spoke South American-influenced Spanish, which often elicited playground taunts from her classmates, mostly Mexican- Americans. Midway through elementary school, she swore she’d never speak Spanish again, except to her Ecuadorean grandmother. Today she runs El Clasificado, the largest free, weekly Spanish- language classified print publication in the U.S., reaching more than 1.5 million people. It’s the flagship title of the thriving 130-employee publishing company de la Torre and her husband, Joe Badame, started 23 years ago for Southern California ’s Latino population. In June, the couple rebranded, changing their company’s name from El Clasificado to EC Hispanic Media to reflect the growth of their five online editions as well as their geographic expansion into the agricultural heart of Central California. With 2010 revenue of $16.3 million, the business is on track to hit $19 million this year, de la Torre says. “El Clasificado is a marvelous niche product,” says Peter M. Zollman, founding principal of marketing firm Advanced Interactive Group in Altamonte Springs, Fla., which publishes Classified Intelligence Report. “It takes a long time to win [the Hispanic market’s] trust and loyalty, but once you have it, you keep it.” While online sales for classifieds in the U.S. have more than doubled to about $6 billion since 2006, Zollman says, the overall industry has shrunk to about $15 billion, half its 2006 total, due to the economic downturn and the collapse in classified revenue at most daily newspapers. Bloomberg contributor Karen E. Klein spoke recently to de la Torre and Badame, an Italian-American who speaks even less Spanish than his wife, about their strategy for future expansion. Edited excerpts of their conversation follow. Karen E. Klein: So many print publications have seen their readership and distribution decline over the past decade. Is that happening to El Clasificado? Martha de la Torre: For years, we’ve been in fear of print disappearing just like everyone else. We ended 2010 principally a print company. Print ads account for 98 percent of our revenues. But we’ve also moved into digital, which accounted for about 1 percent of our revenue in 2010. Year-to-date, digital ads have grown to about 5 percent of our total revenue. Joe Badame: We’re not going away from print. Our print revenues increased close to 16 percent last year and our print circulation is up 10 percent from 2010 to 2011. The demographics are working in our favor. Q: The latest immigration data have shown that fewer Mexicans are emigrating due to improved opportunities in Mexico and the economic downturn in the U.S. How will that affect your success as a Spanish-language company? Badame: It will have a long-term effect on us, maybe five to 10 years out. But we have such a big market of Hispanics here already; there are about 14 million in California and we’re still at 455,000 circulation so we haven’t come close to saturating the market. And the birth rates are much higher, so we don’t expect it to have a huge impact immediately. De la Torre: When we started out, I always thought El Clasificado would stop existing around 2005. I was wrong. Q: Have you found that your readers are migrating online? De la Torre: Digital is attractive to a lot of Latinos who have a little more education and income and are outside of densely Hispanic markets. Digital allows us to find additional niches, like the insurance company or lawyer who will advertise online. The problem is that our print reps are not interested in selling digital ads because they can still sell print and it’s more lucrative. An average digital sale might be $100 a week, where a print account will average $500 to $1,000 a week. Online is also harder to explain to our clients, who are very focused on print and not as advanced technologically. Badame: A lot of our clients don’t believe that our readers are online. But our online traffic results for El Clasificado are showing that we have 6 million page views a month, from 400,000 unique visitors, with 20 percent of them coming through mobile devices. De la Torre: I was at one of our biggest clients a year ago and they said, “Our customers are not online.” But I started doing keyword searches and I showed them that they are getting online now. So we gave them a free online classified so they could try it out. We’re putting all our efforts forward. We operate from fear and always look to the future, continually trying to recognize where our weaknesses could be. Q: Both of you have financial backgrounds. How did you become entrepreneurs? De la Torre: We were both CPAs, we met at Arthur Young & Co. in 1983 and started dating in 1985. I specialized in banking and the oil and gas industry and then I started getting requests to do due diligence on Hispanic media companies. I was alarmed at how much money was being spent on these companies that weren’t very impressive. So I started thinking about doing something like the PennySaver [a free weekly classified publication] but for Latinos. I made a business plan but I didn’t want to be an entrepreneur. I hoped someone would come along to run the thing so I could do what I do best, which was be a financial person. But we started the company in 1988 after Joe raised money from our friends and family. We got married in 1991. Joe kept his day job to keep us afloat for all the years we didn’t take salaries. He joined us full-time in 2000. Badame: We hit bottom in 1992 due to the recession, and ever since we’ve grown every year from 8 percent to 35 percent. Even during this last recession, we were growing by 16 to 17 percent. Q: What changes did you make? De la Torre: One major thing is that we changed our distribution model. My business plan was based on a bulk-mail, home-delivery model. We stuck to that for three or four years -- until we almost went bankrupt. Q: Why did you stay with something that wasn’t working? De la Torre: It took us a long time to finally get it. It was the early ‘90s, we were in recession and it seemed like nothing worked. It was hard to figure out what was going wrong. My mother and father were distributing our magazines in local Hispanic stores. So we tried putting distribution racks in about 150 small business locations, and we finally realized we were getting better results that way because Latino shoppers go to the market every day for fresh food. Today we have close to 22,000 locations where we drop 15 to 400 magazines each. Badame: We started dropping magazines at a location and then we’d sit in our car and watch what happened for a couple of hours. We realized that with home delivery, we were giving the magazine to people who might not want it. They might just throw it away. When it’s sitting in a rack, only the people who want to read it actually pick it up. Q: What’s next for EC Hispanic Media? De la Torre: For 2011, we’re going to do more geographical expansion and focus on more training and hiring. We’re also adding some new products and hope to have new online revenue to add to the 5 percent we’re currently getting from online. Badame: We have a short-term goal to ramp up revenues to $50 million within five years and a long-term plan to hit $100 million in the next 10 years. We can get to $50 million by 2016 if we maintain our historical [average annual] growth rate of 20.8 percent. The more experience we have, the smaller the numbers seem to look to us. Those numbers would have been huge, and unobtainable, to us years ago. To contact the reporter on this story: Karen E. Klein at karen@kareneklein.com To contact the editor responsible for this story: Nick Leiber at nleiber@bloomberg.net |
2024-09-01 | Bloomberg | Discovery’s Full-Year Profit Advances by 50% After Insurer Expands in U.K | Discovery Holdings Ltd. (DSY) , which owns South Africa ’s largest medical-insurance administrator, said fiscal full-year profit rose 50 percent after it expanded in the U.K. Net income for the 12 months to June 30 climbed to 2.58 billion rand ($368 million) from 1.72 billion rand a year earlier the Johannesburg-based company said in a statement today. Earnings a share excluding one-time items were 3.66 rand. The median of eight analysts surveyed by Bloomberg estimated adjusted earnings a share of 3.71 rand. In the fiscal year Discovery, which is seeking to expand its business in South Africa and the U.K., bought the entire share capital of Standard Life Healthcare for 1.56 billion rand and increased its shareholding in Prudential Health Holdings Ltd. The Prudential transaction boosted Discovery’s profit. The insurer also raised 800 million rand in August to help it invest in its existing business and expand further. Discovery is “well capitalized for continued growth and profitability into the future,” the company said, declaring a final dividend of 48 cents a share, keeping its dividend cover ratio at 4.5 times. Discovery is the second-worst performing stock on the five- member FTSE/JSE Life Assurance Index this year after Sanlam Ltd. (SLM) , having dropped 2.8 percent compared with the average return of 0.5 percent. To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-07-11 | Bloomberg | Swaps, CFTC, Peregrine, Vitamin Price-Fixing: Compliance | The U.S. Commodity Futures Trading Commission voted to define when trades are considered swaps under the Dodd-Frank Act, a step that triggers more than a dozen rules under the 2010 financial-regulation overhaul. The agency’s commissioners voted 4-1 yesterday to approve a 600-page measure governing when interest-rate, credit, commodity and other trades involving companies including JPMorgan Chase & Co. (JPM) , Barclays Plc (BARC) and Cargill Inc. should face rules to limit risk in the $648 trillion global market. The Securities and Exchange Commission unanimously approved the rule in a private vote on July 6, the agency said in a statement Monday. “This is significant to the American public because now we will bring transparency to these markets,” CFTC Chairman Gary Gensler said in a Bloomberg Television interview after the meeting. “We will have dealers registering. We will lower the risk to the American public. Congress said further define a term. We further defined it. Two months from now a lot of Dodd- Frank comes into being.” The two agencies, working under a Dodd-Frank mandate that they craft oversight to prevent a repeat of the 2008 credit crisis, missed the July 2011 deadline to complete rules. The swap definition will trigger almost 20 Dodd-Frank measures for reporting, clearing, trading and record-keeping that may take effect as early as September. The swap definition contains a series of exemptions for insurance and retail transactions. Life insurance, and property and casualty insurance are exempt. Interest-rate caps on consumer mortgages and home heating oil agreements are also left out. For more, click here. Compliance Action Peregrine Pursues Liquidation After CFTC Sues Over Shortfall Peregrine Financial Group Inc. filed to liquidate in bankruptcy after the U.S. Commodity Futures Trading Commission sued the brokerage alleging a $200 million “shortfall” in client funds. Peregrine listed assets of more than $500 million and debt of more than $100 million in a Chapter 7 petition filed yesterday in U.S. Bankruptcy Court in Chicago. Separately, U.S. District Judge Rebecca Pallmeyer issued an order freezing Peregrine’s assets at the CFTC’s request, saying it appeared there was “good cause” to believe the firm and its founder, Russell Wasendorf Sr., violated the federal Commodity Exchange Act. The Commodity Futures Trading Commission filed a complaint against Peregrine in federal court in Chicago yesterday after an industry self-regulator cited a $200 million shortfall in customer segregated funds. The National Futures Association said the brokerage’s chairman may have falsified bank records after only $5 million was found in an account that was reported to have $225 million on or about June 29. Peregrine is under investigation over the allegedly missing funds after Russell Wasendorf Jr., the firm’s chairman and chief executive officer, unsuccessfully attempted suicide. And the CFTC is facing renewed scrutiny since the failure of Peregrine comes nine months after MF Global Holdings Ltd. (MFGLQ) collapsed. Republicans who scolded the CFTC over its handling of MF Global cited similarities to the New York brokerage’s failure. “I would have expected regulators to be particularly attentive to situations like the one at PFG in the wake of the MF Global collapse, so I’m disappointed this wasn’t discovered earlier,” Representative Randy Neugebauer , a Texas Republican who is leading an investigation of MF Global’s $1.6-billion customer-fund shortfall, said in an e-mail. For more on the Peregrine bankruptcy, click here. For more on congressional reaction, click here. Orthofix to Pay $5.2 Million to Settle SEC Suit Claiming Bribery Orthofix International NV (OFIX) , a medical-device maker, agreed to pay $5.2 million to settle a U.S. Securities and Exchange Commission lawsuit claiming its Mexican unit, Promeca SA, bribed Mexican officials in return for sales contracts with government hospitals, the SEC said in an e-mailed statement. Orthofix also entered into a deferred prosecution agreement with the U.S. Justice Department over charges of violating the Federal Corrupt Practices Act and will separately pay a fine of $2.22 million. The SEC’s complaint alleges that Promeca made the bribes from “at least” 2003 to 2007 and referred to them internally as “chocolates.” In a filing with the SEC yesterday, Orthofix said the company had undertaken a “self-initiated and self-reported internal investigation” of its subsidiary after the bribes were discovered. Mark Quick, director of investor relations and business development for Orthofix, didn’t return a call seeking comment on the settlement. Doctors to Pay $1.9 Million to Settle SEC Insider-Trading Claims Five doctors will pay $1.9 million to resolve U.S. regulators’ claims they used inside information to profit from the sale of American Physicians Capital Inc., a holding company for a medical professional liability insurer. Apparao Mukkamala, who was the chairman of ACAP’s board at the time, told four fellow physicians of the anticipated sale of the East Lansing, Michigan-based holding company, the U.S. Securities and Exchange Commission said yesterday in a complaint filed in federal court. The five doctors bought almost $2.2 million of ACAP stock from April 2010 to July 2010. The group reaped more than $623,000 in profits when ACAP shares rose 28 percent to $40.63 after closely held Doctors Co. agreed to pay $41.50 a share to acquire the firm on July 8, 2010, according to the SEC. “These physicians made numerous purchases of ACAP shares that were detected as highly unusual when compared to their past trading patterns,” Robert J. Burson, senior associate regional director of the SEC’s Chicago office, said in the agency’s statement. “Board chairmen and other insiders should never choose greed over duty when possessing confidential information about the companies they serve.” The doctors agreed to settle the SEC’s claims without admitting or denying wrongdoing. “We’re pleased to have reached a resolution,” said Mukkamala’s attorney, Lori McAllister of Dykema Gossett PLLC in Lansing, Michigan. The attorneys for the other defendants either didn’t return calls seeking comment or declined to comment. In the Courts Chinese Vitamin C Makers’ Price-Fixing Trial Set for Nov. 5 China Pharmaceutical Group Ltd. (1093) and several other Chinese makers of vitamin C will face a Nov. 5 trial in the U.S. for alleged price-fixing, a federal judge said. U.S. District Judge Brian M. Cogan in Brooklyn, New York, yesterday set the date in a case brought by purchasers of vitamin C. In January, the judge allowed the buyers to proceed with their case as a group against the vitamin makers. Other companies sued in the case include Weisheng Pharmaceutical Co., North China Pharmaceutical Co. (600812) , Hebei Welcome Pharmaceutical Co. and Northeast Pharmaceutical Group Co. (000597) The vitamin companies have argued that the Chinese government forced them to fix prices. The judge rejected that contention in a September ruling. “The Chinese law relied upon by defendants did not compel their illegal conduct,” he wrote. Aland (Jiangsu) Nutraceutical Co., another Chinese firm named in the lawsuit, settled with plaintiffs in May for $10.5 million, according to court filings. Lawyers for the Chinese firms, including Charles Critchlow of Baker & McKenzie LLP, Richard Goldstein of Orrick Herrington & Sutcliffe LLP and Daniel Mason of Zelle Hofmann Voelbel & Mason LLP, didn’t immediately respond to requests for comment on the trial date. The case is In Re Vitamin C Antitrust Litigation, 1:06- md-01738, in the U.S. District Court for the Eastern District of New York. Greenpeace, Audubon Sue to Block Shell Alaska Oil-Spill Plan Royal Dutch Shell Plc (RDSA) should be barred from drilling in the Beaufort and Chukchi seas because its oil-spill plans are inadequate, Greenpeace Inc. and other environmental groups said in a lawsuit. Greenpeace, the National Audubon Society and other groups sued the U.S. Interior Department, which approved Shell’s spill- response plans earlier this year, saying the agency violated the Clean Water Act by failing to ensure the plans can address a “worst-case oil spill.” The approvals for Shell’s response plans should be thrown out, and offshore oil and gas activity blocked, until the Interior Department complies with the law, the groups said in a complaint filed yesterday in federal court in Alaska. The filing couldn’t be confirmed in electronic court records. Shell’s drilling off Alaska’s north coast will be delayed until August as the company waits for ice to clear and modifies a spill-response vessel to meet U.S. Coast Guard requirements, the company said in July. Curtis Smith , a spokesman for Shell, said the company is confident the approved spill plans “will withstand legal review.” Adam Fetcher, an Interior Department spokesman, declined to comment on the lawsuit. The case is Alaska Wilderness League v. Salazar, U.S. District Court, District of Alaska. Hearings and Reports Diamond Says He Didn’t Mislead Lawmakers on Relations With FSA Robert Diamond, who quit as head of Barclays Plc last week after allegations that interest rates had been rigged, denied he misled Parliament on relations with regulators and said he’d be willing to discuss the matter again. Diamond, the former chief executive officer of Barclays, was accused yesterday during a hearing of Parliament’s Treasury Committee of misleading U.K. lawmakers after a letter from the Financial Services Authority emerged. The letter contradicted his July 4 testimony that regulators were “happy” with the bank, and Chairman Marcus Agius told the panel yesterday the bank’s interactions with the FSA were “strained.” Any suggestion that Diamond was less than candid “would be totally unfair and unfounded,” the ex-CEO said in a letter to Treasury Committee Chairman Andrew Tyrie. “The comments made at today’s hearing have had a terribly unfair impact upon my reputation.” Diamond wasn’t present during the session. Diamond resigned July 3 after the London-based lender was fined a record 290 million pounds ($450 million) for attempting to rig interest rates used as a benchmark for global lending. A day later, Diamond told Tyrie’s committee that the FSA had been “specifically pleased” with the “tone at the top,” and he didn’t disclose the FSA’s criticisms of transactions that aimed to show the bank’s accounts in a more positive light. For more, click here. Duke Had Doubts in May About Progress CEO’s Ability to Lead Duke Energy Corp. (DUK) ’s board began expressing concerns about Progress Energy Inc. Chief Executive Officer Bill Johnson ’s ability to lead the combined company in May. The board viewed Johnson as “autocratic” and had concerns about a “lack of transparency,” Duke Chairman and CEO James Rogers told the North Carolina Utilities Commission at a hearing in Raleigh yesterday. Rogers is the only scheduled witness at the hearing investigating Duke’s decision to oust Johnson as head of the combined company. One day after the $17.8 billion deal closed on July 2, Johnson resigned and was replaced by Rogers, who was slated to become executive chairman under terms of the merger agreement. The executive-suite shuffle caused Charlotte, North Carolina-based Duke’s shares to decline 6.4 percent since July 2 and put the company on Standard & Poor’s negative credit watch. Four former Progress board members said they would have voted against the takeover had they known that Rogers would remain in charge. Wade M. Smith, an attorney for Johnson with the law firm of Tharrington Smith LLP in Raleigh, didn’t immediately respond to voice-mails and e-mail seeking comment. Rogers said the company didn’t inform state regulators of the concerns about Johnson because it was a “preliminary view.” The North Carolina agency approved the takeover on June 29. Rogers told the board members on June 23 that he was willing to stay on as CEO if a decision was made to replace Johnson. No final decision was made until July 2, he said. HSBC to Apologize at Hearing on Money Laundering, Memo Shows HSBC Holdings Plc (HSBA) will apologize at a July 17 U.S. Senate hearing for anti-money laundering controls that weren’t effective enough, according to an internal memo obtained by Bloomberg News. “We failed to spot and deal with unacceptable behavior,” Chief Executive Officer Stuart Gulliver said in the note sent to employees yesterday, referring to the period between 2004 and 2010. “It is right that we be held accountable and that we take responsibility for fixing what went wrong.” Europe’s largest bank will be questioned by U.S. lawmakers about two weeks after a record fine was levied against Barclays Plc for rigging interest rates and its ex-CEO Robert Diamond was grilled in the U.K. HSBC, which has doubled spending on compliance since 2010 to curtail illicit money transfers, may also face a “hefty fine,” Mizuho Securities Asia Ltd. said. Gareth Hewett, a Hong Kong-based spokesman for the lender, declined to comment on the contents of the memo. The bank has been “fully cooperating” with the Senate Permanent Subcommittee on Investigations and with U.S. regulators on the issue, he said. Financial Services Workers Report Awareness of Wrongdoing Almost one-third of Britain’s financial-services workers are aware of illegal behavior at their companies, and many fear reporting it, a survey by the securities litigation law firm Labaton Sucharow LLP found. Of 500 senior professionals questioned last month, 30 percent in the U.K. and 22 percent in the U.S. said they had witnessed or had “first-hand” knowledge of wrongdoing, the law firm said yesterday in a statement. Almost 4-in-10 believe their competitors break the law to get ahead, the firm said. The study focused on corporate ethics, the regulatory landscape and individuals’ willingness to report illegal behavior, the New York-based law firm said. It comes amid U.S. and U.K. probes into whether banks rigged the London interbank offered rate and follows a record 290 million-pound ($450 million) fine for Barclays Plc. “It is shocking that four years after the global economic crisis began there continues to be a fundamental lack of integrity in the financial services industry,” Dominic Auld, a lawyer at Labaton Sucharow, said in the statement. The survey shows that 30 percent of workers believe their compensation or bonus plans put pressure on them to compromise ethical standards or break the law, the firm said. An equal number said regulators and law enforcement agencies don’t effectively deter such behavior, the report said. For more, click here. Comings and Goings New Counsel for SEC Compliance Inspections and Examinations Paula Drake will become the new chief counsel and chief compliance and ethics officer in the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations. She begins August 6, according to the agency’s statement. Drake will oversee a staff of eight lawyers and coordinate the efforts of attorney advisers in the SEC’s 11 regional offices. OCIE conducts the SEC’s national examination program for investment advisers and investment companies, broker-dealers, self-regulatory organizations, clearing agencies, and transfer agents to fulfill its mission of promoting compliance, preventing fraud, monitoring risk and informing SEC policy. Most recently, Drake was general counsel and chief operating officer at Oechsle International Advisors LLC, where she was involved in all aspects of the investment management business, including registering investment advisers and establishing risk and compliance programs. To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net. To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net . |
2024-10-13 | Bloomberg | Weber Says Investors Should Take Losses in Swap of Greek Debt | Axel Weber , the former president of Germany’s central bank, urged a restructuring of Greek sovereign debt that results in losses for investors and banks, which would then require additional capital. Weber, speaking today in Philadelphia, proposed a swap in which bondholders would exchange claims on low-rated Greek debt for a wider claim on the euro area. Banks would forgo some principal for better debt, Weber said. Such a program shouldn’t be referred to as a “default,” he said. European leaders this week pushed back a debt-crisis summit amid opposition to Germany’s drive for deeper-than-planned Greek bond writedowns that Luxembourg’s Jean-Claude Juncker said may exceed 60 percent. The Oct. 18 meeting was postponed to Oct. 23 as Europe gropes toward a master plan for dealing with Greece ’s oversized debt, insulating the Spanish and Italian markets, and shielding banks from the fallout. “We have to get to a system where with a restructuring of Greek debt, losses are borne by those that made the decisions to buy the debt, and these are investors and bondholders,” Weber said in a speech at the Federal Reserve Bank of Philadelphia. As a result of losses from the Greek debt swap, some banks will need to be recapitalized, especially weaker ones, Weber said. Stronger companies can probably make it through without being recapitalized, he said. Bank Capital “Only more bank capital can assure further loss absorption and re-establish confidence in the solidity and solvency of banks as counterparties,” Weber said in a slide presentation accompanying his talk. Resolving the European debt crisis should be part of global efforts toward “rebalancing” the world economy, said Weber, 54, who in February unexpectedly announced he would resign from the Bundesbank and as a European Central Bank policy maker. China , singled out among countries with current-account surpluses, needs to do its part to make its currency more flexible and improve its “social security” systems of health care, pensions and unemployment insurance , Weber said. In addition, nations with large current-account deficits “should consolidate their public finances as quickly as possible,” Weber said in one slide. A decline in investor confidence in some European nations’ ability to pay their debt has rattled world financial markets throughout 2010 and 2011. The ECB said Oct. 6 it will reintroduce yearlong loans, giving banks access to unlimited cash through January 2013, and resume purchases of covered bonds to encourage lending. The central bank left its benchmark interest rate at 1.5 percent. Slovakia Fund Today, Slovakia approved Europe ’s enhanced bailout fund, completing ratification across the 17 euro countries. Lawmakers voted to support the European Financial Stability Facility in the second attempt this week after parliament failed to approve the measures on Oct. 11. Enhancing the powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region. European Commission President Jose Barroso yesterday called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to ease debt woes. Weber dismissed options involving expanding the EFSF and said Germany can’t shoulder the burden of bailing out country after country in Europe beyond Greece, Ireland and Portugal. He also said that the ECB shouldn’t be a backstop for European governments and should stick to its role as lender of last resort for banks. Fiscal Union Over time, European governments should move toward a closer fiscal union, Weber said today. Yesterday, Weber said heavily indebted countries outside Europe that run deficits are in danger of facing surging borrowing costs. “No high-debt deficit country should feel safe,” Weber said at Princeton University in New Jersey. Countries with high debt levels and annual budget shortfalls including the U.S. should not have a “wrong sense of security” about being able to roll over bonds as they come due, he said. Weber said in February that a lack of “acceptance” among euro-area leaders for his views on monetary policy caused him to give up on becoming the next chief of the ECB. Mario Draghi , head of Italy ’s central bank, will succeed Jean-Claude Trichet as ECB president on Nov. 1. Weber will become chairman of UBS AG (UBSN) , Switzerland ’s largest bank, in 2013. He is currently a visiting professor of economics at the University of Chicago Booth School of Business. To contact the reporter on this story: Scott Lanman in Philadelphia at slanman@bloomberg.net. To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-03-13 | Bloomberg | Japan Earthquake Insured Losses May Reach $34 Billion, AIR Worldwide Says | The insured property losses from the 8.9-magnitude earthquake that struck Japan on March 11 may be as much as 2.8 trillion yen ($34.2 billion), according to a preliminary estimate by disaster modeler AIR Worldwide. The company used a variety of scenarios including a range from 8.9 to 9.1 in magnitude, a depth of between 15 kilometers (9 miles) and 30 kilometers and a rupture width of 100 kilometers to 150 kilometers, AIR said in an e-mailed statement. AIR said its preliminary range of 1.2 trillion to 2.8 trillion yen doesn’t include damage caused by tsunami waves of 3 meters (9 feet) or higher that battered the northeastern coast, especially Fukushima, Ibaraki, Iwate and Miyagi prefectures. Some tsunami surges reached as far as 10 kilometers inland, AIR said. The company said 14 percent to 17 percent of structures in Japan have earthquake insurance. About 70 percent of all residential buildings are made of wood and about 25 percent concrete, while commercial construction is about 50 percent concrete, with about one-third light metal or steel and less than 10 percent of wood, the firm said. Separately, the Bank of Japan may inject more short-term cash into the banking system after the nation’s most powerful earthquake on record, while keeping its asset-purchase plans unchanged as officials gauge the longer-term effect on the world’s third-largest economy. To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net. To contact the editor responsible for this story: Theo Mullen at tmullen11@bloomberg.net . |
2024-05-24 | Bloomberg | JPMorgan, UBS, Deutsche Bank Said to Face N.Y. Mortgage Probe | JPMorgan Chase & Co. (JPM) , UBS AG (UBSN) and Deutsche Bank AG (DBK) are being investigated as part of New York Attorney General Eric Schneiderman ’s expanded probe of mortgage securitization, according to a person familiar with the matter. Four bond insurers also were subpoenaed: Ambac Financial Group Inc. (ABKFQ) , MBIA Inc. (MBI) , Syncora Holdings Ltd. (SYCRF) and Assured Guaranty Ltd. (AGO) , according to the person, who couldn’t be identified because the probe isn’t public. Schneiderman is seeking information on claims paid out during and after the economic crisis and any information or documents related to litigation or settlements with the banks, according to the person. The expanded investigation was reported earlier by the Wall Street Journal. Goldman Sachs Group Inc. (GS) , Bank of America Corp. (BAC) and Morgan Stanley (MS) were already part of the probe, the person said earlier this month. Schneiderman, who took office in January, is examining mortgage practices and the packaging and sale of loans to investors, according to the person. Lauren Passalacqua, a spokeswoman for the New York attorney general, declined to comment yesterday. Michael Fitzgerald, a spokesman for New York-based Ambac, Torie von Alt, a spokeswoman for Zurich-based UBS, Tom Kelly, a spokesman for New York-based UBS and Renee Calabro , a spokeswoman for Frankfurt-based Deutsche Bank, declined to comment yesterday. Royal Bank of Scotland Group Plc (RBS) is also one of the companies being investigated by the attorney general, the Financial Times reported. Pholida Phengsomphone, a spokeswoman for the Edinburgh-based bank in the U.S., didn’t immediately return a call seeking comment after regular business hours yesterday. ‘Accelerate’ Resolution “We support the attorney general with their investigation which will hopefully accelerate the resolution of mortgage origination, securitization and servicing problems,” Ashweeta Durani, a spokeswoman for Hamilton-Bermuda-based Assured Guaranty, said in an e-mailed statement. “We prefer not to confirm whether or not we have received a subpoena.” New York-based Syncora’s Syncora Guarantee Inc. subsidiary received a subpoena from the New York attorney general “to provide certain information” about mortgage-backed securities lawsuits and settlements, repurchase requests and regulatory inquiries, Syncora spokesman Michael Corbally said in an e-mail. He declined to comment further. Kevin Brown, a spokesman for Armonk, New York-based MBIA, confirmed that the company has received a subpoena and that “the information sought in the subpoena relates to the allegations in our various RMBS complaints.” RMBS refers to residential mortgage-backed securities. MBIA is suing banks for allegedly breaching representations and warranties on loans that are pooled into those securities. 50-State Probe Federal regulators and all 50 state attorneys general are scrutinizing how the biggest U.S. financial firms handle home loans. Last month, as states coordinated settlement talks with banks over foreclosure practices, Schneiderman said that any joint accord shouldn’t preclude individual states, such as New York, from continuing their own inquiries. California Attorney General Kamala Harris set up a task force to investigate mortgage fraud, her office said yesterday in a statement. The group, made up of 25 attorneys and investigators, will work in three teams: consumer enforcement, criminal enforcement and corporate fraud. The task force’s work will include investigations into the origination of mortgage loans, the marketing of mortgage-backed securities, and false or fraudulent claims made to the state with respect to subprime mortgages, according to the statement. It will also target predatory lending as well as loan modification and foreclosure scams. ‘Safeguard the Homeowner’ “We will work to safeguard the homeowner at every step of the process -- from origination of a loan to its securitization, and we will prosecute to the fullest extent of the law those who take advantage of trusting California families,” Harris said in the statement. In April, Bank of America was among 14 of the largest U.S. mortgage servicers that signed consent decrees with authorities including the Federal Reserve to improve foreclosure methods. The firms promised to conduct reviews, overhaul procedures for loan modifications and refinancing and pay back homeowners for losses from home seizures that were mishandled. Last July, Goldman Sachs paid $550 million to settle civil fraud charges brought by the Securities and Exchange Commission over the 2007 sale of a mortgage-linked investment called Abacus. The firm said it made a “mistake” by failing to disclose to investors that a hedge fund was involved both in structuring the investment and planning to bet against it. One-Time Payment MBIA, the company that backed some of Wall Street’s most toxic debt securities, settled $19 billion in guarantees with five financial institutions since September, resolving the obligations with a one-time payment. Its MBIA Insurance Corp. unit paid the firms to tear up contracts insuring against losses on corporate, residential and commercial-mortgage bonds and derivatives, the company said in a statement that didn’t disclose the settlement amounts. The deals terminated guarantees on $15.7 billion of debt in the fourth quarter and $3.3 billion during the first two months of 2011, the company said. To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-07-16 | Bloomberg | Western U.S. Will Keep Burning Unless Fire Policy Changes | It is only mid-July, and Colorado has already had its most destructive wildfire in history -- some 350 houses in and near Colorado Springs burned, causing more than $110 million in damage. This broke the previous state record, which was set earlier this summer in a fire farther up the Front Range of the Rockies. In May and June, New Mexico suffered its most devastating blaze ever -- worse than the one last year that threatened Los Alamos. This is a scary trend. In the 1960s, Colorado had about 460 fires a year that burned an average of 8,000 acres, according to a report compiled from state forest service records. In the past 10 years, the state averaged about 2,500 fires a year that consumed about 100,000 acres. Climate change plays a role. Higher average temperatures mean the snowpack recedes earlier, and the fire season is extended in some places by almost two months. A study in Montana found that a rise of one degree in summer temperatures doubles costs of protecting a home against fire. Yet hand-wringing about global climate patterns shouldn’t distract us from dealing with the primary causes of the danger: human development and forest policy. As more people moved to the so-called Wildland Urban Interface, where houses and forests intersect, the national policy of suppressing fires rather than letting them burn became more entrenched. That has meant fewer natural fires, which burn the underbrush but allow the mature trees to survive and propagate. In recent decades, fuel on the ground has built up, causing today’s fires to burn more intensely, leaving a moonscape of ash. Life and property have been lost in the fires, at unfathomable cost. But this can’t be allowed to obscure the burden borne by U.S. taxpayers -- more than $3 billion annually. About half of the Forest Service’s entire budget goes into fighting wildfires, up from 13 percent in 1995. How can we stop this cycle? Although we can’t prevent people from building in fire zones, we can discourage it. One of four Colorado homes is in a red zone, the places most vulnerable to wildfires. One-fifth of forested private land bordering public wild land in Colorado has been developed -- the largest proportion in the Rocky Mountain West, according to an independent research group, Headwaters Economics. Local officials are loath to impose tighter zoning; this is the scenic real estate that attracts companies and workers. Another reason for foot-dragging is that communities can count on federal firefighting aid and disaster relief. National taxpayers picked up most of the $40 million (and rising) tab to fight the two Colorado fires, for example. Too few municipalities are willing to mandate proven fire-prevention measures such as clearing vegetation to create a safety perimeter and installing fire-resistant roofs. Growing pressure to enforce such changes is coming from the home insurance industry, which is facing escalating claims. Environmentalists complain that the “firewise” practices simply encourage more people to live higher in the forests. But communities have to strike a balance: If they won’t limit new subdivisions, they should at least make public safety a priority. The federal government is aware of the problem. As the inspector general for the Agriculture Department said in a 2006 report, landowners lack incentives to take “responsibility for their own protection” and “ensure homes are constructed and landscaped in ways that reduce wildfire risks.” Why can’t Washington just charge state and local governments for part of the firefighting costs? The prospect of losing free rescue money horrifies lawmakers from fire-prone states, including many budget hawks who decry wasteful public spending. If only the government would let timber companies go in and remove the trees, there would be no problem, some of these politicians say. But commercial logging operations -- subsidized by the U.S. taxpayer through road construction and below-market timber sales -- are generally distant from populated areas. Rather than reduce the danger, they tend to take the big trees and leave the brushy stuff to bake in the sun. So with any plans for “mechanical thinning” -- which often means logging -- the devil is in the details. Tom Tidwell, chief of the Forest Service, said the agency hopes to treat up to 4 million acres of land a year with forest thinning and prescriptive burning. That is just a small patch of the 65 million acres that have been found to have unnaturally thick growth. The decisions about what areas to clean up should be based on science, not on whether they have commercial value for timber companies. This is expensive work, but if it helps to reduce the costs of firefighting down the road, the investment will be worth it. Some scientists say that setting prescribed fires would be simpler, cheaper and better for the environment than any thinning operations. And, yes, these blazes are safe in most cases. They have sparked a disaster or two and those experiences have made them politically unpopular and logistically difficult, especially in the areas near housing developments. One initiative that was supposed to help firefighting agencies make the best use of their combined resources is the long-delayed computer system known as Fire Program Analysis. This was intended to help with forest management decisions such as where to cut, when to fight blazes and when to let them burn, and was scheduled to be up and running by 2007. Five years later, the program appears to be derailed, beset by turf battles among states and other bureaucratic entanglements. President Barack Obama could make this a campaign issue: Put the firefighting resources where they are needed. Conveniently, that would be in the crucial swing state of Colorado. It is unrealistic to expect any politician this year to ask why the federal government picks up most of the bill for protecting subdivisions in the Rockies. But there is no denying that conditions are getting worse. Small steps would be better than nothing. Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today’s highlights: the editors on breaking up too-big-to-fail banks; Noah Feldman on Tunisia ’s continuing Arab Spring ; Jeffrey Goldberg on Romney and Middle East peace ; William Pesek on Asia’s slowing growth ; Ramesh Ponnuru on Republican fiscal hypocrisy ; Luigi Zingales on Barclays and business ethics. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-06-30 | Bloomberg | Lloyds Banking Group Says It Plans to Cut 1,850 Jobs Following HBOS Merger | Lloyds Banking Group Plc , the U.K.’s biggest mortgage lender, is cutting about 1,850 jobs in its retail, insurance and administrative units as a result of divisional mergers following the takeover of HBOS Plc. Once contractors, temporary workers, redeployments and relocations of staff are taken into account, there will be a net loss of 650 full-time jobs, the London-based bank said today in a statement. “For the staff at Lloyds, today marks the start of another long summer of worry as they now face uncertainty about the security of their job,” Cath Speight, national officer of the Unite trade union, said in a separate statement. Lloyds has announced more than 17,700 job cuts since its takeover of HBOS in January 2009, according to the Unite union, which represents some bank staff. The bank plans to reduce costs by 2 billion pounds ($3 billion) annually over the next two years as a result of the HBOS takeover. Losses at HBOS led Lloyds bank to cede a 41 percent stake to the government. The cuts will affect staff in Nottingham and Chester, while some of the roles will be relocated to Warrington and Speke, the bank said. Lloyds also said it will close 265 Halifax independent agencies, which provide some banking services. The agencies will close in November. “The number of independent agencies has declined significantly in recent years,” David Nicholson, Managing Director, of Halifax Community Bank, said in the Lloyds statement. “Following the completion of a strategic review, we have now taken the difficult decision that the agencies are no longer integral to our business model.” To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net |
2024-10-19 | Bloomberg | EU Rescue Fund Insurance Plan May Not Translate Into Debt Crisis ‘Bazooka’ | The bond-insurance program European Union leaders are considering to boost their bailout fund’s firepower may not prove convincing to investors as a solution to the sovereign debt crisis, analysts and economists said. Even if euro-area leaders agree to leverage the temporary 440 billion-euro ($609 billion) European Financial Stability Facility by using it to insure a portion of national bond sales, it may not have enough capacity to provide loans to countries and support banks. Turning the fund into a “bond insurer is not enough unless it’s well capitalized in advance, so markets understand that EU governments are ready and willing to take losses and make good on obligations of either Greece or of the banks that will be impaired when Greece et al default,” Phillip Swagel , assistant U.S. Treasury secretary for economic policy in the George W. Bush administration, said by e-mail late yesterday. As EU leaders prepare for an Oct. 23 summit, momentum has gathered around a proposal for the EFSF to guarantee a portion of new borrowing by countries under pressure and for bondholders to take bigger losses on Greece. European Economic and Monetary Affairs Commissioner Olli Rehn said yesterday that Greek bondholders need to play a bigger role. German Finance Minister Wolfgang Schaeuble , who has consistently opposed expanding the fund’s resources, has told lawmakers that its leverage should be increased, according to Financial Times Deutschland. ‘Insufficient Firepower’ Both ideas represent deviations from plans set at a July 21 summit, when EU leaders agreed to give the rescue fund more flexibility and to work with banks and other investors on a Greek debt swap. Group of 20 finance ministers and central bankers last week set this weekend’s summit as a deadline for the EU to come up with an expanded crisis-fighting strategy. “It seems clear that, even with leverage, there is insufficient firepower to meet all the potential liquidity needs,” David Mackie, chief European economist at JPMorgan Chase & Co., wrote in a note to clients yesterday. The EFSF might be allowed to insure 20 percent to 30 percent of new bonds sold by distressed euro-area governments, a person familiar with the deliberations said. The upgraded facility may still prove too small to deter investors from targeting the bigger economies, according to Mackie, who calculates that given its existing commitments, the fund has about 270 billion euros left. His figures suggest that with Italy , Spain and Belgium facing funding needs of more than 1 trillion euros over the next three years, guaranteeing the first 20 percent of losses would leave less than 100 billion euros for other fire-fighting tasks. New Issuance “This might be sufficient, but it is not exactly a bazooka,” Mackie said, referring to former U.S. Treasury Secretary Henry Paulson’s 2008 request for “bazooka”-like powers to take over Fannie Mae and Freddie Mac , the two government-backed companies that dominate the U.S. mortgage market. As a bond insurer, the EFSF would focus on new issuance rather than taking advantage of its new powers to buy debt on the secondary market, said Marc Chandler , chief currency strategist at Brown Brothers Harriman in New York. This means it won’t be able to relieve the burden on the European Central Bank , which had hoped to pass on some of its crisis-fighting duties and return to its focus on monetary policy. “The insurance model likely means that it will not be able to buy sovereign bonds in the secondary market as some have proposed,” Chandler said. “While some at the ECB may not be pleased, its continued involvement is an important element of support the financial system.” Capital Shortfall The EFSF might not have the resources to help recapitalize Europe ’s banks, another issue that European leaders have pledged to address. And it would face highly concentrated and correlated risks by insuring the debt of multiple European countries with high debt levels like Italy, Spain and Belgium, said Jacques Cailloux , the chief European economist at Royal Bank of Scotland Group Plc (RBS) in London , in a research note. Some requirements under consideration would lead to a 220 billion-euro capital shortfall at 66 of the participating banks, with the biggest gaps at Edinburgh-based RBS, Deutsche Bank and Paris-based BNP Paribas SA, according to a note published by Credit Suisse Group AG analysts on Oct. 13. “We believe it is very risky for euro-area policy makers to rush out some quick deal on leverage or insurance schemes given the risks associated with such mechanisms and the limited actual firepower of the EFSF,” Cailloux said. “There are more downsides than upsides” and “ultimately a fuller involvement of the ECB will be needed.” To contact the reporter on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-11-06 | Bloomberg | Lawmakers Spurn Obama Bid to Preserve NSA Data Gathering | The Obama administration is considering steps to quiet the uproar over U.S. spy programs, including curbs on foreign surveillance while allowing the bulk collection of Americans’ phone records to continue. White House officials also are looking at separating the agencies in charge of intelligence gathering and cyberwar policy to take so much power out of the hands of one general. The ideas don’t go far enough to satisfy U.S. lawmakers looking to rein in the National Security Agency who said yesterday the changes would do more to limit spying on foreign leaders than to limit collecting data on U.S. citizens. “It is so striking that they want to deal with the issue of foreigners when at every town hall meeting I go to people stand up and say why are Americans being asked to give up their individual liberties for the appearance of security,” Senator Ron Wyden , an Oregon Democrat and leading critic of the phone records collection, said in an interview. President Barack Obama ’s administration is making proposals to appease the nay-sayers. One possible step being contemplated would separate the Pentagon’s Cyber Command, which has the ability to carry out offensive cyber-attacks and protect U.S. networks, from the NSA, which collects intelligence, according to U.S. defense and intelligence officials who requested anonymity to discuss White House deliberations. Right now, both agencies are headed by Army General Keith Alexander, who’s announced he’s resigning in March -- and some ex-military leaders say that’s too much power for one person. ‘Different Missions’ James Stavridis, a former supreme allied commander of the North Atlantic Treaty Organization, has said the arrangement is not as beneficial as it was when it began. “Not only do the organizations have starkly different cultures, their missions are vastly different, even contradictory,” Stavridis wrote in an article with Dave Weinstein, a strategic planner at Cyber Command, for Foreign Affairs magazine. Intelligence collection is often at odds with military operations, such as when a fighter pilot targets a building for destruction and kills a human intelligence source in the process, Stavridis said. Those distinct operations deserve separate leaders who can advocate for their interests, he said in the article. One retired military and intelligence official, though, argues that NSA and the Cyber Command should remain unified and be a standalone operation similar to the U.S. Central Command, which directs all military activity in the Middle East. No Alternative A second retired official with experience in intelligence and combat agreed, arguing that the combined command can react faster and more precisely to new threats, especially to U.S. forces in the field. The thrust of the possible changes to the programs would be to leave intact the bulk collection of phone records of millions of Americans by offering changes to foreign spying. Administration officials have privately informed lawmakers that it sees no alternative to having the NSA collect bulk phone records and intercept the communications of Americans. Meanwhile, Alexander and other top administration officials have said publicly they’re open to changing spying abroad. Senate Intelligence Committee Chairman Dianne Feinstein , a California Democrat, said even with complaints from critics, the administration controls intelligence operations and “it’s within their power to make agreements with nations,” indicating that Congress could do little to dictate conditions of those accords. Global Backlash The administration is fighting a global backlash over revelations that the NSA spied on foreign leaders including German Chancellor Angela Merkel , hacked into fiber-optic cables to get data from Google Inc. (GOOG) and Yahoo! Inc. (YHOO) , and intercepted communications of Americans without warrants. Most of the spying was exposed by former NSA contractor Edward Snowden, who remains in Russia under temporary asylum. White House spokesman Jay Carney yesterday confirmed a New York Times report that the White House is considering limits on foreign spying. Meanwhile, the administration has concluded there isn’t a workable alternative to NSA programs collecting the data of Americans, according to Darren Dick, staff director for the House intelligence committee. “They’ve taken a look at different ways of conducting these programs and really can’t find a solution, a workable solution, that gives the same counterterrorism efficacy to the construct other than the one that they have right now,” Dick said at a conference yesterday in Washington. ‘Get Real’ Dick said the administration briefed the committee on the review, which looked at possible alternatives under sections 215 and 702 of the Foreign Intelligence Surveillance Act. The Obama administration “needs to get real” and accept that limitations will be put on the NSA’s ability to collect data on innocent Americans, Senator Patrick Leahy , a Vermont Democrat and chairman of the Senate Judiciary Committee, said in an interview. “I don’t have faith in the NSA handling the powers they do have when they weren’t smart enough to keep a 29-year-old from walking off with some of their secrets,” Leahy said, referring to Snowden. A coalition of lawmakers, technology companies and voters is willing to fight “a long battle” against the administration to end spying on U.S. citizens, Wyden said. “We see the tech community mobilized dramatically here in the last couple of weeks,” Wyden said. “We’re starting to build on the NSA reform issue the same sort of coalition that we built on a number of other issues relating to particularly technology and the Internet.” Google, Apple Google, Yahoo, Apple Inc. (AAPL) and other technology companies have lobbied Congress and the administration to be able to publish statistics about how they respond to government orders for customer data. The idea of reducing “the amount of surveillance we do on foreigners but we’re going to continue the surveillance that’s under way on Americans seems to have it somewhat backward,” Senator Mark Udall, a Colorado Democrat, said in an interview. Udall said there could be limitations placed on spying both domestically and abroad. Leahy, Wyden and Udall have introduced bills that would prohibit the NSA from collecting bulk phone records and give technology companies permission to reveal data about government demands. Feinstein’s committee yesterday approved an authorization measure for U.S. intelligence programs for fiscal year 2014 that seeks to thwart leaks of classified information and strengthen oversight of surveillance activities. Too Late The administration’s position that it has no workable alternatives to NSA surveillance will undermine attempts to appease allies and damage U.S. interests, said Jason Healey, director of the Cyber Statecraft Initiative at the Atlantic Council. Administration proposals to rein in spying programs are coming too late to reverse what Healey called deep and long-term damage to U.S. interests. They probably won’t sway foreign leaders either, he said in a phone interview. “These are dumb, short-term security decisions, they’re not done with the longer term in mind,” Healey said. What’s needed is not the “rounding down” approach to modifying the surveillance programs, Healey said, but a bottom-up review of what surveillance activities are truly required. To contact the reporters on this story: Chris Strohm in Washington at cstrohm1@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net |
2024-07-29 | Bloomberg | Alex Rodriguez Objects to Rangers Bankruptcy Plan | Alex Rodriguez , third baseman for the New York Yankees, objected to the bankruptcy plan of his former baseball team, the Texas Rangers, which owes him $24.9 million in deferred compensation. The plan doesn’t make clear whether Rodriguez’s contract will be assumed by the buyer of the baseball team “with all of his rights remaining intact,” his lawyer said in a filing today in U.S. Bankruptcy Court in Fort Worth, Texas. The objection to the Rangers’ bankruptcy plan was one of several filed today. Besides Rodriguez, the team’s lenders, Major League Baseball, the Major League Baseball Players Association, and the U.S. government’s bankruptcy watchdog filed objections about the plan. The objections come as the Rangers are scheduled to go up for auction next week. A group led by attorney Chuck Greenberg and Hall of Fame pitcher Nolan Ryan has an agreement to buy the team subject to higher bids. Initial bids are due on Aug. 3. Mark Semer , a spokesman for the Rangers, declined to comment about the objections. The lenders, led by JPMorgan Chase & Co. , oppose the Greenberg-Ryan deal and the auction process, which they say will chill bidding and doesn’t give interested buyers enough time to put together their best bids. The lenders repeated those arguments in their court filing and objected to what they said were illegal liability releases in the plan. ‘Unwavering Rush’ “The Greenberg group’s unwavering rush to a confirmation hearing -- like a shopper who grabs a mistakenly underpriced item and runs to the cash register before someone realizes the error -- makes it practically impossible to hold a fair auction of the Texas Rangers,” the lenders said. In his objection, Rodriguez said he hasn’t received assurance from the Rangers or those bidding for the team that he will be paid on his former contract with the team. Rodriguez, who is one home run away from hitting his milestone 600th home run, was traded to the Yankees from Texas in 2004. The committee of unsecured creditors said in an objection that it also hasn’t received assurance that the successful bidder for the team will have the financial ability to satisfy the club’s obligations. The new owner will assume about $204 million in liabilities, including player contracts and deferred compensation agreements, according to the filing. The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth). To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net. Alex Rodriguez has been named by the US governmet to a three-member committee representing Texas Rangers creditors during the team’s bankruptcy case. Photographer: Craig Ruttle/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-03-05 | Bloomberg | New York Agrees to Sell Two Buildings for $249 Million | The city of New York agreed to sell two lower Manhattan buildings for a combined $249 million as part of an effort to reduce government office space and lower operating expenses. The buyers are Peebles Corp., which will pay $160 million for 346 Broadway, and Chetrit Group, which is acquiring 49-51 Chambers St. for $89 million, Mayor Michael Bloomberg’s office said in a statement today. The deals require the approval of the Manhattan Borough Board, led by President Scott Stringer. Both properties are city landmarks, meaning they can’t be altered without government approval. “In 2010, we set a goal of reducing city agency office space by 10 percent within four years,” the mayor said in the statement. “Today’s agreement brings us more than 80 percent towards that goal.” At almost 600,000 square feet (55,700 square meters) combined, the deals value the buildings at about $415 a square foot. That compares with an average value of $362 a square foot on downtown commercial buildings sold last year, a 48 percent increase from 2011, according to data from Real Capital Analytics Inc., a New York-based research firm that tracks commercial-property sales. The buyers plan to redevelop the properties, which house city agencies, for hotel, residential, retail and community uses, according to the statement. Coral Gables, Florida-based Peebles agreed to set aside space at 346 Broadway for a 16,000- square-foot digital-arts and media community center. The building, constructed in the 1890s, is the former home of New York Life Insurance Co. The sales “will continue the revitalization of lower Manhattan ,” the mayor said. Cost Savings City officials expect the sales to generate $120 million in net revenue after the costs of relocating city agencies and creation of the media space. The transactions also will save another $120 million in operating expenses over the next 20 years, the mayor said at a news conference today at 49-51 Chambers, the former Emigrant Industrial Savings Bank building. New York-based Chetrit, which in January agreed to buy the Sony Building in Midtown, plans to convert 49-51 Chambers into a residential and retail building. About 30 percent of that building is currently used as storage, which the mayor’s office called “an inefficient use of valuable real estate.” The mayor is founder and majority owner of Bloomberg LP, parent company of Bloomberg News. To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net |
2024-07-17 | Bloomberg | Discovery Jumps to Record on Singapore Deal: Johannesburg Mover | Discovery Ltd. (DSY) , South Africa’s largest medical-insurance provider, rose to a record after saying its wellness-based life-insurance model Vitality started in Singapore through a joint venture with AIA Group Ltd. (1299) The stock jumped 6.6 percent, the most since Sept. 2008, to 92 rand at the close in Johannesburg, the highest since at least October 1999, when Bloomberg began compiling the data. About 1.6 million shares were traded, or 111 percent of the three-month daily average. Discovery was the second-best performer on the 166-member FTSE/JSE Africa All-Share Index today. “With the way the stock is trading today, up 6 percent, it shows at least some investors are optimistic about the Vitality model roll-out in Singapore,” Ryan Wibberley, the head of equity dealing for frontier and emerging markets at Investec Asset Management, said by phone from Cape Town. Discovery, 25 percent owned by investment holding company RMI Holdings Ltd. (RMI) , expects to invest the equivalent of less than 5 percent of pretax profit into the venture, the company said in a regulatory filing today. The model, called AIA Vitality, provides rewards for participating in wellness programs such as increasing fitness and healthy eating. The venture provides an opportunity for Discovery to expand its footprint in the Asia-Pacific market, Chief Executive Officer Adrian Gore said in the statement. To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net |
2024-05-08 | Bloomberg | U.S. Stocks Climb After Dow Tops 15,000 Amid Earnings | U.S. stocks rose, after the Dow Jones Industrial Average (INDU) climbed above 15,000 for the first time yesterday, as earnings forecasts from Whole Foods Market Inc. (WFM) and Electronic Arts Inc. beat analyst estimates. Whole Foods Market and Electronic Arts gained more than 10 percent. J.C. Penney Co. added 7.4 percent as quarterly sales declined less than in the year-earlier period. Symantec Corp. lost 2.4 percent after it said sales and revenue will miss analyst estimates. The Standard & Poor’s 500 Index rose 0.4 percent to 1,632.69 at 4 p.m. in New York. The Dow added 48.92 points, or 0.3 percent, to 15,105.12. More than 6.2 billion shares traded hands on U.S. exchanges today, about in line with the three-month average. “We’ve recovered from the nervousness that we saw in the market in April and we’ve built a nice base here,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. “We’ve gotten through the earnings season and we’re turning to the phase in the quarter where economic reports will determine if the market can hold up.” The Dow closed above 15,000 for the first time yesterday on optimism over global central bank stimulus and better-than-estimated corporate earnings. The S&P 500 posted its fifth straight record today. The gauge has climbed 3.2 percent in that time, the largest five-day rally since Jan. 7. U.S. stocks are in the fifth year of a bull market amid three rounds of bond purchases by the Federal Reserve. Highest Level About 86 percent of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. That’s the highest level since Feb. 13, while below the two-year high of 93 percent in January. News Corp. and Monster Beverage Corp. were among five S&P 500 companies reporting earnings today. About 72 percent of companies that have released results since the start of the earnings season have exceeded profit projections, while 52 percent have missed sales estimates, data compiled’ by Bloomberg show. The S&P 500 will extend its record rally as the U.S. central bank continues using economic stimulus as a way to reduce unemployment, according to Scott Black, president of Boston-based Delphi Management Inc. “There’s room to go on the upside, especially since you’re getting nothing on the fixed-income side,” Black said in an interview on Bloomberg Radio today. “There’s every indication that Ben Bernanke is going to remain accommodative because we’re not even near the threshold where he wants to get unemployment back under 6.5 percent.” Unprecedented Policy Fed Chairman Ben S. Bernanke has kept overnight interest rates near zero since December 2008 and embarked on a bond buying program that has expanded the central bank’s balance sheet to more than $3 trillion. The Fed has pledged to maintain this policy as long as U.S. unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent. Economic data from China and Germany today came in better than estimated. Chinese export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell. German industrial production also rose more than forecast, increasing for a second month in March in a further sign that Europe ’s largest economy is returning to growth. Investors bought shares of stocks most tied to economic growth, sending 25 out of 30 members of the Morgan Stanley Cyclical Index higher. The gauge has rallied 5.7 percent in the past five days. Raw-material, technology and phone shares had the biggest advances among 10 groups in the S&P 500, climbing at least 0.7 percent. UnitedHealth, Alcoa UnitedHealth Group Inc. added 3.3 percent to $62.51, Hewlett-Packard Co. increased 2.8 percent to $21.07 and Alcoa Inc. gained 2.7 percent to $8.87 for the biggest gains in the Dow (INDU). JPMorgan Chase & Co. increased 1.3 percent to $49.76. The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.3 percent to 12.66. The equity volatility gauge is down 30 percent for the year. Whole Foods gained 10 percent to $102.19. Net income rose to about $142 million, or 76 cents a share, from $118 million, or 64 cents, a year earlier, the Austin, Texas-based company said yesterday. Analysts had projected profit of 73 cents a share, the average of 24 estimates compiled by Bloomberg. The company also said that profit excluding certain items will be as much as $2.89 a share in fiscal 2013, up from a previous estimate of as much as $2.87. Analysts estimate $2.87 a share, on average. Video Games Electronic Arts increased 17 percent to $21.56, the highest since December 2011. The company, which makes the “FIFA” and “SimCity” video games, forecast adjusted earnings of $1.20 a share in the year ending in March, exceeding the $1.10 average estimate compiled by Bloomberg. J.C. Penney added 7.4 percent to $17.61. The department-store chain that replaced its chief executive officer last month said preliminary fiscal first-quarter sales fell 16 percent, a smaller drop than a year earlier. CEO Myron Ullman is working to improve sales after revenue last year tumbled 25 percent to $13 billion amid Ron Johnson’s failed attempt to remake the retailer. Sotheby’s rose 3.8 percent to $36.25. The auction house sold a Paul Cezanne painting for $41.6 million in its Impressionist and modern art sale yesterday. ‘American Idol’ News Corp. climbed 3.3 percent in extended trading following the close of exchanges after reporting profit that beat estimates amid higher licensing fees for television shows such as “American Idol.” Monster Beverage lost 16 percent at 5:50 p.m. as profit was cut by $8.3 million from payments to terminate distributor agreements. Symantec declined 2.4 percent to $24.49. Revenue in the current period, which ends in June, will be $1.61 billion to $1.65 billion, the biggest maker of security software said yesterday. Profit excluding some costs will be 35 cents to 36 cents a share. Analysts on average had projected sales of $1.7 billion and profit of 44 cents. C.H. Robinson Worldwide Inc. lost 7 percent to $57.26 for the biggest retreat in the S&P 500. The transportation logistics firm posted quarterly profit lower than analysts estimated. Williams Cos. lost 3.7 percent to $35.60. The third-largest U.S. pipeline company posted its full-year earnings forecasts through to 2015, trailing current analyst estimates for all three years. Soccer Stock Manchester United Plc lost 1.8 percent to $18.44. Alex Ferguson will retire as British soccer’s most successful manager, having led the club to 38 trophies in 26 years. The S&P 500 may trigger a longer-term buy signal for global equity markets, even as the benchmark gauge for U.S stocks nears a resistance level, according to Roelof-Jan van den Akker, a technical analyst at ING Groep NV. The measure is nearing its short-term resistance of 1,635, signaling a possible 1.6 percent decline from yesterday’s finish to 1,600 within the next two weeks. Still, a monthly close above the longer-term resistance level of 1,600 would send a buy signal for the next year, triggering a greater increase in the S&P 500 that will lead global stock markets higher, van den Akker said. “Prices are slowly breaking the upward rising resistance line around 1,600,” he said via phone from Amsterdam. “Even though we may see a short-term pullback that we will consider normal, the S&P 500’s uptrend is intact and likely to continue. Prices are still in a steep upward move in the next few weeks.” In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Sofia Horta e Costa in London at shortaecosta@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-12-19 | Bloomberg | KB Financial Dropping ING Bid Leaves Euh’s Promise Unmet | KB Financial Group Inc. dropping its bid for ING Groep NV (INGA) ’s South Korean life-insurance unit leaves Chairman Euh Yoon Dae’s promise to diversify business unfulfilled as banking in the country becomes less profitable. KB Financial’s board rejected a plan to buy the ING unit yesterday, deeming it more important to preserve capital as growth slows in Asia ’s fourth-largest economy. The decision is a setback to ING’s plan to raise about $2 billion from the asset sale following a 2008 Dutch government bailout. Banks in South Korea are facing shrinking loan margins and setting aside more cash for bad debts as borrowing by households |
2024-04-15 | Bloomberg | South Korea’s Imports of Iranian Crude Oil Fall 17% in March | South Korea , the world’s fifth- largest oil importer, reduced crude shipments from Iran by about 17 percent in March from a year earlier, customs data show. Purchases last month were 556,658 metric tons, compared with 668,706 tons a year earlier, according to data on the Korea Customs Service ’s website today. The volume was 550,827 tons in February, the figures showed. The March deliveries were equivalent to about 132,000 barrels a day. South Korea halted imports of Iranian crude in August and September after the start of a European Union ban on insurance coverage for tankers carrying oil from the Persian Gulf nation. The injunction was a part of sanctions by Western countries intended to pressure the Islamic republic to stop its nuclear program, which the U.S. and Israel say is aimed at developing atomic weapons and Iran says is for civilian purposes. South Korea resumed crude shipments from Iran in October after the Persian Gulf nation offered its own vessels for transporting the commodity. Imports from the Islamic republic fell 22 percent to 1.92 million tons in the first three months of this year from 2.46 million a year earlier, according to the customs data. The January-March imports were the equivalent of about 6 percent of Korea’s total crude purchases of 31.42 million tons during the three months, the data show. To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net |
2024-01-08 | Bloomberg | Hong Kong Stocks Drop Third Day Amid Overheating Signals | Hong Kong stocks fell, with the city’s benchmark index retreating for a third day from a 19- month high, as developers and energy companies dropped amid signs the market may be overbought. China Resources Land Ltd. (1109) sank 1.7 percent, the developer’s first decline in two weeks. China Life Insurance Co. fell 1.8 percent after CCB International Holdings Ltd. cut its rating on the nation’s largest insurer. Cnooc Ltd. slid a second day after sending icebreakers to clear offshore oilfields amid the coldest winter in decades. Zoomlion Heavy Industry Science & Technology Co. was suspending after the Ming Pao newspaper cited an anonymous letter questioning the crane maker’s accounting. The Hang Seng Index sank 0.4 percent to 23,241.45 as of 9:55 a.m. in Hong Kong. The measure has retreated 0.9 percent in the three days after reaching its highest level since June 2011. The Hang Seng China Enterprises Index of mainland companies declined 0.7 percent to 11,886.59. The Hang Seng Index (HSI) ’s 14-day Relative Strength Index, a measure of trading momentum, was at 74 yesterday, above the 70- level that some investors view as an indicator an asset is overbought. The RSI is at 70 today. To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-10-24 | Bloomberg | Kerimov Rebound From Morgan Stanley Meltdown Snags on Potash | Suleiman Kerimov amassed a net worth of $18 billion betting mainly on shares of companies controlled by Vladimir Putin only to gamble away the bulk of that on Morgan Stanley (MS) and other banks during the global financial crisis. Now the 47-year-old native of Dagestan, on Russia’s Caspian seashore, is back in the eye of an international storm as he tries to rebuild his fortune by dominating the $20 billion potash market. His nemesis this time isn’t sophisticated Wall Street derivatives, but a one-time collective farm boss who’s run the former Soviet province of Belarus for two decades: Aleksandr Lukashenko. Lukashenko is demanding Kerimov sell the centerpiece of his comeback effort, Russian potash champion OAO Uralkali. (URKA) Kerimov in July ended Uralkali’s partnership with Belarus, which held about 40 percent of global exports of the soil nutrient and 20 percent of Belarus’s budget revenue. Lukashenko responded by detaining Uralkali’s chief executive officer on Aug. 26 in Minsk, where he remains, and calling for Kerimov’s arrest. “Now Kerimov has no choice but to sell,” said Sergey Donskoy, who tracks Uralkali for Societe Generale SA (GLE) in Moscow. “He didn’t plan to cash out when Uralkali quit the Belarus venture, but he doesn’t want the political risks of a possible conflict between Putin and Lukashenko.” Belarus Feud The feud with Lukashenko, 59, is jeopardizing Kerimov’s efforts to rebound from the 2008 collapse of Lehman Brothers Holdings Inc., which triggered a global market meltdown that cut his wealth by more than $14 billion as his holdings in Russian companies and foreign banks plunged, according to Forbes Russia. Before the crisis, Kerimov, a lawmaker for 14 years, used funds from state banks including OAO Sberbank (SBER) to amass more than 4 percent each in Sberbank itself and OAO Gazprom (GAZP) , Russia’s gas exporter, three people who worked with him at the time said, declining to be identified because the information is private. He then bought on margin billions of dollars of stocks in western lenders including Morgan Stanley, Deutsche Bank AG (DBK) , Credit Suisse Group AG (CSGN) , Goldman Sachs Group Inc. (GS) , Royal Bank of Scotland Group Plc and Fortis. Lehman Crash When Lehman fell, Kerimov was holding more than 2 percent of both Morgan Stanley and Deutsche Bank, two other people with knowledge of his investments said. Morgan Stanley’s shares slid 79 percent and Deutsche Bank’s dropped 51 percent from Aug. 11 to Oct. 10 of that year, data compiled by Bloomberg show. Sberbank and Gazprom each tumbled 50 percent. Gazprom has yet to recover, remaining at 59 percent below its May 2008 peak, while Sberbank trades at 8 percent less than its July 2007 high. “His strategy of buying stock with borrowed funds and then exiting with a profit didn’t work that time,” Rair Simonyan, a former head of Morgan Stanley in Russia, said in an interview. “When the shares of international banks started to fall, he didn’t stop gambling, adding to his losses.” One of Kerimov’s goals in buying into major U.S. and European lenders was to gain access to executives and learn their views on market trends, Simonyan said. While many western bankers knew about Kerimov and his stock binge, few who met with him came away understanding him, he said. ‘Different Planets’ “It was like two different planets,” is how Simonyan described a meeting Kerimov had in New York in 2006 with Morgan Stanley’s then-Chief Executive Officer John Mack. “Kerimov thinks in associative images and he’s hard to understand if you are not on the same wavelength.” Kerimov, who rarely speaks to the press, declined to comment via his press service, as did Mack through Morgan Stanley. Stung by the stock market, Kerimov switched his focus to buying stakes large enough to influence the strategies of the companies he invests in. He bought 37 percent of OAO Polyus Gold (PLZL) , Russia’s largest producer of the precious metal, from Vladimir Potanin for $1.3 billion in 2009 and then outbid Potanin for Uralkali the following year. His gambler’s instincts still intact, Kerimov learned that Potanin was close to striking a deal for Uralkali in 2010 and decided in just a few days to trump his fellow billionaire’s offer -- without even conducting due diligence, two people with direct knowledge of the matter said. ‘Financial Gambler’ “Kerimov is a financial gambler,” said Sergey Aleksashenko, who ran Merrill Lynch’s Moscow office in 2006 through 2008 and is now the director of macroeconomic research at Moscow’s Higher School of Economics. “He doesn’t have a track record as a businessman.” Kerimov and his partners, Alexander Nesis and Filaret Galtchev, ended up paying $5.3 billion for 53 percent of Uralkali -- money borrowed, as before, from a state-run bank, this time VTB Group, the Vedomosti newspaper reported at the time, citing unidentified people involved in the deal. By then, Kerimov’s personal fortune had fallen to $3.1 billion. Within a year, Kerimov engineered a merger between Uralkali and its bigger Russian competitor, OAO Silvinit, to create the world’s largest potash supplier. Uralkali’s share price surged 45 percent to $50.50 between December 2010, when the merger talks were disclosed, and August 2011, two months after the deal closed, pushing its market value to $30 billion. The stock has since halved, in part because of the Belarus feud. Billionaire Interest At least three other billionaires -- Mikhail Prokhorov , Vladimir Evtushenkov and Mikhail Gutseriev , as well as Putin ally Vladimir Kogan and property developer Alexey Khotin have expressed interest in the combined stake, according to two people involved in the talks. Kerimov is insisting that any deal values Uralkali at $20 billion, or about 25 percent more than the current market price, the people said, declining to be identified because the talks are private. If Kerimov gets his way, he’ll be able to pay off the money he borrowed for the deal and still pocket about $2 billion, boosting his net worth to $5 billion, according to the Bloomberg Billionaire’s Index. Kerimov was born in Russia’s southernmost city, Derbent, near the border with Azerbaijan, in 1966. He graduated with a degree in economics from Dagestan University, where he met his wife Firuza. The daughter of an influential local Communist Party official, she used the family’s contacts to help him get a start in business, according to a longtime friend. Chaotic Transition In 1989, as the Communist Bloc was unraveling across Eastern Europe, Kerimov entered the workforce as an economist at the Eltav electronics plant in Makhachkala, the Dagestani capital, according his foundation’s website. After the Soviet Union disbanded in 1991, Eltav sent Kerimov to work for the bank it had set up in Moscow amid the chaos of the country’s transition to a free-market economy. In 1998, after branching out on his own, he found the financing to acquire Nafta Moskva, a once-mighty oil trader, for about $50 million, according to Forbes Russia. Nafta Moskva’s predecessor, Soyuznefteexport, held a monopoly on oil exports during the Soviet era, handling more than 1.5 billion barrels a year. Its main business shrank as newly privatized oil companies were awarded the right to trade on their own. Putin’s Party Kerimov joined the State Duma, or lower house of parliament, in 1999, as a member of Vladimir Zhirinovsky ’s far-right LDPR party. After switching to the dominant United Russia party in 2007, Putin named Kerimov Dagestan’s representative in the upper house, or Federation Council. “Kerimov has always had administrative resources and he has used them skillfully,” said Simonyan, the former Morgan Stanley banker. Those resources include close ties with senior officials, most notably Prime Minister Dmitry Medvedev and First Deputy Prime Minister Igor Shuvalov , according to Stanislav Belkovsky, a former Kremlin adviser who runs the Institute for National Strategy, a Moscow-based research group. Kerimov was the sole billionaire Medvedev appointed to a working group on turning Moscow into an international financial hub, a project Medvedev championed as president from 2008 to 2012. Medvedev’s spokeswoman, Natalya Timakova, said the premier has never given preferential treatment to anyone in business. The real payoff for Kerimov would come at the end of 2003, when he started borrowing money from state banks to buy shares in the biggest state companies, led by Sberbank, which held more than half of the country’s savings, and Gazprom, the world’s largest gas producer. The government was in the process of trying to transform the tsarist-era savings bank into a modern financial institution and overturning restrictions on foreign ownership of Gazprom’s shares. Sberbank, Gazprom In all, Kerimov borrowed $3.2 billion, first from VEB, the state development bank, and then from Sberbank, to amass 5.64 percent of Gazprom and 4.25 percent of Sberbank, shares that had a combined market value of more than $15 billion at the end of 2006, according to three people who worked with him at the time. Sberbank’s share price rose 1,058 percent from 2004 through 2005, while Gazprom’s almost tripled. He also bought silver and gold producer OAO Polymetal (POLY) for $900 million in 2005. He earned $295 million from the company’s initial public offering in 2007 before selling the rest of his stake for about $2 billion just before the 2008 crisis. Deadly Risks “He is a gifted businessman and likes risk,” Shuvalov, the first deputy premier, said in an interview in Moscow on Sept. 24. “For Kerimov, business isn’t a game, but a series of well-thought-out steps, though risky steps.” Kerimov also takes risks in his personal life, the kind that can kill. In November of 2006, two months after meeting with Morgan Stanley’s Mack in New York, Kerimov crashed his Swiss lawyer’s black Ferrari Enzo into a tree along the Promenade des Anglais in Nice on the French Riviera. He was flown by helicopter to Marseille and placed in a medically induced coma with burns covering 70 percent of his body. He still wears special gloves to protect the skin on his hands and arms. Disaster struck again, this one financial, less than two years later, when the global market rout began. Now, with Uralkali embroiled in the Belarus dispute and falling gold prices hurting his other main asset, Polyus, Kerimov is seeking to sell his stakes in London-listed property developer PIK Group (PIKK) and the historic Hotel Moskva on Red Square. ‘Speed Chess’ He’s also cutting spending on his favorite pastime, the professional soccer club FC Anzhi Makhachkala, by as much as $70 million a year, Anzhi Chairman Konstantin Remchukov said Aug. 7. Guus Hiddink, the former manager of billionaire Roman Abramovich’s London club Chelsea and the national squads of Russia and Holland, quit Anzhi in July after just 18 months. Anzhi also got rid of two of its most expensive players, Cameroonian striker Samuel Eto’o and Brazilian midfielder Willian, both of whom went to Chelsea. The project required big cash flows, taken out of his businesses, Simonyan said. “Kerimov is strong in virtual games that don’t don’t require daily investments.” Whatever Kerimov decides to do next, it will probably be unexpected and fast, Simonyan said. “Business for Kerimov is like a game of speed chess,” Simonyan said. “He prefers fast combinations that have an immediate effect.” To contact the reporters on this story: Irina Reznik in Moscow at ireznik@bloomberg.net ; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net To contact the editors responsible for this story: Hellmuth Tromm at htromm@bloomberg.net ; John Viljoen at jviljoen@bloomberg.net |
2024-06-13 | Bloomberg | Small Banks, Big Banks, Giant Differences: Robert G. Wilmers | There are reasons for bankers like me to view these as good times. Bank profits are up and failures have ebbed. Nonetheless, I remain troubled about the state of the financial-services industry. Here’s why: community banks have given way to big banks and excessive industry concentration; profits are increasingly driven by risky trading; leverage is taking precedence over prudent lending; compensation is out of control. This toxic combination leads to continued taxpayer risk and threatens long- term U.S. prosperity. To understand the change, first consider history. Banking once was a community-based enterprise, relying on local knowledge to guide the process of gathering customer deposits and extending credit. Done well, this arrangement ensures that deposits are deployed into a diversified pool of investments, while providing depositors with liquidity and a return on their savings. Over the past generation, however, the financial services industry changed dramatically. In 1990, the six largest financial institutions accounted for 9 percent of all U.S. domestic deposits. As of Dec. 31, 2010, the six biggest banks accounted for 36 percent of deposits. Such concentration raises the concern that poor decisions at such outsized institutions can lead to systemic risk. But this risk is greatly magnified by the new way in which the major banks, those deemed too big to fail, are doing business today. The largest and most profitable bank holding companies have moved away from traditional lending and come to rely on speculative trading in all types of securities, derivatives, credit default swaps, mortgage-backed securities and other, even more complex and exotic financial instruments -- many of them associated with high leverage. Engine of Income Such trading now is the engine of income. In 2010, the six largest bank holding companies generated $56.1 billion in trading revenue , or 74 percent of their $75.7 billion in pretax income. Trading revenue at these institutions distinguishes them from traditional commercial banks, which aren’t typically involved in such speculative endeavors. The Big Six institutions earned more than 93 percent of the trading revenue generated by all American banks during the past two years. To say these large institutions are the same species as traditional commercial banks is akin to describing dinosaurs as reptiles -- true but profoundly misleading. To concentration and speculation one can add another dangerous element: outsized, bonus-based executive pay. This supersized compensation, like the trading itself, is something new under the sun for bankers -- and poses serious problems for the U.S. labor market and our most talented citizens. Then Versus Now Consider that in 1929 compensation for employees in the financial-services industry was just 1.5 times that of the average nonfarm U.S. worker. By 2009 employees in the securities and investments sector, which includes investment banks, securities brokerages and commodities dealers, earned 3.4 times as much as an average U.S. worker. The average 2009 investment banking compensation at four of the top banks was at least six times that of an average American worker -- while employees in the traditional commercial bank sector earned just 1.2 times the average nonfarm employee. The chief executive officers at the top six bank holding companies were paid an average of $26 million in 2007, or 516 times the U.S. median household income. Indeed, those bank CEOs are paid 2.3 times the average total CEO compensation of the top Fortune 50 nonbank companies. This raises important questions: Should the CEOs of big financial services firms earn more than those in the general economy they are supposed to serve? Shouldn’t managers of companies that put capital to good use, and thus provide greater value for the overall economy by producing goods and services, be paid more than the bankers assisting them? At Taxpayer Expense All Americans have reason to be concerned about this disparity. The major Wall Street banks operate under the taxpayer-backed umbrella of the Federal Deposit Insurance Corp. and, as we saw in 2008, the Treasury Department and the Federal Reserve. To pay for the cost of such protection, legislators and regulators have forced thousands of Main Street banks like the one I run to absorb a larger, more expensive set of regulatory costs, including higher capital and liquidity requirements. This threatens to deny small-business owners, entrepreneurs and innovators the credit they need and on which the economy relies. Such, I fear, are the bitter fruits of a financial services industry unmoored from its traditional role in the commercial economy and a regulatory regime that protects outsized compensation tied to trading. Regulators have failed to distinguish between trading activity and traditional banking, or to recognize that the activity of an institution, not its form, should be the proper focus of oversight. New Rules Needed Main Street banks are heavily regulated -- and have been for generations -- to ensure their safety, soundness and transparency. A new generation of regulation must now be applied to what has become a virtual casino. All the players must be included -- Wall Street banks, investment banks and hedge funds. Complex derivatives and credit default swaps must be brought out of the shadows and into public clearinghouses, so that markets can know their magnitude and extent. Those financial institutions that engage in trading should live and die by the pursuit of their fortunes, rather than impose a burden on the whole economy. It’s time to disentangle the trading of big financial institutions from their more traditional commercial banking operations and put an end to this unsafe business model. (Robert G. Wilmers is chairman and chief executive officer of M&T Bank Corp. (MTB) The opinions expressed are his own.) For more Bloomberg View op-ed. To contact the author of this op-ed: Robert G. Wilmers at mzabel@mtb.com. To contact the editor responsible for this op-ed: James Greiff at jgreiff@bloomberg.net . |
2024-10-07 | Bloomberg | Armed Services Counsel to Covington: Business of Law | The U.S. House Armed Services Committee’s former general counsel, Roger Zakheim, is moving in November to Covington & Burling LLP, where he’ll join the global public policy and government affairs and defense, homeland and national security practices. “He is widely respected across the defense industry and both branches of government for his in-depth knowledge of the budget, public policy and legal issues facing the sector,” Timothy Hester, chairman of the firm’s management committee, said in a statement. In his job at the House Armed Services Committee, Zakheim managed the passage of legislation authorizing the Defense Department’s $600 billion budget. He also oversaw committee investigations and oversight hearings, the firm said. Covington has more than 800 lawyers at offices in Beijing, Brussels, London , New York, San Diego , San Francisco , Seoul , Shanghai , California ’s Silicon Valley and Washington. DLA Piper Chooses Jones Day Lawyer to Head China IP Practice DLA Piper LLP added Horace Lam and four associates to its intellectual property and technology group in Beijing. Lam, who will be a partner and the head of the China intellectual property group, was previously at Jones Day , also in Beijing. Lam practices both contentious and non-contentious IP work and has represented multinational companies on IP issues in China. His practice also includes licensing, trademarks, copyrights and patents, the firm said. “Horace is recognized as a commercially minded, well-established lawyer in the China IP marketplace, and his appointment will bolster our Asia IP offering enabling us to further develop and expand our IP capabilities for our clients in Asia, Europe and the U.S.,” Richard Wageman, DLA Piper’s Asia group head for intellectual property, said in a statement. DLA Piper has about 1,500 lawyers in more than 20 offices worldwide. Edwards Wildman Adds IP Partner in London From Bird & Bird Sarah Pearce joined Edwards Wildman Palmer LLP’s London office as a partner in the intellectual property practice. She was previously in the international commercial group of Bird & Bird LLP’s Paris office. Her practice focuses on information technology , communications and outsourcing projects, and she regularly advises clients on complex information technology transactions and procurement, the firm said. Pearce advises on general commercial matters and has experience developing contractual structures. She has also represented clients on e-commerce projects and has significant experience in commercial and regulatory media, outsourcing, data protection and other matters, the firm said. Edwards Wildman has 600 lawyers in the U.S., Europe and Asia. Hogan Lovells Adds Environmental Litigation Team Hogan Lovells LLP announced that Justin Savage, a former litigator at the U.S. Justice Department, will join the firm’s Washington office as a partner. Savage spent almost a decade working in the agency’s environment and natural resources division, where he was senior counsel. “Justin’s arrival greatly strengthens our capability to secure and sustain litigation work for clients,” Warren Gorrell, the firm’s co-chief executive officer, said in a statement. “Given his 15 years of successful litigation and environmental experience, Justin is a highly valuable asset.” Savage’s practice will focus on complex civil litigation and environmental matters including enforcement actions, citizen suits and regulatory challenges. Hogan Lovells has 2,500 lawyers at more than 40 offices in the U.S., Europe, Latin America , the Middle East and Asia. Sheppard Mullin Adds Accessibility Litigator in Orange County Gregory F. Hurley joined the Orange County, California, office of Sheppard, Mullin, Richter & Hampton LLP as a partner in the business trial practice group. Hurley was previously at Greenberg Traurig LLP, where he helped open that firm’s Orange County outpost and co-led the Americans with Disabilities Act, accessibility, building and life-safety codes practice and managed the office’s litigation group for the past 10 years, the firm said. “Greg is one of the top attorneys in the country specializing in accessibility law and we are excited to welcome him to the firm,” Guy N. Halgren, chairman of Sheppard Mullin, said in a statement. “His extensive experience in ADA and Fair Housing Act matters bolsters our capabilities and allows us to better service client needs,” Hurley’s trial experience includes representing California in the largest class action certified against the state, involving more than 10 million claimants and 4,000 miles (6,400 kilometers) of California Department of Transportation pedestrian routes and 90 park-and-ride facilities, the firm said. He also defended a national class action against 80 golf courses owned and operated by Marriott. Sheppard Mullin has 630 attorneys in 15 offices located in the U.S., Europe and Asia. Proskauer Hires REIT Lawyer Michael Choate as Partner Proskauer Rose LLP announced that Michael J. Choate joined the firm’s real estate capital markets group as a partner in Chicago. Choate and another lawyer joining Proskauer were previously at Shefsky & Froelich. Choate advises publicly traded and non-listed real estate investment trusts in equity and debt offerings, mergers and acquisitions, and internalization transactions. He counsels publicly traded entities on matters of corporate governance, securities law , compliance, and proxy and tender-offer situations. Proskauer has lawyers in the Americas, Europe and Asia. Belkin Burden Brings in Lissner as Real Estate Partner Belkin Burden Wenig & Goldman LLP, a real estate law firm, said Allison R. Lissner joined as a partner in the real estate transactional department in New York. Lissner was previously a partner in the Manhattan office of Cole, Schotz, Meisel, Forman & Leonard PA. She will focus primarily on commercial leasing, acquisitions, sales and financing. Her practice also includes handling the acquisition, development and disposition of vacant land, office buildings, apartment buildings, shopping centers and other properties, the firm said. She counsels clients on due diligence, financing and compliance. Belkin Burden has about 50 lawyers in New York. General Counsel Drinker Biddle Partner Appointed General Counsel at Environ Environ, an environmental, health, safety and sustainability consulting firm, appointed Samuel Mason, a former Drinker Biddle & Reath LLP partner, as its first general counsel. Mason will handle Environ’s legal needs and counsel its board and global management committee. He will be based in the firm’s Philadelphia office. While at Drinker Biddle, Mason was Environ’s primary external corporate counsel for more than 10 years. Firm News Littler Mendelson Names Millman as New York Office Head Littler Mendelson PC named Bruce Millman as office managing shareholder in New York, beginning Jan. 1. Millman counsels private- and public-sector employers on business and personnel strategies. He succeeds Craig Benson, who will return full-time to his employment litigation practice. “Craig has done an excellent job in leading one of the firm’s largest offices, and we thank him for his service,” Tom Bender and Jeremy Roth, co-managing directors of Littler, said in a statement. “We are excited to have Bruce assume the OMS role. His leadership qualities, combined with his more than 35 years of legal experience, will undeniably benefit the office, the firm and our clients.” Millman focuses on business restructuring, wage-and-hour and New York employment law, as well as labor-management relations, discrimination and harassment, employment policies, performance management, and termination and litigation strategies. Littler Mendelson has more than 980 attorneys at 57 offices in the Americas. News Private Detectives’ Clients Face U.K. Data Protection Probe Law firms and insurance companies may be among former clients of private detectives who used illegal methods to collect information that face a probe by the U.K.’s data-protection watchdog. The Information Commissioner’s Office will examine 19 clients of four private investigators who were jailed last year for using illegal data-gathering methods, such as phone hacking, according to Keith Vaz, the office of Parliament’s Home Affairs Committee. Vaz said Christopher Graham, the information commissioner, will give the committee more details on Oct. 8. “There are 19 clients that will now be investigated with another 11 awaiting further information,” Vaz said in an e-mailed statement. “We will seek assurances that the onward investigation will be conducted in the most efficient, comprehensive and speedy manner.” The U.K.’s Serious Organised Crime Agency gave the committee a list of clients, asking it not to publish the names for fear of prejudicing future investigations. The list included 22 law firms, as well as 10 insurance companies, an oil company and eight companies in financial services. Out of 98 names on the list, eight were investigated in the crime agency’s probe of hacking into mobile-phone accounts and blagging, or the use of deception to obtain private details, Vaz said. There’s no case against 24 and another 24 are based outside the U.K., he said. To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-12-18 | Bloomberg | CIC Insurance Gains for Third Day From Record Low: Nairobi Mover | CIC Insurance Group Ltd. (CIC) , Kenya’s second-biggest insurer by premiums, rose for a third day, the longest set of gains in seven weeks, as the stock recovered from a record low. The shares advanced 1.5 percent to close at 3.35 shillings in Nairobi, the capital. The stock traded at 3.10 shillings on Dec. 5, its lowest level since July 18 when it was listed on the Nairobi Securities Exchange at a price of 3.5 shillings. “There was a decline and now the stock is going through a correction to get back some of the value it lost,” Eric Munywoki, a research analyst at Nairobi-based Old Mutual Securities Ltd., said by phone today. “Looking at the price to earnings ratio, the stock is overpriced compared to its peers, therefore the gains will be temporary.” Jubilee Holdings Ltd. (JBIC) , Kenya’s biggest insurer, has a price to earnings ratio of 5.67, according to data compiled by Bloomberg. Pan Africa Insurance Holdings Ltd. (PAIL) has a ratio of 8.71, while CFC Insurance Holdings Ltd. (CFCI) ’s is 3.67, according to data compiled by Bloomberg. CIC has a ratio of 12.8, based on earnings in the 12 months to December 2011, Munywoki said. The company’s first-half profit fell 12 percent to 415.1 million shillings ($4.82 million) after costs and claims increased, it said in August. To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net. To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net |
2024-07-14 | Bloomberg | Deutsche Bank Sued by Dexia Over $1 Billion in Mortgage-Backed Securities | Dexia SA (DEXB) , the lender to local governments rescued by France and Belgium in 2008, sued Deutsche Bank AG claiming fraud in connection with more than $1 billion in residential mortgage-backed securities. Germany ’s biggest bank played a “ubiquitous role” in the mortgage origination and securitization process while betting against the U.S. housing market as far back as 2005, according to the complaint. By the end of 2007, Deutsche Bank had amassed a $10 billion short position that paid off when the loans backing the securities failed, Brussels-based Dexia said. “Deutsche Bank originated, purchased, financed and securitized exceptionally high-risk loans into these RMBS, all while internally disparaging the poor quality of these loans and the RMBS they backed as ‘pigs’ and ‘crap,’” Dexia said in the complaint. Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated. Renee Calabro , a spokeswoman for Frankfurt-based Deutsche Bank, said today by e-mail that the company would fight the lawsuit, which she said was “without merit.” Deutsche Bank knew the quality, origination practices and underwriting guidelines because of its “close relationship” with the lenders that originated the loans, Dexia said in the complaint. ‘Among the Worst’ “As Deutsche Bank knew - but investors like Dexia would only later discover - these originators were among the worst of the subprime mortgage lenders, willing to ‘just give anyone a loan who wants one,’ secure in the knowledge that their Wall Street partners like Deutsche Bank would then foist the loans on unsuspecting investors, like Dexia,” Gerald H. Silk, an attorney with Bernstein Litowitz Berger & Grossmann LLP in New York , said in the complaint. A Deutsche Bank trader entered into trades “enabling Deutsche Bank to effectively ‘short’ the subprime mortgage market by betting against subprime RMBS such as those it created and sold to investors like Dexia,” according to the complaint. Dexia said it invested more than $1 billion in Deutsche Bank residential mortgage-backed securities in 32 offerings from 2005 to 2007. Belgium and France led a 6.4 billion-euro ($9.2 billion) bailout of Dexia in September 2008 as the financial crisis forced governments to prop up institutions across Europe. Countrywide Suit Dexia was among a dozen institutional investors that sued Bank of America Inc.’s Countrywide unit in New York state Supreme Court in January, claiming they were misled about the quality of the loans in mortgage-backed securities. Deutsche Bank and its MortgageIT unit were sued by the U.S. in federal court in New York in May and accused of lying to qualify thousands of risky mortgages for a government insurance program. Deutsche Bank earlier this week asked a judge to dismiss the U.S. complaint, saying that the alleged conduct occurred before it acquired MortgageIT. Attorneys general from all 50 states and federal agencies are investigating the way banks handle mortgage loans and conduct foreclosures. Deutsche Bank is among lenders being probed by New York Attorney General Eric Schneiderman’s office over mortgage securitization, a person familiar with the matter said on May 24. The case is Dexia SA/NV v. Deutsche Bank AG (DBK) , 651918/2011, New York State Supreme Court, New York County ( Manhattan ). To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-01-25 | Bloomberg | SEC Asks Federal Judge to Order SIPC Payout Plan for Stanford Investors | The U.S. Securities and Exchange Commission urged a judge to order the federal Securities Investor Protection Corp. to create a claims process for R. Allen Stanford’s alleged investment fraud victims. SEC lawyers asked U.S. District Judge Robert Wilkins during a hearing today in Washington to require SIPC, a nonprofit corporation funded by the brokerage industry, to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims related to the alleged Stanford fraud. “Ultimately, what we’re seeking here is to provide a forum where claimants can seek judicial review of their claims,” Matthew Martens, the SEC’s chief litigator, told the judge during a three-hour hearing. At issue is whether more than 7,000 brokerage customers who invested in the alleged $7 billion Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC. SIPC, a congressionally chartered group that insures customers against losses caused by broker theft, says the Stanford investments don’t fit into the confines of the federal law that governs who’s eligible for the payouts. Investors and their advocates in Congress say SIPC is deliberately taking a narrow view of the law to protect brokers from higher assessments. ‘Proof of Customers’ “There has to be proof of customers to start a liquidation,” Eugene Assaf, a lawyer for SIPC, argued today. Assaf, of Kirkland & Ellis LLP in Washington, said the SEC was trying to open a liquidation proceeding in Texas without any judicial review of whether the Stanford investors are “customers” under the law. He asked Wilkins to require the SEC to refile its lawsuit, allow the parties to seek discovery and then decide whether the Stanford investors are covered by the Securities Investor Protection Act. “This is our only opportunity to convince the court whether a liquidation should be ordered or not,” said Assaf, adding that a liquidation proceeding would cause significant expense for SIPC. Martens told Wilkins that a SIPC-appointed trustee and the U.S. bankruptcy court in Texas would be responsible for reviewing whether individual claimants qualified for payouts. ‘Under Advisement’ Wilkins said he would take the matter “under advisement” and issue a ruling “as soon as I can.” Stanford allegedly used his brokerage to entice investors to buy high-interest certificates of deposit through his private Stanford International Bank Ltd. in Antigua. Instead, according to prosecutors, much of the money was used to support Stanford’s businesses and lifestyle. Opening statements in Stanford’s criminal trial began today in Houston. Stanford, 61, was the ringleader of a $7 billion investment fraud, the U.S. said in a 14-count indictment accusing him of mail fraud and wire fraud , crimes that carry maximum sentences of 20 years in prison. He’s also charged with conspiracy to commit mail fraud and wire fraud and to obstruct an SEC probe. “I plead not guilty to every count,” Stanford, wearing a light gray plaid suit and a white dress shirt and no necktie, told the jury today. ‘Lie After Lie’ Stanford stole from investors “so that he could live the lifestyle of a billionaire,” Assistant U.S. Attorney Gregg Costa said in his opening statement. “He told them lie after lie after lie.” In the defense’s opening remarks, Robert Scardino, one of Stanford’s court-appointed lawyers, told the jury: “Mr. Stanford’s financial empire was real and did make a lot of money and did pay every penny of what was owed to depositors for 22 years.” In June, the SEC ordered SIPC to start a process that could grant as much as $500,000 for each Stanford client -- the same maximum amount it offers in any case. After SIPC balked, the SEC for the first time sued the group in federal court in Washington. SIPC is responsible for providing coverage for individual investors who lose money or securities held by insolvent or failing member brokerage firms. It has agreed to cover losses sustained by victims of Bernard Madoff’s multibillion-dollar Ponzi scheme and investors who may have lost money in the October collapse of commodities broker MF Global Holdings Ltd. (MFGLQ) SIPC may be best known for its logo, which dues-paying brokerage firms put on their marketing materials to show customers they’re protected. Unlike the protection that the Federal Deposit Insurance Corp. gives to bank accounts, SIPC doesn’t run a general insurance fund or cover investment losses. Under the Securities Investor Protection Act, it’s supposed to aid investors when their securities or cash are stolen or go missing. Offshore Banks SIPC doesn’t guarantee an investment’s value or protect against fraud, the agency said in court papers. It also doesn’t cover investments with offshore banks or non-member firms. Stephen Harbeck , SIPC’s president, has said that SIPC shouldn’t get involved because investors received actual CDs after the brokerage passed their money to a bank. What happened after that isn’t under SIPC’s purview because the Stanford account holders have possession of their securities, he told a court-appointed receiver in 2009. The SEC eventually decided that there was no true separation between Stanford’s bank and the brokerage firm. Customers who made investments with the bank were effectively depositing money with the brokerage and should get SIPC coverage, the SEC said. Martens told Wilkins today that the SEC has full authority over SIPC, which is why the judge should enforce the SEC’s order to begin the liquidation proceeding. U.S. Senator David Vitter , a Louisiana Republican whose state is home to many Stanford investors, asked SEC Chairman Mary Schapiro in a Capitol hearing last month to sue SIPC. The case is Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington). To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-10-10 | Bloomberg | ‘Frumpy’ Bookkeeper Accused of Bilking Democrats for Millions | To neighborhood kids, the cream- colored stucco house near Hughes Middle School was known as the site of an annual Halloween party. To neighbors in Long Beach, California , Kinde Durkee’s two-bedroom ranch was notable for its chipped paint and overgrown shrubbery. In Democratic circles, the 58-year-old bookkeeper with at least 398 bank accounts for political campaigns and nonprofit groups had a reputation for being prompt and responsive. Neighbors and associates say there’s nothing in Durkee’s background, demeanor or lifestyle to suggest that she “masterminded a multimillion dollar fraudulent scheme,” as U.S. Senator Dianne Feinstein charged in a Sept. 23 lawsuit. While Feinstein reported $5 million in cash to the Federal Election Commission as of June 30, the bank found only $662,100 on Sept. 21, according to court documents. “She’s a warm, accessible person,” said Eric Bauman, chairman of the Los Angeles County Democratic Party, who said he’s known Durkee since the early 1990s. “At best you would describe her attire as frumpy. Drove a beat-up old car. Lived in a plain home in Long Beach. You don’t look at this person and say, ‘This person doesn’t look right.’” Durkee, who hasn’t replied to Feinstein or entered a plea in a related criminal case, didn’t respond to requests for comment in telephone calls and notes left at her home and office. Neither did her husband and business partner, John Forgy, or client-accounts manager, Matthew Lemcke. Her lawyer, Daniel Nixon, didn’t respond to a message left at his office. Embezzlement’s Scope The scope of the alleged embezzlements from Durkee- controlled funds for federal politicians is the largest at least since the Federal Election Campaign Act became law in 1972, said Kent Cooper, a former Federal Election Commission official. “There’s been no one else who even comes close,” Cooper, who now runs the money-in-politics database Capitol Hill Access, said by telephone from Washington. Feinstein’s campaign also sued First California Bank, the operating unit of Westlake Village , California-based First California Financial Group Inc. (FCAL) , where Durkee had 398 accounts. Chief Executive Officer Chong Guk Kum didn’t respond to voice mail messages requesting comment. Gary Horgan, a company lawyer, said in an e-mail that the bank would not comment. Things Unravel Things started to unravel for Durkee in 2010, when the California Fair Political Practices Commission found irregularities while auditing the political finances of Jerome Horton, the chairman of the Board of Equalization, the state’s tax administrator. Horton said Durkee “acknowledged her mistakes” during the audit and agreed to pay the commission’s $13,000 fine and his legal bills. “I had no knowledge of the magnitude of her fraud or the extent to which others were involved until I read it in the paper,” Horton wrote in an e-mail message to Bloomberg News. After auditing another Durkee-managed account, the commission in November 2010 called the Federal Bureau of Investigation’s Public Corruption Squad in Sacramento , according to court documents. In an affidavit, FBI Special Agent Reginald Coleman said it appeared that Durkee moved money from campaign accounts to her company’s bank accounts and then transferred other candidates’ funds to cover shortfalls. She covered up her actions by filing false disclosure forms, according to the affidavit. Missing Money The account of a Democratic state assemblyman from Anaheim, Jose Solorio, is missing $677,181, the FBI investigation revealed. Other Durkee clients, including Democratic U.S. Representatives Susan Davis of San Diego and Loretta Sanchez of Santa Ana and the Los Angeles County Democratic Party, reported losses of $200,000 or more. At least some of the money went to pay Durkee’s mortgage and credit-card bills, which included charges for gas, ice cream, cosmetics and a veterinarian, the FBI said. Durkee also used campaign funds to make a $4,950 payment to Belmont Village, an assisted-living facility where her mother lives, according to Coleman’s affidavit. In addition, Durkee donated money to three of the funds she is accused of stealing from: $500 to Feinstein in 2000, a total of $4,900 to Sanchez in 2010 and 2011 and a total of $825 to the Los Angeles County Democratic Party in 2006 and 2007, according to Federal Election Commission records. Unique Case At the state level, a typical embezzlement case involves lawmakers inducing employees to do campaign work on government time, said Edwin Bender , executive director of the National Institute on Money in State Politics, a Helena, Montana-based watchdog group. “This case is unique, in my experience, in that one person handled the accounts of many, many candidates and apparently managed over a long period of time to transfer money around in such a way as to benefit personally,” Bender said in an e-mail message. The FBI arrested Durkee on Sept. 2. Since then, dozens of other candidates and organizations across Southern California have checked their own books for losses. Davis said in a Sept. 10 letter to supporters that about $250,000 in campaign funds had been stolen. The San Diego Democrat described Durkee as “the Bernie Madoff of campaign finance treasurers.” ‘Wiped Out’ Sanchez’s campaign, which reported almost $379,000 in cash on hand June 30, said in a statement to supporters that it had been “nearly wiped out” by Durkee. Durkee, who is not a certified public accountant, began her political career in the 1970s as a protégée of Jules Glazer, a longtime California Democratic campaign treasurer, according to Bill Carrick , Feinstein’s political strategist. Glazer was national treasurer for the presidential campaign of Jimmy Carter , and statewide treasurer for California Governors Pat Brown and his son, Jerry Brown , according to the Los Angeles Times. When Glazer retired in 1994, Durkee took on most of his business, Carrick said. Glazer died in 1999 at the age of 77. Durkee established a reputation as responsive and efficient, if occasionally sloppy, Bauman and Carrick said. Bauman said he recommended Durkee to groups such as the Young Latino Democrats of the San Fernando Valley when it formed in 2009. Jose Sandoval, the 32-year-old founder, said in an interview that Durkee waived her fees when she met with members in early 2010 to explain how to comply with campaign-finance regulations. Seemed Honest “She seemed honest and was highly recommended,” said Sandoval, who added that no money was missing from his group’s account. When the Democratic Women of the San Fernando Valley in 2007 established its Susan B. Anthony award to honor female advocates, Durkee was the first recipient. Durkee and her clients were fined a total of $135,862 by the Fair Political Practices Commission in five cases between December 2009 and April 2011, state records show. Durkee also received five warning letters during that period. The size and number of the enforcement actions attracted notice at the commission, Chairwoman Ann Ravel said in an interview. “There was a pattern that should have set off alarm bells,” she said. “We believe it was sloppy bookkeeping and failure to do things on time. Some of those things were pretty major, though.” Bauman, whose Los Angeles County organization was included in two cases that drew fines, said they involved technical violations such as missing deadlines rather than any evidence of misappropriations. Low Profile Durkee kept a low profile in the Long Beach neighborhood where she and her husband bought a 1,614-square-foot, two- bedroom house in 1991, according to neighbors and Los Angeles County property records. The couple left home early for the 35- mile commute to their office in Burbank, easily an hour in Southern California traffic, and returned late, rarely interacting with others on their block, neighbors said. On a Sept. 29 visit, a mid-1990s Audi A6 and a late-1990s Chevrolet Blazer sat in the driveway, both caked with dirt. Durkee and Forgy stood out only for being generous to neighborhood children on Halloween and, in a neighborhood that leans conservative, for posting a campaign sign supporting Democrats John Kerry and John Edwards in 2004, said Paul Trudeau, who’s caring for his mother in the house next door. ‘Hello and Goodbye’ “I don’t know much more than hello and goodbye,” Trudeau said. “They worked quite late.” The couple struggled to pay bills, court records show. In 2000, the Los Angeles County Superior Court entered an $8,350 judgment against Forgy for First Select Corp., the collections arm of credit-card issuer Providian Financial Corp., which was acquired by Washington Mutual Inc. (WAMUQ) in 2005. Chase Manhattan Bank, since absorbed into JPMorgan Chase & Co. (JPM) , sued Durkee in 2002 and 2003 to collect debts, court records show. Both cases were dismissed. Their home, for which they owed $4,169 in taxes in 2009, was the subject of three tax liens, two in 2008 and one earlier this year, according to Los Angeles County Registrar of Deeds records. The 2008 liens, which totaled $18,549, were lifted, the records show. There is no record of any settlement of the 2011 lien, which was in the amount of $10,002, according to the records. Several lawyers for Durkee-managed campaign accounts said they’re mystified about where any misappropriated money might have gone, noting that Durkee and Forgy gave no signs of flaunting wealth. “I find the whole thing remarkable,” said Stephen Kaufman , the lawyer for the Los Angeles County Democratic Party and several other Durkee clients, in an interview. “We have no idea where all the money went.” To contact the reporter on this story: James Nash in Sacramento at jnash24@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-12-05 | Bloomberg | Czech Stocks Advance to Eight-Month High, Led by Komercni Banka | Czech shares rose to the highest in more than eight months, led by Komercni Banka AS (KOMB) and Vienna Insurance Group AG, as an easing of investment rules in China boosted investor demand for financial stocks worldwide. Komercni, a unit of Societe Generale SA, climbed 2 percent to 3,941 koruna by the end of trading in Prague , while VIG of Austria advanced 1.2 percent. The PX (PX) index, in which the two companies have a combined weight of 34 percent, advanced 0.3 percent to 997.73, the highest close since March 19. Lenders were among the biggest stock gainers in Europe today after China curbed restrictions on investments in banks and HSBC Holdings Plc agreed to sell its stake in China’s Ping An Insurance (Group) Co. to Thai billionaire Dhanin Chearavanont for $9.4 billion to boost profit and capital. “Favorable news from China and a successful asset sale by HSBC are the main factors supporting gains for financial stocks across Europe , including Czech banks,” Marek Hatlapatka, an analyst at Cyrrus brokerage in Brno, Czech Republic, said by e- mail. The koruna strengthened 0.1 percent to 25.225 per euro. To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net |
2024-08-03 | Bloomberg | Allianz, Axa Profits Beat Estimates on Life, Health Units | Allianz SE (ALV) and Axa SA, Europe ’s biggest insurers, reported profit that beat analysts’ estimates, helped by higher earnings at their life and health businesses. Net income at Munich-based Allianz rose 23 percent to 1.23 billion euros ($1.5 billion) in the second quarter, beating the 1.15 billion-euro average estimate of 13 analysts surveyed by Bloomberg. First-half net income at Paris-based Axa fell a smaller-than-estimated 36 percent after year-earlier gains from asset sales weren’t repeated. Allianz reiterated its full-year operating profit target of 7.7 billion euros to 8.7 billion euros as the insurance industry recovers from record claims related to earthquakes and floods in Japan and Thailand last year. Insurers are struggling to cover payments to life policyholders as Europe’s sovereign debt crisis depresses interest rates. “These results show good resistance,” said Jacques-Pascal Porta, who helps manage 500 million euros at Ofi Gestion Privee in Paris, including Allianz and Axa (CS) shares. “These big insurers dealt with sovereign crisis risks better than banks.” Allianz rose 3.7 percent to 81.49 euros by 11:46 a.m. in Frankfurt trading, bringing this year’s gain to 10 percent. Axa advanced 3.6 percent to 10.05 euros in Paris, trimming its 2012 decline to 0.3 percent. Property, Casualty Europe’s biggest insurers and the reinsurers who help them shoulder risks for clients used last year’s catastrophes to push through higher prices for coverage. Natural disasters caused an estimated $5.48 billion of insured losses for insurers and re- insurers in the second quarter, down from more than $27 billion a year earlier, according to estimates from Aon Benfield, the world’s biggest reinsurance broker. “Our operative business is stable and remains on course,” Allianz Chief Executive Officer Michael Diekmann, 57, said in the statement. “Despite the challenging environment, we confirm our outlook.” Allianz’s property and casualty unit, typically the most important in terms of earnings, raised prices by 1.4 percent, the insurer said. Profit at the business fell 15 percent to 807 million euros in the quarter after the company boosted reserves by 120 million euros following last year’s Thai floods. The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, worsened to 97.4 percent from 95 percent a year earlier. That compares with the average 96.6 percent estimate of 11 analysts surveyed by Bloomberg. A ratio above 100 percent means an insurer’s claims and costs exceed premium income, giving it a loss from underwriting. Life, Health Allianz’s life- and health-insurance division saw net income more than double to 506 million euros, helped by reduced impairments and gains from selling assets. Operating profit at the unit rose 21 percent to 821 million euros. Net investment income advanced to 5.66 billion euros in the quarter from 4.52 billion euros a year ago, helped by currency gains, the company said in a presentation on its website. Allianz wrote down its Greek debt holdings by 326 million euros in the year-earlier period. The firm’s asset-management unit, which includes Newport Beach , California-based Pacific Investment Management Co., posted an increase in profit of more than 19 percent to 345 million euros in the quarter. Assets under management rose almost 16 percent to 1.7 trillion euros while third-party funds the company oversees climbed to 1.4 trillion euros from 1.2 trillion euros. Axa Targets Axa’s asset management earnings rose 2 percent to 159 million euros in the first half. The business had 7.7 billion euros of net outflows, mostly in the first quarter, figures from Axa show. AllianceBernstein Holding LP, the New York-based fund- management unit, had 5.2 billion euros of outflows in the half. Axa, led by Chief Executive Officer Henri de Castries, 57, is expanding in Asia as it aims for 10 percent annual growth in operating earnings a share through 2015. The French insurer last year set a 2015 target to reach annual operating profit of 6 billion euros, compared with 3.88 billion euros in 2010. Axa is “perfectly in line” with its cost-cutting and productivity targets, de Castries said in an interview on Axa’s website. Property and casualty earnings climbed 6 percent to 1.04 billion in the first six months of the year. Average price increases of 3 percent boosted the unit’s revenue, the company said in a statement today. The combined ratio improved to 96.4 percent from 97.2 percent. Profit at Axa’s life-and-savings business, the insurer’s largest, increased 7 percent to 1.41 billion euros, beating analysts’ estimates. First-half annual premium equivalent, a common measure of sales for insurers, rose 11 percent to 1.25 billion euros at health-and-protection, which includes coverage for critical illnesses and long-term nursing care, Axa said. “Our strategy has been for several years now to develop in business lines that are not market sensitive -- property and casualty, health, protection,” Chief Financial Officer Gerald Harlin said on a call with journalists. To contact the reporters on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net ; Oliver Suess in Munich at osuess@bloomberg.net Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-08-12 | Bloomberg | Prudential Jumps to Record as Profit Beats Forecasts on Asia | Prudential Plc (PRU) surged to a record in London trading after the U.K.’s biggest insurer by market value reported first-half profit that beat analyst estimates, buoyed by rising sales in Asia and a jump in U.S. earnings. Operating profit climbed 22 percent to 1.42 billion pounds ($2.2 billion) in the first six months, the London-based insurer said in a statement today. That beat the 1.3 billion-pound estimate of 17 analysts provided by the company. The stock surged to the highest since at least 1988 as the firm raised its dividend and posted record profit for its fund management unit. “There is still plenty of potential in that share price,” Chief Executive Officer Tidjane Thiam said on a conference call with reporters from London. Today’s results “provide further evidence of our ability to deliver both earnings growth and cash. We look forward to the rest of the year with confidence.” The stock, which has more than doubled since Thiam became CEO in October 2009, advanced 4.1 percent to 1,232 pence in London. That’s bringing gains this year to 42 percent, compared with a 23 percent increase for the FTSE 350 Insurance Index. Record Sales Thiam, 51, said the insurer has achieved four of the six 2013 objectives that were set out in 2010, and remains on track to achieve the last two, which include doubling Asia’s 2009 operating profit by year end. Asia reported a 18 percent jump in the first half, with seven of its units in the region posting record sales in the second quarter. Asia remains a “significant driver” of earnings for the company, according to Thiam, given the rebalancing of global economic growth toward the region and low penetration rate of insurance policies in countries such as the Philippines and Vietnam. The CEO said the insurer is close to completing the reorganization of is Asia business into one single legal entity, potentially making it easier to sell in the future. “Rebalancing is under way of the world economy, it’s rapid and substantial,” Thiam told reporters. “One of our successes as a group has been an early recognition of this.” New business profit, or NBP, in Asia jumped 20 percent to 659 million pounds from a year ago. Sales of life insurance products rose 42 percent in China , 38 percent in the Philippines and Korea and 28 percent in Vietnam, the company said. ‘Strong Results’ It was “a characteristically strong set of results from Prudential, with continued strong growth in operating profits from the major growth engines” of Asia, the U.S. and asset management, Christopher Esson, a London-based analyst at Credit Suisse Group AG with an outperform rating on the stock, wrote in a note. “With NBP remaining on a strong trajectory in Asia, forward momentum is likely to remain robust.” Operating profit from Jackson National Life, Prudential’s U.S. business, jumped 32 percent to 582 million pounds in the first half, helped by sales of Elite Access, a variable annuity product. Thiam said the company will benefit from the retirement of America’s 77 million baby boomers, adding that he remains “open minded” to the future of the U.S. division including a potential sale. In the U.K., Prudential’s fund management arm M&G increased operating profit 17 percent to a record 204 million pounds as the business reported net inflows of 4.8 billion pounds, boosted by increased sales in continental Europe. Prudential raised its interim dividend 16 percent to 9.73 pence a share. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-09-21 | Bloomberg | Mumbai Road Builders Ready First Dim Sum Bonds to Cut Costs: India Credit | Indian companies may turn to Hong Kong’s yuan bond market to raise funds at 40 percent the cost of top-rated companies at home after the South Asian nation eased borrowing rules. The government agreed for the first time last week to allow Indian companies raise as much as $1 billion of debt in the Chinese currency, bolstering the yuan’s challenge to the dollar as a funding currency. Mumbai-based Infrastructure Leasing & Financial Services Ltd., an Indian lender to road projects, plans to raise $100 million in yuan bonds and developer Unity Infraprojects Ltd. (UIP) said it may consider a sale. Yields on so-called dim sum bonds fell 3 basis points in September to 2.8 percent, while three-year AAA-rated corporate notes in India climbed 7 basis points this month to an average yield of 9.46 percent, after the Reserve Bank of India raised interest rates 12 times since March 2010 to slow inflation. U.S. dollar bonds from India pay an average 6.25 percent, an index compiled by JPMorgan Chase & Co. shows. “Most of the India issuers, including the banks, are high yield, but they still can save some money in the yuan market,” Steve Wang , the head of fixed-income research in Hong Kong at BOCI Securities, a unit of Bank of China Ltd., said in a telephone interview on Sept. 16. Top-rated Indian companies would be able to sell yuan debt for around 3 to 4 percent, he said. Dim Sum Bonds International bond sales by Indian companies stalled this month, while sales in rupees dropped 79 percent to 52 billion rupees ($1.1 billion), according to data compiled by Bloomberg. In Hong Kong, companies have raised 8.9 billion yuan ($1.4 billion) in the dim sum bond market this month, with sales tripling this year to a record 118.9 billion yuan. China, which was the biggest contributor to world growth last year, according to the International Monetary Fund , is promoting the yuan’s use in global trade and finance. Yuan deposits in Hong Kong probably totaled a record 572.2 billion yuan at the end of July, almost double the level at the end of 2010, according to Hong Kong Monetary Authority data. “The IL&FS group is to raise an equivalent of $100 million in yuan-denominated bonds,” Milind Patel, the Mumbai-based deputy managing director of IL&FS Financial Services Ltd., a unit of lender Infrastructure Leasing & Financial Services, said in a telephone interview yesterday. The company retained Deutsche Bank AG, Royal Bank of Scotland Group Plc and UBS AG to manage the issue. ‘Attractive Proposition’ Rural Electrification Corp., India’s state-controlled lender to power projects, has applied to China Export and Credit Insurance Corp., the state-owned export credit agency known as Sinosure , for a guarantee on a $350 million loan, Chairman Hari Das Khunteta said in an interview on Sept. 16. “Borrowing in yuan-denominated debt is an attractive proposition and we will consider it soon to offset rising interest costs in India,” Madhav Nadkarni, chief financial officer at Mumbai-based Unity Infraprojects, said in a telephone interview on Sept. 19 in Mumbai. “Allowing issuance of debt denominated in many currencies is becoming a necessity and not an option.” Power companies such as Lanco Infratech Ltd. (LANCI) and Adani Power Ltd. have also said they’re talking to Chinese banks for loans after Reliance Power Ltd. (RPWR) borrowed $1.1 billion from China Development Bank Corp. in December. Growth, Inflation “Yuan is a strong currency and China has reserves of more than $3 trillion,” Khunteta said. Rural Electrification will borrow in yuan “if the terms are good and taking into account interest rates,” Khunteta said. Annual trade between the world’s most populous countries will touch $60 billion in 2011, the Federation of Indian Export Organisations , a government-affiliated trade group, said in a statement on April 15. The Asian Development Bank cut its forecast for India’s economic expansion in the year ending March 31 to 7.9 percent last week from 8.2 percent estimated in April. Gross domestic product gained 7.7 percent last quarter from a year earlier, the smallest gain since 2009, a government report showed on Aug. 30. Benchmark inflation in India is the highest among the so- called BRIC nations, increasing to a 13-month high of 9.78 percent in August, according to government data. Consumer prices rose 7.2 percent in Brazil , 8.2 percent in Russia and 6.2 percent in China last month from a year earlier. In South Africa , they climbed 5.3 percent in July. Credit-Default Swaps The cost of insuring against default the debt of government-owned State Bank of India, seen as a proxy for the nation, climbed 43 basis points this month to 318 yesterday, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Yields on India’s benchmark 10-year bonds fell one basis point to 8.33 percent today in Mumbai, according to the central bank’s trading system. The extra yield investors demand to hold five-year company debt rather than similar-maturity government securities has risen 6 basis points this month to 95, according to data compiled by Bloomberg. Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, may provide dim sum bond services to Indian companies, Yang Kaisheng, president of the Beijing based bank, said in Mumbai on Sept. 15. Yuan Appreciation Indian companies can now see how the yuan is appreciating and might want to hold some renminbi funds, Yang said. The yuan is the only currency among the biggest emerging nations to strengthen against the dollar this quarter, and yuan-denominated notes in Hong Kong are the only domestic bonds among the so- called BRICs to provide positive returns, according to indexes compiled by HSBC and JPMorgan. “The moment China delinks the renminbi, the currency will appreciate,” Prabal Banerji, chief financial officer at Adani Power Ltd. (ADANI) in the western Indian city of Ahmedabad, said in an interview on Sept. 13. “It will be inadvisable and not appropriate for Indian corporates to borrow renminbi at this point of time. A rising yuan means all borrowers will be out of money.” The rupee declined 6.8 percent this quarter, the second- worst performer of the 10 Asian currencies tracked by Bloomberg. India’s currency climbed 0.3 percent to 47.9150 per dollar today in Mumbai, according to Bloomberg data. The yuan appreciated 1.4 percent this quarter to 6.3776 per dollar in Shanghai , according to the China Foreign Exchange Trade System. ‘New Animal’ Investors will be interested in Indian dim sum bonds to tap potential for growth in the South Asian nation without taking a currency risk , said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “Indian yields may be more attractive,” he said. Dim sum bonds returned 0.6 percent this quarter, compared with losses of 11 percent for local-currency bonds in Brazil, 10.1 percent for Russia and 6.3 percent for India, according to indexes compiled by HSBC and JPMorgan. “Yuan debt from India is a new animal,” said Hong Kong- based Atul Gharde, a credit analyst at SJS Markets Ltd. “This is more of a diversification strategy for Indian dim sum issuers and a new market opening up for Chinese investors.” To contact the Bloomberg News staff for this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net Henry Sanderson in Beijing at hsanderson@bloomberg.net To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net |
2024-11-15 | Bloomberg | Soros Joined Och-Ziff Betting on AIG Before Sandy Struck | Billionaire investor George Soros and Och-Ziff Capital Management Group LLC (OZM) , the hedge-fund firm with $31.8 billion under management, added stakes in American International Group Inc. (AIG) in the third quarter before superstorm Sandy devastated the Eastern U.S. The family office of Soros, 82, disclosed an investment of 15.2 million shares in the New York-based insurer as of Sept. 30, according to a filing yesterday. Och-Ziff tripled its stake to 33.2 million shares, it said in a filing. AIG has fallen 16 percent from a 20-month closing high of $37.21 on Oct. 18. The firm hasn’t announced losses from the storm that made landfall Oct. 29, killing at least 100 people in the U.S. Sandy caused insured losses of $20 billion to $25 billion, according to Risk Management Solutions Inc. “With Hurricane Sandy remaining an overhang for the group, primary insurers are now trading at levels well off recent highs,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., wrote in a research note. “This trading is amplified by the fundamental uncertainty around the reasonable range of industry losses.” AIG advanced 1.8 percent to $31.24 at 4:01 p.m. in New York, the most among 22 companies on the Standard & Poor’s 500 Insurance Index. (S5INSU) The shares have gained 35 percent this year. Flooding from the storm displaced the insurer from its Manhattan headquarters. Government Stake The U.S. cut its stake in AIG this year after a 2008 bailout that swelled to $182.3 billion. The Treasury Department sold $20.7 billion of shares in the most recent offering in September, trimming its holding to 16 percent from a majority. Chief Executive Officer Robert Benmosche is seeking to improve results to attract private investors. AIG may benefit as prices rise for commercial coverage and the firm makes progress in efforts to boost underwriting, Stirling said in the note. “AIG’s investors will, in due course, be rewarded handsomely for their foresight,” he wrote. Jonathan Gasthalter, a spokesman for Och-Ziff at Sard Verbinnen & Co., and Michael Vachon , a Soros spokesman, declined to comment. Soros and Och-Ziff also disclosed AIG options. Matt Gallagher, an AIG spokesman, declined to comment. Soros’s firm managed more than $20 billion in the 1990s when it was the world’s largest hedge-fund group. Soros and chief strategist Stanley Druckenmiller made about $1 billion from the 1992 drop in the British pound after the U.K. government abandoned a peg to a basket of European currencies. Vanguard Group Soros returned money to investors last year and focused the firm on managing assets for his family. Vanguard Group Inc., the largest mutual-fund manager, also added AIG shares, including in its oldest fund. The actively managed Wellington Fund (VWELX) invests about two-thirds of its $64.4 billion in net assets in stocks and the rest in bonds, according to Vanguard’s website. It has returned 3.8 percent annually over the past five years, beating 88 percent of similar funds, data compiled by Bloomberg show. Third Point LLC, the New York-based hedge fund run by Daniel Loeb , and Perry Capital, founded by Richard Perry , also reported AIG stakes in the quarter, according to filings compiled by Bloomberg. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-28 | Bloomberg | Loews Upgraded by Moody’s on Strength of Insurance, Energy Units | Loews Corp. (L) , the company run by New York’s Tisch family, was upgraded by Moody’s Investors Service on improving finances at its insurance and energy units. The rating was lifted to A2 from A3 on “the strengthening credit profile of its primary operating subsidiaries and the parent company’s stand-alone financial strength and conservative financial policies,” the ratings firm said today in a statement on the New York-based company. To contact the reporter on this story: Laura J. Keller in New York at Lkeller12@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-15 | Bloomberg | Osborne Warns on Greek Euro Exit, Suggests Deposit Cover | George Osborne , the U.K. Chancellor of the Exchequer, warned against the dangers of a disorderly Greek exit from the euro area and backed deposit insurance for the currency bloc’s banks. “The worst thing for the world would be a Greek exit without a plan to deal with the contagion, because that would be like letting Lehman Brothers go and not having a plan for the day after,” Osborne said in excerpts of a CBS Evening News interview scheduled for broadcast this evening. The 2008 collapse of Lehman Brothers Holdings Inc. deepened the global financial crisis. Osborne spoke two days before Greek voters go to the polls in an election that may decide whether the nation leaves the 17- nation euro area. A Group of 20 summit in Mexico next week will give European leaders a chance to discuss the crisis with heads of other major economies, including U.S. President Barack Obama. European leaders are considering ways to strengthen the monetary union and share risks as they seek to restore the health of the financial system. Among the proposals are a facility that can take direct stakes in banks, to be followed later by a single resolution authority for the 17-country monetary union and a single deposit-insurance fund. “We need to have some confidence that bank depositors in Spain and other countries have their deposits protected by the rest of the euro zone,” Osborne said, according to the advance excerpts of the interview. Merkel Opposes Osborne said if the euro zone has a single currency, it needs to have common debt, and he said these proposals were all about moving in the direction of a “political union.” “Whilst they dither and delay in getting to that point, the U.S. is suffering,” Osborne said. “The U.K. is suffering. The rest of the world is suffering. And, of course, the peoples of Spain and Greece and all these other countries are suffering, too.” German Chancellor Angela Merkel today rejected calls for a deposit-insurance fund and said she opposes “premature” proposals for pooling debt to stem the euro area’s financial crisis. “ Germany will not be persuaded of all those quick solutions such as euro bonds, stability bonds, a European deposit-insurance fund,” Merkel said in a speech to a small- business group in Berlin. To contact the reporter on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-04-11 | Bloomberg | Senate’s Hatch Urges Dodd-Frank Delay to Set Global Coordination | Dodd-Frank Act implementation should be delayed by U.S. regulators until concerns over global coordination of new rules can be addressed, Senator Orrin Hatch said in a letter to Treasury Secretary Timothy F. Geithner. Hatch of Utah, the top Republican on the Senate Finance Committee, asked Geithner to provide details of international coordination in advance of this week’s meetings of the Group of 20 finance ministers, the World Bank and the International Monetary Fund. “There are significant outstanding issues surrounding global coordination,” Hatch wrote in the letter to Geithner dated April 8. “These concerns demand delay of further implementation and rulemaking of Dodd-Frank Act provisions until and unless we receive assurances that international partners agree to adopt similar regulatory reforms.” U.S. regulators including the Federal Deposit Insurance Corp. and the Securities and Exchange Commission are writing hundreds of rules to implement the law enacted last year. Many must be completed by July 21 -- the one-year anniversary of President Barack Obama signing the rules into law. Hatch requested information on the implementation, as well as reports on consultations with other G-20 nations. He also focused his requests on whether there is international agreement on the Volcker rule, a provision that would bar banks from engaging in proprietary trading. Finance ministers and central bankers from around the globe are scheduled to meet Washington this week for the semiannual meetings of the International Monetary Fund and World Bank. Finance officials from the Group of 20 meet on April 15, and the International Monetary and Financial Committee, the IMF’s steering committee, meets on April 16. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-03-17 | Bloomberg | ThyssenKrupp’s Beitz to Blame for Decline, Krupp Nephew Says | ThyssenKrupp AG (TKA) Honorary Chairman Berthold Beitz is the main culprit for the steelmaker’s “decades-long decline,” according to a nephew of the company’s former owner Alfried Krupp von Bohlen und Halbach. Beitz, the 99-year old head of the foundation that holds 25.3 percent of ThyssenKrupp shares, “has failed” to fulfill the late Krupp’s will to keep the company intact and expand it, Friedrich von Bohlen und Halbach said yesterday in a phone interview. “If anybody is responsible for the negative development of the company, it’s Berthold Beitz,” von Bohlen und Halbach said. The honorary chairman is to blame for the “decades-long decline of the company, and in particular for its current sorry state.” ThyssenKrupp on March 8 said that Chairman Gerhard Cromme, whom Beitz handpicked more than 27 years ago for a key role at the steelmaker, will step down as chairman at the end of the month. Chief Executive Officer Heinrich Hiesinger is seeking to repair the damage from price-fixing and bribery scandals and a botched expansion in the Americas that cost ThyssenKrupp 3.6 billion euros ($4.7 billion) in writedowns last fiscal year. Hiesinger plans to “review all aspects of the relationship between foundation and company and reorganize them if necessary,” ThyssenKrupp spokesman Kilian Roetzer said yesterday in an e-mail. Bohlen und Halbach, whose comments were first reported by Focus magazine yesterday, said he had not spoken with Hiesinger about potential changes. Beitz agreed to part with Cromme “to protect himself,” von Bohlen und Halbach said. Beitz wanted to show “who has got the last say in the company,” he said. In an interview with Sueddeutsche Zeitung yesterday, Beitz said he will lead the foundation “as long as I’ve got a clear head.” Representatives at the Alfried Krupp von Bohlen und Halbach Foundation said no spokesmen were immediately available for comment when contacted by Bloomberg News yesterday, outside of normal business hours. To contact the reporter on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net |
2024-12-17 | Bloomberg | QR Energy's $300 Million IPO Finishes Week of Nine U.S. Public Offerings | QR Energy LP, the Houston-based company formed to acquire oil and gas properties, raised $300 million in its U.S. initial public offering after selling shares at the middle of its forecast range. QR Energy sold 15 million units at $20 each yesterday after offering them at $19 to $21 apiece, data compiled by Bloomberg show. Fortegra Financial Corp. also completed its $66 million sale after chopping the IPO 46 percent, while Ventrus Biosciences Inc. raised $17.4 million. Nine companies completed U.S. IPOs this week, the most in almost two months, data compiled by Bloomberg show. QR Energy’s sale comes after Targa Resources Corp. and Chesapeake Midstream Partners LP gained more than 20 percent since their IPOs this year, according to Bloomberg data. The performance of energy-related IPOs has “been quite positive, and I think that’s helping this deal as well,” said Josef Schuster , the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. Wells Fargo & Co. of San Francisco, New York-based JPMorgan Chase & Co., Raymond James Financial Inc. of St. Petersburg, Florida, and Toronto-based Royal Bank of Canada led the offering for QR Energy. The company will use the proceeds from the IPO and borrowings from a credit facility to make a cash payment to QR Energy’s existing owners and repay debt, its prospectus said. Today’s Trading QR Energy intends to pay an annual dividend of $1.65 per share, according to its SEC filing. That would amount to 8.25 percent of its IPO price of $20 a share. The payout is about quadruple the dividend yield for companies in the Standard & Poor’s 500 Index , data compiled by Bloomberg show. U.S. benchmark interest rates are currently near zero. QR Energy fell 2 percent to close at $19.60 in trading on the New York Stock Exchange. Targa Resources , a natural-gas pipeline company that was controlled by Warburg Pincus LLC, has advanced 24 percent since its $360 million initial offering this month. The Houston-based company has an indicated dividend yield of 3.52 percent, data compiled by Bloomberg show. Chesapeake Midstream , a pipeline operator owned by the second-largest U.S. natural gas producer, Chesapeake Energy Corp., has gained 27 percent since its $513 million IPO in July. The Oklahoma City-based company has an indicated dividend yield of 5.12 percent, according to Bloomberg data. ‘Different Ballgame’ “It’s a yield play,” said IPOX Capital’s Schuster. “That’s a different ballgame than a traditional IPO.” Fortegra, the Jacksonville, Florida-based insurance services company, priced 6 million shares at $11 each yesterday after failing to complete a 7.7 million offering at $14 to $16 apiece, Bloomberg data show. Ventrus of New York sold 2.9 million shares for $6 each after offering 2.8 million at $6 to $7 apiece, its SEC filing and data compiled by Bloomberg show. The company intends to use the proceeds to conduct clinical trials, develop drugs and repay debt, the prospectus said. Fortegra was unchanged at $11.00 in NYSE trading. Ventrus gained 5 percent to $6.30 on the Nasdaq Stock Market. A total of 192 companies have sold $47.8 billion of shares in U.S. initial offerings this year, more than double the $20.2 billion raised in 2009, according to data compiled by Bloomberg that excludes sales from over-allotment options. The amount is the highest since $87.6 billion in IPOs were completed in 2007, when the Standard & Poor’s 500 Index , the benchmark gauge of American equity, climbed to an all-time high. Take away Detroit-based General Motors Co.’s sale of common shares last month and the 2010 total decreases to $32 billion. Swift Transportation Co. of Phoenix completed the second- largest U.S. IPO of the year behind GM this week, selling $806 million of shares. The biggest truckload carrier in North America raised about 20 percent less than originally sought. To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net. To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net . |
2024-01-25 | Bloomberg | Indian Stocks Advance to Two-Year High; Maruti Jumps on Earnings | Indian (SENSEX) stocks rallied to a two-year high, erasing a weekly loss, as carmakers and lenders increased ahead of the central bank policy meeting next week. The BSE India Sensitive Index, or Sensex, rose 0.9 percent to 20,103.53 at the close. The gauge climbed 0.3 percent this week. Maruti Suzuki India Ltd. (MSIL) , the biggest carmaker, surged to a three-year high after third-quarter profit exceeded analysts’ estimates. Tata Motors Ltd. (TTMT) , the owner of Jaguar Land Rover, jumped 2.6 percent, ending a five day, 11-percent drop. State Bank of India Ltd. , the nation’s biggest lender, increased 2.2 percent, the most since Dec. 14. Prime Minister Manmohan Singh ’s administration took a step yesterday to spur inflows and avert a debt-rating downgrade by increasing a limit on foreign investment in rupee bonds by $10 billion to $75 billion. The Reserve Bank of India will cut the benchmark rate by 25 basis points to 7.75 percent on Jan. 29, according to 15 of 18 analysts surveyed by Bloomberg. Two analysts forecast a 50 basis-point cut. “We would be happy if the central bank is slow in cutting interest rates as India is still prone to inflationary risks,” Gary Dugan, chief investment officer for Asia and Middle East at Royal Bank of Scotland Group Plc’s wealth management unit, told Bloomberg TV India today. “We would be comfortable” with a 25 basis point rate cut by the RBI next week. Consumer-price inflation accelerated to 10.56 percent in December, the second-highest level among the Group of 20 major economies, data compiled by Bloomberg show. Core inflation eased to 4.19 percent from 4.49 percent in November, according to calculations by Bloomberg. The RBI has left its benchmark rate at 8 percent since a 50 basis-point cut in April 2012. Carmakers Rally Tata Motors, the best performer on the Sensex last year, increased 2.6 percent to 301 rupees. Mahindra & Mahindra Ltd. (MM) , India’s largest maker of sport-utility vehicles, gained 2.8 percent to 901.5 rupees. Maruti Suzuki soared 3.9 percent to 1,599.45 rupees, the highest level since Dec. 14, 2009. Third-quarter net income at Suzuki Motor Corp. (7269) ’s Indian unit more than doubled to 5.01 billion rupees ($93 million), beating the 4.89 billion-rupee median of 38 analysts’ estimates compiled by Bloomberg. Only two out of 13, or 15 percent, of Sensex members that have reported December-quarter earnings have missed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show. The Sensex has advanced 3.5 percent this year, extending last year’s 26 percent jump, as government efforts to open up more industries to overseas investment and cut fuel subsidies lured foreign funds. The gauge trades at 16.9 times reported earnings, the most expensive since July 2011. ‘Right Policies’ Finance Minister Palaniappan Chidambaram is on a tour of Asia and Europe to woo investors. He pledged to deepen a policy overhaul that lured foreigners to invest $24.5 billion into domestic shares last year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. The inflows helped fuel the biggest annual increase in the Sensex since 2009. “It’s not always simple to invest in India and get the full support of government policies,” RBS’s Dugan said. “At the moment the policies are in the right direction, and for a foreign investor look very attractive.” Dugan said he expects the 50-stock S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India Ltd. to rally to a record 6,600 by December this year. The Nifty jumped 0.9 percent to 6,074.65 at the close. The India VIX index, which gauges the cost of protection against losses in the Nifty, added 2.1 percent to 14.77. Volumes on the Sensex exceeded the 30-day average by 13 percent. Overseas funds were net buyers of local stocks for an 19th straight day on Jan. 23, purchasing a net $151.5 million, data from the regulator show. They have bought a net $3.01 billion of stocks this year, a record for the period, the data show. To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-05-03 | Bloomberg | UBS Looks at All Investor Input on Knight Vinke Proposal | UBS AG (UBSN) is always looking at all shareholder suggestions, Chief Executive Officer Sergio Ermotti said, a day after investor Knight Vinke Asset Management LLC called for a spinoff of the lender’s investment bank. “We’re taking the input and suggestions of every shareholder always very carefully,” Ermotti, 52, told Bloomberg News in an interview at a conference in St. Gallen , Switzerland today. “Yesterday was a good opportunity for all our shareholders to come to the AGM and voice their opinions.” Ermotti’s comments come a day after New York-based Knight Vinke said in an open letter to shareholders before UBS’s annual general meeting that ownership of the investment bank, which “nearly destroyed UBS” during the financial crisis, could be transferred to employees and managers. In 2011, a $2.3 billion loss from unauthorized trading at the unit led to the exit of former CEO Oswald Gruebel , three years after the bank received a government bailout to ward off a collapse. UBS shares rose 0.4 percent to 16.85 Swiss francs at 4:20 p.m. in Zurich. They have gained about 18 percent this year, trailing Credit Suisse Group AG’s 24 percent increase. Knight Vinke, led by founder Eric Knight, targets large, publicly traded companies and seeks to recruit other institutional investors to press the companies’ management to change course. In 2007, the firm said that HSBC Holdings Plc (HSBA) , Europe ’s largest bank, misled investors about a new share plan payable in 2008 to reward management. ‘Serious Threat’ The firm wrote in the letter that it questions “the merits of keeping the investment bank under the same roof as the wealth management and Swiss banking businesses.” Investment banking “is a very risky business,” which poses “a serious threat.” No Knight Vinke representative spoke publicly at yesterday’s shareholder meeting in Zurich and the proposal to split off the investment bank wasn’t discussed. The firm says it owns almost 1 percent of UBS shares. Ermotti announced plans last year to eliminate 10,000 jobs and exit most debt-trading businesses to concentrate on money management and boost profitability. UBS this week posted first- quarter earnings that exceeded analysts’ estimates. Pay Structures The investment bank posted a 92 percent gain in first- quarter pretax profit to 977 million francs ($1 billion), UBS said on April 30. That was more than triple the average analysts’ estimate of 321 million francs. The unit had a pretax return on equity of 49.5 percent for the quarter, up from 17 percent a year earlier. The lender has changed its pay structures, limiting cash payouts, after almost 37 percent of shareholders voted last year against its 2011 compensation report. Yesterday, the 2012 report was approved with 83 percent of the votes. “Clearly our shareholders understand that we’re fixing past mistakes in a critical and constructive way, but the firm also needs to look forward,” Ermotti said today. “We’re pleased with the recognition of our shareholders for these efforts.” Ermotti, who was appointed CEO in November 2011, said later during a panel at the conference that had UBS introduced its current pay structure in 2004 or 2005, it would “most likely” not have needed the bailout as claw-back provisions are linked to long-term performance. “The real problem is to make sure that people are paid for sustainable performance,” Ermotti said. “And you can only measure sustainability over the next at least three to five years.” To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net ; Frank Connelly at fconnelly@bloomberg.net |
2024-10-08 | Bloomberg | Apollo Said to Bid for $6 Billion of Life Policies From KBC | Apollo Global Management LLC , the private-equity firm founded by Leon Black , is bidding on life insurance policies with a combined face value of $6 billion held by Belgian bank KBC Groep NV , according to two people with knowledge of the talks. The firm is seeking $525 million from investors to acquire policies and pay the premiums on the contracts, which will distribute cash to the buyers when the insured individuals die, said one of the people, who asked not to be identified because the bidding is private. The Oregon Investment Council’s staff recommended committing $100 million to the fund, according the state pension plan’s website. Policies were for sale at “distressed pricing” in the so- called life-settlements market, according to a document included in Oregon’s public meeting material on Sept. 29. European regulators are encouraging banks to divest their non-core assets, which include holdings such as life-settlement portfolios, according to the presentation. “A large European bank is a motivated seller of its life- settlements portfolio,” according to the document on the Oregon Investment Council’s website. “Apollo believes it will acquire the portfolio at an attractive distressed value.” Apollo joins rival buyout firms in seeking to expand beyond traditional buyouts as private-equity dealmaking is down about 80 percent from its peak in the second quarter of 2007, when $209 billion of deals were announced. The firm built a life reinsurance business, Athene Life Re Ltd., to negotiate the purchase of annuity policies. Viviane Huybrecht , a spokeswoman for KBC, and Charles Zehren , an outside spokesman for Apollo, declined to comment. Life Reinsurance Apollo reported $1.2 billion in assets under management in its life reinsurance asset management business, which oversees investments for Athene Life and other similar companies, as of June 30, according to a filing with the Securities and Exchange Commission. The company said in a prior filing the figure was more than $800 million at the end of 2009. KBC is selling units as it seeks to raise funds to repay 7 billion euros ($9.7 billion) of state aid. The company agreed in May to sell KBL European Private Bankers SA for 1.35 billion euros to India’s Hinduja Group. ‘They’re Going to Win’ Life-settlement investors “are selling because they ran out of money to maintain the premiums,” said Paul Siegert, chief executive officer of Insurance Studies Institute , the Keystone, Colorado-based, non-profit research group. Buyers are “willing to put up the money to keep those premiums paid, and they’re going to win” when benefits are collected, he said. Investors bet on life expectancies by purchasing insurance from policyholders who are seeking cash payments before death. The policies may then be sold in the secondary market, which was “sluggish” in 2008 and last year, according to an Apollo slide on the Oregon website. Life policies that changed hands in 2008 had a face value of about $11.8 billion, compared with $12.2 billion in 2007, according to a report last year by Hartford, Connecticut-based asset management firm Conning & Co. To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net ; Andrew Frye in New York at afrye@bloomberg.net. To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net ; Dan Kraut at dkraut2@bloomberg.net |
2024-04-26 | Bloomberg | Stifel Agrees to Purchase Weisel for $318 Million, Expanding on West Coast | Stifel Financial Corp., the Missouri-based brokerage, agreed to buy Thomas Weisel Partners Group Inc. for about $318 million in stock to expand investment banking. Thomas Weisel investors will get 0.1364 shares of Stifel for every share they own, the companies said in a statement today. The purchase values San Francisco-based Thomas Weisel at about $7.60 a share, 74 percent more than its $4.36 closing price on April 23. The deal will help Stifel add investment-banking clients in the technology and health-care industries, the firm said. The combined company will have estimated 2010 revenue of about $1.6 billion and a market value of about $2 billion, the companies said. The merger will also make Stifel the largest equity- research firm, with more than 1,100 companies covered. “This is as good of a fit as I’ve ever seen in the business,” Stifel Chairman and Chief Executive Officer Ronald Kruszewski said today in a conference call with investors. “We’ve been playing in different sandboxes, and we are going to combine those efforts.” The purchase, set to close on June 30, is subject to approval by Thomas Weisel shareholders and regulators. Thomas Weisel had about 32.8 million shares outstanding at the end of March. The $318 million valuation includes outstanding shares as well as restricted stock units and warrants. Stifel shares fell $2.33, or 4.2 percent, to $53.41 at 10:47 a.m. in New York Stock Exchange composite trading. Thomas Weisel shares jumped $2.84, or 65 percent, to $7.20 in Nasdaq Stock Market trading. Cost Savings Thomas W. Weisel, founder of the eponymous firm, will become co-chairman of Stifel with Kruszewski upon the completion of the deal. Kruszewski will remain CEO and Stifel’s headquarters will remain in St. Louis, the company said. As many as three Thomas Weisel directors will join the Stifel board. The firms estimate the merger will provide cost savings of $62 million, or about 5 percent of the companies’ combined 2009 expenses. Kruszewski wouldn’t say when those savings are expected to be realized. The institutional group and wealth management each contribute about half of the revenue of the combined firm. To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Michael J. Moore in New York at mmoore55@bloomberg.net . |
2024-01-10 | Bloomberg | Life Insurer Acquisitions ‘Ripe for Acceleration’ | Life insurers may pursue more acquisitions worldwide to add business as capital builds while low bond yields and sluggish economic growth weigh on results. “There seems to be a rising appetite” for deals this year, Sam Friedman, insurance research leader at Deloitte Services LP’s Center for Financial Services, said in an interview. “They’re well-capitalized and there’s some impatience in terms of trying to meet expectations for what their return on equity will be.” Firms led by New York-based MetLife Inc. (MET) and Prudential Financial Inc. (PRU) have pursued deals in the U.S. and emerging nations as they seek to increase shareholder returns. Faster economic growth and expanding middle classes in emerging countries such as India and in Latin America can offer greater opportunities to insurers than developed markets in the U.S. and Europe, Friedman said. “The overall M&A environment seems ripe for an acceleration of deals in 2013,” Deloitte analysts said in their 2013 life insurer outlook , scheduled for release today. “Merger or acquisition deals may spring from carrier interest in entering or growing within emerging markets to pursue growth potential that seems more elusive in mature regions.” Economic growth in Latin America is projected to quicken to 3.6 percent in 2013, compared with 2 percent in the U.S. and contraction in the region that shares the euro, according to economists’ forecasts compiled by Bloomberg. China’s economy , the largest after the U.S., may grow 8.1 percent, and India’s is estimated to expand by 5.5 percent, the forecasts show. Emerging Markets “If there’s growth to be found, a lot of it is in the emerging markets,” Friedman said yesterday in a phone interview. “You see companies going into South America, you may see some additional companies going into Asia.” MetLife, the largest U.S. life insurer, expanded beyond the U.S. with the purchase of American Life Insurance Co. from American International Group Inc. (AIG) in 2010. Alico had operations in more than 50 countries at the time. Prudential acquired an individual life business from Hartford Financial Services Group Inc. (HIG) Principal Financial Group Inc. (PFG) , the seller of life insurance and retirement products, agreed in October to buy Chilean pension provider AFP Cuprum (CUPRUM) SA for about $1.5 billion. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-01-31 | Bloomberg | Canadian Stocks Slump Most in Three Months on Materials | Canadian stocks slumped the most in three months as raw-material producers fell amid disappointing earnings and a drop in commodity prices, overshadowing faster- than-estimated expansion in the nation’s economy. Potash Corp. of Saskatchewan Inc ., the world’s largest fertilizer producer, fell 1.9 percent after forecasting first- quarter profit that trailed analysts’ estimates. BlackBerry, formerly known as Research in Motion Ltd., dropped 6.8 percent after Credit Suisse downgraded it to underperform. Goldcorp Inc. (G) and Barrick Gold Corp. fell at least 2.2 percent after the metal slid the most in almost four weeks. The Standard & Poor’s/TSX Composite Index retreated 109.20 points, or 0.9 percent, to 12,685.24 at 4 p.m. in Toronto. The S&P/TSX has risen 2 percent this year, the fourth-worst performance among the world’s 24 developed markets, according to data compiled by Bloomberg. The main equity benchmark for stocks in Israel has fallen 0.7 percent, Belgium ’s equities rose 1.8 percent and Austrian shares added 1.9 percent. “Everyone’s focused on earnings,” Anil Tahiliani, fund manager at Calgary-based McLean & Partners Wealth Management Ltd., which has C$900 million in assets, said in a phone interview. “We’re getting mixed signals from companies regarding forward guidance. Having a pullback is not surprising.” About 81 percent of the 16 companies in the S&P/TSX that have released results so far in this reporting season have exceeded profit projections. Forty percent have surpassed sales estimates, according to data compiled by Bloomberg. Canada’s GDP Canada’s gross domestic product grew at the fastest pace in seven months in November on gains in manufacturing, mining and energy. Output grew 0.3 percent to an annualized C$1.56 trillion ($1.56 trillion), following a prior gain of 0.1 percent, Statistics Canada said today in Ottawa. The median forecast in a Bloomberg economist survey was for a 0.2 percent expansion in the month. Potash fell 1.9 percent to C$42.37. First-quarter earnings will be 50 cents to 65 cents a share, the Saskatoon, Saskatchewan-based company said today in a statement. The average of 17 estimates compiled by Bloomberg was for 69 cents. The company said taxes will be higher in 2013 because of reduced capital spending. Fourth-quarter earnings and revenue also trailed analyst projections. Gildan Activewear Inc., the top-performing company in the S&P/TSX last year, fell 3.1 percent to C$36.71. Tal Woolley, an analyst with RBC Capital Markets , lowered his recommendation for the clothing supplier to sector perform, or hold, from outperform. Gold Slips “Strong price appreciation is the primary reason for our downgrade,” Woolley said in a note to clients today. Gildan now trades more expensively than its peers based on his 2014 earnings forecast of $3 a share, he said. Barrick Gold fell 2.2 percent to C$31.76 and Goldcorp (C) dropped 2.5 percent to C$35.13. After the close of trading, Barrick Gold confirmed in an e-mail that it was considering the sale of its Barrick Energy unit and other non-core assets. Gold futures for April delivery dropped 1.2 percent to settle at $1,662 an ounce on the Comex in New York. Raw- materials producers in the S&P/TSX slipped 1.5 percent to the lowest closing level in five months. BlackBerry lost 6.8 percent to C$12.92, extending its decline for the week to 27 percent. BlackBerry stumbled in its introduction of the BlackBerry 10 lineup yesterday, disappointing shareholders with the lack of a firm U.S. release date and setting a price that may be too high to lure away customers from Apple Inc. and Google Inc.’s Android. Kulbinder Garcha, of Credit Suisse, is the latest analyst to downgrade the smartphone maker. In all, five analysts recommend buying the stock, 20 have a hold rating, and 20 advise selling, according to data compiled by Bloomberg. To contact the reporter on this story: Leslie Picker in New York at lpicker2@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-10-10 | Bloomberg | Keynes and Hayek, the Great Debate (Part 3): Nicholas Wapshott | By the early 1940s, the Keynesian Revolution in America was in full swing. Fast-moving events in Germany obliged Franklin D. Roosevelt to spend on the vast scale that John Maynard Keynes prescribed. Despite the president’s assurances during the 1940 presidential campaign -- “I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into foreign wars” -- he ordered a gargantuan rearmament program. In 1940, the annual defense expenditure was $2.2 billion; the following year it reached a sizzling $13.7 billion. “If expenditure on armaments really does cure unemployment, a grand experiment has begun,” Keynes declared in 1939. “We may learn a trick or two which will come in useful when the day of peace comes.” The multiplier effect of so much public money being pumped into the American economy caused gross domestic product to jump by about $25 billion, with arms and other defense spending accounting for 46 percent of the increase. Even so, employment wasn’t restored to the pre-Roosevelt recession level until 1941, the year America was attacked by the Japanese at Pearl Harbor. “We saw the war as a justification of the Keynesian theory, the Keynesian doctrine, and the Keynesian recommendation,” John Kenneth Galbraith recalled. Pessimistic Masterwork Friedrich Hayek, meanwhile, set out on his pessimistic masterwork, “The Road to Serfdom.” As his biographer Alan Ebenstein observed, the book revolutionized Hayek’s life. Before its publication, he was an unknown professor of economics. A year after it was published, he was famous around the world. Not bad for a book that Hayek, with rare modesty, believed only a few hundred would read. The principal targets of “The Road to Serfdom” are what Hayek deemed the twin evils of socialism and fascism, though he felt obliged to soften his criticisms of communism and allude more to the dangers of Nazism because at the time of writing Josef Stalin ’s Soviet Union was allied to Britain and America. He said the common perception that the extremes of Left and Right were polar opposites was a misapprehension because both -- by replacing market forces with state planning -- assaulted individual liberties. He reiterated his belief that as economic planners can’t know the will of others, they end up acting like despots. Preconditions for Totalitarianism Hayek feared that when World War II was won, the Allied victors might conclude that wartime economic management would speed a more prosperous, more just postwar society. Such policies, he warned, invited the preconditions for totalitarianism and might cause history to repeat itself. “We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past,” he wrote. “It is Germany whose fate we are in some danger of repeating.” Classical economists and conservatives don’t fare much better than socialists and communists in Hayek’s stark analysis. He condemns the “wooden” advocates of free-market solutions, while rejecting conservatism, a devotion to existing institutions. “Though a necessary element in any stable society, [conservatism] is not a social program,” he wrote. “In its paternalistic, nationalistic and power-adoring tendencies, it is often closer to socialism than true liberalism; and with its traditionalistic, anti-intellectual, and often mystical propensities it will never. .. appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place.” Coincidence By coincidence, Keynes read “The Road to Serfdom” in June 1944, while he was sailing across the Atlantic en route to Bretton Woods in New Hampshire to preside over the negotiations for the international currency mechanism that took the hotel’s name. Plainly relaxed after his sea crossing, Keynes dropped a line to his old rival from the Claridge Hotel in Atlantic City , New Jersey. “The voyage has given me the chance to read your book properly,” he wrote. “In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.” Role for Planning Hayek conceded in “The Road to Serfdom” that in the case of tackling chronic unemployment, planning might play its part and that the right form of planning might not lead to oppression. As he later expressed it, “So far as government plans for competition or steps in where competition cannot possibly do the job, there is no objection.” He also believed that the state may have a moral duty to step in and that was admissible so long as the spirit of free enterprise was not compromised. “There can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody,” he wrote. “Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance -- where, in short, we deal with genuinely insurable risks -- the case for the state’s helping to organize a comprehensive system of social insurance is very strong.” (Nicholas Wapshott, a former senior editor at the Times of London and the New York Sun, is the author of “ Ronald Reagan and Margaret Thatcher : A Political Marriage.” This is the third in a four-part series excerpted from his new book , “Keynes Hayek: The Clash that Defined Modern Economics,” to be published Oct. 11 by W.W. Norton. See Part 1 and Part 2 .) To contact the writer of this article: Nicholas Wapshott at wapshott@nyc.rr.com. To contact the editor responsible for this article: Mark Whitehouse at mwhitehouse1@bloomberg.net . |
2024-08-29 | Bloomberg | Bershidsky's View From Europe | Here's today's look at some of the top stories on markets and politics in Europe: Italy abolishes property tax to please Berlusconi. The Italian government canceled payment of the unpopular property tax until the end of 2013, deciding instead to introduce a vaguely defined local "service tax" next year. The decision creates a $5.3 billion annual shortfall but helps Prime Minister Enrico Letta keep the ruling left-right coalition intact. That's because it satisfies ex-premier Silvio Berlusconi, who has lately threatened to break up the coalition; the repeal of the property tax had been one of his party's main demands. Berlusconi, recently convicted of tax fraud and banned from holding public office, has demonstrated that he still has the clout to ram through major policy decisions. A few court verdicts are definitely not enough to force Il Cavaliere out of Italian politics. Merkel counterattacks in fight over Greek aid. Chancellor Angela Merkel responded asymmetrically to demands by her Socialist rivals in the upcoming federal election that she disclose the specifics of a planned aid package for Greece. "Greece should not have been allowed into the euro," she said. "Chancellor Schroeder accepted Greece in and weakened the Stability Pact and both decisions were ... one of the starting points for our current troubles." Gerhard Schroeder, of course, was a Socialist. Merkel has a point: Germany is indeed paying the price for the eurozone's thoughtless expansion before the global financial crisis. Yet pulling out now and calling all that investment a sunk cost would crash markets and kill the euro area's nascent economic recovery. Germans see the common sense in Merkel's position: her coalition is leading the polls. Swiss government agrees to settle tax dispute with U.S. After a long standoff with the U.S. Justice Department, the Swiss government gave its Finance Ministry the go-ahead to finalize a joint statement with the U.S. that will give Swiss banks a way to disclose information on their American clients without facing further legal problems. The U.S. is already investigating a number of Swiss banks, including Credit Suisse and Julius Baer, for allegedly helping Americans evade taxes. The general solution comes too late for these banks, but others will apparently be able to come forward with information on any past wrongdoing and not face prosecution in the U.S. This is a blow to famed Swiss bank secrecy, but, given the U.S. investigations, it was already in tatters. The two-year delay in finding a mutually acceptable solution has given the banks' clients enough time to make alternative arrangements. Ending the acrimony is now to everyone's benefit. Online ads account for a quarter of European market. According to the AdEx Benchmark Report, published by Europe's IHS and Interactive Bureau, the standard-keeper for online advertising on the Continent, in 2012 online advertising accounted for 25.6 percent of the total ad spend. Though a mature market now worth $32.5 billion, it is still growing faster than any other sector of the advertising market -- 11.5 percent in 2012. That happened to a large extent because of emerging markets like Russia and Turkey, where online advertising expanded by more than 30 percent, making Russia the fourth-biggest market in Europe. When that explosive growth slows down to the pace of the more developed nations, mobile advertising will likely become the next growth engine. It makes up only 5 percent of all display advertising now, but, judging by the 150 percent annual increase in the U.K., it is the wave of the future. Human " mini-brains " expected to help cure autism and schizophrenia. Scientists at the Institute of Molecular Biotechnology (IMBA) in Vienna have succeeded in growing human stem cells into mini-brains up to 0.15 inches in diameter with a neural structure similar to the brain of a 9-week-old embryo. The institute said it might be possible to create bigger brains with cognitive ability by giving the "organoids" blood supply and sensory inputs, but that would be unethical. The scientists' purpose is to use the mini-brains to study neural disorders, including autism and schizophrenia, and eventually to fix them by replacing defective genes. This breakthough research is a major success not only for the institute, but for the very idea of public-private partnership: IMBA is a joint initiative of the Austrian Academy of Sciences and the German pharmaceutical company Boehringer Ingelheim. (Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at bershidsky@gmail.com). |
2024-05-08 | Bloomberg | KKR to Goldman Breach Water Deal Dam in U.S.: Commodities | Brandon Freiman was sizing up water investments for KKR & Co. (KKR) ’s $4.6 billion infrastructure fund in 2011 when he came across a debt-burdened New Jersey city that Tony Soprano skirts by to open the Time Warner Inc. HBO series. By December 2012, Bayonne, KKR and the United Water unit of Suez Environnement (SEV) , Europe ’s second-biggest water company, struck a first-of-its-kind deal in what bankers say may become a U.S. model. Results were almost immediate: Bayonne, at risk of a credit downgrade, cut debt by more than a third. Moody’s Investors Service raised its outlook to stable from negative. Public-private partnerships, or PPPs, are common for capital-intensive infrastructure projects such as toll roads and bridges. Government funding lands there too: The nearby Bayonne Bridge is getting a $1 billion overhaul. Municipalities steered away for years from private funding for water projects until Bayonne after failures such as a decade ago in Atlanta , which endured surprise rate increases and service complaints. “It’s just been really, really rare in the water space,” Freiman, the director who oversaw the accord for KKR’s Energy & Infrastructure fund, said in an interview. “These are difficult deals to get done.” With the U.S. government estimating as much as $1 trillion in water upgrades needed by 2020, many are reconsidering. Bayonne’s 40-year, $307 million deal, called a concession agreement, was followed by another when the California town of Rialto agreed in January to a 30-year pact with Goldman Sachs Group Inc. (GS) , Barclays Plc, Table Rock Partners LLC, Ullico Inc. and Paris-based Veolia Environnement (VIE) , the largest water company. Colorado, Florida Allendale in northern New Jersey is also considering an agreement with United Water to assume operation and maintenance of its water department, according to the borough’s website. Bayonne, which received a $150 million payment upfront, has since had inquiries from municipalities in Texas, Colorado and Florida , said Steve Gallo, executive director of Bayonne’s municipal water utility and Mayor Mark Smith ’s chief of staff. Without the deal, the city was facing rate increases of 24 percent to 30 percent, Gallo said yesterday. “Nobody likes to pay increased rates on anything,” Gallo said in an interview. “With this transaction, we were able to mitigate that down to an 8.5 percent immediate increase, a couple years of no increase, and then a steady increase of less than 4 percent. Across the board, it made sense. It insulates you from huge rate shock.” Since the Bayonne water pact, inquiries have picked up, KKR said. “We thought if we can get one done, then that will really illustrate our ability to demonstrate the concept,” Freiman said. ‘Potentially Groundbreaking’ The deal’s “a potentially groundbreaking transaction that may lead the way for further private equity participation in the water-system asset class,” Su Gao, an analyst for London-based Bloomberg New Energy Finance, said in a report. Global Water Intelligence, an industry publication, gave the Bayonne concessionary agreement a “distinction” award at an April 22-23 water conference in Seville, Spain. KKR isn’t only interested in U.S. water, acquiring the central England water supplier South Staffordshire Plc from the Greenwich, Connecticut-based infrastructure fund manager Alinda Capital Partners Plc, the companies announced today. Terms weren’t disclosed. The deal was agreed to on May 3, they said. Fewer Missteps Rialto and Bayonne participants said the two-plus years needed to work out the contracts ensured fewer missteps. Municipalities get global water expertise and a capital injection that spares funding for libraries, police and schools. Unexpected cost rises that plagued earlier agreements are tempered by a rate-stabilization fund. In exchange for the 8.5 percent initial rate increase, or about $5 a month per Bayonne residence, rates freeze until 2015, when a 3.5 percent raise is scheduled. After that, rates are calculated each year at a fixed rate for 70 percent of the water bill increase with the rest tied to an inflation index. Private placements, or loans typically in a 5 percent to 6 percent range, help smaller communities that may struggle to compete with big cities to sell bonds tied to water infrastructure, said Kathleen McNamara, a municipal strategist at UBS Wealth Management in New York , which oversees about $90 billion in local debt. “When they come to market, they have to issue debt with higher rates just to sell their bonds,” McNamara said. Water and sewer project bonds returned 4.59 percent on average the past 12 months. That compares with an overall muni-bond average of 4.7 percent, according to Barclays index data. PPP Agreements These water pacts differ from recent pay-for-performance PPP agreements in North America. Deals in Pittsburgh and New York with Veolia that peg performance to peers followed a 2011 agreement in Winnipeg, Canada. Veolia helps find efficiencies, such as installing meters. In New York, Veolia identified $108 million to $130 million in annual savings. “In New York and Pittsburgh, it’s shorter-term contracts,” Laurent Auguste, who runs Veolia Water Americas, said in an interview. “We’re not talking about 30 years, we’re not talking about the private company taking over day-to-day operations, which are still run by the city.” Concessionary structures are common outside the U.S. from Europe to Asia. Customized arrangements are needed in the U.S. because each municipality has different rules. Veolia “absolutely” expects to see more arrangements like Bayonne and Rialto, Auguste said. ‘Primary Concern’ Concession agreements, called such because of tax rules, tend to fall apart in the first two years and raise rates more , said Mary Grant , a researcher at the Washington-based advocacy group Food & Water Watch. In operating deals, a municipality keeps responsibility for improvement funding. Private agreements often put the burden on companies. “Our primary concern is the loss of local public control over water resources and management,” Grant said. “That affects the cost of service and the quality of service.” Gary La Pelusa, a former Bayonne councilman and commissioner for the city’s previous water authority, opposed the deal and rate increases, saying Bayonne gave up too much. “The city could have done all these things on their own,” he said in an interview. “I live in this town, I get a water bill just like everybody else. I just felt like it wasn’t worth it.” Allentown Deal The water-advocacy group opposed a measure in Allentown, Pennsylvania , that on April 2 awarded a 50-year, $220 million water-system lease to Lehigh County Authority, a nonprofit that outbid United Water and American Water Works Co., the largest publicly traded water company in the U.S. Allentown sought to plug a $170 million budget hole from underfunded pensions, not an overhaul. “We looked at a lot of things, and I thought, ‘OK, here’s an asset we can actually monetize,’” Mayor Ed Pawlowski said in an interview. “And we’re doing profit-sharing on any future expansion of water sales.” Concession agreements don’t offer the 20 percent-plus annual returns of typical corporate private equity deals, unappealing for short-term investors, said Megan Matson , a Table Rock partner who negotiated the Rialto transaction. Her firm wants to do more and is talking with several cities. “Long-term secure returns are really difficult to find right now,” Matson said in a phone interview. “The overall equity returns are in the 15 to 19 percent range, which isn’t wild, but we understand it, it’s solid for the long term. It might be harder up front than a lot of companies want to pursue but for us it’s really satisfying.” The private sector has shouldered more responsibility in recent years, executives, city officials and bankers said. With all the calls to upgrade U.S. water and water-treatment systems, firms see potential for annuity-type cash streams. Investor Interest Municipalities also have much to gain from pursuing such agreements, said Lewis D. Solomon, a George Washington University professor who wrote “America’s Water and Wastewater Crisis” and gave public testimony on Allentown’s deal. “There’s a lot of capital available, with private equity, infrastructure funds, there’s a lot of investor interest,” Solomon said in an interview. Since Atlanta, “a decade has passed. People have learned. Municipalities are more sophisticated. The private partners are more sophisticated.” For Bayonne, the deal already eased one concern: Moody’s on March 6 raised the city’s debt outlook to stable. Bayonne’s $262.3-million general obligation bonds are rated Baa1, the third-lowest investment grade. That’s boosted the interest level, said Hadley Peer Marshall, a Goldman banker who worked on the Rialto transaction. “Private placement is investing more time in this asset class,” Marshall said in a phone interview. “There are more of these opportunities popping up.” New Model Private-equity funds have been used to build new facilities, including a wastewater plant in Santa Paula, California. The Bayonne pact is significant “because one of the biggest issues with water systems in the U.S. is that there’s been a lot of deferred maintenance,” BNEF’s Gao said in an interview. “It was really interesting to see a new model of investment on the O&M side.” In the Bayonne arrangement , KKR made 90 percent of the equity investment via its infrastructure fund and United Water the remainder for a total initial investment of $172.5 million. Bayonne owns the assets , with the new venture leasing them. Agreement Details The agreement also commits to capital investment in the water, sewer and stormwater system of about $110 million over 40 years, a slide presentation from KKR, Bayonne and Suez shows. According to the agreement filed with New Jersey Board of Public Utilities and Gao’s report, about $125 million of the upfront payment went to extinguish debt owned by the old Bayonne Municipal Water Authority, backed directly by the city. About $7 million will be used for capital improvements within two years, up to $2.15 million in each of the next two years and about $2.5 million for additional improvements yearly after that if needed. The intricate structures and negotiations in the Sopranos’ home state show water companies learned from past mistakes, mostly around funding mechanisms and initial capital investment , United Water Chief Executive Officer Bertrand Camus said. “They want to have control over rates,” Camus said in a phone interview. “This is what we tried to bring to the table with this model.” ‘Revenue Stream’ “We didn’t guarantee anything other than a revenue stream,” said Joseph P. Baumann Jr., a lawyer who worked on the transaction for Bayonne’s municipal water utility. That helped assure city officials investors weren’t getting “a windfall.” Robb Steel, Rialto’s redevelopment director , said city officials realized they needed help running and funding their system, which had lost about half its employees without replacing them. And Veolia already ran Rialto’s wastewater system. “Most cities have a certain amount of bravado that they want to manage these things themselves,” Steel said. “Water and sewer is something that we didn’t view long-term as something we were very good at. That’s why we cut and run.” To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net ; Justin Doom in New York at jdoom1@bloomberg.net To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net |
2024-10-23 | Bloomberg | Why Obamacare Is Like Three Mile Island | I’ve been blogging a lot over the past week or so about the risk of an insurance market "death spiral" -- where young people stay away, so the only people buying insurance are old and sick, causing the cost of insurance to rise over time and pushing ever more healthy young people out of the market. Adrianna McIntyre says that we shouldn’t worry; there’s a provision in the Patient Protection and Affordable Care Act that deals with this: I don’t find this reassuring. These mechanisms were not put in place to prevent a death spiral, and they aren’t designed to do that. Rather, they were put in place to prevent an entirely different problem: insurers trying to cherry-pick healthy people out of the pool (by, say, offering a policy that comes with a free gym membership). The idea is that there’s a huge tax on excess profits -- and a subsidy for losses -- so that it doesn’t make sense to expend a lot of energy trying to get a better patient mix. The mechanisms do ensure that insurers will not go bankrupt from getting a much older and sicker pool of folks than they expected. But I wasn’t really worried that insurers would go bankrupt; the major insurers have enough reserves to last them a year and a keen eye to their own self-interest. Rather, I’m concerned that insurers will raise premiums a lot next year, which will mean a big spike in subsidy payments and an adverse-selection death spiral among the folks who buy unsubsidized insurance. And since the risk adjustment transfers do not cover all their potential losses, insurers still have a pretty strong incentive to price based on their 2014 costs -- which is to say raise premiums by a lot. Now, if McIntyre is suggesting that these adjustment payments might be used as a sort of slush fund to pay off insurers in order to nominally keep premiums low, at potentially massive expense to the federal budget, well, perhaps they can. I’m not a lawyer, so I won’t presume to comment on the legality of such a maneuver. I will, however, point out that this is not a good idea. It’s fiscally irresponsible at a time when budget deficits remain at near-record postwar levels. (Post-World War II, I mean.) And while many of the law’s supporters may feel that increasing the deficit is a trivial problem compared with the problems of the uninsured, this law was sold to the American public as something that reduced the deficit. The administration should not deliberately violate that trust -- not least because spiraling costs could put the law they championed in jeopardy. Big health-care expansions in states such as Tennessee have been rolled back in the past when it was discovered that they put too much pressure on the budget. If we’re looking for reasons to be sanguine about a possible death spiral, I’m actually more hopeful about the subsidies than the risk adjustments. The subsidy calculation is a bit complicated, but here’s a simple summary: If you make less than 400 percent of the federal poverty level, the cost of the second-cheapest, or "silver," plan on your exchange (a moderately high level of deductibles and co-pays) is capped at 9.5 percent of your income or less. (The exact percentage starts very low and rises as your income does.) Effectively, that’s a hard cap on the cost of a reasonably comprehensive policy for a large percentage of the people who will be buying on the exchanges. That may put a hard stop on the exodus of young, healthy people from the system. Once they’ve hit the cap, their premiums will stop rising. The cost to the federal government will go up, of course, and that’s a big problem, because we haven’t budgeted for a big adverse-selection problem. But this will probably mitigate at least some of the exodus that we saw in states like New York and Massachusetts. However, I don’t find this too comforting, because it’s not clear to me whether this will be enough. If you’re a single person making $45,000 a year, it’s nice to know that you can’t be made to pay more than $350 a month for insurance. On the other hand, if you’re taking home something north of $2,500 a month -- less, if you’re self-employed -- then $350 a month for insurance with fairly high deductibles and co-pays might not be in the budget. We may lose young, healthy people well before they hit those caps. And then there are the people who aren’t eligible for subsidies. My understanding is that they’re expected to be a relatively small portion of the folks who end up on the exchanges. But according to the Kaiser Family Foundation, 5 percent of the population was already buying insurance on the individual market. Many of them are ineligible for subsidies. But the same adverse-selection pressures will apply to them without the individual mandate because it will be hard to maintain any significant price difference between the exchanges and the rest of the individual market. The markets are complementary: If prices for similar policies are too different, unsubsidized consumers will simply buy wherever they are cheaper. Does this mean that we are definitely going to have a death spiral? Of course I can’t say that; I’m not psychic. There are various steps that the administration might take, legal or quasi-legal, to try to get the insurers to keep selling cheap policies even as their costs rise. And as I pointed out a while back, the young may buy simply because this is now the law of the land, even if it’s difficult, and even if we delay the individual mandate. But, of course, there was no way to be 100 percent certain that invading Iraq would turn out badly; smart critics of that policy argued (correctly) that invading Iraq ran unacceptably high risks. The goal was a great one: Free Iraq from a dictator who was a destabilizing geopolitical force and help the Iraqi people to establish a prosperous and functional democracy. But the downside risk of embroiling the U.S. in an unwinnable war that would kill a lot of Iraqis and destabilize the region even further was horrifying, and all too likely. Looking at the aftermath, I sure wish I’d listened -- and even more that our leaders had. Which reminds me of something that I’ve been wanting to say. I admire the way that fearless liberals have come out to criticize the rollout of the exchanges -- much more quickly and completely than supporters of the Iraq War managed, I’m afraid. (Though of course, in fairness, the malfunctioning exchanges are right here where everyone can see them, not thousands of miles away.) But as with Iraq, I fear that the bitterness of the debate in the run-up is making the administration and many of its supporters discount too deeply the valid criticism coming from the opposition. It is true that I, and many others who are talking about the problems with these exchanges, opposed the health-care law; my preference is not for a delay but for completely getting rid of this law, and starting over with something that works better. (More on that later.) But I’m also an American who wants our insurance market to work. My first preference is for Obamacare to go away, making room for a more market-oriented solution. Failing that, of course I want Obamacare to work as its designers envisioned, rather than destroying the market for individual insurance and costing the federal government boatloads of money that it doesn't have. It’s just that I don’t think this is the most likely outcome, and frankly, it’s looking less likely with every ham-fisted management decision that endangers the long-term health of the system and gains only some evanescent political advantage. In this, I expect I feel much the same way as patriotic critics of the war who wanted the troops brought home ASAP because they thought that our efforts in Iraq were doomed -- but, failing that, would rather have seen their opponents proven right, their country prevail, and peace and prosperity come to Iraq. That’s why I want to either see the whole law delayed for a year or see the whole law go forward -- even though I understand that, yes, the latter choice would mean hardship for uninsured folks who get hit with a fine. Not because it’s 100 percent certain that we’ll end up in a death spiral, but because a merely high risk of a death spiral is unacceptable to me, and I should hope to everyone else. Isn’t the foundational rule of health care to first do no harm? Obamacare’s insurance market reforms were not designed to stand on their own. They’re designed to operate together; pull out one piece, and you risk breaking the whole thing. Don’t believe me? Then take it from someone you presumably trust: the Obama administration. That’s from the solicitor general’s response to the Supreme Court. Of course, he was talking about a general repeal of the individual mandate, not a temporary delay. But if the administration announces a delay after insurers have committed to sell policies at prices that assumed a mandate (and functional exchanges), the administration may find it has thrown away the credibility it would need to persuade insurers to try again next year. Not to mention their credibility with young, healthy folks, who may simply assume that they can count on another delay. Again, none of this is a 100 percent certainty. But the Affordable Care Act’s insurance market reforms have created a system prone to what Charles Perrow dubbed “Normal Accidents.” By "normal," he didn’t mean “minor” -- the lead exhibit was Three Mile Island. Rather, he meant something like “hard to avoid.” The system is both complex and tightly coupled: All the pieces are interdependent, so a failure in one part is apt to cascade throughout the market. This is not a system where you want to start pulling out one piece to see how well the rest can get along without it. The administration clearly understood this -- right up to the point where a major component failed. Now it's apparently planning to keep the reactor running with as many pieces as possible in the hopes that none of it will unexpectedly blow up. This is not sound policy thinking, or even sound political thinking, and I think that all of us who care about keeping insurance available for ordinary Americans should try to talk them out of it -- for their good, as well as our own. |
2024-03-21 | Bloomberg | Buffett Won’t Sell Japan Shares as Earthquake Creates ‘Buying Opportunity’ | Warren Buffett , whose Berkshire Hathaway Inc. (BRK/A) has a bullish derivative bet on Japan’s benchmark stock index, said the country’s record earthquake created a buying opportunity for equity investors. “If I owned Japanese stocks, I would certainly not be selling them because of the events of the past 10 days or so,” said Buffett, speaking to reporters in the South Korean city of Daegu. “Something out of the blue like this, an extraordinary event, really creates a buying opportunity.” The March 11 quake and tsunami, which caused the worst nuclear disaster in 25 years, may result in losses of $200 billion to $300 billion, with most of the costs uninsured, according to Risk Management Solutions Inc. Japan ’s Nikkei 225 Stock Average has declined 12 percent since March 10. Markets in the nation are closed today for a public holiday. The iShares MSCI Japan Index Fund (EWJ) , an exchange-traded fund that tracks the country’s stocks, gained 2.6 percent at 1:24 p.m. in New York. The Nikkei 225 is one of four indexes across the globe whose declines since the 2008 financial crisis have forced Berkshire to post derivative losses on earnings statements. Buffett, 80, sold put options on the indexes and may be required to make cash payments when the contracts begin to mature in 2018. Until then, Berkshire reports mark-to-market gains and losses based on the quarterly performances of the indexes. Mark Mobius , executive chairman of Templeton Asset Management’s Emerging Markets Group, said investors may profit as rebuilding increases purchases of construction materials. “The demand for cement, steel and raw materials will grow because of the infrastructure spending they will have to do to repair what has been damaged,” Mobius said today in an interview on Bloomberg Television’s “In the Loop” program. ‘Larger the Better’ Buffett canceled a trip to Japan where he was scheduled to visit a factory owned by Iscar Metalworking Cos.’s Tungaloy Corp. in Fukushima prefecture, home to a damaged reactor. Iscar Chairman Eitan Wertheimer, who sold his firm to Buffett, said sales may decline in Japan after Tungaloy halted work at a factory and evacuated most of the 1,400 employees from the local headquarters amid radiation leaks. “It’ll take some time to rebuild, but it will not change the future of, the economic future of Japan,” said Buffett, Berkshire’s chairman and chief executive officer. Berkshire would owe $3.8 billion to derivatives counterparties if index prices and foreign exchange rates at maturity were unchanged from the levels of Dec. 31, Buffett said last month in his annual shareholders’ letter. Berkshire received premiums of $4.2 billion at the initiation of the contracts, Buffett said. South Korea is a “hunting ground” for acquisitions, said Buffett, who prefers larger companies. Berkshire committed more than $35 billion to takeovers in the last two years. “We’re ready to invest, and basically the bigger the better,” said the billionaire investor. “Large companies appeal to me and Korea has a number of large companies obviously, so it’s a hunting ground.” Buffett reiterated that he is open to buying non-U.S. companies, while also saying U.S. businesses remain more likely targets. Berkshire invested in TaeguTec Inc. through Iscar, the Tefen, Israel-based toolmaking unit. ‘Pile Up Cash’ “We do pile up cash, month by month, and we’re looking for large businesses to buy,” Buffett said. The U.S. is “the most familiar to me, so it’s most likely where we would do something.” Buffett is seeking deals in the U.S. and abroad as earnings climb at Omaha, Nebraska-based Berkshire. He agreed this month to pay about $9 billion for engine-additive maker Lubrizol Corp. (LZ) and last year bought railroad Burlington Northern Santa Fe for $26.5 billion. Berkshire’s cash holdings rose to $38.2 billion as of Dec. 31, prompting Buffett to tell investors two months later that his “elephant gun has been reloaded.” “He can still write a check for $30 billion or $40 billion,” Thomas Russo , a partner at Berkshire investor Gardner Russo & Gardner, said after the March 14 announcement of the Lubrizol deal. Insurance, Ice Cream Buffett doesn’t pay a dividend or repurchase stock, preferring instead to buy companies and securities with his firm’s profits. In four decades running Berkshire, Buffett has accumulated more than 70 subsidiaries selling products from Geico car insurance to Dairy Queen ice cream and NetJets Inc. flights. The Lubrizol deal, an all-cash transaction, will be completed in the third quarter, the companies said. Buffett, whose largest non-U.S. acquisition was the 2006 purchase of Iscar, is traveling in South Korea and India to visit Berkshire’s operations and look for opportunities. Iscar was purchased for $4 billion. He visited China in September. Buffett transformed Berkshire over the last decade by adding shipping businesses and real-estate brokers to the company’s insurance, energy and consumer-goods units. David Sokol , a Berkshire energy executive, said Buffett has the access to capital and confidence to pounce on an opportunity and isn’t limited by devotion to certain industries. Economic Sense “Warren’s not the kind of investor to buy something because it fits a plan,” Sokol, chairman of Berkshire’s MidAmerican Energy Holdings, said in an interview in August. “He buys something if it makes economic sense and he believes in the long-term capability of that business.” Buffett heads a staff of about 20 at Berkshire’s headquarters and delegates operational authority of subsidiaries to the CEOs of each unit. His only instruction to Lubrizol CEO James Hambrick, who will continue running the firm after Berkshire’s takeover, was: “Just keep doing for us what you’ve done so successfully” for investors, Buffett said. Buffett traveled to Europe in 2008, visiting Germany , Italy , Spain and Switzerland where he touted Berkshire as an attractive buyer for family-run businesses whose managers may want to retain roles with the companies they built. That trip was arranged by Angelo Moratti, an Italian energy executive and Wertheimer. Berkshire’s growth has prompted Buffett to focus more on businesses such as power producers and railroads, which require consistent investment in infrastructure and equipment. Last year, Berkshire posted $13 billion of net income and spent $6 billion on property and equipment. He has taken at least $2.25 billion in dividends from Burlington Northern since the February 2010 takeover. Pricing Power The most important criteria when evaluating a business is pricing power, Buffett told the Financial Crisis Inquiry Commission in May. “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business,” he said in a recording released by the FCIC in February. Buffett has said he also focuses on a company’s management and ability to distinguish its products from those of competitors when deciding whether to invest. Buffett’s investment criteria include companies with “good returns on equity,” little or no debt, “simple” businesses that he can understand, and consistent earnings, he said in Berkshire’s latest annual report. Buffett doesn’t participate in auctions for companies and can tell prospective sellers within five minutes of an offer if he is interested in making a deal, he said in the report. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net ; Jun Yang in Seoul at jyang180@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net ; Brett Miller at bmiller30@bloomberg.net |
2024-04-11 | Bloomberg | Pimco Total Return Cuts Government-Related to Negative, Boosts Cash Assets | Bill Gross , who runs the world’s biggest bond fund at Pacific Investment Management Co., bet against U.S. government-related debt last month and boosted cash to be the largest of the Total Return Fund’s holdings. Pimco’s $236 billion fund had minus 3 percent of its assets in government and related debt, after reducing the position to zero in February, the Newport Beach , California-based company said on its website. Cash and equivalents rose to 31 percent from 23 percent, making it the largest component for the first time in four years. Gross has said he is concerned about what will happen when the Federal Reserve stops buying Treasuries, after the securities fell for a second quarter. The central bank implemented a plan in November to purchase $600 billion of debt by June 30 to sustain the economic expansion. “Their objective obviously is to improve the economy and to create jobs, but also to put a floor under the stock market, and we know that’s working,” Gross said April 1 in a radio interview on “Bloomberg Surveillance” hosted by Tom Keene. “The question remains, when the Fed stops buying Treasuries, does the private sector take the baton and run the last leg of the relay race?” Cutting Mortgages Gross lowered mortgage-related debt to 28 percent from 34 percent, according to the website. Investment-grade bonds comprised 18 percent of the fund’s holdings, unchanged from February, the figures showed. Treasuries fell today, extending a three-week decline, as economists said three government reports this week will show inflation is quickening. The securities handed investors a 2.8 percent loss in the six months ended March 31, according to Bank of America Merrill Lynch’s Treasury Master index. The MSCI All Country World Index of stocks returned 14 percent in the period. Longer-maturity bonds, those most sensitive to costs in the economy, are suffering the steepest declines. They also slid as the U.S. prepared to sell $32 billion of 3-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three daily auctions beginning tomorrow. Ten-year Treasury yields increased two basis points to 3.60 percent as of 8:33 a.m. in London , according to Bloomberg Bond Trader. The 3.625 percent note maturing in February 2021 declined 5/32, or $1.56 per $1,000 face amount, to 100 6/32 Cost of Living The Labor Department on April 15 will say the cost of living index rose 0.5 percent last month from February and was up 2.6 percent from March 2010, according to a Bloomberg News survey. Core prices, which exclude volatile food and fuel, climbed 0.2 percent for a third month. Labor Department figures earlier in the week will show wholesale prices and the cost of goods imported into the U.S. also climbed. So-called producer prices rose 1 percent in March, while import prices increased 2.2 percent, surveys show. The Total Return Fund appreciated 7.3 percent in the past year, beating 84 percent of its peers, according to data compiled by Bloomberg. Pimco is a unit of the Munich-based insurer Allianz SE. Treasuries “have little value,” Gross wrote in his April investment outlook on the company’s website. The Total Return Fund can have a so-called negative position by using derivatives, futures or by shorting. Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen. Government-related debt refers to sovereign bonds, Treasury Inflation Protected Securities, agency bonds, interest rate swaps, Treasury futures and options and corporate securities guaranteed by the Federal Deposit Insurance Corp., according to Pimco. To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net . |
2024-08-16 | Bloomberg | Hanwha Chairman Gets Four Years in Jail for Embezzlement | Hanwha Group Chairman Kim Seung Youn was sentenced to four years in jail and fined 5.1 billion won ($4.5 million) for embezzlement amid a presidential election campaign that’s increasing scrutiny of South Korean executives. A three-judge panel in the Seoul Western District Court found that Kim used funds from the nation’s 10th-largest industrial group to pay the debts of private firms owned under false names. The 60-year-old, who was granted a presidential pardon in 2008 after striking a man with a steel pipe and threatening others with an electric shock device, plans to appeal against today’s ruling. The Hanwha chairman was taken directly into custody in a break from common practice in Asia ’s fourth-biggest economy, where judges have suspended prison terms for corporate leaders including Kim for assault and the chairmen of Samsung Electronics Co. and Hyundai Motor Co. for white-collar offenses. Shares of Hanwha Corp., Hanwha Securities (003530) Co. and Hanwha Chemical Corp. all declined. “It’s a bit of a surprise,” Charles Lee, a Hong Kong- based research director for North Asia with the Asian Corporate Governance Association, said by phone. “Korea Inc. appears to have taken the first step forward to change its usual political and legal practices.” Kim had pleaded not guilty and said through his lawyers during the trial that Hanwha companies had not incurred any losses. Investigations began in 2010 into allegations that Kim was involved in embezzling money between 2004 and 2006. Tougher Laws With campaigning underway for a presidential election in December, 23 members of the ruling New Frontier Party on July 16 submitted a draft revision to the National Assembly to increase sentences and limit the scope for judges to suspend jail terms for leaders of the chaebol, as the business groups are known in South Korea. “It’s said money is almighty and that chaebol bosses are protected by people in power,” the group said in the draft. Since 1990, seven chairmen from the nation’s 10 largest industrial groups have been sentenced to jail, and on every occasion the prison term was ultimately suspended, according to Chaebul.com , a Seoul-based organization that collects information about the conglomerates. After attacking bar workers in 2007 who’d been involved in a scuffle with his son, Kim was given a three-year jail sentence that was suspended on condition he did 200 hours of community service. The next year he received a presidential pardon. Explosives, Insurance Kim succeeded his father as chairman of Hanwha Group in 1981. The conglomerate generates about 60 percent of its revenue from financial services through companies including Korea Life and Hanwha Securities, with much of the remainder coming from explosives, chemicals and construction, according Hanwha Group spokesman Park Jang Woo. Hyundai Motor Chairman Chung Mong Koo and SK Holdings Co. Chairman Chey Tae Won were among 74 business people pardoned along with Kim in 2008. “I am aware that there is criticism of the amnesties and personally I oppose them,” President Lee Myung Bak said in a statement at the time. “But I considered slowing investment and decided that businesses may be facing difficulties.” The chaebol, some of which trace their origins back to the Japanese colonial era which ended in 1945, thrived during the postwar period and helped drive the export-led growth that pulled South Korea out of poverty and into the ranks of the Group of 20 nations. Surging Revenue Hanwha Group’s revenue has jumped 47-fold since 1980 to 35 trillion won last year, according to data from the nation’s Fair Trade Commission. Hanwha Corp. (000880) shares fell 2.6 percent to 30,100 won at the 3 p.m. close of trading in Seoul, while the benchmark Kospi index rose 0.05 percent. Hanwha Securities declined 0.9 percent, Hanwha Chemical dropped 0.5 percent and Korea Life advanced 0.5 percent after earlier sliding as much as 1.6 percent. Samsung Group , led by Samsung Electronics Chairman Lee Kun Hee, is the largest of South Korea’s chaebol and has sales equivalent to about one-fifth of the nation’s economy. Lee was convicted of tax evasion in 2008, given a suspended three-year prison term and also subsequently pardoned by the president. Hong Dong Ok, co-chief executive officer of Yeochun NCC Co., an affiliate of Hanwha Chemical, was sentenced to four years in prison today and fined 1 billion won for aiding Kim. The case is Kim Seung Youn and 15 others 2011 Gohap 25, Seoul Western District Court. To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net |
2024-09-30 | Bloomberg | Chronic Bubble Phobia Has German Investors Shunning Stocks, Playing Safe | At 79, Karl-Friedrich Markwort is old enough to remember the postwar economic collapse that left German currency and equities all but worthless. So it might not seem surprising that Markwort, a retiree in the Frankfurt suburb of Bad Soden, steers clear of stocks. He was lured into the market once, during the 1990s Internet boom, because he wanted to own “the businesses of the future,” he says. By the time Deutsche Telekom AG , Germany’s biggest phone company, spun off part of its T-Online unit in an April 2000 public offering, Markwort was eager to own 500 shares. “I was lucky because I was only allocated 35,” he says. He later sold them for a 50 percent loss. “I don’t trust the stock market now,” he adds. “I wouldn’t invest there anymore.” In Düsseldorf, 44-year-old Reinhard Strueven feels the same way. His re-tirement plan consists of a pension, a bank account, an investment apartment -- and no equities, Bloomberg Businessweek reports in its Oct. 4 issue. Max Ruehle, 30, a furniture store owner in Wiesbaden who lost 30,000 euros ($38,424) on stocks from 2001 to 2005, also stashes his cash in the bank. “If I want to play with money, then I go to a casino,” he says. When it comes to investing, many Germans are uncomfortable taking risks. Only 6 percent directly owned stocks in the first half of 2010, according to Deutsches Aktien-institut (DAI), a shareholder lobby association, whereas stock ownership for the French is 15 percent and 10 percent for Britons, according to official figures. Financial Assets Only 9.4 percent of the German population owned shares of mutual funds in the first half of 2010, versus 44 percent of households in the U.S. in 2009. At the end of 2009 stock investments represented 3.9 percent of the financial assets of German households, the lowest level since at least 1991. Instead of stocks, Germans have 28 percent of their assets invested in life insurance products, 18 percent in cash and short-term deposits, and 20 percent in bank deposits. Some of Germans’ reluctance to sink their money into equities is a result of the structure of the retail banking system, which is dominated by locally owned savings banks and cooperative lenders. As a result, investment advice tends to be more conservative than in other Western economies. Local Power The banks “have a different type of governance, with more local power,” said Andreas Hackethal, a professor of finance at Frankfurt’s Goethe University. “People know each other, and that’s an incentive to be more conservative as advisers don’t want to risk personal relationships.” As well as the 2003 implosion of the Neuer Markt -- a technology-focused market started four years before -- there was also a series of money-losing IPOs to frighten people away from stocks: In 1996 the Kohl government privatized Deutsche Telekom, and shares surged from the equivalent of 14.57 euros in the public offering to its high of 103.5 euros in March 2000, before the dot-com bust shattered the price, and Germany’s fragile investing confidence along with it. Today, Bonn-based Deutsche Telekom still trades below its IPO value. Shares of Deutsche Post AG , Europe’s biggest mail carrier which also has its headquarters in Bonn, followed a similar pattern, selling for 21 euros each in a 2000 IPO. They’re now worth little more than half that. Since German reunification in October 1990, the DAX Index has more than quadrupled in value, confounding skeptics who said the costs of subsidizing East Germany’s crippled economy would cause years of stagnation. So far this year, German stocks have performed better than those in most developed nations. Still, Germans aren’t going for it. “The thinking of the broad population,” says DAI director Franz-Josef Leven , “is that shares are here to lose money.” To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net. To contact the editors responsible for this story: David Merritt at dmerritt1@bloomberg.net. Angela Cullen at acullen8@bloomberg.net |
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