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2024-02-20 | Bloomberg | Europe Bank Stocks May Rally 18%: Technical Analysis | The Stoxx 600 Banks Index , a measure of shares in European lenders, may rally as much as 18 percent in the next three months if it can breach its highest level this year, according to a technical analyst at Natixis SA. The gauge may extend its advance to a first resistance level of 194.34 in the next two months if it can break through its intraday high of 180.06 reached on Jan. 30, Ouri Mimran said in a telephone interview from Paris today. The index may then climb to 209.80, an 18 percent jump from yesterday’s close. “Upside potential for banking stocks over the next few weeks remains intact,” Mimran said. “We’re seeing European banks holding nicely above the support trendline at 173.70, not far away from its recent high. Breaching through that level would signal a new upward wave.” The measure, which includes HSBC Holdings Plc and Banco Santander SA, has rallied 46 percent since it reached the lowest level of 2012 on June 4 as the European Central Bank committed to an unlimited bond-buying program and U.S. lawmakers agreed on a compromise federal budget. A pullback below the level of 173.70 would signal a consolidation in one to two weeks, “but that will not invalidate completely our scenario,” Mimran said. In technical analysis, investors study charts of trading patterns and prices to predict changes in a stock, commodity, currency or index. Analysts identify resistance levels, or ceilings limiting further gains, and supports, which act as floors in a declining market. To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-08-06 | Bloomberg | Rubber Set for Best Weekly Gain Since June on Improved Auto Demand Outlook | Rubber advanced for a second day, heading for the biggest weekly rise since June, amid speculation that demand for the commodity used in tires may grow after automakers raised their earnings outlook. Futures in Tokyo climbed as much as 0.7 percent to 282.6 yen a kilogram ($3,282 a metric ton) after reaching a five-week high of 287 yen yesterday. The price is set for its best performance since the week ended June 25. Toyota Motor Corp. , the world’s largest carmaker, increased its full-year profit forecast this week on recovering U.S. sales and gains in Asia. The report came after Honda Motor Co., Japan’s second-largest automaker, raised its earnings outlook on improving Asian sales. “Good numbers from carmakers eased concern that a slowdown in the U.S. economy may curb demand,” Kazuhiko Saito , analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Demand may be sustained, led by growth in Asian car sales.” January-delivery rubber traded at 281.2 yen at 2:30 p.m. on the Tokyo Commodity Exchange. Toyota may post net income of 340 billion yen in the year ending in March, compared with an earlier estimate of 310 billion yen, it said on Aug. 4. The automaker raised its sales outlook for all regions except Europe amid a rebound in demand. Honda expects net income of 455 billion yen in the year ending March, compared with an earlier estimate of 340 billion yen, the Tokyo-based company said July 30. Gains in rubber futures were limited as Asian equities fluctuated and the dollar traded near the weakest in eight months against the yen ahead of a report today expected to show that the U.S. lost jobs for a second month. U.S. non-farm payrolls probably fell by 65,000 in July, according to the median estimate of 84 economists surveyed by Bloomberg News. More Americans than projected filed applications for unemployment insurance last week, indicating firings remain elevated as the recovery moderated. January-delivery rubber on the Shanghai Futures Exchange lost 0.8 percent to 24,625 yuan ($3,637) a ton. To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net |
2024-07-15 | Bloomberg | Canada Existing Home Sales Down 8.2% in June, Real Estate Association Says | Canadian existing home sales fell 8.2 percent in June from May on a seasonally adjusted basis as the country’s housing market continues to cool, according to a release from the Canadian Real Estate Association. The number of homes sold dropped to 33,959 units, from 37,005 units in May, CREA said in the release from Ottawa today. The value of home sales dropped 10.5 percent to C$11.3 billion ($10.9 billion), the association said. “The June report was weak no matter how you slice it,” Pascal Gauthier , an economist with Toronto-Dominion Bank, said in a note to clients. “But it comes as no surprise that the housing market continued cooling from the record levels of activity established last year.” The Bank of Canada predicted in April that housing will “weaken markedly through the remainder of 2010 and well into 2011.” The central bank said housing will contribute 0.6 percentage point to growth this year and cut 0.1 point from next year’s expansion. The real estate group cited tighter regulations for mortgage insurance and “anticipated interest rate increases” as factors causing the decline. Sales were 20 percent lower than in June 2009, with drops of 35 percent in Alberta and 23 percent in British Columbia, the group also said. New listings fell 6.8 percent to 70,401 units in June from May, the realtor group said. The average price for a home in Canada was C$342,662 in June, an increase of 4.9 percent from a year earlier. To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net . |
2024-02-16 | Bloomberg | Oil Rises to Six-Week High on Greece Optimism, Drop in U.S. Jobless Claims | Oil advanced to a six-week high on optimism that Greece will get a second bailout and as U.S. jobless claims dropped to the lowest level since 2008. Futures rose 0.5 percent after Pantelis Kapsis, a government spokesman, said Greece expects euro area finance ministers to approve a deal at a meeting on Feb. 20. Applications (INJCJC) for unemployment insurance payments dropped 13,000 in the week ended Feb. 11 to 348,000, the Labor Department said. “All of the markets are clearly rising on the latest Greek news,” said John Kilduff , a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. A bailout “should lead to greater stability and strength in all of the euro-zone economies and reduce the fear of a total default, which could have had terrible consequences.” Oil for March delivery gained 51 cents to $102.31 a barrel on the New York Mercantile Exchange , the highest settlement since Jan. 4. Prices have gained 3.5 percent this year. Brent oil for April rose $1.18, or 1 percent, to settle at $120.11 a barrel on the ICE Futures Europe exchange, an eight- month high. Letters of commitment to implement the second aid plan won’t be required from party leaders outside the two supporting Prime Minister Lucas Papademos , Kapsis said in Athens. “The Greek conservative leaders have finally signed on, which is removing a final impediment to assistance,” Kilduff said. Equities, Euro Gain U.S. stocks and the euro gained after the Greece bailout news. The Standard & Poor’s 500 Index rose as much as 1.1 percent. The euro strengthened 0.6 percent against the dollar after falling as much as 0.7 percent. A stronger euro and weaker dollar boost oil’s appeal as an investment alternative. The European Central Bank is swapping its 50 billion-euro ($66 billion) Greek government bond holdings for new Greek bonds, Germany ’s Die Welt newspaper reported, citing unidentified central bank officials. The swap will be completed by Feb. 20, Die Welt said in a pre-release of an article to be published tomorrow. European governments may cut interest rates on emergency loans to Greece and use contributions from the ECB to plug a new financing gap in the second bailout program for Athens, two people familiar with the discussions said. “If we aren’t going to have a meltdown, it’s good for risk assets,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The Germans, Finns and Dutch have gotten some real concessions out of the Greeks, and may be ready for a deal.” Jobless Claims Estimates for first-time jobless claims ranged from 350,000 to 380,000 in a Bloomberg survey of 45 economists. The Labor Department revised the prior week’s reading up to 361,000 from 358,000. The number continuing to collect jobless benefits dropped by 100,000 to 3.43 million, the fewest since 2008. Total fuel demand increased 5.9 percent from a 12-year low to 18.7 million barrels a day last week, the Energy Department reported. “The jobs number is pretty bullish,” said Phil Flynn , an analyst at PFGBest in Chicago. “If the jobs market starts to recover, oil demand will come back.” Oil was also supported by other government data that beat expectations. The Commerce Department reported that U.S. builders broke ground on more homes than forecast in January and the Federal Reserve Bank of Philadelphia’s general economic index for February rose to 10.2, a four-month high. “Economic numbers are showing the U.S. economy is recovering,” said James Williams, an economist at WTRG Economics, an energy research firm in London , Arkansas. Futures dropped as much as 0.9 percent in early trading after Moody’s Investors Service said it is reviewing the credit ratings of 17 banks and securities firms and as the U.S. played down Iran’s claim of a nuclear breakthrough. Electronic trading volume on the Nymex was 595,430 contracts as of 3:11 p.m. in New York. Volume totaled 792,027 yesterday, 30 percent above the three-month average. Open interest was 1.48 million contracts. To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net |
2024-08-28 | Bloomberg | New China Life Falls as Profit Misses Estimates: Hong Kong Mover | New China Life Insurance Co. (1336) , the nation’s third-largest life insurer by premium income last year, fell by the most in more than a month in Hong Kong trading after first-half profit missed analyst estimates. The stock dropped as much as 3.8 percent, the most since July 12, and traded 3.1 percent lower at HK$20.65 as of 10:36 a.m. local time. Net income rose 15 percent to 2.18 billion yuan ($356 million), the company said in an exchange filing yesterday, missing the 2.38 billion yuan mean estimate of five analysts surveyed by Bloomberg News. New China Life’s gross premiums fell 8 percent in the first half after sales of new policies over bank counters tumbled 55 percent as higher-return wealth management products offered by lenders erode the appeal of insurance products. “Business continued to worsen,” Tong Chengdun, Shenzhen-based analyst at Guosen Securities Co., wrote in a report today, citing declines in both sales through banks and the more profitable new business acquired by individual agents. The Beijing-based insurer also reported 573 million yuan in unrealized losses from investments, reversing 272 million yuan of gains a year earlier, as the benchmark Shanghai Composite Index (SHCOMP) declined 13 percent in the first half amid an economic slowdown. To contact 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 |
2024-08-03 | Bloomberg | Herbert Smith, Proskauer, Ropes & Gray: Business of Law | Herbert Smith LLP hired a team of six commercial litigation partners from Chadbourne & Parke LLP, five of whom will open a New York office in September, the firm’s first in the U.S. Thomas Riley, Chadbourne’s former litigation head, Gregory Loss, Chadbourne’s former products liability counseling and defense practice group head, David Wallace, Allison Alcasabas and Joseph Falcone will handle complex litigation ranging from general commercial disputes to regulatory matters, securities, investigations and product liability in the New York office. A sixth partner, Philip Pfeffer, who is U.S. qualified and based in London, will work in Herbert Smith’s dispute resolution practice in London. Pfeffer focuses on product liability, public international law and other commercial work including shareholder disputes, the firm said. “We remain committed to a strong products liability litigation practice in the U.S. and internationally,” Chadbourne managing partner Andrew Giaccia said in a statement. “We wish the tobacco team well. They are distinguished lawyers and good colleagues. We are grateful for the many contributions that they have made to the firm.” Herbert Smith’s New York office will focus solely on disputes work, with particular emphasis on cross-border investigations, international arbitration and cross-border litigation for network clients. The new team’s primary focus will be on advising international clients with U.S. litigation issues, the firm said. They will be joined in New York by international arbitration partner Chris Parker, who is relocating from London to establish an arbitration practice. “We have recruited a very high caliber team whose reputation will allow us to hit the ground running in New York,” Jonathan Scott, Herbert Smith’s senior partner, said in a statement. Herbert Smith has more than 1,400 lawyers, including more than 250 partners, in 17 offices in Europe, the Middle East and Asia. The firm announced that it will merge with the Australian law firm Freehills on Oct. 1, so the New York office will become part of the new firm. Duffie Named Head of Littler Mendelson’s Atlanta Office Littler Mendelson PC named L. Traywick Duffie head of its Atlanta office, succeeding Cameron Pierce. Pierce, a founding shareholder of the office, was head of the Atlanta office for more than 10 years. He will continue his practice at Littler, focusing on employment litigation and counseling. “For more than a decade, Cameron has done a tremendous job in building a strong and significant presence in the Atlanta market and we thank him for his efforts,” said Marko Mrkonich, president and managing director of Littler. “Traywick is the ideal candidate to lead the office’s future growth with his extensive experience in starting, growing, and managing law offices and labor and employment practices.” Duffie represents corporate clients in a range of industries throughout the U.S. He has successfully defended numerous class and collective matters and countered union organizing campaigns in more than 40 states, the firm said. Littler has more than 900 attorneys at 56 offices in North America and South America. Moves Proskauer Hires Seyfarth Litigator, Begins New Practice Proskauer Rose LLP hired employment litigator Steven J. Pearlman as a partner in the firm’s Chicago office. Pearlman is a former partner and co-chair of Seyfarth Shaw LLP’s national Sarbanes-Oxley whistle-blower team, Proskauer said. He joins Proskauer’s labor and employment law department as co-head, along with partner Lloyd Chinn, of its new whistleblowing and retaliation practice group. “Steve is one of the country’s foremost whistleblower defense and employment litigators,” said Elise Bloom, co-chair of Proskauer’s labor and employment law department and co-head of the firm’s class/collective action group. Pearlman has experience defending management against whistle-blower claims arising under federal laws, state statutes and common law. He also counsels clients on strategies to avoid litigation, in addition to defending employers against class action and single-plaintiff claims of discrimination, harassment and violations of wage-and-hour laws, the firm said. Pearlman is the latest in a series of lawyers who have recently joined Proskauer’s labor and employment law department. In April, the firm added Los Angeles partner Kenneth Sulzer as co-head of its California labor and employment law and class/collective action groups. In June, it added Cédric Jacquelet as international counsel in Paris. Proskauer’s labor and employment law department has more than 160 lawyers globally. The firm has 13 offices worldwide. Litigator Carl Buchholz Joins DLA Piper in Philadelphia Carl Buchholz, a former Blank Rome LLP managing partner and chief executive officer, joined DLA Piper LLP’s litigation practice in the Philadelphia office. Buchholz served as managing partner and CEO of Blank Rome from 2006 to 2010. He concentrates on government relations and complex commercial litigation. He is experienced in federal and state administrative, regulatory and legislative matters; government contracts; commercial and general litigation; environmental law; insurance; and intellectual property and patent matters, the firm said. Buchholz also served as special assistant for Homeland Security to President George W. Bush from 2001 to 2002 and worked as transition team chairman for the U.S. Department of Homeland Security. He was also co-chairman of the transition team for Pennsylvania Attorney General Tom Corbett, who is now that state’s governor, and worked as Pennsylvania general counsel for the Bush-Cheney presidential campaign in 2004, the firm said. “Carl is an accomplished and well-known lawyer with a proven track record,” said Robert Mathias, joint global leader and U.S. chair of DLA Piper’s litigation practice. “In addition to complementing our existing litigation and corporate practices, Carl’s extensive government work will be a valuable asset to the firm and our Philadelphia office.” DLA Piper’s litigation practice comprises more than 1,500 lawyers globally. The firm has 4,200 lawyers in 31 countries and 77 offices throughout the Americas, the U.K., Continental Europe, Middle East, Asia and Australia. Holland & Knight Hires IP Litigator Weiss to Head Practice Holland & Knight LLP said Charles A. Weiss joined the firm as a partner and head of its New York Intellectual Property Group. He was previously a partner with Kenyon & Kenyon LLP, the firm said. Weiss has litigated patent, trade secret, license and false advertising cases involving matters such as the expression of recombinant proteins, controlled-release pharmaceuticals, medical diagnostic agents, endocrine and hormone products, nutritional supplements, food chemistry and processing, high- caustic detergents, pipe liners and tube fittings. “Charles’s vast experience with technology-driven litigation and transactions, primarily in the pharmaceutical, chemical and biotechnology areas, will prove beneficial to our clients,” said John M. Hogan, chair of the firm’s litigation section. Weiss also has experience in the investigation of product counterfeiting and pursuit of those responsible. Holland & Knight LLP has more than 1,000 lawyers and other professionals in 17 U.S. offices, as well as Abu Dhabi , Beijing, Bogota and Mexico City. Deals Bain Capital Agrees to Purchase Stake in Genpact for $1 Billion Bain Capital Partners LLC agreed to buy a stake in outsourcing company Genpact Ltd. (G) from General Atlantic LLC and Oak Hill Capital Partners LP for $1 billion. Ropes & Gray LLP is representing Bain on the deal. Cravath Swaine & Moore LLP is representing Genpact. Paul, Weiss, Rifkind, Wharton & Garrison LLP advised the selling shareholders, funds associated with General Atlantic and Oak Hill Capital Partners. The Ropes & Gray team was led by Boston corporate partner Newk Stillwell. Additional corporate partners include Will Shields, Alison Bomberg and Marcia Ellis. Finance partner Byung Choi and tax partners Chris Leich and David Saltzman were also involved. The Cravath team was led by partner Sarkis Jebejian and included partners Thomas E. Dunn, corporate; James C. Vardell III, finance; and Michael L. Schler, tax. The Paul, Weiss team included corporate partners Matthew Abbott, Neil Goldman and David Lakhdhir and tax partners Richard Bronstein and David Sicular. Bain, a private-equity firm, is buying about 30 percent of Genpact’s stock outstanding for $14.76 a share, according to a statement. The transaction is expected to be completed this year after a special dividend of $2.24 a share to all shareholders, including General Atlantic and Oak Hill. Oak Hill and General Atlantic acquired 60 percent of the company, formerly known as GE Capital International Services, for $500 million in 2004. For more, click here. Litigation Whitman Lawyer Challenges Motey’s Trial Testimony on Inside Tips A lawyer for Whitman Capital LLC founder Doug Whitman tried to undermine the testimony of a government witness who testified that he passed inside information about Marvell Technology Group Ltd. (MRVL) revenue to Whitman. Karl Motey, a former computer-chip industry analyst, testified at Whitman’s criminal trial that he got detailed non- public information about Marvell’s revenue figures from two sources inside the company and shared them with his clients, including Whitman. He told jurors that Whitman knew the information was illicit. A defense lawyer cross-examined Motey yesterday, trying to show that Whitman thought the information he was getting from Motey wasn’t confidential because it had been widely disclosed. Motey agreed with the lawyer, David Rody, a partner at Sidley Austin LLP, that he told Whitman that “Marvell was leaky.” Motey, one of the government’s two key witnesses, testified for a second day in Whitman’s trial in Manhattan federal court. Prosecutors claim Whitman used inside information from Motey and from Roomy Khan , a former Intel Corp. (INTC) executive, to make almost $1 million for his Menlo Park, California-based hedge fund. The trial is part of a broad government investigation of insider trading involving hedge funds. Since August 2009, at least 70 people have been charged with illegal trading by the office of U.S. Attorney Preet Bharara. More than 60 have pleaded guilty or been convicted at trial. Motey pleaded guilty in 2010 to conspiracy and securities fraud. He told jurors Aug. 1 he’s testifying in hopes of avoiding a prison sentence. Rody showed Motey copies of research reports he published on companies in the semiconductor industry, including Marvell, before the time when Motey admits he was passing inside tips. “Sources indicate MRVL’s storage segment remains strong,” one report from 2005 read, referring to Marvell’s ticker symbol. Whitman’s lawyers have told U.S. District Judge Jed S. Rakoff, who is overseeing the trial, they are trying to show that the words “source” and “mole,” which Whitman is alleged to have used in discussing Motey’s contacts at Marvell, refer to sources of legitimate company information. Rody also got Motey to agree that some of the information he got from his Marvell sources was inaccurate. Marvell, based in Hamilton, Bermuda, makes computer chips that run smartphones and that are used in computer hard drives. The case is U.S. v. Whitman, 12-cr-00125, U.S. District Court, Southern District of New York (Manhattan). News JPMorgan Lobbying Chief Scher to Add Oversight of Philanthropy JPMorgan Chase & Co. (JPM) said corporate-responsibility head Peter Scher, who runs the bank’s lobbying staff, will also supervise philanthropy, according to an internal memo obtained by Bloomberg News. Scher, who reports to Chief Executive Officer Jamie Dimon , will oversee Kim Davis, president of the JPMorgan Chase Foundation, according to the memo. The contents were confirmed by Jennifer Zuccarelli , a spokeswoman for the New York-based bank, the largest in the U.S. by assets. Scher, 51, joined JPMorgan in May 2008 after serving as the managing partner of the law firm Mayer Brown LLP. He previously was chief of staff to U.S. Senator Max Baucus , a Montana Democrat, and in 2004 managed the vice presidential campaign of John Edwards. The bank and foundation gave more than $150 million during 2010 in 28 domestic markets and more than 25 countries, according to its website. The foundation concentrates on neighborhoods with high rates of poverty and historic disinvestment, the company said. Obama to Nominate Meade as Treasury Department General Counsel Christopher Meade will be nominated for Treasury Department general counsel, President Barack Obama announced Aug. 1, BNA reported. Meade is currently principal deputy general counsel at Treasury and has served as acting general counsel since June. From 2005 to 2010, he was a partner at Wilmer Cutler Pickering Hale & Dorr LLP, where he was a member of the litigation and securities departments, as well as the appellate and Supreme Court litigation group. Fees Madoff Trustee Firm Charges $43.3 Million for Oct. 1-Jan. 31 The liquidator of Bernard Madoff ’s brokerage, Irving Picard , and his law firm put in a bill for $43.3 million in fees for work from Oct. 1, 2011, through Jan. 31, according to a federal court filing in Manhattan. The firm, Baker & Hostetler LLP, previously has been paid $273 million for liquidating the estate since 2008. Madoff is serving a 150-year prison sentence after pleading guilty to running the biggest Ponzi scheme in U.S. history. The Madoff brokerage liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court , Southern District of New York (Manhattan). 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 . |
2024-07-28 | Bloomberg | St James’s Place’s First-Half Profit Rises 68% on New Funds | St. James’s Place Plc, the wealth manager majority-owned by Lloyds Banking Group Plc, said first- half profit climbed 68 percent as it attracted new funds. Net income rose to 47.6 million pounds ($77.8 million) in the six months to June 30, compared with 28.4 million pounds a year earlier, the Cirencester, England-based firm said today in a statement. That beat the 43 million-pound estimate of four analysts surveyed by Bloomberg. “The results were particularly pleasing given the current economic environment, sovereign debt concerns and fragile stock markets,” Chief Executive Officer David Bellamy said in the statement. “We continue to attract new funds from both new and existing clients.” St. James’s Place, which advises clients with more than 30,000 pounds to invest, is the best-performing member of the FTSE ASX Life Insurance (FALIFE) Index over the past six months after raising its dividend 49 percent in February. The firm has benefitted from wealthy clients seeking to shelter their savings in tax-free accounts as the British government raised levies on higher earners. Net inflow of funds grew 13 percent to 1.7 billion pounds, the company said. To contact the reporters on this story: Kevin Crowley in London at kcrowley1@bloomberg.net ; Anne-Sylvaine Chassany in London at achassany@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net ; |
2024-05-22 | Bloomberg | Kasowitz Benson, Eversheds, Latham: Business of Law | Kasowitz, Benson, Torres & Friedman LLP hired insurance recovery litigators Jerold Oshinsky and Linda Kornfeld from Jenner & Block LLP as partners to open the firm’s Los Angeles office. Oshinsky was Jenner’s co-chairman of the insurance litigation and counseling practice. Kornfeld will head Kasowitz’s Los Angeles office. The two new partners join the insurance recovery group. “Jerry continues to pioneer many of the legal theories that underlie insurance recovery law today, and Linda has repeatedly proven her ability to obtain winning results for her clients in high-stakes cases,” Robin Cohen, who leads Kasowitz’s insurance recovery group, said in a statement. “With their arrival, we will continue to expand nationally, while exploring new, creative strategies to meet our clients’ needs in the rapidly evolving insurance area.” Oshinsky and Kornfeld have recently focused on issues relating to cyber liability, intellectual property, antitrust and sexual abuse claims, as well as natural disaster cases related to earthquakes, hurricanes, floods, tornadoes and storms such as Superstorm Sandy, the firm said. Kasowitz, Benson has more than 375 lawyers, primarily focusing on complex commercial litigation. The firm has eight U.S. offices. Eversheds Starts Beijing Office with Two New Partner Hires Eversheds LLP started a Beijing office yesterday with corporate energy lawyer Ingrid Zhu-Clark and corporate lawyer Jay Ze. Zhu-Clark joins Eversheds from Morgan Lewis & Bockius LLP, where she was co-managing partner of the Beijing office. She will head the Beijing office for Eversheds. Ze was previously at Uria Menendez. Zhu-Clark’s practice is focused on the international oil and gas sector, in particular representing Chinese clients in outbound investment matters across multiple jurisdictions including Russia , Central Asia and Africa , the firm said in a statement. Ze handles cross-border M&A working with state-owned enterprises, global companies and investments banks, the firm said. “In the past five years, since the launch of our first office in the region, Asia has been a significant and growing market for Eversheds,” Stephen Kitts, Eversheds’ Asia managing partner said in a statement. “We are confident that the recruitment of high caliber M&A experts like Ingrid and Jay will build on our success.” Eversheds has more than 4,500 employees at 44 international offices in 26 jurisdictions. King & Wood Mallesons’ Australia Head Steps Down After 13 Years Tony O’Malley, King & Wood Mallesons’ managing partner of the law firm’s Australian offices, agreed to resign immediately and will retire as a partner at the end of 2013. King & Wood Mallesons’ board has formed a subcommittee to replace O’Malley with a new managing partner for Australia expected to be named in two or three weeks, Stuart Fuller, the firm’s global managing partner, said in an e-mailed statement yesterday. O’Malley had been with the firm for 13 years, it said. King & Wood and Mallesons Stephen Jaques combined last year to form Asia’s biggest law firm, which now has about 2,200 legal professionals. Fuller gave no reason for O’Malley’s resignation in the statement. O’Malley’s departure was reported earlier by the Australian Financial Review. Deals Latham Advises Actavis on Warner Chilcott Purchase Latham & Watkins LLP advised Actavis Inc. (ACT) , the largest U.S. maker of generic drugs by market value, which agreed to acquire Warner Chilcott Plc (WCRX) for about $5 billion excluding net debt in a deal to expand in women’s health and urology. Davis Polk & Wardwell LLP advises Warner Chilcott. Latham’s team was led by Orange County partners Scott Shean and Charles Ruck. Advice was also provided by New York partner Stephen Amdur on M&A; Brussels/Washington partner Michael Egge, on antitrust; Washington partner Nicholas DeNovio and Los Angeles partner Laurence Stein on tax; Los Angeles partner James Barrall on employee benefits; Los Angeles partner David Schindler on compliance; and New York partners Wesley Holmes and Daniel Seale on finance matters. The Davis Polk corporate team includes partners Michael Davis and H. Oliver Smith. Partners Edmond T. FitzGerald, executive compensation advice; Michael Mollerus, tax; Michael Kaplan, capital markets; Joel M. Cohen, antitrust and competition advice. Arthur Cox & Co. is advising Warner Chilcott as to matters of Irish law. Fried, Frank, Harris, Shriver & Jacobson LLP represented Bank of America Merrill Lynch and Greenhill & Company, financial advisers to Actavis. The Fried Frank team included corporate partners Philip Richter, Abigail Bomba and Richard May and tax partner Alan Kaden. Warner Chilcott investors will receive 0.16 shares of new Actavis stock for each Warner Chilcott share they own, Parsippany, New Jersey-based Actavis said in a statement yesterday. The agreement currently values each Warner Chilcott share at $20.08, a 4.5 percent premium over the stock’s closing price on May 17. Including Warner Chilcott’s more than $3 billion in net debt, the total value of the acquisition is about $8.5 billion. The combined company will have $11 billion in annual revenue as Actavis also adds gastroenterology and dermatology businesses, according to yesterday’s statement. The purchase also may provide Actavis with a $4-a-share tax benefit because Warner Chilcott is incorporated in Ireland, Leerink Swann LLC said. Actavis rejected an offer from Mylan Inc. for $15 billion, deciding instead to pursue talks to take over Warner Chilcott, said people familiar with the matter, Bloomberg News reported on May 14. For more, click here. Simpson Thacher Advises Yahoo on $1.1 Billion Tumblr Purchase Simpson Thacher & Bartlett LLP is representing Yahoo! Inc. (YHOO) in buying blogging network Tumblr Inc. for about $1.1 billion as Chief Executive Officer Marissa Mayer seeks to lure users and advertisers with her priciest acquisition to date. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP advised Tumblr. Simpson Thacher corporate partner Gary Horowitz is leading the team for Yahoo. Additional partners include Kirsten Jensen, mergers and acquisitions, Katharine Moir, tax, and Tristan Brown, executive compensation and employee benefits. Additional lawyers who worked on the deal are Sean Crnkovitch, Andrew Nightingale, Cara Walsh and Linda Barrett. Latham & Watkins LLP partners Hanno Kaiser in San Francisco, Amanda Reeves in Washington , and Susanne Zuehlke in Brussels are advising Yahoo on regulatory matters related to the deal. Gunderson partners on the deal included Ward Breeze, Steven Baglio and Daniel Goldberg in New York. Tumblr, based in New York, will continue to host its more than 108 million blogs, while CEO and founder David Karp, 26, will remain in charge of the website, “per the agreement and our promise not to screw it up,” Sunnyvale, California-based Yahoo said yesterday in a statement. Mayer, CEO of the biggest U.S. Web portal since July, is betting that Tumblr will help transform Yahoo into a hip destination in the era of social networking as she challenges Google Inc. (GOOG) and Facebook Inc. (FB) in the $17.7 billion display ad market. The price she’s paying -- about a fifth of Yahoo’s $5.4 billion in cash -- underscores the deal’s importance to Mayer’s turnaround effort, according to Zachary Reiss-Davis , an analyst at Forrester Research Inc. For more, click here. Cooley Advises Websense on $906 Million Private-Equity Buyout Cooley LLP was legal adviser to Websense Inc. (WBSN) , a website-filtering company that is shifting into Internet security and will be acquired by private-equity firm Vista Equity Partners for about $906 million. Kirkland & Ellis LLP was Vista’s legal adviser. Cooley partners included Barbara Borden, Al Browne, Thomas Welk, Francis Fryscak and Michael Tollini. The Kirkland team includes corporate partners David Breach, Daniel Wolf, Stuart Casillas and Joshua Zachariah, and debt finance partner Francesco Penati. Websense’s in-house lawyers on the deal include its general counsel Christian Waage and Kirk Tyree, a former Cooley associate. Websense investors will receive $24.75 a share in cash, a premium of about 29 percent over the stock’s closing price on its last trading day, according to a statement yesterday. The deal will turn the San Diego company into a closely held business. JPMorgan Chase & Co., RBC Capital Markets and Guggenheim Partners are providing debt financing for the transaction. The company is trying to transition from its roots blocking inappropriate websites in the workplace -- described by Chief Executive Officer John McCormack as the “porn-filtering market” -- into a provider of broader online-security services. Vista, an Austin, Texas-based firm that specializes in technology investments, will help bring “operational discipline” to the company, McCormack said in the statement. For more, click here. Moves O’Melveny Hires Another Cadwalader Bankruptcy Lawyer O’Melveny & Myers LLP announced that Zachary H. Smith has joined the firm’s restructuring practice as a partner in New York. Smith joins from Cadwalader Wickersham & Taft LLP, in the wake of the recent departures of John J. Rapisardi and George A. Davis, former co-chairmen of Cadwalader’s global financial restructuring department, and former Cadwalader partner Peter M. Friedman, all of whom joined O’Melveny. Smith represents debtors, creditors, lenders and strategic investors in in-court and out-of-court restructurings. He has been the lead lawyer representing Vertis Inc., advising the company through its chapter 11 proceeding, the firm said. He also was a member of the team that was outside counsel to the U.S. Treasury Department and Presidential Task Force on General Motors’ restructuring. O’Melveny has about 800 lawyers in 16 offices in the U.S., Europe and Asia. Video Supreme Court Bar Lacks Diversity, Associated Press Says While the Supreme Court has three female justices, a Hispanic and an African-American, the lawyers appearing before it are almost all white males. According to the Associated Press, during the roughly 75 hours of oral arguments this term, an African-American lawyer spoke one time, for just 11 minutes. Four Hispanic lawyers spoke for less than 2 hours, while female lawyers accounted for just 17 percent of the arguments. Women who do appear tend to have lower paying jobs as public interest lawyers, government lawyers, or public defenders. Ten men from law firms have argued two or more cases this term. Arnold & Porter LLP’s Lisa Blatt is the only woman to do the same. The Justice Department’s Office of the Solicitor General is a leading pipeline to the big law firms that handle High Court cases. While men hold the top supervisory positions there, six women from the office argued before the Court this term. To see the video, click here. Are Political Intelligence Practice Groups Too Risky? Robert Walker, attorney at Wiley Rein LLP, talks with Bloomberg Law’s Lee Pacchia about the legal and ethical implications of law firms selling political intelligence. Last month, the SEC issued subpoenas to Greenberg Traurig LLP as part of their investigation into the law firm’s political intelligence practice. Although the firm has denied wrongdoing, Greenberg Traurig has recently stated that it will no longer work in the political intelligence space. This is a Bloomberg podcast. To download, watch or listen to this report now, click here. News U.S. Attorney Leaked Memo to Undermine Fast and Furious Concerns A federal prosecutor involved in the botched gun operation known as Fast and Furious gave an internal memo to the news media, possibly to undermine a federal agent’s criticisms, the Justice Department’s inspector general said. Dennis Burke, then the U.S. attorney for Arizona , in 2011 provided a memo written by John Dodson, a special agent with the Bureau of Alcohol, Firearms, Tobacco and Explosives, to a Fox News reporter. Burke wasn’t authorized to release the memo and may have intentionally given it to the press to damage Dodson, according to a 23-page report from Michael Horowitz, the Justice Department’s inspector general. “We believe this misconduct to be particularly egregious because of Burke’s apparent effort to undermine the credibility of Dodson’s significant public disclosures about the failures in Operation Fast and Furious,” said the report, which was released yesterday. Dodson was one of the first law enforcement officials to publicly criticize operations where agents allowed guns to “walk” -- be purchased by straw buyers and cross into Mexico. The operations were intended to lead law enforcement to individuals in Mexican drug cartels, which utilize straw purchasers to get guns for their organizations. One of the operations, known as Fast and Furious, became a focal point for congressional investigators as they sought to identify the origins and driving forces behind the program. The inspector general’s office referred its findings to the Justice Department’s Office of Professional Responsibility for a determination of whether the conduct “violated the Rules of Professional Conduct for the state bars in which Burke is a member,” according to the report. Burke, through his lawyers, acknowledged in 2011 that he provided the memo in which Dodson proposed to work undercover as a straw purchaser of firearms. Burke gave it to the Fox News reporter to “give context to information that the reporter already had,” according to a letter sent to the Justice Department’s inspector general by Lee Stein, one of Burke’s lawyers, in November of that year. Burke resigned as U.S. attorney in August 2011. Chuck Rosenberg, another lawyer for Burke, declined to comment on the inspector general’s report. Horowitz released a 471-page report last year outlining management failures at the ATF and the Justice Department as part of the operation that lost track of about 2,000 guns purchased by straw buyers. Two of those guns were found at the scene of the 2010 killing in Arizona of U.S. Border Patrol Agent Brian Terry. 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 . |
2024-12-09 | Bloomberg | Municipal Debt Held by U.S. Households Shows First Decline in Two Years | U.S. households’ municipal-debt holdings fell a half percent in the third quarter, the first decline in two years, as the recovering economy boosted the allure of stocks. State and local government debt owned by households, the largest investor group, fell $5.7 billion to $1.06 trillion in the three months ended Sept. 30 from the previous quarter, data released today by the Federal Reserve said. It’s the first decline since the third quarter of 2008. Holdings were 7.7 percent higher than in the third quarter of 2009, the Fed said. Record-low tax-exempt yields and a 10.7 percent jump in the Standard & Poor’s 500 stock index in the quarter may have prompted households to shift funds, said Howard Cure , director of municipal research for Evercore Wealth Management LLC in New York. “It could just be people sensing the economy picking up, making them less risk-adverse and switching from bonds to equities,” he said. The total municipal-bond market, including short- and long- term debt that states and local governments sold for their own purposes or for nonprofit, expanded by half a percent to $2.86 trillion during the third quarter from the second, the Fed data show. The market was 3 percent larger than in the same period last year, it said. International holdings rose 1 percent in the quarter to $52 billion, the Fed data show. The amount is up 4 percent from a year earlier. To contact the reporters responsible for this story: Ashley Lutz at alutz8@bloomberg.net Brendan A. McGrail in New York at bmcgrail@bloomberg.net. To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net . |
2024-06-09 | Bloomberg | U.S. Jobless Claims Unexpectedly Climb | U.S. initial jobless claims unexpectedly rose last week, a sign that the labor market is struggling to gain traction. Jobless claims increased by 1,000 to 427,000 in the week ended June 4, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast. The number of people on unemployment benefit rolls and those receiving extended payments decreased. Some employers are cutting staff as demand slows because of elevated energy prices, falling house prices and tight credit. The economy generated the fewest jobs in May in eight months and the unemployment rate rose, a report showed last week. “Claims continue to disappoint and suggest there won’t be a quick rebound in employment,” said Sean Incremona, a senior economist at 4Cast Inc. in New York , who correctly forecast the gain. “We are still in a soft patch and progress will be tediously slow.” It was the ninth consecutive week that claims were above 400,000. They reached a two-year low of 375,000 in February. The median forecast was based on a survey of 49 economists. Estimates ranged from 400,000 to 430,000. The Labor Department revised the prior week’s figure to 426,000 from the 422,000 initially reported. Payrolls grew by 54,000 workers last month after increasing by 232,000 in April, Labor Department data showed last week. The jobless rate rose to 9.1 percent from 9 percent. Trade Report In a separate report, the Commerce Department said the U.S. trade deficit narrowed in April, reflecting a plunge in auto and oil imports combined with record exports. The gap shrank 6.7 percent to $43.7 billion, the lowest since December, the Commerce Department said. Stock-index futures rose after the reports. The contract on the Standard & Poor’s 500 Index expiring this month increased 0.4 percent to 1,282.30 at 8:34 a.m. in New York. The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell to a six-month low of 2.92 percent from 2.94 percent late yesterday. Economists at Barclays Capital Inc. last week cut their forecast for the year to 2.5 percent growth from a prior estimate of 3.1 percent at the beginning of the year. Housing prices in 20 major cities dropped in March to the lowest level since 2003, according to data from S&P/Case Shiller released last month. Declining home values weigh on consumer confidence and curb the household spending that makes up 70 percent of the economy. Gasoline Prices Prices for regular gasoline that rose as high as $3.99 in early May also hurt confidence and spending, likely leading to less hiring. Those prices have since come down more than 20 cents, which may provide some relief. Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, fell to 424,000 last week from 426,750. The number of people continuing to receive jobless benefits fell by 71,000 in the week ended May 28 to 3.68 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 52,100 to 3.99 million in the week ended May 21. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent from 3 percent, today’s report showed. Claims Increase Twenty-six states and territories reported an increase in claims, while 27 reported a decrease. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. Some employers are still considering possible cuts to their workforce. Morgan Stanley (MS) , owner of the world’s largest brokerage, may eliminate more jobs at its wealth management unit as Barclays Capital cuts positions in its equities division worldwide. “As we continue to take actions to improve broker efficiency we may reduce our broker headcount below previously announced targets,” Morgan Stanley Chief Financial Officer Ruth Porat said at the Deutsche Bank Global Financial Services Conference on June 7. The unit, which had about 17,800 employees at the end of March, was previously aiming to reduce that figure to as little as 17,500, according to a spokesman for the bank. The firm cut 300 brokers at the division in the first quarter. Barclays Capital, the investment-banking unit of London- based Barclays Plc (BARC) , cut as many as 50 jobs in its equities unit, a person familiar with the matter said. General Motors General Motors Co. (GM) and Ford Motor Co. may enter contract talks with the United Auto Workers this year seeking to close as many as six assembly plants to boost profit while the union tries to save jobs amid an industry recovery. Kim Carpenter , a GM spokeswoman, said last month the company hasn’t decided how many plants it may close and what savings might result. Ford, which intends to close a plant in Minnesota late this year, also may choose to shutter Michigan and Ohio plants making slow-selling vehicles, industry researchers said. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-02-15 | Bloomberg | Geithner Says Republicans Walked Away From U.S. Tax Overhaul | The Obama administration isn’t proposing a comprehensive rewrite of the U.S. tax code because Republicans in Congress aren’t ready to discuss it, Treasury Secretary Timothy F. Geithner said. A necessary, inevitable tax overhaul can’t be achieved because discussions with Republicans last year on deficit reduction proved “impossible,” Geithner said today in an exchange with Republican Representative Dave Camp , the chairman of the House Ways and Means Committee, at a panel hearing. “Your side walked away from the table three separate times,” Geithner said. “You guys were not ready.” Camp, of Michigan , disputed Geithner’s characterization, saying it was unfair to compare private meetings to consideration of a public tax overhaul proposal. “Why isn’t there a comprehensive reform plan coming from this administration?” Camp asked. “What we’re asking is for some sort of public leadership stand on this issue.” Camp has released a discussion draft on parts of a tax-code rewrite, and he said to Geithner that Republican proposals on the deficit-reduction supercommittee last year included some higher revenue. In later comments, Geithner said he would speak “carefully” to avoid provoking Camp. ‘Too Far Apart’ “We found, frankly, that we were too far apart,” Geithner said. “We’re just so far apart on these core priorities.” Camp criticized President Barack Obama’s fiscal 2013 budget plan because it includes tax increases that he said would put U.S. companies at a “competitive disadvantage” around the world. “The budget is replete with proposals that will take more money away from employers, investors and savers,” Camp said. In Obama’s budget plan, released Feb. 13, the top tax rate on ordinary income would increase to 39.6 percent from 35 percent while the top rate on capital gains would rise to 20 percent from 15 percent. Dividends would be taxed as ordinary income instead of at a 15 percent preferential tax rate. The hearing demonstrated the gaps between Republicans and Democrats on tax policy and on whether tax increases should be used to reduce the budget deficit. ‘Top 2 Percent’ “Focusing these revenue proposals on the top 2 percent, those who have fared the best in the last decade of financial excess, is far better for the economy and more fair for the American people than cuts of equivalent magnitude” to Medicare and other programs, Geithner said. The Treasury secretary said the administration will release a framework for changing the corporate tax code this month. That framework will suggest a lower tax rate and fewer tax breaks while retaining some incentives, he said, citing what he called the test he is using. “Are we making it more likely that that next factory by a U.S. company or a foreign company is built here?” Geithner said. Republican Representatives Jim Gerlach of Pennsylvania and Erik Paulsen of Minnesota questioned whether a 2.3 percent medical-device excise tax scheduled to take effect in 2013 would cause job losses. “It’s a time bomb out there,” said Paulsen, citing concerns from device companies in his district. Geithner said he disagreed, because the expansion of access to health insurance would create more opportunities for device companies. “On balance, it is a good package for people in the health care business,” he said. 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 in Washington at jschneider50@bloomberg.net |
2024-11-27 | Bloomberg | Gazprom Revives German Power Plan for Nord Stream Gas | OAO Gazprom (OGZD) , the world’s biggest natural-gas producer, is reviving plans to build a power plant in Germany to boost sales to its biggest export market via the Nord Stream pipeline and develop European generation. The northeastern German state where the pipeline comes ashore from the Baltic Sea is lobbying to build gas-fired power generators and has asked Gazprom to participate, Gunnar Bauer, the spokesman for the Economy Ministry of the state of Mecklenburg-Vorpommern, said by e-mail yesterday. A Gazprom Export official, who declined to be identified in line with company policy, confirmed its interest in the power project. “ Europe needs investments, particularly Germany with its nuclear closure,” Sergey Beiden, a power analyst at Otkritie Capital in Moscow, said by e-mail on Nov. 26. “Any project that secures stable gas supplies is interesting for Gazprom.” Gazprom, which supplies about a quarter of Europe’s gas, is seeking to maintain its market share and boost German sales by gaining access to end-customers. With partners EON SE, GDF Suez SA (GSZ) , Wintershall AG and Nederlandse Gasunie NV, the Moscow-based company last month doubled the pipeline’s capacity to 55 billion cubic meters a year. While Nord Stream’s current flows are less than a quarter of capacity, Gazprom is considering adding two more lines to the project, with one potentially ending in the U.K. BP Plc (BP/) is interested in the Nord Stream expansion, Toby Odone , a spokesman for the London-based company, said by phone. EON, Gazprom EON plans to build and operate a combined heat and power generation plant in the town of Lubmin, near Nord Stream’s entry point, through a joint project company with Gazprom’s Wingas GmbH venture, said Alexander Ihl, a spokesman for the German utility. Gazprom is taking over Wingas, acquiring Wintershall’s half of the venture as part of an asset swap. Gazprom had sought to build a gas-fired power plant with EON under a February 2008 memorandum, which was put on hold the next year because of the global economic slump. Harry Glawe, the German region’s economy minister, will talk about the plan with Nord Stream representatives in Switzerland on Nov. 29 and Nov. 30, after meeting with Gazprom Export officials in Russia last month, Bauer said. Power-generating operations may start by December 2015, the approval authority said in a statement on Nov. 19. The region plans to build three generating units with a maximum total capacity of 3,450 megawatts, according to the statement. Well Advanced The approval processes for gas-powered plants are “well advanced,” Glawe said in Moscow, according to an e-mailed statement dated Oct. 19. Mecklenburg-Vorpommern needs “the construction of additional highly flexible gas-fired power plants,” he said. Gazprom wants to gain a foothold in European power generation to secure customers for its gas at a time when its clients are seeking discounts and revisions to its oil-linked pricing, and demand for Russian gas is squeezed by competition with liquefied natural gas, supplies from Norway and cheaper U.S. coal exports. Gazprom and EON are banking on saving supply costs from Nord Stream to boost power-plant margins. “It makes sense in terms of delivered cost of that gas,” said Massimo Di Odoardo, principal analyst for European gas and power research at Wood Mackenzie Ltd. in London. “But in Germany , no one is building gas power plants just because of the combination of the power prices on the one side, and the cost of gas versus coal makes these investments not suitable at this time.” Clean-Spark Spreads Germany generators make a loss of 12.43 euros ($16.15) a megawatt-hour from burning gas, according to Bloomberg calculations of the so-called clean-spark spread, which takes into account electricity, fuel and carbon prices for next month. Clean-spark spreads to at least 2015 are negative. The equivalent measure when burning coal shows a profit of 11.23 euros a megawatt-hour. “At the moment, given where the carbon price is, it makes sense to burn coal, not gas,” Di Odoardo said by phone. Long-term goals to curb use of dirtier-burning coal and increase the share of cleaner gas and renewables remain intact because of European Union environmental rules and Chancellor Angela Merkel ’s order to close all German nuclear power plants by 2022. “New clean coal technology is very expensive and I think gas power plants are quite attractive,” Otkritie’s Beiden said. To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net ; Tino Andresen in Dusseldorf at tandresen1@bloomberg.net To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net |
2024-12-21 | Bloomberg | BlackRock Sees Distortions in Country Ratings Seeking Revamp | Credit rating companies are distorting capital markets by assigning the same debt ranking to countries from Italy to Thailand and Kazakhstan, according to BlackRock Inc. (BLK) , the world’s biggest money manager. While 23 countries share the BBB+ to BBB- levels assessed by Standard & Poor’s, the lowest investment grades, up from 15 in 2008 at the beginning of the financial crisis, their debt to gross domestic product ratios range from 12 percent for Kazakhstan to 44 percent for Thailand and 126 percent for Italy, International Monetary Fund estimates show. The cost of insuring against a default by Italy, ranked BBB+, over the next five years is almost triple that for Thailand, which has the same rating. For BlackRock, which oversees $3.7 trillion in assets, the measures are so untrustworthy that the firm is setting up its own system to gauge the risk of investing in government bonds. This year, the market moved in the opposite direction suggested by changes to levels and outlooks 53 percent of the time, data compiled by Bloomberg show. “The rating agencies were very, very slow to the game,” Benjamin Brodsky, a managing director at BlackRock International Ltd., said in a Nov. 23 interview from London. “They all came after the fact. For us, this is not good enough.” Since S&P cut the U.S. to AA+ from AAA on Aug. 5, 2011, yields on the benchmark 10-year Treasury note have fallen to 1.76 percent from 2.56 percent. After France (GFRN10) was downgraded on Jan. 13, 10-year yields fell to 1.97 percent from 3.08 percent. Australian Verdict Ratings companies, the arbiters of creditworthiness and the likelihood of default by governments and companies in the $46 trillion global debt market, are coming under more scrutiny from regulators and investors. When S&P downgraded the U.S., a Treasury official said the company had made a $2 trillion error. France’s top central banker said Moody’s Investors Service’s ranking is wrong. Russia’s deputy finance minister said S&P and Fitch Ratings exaggerated its weaknesses relative to higher-rated countries. A court in Australia found Nov. 5 that S&P misled investors during the financial crisis that began in 2007. Regulations being written under the U.S. Dodd-Frank law may ban government entities from using ratings to price bonds. Moody’s said on Dec. 17 that it plans to change the methodology for sovereign rankings, putting more importance on economic growth. The unit of New York-based Moody’s Corp. (MCO) is seeking market feedback to help its system become more transparent and “forward-looking,” according to the statement. Argentine Risk BlackRock started compiling its own Sovereign Risk Index to measure countries’ creditworthiness in June 2011. The latest quarterly update in October rates Spain, Ireland and Italy similar to Argentina and Venezuela (JPEGVN) , among the 10 most risky countries. S&P puts Argentina, which defaulted on its debt in 2001, at B-, six levels below Spain. Venezuela is B+, six grades below Italy and Ireland. The New York-based fund manager sorts countries based on their willingness to pay debts, their access to external funding, the strength of their finance industries and fiscal metrics such as debt-to-GDP, according to Brodsky. The index shows Malaysia and Russia rank similar to the U.S., while the Philippines is no riskier than France and the U.K. “Ratings should be evaluated on the basis of their correlation over time with defaults, not with short-run movements in market prices,” John Piecuch, a spokesman for S&P, wrote in an e-mail response to questions from Bloomberg on Dec. 6. “Ratings and market indicators of creditworthiness often diverge, because they are generated by fundamentally different processes and can be driven by very different factors.” European Downgrades The number of countries rated in the BBB category grew as S&P cut European nations such as Spain that are mired in the three-year-old debt crisis and promoted developing nations, including Colombia, from below investment grade. Those ranked A-or above shrunk to 43 from 52 since 2008, according to data compiled by Bloomberg. Gary Jenkins, founder of Swordfish Research Ltd. based outside of London, said analyzing sovereign credit is becoming more difficult as policy makers and politicians increase intervention in markets. “It’s not like analyzing cash flows and gearing,” Jenkins, a former head of fundamental credit strategy at Deutsche Bank AG, said by phone from Amersham, England on Nov. 16. “When it comes to European sovereigns they have no more real insight into what may happen than anyone else does. It is educated guesswork. That’s all it is.” Opposite Direction Bond spreads have moved in the opposite direction from what the companies suggested in 53 percent of rating or outlook changes for countries from France to South Korea since February, according to data compiled by Bloomberg. Over the past 38 years, yields have gone the opposite way about half the time for more than 300 issues. U.S. and French bonds have rallied since the countries were stripped of their top grades. The companies “quite accurately rank sovereign credit risk” and “they should not be expected to be consistent with specific default probabilities,” according to an IMF study published in October 2010. All 14 sovereign defaults between 1975 and 2009 had been rated non-investment grade one year prior to the event, according to the study. Most of the “useful informational value” in their assessment comes from their outlook changes, rather than the actual upgrades or downgrades, according to the IMF report. The companies say they assign ratings based on their assessment of the countries’ ability and willingness to pay obligations, examining criteria such as debt levels, economic growth and political and regulatory stability. Moody’s Review The review by Moody’s of its rating performance since 1983 shows that the system has proven to “powerfully” rank-order sovereign default risks, according to the company’s Dec. 17 report. No government has defaulted on its debt within a year of holding an investment-grade rating, according to the report. Countries rated Caa and C, the lowest ranking, had a default rate of 28 percent, compared with 0.6 percent among those in the Ba category, which is the highest speculative grade, the report said. “There’s nothing in the sovereign statistics to suggest that we are missing credit risk, under- or overestimating sovereign risks in any direction,” Bart Oosterveld, the head of the sovereign risk group at Moody’s in New York, said in a telephone interview on Dec. 6. “Our track record of accurately ranking default risks for sovereigns is really quite good.” Spanish Payments Among the countries in the BBB category that have credit default swaps available, investors are betting that the probability of them missing interest-rate payments by 2018 varies from 23 percent in Spain to 8 percent in Thailand, according to data compiled by Bloomberg. While S&P has downgraded Italy twice since September 2011, the country is still rated the same as Kazakhstan and Thailand. Italy’s economy probably contracted 2.1 percent this year, compared with growth of 5.4 percent in Thailand and 5.2 percent in Kazakhstan, according to economists surveyed by Bloomberg. Credit default swaps show Europe’s fourth-largest economy is more risky. The cost to insure Italian debt for five years more than doubled since the end of 2009 to 278 basis points, or 2.78 percentage points, compared with 93 basis points for Thailand and 145 for Kazakhstan, according to data compiled by Bloomberg. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements. ‘Lagging Indicator’ “Rating agencies tend to be a lagging indicator rather than leading indicator,” said Neil Shearing, chief emerging markets economist for Capital Economics Ltd., in a telephone interview from London on Nov. 19. “The danger is giving too much weighting to rating agencies’ opinion.” Regulators remain divided about how to create a better system. The Dodd-Frank Act, signed into law last year to overhaul financial regulation, requires government agencies to replace ratings with another standard for creditworthiness, without providing details. Basel III international banking standards rely on rankings to gauge risk. In Europe, governments have criticized the companies as downgrades of Portugal , Spain, Italy, Ireland and France amid the region’s debt crisis risked raising borrowing costs and hampering efforts to restore stability. Bank of France Governor Christian Noyer said at a Nov. 30 press briefing in Hong Kong that Moody’s was wrong in its reasoning for revoking the nation’s Aaa rating on Nov. 19, saying the company made a “factual mistake” judging exposure to the debt crisis. S&P Cuts After S&P cut its rating on U.S. debt to AA+ from AAA in August 2011, John Bellows, then acting assistant secretary for economic policy at the U.S. Treasury, spotted what he thought was a mistake in S&P’s math. There was no “justifiable rationale” for the downgrade, Bellows wrote on a Treasury blog post. S&P said its decision wasn’t affected by the “change of assumptions.” Governments, banks and companies pay for assessments of their creditworthiness. S&P, a New York-based unit of McGraw-Hill Cos., Moody’s and Fitch generate about $4 billion in annual revenue with 3,054 analysts ranking 2.52 million securities worldwide, according to data compiled by the Securities and Exchange Commission and Bloomberg. They also rate borrowers that haven’t asked or paid for them. Fifteen of 128 sovereign ratings at S&P, including the U.S., U.K., France, Switzerland and Argentina, are designated as “unsolicited,” according to a company report dated Dec. 5. Pension Funds The companies postponed cutting the European countries to junk status because doing so would deprive them of much-needed capital, according to Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania. Some investors, such as pension funds and insurance companies, are barred by regulators from holding high-risk, non-investment grade assets. “If there are huge incentives for maintaining higher than normal ratings, then that will be the industry behavior,” said Egan in a phone interview on Nov. 19. “If a rating company is not rewarded for being timely and accurate, why in the world they should be timely and accurate?” Egan-Jones, which competes with S&P, Moody’s and Fitch to rate securities, charges investors, rather than bond issuers, for its opinion on the securities. All Models “We believe that the marketplace should be open to all business models, provided that all conflicts of interest are identified, disclosed and either eliminated or managed,” Daniel J. Noonan, a spokesman at Fitch in New York, wrote in an e-mail Dec. 6. “In the case of the issuer-pays model, we think that the potential for conflicts of interest is understood and well managed.” Fitch is a unit of Paris-based Fimalac SA. Rating companies have been slow to recognize improvements in emerging markets, according to David Robbins, who manages a $5.7 billion emerging-market debt fund at TCW Group Inc. “Many emerging-market countries, certainly by their credit fundamentals, are under-rated compared to developed markets,” Robbins said in a telephone interview from New York on Oct. 22. “The relative credit quality improvement of the emerging market versus developed market probably won’t be over until 2015.” Russia’s Deputy Finance Minister Sergei Storchak said in June the country should be upgraded at least two steps, a level that would put it above Ireland and Italy. Russia cut its debt to 11 percent of GDP this year from 40 percent in 2002, while Italy’s debt increased to 126 percent from 105 percent, according to the IMF data. “The issue is the entire finance industry chooses to rely on what is clearly the stuff that doesn’t pass the smell test,” Jan Dehn, a London-based strategist at Ashmore Investment Management Ltd., which oversees $68 billion of emerging-market assets, said in a phone interview on Dec. 3. “As long as these perceptions exist in the markets, then you will have misallocation of capital.” To contact the reporters on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net ; Ye Xie in New York at yxie6@bloomberg.net To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net |
2024-02-04 | Bloomberg | CSR, New China Life Insurance, Gazprombank: China New Bond Alert | CSR Corp., New China Life Insurance Co., Chinatex Corp. and OAO Gazprombank are among issuers that may sell bonds in the nation’s debt markets. Domestic Bonds CSR CORP.: The company may sell as much as 5 billion yuan ($803 million) of medium-term notes after the board approved a plan to sell debt with maturities of five to 10 years to replenish working capital, according to a statement to the Shanghai stock exchange. (Added Feb. 4) NEW CHINA LIFE INSURANCE CO. : The company plans to sell as much as 5 billion yuan of bonds this year with maturities of more than five years, according to a statement to the Hong Kong stock exchange. (Added Feb. 4) CHINATEX CORP.: The company plans to sell 1 billion yuan of 365-day bonds tomorrow, according to data compiled by Bloomberg. (Updated Feb. 4) CHINA DEVELOPMENT BANK: The bank plans to upsize five batches of bonds by as much as 30 billion yuan combined tomorrow, according to a statement on the Chinese government bond clearing house’s website. (Updated Feb. 4) YUNTIAN CHEMICAL GROUP CO.: The company plans to sell 2 billion yuan of one-year bonds tomorrow, according to data compiled by Bloomberg. (Updated Feb. 4) CITIC GUOAN GROUP: The company plans to sell 2 billion yuan of one-year bonds tomorrow, according to data compiled by Bloomberg. (Updated Feb. 4) NANJING CHINA ELECTRONICS PANDA CO.: The company plans to sell 1.1 billion yuan of 365-day bonds tomorrow, according to data compiled by Bloomberg. (Updated Feb. 4) ZHANGZHOU JIULONGJIANG CONSTRUCTION CO.: The company plans to sell 1 billion yuan of 365-day bonds on tomorrow, according to data compiled by Bloomberg. (Updated Feb. 4) CITIC DAMENG HOLDINGS LTD.: The company plans to sell 1 billion yuan of bonds, according to a Hong Kong stock exchange announcement. (Added Feb. 1) JIANGSU HONGTU HIGH TECHNOLOGY CO.: The company plans to sell 400 million yuan of three-year bonds on Feb. 6, according to a statement posted to Chinabond.com.cn, the bond clearing house website. (Added Jan. 31) BANK OF NINGBO CO.: The lender won approval from the China Banking Regulatory Commission to issue 8 billion yuan of bonds, according to a statement to the Shenzhen Stock Exchange. (Added on Jan. 24) GUANGZHOU AUTOMOBILE GROUP CO.: The company won approval to sell up to 6 billion yuan of bonds in multiple tranches, the first of which can be no more than 50 percent of the total amount, according to a statement to the HK stock exchange. (Added Jan. 23) CITIC SECURITIES CO.: The company is seeking approval to issue up to 40 billion yuan of yuan-denominated debt in onshore and offshore markets, according to a filing to Hong Kong’s stock exchange. (Added Jan. 24) HEBEI IRON & STEEL CO.: The company has regulatory approval to sell 5 billion yuan of bonds, according to a statement posted to the Shenzhen Stock Exchange. (Added Jan. 9) SHANXI TAIGANG STAINLESS STEEL CO.: The company won approval from the National Association of Financial Market Institutional Investors to sell 9 billion yuan of bonds, according to a statement posted to the Shenzhen Stock Exchange. (Added Jan. 9) Dim Sum Bonds OAO GAZPROMBANK: The Russian leder is marketing 3-year Dim Sum bonds at a yield of about 4 percent, according to a person familiar with the matter. (Added Feb. 4) CITIC SECURITIES CO.: The company is seeking approval to issue up to 40 billion of yuan-denominated debt in onshore and offshore markets, according to a filing to Hong Kong’s stock exchange. (Added Jan. 22) KEPPEL CORP.: The world’s biggest oil-rig builder may sell yuan-denominated bonds offshore, according to its chief financial officer Loh Chin Hua in a Jan. 15 interview in Singapore. (Added Jan. 16) To contact Bloomberg News staff for this story: Rachel Evans in Hong Kong at revans43@bloomberg.net To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net |
2024-07-23 | Bloomberg | HSBC Trinkaus Considering Acquisitions, Euro am Sonntag Reports | HSBC Trinkaus & Burkhardt AG (TUB) may make acquisitions to grow its private wealth management business in Germany, Euro am Sonntag reported, citing an interview with board member Olaf Huth. The bank, majority-owned by HSBC Holdings Plc (HSBA) , is above a plan to increase private-wealth customer funds under management by 1 billion euros ($1.4 billion) to 23 billion euros, the weekly newspaper said. To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net |
2024-09-10 | Bloomberg | Romney: Democrats Are More Patriotic Than Republicans | Mitt Romney seems to have an extraordinarily high opinion of congressional Democrats. In his much-anticipated appearance on "Meet the Press" yesterday, Romney made news by saying he supports retaining parts of Obamacare, especially a ban on pre-existing conditions. His campaign subsequently made clear that his position hadn't changed from the primary: If you lose your insurance at any time for any reason, and you have an expensive pre-existing condition, you're basically out of luck when you seek new coverage. What struck me, however, was Romney's suggestion to host David Gregory that Democrats in Congress would rally round his presidency for the good of the country. "I actually think that because we’re at this precipice, economically, at the precipice fiscally as a nation as well, that there are going to be good Democrats and good Republicans who have shown respect,” Romney said. “If they see a president that’s willing to work with them, to share credit with them, to encourage them and pull them along, that we’re going to be able to deal with the challenges we have." In other words, Romney believes -- or says he does -- that Democrats come from a different planet, galaxy and universe than Republicans. In January 2009, the month in which Barack Obama was sworn in as president, the U.S. lost 800,000 jobs. Another 700,000 would be lost the following month. The nation’s GDP had just contracted at a 9 percent annual rate in the previous quarter, hurtling the U.S., and with it the global economy, toward depression. In response, about 15 House and Senate Republicans, including the man Romney chose as his running mate, Paul Ryan , met on the very night of Obama’s inauguration. Over a lengthy dinner, they decided to organize what author Robert Draper characterized as "united and unyielding opposition to the president's economic policies." And the Republicans relentlessly followed through. “Instead of doing what was right, partisan politics always came first,” former Republican Senator George Voinovich told author Michael Grunwald. All that Senate Republican leader Mitch McConnell cared about, Voinovich said, “was making sure Obama could never have a clean victory.” It’s not clear why Romney thinks Democrats are less partisan and more patriotic than Republicans. Democratic leaders did round up votes to pass President George W. Bush ’s politically toxic Troubled Asset Relief Program in 2008, despite revulsion at legislation to bail out a traditionally Republican constituency -- big banks. But it seems a bit optimistic to expect similar Democratic accommodations to a Romney White House. The "precipice" Romney sees is a vast, stable plain compared to the economic situation in early 2009. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid are as partisan as any Democrat in Washington. It's also possible they might harbor some ill feelings about the whole “united and unyielding” thing. Romney's not dumb. So he's probably just mimicking the disingenuous line taken up by President Barack Obama, who has said that his re-election would break the Republican “fever” and enable Republicans to resume working across party lines. As Ramesh Ponnuru has explained , it’s highly unlikely that Republicans will offer anything but massive resistance to a second Obama term. In the event Romney is elected, Democrats will almost certainly take up the role of Hatfields to the White House McCoys. (Francis Wilkinson is a member of the Bloomberg View editorial board. Follow him on Twitter.) Read more breaking commentary from Bloomberg View at the Ticker . |
2024-01-17 | Bloomberg | MFP’s Price Says He Wouldn’t Buy Goldman Sachs Shares | MFP Investors LLC’s Michael Price said he wouldn’t add to his holdings in Goldman Sachs Group Inc. (GS) at the current price because the fifth-largest U.S. bank by assets is trading at fair value. “I don’t buy it here,” Price, said in a “Bloomberg Surveillance” television interview with Tom Keene and Sara Eisen today. “It’s fair value.” He said, “You buy things when people are selling and you sell when the sun is shining.” Price, who made his reputation as a value investor in the 1980s by buying shares of beaten-down lenders, owned a $4.5 million stake in Goldman Sachs, according to a September regulatory filing. The New York-based firm rallied 4.1 percent yesterday, the most in 10 months, after reporting quarterly profit that beat analysts’ estimates and full-year revenue grew for the first time since 2009. Goldman Sachs shares are trading at about 10 times earnings and 1 times book value, Price said. The bank reported yesterday that fourth-quarter earnings more than tripled to $5.60 a share, surpassing even the highest estimate of 26 analysts surveyed by Bloomberg. “They’re the smartest guys in the room,” Price said. “When you’re looking at financials -- banks, brokers, insurance companies -- who’s going to be smarter than Goldman? And you don’t want to pay more than one times book and 10 times earnings. That to me is the center point.” Dell LBO While Price doesn’t own shares of Dell Inc. (DELL) , he said the chances of a leveraged buyout for the personal-computer maker are greater than 50 percent. The company is in discussions with private-equity firms including Silver Lake Management LLC, Bloomberg News reported on Jan. 14. A tender offer for the company could be about $14 to $15 a share, Price said. Dell shares have surged 16 percent to $12.61 this week. “This is the time to do it,” Price said on Dell’s potential buyout. Hewlett-Packard Co.’s “probably too big to do. Dell is big, but not too big, to do,” he said. Price said he owns shares of Citigroup Inc. (C) , the third- biggest U.S. bank, and foreign-exchange broker FXCM Inc. He is also bullish on McGraw-Hill Cos., the educational publisher and financial services provider that is planning on splitting its two businesses. To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-03-28 | Bloomberg | China Stocks Fall Most in Three Weeks as Financial Shares Slump | China stocks fell, dragging the CSI 300 Index (SHSZ300) down the most in three weeks, as banks tumbled on concern new wealth-management product rules will hurt earnings and as the government signaled more flexible interest rates. Industrial Bank Co. lost 9.2 percent, while China Minsheng Banking Corp. declined 7.6 percent, leading a gauge of financial companies to an 11-week low. A directive from the banking regulator for lenders to limit the investment of client funds in debt that isn’t publicly traded will hurt revenue for some banks by 2 percent, according to a Citic Securities Co. report today. “The regulation will hurt banks’ profits,” Zhou Lin, an analyst at Huatai Securities Co., said by phone from Nanjing. That will drag on stocks because “banks have a big weighting” on benchmark indexes, he said. The Shanghai Composite Index (SHCOMP) sank 2.4 percent to 2,245.57 at 10:27 a.m. local time. The CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, tumbled 2.9 percent, the most since March 4, to 2,508.96. Hong Kong ’s Hang Seng China Enterprises Index dropped 1.7 percent. The CSI 300 Financials Index slumped 4.7 percent, the most since March 4 and the biggest drop among the CSI 300’s 10 industry groups. The rule to cap investment by Chinese banks’ wealth management products in non-exchange traded products will reduce growth of total social financing, leading to pessimistic expectations about economic recovery, analysts led by Mao Changqing at Citic Securities wrote in a report today. Banks also fell on concern the government will relax or remove a cap on deposit rates or the floor on lending rates. China will introduce new measures to promote “interest-rate and exchange-rate liberalization,” the State Council, or cabinet, said in a statement yesterday. To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-10-28 | Bloomberg | MetLife Swings to Profit on Derivatives, Misses Estimates | MetLife Inc. , the biggest U.S. life insurer, swung to a profit in the third quarter as the company’s derivative losses narrowed. The stock declined in late trading as results fell short of analysts’ estimates. Net income in the three months ended Sept. 30 was $316 million, or 32 cents a share, compared with a loss of $620 million, or 79 cents, in the same period a year earlier, the New York-based company said today in a statement. Excluding some investment results, MetLife profit was 99 cents a share, missing the $1.03 estimate of 16 analysts compiled by Bloomberg. MetLife uses the derivatives to produce income and guard against moves in interest rates, currencies and equities. The insurer had more than $200 billion in the contracts at the end of June and $857 million in derivative losses in last year’s third-quarter. The loss on the contracts narrowed to $190 million in the three months ended Sept. 30. MetLife “requires a lot of derivatives to hedge the guarantees” the insurer makes to clients including holders of equity-linked retirement products, said Randy Binner , an analyst with FBR Capital Markets. “The companies with the most derivatives are going to be the larger, more complicated companies that also happen to be those that sell a lot of variable annuities.” Stock Decline MetLife fell 96 cents, or 2.4 percent, to $39.50 at 4:25 p.m. in late New York trading. The company has gained about 14 percent this year on the New York Stock Exchange, compared with the 17 percent advance of the 24-company KBW Insurance Index. Premiums, fees and other revenue in the U.S. were $7.1 billion, “down slightly” from the third quarter last year, MetLife said. International revenue advanced about 16 percent to $1.3 billion on growth in Chile, Korea and Hong Kong. Chief Executive Officer Robert Henrikson poised to increase business outside the U.S. when the firm completes its $15.5 billion acquisition of an AIG unit with sales in Japan, Russia and Poland. Book value per share, a measure of assets minus liabilities, climbed 7.5 percent from June 30 to $48.93 on Sept. 30 as unrealized gains surged to $14.8 billion from $7.3 billion at the end of the second quarter. Unrealized gains, reflecting market fluctuations that aren’t counted toward earnings, are monitored by investors and rating firms as a gauge of financial strength. Private Equity Net investment income, including payments on bonds, gained 12 percent to $4.39 billion. Returns from private equity holdings boosted the company’s so-called variable investment income, which was $186 million after tax, or $56 million above the company’s plan. MetLife raised $3.62 billion in a share sale in August to help pay for AIG’s American Life Insurance Co., which Henrikson agreed in March to acquire. Henrikson also sold $3 billion of senior notes. Raising the capital lowered operating earnings by 8 cents a share, MetLife said today. “All of us at MetLife are eager to welcome our new colleagues from Alico,” Henrikson said in the statement. “We will be well positioned to deliver significant value for our customers and our shareholders.” MetLife, which reported $24.2 billion of interest-rate floors among its derivative holdings at the end of June, has posted gains when bond yields fall. Yields on two-year Treasuries plummeted in the third quarter to 0.42 percent on Sept. 30 from 0.6 at the end of June. MetLife’s credit spreads narrowed in the three months ended Sept. 30. According to accounting rules, insurers increase the value of liabilities when their credit improves. Credit-default swaps on MetLife dropped to 222 basis points as of Sept. 30 from 335 basis points on June 30. In last year’s third quarter, the company’s swaps dropped to 231 from 529. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net . |
2024-10-21 | Bloomberg | Cheung Kong, PetroChina, Posco, Sun Hung Kai: Asia Stock Preview | The following companies may have unusual price changes in Japanese trading on Oct. 24. Stock symbols are in parentheses, and share prices are as of the last close. The information in each item was released after markets shut unless stated otherwise. Hong Kong developers: Home prices in the city fell 0.56 percent in the seven days ended Oct. 16 from a week earlier, according to Centaline Property Agency Ltd. Sun Hung Kai Properties Ltd. (16) (16 HK), the world’s biggest developer by market value, gained 0.8 percent to HK$98. Cheung Kong (Holdings) Ltd. (1 HK), controlled by billionaire Li Ka- shing, rose 0.1 percent to HK$88.75. China oil producers: China’s diesel stockpiles fell the most in at least 20 months as refiners shut plants for repairs and lowered output to cut losses from processing crude, according to a newsletter by the official Xinhua News Agency. Inventories fell about 13 percent at the end of September from a month earlier, the biggest decline since at least the start of 2010, according to data from Xinhua’s China Oil, Gas and Petrochemicals. PetroChina Co. (857 HK), the nation’s biggest oil producer, declined 0.5 perecent to HK$9.40. China Petroleum & Chemical Corp. (386) (386 HK), a refiner known as Sinopec, gained 0.1 percent to HK$7.14. Blue Dart Express Ltd. (BDE) : The Indian courier company controlled by DHL Worldwide Express said third-quarter profit jumped 42 percent from a year earlier to 297.5 million rupees. Sales rose 32 percent to 3.89 billion rupees. Shares advanced 1.8 percent to 1,625.8 rupees. CapitaLand Ltd. (CAPL) , Southeast Asia ’s biggest developer, said third-quarter net income decline to S$80.2 million ($63 million) from S$460.1 million a year earlier. The stocks gained 1.7 percent to S$2.45. Daewoo Shipbuilding & Marine Engineering Co. (042660 KS): The shipyard failed to win a bid for a Canadian Navy project, according to a regulatory filing. The shares added 1.7 percent to 24,350 won. Dayang Enterprise Holdings Bhd. (DEHB) : The Malaysian oil and gas services provider received an extension of a maintenance services contract valued at between 50 million ringgit ($16 million) and 100 million ringgit from Murphy Sabah Oil Co. and Murphy Sarawak Oil Co., it said in a statement. Dayang fell 0.6 percent to 1.70 ringgit. Hana Financial Group Inc. (086790) (086790 KS): Third-quarter profit fell 20 percent on costs related to an early retirement program. The financial company gained 2.8 percent to 36,800 won. Hitachi Zosen Corp. (7004) (7004 JT): The manufacturer of environmental equipment said its first-half net income ended Sept. 30 was 1.6 billion yen ($21 million), less than the 3 billion yen it forecast, according to a preliminary earnings statement. The stock gained 0.9 percent to 110 yen. Hyundai Mobis (012330) Co. (012330 KS): Hyundai Motor Group units, including Mobis and Kia Motors Corp. (000270 KS), will buy a combined 93.6 percent of Green Cross Life Insurance Co., according to regulatory filings. Mobis rose 2.7 percent to 342,000 won, while Kia advanced 1.5 percent to 72,400 won. Green Cross Holdings Corp. (005250 KS) jumped 11 percent to 19,400 won. Hyundai Securities Co. (003450) (003450 KS): The company is considering acquisition of a brokerage in Indonesia as it seeks to expand overseas business, according to a regulatory filing. The South Korean brokerage climbed 0.8 percent to 9,450 won. Nippon Yusen K.K. (9101 JT): The Japanese shipping company said its net loss for the six months ended September was 12 billion yen, more than double its forecast for a loss of 5 billion yen, in a preliminary earnings statement. The company cited lower freight rates and the effects of the strong yen for the wider loss. The stock slid 2.5 percent to 199 yen. Olympus Corp. (7733) (7733 JT): The maker of endoscopes and cameras said it will form a third-party committee including attorneys and accountants to investigate the company’s past acquisitions. The company received letters from some shareholders asking about the takeovers and is preparing to respond to the queries, it said. The stock closed 6.8 percent lower at 1,231 yen. Petron Corp. (PCOR) : The Philippines ’ largest oil refiner said it had a net income of 1.56 billion pesos and revenue of 67 billion pesos in the third quarter. Petron posted a 1.81 billion peso profit on 54.4 billion pesos of sale in the third quarter last year. The stock climbed 1.5 percent to 13.90 pesos. Posco (005490) (005490 KS): The world’s third-biggest steelmaker reported a 78 percent decline in third-quarter profit from a year earlier because of foreign-currency losses and weaker demand for the alloy used in cars and construction. The shares added 0.3 percent to 360,500 won. Tanjung Offshore Bhd. (TOFF) : The Malaysian oil and gas services provider won a charter contract valued at 27 million ringgit to provide three offshore support vessels to Petronas Carigali Sdn. for up to two years, it said in a statement. Tanjung fell 1.8 percent to 84 sen. Thomas Cook ( India ) Ltd. (TC IN): The travel company posted third-quarter profit of 250.5 million rupees, compared with 224.5 million rupees a year earlier. Revenue rose to 1.02 billion rupees from 898 million rupees. The stock declined 1.9 percent to 49.7 rupees. To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-05-17 | Bloomberg | Junk-Debt ETFs Set Markets ‘Abuzz’ After Record Trades | The largest trades on record in shares of two exchange-traded funds that invest in junk debt are attracting attention to the four-year-old market that allows anyone from banks to retirees fast and discreet access to speculative-grade bonds and loans. The transactions were completed hours before JPMorgan Chase & Co. disclosed $2 billion of trading losses tied to credit derivatives , an announcement that has heightened awareness of big trades in debt markets. Shares of an Invesco Ltd. ETF that invests in leveraged loans had a record one-day inflow on May 10 that boosted its shares outstanding by 25 percent, according to data compiled by Bloomberg. The same day, an investor used State Street Corp. (STT) ’s ETF of junk bonds to anonymously obtain as much as $780 million of the debt by swapping shares of the fund. “Markets are abuzz” over the State Street ETF trade that allowed an unidentified investor to avoid moving prices in the privately negotiated debt market, New York-based CreditSights Inc. analysts Chris Taggert and Nathan Wenger wrote in a report yesterday. Investors including TF Market Advisors and Pacific Asset Management speculate that the two trades last week are related. JPMorgan, which said its losses stemmed from trades done by its chief investment office in London , wasn’t involved in the transactions, according to a person familiar with the bank’s positions, who asked not to be identified because the lender’s trades are private. Brian Marchiony , a spokesman for New York- based JPMorgan, declined to comment. Cantor Brokers Trade “This is atypical,” said Brian Robertson, a managing director at Pacific Asset Management, the Newport Beach , California-based affiliate of Pacific Life Insurance Co. that oversees about $3 billion. “There appears to be a correlation given that two of the largest trades happened within 24 hours.” A May 10 trade brokered by Cantor Fitzgerald LP at 2:42 p.m. in New York created about 4.5 million new shares in the PowerShares Senior Loan Portfolio (BKLN) , Bloomberg data show. The trade, which fueled the highest daily volume for the 14-month- old $565.5 million fund, was valued at about $110.3 million. Earlier that day, an investor exchanged as much as 19.7 million shares in the SPDR Barclays Capital High Yield Bond ETF (JNK) for the equivalent of about $779.3 million in bonds, Bloomberg data show. The redemption, the biggest since the $11.2 billion fund was started four years ago, came after the investor had accumulated shares over several weeks, according to Knight Capital Group Inc., which brokered the trade. Betting Without Owning “He used the ETF to get his exposure initially; he figured it was an easier way to maintain his anonymity,” Eric Lichtenstein, the global head of ETF trading at Jersey City , New Jersey-based Knight Capital, said in a May 14 telephone interview. “It was a unique approach. This was his plan going into it.” ETFs typically allow individual investors to speculate on securities without directly owning them. Unlike mutual funds, whose shares are priced once daily, ETFs are listed on exchanges and are bought and sold like stocks. The funds generally don’t buy securities directly when they receive inflows or sell them to meet outflow requests. Instead, an authorized participant receives cash from investors and uses it to buy securities in exchange for fund shares. With redemption requests, the approved participant returns shares to an ETF’s manager and receives securities. Junk bonds and loans are ranked below Baa3 at Moody’s Investors Service and lower than BBB- at Standard & Poor’s. Junk Gains U.S. speculative-grade bonds and leveraged loans both gained about 0.1 percent on the day of the trades, according to Bank of America Merrill Lynch index data and the S&P/LSTA U.S. Leveraged Loan 100 Index. After the close of securities exchanges that day, JPMorgan disclosed the trading loss in credit derivatives positions that has since roiled debt markets. The investment in State Street’s fund, which tracks the Barclays Capital High Yield Very Liquid Bond Index, may mark a new way for investors to gain control over a large group of bonds without tipping off other investors. It was likely related to the move in the leveraged-loan fund, said Peter Tchir, founder of New York-based hedge fund TF Market Advisors. “It’s too coincidental to have these two unprecedented moves going in the opposite direction,” he said. To contact the reporter on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-10-05 | Bloomberg | Tesco Says Bank Delays to Hurt Profit Amid Weaker U.K. Sales | Tesco Plc (TSCO) , the U.K.’s largest supermarket chain, said delays to banking products will reduce profit by 40 million pounds ($61 million) this year, adding to the grocer’s struggle to revive growth in its domestic market. The retailer is deferring the introduction of mortgages until 2012 and slowing a switchover to new information systems following the end of a tie-up with Royal Bank of Scotland Group Plc, the Cheshunt, England-based grocer said today. Tesco also reported a 0.7 percent drop in second-quarter U.K. same-store stores, excluding gasoline and value-added tax, the worst performance in at least six years. “The bank is not quite delivering and that is the big issue here,” Chris Hogbin, an analyst at Sanford C Bernstein, said by phone. “The U.K. performance is OK, a lot is going on and I can see how it might get better.” Hogbin has an “outperform” recommendation on Tesco shares. Tesco’s U.K. sales trailed rival J Sainsbury Plc (SBRY) , which today reported same-store growth of 0.9 percent, excluding gasoline and value-added tax. Tesco is more vulnerable to reduced spending on discretionary items because it sells more non-food merchandise such as televisions and appliances. The retailer last month cut prices of 3,000 basic items such as milk and vegetables and said today that the so-called Big Price Drop campaign has been well received by shoppers. Tesco rose 3.95 pence, or 1 percent, to 384.05 pence at 11:47 a.m. in London trading, trailing gains in the broader market. Sainsbury advanced 4.4 percent to 286.9 pence. Non-Food Decline Trading profit at the banking division fell by 66 percent to 44 million pounds, after a 57 million-pound increase in a provision for payment-protection insurance. Excluding the provision, the unit’s profit declined 22 percent. Tesco Bank plans to slow the introduction of new products such as mortgages and current accounts after “technical issues” in the summer left some customers without access to their online accounts, the company said. This will lead to an extended period of “double running costs,” hurting profit. Early signs from changes to supermarket pricing and non- food ranges are “encouraging,” Tesco Chief Executive Officer Philip Clarke said today on a conference call. Same-store sales of non-food ranges slumped 4.8 percent in the first half as shoppers visited large-format Extra stores less often, he said. Last month’s price cuts are “the biggest change to our pricing policy for a number of years,” the CEO said. “We’re trying to make it a bit easier for customers.” U.S. Loss Tesco’s first-half trading profit, a measure which excludes property gains, rose 3.7 percent to 1.77 billion pounds. Losses at the U.S. chain Fresh & Easy, which Tesco started in 2007, narrowed to 73 million pounds from 95 million pounds a year earlier. Tesco is opening new outlets in northern California and building customer numbers by adding in-store bakeries and freshly prepared meals. A plan to break even in the U.S. in fiscal 2013 is showing “promising early results.” Trading profit in Asia , where Tesco last month announced it plans to exit Japan , rose 19 percent, buoyed by gains in Malaysia, China and Thailand. In Europe , where the retailer has stores in the Czech Republic , Poland , Hungary, Slovakia and Turkey , profit rose 12 percent. In the U.K., where Tesco still gets about two-thirds of revenue, trading profit rose 4.5 percent to 1.27 billion pounds. Still, Tesco’s share of U.K. grocery spending fell to 30.4 percent in the 12 weeks through Sept. 4 from 30.8 percent a year earlier, according to Kantar Worldpanel research. The company said it’s “broadly comfortable with current market consensus forecasts” for fiscal 2012, adjusted for the provision at the banking unit. To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net. To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net . |
2024-03-22 | Bloomberg | FSA to Focus on Implementing EU Rules in 2011, Limit Hires | The U.K. Financial Services Authority will focus on implementing international financial rules for banks and insurers this year and will forgo hiring additional staff. The financial watchdog targeted European insurance rules and Basel III, an international accord on bank capital, as “the two biggest policy initiatives,” in a statement on next year’s business plan. The FSA will also implement a review of the mortgage market, publishing an assessment later this year. “The 2011/12 business year for the FSA will be a difficult one,” Hector Sants , the FSA’s chief executive officer, said in the statement. “We will be seeking to deliver this agenda with a capped headcount.” The FSA increased its budget 10 percent to 501 million pounds ($821 million) in February, citing structural changes and more intensive supervision of large banks. The FSA, the U.K.’s financial regulator, will be abolished by 2013 and replaced by at least two new authorities. “All this has to be done at the same time as taking forward the preparations for a new regulatory structure,” Sants said. The FSA is creating internal units to prepare for the creation of new authorities. Margaret Cole , the FSA’s enforcement chief, will lead the so-called Conduct Business Unit, as managing director. Sants will lead the Prudential Business Unit. To contact the reporter for this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net. To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net . |
2024-04-07 | Bloomberg | Sokol Joins Brandon Winning Buffett’s Praise in Berkshire ‘Head Scratcher’ | David Sokol , who left Berkshire Hathaway Inc. (BRK/A) after investing in a buyout target, joins departed manager Joseph Brandon in winning praise from Warren Buffett after actions that brought scrutiny to a firm where executives stress the importance of reputation. Sokol’s contributions to Berkshire were “extraordinary,” Buffett said when he announced his resignation March 30. Buffett said in 2009 that Brandon helped in “ righting the ship ” at General Re. Brandon left in 2008 after prosecutors named him an unindicted co-conspirator at a trial where four former General Re officers were convicted of helping American International Group Inc. (AIG) deceive investors through a sham transaction. Brandon wasn’t charged with a crime. Buffett’s praise of the subordinates doesn’t match his comments about guarding the firm’s image, said Jeff Matthews , author of “Pilgrimage to Warren Buffett ’s Omaha.” Buffett told Congress in 1991 that he had given employees of Salomon Inc. a message after a bond scandal: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” Buffett’s annual meeting and letters to shareholders are “all about reinforcing the message on upholding Berkshire’s good reputation,” Matthews said in an e-mail. “This letter about the Sokol affair does not reinforce the message.” The contrast is “the biggest head-scratcher,” he said. Sokol, 54, bought 96,060 Lubrizol Corp. (LZ) shares in January, less than two weeks before recommending the firm as a target, Buffett said in a March 30 letter announcing the departure. Buffett, 80, said doesn’t believe Sokol’s trades were unlawful. Sokol and Brandon had previously been considered possible successors to Buffett as CEO of Omaha, Nebraska-based Berkshire. ‘Graceful Exit’ “There’s nothing wrong with a graceful exit,” Charles Elson , director of the University of Delaware ’s John L. Weinberg Center for Corporate Governance, said in an interview. “The fact that they are leaving says it all.” Buffett didn’t return a request for comment left with an assistant. Berkshire announced March 14 it would buy Lubrizol for about $9 billion, or $135 a share, compared with the closing price of $105.44 on the New York Stock Exchange in the last trading day before the announcement. Sokol’s investment may have given him a profit of about $3 million, according to data compiled by Bloomberg. Sokol told CNBC last week that he did nothing wrong related to Lubrizol. ‘Passing Remark’ Sokol had initially made a “passing remark” about owning stock in the company, and Buffett didn’t then ask about the extent of his holdings, according to the letter. Buffett found out specifics of Sokol’s trades “shortly before” leaving for an Asia trip on March 19, he said in the March 30 document. Criticizing Sokol, who was also chairman of Berkshire’s energy business, would have been “a self-indictment” for Buffett because he was aware of the personal stake before making the deal with Lubrizol, said Elizabeth Nowicki, a professor at Tulane University Law School. Buffett’s policy prohibits covered employees from making trades based on insider information that “Berkshire has taken or altered a position in a public company’s securities or that Berkshire is actively considering such action,” according to a document on the firm’s website. The Wall Street Journal reported yesterday on Berkshire’s policies. The U.S. Securities and Exchange Commission is probing whether Sokol bought shares in Lubrizol on inside information that Berkshire was considering buying the company, according to a person who declined to be identified because the investigation is secret. ‘Lawyer-Drafted Boilerplate’ Buffett’s reputation for candor, based partly on his annual letters to shareholders, denied him the option of sidestepping the specifics that he revealed, said Nowicki, a former attorney with the SEC. He “couldn’t just put out your typical lawyer-drafted boilerplate, cryptic, nonsensical non-statement,” Nowicki said. “It would have raised more questions than it answered.” Last year Buffett wrote that Richard Santulli, who was replaced by Sokol as leader of NetJets after posting losses at the luxury air-travel business, was the father of the industry who established “ top-of-the-line standards for safety and service.” Buffett said in a letter published in 2009 that General Re , a reinsurance business purchased by Berkshire in 1998, had suffered from poor underwriting and reserving and that “these problems were decisively and successfully addressed,” by Brandon and Tad Montross, who replaced him as CEO of the unit. Brandon stepped down after a trial centered on contracts that prosecutors said helped AIG inflate reserves by $500 million in 2000 and 2001. Buffett was unaware that a written deal had secret side agreements that let AIG book fraudulent reserves, prosecutors said. The SEC has sent Brandon a letter stating that the regulator isn’t pursuing any civil claims in the case, according to two people familiar with the document. Clarity The departures of Brandon, 52, and Sokol told investors more than remarks from Buffett, who showed “grace” in handling the exits, said Nell Minow , a board member at GovernanceMetrics International, a corporate governance research company. “I don’t think there’s any lack of clarity” in the Sokol remarks, Minow said. Buffett said in his letter that he accepted the resignation after twice talking Sokol out of leaving before the Lubrizol talks. “I don’t think anyone needs any more information,” she said. Berkshire said in February it has four candidates to succeed Buffett as CEO, without identifying them. During a trip to India last month, Buffett said the firm’s directors would support Ajit Jain, 59, as the company’s next head if the reinsurance executive decided to seek the post. “He’s not only excelled at every single task he’s taken on in insurance, but he’s behaved in a way that’s been totally honorable,” Buffett said at a news conference in Bangalore on March 22. “He could have made a lot more money working for somebody else than working for Berkshire.” To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net ; Michael J. Moore in New York at mmoore55@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-07-12 | Bloomberg | China’s Stocks Slump on Europe Debt Crisis, Property Curbs | China ’s stocks fell, driving down the benchmark index by the most in almost two weeks, on concerns Greece ’s debt crisis may spread to bigger economies in Europe and the Chinese government is intensifying property curbs. Jiangxi Copper Co. and China Shenhua Energy Co., the nation’s biggest producers of copper and coal, slumped more than 1 percent on speculation demand for commodities will falter. Poly Real Estate Group Co. retreated the most in a week after Xinhua News Agency reported Shanghai will start a trial to cap prices of newly built residential properties in some areas. “The European debt crisis seems to be spreading and that will undoubtedly shatter confidence in global financial markets,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 25.7 points, or 0.9 percent, to 2,777.04 at 9:42 a.m. local time. The CSI 300 Index (SHSZ300) fell 1 percent to 3,083.02, led by energy and financial stocks. The Standard & Poor’s 500 Index slumped 1.8 percent yesterday as concern grew Europe’s debt crisis will spread. Euro-area countries may have to double their bailout fund to 1.5 trillion euros to cover a crisis in Italy , the European Central Bank said, according to German newspaper Die Welt, citing unidentified “high-ranking” people at central banks. German Finance Minister Wolfgang Schaeuble said “there’s no discussion whatsoever” of doubling the European Union’s rescue facility after the Die Welt report. The Financial Times cited unidentified senior officials as saying European leaders are prepared to accept that Greece should default on some of its bonds. The EU is China’s biggest export market, accounting for about a fifth of the Asian nation’s overseas shipments. Commodities Slump Crude oil for August delivery fell 1.1 percent to $95.15 a barrel in New York yesterday, the lowest level since July 1. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 1.6 percent, the biggest drop since June 2. Jiangxi Copper, China’s biggest producer of the metal, fell 1.7 percent to 35.34 yuan. China Shenhua, the nation’s largest coal producer, lost 1.7 percent to 30.37 yuan. The Shanghai gauge has fallen 1.1 percent this year after the central bank raised interest rates five times and reserve- requirement ratio 12 times since the start of 2010 to tame inflation that quickened to a three-year high last month. The index has pared a loss of as much as 6.7 percent on speculation fiscal policies such as spending in affordable housing will support the economy and after Premier Wen Jiabao said on June 24 efforts to stem inflation have worked. “Inflation is still a big problem in China now and the government won’t ease tightening until inflationary pressure really recedes,” said Wu. Property Curbs Chinese inflation is being driven by property price increases, which will be key to controlling consumer prices, Yi Xianrong, a researcher at the Chinese Academy of Social Sciences , wrote in a commentary in the Hong Kong Economic Times today. Shanghai will start a trial to cap prices of newly built residential properties in planned urban areas in Pudong New District in the second half of this year, Xinhua reported yesterday, citing the city’s Mayor Han Zheng. Poly Real Estate, China’s second-largest developer by market value, dropped 2.6 percent to 10.95 yuan. China Vanke Co., the nation’s biggest listed property developer, slid 1.8 percent to 8.60 yuan. China’s economy probably grew 9.3 percent in the second quarter, according to the median estimate in a Bloomberg survey. It expanded 9.7 percent in the first quarter. The figure and other June data including industrial production and retail sales are due tomorrow. State Council The State Council may discuss China’s economic development direction for the second half during a regular meeting tomorrow, the National Business Daily reported today, without saying where it got the information. The country’s top leaders may also meet at the Beidaihe seaside resort area near Beijing in late July to set the tone for measures during the second half, the report said. In Hong Kong , the Hang Seng Index fell 2.1 percent after Moody’s Investors Service said some Chinese companies are engaging in potentially risky business practices. West China Cement Ltd. tumbled by a record 13 percent after Moody’s said the cement producer faced the biggest risk on governance or accounting standards of 61 Chinese companies it analyzed. --Zhang Shidong. Editors: Allen Wan, Darren Boey To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-11-24 | Bloomberg | Zuckerberg Says U.S. ‘Really Blew It’ on Surveillance | The U.S. government “really blew it” on conducting surveillance programs that riled foreign leaders and domestic skeptics, Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg said in a television interview. “They’re continuing to blow it in some ways and I hope they become more transparent,” Zuckerberg, 29, said in an interview broadcast today on ABC’s “This Week.” “These things are always in balance, in terms of doing the right things and also being clear and telling people about what you’re doing.” The National Security Agency is facing scrutiny in Congress and abroad over revelations that it spied on foreign leaders, broke into fiber-optic cables overseas and gathered e-mails and phone records of innocent Americans. Most of the revelations were exposed by Edward Snowden, the former NSA contractor who remains in Russia under temporary asylum. Zuckerberg, whose Menlo Park , California-based social media company started its initial public offering in May 2012, has spent much of the last year getting involved in political issues, from education in New Jersey to infrastructure development in Africa. In April he announced the formation an advocacy group called FWD.us to lobby for changes to U.S. immigration policy, higher academic standards and investments in scientific research. “The future of our economy is a knowledge economy , and that means getting the most talented people into this country is the most important thing we can do to make sure the companies of tomorrow are founded here,” Zuckerberg, whose estimated worth of $22.6 billion ranks him 32nd on the Bloomberg Billionaires Index of the world’s wealthiest individuals, said in the ABC interview. Undocumented Misconceptions There are “a lot of misconceptions” about the legality of 11 million undocumented persons in the U.S., Zuckerberg said, citing the case of a student he taught in an after-school program who said he wouldn’t be able to attend college because he was undocumented. “When you meet these children and they’re really talented and they grew up in America and don’t really know any other country besides that but they don’t have the opportunities that we all enjoy, it’s really heartbreaking,” he said. “It seems like it’s one of the biggest civil rights issues of our time.” Fwd.us supports helping undocumented workers become citizens and is calling for an increase in H-1B visas , a program favored by the technology industry that lets skilled guest workers come to the U.S. Zuckerberg visited Capitol Hill in September and discussed immigration with lawmakers. Citizenship Path The Senate in June passed a bill that, as part of revising immigration policy, includes a path to citizenship for undocumented immigrants. The measure has stalled in the House, where many Republicans oppose the citizenship provision. House Speaker John Boehner , an Ohio Republican , has said he wants to approach changes to immigration policy “in a common sense, step-by-step way.” He has rejected the Senate approach of using one bill to address multiple issues. Asked for his advice on what President Barack Obama ’s administration should do to resolve snags in the new government-run health-insurance exchanges created under the Affordable Care Act, Zuckerberg cited his company’s own technological challenges. “Sometimes stuff doesn’t work when you want it to,” he said. “We’ve certainly had plenty of mistakes and things that haven’t worked the way that we want to. The right thing here is to keep on focusing on building the service that you think is right in the long term.” To contact the reporters on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net ; Todd Shields in Washington at tshields3@bloomberg.net To contact the editor responsible for this story: Romaine Bostick at rbostick@bloomberg.net |
2024-02-03 | Bloomberg | Deutsche Bank Investment Banking Profit Rises on Trading Revenue | Deutsche Bank AG , Germany ’s biggest bank, said higher revenue from fixed-income and equities trading lifted fourth-quarter earnings at its investment bank. Pretax profit at the division rose to 625 million euros ($862 million) from 398 million euros in the year-earlier period, according to a statement today. Revenue from sales and trading climbed 30 percent to 2.44 billion euros, helped by a rebound in asset values, the Frankfurt-based company said. The German bank’s trading result compares with an 8 percent decline on average at Goldman Sachs Group Inc ., Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp., according to data compiled by Bloomberg. Anshu Jain, sole head of Deutsche Bank’s corporate and investment bank since July 2010, is trying to increase cooperation between the trading, finance and transaction units to boost earnings. “Deutsche Bank performed better than many of its U.S. peers in sales and trading,” said Andreas Plaesier, a Hamburg-based analyst at M.M. Warburg who recommends buying the shares. “It has been winning market share since the financial crisis.” Deutsche Bank shares rose 2 percent to 45.32 euros as of 10:35 a.m. in Frankfurt trading. They have rallied 16 percent this year, valuing the company at about 42 billion euros. The Bloomberg Europe Banks and Financial Services Index of 48 companies has climbed 12 percent in the period. Deutsche Bank already reported net income and revenue in a preliminary statement on Jan. 31. Net Income, Revenue Fourth-quarter profit fell 54 percent to 601 million euros, missing analysts’ estimates, on costs tied to the acquisitions of Deutsche Postbank AG and Sal. Oppenheim Group and changes at the corporate and investment bank, the company said today. Revenue climbed 34 percent to 7.43 billion euros, beating projections, while non-interest expenses increased by 50 percent to 6.31 billion euros. Rising expenses included acquisition-related costs of 750 million euros and higher severance payments, the lender said. “We expect that Deutsche Bank is doing its best to cut costs in the investment bank to prepare for a harsher operating environment in the years to come,” Peter Thorne , a London-based analyst at Helvea Ltd., said in a Feb. 1 note. The fixed income, currencies and commodities business “for structural and regulatory reasons is in decline at the moment and the smart banks are adjusting before rather than after,” he said. Postbank, Sal. Oppenheim Deutsche Bank, led by Chief Executive Officer Josef Ackermann , 62, bought consumer lender Postbank and private- wealth manager Sal. Oppenheim last year to reduce dependence on investment banking. The company today reiterated a target to double pretax profit at its operating businesses to 10 billion euros this year from 2009 levels. Analysts remain skeptical Deutsche Bank can reach the 10 billion-euro goal and forecast 2011 pretax profit of 8.4 billion euros, according to data compiled by Bloomberg. “Naturally, we are well aware that we will again have many challenges to face and imponderables to consider this year,” Ackermann said in a speech in Frankfurt today. “But one thing is certain: Barring unforeseen major obstacles, we will be able to build on last year’s hard work and draw on the momentum from our successes to achieve our target.” Risks include regulation, slowing global economic growth, the sovereign-debt crisis, geopolitical risks, rising energy and commodity prices as well as overheating in some emerging-market economies, according to Ackermann. Dividend Deutsche Bank plans to pay a dividend of 75 cents for 2010, unchanged from the previous year, with the CEO saying the firm will maintain its “disciplined capital management ” and “pay an appropriate dividend.” He also said he sees “significant upside potential” in the lender’s share price. Deutsche Bank’s Tier 1 capital ratio, a measure of financial strength, was 12.3 percent at the end of December, compared with 12.6 percent at the end of 2009. Regulators from 27 nations last year agreed to more than double capital requirements for banks to help avert future financial crises. Fourth-quarter revenue from debt sales and trading gained 26 percent to 1.57 billion euros, helped by foreign-exchange and money markets revenue as well as writeups of 202 million euros, following year-earlier writedowns. Equities trading revenue rose 37 percent to 872 million euros. Banker Pay The company increased the total amount it set aside to pay its 15,943 corporate and investment banking employees for 2010 by 17 percent to 5.94 billion euros from a year earlier. Pretax profit at the retail-banking unit, run by Rainer Neske , climbed almost fivefold to 222 million euros, helped by Postbank. The asset and wealth management unit posted a pretax loss of 36 million euros after a 325 million-euro profit in the year-earlier period. Earnings from transaction banking decreased 48 percent to 94 million euros. Sal. Oppenheim may break even this year after restructuring and should contribute 100 million euros to 150 million euros in pretax profit from 2014, Ackermann said today. To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net ; Jann Bettinga at jbettinga@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-07-12 | Bloomberg | European Unity Project Mustn’t Be Abandoned, Soros Writes in FT | The European status quo has become untenable, yet it should still be possible to mobilize a “silent majority” in favour of further advance toward a united Europe, said George Soros , the billionaire investor. Writing in the Financial Times, Soros said the euro was from the start an incomplete currency, in the sense that it had a central bank but no treasury, and its architects thought, wrongly, that markets would correct their own excesses; hence they set up rules designed to stop only public-sector excesses. The excesses, however, were mainly in the private sector, as interest-rate convergence generated economic divergence; lower rates in the weaker countries led to housing bubbles, while the strongest country, Germany , had to keep a tight rein to cope with reunification; and finance was compromised by the spread of risky financial instruments and unsound lending practices, Soros said. As integration has turned into disintegration, Europe ’s political establishment has turned from spearheading further unification to defending the status quo, he said. A Greek default may be inevitable, but it needn’t be disorderly; the rest of the eurozone must be safeguarded, and that means strengthening it through a wider use of Eurobonds and a eurozone deposit-insurance arrangement, Soros concluded. To contact the reporter on this story: Alan Purkiss in London on apurkiss@bloomberg.net. To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net . |
2024-02-13 | Bloomberg | Assadism Without Assad Could Prevent Sectarian Mayhem: Vali Nasr | Syria has arrived at a tipping point. After months in which the regime of President Bashar al- Assad clearly held the dominant hand, the forces arrayed against him have now multiplied to the point where a serious battle is possible. The resistance increasingly is armed and taking on the regime, even controlling towns and villages. The Arab League has abandoned tradition to fully support the opposition. And at the United Nations , only Russia and China stand in the way of a resolution calling for Assad to go. The stakes for Syrians and the Mideast in general go well beyond how democratic Syria may become after the fighting ceases. According to the prevailing narrative, the recent revolutions in the Arab world are battles between the forces of authoritarianism and freedom. But it is the long-running rivalry between the Shiite and Sunni factions of Islam that is the dominant dynamic in the region today. Syria is ground zero in the sectarian great game consuming the Middle East. Among the manifestations of this phenomenon are the pro- democracy protests in Bahrain last spring that quickly turned into a sectarian clash between the Sunni monarchy and the majority Shiite population. The prospect of a neighboring kingdom falling under Shiite rule so alarmed the Sunni rulers of Saudi Arabia, they sent troops to Bahrain in an effort -- not entirely successful -- to end the unrest. That move aggravated tensions between the Saudi government and that of Shiite- majority Iran. Brutal Bombing Campaign In Iraq, sectarian posturing trumped talk of national unity the moment the last U.S. troops exited the country in December. Sunni parties broke with the Shiite-dominated government, and Sunni extremists resumed their brutal bombing campaign against Shiite targets. Lebanon, once the archetype for sectarian mayhem, is again simmering with Sunni-Shiite tensions. Sunni political parties have been in a constant state of conflict with the Shiite party Hezbollah after it strong-armed the Sunni government of Prime Minister Saad Hariri out of office last year, replacing it with its own choice of Sunni leader. That resulted in a lack of justice for the 2005 murder of popular Sunni Prime Minister Rafiq Hariri , for which a UN-backed tribunal blamed four Hezbollah members. Among other factors deepening the region’s sectarian divide are the rise in Egypt, Jordan and Syria of Salafi forces, who espouse a very narrow definition of who is a Muslim and are deeply anti-Shiite; Iran’s resentment that some Sunni-led Arab governments support U.S. pressure on Iran; and Turkey ’s newfound interest in speaking for the region’s Sunnis. Yet nothing is as explosive as the situation in Syria. And what happens in Syria won’t stay in Syria, which is why so many other parties are trying to influence the outcome there. For the past four decades, Syria has been ruled by the country’s Alawite minority, adherents of a subset of Shiism, who have denied power to the majority Sunnis. In that sense, Syria today is a mirror image of Iraq before the U.S. invasion. Syria’s Sunnis, like Iraq’s Shiites in 2003, stand to gain from regime change, while Syria’s Alawites, like Iraq’s minority Sunnis at that time, are clinging desperately to power. The predominantly Sunni opposition in Syria is backed by the region’s principal Sunni power brokers: Saudi Arabia , Turkey and Qatar. This, once again, has pitted Iran against Saudi Arabia. And it has clouded relations between Iran and Turkey. Blow to Iran The Sunni axis, backed by the U.S. and its European allies, wants to see Assad fall and a complete change of regime. This would be a strategic blow to Iran and Hezbollah and would strengthen the position of Turkey and Saudi Arabia in the region. A Sunni-dominated Syria would truncate the “Shiite crescent” that connects Iran, Iraq and Syria and extends into Lebanon via Hezbollah. Some Saudis go so far as to think that, combined with U.S. pressure on Iran, this would end the Shiite threat to regimes in the Persian Gulf. The Shiite axis, meanwhile, hopes to keep Assad from falling. Iraq ’s Shiite Prime Minister Nouri al-Maliki even pleaded his case to U.S. President Barack Obama during his recent White House visit. It’s difficult to imagine the Syrian resistance giving up on its push to knock Assad off his pedestal. At the same time, a quick collapse of his regime seems unlikely. More probably, Syria will continue to slide gradually into civil war. Warring cantons backed by rival regional blocs may emerge. The resultant bloodshed, sectarian cleansing, refugee crises, assassinations and bombings could destabilize the whole region. Iraq would be at particular risk. The country’s sectarian wounds remain open. Sunnis there are unhappy. Encouraged by events in neighboring Syria, they once again are turning to insurgency to secure their future. Iraq’s Sunni tribes already are major arms conduits for Syria’s rebels. The Sunni insurrections in Syria and Iraq could combine to create a dynamic infecting a zone from the Persian Gulf to the Mediterranean. Given these terrible scenarios, the U.S. and its European allies must consider a way out that mitigates these risks. One option would be to have Assad go but “Assadism” remain. Yemen offers a precedent. Last year, amid unrest in Yemen, Saudi Arabia persuaded President Ali Abdullah Saleh to give up power in exchange for immunity from prosecution, while his clan remained firmly in control. The Arab League has hinted at such a resolution for Syria, though so far there is no international support for it. Having Assad exit with his regime intact could stop the violence and give Syria an opportunity to reform. Achieving that would require the U.S. and its partners to work closely with Russia , which has a relationship of trust with Assad. The Russians would need reassurances that post-Assad they would be able to maintain their naval presence in the Syrian ports of Latakia and Tartous, the only Mediterranean harbors to which they have access. Allowing Assad’s repressive Alawite regime to survive after he goes would be a distasteful solution. But the reality is that with Syria, the only choices left are bad ones. This is the least-bad alternative. (Vali Nasr is a Bloomberg View columnist, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and a senior fellow in foreign policy at the Brookings Institution. The opinions expressed are his own.) Read more opinion online from Bloomberg View. To contact the writer of this article: Vali Nasr at vali.nasr@tufts.edu. To contact the editor responsible for this article: Lisa Beyer at lbeyer3@bloomberg.net . |
2024-12-18 | Bloomberg | UBS Capital Strategy Converges With Credit Suisse in Fortress Switzerland | UBS AG (UBSN) and Credit Suisse Group AG (CSGN) , Switzerland’s largest banks, are finding that the advantages of Europe’s toughest capital requirements are helping offset the costs as the region’s sovereign-debt crisis escalates. The two lenders shrank their balance sheets the most among Europe’s 15 biggest banks since 2007, even as rivals grew, data compiled by Bloomberg show. Both are further scaling down their securities units to lift capital ratios. While UBS and Credit Suisse, based in Zurich, initially resisted Swiss regulators’ efforts to introduce stricter capital and liquidity measures starting in 2008, arguing they wouldn’t be able to compete with international rivals, they now say the more prudent capital and cash reserves are beneficial. “In a market like this one, investors are looking for solidity and safety,” UBS Chief Executive Officer Sergio Ermotti said in an interview last month. “To have a buffer of capital above our peers is something we think is a competitive advantage. But at the end of the day, what is also a competitive advantage is the solidity of Switzerland as a country.” Ermotti, 51, announced plans last month to cut UBS’s risk- weighted assets by 130 billion francs ($139 billion), or 33 percent, by the end of 2016. He’s following predecessor Oswald Gruebel , who made building up capital an “overriding priority” when he joined UBS in 2009, four months after the Swiss government and central bank bailed out UBS. Credit Suisse CEO Brady Dougan, 52, who led the company through the subprime-mortgage crisis without a state rescue, said last month the bank will eliminate 85 billion francs, or 23 percent, of risk-weighted assets by the end of 2014. Luring Wealthy Clients Ermotti and Dougan say fatter capital buffers help them attract funds from wealthy clients. UBS, which got 53 percent of pretax profit from wealth management in the first nine months of the year, added 30.7 billion francs of net new funds in the period. Credit Suisse, which generated 27 percent of earnings from wealth management, attracted 33.8 billion francs. The Swiss banking regulator and the Swiss National Bank began pushing the lenders to clean up their balance sheets, cut assets and boost capital amid the 2008 crisis. That gave UBS and Credit Suisse a head start on European peers, who are now deleveraging. Twenty-two European lenders plan to cut risk- weighted assets by a combined 1.2 trillion euros ($1.6 trillion), or about 15 percent, according to Kian Abouhossein, an analyst at New York-based JPMorgan Chase & Co. Early Resistance From the end of 2007, when the U.S. subprime crisis was claiming its first casualties, through this September, UBS and Credit Suisse had already reduced their risk-weighted assets by 44 percent and 35 percent, respectively, company reports show. The rest of the 15 largest European banks have, on average, increased such assets by 12 percent in the period, according to Bloomberg data. UBS and Credit Suisse, which put up “a large amount of initial resistance” to the regulators’ demands, became more amenable to the changes after the September 2008 bankruptcy of Lehman Brothers Holdings Inc. , according to the Swiss Financial Market Supervisory Authority’s report on lessons from the crisis published in September 2009. Philipp Hildebrand, then SNB vice president, proposed limiting the banks’ leverage, or the ratio of total assets to capital, in June 2008 after the central bank’s analysis of financial system stability showed that cumulative assets of UBS and Credit Suisse in 2007 exceeded the country’s annual gross domestic product by seven times while their capital-to-assets ratio had fallen to about 2.5 percent from 7 percent since 1995. UBS Rescue The banks protested that such a capital requirement was too crude because it didn’t take into account the riskiness of assets. Less than two weeks after the SNB’s proposal was made public, Credit Suisse Chief Risk Officer Tobias Guldimann rejected the idea, saying: “We manage banks according to Basel II , not Hildebrand I.” The regulators’ influence increased after UBS had to turn to the Swiss government for a capital injection of 6 billion francs to spin off illiquid assets to an SNB fund in October 2008. The following month, the banking regulator signed into law requirements for UBS and Credit Suisse to limit their gross assets in proportion to capital and tighten the rules for reserves compared with risk-weighted assets by 2013. In 2009, the banking regulator put forward proposals for stricter liquidity rules, and by the end of June 2010 the two banks were required to hold enough “first-class” liquid assets to cover at least 30 days of expenditures during a crisis. This year, both chambers of the Swiss parliament approved law changes to require the two banks to hold capital equal to at least 19 percent of risk-weighted assets by 2019. Basel Rules Few financial regulators in Europe acted as fast, waiting instead for international rules from the Basel Committee on Banking Supervision. France and Germany led efforts to weaken regulations from the committee, which softened its original proposals and gave lenders about a decade to comply. Banks worldwide will be required to hold capital of at least 10.5 percent of risk-weighted assets by 2019. The committee last week was weighing changes to a proposed liquidity requirement, similar to the one Switzerland implemented last year, under pressure from banks that argue it will stymie lending. A leverage ratio requirement is still under review. Finma Chairman Anne Heritier Lachat said the Swiss regulator is vindicated for pushing through tougher requirements. ‘No Choice’ The credit crisis of 2008 showed that “self-regulation doesn’t work,” she said at a Dec. 1 event of the British-Swiss Chamber of Commerce in Geneva. “We had to act because Switzerland was in a very specific situation. The risks were high. We had really no choice.” Thanks to stricter rules, UBS and Credit Suisse have cleaner and more transparent balance sheets than their rivals, said James Breiding, who this year co-authored the book “Wirtschaftswunder Schweiz” (Swiss Made -- The Untold Story Behind Switzerland’s Success) with Gerhard Schwarz. “The idea of requiring more capital is a crude way of risk control, but it’s effective and easy to measure,” said Breiding, a co-founder of Zurich-based asset manager Naissance Capital Ltd. who doesn’t hold UBS and Credit Suisse shares. “During the last crisis, UBS’s problems caught everyone completely by surprise, but in terms of how the Swiss responded and dealt with that, I think it was very rapid, decisive and exemplary.” Market Rout While bigger capital buffers haven’t made UBS and Credit Suisse immune to the market rout as investors shun financial companies, they may have helped lessen the impact. UBS dropped 29 percent this year in Zurich trading, and Credit Suisse tumbled 41 percent, compared with a 35 percent decline in Bloomberg’s European banking index. (BEBANKS) The two banks trade at price-to-book ratios that are only surpassed by HSBC (HSBA) Holdings Plc and Nordea Bank AG among the 15 biggest European lenders. The cost of insuring against default on UBS’s debt with credit-default swaps more than doubled in 2011, while Credit Suisse saw a 64 percent increase. Among the region’s 15 biggest banks, only contracts tied to London-based HSBC and Nordea of Stockholm are less expensive, Bloomberg data show. The Swiss lenders also have less risk tied to Southern European bonds than some competitors. UBS’s net exposure to the sovereign debt of Italy , Belgium, Greece , Iceland, Spain , Portugal and Ireland was 1.34 billion francs at the end of September, while Credit Suisse’s net exposure to sovereign debt of Portugal, Italy, Ireland, Greece and Spain was about 900 million francs. ‘Liquidity Profile’ UBS and Credit Suisse fare better than French banks, Deutsche Bank AG and Barclays Plc in terms of their liquidity profile, said Andrew Lim, an analyst at Espirito Santo Investment Bank, in a September note. He analyzed the banks’ high-quality liquid assets as a proportion of wholesale funding maturing within one year. “The liquidity profile of a bank is the risk metric that investors should be most concerned about, since the absence of liquidity quickly leads to a bank’s demise regardless of how strongly capitalized it is,” London-based Lim wrote. “UBS and Credit Suisse could theoretically fund themselves for about four-fifths of a year without having to resort to the wholesale funding markets.” Credit Suisse’s dependence on short-term funding is down 34 percent since 2007 and its long-term liabilities exceed long- term assets by 110 billion francs as the bank had “substantially completed” its debt funding plan for this year, the company said on Nov. 1. Lower Profits Customer deposits and long-term debt make up more than 50 percent of UBS’s funded balance sheet, up from about 40 percent in 2007, Chief Financial Officer Tom Naratil told investors on Nov. 17. The bank also has a surplus of “well over” 100 billion francs when comparing assets and liabilities with maturities of more than one year, he said. While the finances of Swiss banks are being strengthened, shareholders need to prepare for lower profits and constrained dividend payments, said Dirk Becker , a Frankfurt-based analyst at Kepler Capital Markets. Investment-bank downsizing will lead to lower revenues and possible losses, while profitability in wealth management will be squeezed as nations seek to repatriate non-declared funds from Switzerland and clients trade less, Becker said. Dividends He said he expects Credit Suisse to cut dividends for this year and next to 50 centimes a share from the 1.30 francs the bank paid for 2010. UBS said last month it plans to pay 10 centimes a share for 2011, its first cash dividend in five years. “Fortress Switzerland is being built at the expense of shareholders, at least in the short term,” said Becker. “In the long-term it’s of course good when you have a stable banking system and there might be advantages coming from that at some point. Right now the banks are only positioned well on capital, nowhere else.” Pain for investors is unlikely to dissuade regulators seeking to protect stability in a country with a population of less than 8 million sandwiched between Germany, France, Italy and Austria. Daniel Zuberbuehler, Finma’s departing vice chairman, told newspaper Finanz und Wirtschaft this month that even the toughened capital requirements for UBS and Credit Suisse are “too mild.” To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-10-11 | Bloomberg | Gold Rises to Record Closing Price on Speculation Dollar to Resume Slump | Gold futures rose to a record closing price on bets that the dollar will resume a slump, boosting demand for precious metals as an alternative investment. Silver extended a rally to the highest level since 1980. The greenback traded close to a a 15-year low against the yen on speculation that the Federal Reserve will expand a stimulus program to bolster the economy. The dollar rebounded against the euro. Hedge funds and other large speculators hold the most-bullish position in gold futures in almost a year. The metal has climbed 24 percent this year. “The bullish case for gold is still intact, and people will come in and buy on the dips,” said Frank Lesh , a trader at FuturePath Trading LLC in Chicago. “You’ve got the specter of more Fed easing and economic uncertainty to support the gold market.” Gold futures for December delivery rose $9.10, or 0.7 percent, to settle at $1,354.40 an ounce at 1:37 p.m. on the Comex in New York. The intraday record is $1,366, set on Oct. 7. The Fed has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and bought Treasuries and mortgage-backed securities to revive the economy. Policy makers next meet on Nov. 3 to decide on another round of quantitative easing. Macquarie Bank Ltd. forecast that gold and silver next year will trade 15 percent higher than forecast. Gold will average $1,265, and silver will climb to $19.50 an ounce, the bank said in a report. Exchange-Traded Products Demand for gold as a haven from slumping currencies boosted investment in exchange-traded products backed by the metal. Global holdings gained about 1.1 metric tons to 2,084.76 tons on Oct. 8, according to Bloomberg data from 10 providers after reaching a record 2,097.01 tons on Sept. 30. The 14-day relative-strength index for gold futures has been above 70 since Sept. 22, a signal to some traders that prices are poised to fall. “Gold is overbought and needs a correction before it can go higher,” Lesh of FuturePath said. Silver futures for December delivery advanced 24.4 cents, or 1.1 percent, to $23.349. Earlier, the metal reached $23.675, the highest level since September 1980. Platinum futures for January delivery fell $17.90, or 1 percent, to $1,690.80 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery rose $1.15, or 0.2 percent, to $588.75 an ounce. To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net ; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net. To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net |
2024-03-19 | Bloomberg | Greece Auction to Settle $3.2 Billion of Credit-Default Swaps | Credit-default swaps dealers will hold an auction today to settle as much as $3.2 billion of Greek bond insurance triggered by the nation’s debt restructuring. The auction will be held under the rules of the International Swaps & Derivatives Association and will determine the amount that sellers of protection must pay by setting a recovery price for Greek bonds. An initial rate will be set at 11 a.m. London time with a final value determined at 3:30 p.m. Greek credit-default swaps are being settled after investors were forced to exchange their bonds at a loss in the biggest ever debt restructuring. The auction ends more than two years of speculation over whether the derivatives are viable for insuring sovereign debt after European policy makers sought to prevent payouts on concern they’d worsen the region’s crisis. “Triggering CDS might have more positive than negative implications for European government bond markets,” said Ioannis Sokos , a fixed-income strategist at BNP Paribas SA in London. “It’s a clear demonstration that there is a functioning hedging tool out there for holders of other peripheral bonds.” Sellers of protection will pay buyers face value in exchange for the underlying securities or the cash equivalent. The results of the auction will be posted on Creditfixings.com , a website run by Creditex, a New York-based derivatives broker, and financial information provider Markit Group Ltd. Portugal Risk Investor concern that Portugal will follow Greece in seeking to reduce its debt burden by imposing losses on private bondholders has driven up the cost of insuring $10 million of that nation’s debt for five years to $3.65 million in advance and $100,000 annually. The price of credit-default swaps signals a 66 percent chance of default, according to CMA. Former European Central Bank President Jean-Claude Trichet led opposition to triggering Greek swaps on concern traders would be encouraged to bet against failing nations and profit from the region’s sovereign debt crisis. In Greece’s restructuring, investors were forced to write off more than 100 billion euros ($132 billion) of debt in return for new bonds worth 31.5 percent of their original investment. investment. Contracts wouldn’t have been triggered if the debt exchange had been voluntary, according to ISDA ’s rules. “If Greece and EU authorities had invalidated the reason for existence of CDS contracts, this could create selling pressures on other peripheral bond markets,” BNP’s Sokos said. Traders will set a recovery rate for the bonds of about 20 cents on the euro, causing a swaps payout of 80 cents, based on the price of the new 30-year Greek securities. Investors are using the longest-dated notes to calculate the settlement, according to Alessandro Giansanti, a senior rates strategist at ING Groep NV. “It’s positive for the CDS market because the meaning of the instrument is to protect against default,” said Amsterdam- based Giansanti. “It’s important to give investors a way to hedge exposure.” To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net |
2024-06-25 | Bloomberg | Liechtenstein to Focus on Asset Management, Asia, Regulator Says | Liechtenstein banks should focus on asset management and attracting inflows from wealthy Asian clients to rebuild their business, according to the head of the Alpine country’s financial regulator. “To get earnings back to where they used to be we need to implement new business ideas,” Financial Market Authority Chief Executive Officer Mario Gassner said, citing asset management, alternative investment funds and Asian customers. “With classic private banking it will be difficult to attract net new money.” Liechtenstein’s wealth management assets have dropped almost a fifth to 166 billion Swiss francs ($173 billion) since Germany used data stolen from the principality biggest bank, LGT Group, in 2008 to prosecute tax evaders. The country of 36,000 people agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. The principality’s tax authority last month wrote to customers of Liechtensteinische Landesbank AG (LLB) that the U.S. had sent an information request covering accounts that contained at least $500,000 at any time since the beginning of 2004. Liechtenstein’s second-biggest bank, also known as LLB, is one of 11 financial firms, including Credit Suisse Group AG (CSGN) , being investigated as part of a U.S. probe of offshore tax evasion. “With the OECD’s new tax standards there will be more information requests,” said Gassner. To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-12-07 | Bloomberg | Try Meditation to Strengthen Your Resilience | I was having one of those days — maybe you're familiar with them? — when I felt like a passenger on a fast, jerky subway train, holding the handrail tight just to stay standing, each turn throwing me off balance. I gave a presentation that received a standing ovation and left the stage on top of the world. Then I read an angry email from someone and became angry myself. Following that, I did a fun on-radio interview and I was energized. A little later, I received feedback that I talked too much in a meeting and I was embarrassed and disappointed in myself. Each new experience sent me flying in a different direction. My concept of myself was simply a reflection of my latest interaction. I was out of control, a victim to the whim of circumstance. I'm not proud to admit this, but in the past I had a system that helped me remain confident and feeling good in the midst of the turbulence: I took credit for the positive experiences while blaming the negative ones on others. That presentation I did? Yeah, I'm good! The feedback that I talked too much? Clearly that person has her own issues. The problem with that system, of course, is that it requires a level of denial that anyone with a shred of intellectual honesty and a modicum of self-awareness would find difficult to sustain. Eventually, reality overcomes self-deception. No, I needed something more solid, an alternative to being tossed around by external events that didn't rely on pretense. Then, one day, sitting in meditation, I found it. As I followed my breath in and out, I noticed something I hadn't paid much attention to before. And paying attention to it changed everything. That something I noticed? My Self. By Self, I don't mean the person who was breathing, I mean the person who was watching the breathing. This is a little difficult to describe, so bear with me here. Your Self doesn't change when circumstances around you change. You're not a different person after a compliment than you are after an insult. You might feel different things after each, but you aren't, essentially, a different person. Becoming familiar and identified with your Self is useful for everyone, but it's especially important for leaders. You cannot lead without some people's disapproval and admiration. Or your own doubt and self-aggrandizement. That's the reality of leadership. And unless you find solid footing in your consistent, unshakable Self, you'll be thrown off balance and lose your way. You'll change your mind at the first resistance. You'll become overconfident when praise abounds. And you'll make poor decisions, just to feel better. Connecting with your Self is the key to maintaining your equanimity, your peace, your clarity, and your judgment, even in the face of changing circumstances and pressures. So how can you find your Self? One of the great gifts of meditation is that it exposes your Self. As it turns out, it's surprisingly easy to find because it's always there, watching. Don't take my word for it, see for yourself: Sit comfortably, shut your eyes, and breathe naturally. Follow your breath as it goes in and out of your body without thinking about anything in particular except your breath. Soon enough, you will notice that your mind is thinking about something. Maybe it's wondering what you're doing or what you look like doing it. Maybe it's trying to solve a problem. Maybe it just remembered something you forgot to do. The person noticing those thoughts? That's you. That's your Self. Your Self just noticed "thinking". See, Descartes was wrong when he said I think, therefore I am. It's more accurate to say I watch myself think, therefore I am. You are not your thinking. You are the person watching your thinking. That little distinction is the difference between feeling your feelings and being them — and it's critically important. When you feel anger, you're in control of what you do next. When you are angry, you've lost control. The part of you that observes your thoughts and feelings is steady and wise and trustworthy. Identifying with your stable, predictable Self makes you a stable, predictable person and leader, one who doesn't get tossed around by random events and the decisions of the people around you. Being connected with your Self will give you the courage to act even in risky situations because you'll know, no matter what happens, that you'll be fine. Even though everything around you may change — how much money you have, whether you have a job, whether you're married, and so on — your Self will still be there, observing. In other words, even in failure, you'll be able to let the part of you that did not change as a result of the failure see what it feels like to fail. Then, when you realize your Self is still intact, you'll get up and try again. The same holds true for your successes. Having a strong relationship with your Self will make you incorruptible. Success can still feel good; you just won't define yourself by it. How can you best cultivate your relationship with your Self? The most reliable way I have found is by meditating. Which doesn't always have to mean sitting on a cushion on the floor. Yesterday I was, literally, on one of those twisty-turny subway rides and I decided to play a game I used to play as a teenager. I got into a stable stance and let go of the handrails. Subway surfing. As the train lurched, I absorbed the changes by shifting my weight and keeping my balance, staying upright and steady, and noticing what this particular kind of fun feels like. |
2024-04-02 | Bloomberg | VIG, Erste Group Tumble, Lead Czech Shares Toward Two-Month Low | Vienna Insurance Group AV (VIG) and Erste Group Bank AG (RBAG) led a drop in Czech shares as euro-area manufacturing contracted an eighth month and unemployment rose to the highest in more than 14 years. VIG fell 2.4 percent to 799 koruna by 12:38 p.m. in Prague and Erste retreated 0.8 percent to 423.5 koruna. The 14-member PX (PX) gauge, where the two Austrian companies have a combined 32 percent weighting, slid 0.4 percent to 968.8, headed for its lowest close in two months. To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-12-13 | Bloomberg | Swiss Fund Moves, Swaps Rule Testimony, GDF: Compliance | Swiss hedge fund managers are considering relocating to neighboring Liechtenstein to sidestep tougher regulations being introduced in Switzerland and gain access to the European Union, PricewaterhouseCoopers LLP said. About 47 percent of 92 firms surveyed, including managers of hedge funds, private equity and real estate, would pick EU member Liechtenstein over being supervised by the Bern-based Swiss Financial Market Supervisory Authority , PwC said. The move would allow them earlier access to EU markets under a new regulatory regime for alternative investment managers. Switzerland has amended legislation to mirror the EU’s Alternative Investment Fund Managers Directive , tightening risk, compliance and auditing standards and increasing fund transparency. Managers from countries that don’t pass equivalent laws won’t be able to market to EU investors. While the EU directive comes into force next year, more than 400 Swiss alternative investment firms may have to wait until at least 2015 before obtaining a “passport” to participate in the EU market. Firms with managers in Switzerland or offshore jurisdictions will get quicker access to the EU if they relocate them to Liechtenstein rather than operate from Switzerland, according to the report. Almost three-quarters of firms surveyed said they selected Switzerland for proximity to family and friends, while only 39 percent cited corporate taxes as an advantage. In the future, regulatory conditions and the practices of the supervisory authority will be the most important criteria, PwC said. Compliance Policy Dodd-Frank CFTC Swap Rules Opposed for Benefiting Futures U.S. Commodity Futures Trading Commission rules were opposed by congressional lawmakers and parts of the derivatives industry for helping exchange-traded futures and threatening the viability of over-the-counter swaps. GFI Group Inc. (GFIG) , a New York-based interdealer broker, and a coalition of trading platforms including one operated by Bloomberg LP told a U.S. House Financial Services subcommittee in testimony for a hearing yesterday that CFTC rules are hurting the swaps market and encouraging a shift to futures. The companies say futures face fewer customer protections and less stringent margin rules. In addition to GFI and Bloomberg, the Companies Supporting Competitive Derivatives Markets group includes Thomson Reuters Corp. (TRI) , ICAP Plc (IAP) and Tradeweb Markets LLC among others, according to the testimony. Bloomberg LP is the parent company of Bloomberg News. The CFTC and Securities and Exchange Commission are required under the Dodd-Frank Act to complete rules to increase transparency in the swaps market by having trades conducted on exchanges or other so-called swap execution facilities. The agencies missed a July 2011 deadline to complete most of Dodd- Frank regulations, and rules governing swaps-trading are unfinished. The agencies also faced questions about the international reach of their rules after European and Asian regulators criticized the CFTC’s cross-border guidelines. The CFTC needs to “clarify and limit the scope of cross-border applicability,” Samara Cohen, a Goldman Sachs Group Inc. (GS) managing director, said in testimony submitted to the panel. CFTC Chairman Gary Gensler said in written testimony that the cross-border reach of some rules is intended to protect taxpayers from overseas risks returning to U.S. markets. Separately, the SEC is preparing to release a rule on the overseas reach of its regulation of some credit-default and equity swaps. The SEC will conduct an economic analysis of its rules, Robert Cook, the SEC’s director of the division of trading and markets, said in testimony. For more, click here. Company Insolvencies May Be Publicized Under EU Draft Rules Creditors and distressed-asset investors may get more insight from proposed European Union rules to publicize information on company insolvencies. Judges and creditors need to know when insolvency cases in other countries begin to aid decisions on making claims, the European Commission said in the proposal. There is currently no EU requirement to publish decisions on the start of insolvency proceedings and no joint register to search bankruptcies across the 27-nation bloc. The new EU rules, which need the support of EU governments and the European Parliament before they can be enforced, would clarify which country’s courts will handle cases and would require coordinating insolvencies for company units. The EU said the rules would increase the efficiency of cross-border insolvency proceedings that affect 50,000 companies in the bloc every year. Courts in other countries would be also able to refuse so- called secondary proceedings if another jurisdiction was handling the case. The EU also wants to offer bankrupt entrepreneurs a second chance and is encouraging governments to draft laws by 2013 that would result in so-called honest entrepreneurs having their debts discharged within three years after a bankruptcy, it said. Insolvency rules could distinguish between such cases and “dishonest” bankruptcies, where a business failure was caused by fraud or irresponsibility, regulators said. U.S. Community Banks Weigh Fiscal-Cliff Plan for Deposit Program Community bankers who expect the U.S. Senate to pass a bill today that would extend a program intended to help them retain deposits also believe they will have a tougher time getting the measure though the House. Facing strong opposition in that Republican-controlled chamber, including from Majority Leader Eric Cantor of Virginia and incoming Financial Services Committee Chairman Jeb Hensarling of Texas , supporters of the Transaction Account Guarantee program may now try to add the extension to fiscal- cliff legislation. The TAG program guarantees $1.5 trillion in non-interest- bearing accounts above the Federal Deposit Insurance Corp.’s general limit of $250,000. It was created in 2008 and extended in 2010 to provide unlimited backing for the accounts to keep them in community banks. Republicans have labeled TAG a bailout- era program that shouldn’t be extended. Small businesses, local governments and nonprofit organizations use the transaction accounts for payroll and other recurring expenses. The FDIC said in a Dec. 4 report that community banks now have sufficient liquidity to manage TAG’s expiration even if the deposits it attracts do migrate to bigger institutions. Cantor objects to the extension because the program was supposed to be temporary, said his spokesman, Roy Cooper. Majority Leader Harry Reid, a Nevada Democrat, is sponsoring the extension bill in the Senate. He has described it as a “must- do” before the end of the year. For more, click here. EU Reaches ECB Oversight Deal That May Speed Direct Bank Aid European Union finance ministers agreed to put the European Central Bank in charge of all euro-area lenders in a deal that paves the way for the currency bloc’s firewall fund to provide direct bailouts to banks. The accord marks a step toward tightening integration of the monetary union to stem the financial crisis that emerged in Greece in 2009. The policy makers’ goal was to break a vicious circle that undermined confidence in Europe ’s banks. Issues such as financing, bank resolution and deposit insurance remain, Julian Callow, London-based chief international economist at Barclays Plc, said today on Bloomberg Television. The new supervisor should be ready by March 1, 2014, with about 200 banks automatically qualifying for direct ECB oversight, EU Financial Services Commissioner Michel Barnier said at 4:30 a.m. today in Brussels after 14 hours of talks. In the interim, the 500 billion-euro ($654 billion) European Stability Mechanism could aid banks directly using its own procedures and asking ECB supervisors to step in, he said. EU leaders sought common bank oversight to rejuvenate their crisis-management effort. The heads of state and government, who gather in Brussels today for a regular summit, will be looking beyond ECB supervision to other measures needed to break the links between banking woes and sovereign-debt struggles, such as who should pay to stabilize failing banks. The legal framework for the new supervisor could be in place by the end of February, allowing the ECB a full year to prepare before taking on its new duties. Today’s agreement opens the way for negotiations with the European Parliament. The balance of ECB power has been a key obstacle for finance ministers trying to reach a deal this month on a single supervisor for banks, according to a Dec. 9 opinion from the ECB and the European Commission. Under today’s agreement, euro-area finance ministers could use the European Stability Mechanism to recapitalize banks directly if they make a unanimous request to the ECB to take over direct oversight of a troubled institution.. For more, click here Arrested Deutsche Bank Employees to Appear in Court Today Five Deutsche Bank AG (DBK) employees arrested yesterday on allegations of obstruction of justice and money laundering will make their first court appearance today. A judge at the Frankfurt local court will allow the suspects to comment on the accusations, Guenter Wittig, a spokesman for the Frankfurt General Prosecutor, said by phone. He declined to identify them. The case is part of a criminal probe over tax-evasion allegations linked to the sale of carbon-emission certificates in which prosecutors are investigating a total of 25 people at Deutsche Bank. Overall, prosecutors are investigating about 190 people now, according to Wittig. The lender’s German offices were raided yesterday. The lender has said Co-Chief Executive Officer Juergen Fitschen and Stefan Krause, the firm’s chief financial officer, are subjects of a tax probe. The probe has been pending for more than two years and led to Europe-wide raids in 2010, including at the offices of Deutsche Bank. People at the bank were warned beforehand of the 2010 raids. Courts GDF’s Electrabel Loses EU Court Appeal of Merger-Breach Fine GDF Suez SA (GSZ) ’s Electrabel unit in Belgium lost a European Union court appeal against a 20 million-euro ($26 million) fine levied for taking over another company years before it sought formal clearance for the deal. The EU General Court, the bloc’s second-highest tribunal, rejected the appeal by Electrabel in a ruling in Luxembourg yesterday. The decision can be appealed. The European Commission fined Electrabel in 2009 for notifying the EU’s antitrust regulator more than four years after it took control of French electricity generator Cie. Nationale du Rhone in 2003. Electrabel notified the commission of the deal in 2008 and it was cleared in April of that year. Electrabel needs to study the verdict before commenting, said Anne-Sophie Huge, a Brussels-based spokeswoman. The Brussels-based commission yesterday said it welcomed the ruling. The court “confirmed that such early implementation constitutes a serious breach of EU merger control law,” the commission said in an e-mailed statement. The case is: T-332/09, Electrabel v. Commission. SEC Says Madoff Customers Entitled to Interest on Cash Deposits The U.S. Securities and Exchange Commission said con man Bernard Madoff ’s brokerage customers are entitled to interest payments on cash they deposited in the Ponzi scheme, as inflation adjustments “provide a more accurate calculation of the real-dollar value of the customer’s net investment.” While faulting the Madoff trustee and the Securities Investor Protection Corp. that hired him for opposing interest payments, the SEC said the court must weigh the costs and benefits of the issue. “Whether such an adjustment should be made in a given case (or in this case) should be guided by a consideration of the relative costs and benefits of doing so, including the impact of administrative delay and additional cost to the bankruptcy estate, as well as the economic impact on claimants and any settled expectations they may have at the time of determination of their claim,” the regulator said in a Dec. 10 filing in federal court in Manhattan. Ex-Mizuho Banker Gets 32 Months for Leaking Tips to Girlfriends Former Mizuho International Plc investment banker Thomas Ammann was sentenced to 32 months in prison for passing inside information about deals he was advising on to two women he was dating. Ammann, a 39-year-old German national who worked on the Mizuho mergers and acquisitions team advising Canon Inc. (7751) on its takeover of OCE NV, must serve half of the sentence, Judge Anthony Leonard ruled today. Jessica Mang and Christina Weckwerth were cleared of trading on illegal tips from him after a London trial last month. Ammann pleaded guilty earlier this year to insider trading and encouraging both women to commit insider trading. Mang and Weckwerth nearly doubled the amount they invested then paid half their profits to Ammann, the U.K. Financial Services Authority said prosecuting the case at a four-week trial. Ammann tried to avoid getting caught by having his girlfriends, who didn’t know the banker was dating them simultaneously, make the trades, the FSA said. Ammann has a young son with a Chinese woman who has now left the country, leaving his elderly mother to care for the child, Ammann’s lawyer Adrian Darbishire, said, asking the judge for leniency. Canon, the Tokyo-based maker of cameras and photocopiers, agreed to buy OCE in a 730 million-euro ($952.7 million) deal in November 2009. Tiger Asia Pleads Guilty, Pays $60 Million in Insider Probe Tiger Asia Management LLC, the New York-based hedge fund run by Bill Hwang, pleaded guilty in an insider-trading case and agreed to criminal and civil settlements totaling more than $60 million. Hwang entered the plea yesterday in federal court in Newark , New Jersey, admitting Tiger Asia used material nonpublic information by selling short shares of Bank of China Ltd. in December 2008 and January 2009. Tiger Asia agreed to forfeit $16.3 million to resolve the criminal case. Tiger Asia Management, Hwang, Tiger Asia Partners LLC and former head trader Raymond Y.H. Park agreed to pay $44 million to settle a U.S. Securities and Exchange Commission lawsuit filed yesterday. Tiger Asia used inside information received through private placement offerings to engage in short selling of Bank of China and another bank, according to the SEC. U.S. District Judge Stanley Chesler placed Tiger Asia on probation for one year, and said the $16.3 million represents the total illicit gain in the criminal case. “Tiger Asia regrets the actions for which it accepts responsibility today and is grateful that this matter is now resolved and behind it in the U.S.,” Hwang said in a statement. Hwang, 48, lives in Tenafly, New Jersey. Tiger Asia’s attorney Lawrence Lustberg told Chesler yesterday that the entire criminal forfeiture was paid that day. “It reflects a just resolution of this matter,” Lustberg told the judge. All investor capital has been returned, he said in an interview. For more, click here. Interviews Levitt Says Company Postings on Facebook Violate Regulations Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, said the SEC’s Regulation Fair Disclosure, known as Reg FD, is violated in principle when companies post information on social media like Facebook. Levitt talked with Bloomberg’s Tom Keene and Michael McKee on Bloomberg Radio’s “ Bloomberg Surveillance .” For the audio, click here. AIM’s Stuttard Sees Global Policy Push to Support SMEs Marcus Stuttard, head of the Alternative Investment Market , the London Stock Exchange’s international market for smaller companies, discussed the outlook for listings of smaller and medium-sized enterprises. He spoke with Francine Lacqua and Guy Johnson on Bloomberg Television’s “City Central.” For the video, click here. 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 |
2024-03-28 | Bloomberg | European Insurer in Talks to Buy IDB’s Clal Stake, Globes Says | IDB Holding Corp. is in talks to sell its stake in Clal Insurance Enterprise Holdings Ltd. (CLIS) to a European insurance company, the Globes reported. The price could reach $2.1 billion compared with a $1.9 billion company value being negotiated with Permira Funds LLC, the financial newspaper reported, without saying where it obtained the information. A representative for IDB told Bloomberg today a number of parties have shown interest in Clal. IDB said Jan. 27 it was in talks to sell Clal to Permira, a private-equity fund. Click here for web link To contact the reporter on this story: Sharon Wrobel at swrobel4@bloomberg.net To contact the editor responsible for this story: Susan Lerner at slerner2@bloomberg.net |
2024-08-06 | Bloomberg | NYC’s Good Times May Sour Like Detroit’s, Bloomberg Warns | New York Mayor Michael Bloomberg invoked Detroit ’s bankruptcy to recall the most populous U.S. city’s own brush with insolvency and warn its residents that they shouldn’t take the current fiscal well-being for granted. Bloomberg, 71, said his 12 years in office helped generate a “virtuous circle” in which spending on schools, public safety and cultural amenities led to population growth , business investment, job creation and tax revenue gains. It can easily be undone, he said in prepared remarks for a speech today in Brooklyn. Seven Democrats, three Republicans and at least two independents are vying to succeed Bloomberg, who leaves office Dec. 31. The mayor, in his speech, warned that a vicious circle may be created if municipal health and pension costs overtake the city’s capacity to maintain quality of life for New Yorkers. The result: population declines, followed by economic dislocation and the issues that pushed Detroit into insolvency - - and almost did the same to New York in the 1970s, he said. “Short-sightedness, corruption, mismanagement and perhaps most dangerous of all, special-interest politics” may lead to a reprise of New York’s troubles of decades ago, Bloomberg said. “We saw all of those factors at work in Detroit -- and in recent years, the most harmful factor may have been special-interest politics.” Prosperity Policies The mayor’s remarks came in what his staff described as “a detailed address” discussing how municipal economic and fiscal policies affect quality of life and urban prosperity. The mayor gave the speech inside a former Pfizer Inc. (PFE) manufacturing plant in Brooklyn used by the city to rent space to startup companies. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. The challenges facing the next mayor haven’t reduced investor confidence in the city’s credit rating, as the yield penalty on some of New York’s securities has shrunk 17 percent in 2013, data compiled by Bloomberg show. Investors demand less extra yield on some borrowings. Bonds maturing in August 2020 were valued yesterday at a yield spread of about 0.39 percentage point, down from 0.47 percentage point at the start of the year. A diversified, expanding economy will help the new administration, said John Flahive, director of fixed income at BNY Mellon Wealth Management in Boston , in an interview last month. Job Growth New York set a record with 3.95 million jobs in June, a 7.7 percent increase from a post-recession low of 3.67 million set in November 2009. The June total is 145,000 more than the previous high of 3.81 million, reached in August 2008, state Labor Department figures show. The mayor said that by comparison, the U.S. economy has regained about three-quarters of the jobs lost nationwide during the downturn. “The reality is we may be a long way from Detroit but we are only a short distance from relapsing into decline if we allow health care and pension benefits to crowd out the investments that make New York City a place where people want to live, work, study and visit,” Bloomberg said. Rising Costs Pension benefits for city retirees have risen to $8 billion a year from $1.4 billion in 2002, when he first took office, Bloomberg said. Health insurance, free to most municipal workers, has almost doubled to $6.3 billion, he added. Gains from a rising stock market won’t increase pension assets enough to offset higher taxpayer costs, the mayor said. “Just as the financial collapse had only a small impact on our pension bill, as the market improves, it will not solve the problem,” he said. “The idea that our costs can be substantially reduced through increased market returns is a fantasy.” In a rare venture into this year’s mayoral campaign, Bloomberg said whoever succeeds him would do well to follow two principles: support diversification of the economy throughout the city’s five boroughs, and refuse to sign a labor contract unless workers agree to contribute more to their retirement and health plans. The mayoral primary is Sept. 10, followed by the general election on Nov. 5. Contract Issues The mayor said contracts expired with the city’s 300,000 workers -- in some cases years ago -- because their union leaders refused to share more of the burdens of these benefits, upon which the mayor conditioned any deal. Since then, city employees have been receiving raises and working under the most-recent collective-bargaining agreements. Bloomberg said voters should demand that candidates pledge to condition future accords on increased worker contributions to pensions and health care. He also said the candidates should commit to refusing to make any raises retroactive for those years worked under expired contracts. While the city has budgeted money for small future pay increases, it can’t afford retroactive wage boosts, he said. “The unions cannot give us retroactive productivity savings to pay for it,” he said. Michael Mulgrew, president of the 200,000-member United Federation of Teachers , rejected Bloomberg’s arguments and characterized the speech as self-serving. “I always enjoy listening to the mayor talk about what a great job he has done, and I’m looking forward to five more months of his self-congratulatory speech-making,” Mulgrew said in an e-mail. Of the major Democratic mayoral candidates, city Comptroller John Liu and Public Advocate Bill de Blasio have said they wouldn’t rule out a deal with unions including retroactive pay increases. Paying Nothing Former city Comptroller William Thompson and City Council Speaker Christine Quinn have declined to discuss contract issues, saying they didn’t want to negotiate terms in public. Former U.S. Representative Anthony Weiner is alone among Democrats in proposing city workers pay more for health care. Bloomberg said about 95 percent of the city’s employees currently pay nothing for their health insurance. Among the Republicans, billionaire supermarket magnate John Catsimatidis is the only candidate uncommitted on the issue. Former Metropolitan Transportation Authority Chairman Joseph Lhota and homeless advocate George McDonald, founder of the nonprofit Doe Fund, have said they’d insist on workers paying more for benefits. City officials plan to seek bids from insurance companies for new arrangements to handle health benefits for the city’s 300,000 employees, injecting competition into a system that has employed the same primary provider -- Emblem Health -- and its corporate predecessors for more than 30 years, Bloomberg said. Saving Already “We will seek a data-driven, modern health-care plan that will focus on prevention, provide higher-quality care,” the mayor said. He estimated the savings at $400 million a year. After the city began looking for alternatives to Emblem Health, the company said it wouldn’t seek a rate increase for the first time in 15 years, saving New York about $300 million in an expected annual increase, Bloomberg said. The search for a new insurance provider “will be a fight the public will have to force the next mayor to pursue,” Bloomberg said. Even with a new plan, the city “will still be facing a health-care bill that is growing at a rate beyond what we can afford,” he said. City unions are hoping the next mayor will back down and not insist that workers make greater contributions to pensions and health care, Bloomberg said. At the same time, the unions are anxious to secure new contracts and raises after so long, Bloomberg said. “It will be up to you -- the voters -- to make sure that we elect a mayor who understands how important this opportunity is and not someone who is going to squander it,” he said. To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net . |
2024-12-31 | Bloomberg | Possible U.S. Budget Deal Would Extend Tax Cuts | The White House and congressional negotiators agreed to contours of a budget deal including tax cut extensions, with the remaining sticking point being how to avert automatic federal spending cuts, said an official familiar with the talks. The official described the proposed framework as the White House announced President Barack Obama ’s plans to deliver remarks at 1:30 p.m. Washington time on the status of the talks. Under the proposed deal, income tax cuts would be extended for annual income up to $450,000, the official said, with rates rising to 39.6 percent on income above that. Expanded unemployment insurance would be continued through 2013. Lawmakers are seeking to avert more than $600 billion in tax increases and spending cuts that make up the so-called fiscal cliff. Even if a deal is reached and can get through both chambers of Congress, it would be more limited than President Barack Obama and leaders of both parties sought. It would set up another battle early in 2013 over the budget and the federal debt limit. Some Senate Democrats expressed resistance toward an income threshold for increased tax rates that would be higher than the $250,000 they sought. Senator Tom Harkin , an Iowa Democrat, said on the Senate floor this morning that he doesn’t support a $450,000 income threshold, signaling that a deal reached by Vice President Joe Biden and McConnell could lose the votes of some Democrats. ‘Doesn’t Agree’ “This is one Democrat that doesn’t agree with that -- at all,” Harkin said on the Senate floor. “We’re going to lock in forever the idea that $450,000 a year is middle class in America?” Capital gains and dividend rates would rise to 23.8 percent for top earners, including taxes as part of the 2010 health-care law, according to the official. Estate tax rates would rise to 40 percent on amounts above $5 million. Extensions of business tax breaks would continue through the end of 2013. The measure would permanently prevent an expansion of the alternative minimum tax. It also would avert a cut in Medicare payments to doctors through 2013. The possible deal would generate $600 billion in new revenue. Earlier in the day, Senate Majority Leader Harry Reid said negotiators could reach a U.S. budget deal today that would protect all but top earners from a tax increase at midnight. Two Years Democrats have sought to delay the automatic federal spending cuts for two years, at a cost of $200 billion, though they haven’t identified other savings to pay for it. Republicans insisted that the spending cuts be offset with savings elsewhere in the budget and that new revenue should be used to reduce the deficit. Talks between Reid and McConnell stalled yesterday, and McConnell reached out to Biden in an effort to break the impasse. Representative Chris Van Hollen of Maryland , the top Democrat on the House Budget Committee, told Bloomberg Television today that the odds of reaching a deal are “a little better than 50-50” while noting that “a lot has to go right.” Stocks rose. The Standard & Poor’s 500 Index gained 0.2 percent to 1,405.49 at 11:29 a.m. in New York. The Dow Jones Industrial Average fell 6.88 points, or 0.1 percent, to 12,931.23 today. The benchmark 10-year Treasury bond yield increased three basis points, or 0.03 percentage point, to 1.73 percent at 11:26 a.m. in New York, according to Bloomberg Bond Trader prices. Tax Cuts Tax cuts first enacted during George W. Bush ’s presidency are scheduled to expire tonight. Obama and other Democrats have sought to extend the reductions for married couples’ income up to $250,000 a year while letting tax rates rise for income above that amount. Republicans oppose tax rate increases for any income level. Allowing the fiscal changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office. In the event the Senate can’t reach a compromise, Obama has asked Reid to ready a bare-bones bill for a vote today to extend expanded unemployment benefits and tax cuts on family income up to $250,000. If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington. Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office. The effects of the higher tax rates and federal spending cuts would accumulate over a matter of months. Congress could reverse them by acting retroactively in 2013. To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net ; Kathleen Hunter in Washington at khunter9@bloomberg.net ; Heidi Przybyla in Washington at hprzybyla@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-10-19 | Bloomberg | U.S. Consumer Prices for Health Insurance in September | The following table shows the consumer price index for health insurance from the Bureau of Labor Statistics. To contact the reporter on this story: Chris Middleton in Washington at cmiddleton2@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-01-23 | Bloomberg | How to Repair a Badly Damaged Portfolio | The recent recession battered Americans’ investment portfolios, hurt their home values and cut into their incomes. Some unlucky people suffered severely from all three. Bloomberg.com asked leading financial advisers how they'd handle a client hit by such severe setbacks. We constructed a fictional, but realistic, scenario and then asked: What does it take to get these people’s retirement dreams back on track? We imagined a married couple, age 55. Coming out of the recession, the couple has a combined annual income of $200,000; a $390,000 mortgage and $20,000 in parent college loans; and an investment portfolio of $1 million, with 55 percent in actively managed stock funds and 45 percent in bond funds. In the past few years, their annual pay fell $100,000 after a job change and shrinking bonuses. Their investments have lost 40 percent, hurt by poorly timed stock sales to pay college tuition. Finally, their home has lost a third of its value, wiping out almost all the home equity on their now-$400,000 home. Below are edited excerpts of advisers’ reactions and suggestions: Refinance, check costs, add stocks 1. Karen Altfest, executive vice-president at Altfest Personal Wealth Management If they were my clients, I’d be very concerned about their habits. There are many, many things they have to get in shape. They’re not prepared for their retirement. They have to live somewhere, and yet they have just about zero equity in their home. They are in big trouble in their spending patterns. They don’t have an emergency fund. I’d like to see them plan to retire at 70. Many people live well into their 90s. If they retire at 65, $1 million to last 30 years is not as much as it sounds. I’d like to know if there is any opportunity to refinance their mortgage. Since rates are so favorable right now, can they do better? The lack of equity in their home would be a problem for a mortgage lender, but not insurmountable. They need to contain their costs. I hear so often: “I don’t know where it goes.” They need to keep track of their spending for six months, see where the money goes, and revise their spending patterns if needed. Sometimes just pointing out what somebody is spending will cause a wake-up call. This is a good time to increase the stocks they own. There are some good values out there. Everybody should have a modest portion in Europe , where some of the stock markets are cheap and are going to rally over time. The 4 Percent Solution 2. Kevin M. Peters, financial adviser at Morgan Stanley Smith Barney First, we’d have to get an understanding of their plans. How much income do they think they need when they retire? We would work backwards from whatever income number they need. Let’s assume inflation and interest rates stay fairly benign over the next several years. If so, you need to plan on pulling out about 4 percent of retirement savings annually in order not to dilute principal. In other words, if you have $1 million, you would be able to pull $40,000 a year from the portfolio while still allowing it to grow 1 percent to 2 percent a year to make up for inflation. If their mortgage rate is high, refinance and potentially roll the college loan into the mortgage. Mortgage loans are tax deductible, while consumer loans are not. If this couple plans on staying in that house for only seven years, they could potentially go into a 7-year, interest-only mortgage at 3.25 percent. They don’t have much equity in the house, so why pay down principal? Conserve cash flow today and invest it. They can earn more than 3 percent on their portfolio, so why not use that leverage to their advantage? As their house recovers in price, pay off the mortgage. If their investments are down 40 percent, they were much too aggressive. You want them to be able to sit through tough markets, without making ill-timed stock sales. So you may not be able to give them an 8 percent return over the next five years. You might have to model a 6 percent return because they can’t stand the volatility. Direct deposit -- into savings 3. Diahann Lassus, president of wealth management firm Lassus Wherley They really need to totally regroup. What is it they’re trying to accomplish? Is it more important to them that they have the higher dollars, which means they work longer? Or is it more important to have free time with their family, in which case they need to cut back and spend less? Even though they’ve lost money, they are still in a pretty good place in terms of overall assets. For retirement, there is no magic number you need. There is no scientific way to figure that out. Instead, you save the maximum you can save without killing your current lifestyle, and you develop a diversified investment portfolio. You start with making sure they’re maximizing 401(k)s, especially if there is employer matching. Also, have dollars go directly into a savings account, not a checking account. If you have cash reserves and a safety net, you don’t have to sell investments at the worst possible time. In terms of asset allocation , they should have a broad diversification that includes U.S. large-cap, U.S. small-cap and international stock mutual funds and bond funds, along with real estate and commodities. It’s the consistent, boring funds -- the index funds and passive investment funds -- that do well over a long period of time. It’s not trying to pick the next hot fund. People say, “I want an aggressive portfolio because I want to make a lot of money fast.” But they aren’t willing to accept the super losses they’ll get if they’re very aggressive when the market tanks. They’re better off doing something more moderate and middle-of-the-road. That portfolio today would be 60 percent to 70 percent in equity and 30 percent or 40 percent in bonds. |
2024-09-29 | Bloomberg | Government Shutdown 1 Day Away as Deal Evades Lawmakers | Congress is leaving itself just one day tomorrow to end a budget stalemate that raises the risk of the first government shutdown in 17 years as Republicans sought to shift blame for the gridlock to Democrats. The Senate will reconvene tomorrow afternoon, when it will reject a House plan passed early today to delay and limit President Barack Obama ’s Affordable Care Act. In response, the House would add “another provision” to the spending measure and send it back to the Senate, said Representative Kevin McCarthy , the top House Republican vote counter. The provision would “reflect the House” and would be one “the Senate can accept,” McCarthy of California said on “Fox News Sunday” without offering details. A likely option would end the government’s contribution to the health insurance of members of Congress and their staffs, as a way of testing Democrats’ willingness to make any changes to the health law, according to a leadership aide who spoke on condition of anonymity to discuss party strategy. House Republican leaders don’t expect to pass a bill that only extends federal spending, or have enough Republicans who support that, the aide said. The House version of the spending measure would also delay the start of the health law, which is known as Obamacare. No talks were held today between House Republican and Senate Democratic leaders, even at the staff level, said a Senate Democratic aide who requested anonymity. A House Republican aide confirmed there weren’t talks between House leaders and White House officials. Stocks Fall Concerns that the budget impasse will hurt economic growth helped push the Standard & Poor’s 500 Index to its first weekly decline since August. The index fell 0.4 percent to 1,691.75 on Sept. 27, and dropped 1.1 percent last week. The rate on 10-year Treasury notes fell three basis points to 2.62 percent. About 20 House Republicans gathered today in front of the Senate side of the U.S. Capitol and urged senators to return and take up the spending bill. They accused Democrats of wanting a shutdown to score political points. “The Senate doors are shut, they are locked,” said Representative Cathy McMorris Rodgers, the chairwoman of the House Republican conference. “If the Senate doesn’t act, it may be inevitable. Why are they waiting?” Unless differences are resolved, as many as 800,000 federal employees would be on furlough and national parks and Internal Revenue Service call centers probably would close. Air-traffic control and Social Security payments would continue. Short Term The latest House plan would authorize 10 weeks of spending starting Oct. 1 only if much of the Obama health law is delayed for a year. The Senate tomorrow will remove the health-care provisions and return to the House the same six-week spending measure it approved last week, said three Senate Democratic aides, who asked for anonymity to discuss plans. “The House position, which is basically the same one they sent us the last time, is going to be rejected again,” Senator Richard Durbin of Illinois , the chamber’s second-ranking Democrat, said today on CBS’s “Face the Nation.” Asked if he thought a government shutdown would occur, he said, “I’m afraid I do.” In a government shutdown, essential operations and programs with dedicated funding would continue. A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers. Treasury Forecast A brief government shutdown won’t lead to any significant change of the Treasury Department’s forecast for when the U.S. will breach the debt limit, a Treasury spokeswoman said today in an e-mail. The Treasury has said measures to avoid breaching the debt ceiling will be exhausted on Oct. 17. The plan passed by the House today opened the second round of volleys with the Senate. While House Republicans have moved slightly off their position -- from defunding Obamacare to delaying most of its provisions -- Democrats haven’t budged in their support for the health law. Senate Democrats said they will reject the any plan that includes health-care provisions, and Obama said he would veto it if passed by the Congress. Texas Republican Senators John Cornyn and Ted Cruz said Senate Majority Leader Harry Reid , a Democrat, should call the Senate into session today to consider the latest House proposal. ‘On Vacation’ “There’s no reason the Senate should be home on vacation,” Cruz, who last week spoke on the Senate floor for more than 21 hours to protest the health care law, said today on NBC’s “Meet the Press.” The Senate can act quickly to pass legislation, if all 100 members agree. If a single member objects, it would block legislation from being passed for four days or more. With no official action today, the final chance to avert a shutdown could be tomorrow evening, if the Senate turns down the latest House plan, as Democrats promise to do. At that point, House Speaker John Boehner would have four main choices -- two of which avert a shutdown. He could pass the Senate bill with mostly Democratic votes or attempt a short-term funding extension to keep the government open past Oct. 1, when fiscal year 2014 begins. The last government shutdown was in 1996. The other two options lead to a shutdown. Boehner could add health-law provisions to the spending bill and ask the Senate to go along, which Senate Democratic leaders have said they’d reject, or do nothing and wait for the political fallout. Funding Gaps The U.S. has had 17 funding gaps from 1977 to 1996, based on a Congressional Research Service analysis. In 1995 and 1996, interruptions lasted from Nov. 14 to Nov. 19 and from Dec. 16 to Jan. 6, as Republicans led by then-House Speaker Newt Gingrich clashed over the budget with President Bill Clinton. The latest House bill leaves intact some parts of the health-care law already in effect, such as requirements insurance companies cover people with pre-existing conditions and that family plans cover children to age 26. The bill would allow insurers to deny abortion coverage based on religious or moral objections. The House measure would delay a requirement for people to purchase coverage or face a penalty, and postpone the creation of marketplaces -- which are supposed to start functioning Oct. 1 -- where people could shop for coverage from private insurers. Further, it would repeal the 2.3 percent medical device tax, which would increase the U.S. deficit by about $29 billion during the next decade. Exchanges Open The exchanges will be open in the event of a shutdown because the 2010 law relies primarily on mandatory spending, which congressional inaction can’t stop. It’s the budget category used for benefits such as Medicare and Social Security. Republicans and Democrats began bracing for a shutdown by attempting to affix blame on the other side. It is at least the fourth time in the past three years that lawmakers have taken a budget battle to the brink of a fiscal crisis, each time averting the worst-case scenario just before or after the deadline. “This has been the Congress of chronic chaos since day one, and this is just another episode,” said Representative Steve Israel , a New York Democrat. Boehner attempted to avoid this fight, offering a plan earlier in September that wouldn’t have tied the health law, which has become known as Obamacare, to the extension of government funding. Debt Ceiling Instead he wanted to have what he called a “whale of a fight” in October over raising the federal debt ceiling. That will be necessary by Oct. 31 at the latest to ensure the government has enough money to pay its bills, according to the Congressional Budget Office. Tea Party-backed hardliners aligned with Cruz rejected Boehner’s plan, insisting on the decisive battle that is unfolding in the days leading up to Oct. 1, when insurance exchanges open and allow uninsured Americans to enroll for coverage in 2014. “The American people deserve to have time to see what this monstrosity will do before it is implemented,” said Representative John Culberson, a Texas Republican. “We are simply offering a compromise of a year’s delay.” The vote early today on the one-year delay was mostly along party lines, with Democrats Mike McIntyre of North Carolina and Jim Matheson of Utah voting yes and Republicans Chris Gibson and Richard Hanna, both of New York, voting no. To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net ; Kathleen Hunter in Washington at khunter9@bloomberg.net ; Michael C. Bender in Washington at mbender10@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-11-22 | Bloomberg | Baum on Money: Virtual Interest Rate | Happy Friday. Before you check out for the weekend, check in for my daily reads. Enjoy. The shadow knows First there was a virtual currency, the Bitcoin. Now there's a virtual funds rate, which economists have labeled the shadow rate. Nothing nefarious, as the Atlanta Fed's Macroblog explains. With the funds rate near zero since December 2008, economists wanted a way to capture the Fed's unconventional policies and express them in a single number for -- what else? -- their models. (A link in the post takes you to a graph of the actual and virtual funds rates.) The shadow rate was -1.68 percent in October. A little knowledge is dangerous I'm a big fan of George Mason University economist Don Boudreaux, who blogs at Cafe Hayek. In this post, he aims at people who don't understand economics. No, you can't hate them for that. But unlike the typical person who is ignorant on the subject of matrix algebra, our economics ignoramus thinks he understands enough about "the logic of markets to comment critically upon real-world market processes," Boudreaux writes. And that's not the worst part. "Even more annoying than economically uninformed people making unfounded economic assertions are people who have a smidgen of exposure to economic jargon or economic models but inadequate knowledge and wisdom to apply that jargon and those models helpfully to reality," Boudreaux says. Been there, seen and heard that. Black and white Friday First retailers decided to open their doors before dawn on the Friday after Thanksgiving to attract early shoppers. Then it was Thanksgiving evening. This year, some retailers will be open all day Thursday. But beware press releases touting statistics on how many consumers plan to "hit the stores" that day, according to Time magazine's Brad Tuttle. Many of those folks will be hitting the "enter" key, pointing-and-clicking their way to gifts. "The latest data from Nielson holds that the percentage of American consumers who will not go shopping in physical stores on Black Friday is clearly on the rise," Tuttle says. Yes, there are great deals on 50-inch flat-screen TVs for the first four people who walk through the door at Best Buy, assuming they aren't trampled first. But a head-start on Christmas shopping does not mean consumers will spend more in total. It does give local TV news some needed material for their broadcasts. The website is a welcome distraction from bigger problems While the rollout of Healthcare.gov was a huge embarrassment for the Obama administration, it now looks like a blessing: a distraction from the more fundamental problems with Obamacare. Just this week we learned that some insurance companies can't or won't extend existing plans for a year. Insurers are restricting choices of hospitals and doctors to contain costs. Some hospitals, including the Cleveland Clinic, have decided to participate only in plans with higher reimbursement rates. Small businesses will pay higher premiums as insurers pass along the new fees the law imposes on them. And many individuals are discovering that Obamacare is only affordable to the extent that they don't get sick -- and have to cover a high deductible. In other words, thank goodness for the focus on technical glitches! More than promises broken The cover of the Dec. 2 issue of Time Magazine says it all. Under a photo of a pill that is broken in two -- "Obama" on one half, "Care" on the other -- the caption reads: "Broken Promise." I'm not a subscriber so I can't read the full article, but the teaser promises "What it means for this presidency" and "What it means for your healthcare." I suspect neither is very encouraging. (Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.) |
2024-06-07 | Bloomberg | Apple, Merck, Syms, Haka, Nortel: Intellectual Property | Apple Inc. (AAPL) filed an enforcement action at the U.S. International Trade Commission in Washington, seeking an emergency order that would block imports of HTC Corp.’s (2498) newest phones and tablet computers. HTC had been ordered by the commission to remove a function patented by Apple for data-detection technology if it wanted to continue selling its mobile phones in the U.S. Apple contends HTC products continue to infringe its patent even after an exclusion order was issued in December. HTC, Asia’s second-largest smartphone maker, is counting on its One series of phones to improve its share of a market that reached $312 billion last year, according to Bloomberg Industries data. Some HTC products were stopped at the U.S. border last month, delaying plans by Sprint Nextel Corp. (S) to sell the HTC EVO 4G. U.S. Customs and Border Protection allowed the products, made in Taiwan, to enter the U.S. after assurances by HTC that the devices weren’t infringing the Apple patent. “HTC has completed the review process with U.S. Customs and HTC devices have been released, as they are in compliance with the ITC’s ruling,” the Taoyuan, Taiwan-based company said yesterday in an e-mailed statement. Apple wants the commission to have all HTC products that run on Google Inc.’s Android operating service blocked from the U.S. until the enforcement case is resolved. It also asks the agency to force HTC to remove any products from store shelves that it imported in violation of the exclusion order. Cupertino, California-based Apple said that if such an order isn’t imposed, HTC otherwise should be required to post a bond equal to the value of each imported product, or at least $290 for each device, Apple said in the filing dated June 4. Apple filed its initial complaint against HTC in March 2010, the first salvo in the iPhone maker’s legal battle against devices that run on Android. It has since become embroiled in litigation with Samsung and Motorola Mobility Holdings Inc., which became a Google unit last month, over their Android products. The newest case is In the Matter of Personal Data and Mobile Communications Devices and Related Software, Complaint No. 2900. The earlier case is In the Matter of Certain Personal Data and Mobile Communications Devices and Related Software, 337-710. Both were filed at the U.S. International Trade Commission (Washington). Merck KGaA to Cooperate With Dr. Reddy’s on Biosimilar Drugs Merck KGaA (MRK) agreed to develop lower-cost copies of biotechnology cancer treatments with Indian partner Dr. Reddy’s Laboratories Ltd. (DRRD) as the German drugmaker seeks to add a product line to propel growth. The companies will share research and development costs, with Darmstadt-based Merck marketing the drugs outside the U.S. and paying Dr. Reddy’s a royalty, they said in a joint statement yesterday. The drugmakers will share marketing rights in the U.S., and Hyderabad-based Dr. Reddy’s will have them in certain emerging markets. Other terms weren’t disclosed. Biosimilars are lower-cost versions of complex drugs made from living organisms. About $80 billion worth of branded biologic drugs will lose patent protection by 2013 and face competition from biosimilars that may earn $5.6 billion worldwide, according to a 2009 report from Research & Markets, a market data company in Dublin. Competitors to the Merck and Dr. Reddy’s project will include Novartis AG (NOVN) ’s Sandoz unit. Merck is reorganizing after setbacks in developing medicines for cancer and multiple sclerosis. The company said in April that it plans to close the Geneva headquarters of its Serono drug unit. It ended seven drug development programs last year and hired a new finance chief and head of pharmaceuticals. “Our experience in developing, manufacturing and commercializing biopharmaceuticals gives us a clear advantage in the biosimilars field,” Stefan Oschmann, the head of Serono, said in the statement. “Dr Reddy’s will bring their first-in- market experience in biosimilars, as well as their expertise in generics and emerging markets to the table.” Serono set up a biosimilars division in the Swiss canton of Vaud earlier this year, it said yesterday Microsoft Case Against Motorola Mobility Headed to Trial Microsoft Corp. (MSFT) and Google Inc. (GOOG) ’s Motorola Mobility unit are headed to a trial in a dispute over royalty rates on the Xbox gaming system and Windows products, after a judge refused to end the case in Microsoft’s favor. The dispute revolves around patents owned by Libertyville, Illinois-based Motorola Mobility that are used in standards that all electronics, including the Microsoft products, follow for WiFi and video coding technology. U.S. District Judge James Robart in Seattle declined yesterday to find that Motorola Mobility breached obligations to license those patents to Microsoft on fair terms, saying the issue must be resolved at a November trial. Microsoft is also seeking to prevent Motorola Mobility from winning a ban on sales or U.S. imports of the Xbox. “While the court will not at this time set forth a legal standard with respect to Motorola’s duty to offer its patents in good faith, it is likely that any analysis of Motorola’s duty will involve, at least in part, an examination of the intent behind Motorola’s offers,” the judge ruled. Robart rejected the handset maker’s claim that Microsoft lost the right to complain by filing suit instead of responding to early royalty demands. At this stage in the case, he said, Microsoft hasn’t proven Motorola Mobility acted dishonestly in making its demands. Motorola Mobility sent letters to Microsoft with what it said was a standard demand for a 2.25 percent royalty on the end price of products that use the inventions, including the Xbox and Windows products. Microsoft contends that would add as much as $4 billion in annual royalties, a figure Motorola Mobility disputes. “Motorola Mobility has acted in good faith and we will prove that at trial,” spokeswoman Jennifer Erickson said in an e-mail. “We are pleased that the court is holding Microsoft to its word -- to license our essential patents just as the vast majority of the industry has done.” Microsoft’s entertainment unit that includes Xbox sales generated $8.9 billion in revenue last year, and the Windows unit garnered $19 billion, according to Bloomberg data. The Redmond, Washington-based company is trying to prevent the U.S. International Trade Commission from blocking imports of the Xbox from Asia, where it is built. An ITC judge in April said the Xbox infringed four Motorola Mobility patents, including three related to industry standards. The commission is scheduled to announce June 25 whether it will review the infringement finding, and any exclusion order would be announced in August. “This case is about Motorola breaking its promise to make its standard essential patents available on reasonable terms and putting the price and availability of consumer technology in jeopardy,” Microsoft Deputy General Counsel David Howard said in a statement. “Today’s decision underscores that Motorola made a promise to the industry which it now must keep, and we look forward to the November trial to determine the appropriate licensing royalty.” Motorola Mobility, which became a Google unit last month, said that Microsoft refuses to pay royalties on the standard patents. Motorola Mobility has sued the software maker in the U.S. and Europe. Robart has prevented Motorola Mobility from taking action to ban sales of Microsoft products in Germany. Motorola Mobility officials had no immediate comment on today’s decision. The European Union is investigating complaints by Microsoft and Apple that Motorola Mobility is unfairly using standard- essential patents to block competition. The U.S. case is Microsoft Corp. v. Motorola Inc., 10-cv- 1823, U.S. District Court for the District of Washington (Seattle). The ITC case is In the Matter of Gaming and Entertainment Consoles, 337-752, U.S. International Trade Commission (Washington). For more patent news, click here. Trademark ‘Filene’s Basement’ Mark May Be Withheld From Syms Corp. (SYMSQ) Auction At today’s scheduled auction of Syms Corp.’s intellectual property assets, the “Filene’s Basement” trademark won’t be included, the Boston Herald reported. Macy’s Inc. (M) , the Cincinnati-based owner of the Basement mark, had licensed it to Syms, according to the newspaper, and contended it could be assigned only to an entity that acquired the Basement’s assets and kept the business intact. Jack Hazan, executive vice president of auction company Hilco Streambank , told the Herald the Basement trademark “has several issues” that hadn’t been resolved. He said the “Running of the Brides” mark may also not be put up for sale “because it’s so connected to Filene’s Basement,” according to the Herald. Michigan Attorney General Says Trademark for Road Invalid Michigan’s attorney general issued an opinion that roadways in the state can’t be registered as a trademark, Interlochen Public Radio reported. M-22, a company based in Traverse City, Michigan, holds several federal trademarks for M-22, a highway name, and has warned that it will sue potential infringers, according to IPR. Enrico Schaefer, the lawyer who represented M-22, told Interlochen Public Radio that the attorney general’s opinion is trumped by federal trademark law. He said that although other companies have wanted to “copy and ride the coat tails” of his client because of its success, only M-22 actually gets to use it as a brand, IPR reported. Maori Tribe Told Haka Phrases Can’t Be Registered as Trademark, The Ngati Toa Maori tribe from New Zealand ’s North Island failed in its attempt to register four phrases from its most- famous haka war dance, the Brisbane Times reported. New Zealand’s trademarks commissioner said that although the tribe owned the haka, it didn’t have a monopoly over its commonly used words, according to the newspaper. ProKiwi, a souvenir company in Christchurch, New Zealand, had opposed the registration attempts after the tribe tried to halt the company’s production of a tea towel using the phrases from the haka , the newspaper reported. Taku Parai, chairman of the tribe’s governing body, told the Times he was disappointed registration was denied because “there has been no other mechanism that we could use to protect this work.” For more trademark news, click here. For copyright news, click here. Trade Secrets/Industrial Espionage Secret Memo Warns of Canada Cyber Threat After Nortel Attack Cyber attacks pose a greater risk to Canada’s economic prosperity than the government previously believed and the country lacks the tools to fight hackers, officials warn in internal documents obtained by Bloomberg News. “All new knowledge obtained indicates the problem is more widespread than previously thought,” said a “secret”-stamped memo to Public Safety Minister Vic Toews from his deputy minister, obtained under Canada’s freedom-of-information law. Canada is trying to bolster its defenses as countries deploy increasingly advanced technology to disrupt their enemies’ networks and gain access to trade secrets. Some of Canada’s biggest companies, such as Potash Corp. (POT) of Saskatchewan Inc. and Nortel (NRTLQ) Networks Corp., have been targeted. A software virus discovered last month called Flame, which targeted Iran’s energy sector, is more complex and resourceful than “all other cyber menaces known to date,” according to Moscow-based security company Kaspersky Lab. Flame’s discovery comes after Iran’s nuclear facilities were attacked by the Stuxnet virus, which was created by the Israeli and the U.S. governments, the New York Times reported June 1. Nortel, once North America’s largest phone-equipment maker, was under steady attack by Chinese hackers from about 2000 until 2009, according to Brian Shields, who advised the Mississauga, Ontario-based company on cyber security for almost 20 years. When Shields reported the attacks to the Royal Canadian Mounted Police in 2004, they didn’t take it seriously, he said. It was not until January 2009 that the Canadian Security Intelligence Service, Canada’s spy agency, got involved -- the same month Nortel filed for bankruptcy, Shields said. The RCMP didn’t immediately respond to a request for a comment on the Nortel allegations. More recent attacks in Canada have been linked to commodities like potash, a natural fertilizer sought after in Asia to help improve crop yields. China-based hackers looking to derail BHP Billiton Ltd. (BHP) ’s $40 billion bid in 2010 to acquire Potash Corp. zeroed in on the Canadian law firms connected with the transaction. The Public Safety department established the Canadian Cyber Incident Response Centre to coordinate the federal response to “cyber security incidents” outside government networks, with a focus on guarding key infrastructure such as energy pipelines and power plants. To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-08-23 | Bloomberg | Asian Stocks Advance on U.S., China Stimulus Speculation | Asian stocks advanced, with the region’s benchmark index set for its highest close since May, on speculation central banks in the U.S. and China will ease monetary policy amid signs growth is slowing. Jiangxi Copper Co. (358) , the mainland’s biggest producer of the metal, climbed 3.6 percent in Hong Kong after the People’s Bank of China left the door open to more interest-rate cuts. Sinopharm Group Co. jumped 6.2 percent after first-half profit rose 22 percent at the nation’s No. 1 pharmaceuticals distributor. QR National Ltd. added 2.3 percent after Australia’s largest coal-train operator beat profit estimates. The MSCI Asia Pacific Index (MXAP) gained 0.9 percent to 121.73 as of 5:29 p.m. in Tokyo, with almost two shares rising for each that fell. The gauge, which is headed for its highest close since May 4, extended its advance after U.S. Federal Reserve Bank of Chicago President Charles Evans urged more accommodative policy by central banks around the world. “Some form of quantitative easing is coming soonish,” said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which manages about $25 billion. “U.S. policy makers are frustrated with the anemic pace of the recovery and this increased the odds that some form of additional Fed easing will be implemented at the central bank’s September meeting.” Stimulus Bets The MSCI Asia Pacific Index has risen more than 11 percent from a June low on bets monetary authorities in the U.S., Europe and China would take action to boost slowing growth. Stocks on Asia’s benchmark index were valued at 12.6 times estimated earnings on average, compared with 13.7 for the S&P 500 and 11.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. Hong Kong’s Hang Seng Index (HSI) rose 1.2 percent. PBOC Governor Zhou Xiaochuan yesterday said adjustments to interest rates and banks’ reserve requirements are still possible even after the central bank stepped up temporary cash injections this month. Japan’s Nikkei 225 Stock Average (NKY) gained 0.5 percent. Australia’s S&P/ASX 200 Index added 0.2 percent and South Korea’s Kospi Index both increased 0.4 percent. The Shanghai Composite Index advanced 0.3 percent, having swung between gains and losses at least seven times, after a report showed China’s manufacturing may contract at a faster pace in August, signaling more stimulus is needed by the world’s second-largest economy. The preliminary reading for a purchasing managers’ index for China released today by HSBC Holdings Plc and Markit Economics was 47.8 after July’s final 49.3 figure. If confirmed, it would be the weakest level since November. It would also mark the 10th month the gauge was below the 50 threshold that signals contraction, the longest run of such readings in the index’s eight-year history. Bad News? “It’s probably one of these occasions when bad news is good news,” said Garry Evans , Hong Kong-based head of global equity strategy at HSBC, Europe’s biggest lender. “Slightly weak China data maybe says we are going to get more policy response.” Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The gauge rose less than 0.1 percent yesterday, reversing a 0.5 percent drop after minutes of the Federal Reserve ’s most recent meeting showed many policy makers favored further stimulus measures unless the economy shows signs of sustainable recovery. Jackson Hole Fed policy makers said after the July 31-Aug. 1 meeting that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009. Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole , Wyoming , where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13. Raw material producers and information-technology companies advanced the most among the 10 industry groups in the MSCI Asia Pacific Index. Jiangxi Copper climbed 3.2 percent to HK$18.80 in Hong Kong. Glencore International Plc (805) , the world’s largest publicly traded commodities supplier, rose 2 percent to HK$43.85. China Telecom Corp. (728) surged 6.7 percent to HK$4.45, extending gains for a second day, after the country’s biggest fixed-line carrier yesterday posted second-quarter profit that beat analyst estimates. JPMorgan Chase & Co. today raised its rating to overweight from neutral, citing rising mobile users. Sinopharm Jumps Of the 458 companies in the Asia-Pacific index that have reported quarterly earnings since July 1, and for which Bloomberg has estimates, more than half failed to meet projections, according to data compiled by Bloomberg. Sinopharm jumped 6.2 percent to HK$24.80 after saying first-half profit increased 22 percent from a year earlier to 959.1 million yuan ($151 million) as broader health insurance coverage and higher subsidies spurred demand for medicines in China. Henderson Land Development Co. advanced 4.7 percent to HK$49.05 after the Hong Kong builder controlled by billionaire Lee Shau-kee reported underlying profit of HK$3.59 billion ($463 million) for the first half, topping the median estimate of HK$2.7 billion of three analysts surveyed by Bloomberg. Wharf Holdings Ltd. rose 4.7 percent to HK$48.90. The Hong Kong developer expanding in at least 14 Chinese cities said first-half profit excluding exceptional items rose 49 percent from a year earlier to HK$5.43 billion on sales from a Shanghai project and climbing rental income. QR National (QRN) rose 2.3 percent to A$3.55 in Sydney after posting full-year net income of A$440.9 million ($464 million), exceeding the A$372.5 million average estimate by eight analysts compiled by Bloomberg. Among stocks that fell, Fairfax Media Ltd. slumped 9.7 percent to 51 Australian cents, the most on the MSCI Asia Pacific Index. The publisher of the Australian Financial Review posted a record annual loss after writing down the value of newspaper titles by A$2.8 billion. To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net ; Adam Haigh in Sydney at ahaigh1@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-09-30 | Bloomberg | Cuomo Hurdles Voters in $1 Billion Sale: Muni Credit | (Corrects to show sales-tax bonds count against the debt cap in sixth paragraph. For more credit-market news, click on TOP CM. For Municipal Credit Markets column alerts, see SALT MUNCREDIT.) Governor Andrew Cuomo plans to sell $1 billion in bonds backed by sales taxes for the first time in 18 years as New York debt outpaces the $3.7 trillion municipal bond market by the most in two months. The securities will be issued next month under a program included in the budget that lawmakers approved in March as New York’s sales-tax revenue set a record high. It’s designed to win the same top rating as New York debt backed by personal income taxes and save money as the state consolidates borrowing for road and bridge construction, said Morris Peters, a spokesman for Cuomo’s budget division. The bonds, which won’t require voter approval, will provide a new credit in a market hungering for New York borrowings, said Howard Cure, director of muni research at Evercore Wealth Management LLC, which oversees about $4.7 billion. Issuers in the state have sold 34 percent less debt in 2013 than at the same time last year, on pace for the steepest slowdown in at least a decade, data compiled by Bloomberg show. “With New York state , anytime there’s a new structure for debt, it’s an opportunity to diversify your portfolio, and it should be very well received,” said Cure, who’s based in Manhattan. “It’s another example of New York being creative in devising mechanisms to circumvent voter approval,” which is needed for general-obligation debt. Confidence Climb Cuomo, a 55-year-old Democrat, has instilled confidence in investors, winning three consecutive on-time budgets for the first time since 1984 and trimming more than $13 billion in deficits. The victories have New York poised for its highest credit rating from Standard & Poor’s since 1972. Comptroller Thomas DiNapoli , a fellow Democrat, doesn’t support Cuomo’s plan. He said it will build on New York’s decades-old practice of borrowing without voter approval, he wrote in an April report on the fiscal 2014 budget. Only about 5 percent of the state’s outstanding debt has been authorized by referendum, DiNapoli said. The tax bonds count against the debt cap, he said. “The new debt structure provides an additional vehicle that will allow the state to avoid seeking voter-approval for billions of dollars in new borrowing in the years ahead,” DiNapoli said in the report. Debt Load The program won’t increase the amount of debt New York issues and it won’t go toward closing budget gaps, as some programs in the past have, Peters said. Even though voters won’t have their say, the borrowing still must be approved by the legislature, the Public Authorities Control Board and the governing board of the agency that’s issuing the bonds, he said. As issuance has slowed this year, New York’s debt has been beating the rest of the market. Investors demand about 18 basis points, or 0.18 percentage point, of extra yield to own New York bonds instead of benchmark offerings, close to the smallest spread since July, Bloomberg data show. The $1 billion issue, scheduled to start Oct. 16, is part of a plan to save as New York consolidates borrowing for road and bridge construction into three programs -- personal income tax, general obligation and sales tax, Peters said. S&P rates the PIT debt AAA and the general obligations AA, third-highest. The sales-tax bonds haven’t been rated. “New York PIT bonds have yields that are at least 20 basis points better than some of our older programs,” Peters said by e-mail. “We expect our new sales-tax bonds to perform just as well.” 1995 Precedent It would be the state’s first issue of sales-tax-backed debt since the New York Local Government Assistance Corp. in 1995, according to Peters. Ten-year debt the agency sold in March that year priced to yield 5.45 percent, compared with about 5.3 percent for benchmark debt, Bloomberg data show. This month, a state agency sold PIT securities, including 10-year bonds priced to yield 3.06 percent, or about 0.1 percentage point above benchmark debt. Some institutional investors are approaching their capacity for the income-tax debt, JPMorgan Securities LLC wrote in response to a proposal request by the Thruway Authority, which issues personal income tax-backed debt. “All mutual funds, the largest holders of PIT bonds, have a single credit capacity constraint,” JPMorgan wrote in its September 2012 request to become an underwriter for the Thruway. “To improve the pricing of PIT bonds and market receptivity of New York state bonds, the state could diversify its offering.” PIT Reference The sales-tax bonds will be structured similarly to the PIT debt, according to New York’s capital-spending plan. One percent of state sales-tax revenue will be set aside each year to pay them off and if collections aren’t enough, the fund will automatically pull from savings, it said. Last fiscal year, New York collected $11.2 billion in sales taxes, beating the $10.6 billion collected in fiscal 2008 as the U.S. plunged into the worst recession since the Great Depression, according to Peters. Fred Yosca, head of fixed-income trading at BNY Mellon Capital Markets LLC in New York, said the sales-tax bonds will help portfolio managers diversify and will probably get the credit rating the state wants. “But at the end of the day, it’s state debt and there’s no getting around that,” Yosca said. Market Week Localities nationwide plan to issue about $3.6 billion of long-term debt this week as yields are the lowest in three months. At 2.69 percent , benchmark 10-year yields compare with 2.62 percent on Treasuries with a similar maturity. The ratio of the interest rates , a measure of relative value, is about 103 percent, compared with a 10-year average of about 95 percent. The lower the figure, the more expensive munis are compared with federal securities. Following are pending sales: Washington ’s Tobacco Settlement Authority is set to issue about $344 million of revenue bonds this week, Bloomberg data show. Connecticut plans to sell $575 million in general-obligation debt to finance a general-fund deficit that arose as the state changed procedures to conform with generally accepted accounting principles. To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-04-28 | Bloomberg | Dewey Said to Be Subject of Probe as Deadline Nears | Dewey & Leboeuf LLP, the New York law firm fighting to stay alive after more than 70 partners left, is the subject of a criminal probe by state prosecutors related to whether managers misled partners about payments due them, a person familiar with the matter said. Manhattan District Attorney Cyrus Vance Jr.’s investigation is in a preliminary stage, said the person, who declined to be identified because the matter isn’t public. Prosecutors, tipped by disenchanted Dewey partners, are probing whether some attorneys were wrongly shut out of pay as the firm’s profits shrank while others received guaranteed packages. Vance seeks to ensure documents and other evidence is preserved ahead of any bankruptcy, merger or dissolution, the person said. Dewey, the No. 3 law firm adviser to banks handling merger deals, faces an April 30 deadline to show lenders it has a survival plan, possibly including absorption by another firm or cost-cutting. The law firm has lost about 72 partners in recent months amid complaints about pay and a plan to restructure the firm. It has drawn about $75 million of a $100 million credit line from banks including JPMorgan Chase & Co. and Citigroup Inc. (C) , according to a person familiar with the firm’s finances. The banks extended an initial April 16 deadline to come up with a plan, according to a person who is familiar with a merger proposal that Dewey presented to other law firms. Defections Mounted Erin Duggan, a spokeswoman for Vance, declined to comment. Angelo Kakolyris, a spokesman for Dewey, didn’t return a call seeking comment yesterday on the probe. On April 26, he declined to comment on the deadline. In a copy of an internal memorandum obtained by Bloomberg News and dated yesterday, the law firm said it’s aware of an investigation by Vance into one Dewey attorney involved in the firm’s management. The firm said in the memo that it has begun an internal probe and plans to cooperate with Vance’s office. Harvey Kurzweil and Seth Farber, as counsel to the firm, were asked to conduct the internal investigation, the memo stated. Last month, as defections mounted, Dewey restructured its chairman’s office to include the heads of four practice groups in addition to Chairman Steven Davis. The group includes Martin Bienenstock , who runs the firm’s restructuring group; Rich Shutran, head of the corporate department; Jeffrey Kessler , head of litigation; and Charles Landgraf, who runs the Washington office and the legislative and public-policy group. ‘Various Paths’ The firm said last week that it was considering “various paths including continuing to operate as an independent global law firm and a strategic combination with another leading law firm.” A possible partner is Greenberg Traurig LLP, which has held “preliminary discussions relating to lawyers at Dewey” and was making no commitments, Jill Perry, a spokeswoman for Greenberg, said. In addition to the bank deadline, the firm also has $125 million in bonds sold to insurance companies in 2010 to refinance previous bank loans. The bonds, placed by New York-based JPMorgan, come due between next year and 2020, Dewey said at the time. The firm’s revenue last year was $782 million, compared with about $760 million in 2010, according to the American Lawyer, a trade magazine which tracks law firm results. The publication lowered its numbers for Dewey this month after getting what it called “newly obtained information.” The Team A team led by partners Bienenstock and Bruce Bennett was weighing a so-called pre-packaged bankruptcy, one of the people familiar with the firm said. A bankruptcy plan approved in advance by creditors could lead to a merger with another U.S. firm, said the person, who didn’t want to be identified because they weren’t authorized to discuss the plans. The team also explored what might happen if the firm shut down, the person said. Closing Dewey would make it much more difficult for members of the firm’s limited liability partnership and creditors to get any money back, the person said. Bienenstock, whose restructuring team represented Los Angeles Dodgers LLC in its sale to a group including former professional basketball player Magic Johnson , didn’t respond to calls and e-mails seeking comment on plans for Dewey. Dewey ranked third among legal advisers to investment banks advising companies on mergers this year, according to data compiled by Bloomberg. The firm placed 28th in American Lawyer’s ranking of the largest 100 law firms, with 190 partners and 2011 revenue of $782 million. Large Law Firms Most large law firms that fail don’t come out of bankruptcy, said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP in Louisville, Kentucky. Instead, they liquidate, he said, citing New York-based Finley Kumble, which went bankrupt in 1988. The firm had almost 200 partners, according to the American Lawyer. Dewey might struggle to find a merger partner because many rivals prefer to select only the partners they want, Bowles said. The serial defections suffered by Dewey were “a form of cherry picking with groups of partners leaving,” he said. While a pre-packaged bankruptcy “in theory could work,” Dewey’s challenge would be to keep control of the firm’s assets, which are mainly its partners, Bowles said. “The money is in the books of business of the productive partners.” Dewey’s Defections Dewey’s defections began in March with the departure of a group of 12 insurance and regulatory lawyers for Willkie Farr & Gallagher LLP. The firm has since lost lawyers to DLA Piper LLP, Reed Smith LLP , Patton Boggs LLP, Hunton & Williams LLP and Pillsbury Winthrop Shaw Pittman LLP. In Dewey’s international network, the 42-lawyer Moscow outpost was recently assessing its options after approaches from firms including King & Spalding LLP, said a person familiar with the negotiations. The Russian office focuses on energy and corporate law. In April, Dechert LLP took a five-partner corporate and securities team from Dewey’s Dubai office to open in the city. Dewey’s Rome office head, Stefano Speroni, has said the Italian business wasn’t negotiating with anyone to leave. Revenue for the first two months of this year rose 28 percent from a year earlier, and so-called billable value increased 13 percent, according to a letter to the partners obtained by Bloomberg News last month. Revenue for the 12 months through Feb. 29 grew 6 percent with an increase in billable value of 9.7 percent, according to the letter. To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net ; Sophia Pearson in Philadelphia at spearson3@bloomberg.net ; Tiffany Kary in Brooklyn , New York, at tkary@bloomberg.net. To contact the editors responsible for this story: John Pickering at jpickering@bloomberg.net ; Michael Hytha at mhytha@bloomberg.net . |
2024-12-17 | Bloomberg | Allianz Pays $12.3 Million to Settle Indonesia Bribe Claim | Allianz SE (ALV) will pay more than $12.3 million to settle U.S. Securities and Exchange Commission claims that the Munich-based insurer made improper payments to government officials in Indonesia during a seven-year period. SEC investigators found that Allianz violated the Foreign Corrupt Practices Act in 295 insurance contracts for government projects from 2001 to 2008 obtained or retained by payments to employees of state-owned entities, the agency said today in a statement. Allianz made more than $5.3 million in profits as a result of the improper payments, the SEC said. “Allianz’s subsidiary created an ‘off-the-books’ account that served as a slush fund for bribe payments,” Kara Brockmeyer, chief of the SEC’s Enforcement Division’s FCPA Unit, said in the agency’s statement. The company lacked sufficient internal controls to detect and prevent illicit payments and improper accounting, the SEC said. Joel Cohen , a Gibson Dunn & Crutcher LLP partner representing Allianz, said in an e-mail that the company fully cooperated with the investigation, which it resolved without admitting or denying wrongdoing. “Over the past few years, Allianz has enhanced its global Anti-Corruption Program, which includes robust books and records controls and global anti-corruption and compliance trainings for employees,” Cohen said in the e-mail. “Prior to and during the SEC’s investigation, Allianz took steps intended to strengthen its internal controls and mitigate FCPA risks.” The alleged misconduct was brought to the SEC’s attention by two complaints, according to the agency. The first, submitted in 2005, led to an audit of accounting records at the Indonesian subsidiary that showed managers were using “special purpose accounts” to pay government officials. A second complaint was made to Allianz’s external auditor in 2009. To contact the reporter on this story: Gregory Mott in Washington at gmott1@bloomberg.net To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-11-24 | Bloomberg | Default Swaps Soar on `Sacrosanct' Senior Europe Bank Debt: Credit Markets | The cost of protecting against defaults on senior notes of European banks is soaring on speculation bondholders will be forced to take losses as governments try to share the burden of taxpayer-funded bailouts. The Markit iTraxx Financial Index of credit-default swaps on senior debt rose 6.5 basis points, or 0.065 percentage point, to 157.5. basis points. Contracts on Portugal’s Banco Espirito Santo SA are at a record, and Spain’s Banco Santander SA are at the highest level in five months. Europe’s debt crisis has spread to Ireland from Greece, and bond investors bet that Portugal and Spain will be next in line for a bailout from the European Union and International Monetary Fund. The EU estimates a rescue for Ireland, downgraded yesterday by Standard & Poor’s, may total 85 billion euros ($113 billion). “Under a ‘bail-in’ regime, senior bondholders will most likely find themselves as potential burden-sharers, which is in stark contrast with the rules of engagement of the market hitherto,” Roberto Henriques , an analyst at JPMorgan Chase & Co. in London, said in a research report. “Even at the worst point of the current crisis, it was generally a given that senior debt was sacrosanct.” Subordinated bonds have largely borne the brunt of losses because they stop paying before senior securities in case of a default or debt restructuring. Should banks be unable to pay senior bondholders, they may find it more difficult and expensive to raise money. Anglo Irish Bank Corp. investors were forced to take 20 cents on the euro for subordinated debt this week. Relative Yield Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of similar maturity government debt rose 3 basis points to 169 basis points, the highest since Oct. 20, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Yields averaged 3.61 percent. Performance Food Group Co. withdrew a planned $550 million note sale citing “adverse market conditions.” National Amusements Inc., the movie-theater chain and holding company controlled by billionaire Sumner Redstone , planned to issue $390 million of bonds. Loan prices fell yesterday and relative yields on emerging market debt soared. “There’s a risk-off trade right now because there’s a lot of fear in the marketplace,” said Kingman Penniman , chief executive officer of KDP Investment Advisors in Montpelier, Vermont. “With the combination of everything that’s happening in Europe and Asia and the aggressive amount of new issuance that’s come recently, we’re definitely seeing a correction.” Sales Pulled Performance Food, owned by Blackstone Group LP and Wellspring Capital Management LLC, pulled its offering even after sweetening terms for the debt on Nov. 22 in an effort to attract investors, said a person familiar with the transaction who declined to be identified because the marketing was private. Bain Capital LLC’s Burlington Coat Factory Warehouse Corp. decided to cancel a $1.5 billion debt financing on Nov. 18. In Asia, Hongkong Electric Holdings Ltd. , delayed its sale of as much as $500 million of 10-year dollar bonds due to tensions on the Korean peninsula, two people familiar with the matter said today. Yuzhou Properties Co., a developer in southern China, and Vietnam National Coal-Mineral Industries Group postponed dollar- denominated bond offerings as investor appetite for risk diminished, people with knowledge of the sales said yesterday. Vienna Insurance In Europe, Vienna Insurance Group , the east of the region’s biggest insurer, postponed its 500 million-euro ($666 million) sale of 30-year subordinated bonds, according to a banker involved in the transaction. Caterpillar Inc. , the world’s biggest maker of construction equipment, hired Goldman Sachs Group Inc. to help it sell yuan- denominated bonds in Hong Kong, according to a person familiar with the matter. The Peoria, Illinois-based company plans to raise as much as 1 billion yuan ($150 million) from two-year bonds, said the person, who asked not to be identified as the matter is private. National Amusements may sell its seven-year senior secured notes as soon as next week, said a person familiar with the transaction. The notes will have a provision allowing up to 10 percent of the debt to be redeemed at 103 percent annually during the first three years, after which time all of it can be called, said the person, who declined to be identified because terms aren’t set. Most-Traded Bonds In the asset-backed securities market, the Securities and Exchange Commission indefinitely extended the timeframe for bond issuers to omit credit ratings from marketing materials, effectively exempting companies from part of the U.S. Dodd-Frank financial reform act. Fears of burden sharing are also being seen in senior bank bonds. The 1 billion euros of senior unsecured floating-rate notes due 2012 issued by Banco Espirito Santo were at 90.8 cents, down from 93.4 on Nov. 4, according to Bloomberg composite prices. Its 500 million euros of senior notes due 2013 were at 83 cents, down from 88.38 on Nov. 4. Banco Bilbao Vizcaya Argentaria SA’s 1.25 billion euros of 3.875 percent senior notes due 2015 were at 98.8 cents to yield 4.14 percent, down from 101.7 cents and a yield of 3.47 percent on Nov. 1, according to Bloomberg composite prices. While Irish Finance Minister Brian Lenihan has pledged only to impose losses on holders of subordinated bonds of nationalized lenders, investors are concerned his promise won’t be honored as EU and IMF officials gain authority in Dublin. Outlook for Bondholders “There will be private-sector burden-sharing,” said Willem Buiter , chief economist at Citigroup Inc. in London. “Ireland may be the first example, with haircutting of senior unsecured bank debt and possible sovereign debt restructuring as well in due course.” The Markit iTraxx SovX Western Europe Index of contracts on 15 governments reached a record high 181.5 basis points. Credit-default swaps typically rise as investor confidence deteriorates and fall as it improves, paying the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Dublin-based Anglo Irish was taken over by the government in January 2009 as loan losses spiraled after a real-estate bubble burst. The government has also taken a 36 percent stake in Bank of Ireland, the country’s biggest lender, and is preparing to take a majority share of Allied Irish. Anglo Irish Credit-default swaps on Anglo Irish’s bonds may be triggered following a subordinated debt exchange, with investors asking the International Swaps & Derivatives Association whether the transaction constitutes a so-called restructuring credit event. If ISDA rules that Anglo Irish swaps can be triggered, buyers of insurance on the bank’s senior bonds should hold off demanding payment because they may recover more as the risk of holding the debt increases, according to Tim Brunne , a credit strategist at UniCredit SpA in Munich. Forcing holders of senior bonds sold by some European banks to take losses may be necessary given the amount of debt involved, according to Brunne. “You don’t have the possibility to solve the situation without cutting the link between the financial sector and the sovereign, and that’s a problem you see everywhere,” he said. The 750-billion-euro European Financial Stability Facility, created in May to support the region’s most indebted governments, won’t be big enough to rescue Spain, Citigroup’s Buiter said. A rise in Spanish bank risk could be the “tipping point” for the financial credit swaps gauge, according to JPMorgan. Spanish Banks Credit-default swaps on Lisbon-based Banco Espirito Santo have climbed to a record 722, according to CMA. Contracts on Banco Santander are at a five-month high of 236. German Chancellor Angela Merkel wants buyers of new euro- region bonds to accept liability clauses starting in 2011, two years before a revamped crisis-management system kicks in, according to a government document obtained by Bloomberg News. “The problem areas are there for all to see -- haircuts for subordinated bank debt holders and fear that senior holders could get dragged in,” said Suki Mann , a credit strategist at Societe Generale SA in London. “The market has moved on from Greece, is beating up on Ireland and is looking closely at Portugal.” To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net |
2024-06-28 | Bloomberg | British Financial Firms' Business Volumes Are Increasing, CBI Survey Says | Almost two thirds of financial services companies in the U.K. anticipate a rise in transaction volumes for the coming quarter, the most positive result since December 1993, according to a survey by the Confederation of British Industry and PricewaterhouseCoopers LLP. Approximately 63 percent of those surveyed said they expect the increase, driven by the banking, life insurance, securities and investment management industries, according to today’s report. “In other encouraging signs, overall predictions for customer demand are among the most positive seen in recent years, marketing intentions are generally strong and recruitment plans have returned to positive territory for the first time since 2007,” according to the report. British financial firms are recovering after the worst recession since World War II ended in the final quarter of 2009, following $544 billion in credit losses and writedowns among U.K. and other European institutions. “Firms hope that activity will strengthen over the coming quarter and are now planning to expand their staff numbers,” said John Cridland , deputy director general of the CBI, Britain’s biggest business lobby group. Some London banks have started hiring staff to replace employees cut during the credit crisis. Lloyds Banking Group Plc , the lender 41 percent-owned by the U.K. government, is hiring more sales and trading staff, people familiar said in April. Barclays Plc, the U.K.’s second largest bank, has also been adding merger bankers at its securities unit. ‘Red Tape’ Still, a high proportion of those surveyed are “worried about the impact of prospective regulation on their businesses and many remain concerned that red tape will hamper growth prospects in the year ahead,” the CBI’s Cridland said. Governments are stepping up regulation of banks, forcing them to curb riskier activities such as proprietary trading and to hold more capital to prevent a repeat of the credit crisis. In December, the Basel Committee on Banking Supervision , which sets minimum standards for banks in 27 countries and territories, proposed changes requiring financial firms hold more and better-quality assets as a cushion against short-term liquidity needs. Firms are also “more worried about increased competition within the sector, particularly from new entrants and from overseas,” the CBI’s Cridland said. The CBI and PricewaterhouseCoopers surveyed 73 banks, building societies, investment managers and securities firms between May 19 and June 2. To contact the reporter on this story: Ambereen Choudhury in London achoudhury@bloomberg.net June 28 (Bloomberg) -- Andrew Gray, head of the U.K. financial services consulting practice at PricewaterhouseCoopers LLP, talks about its quarterly survey of the financial services industry. Almost two thirds of financial services companies in the U.K. anticipate a rise in business volumes for the coming quarter, the most positive result since December 1993, according to a survey by the Confederation of British Industry and PricewaterhouseCoopers. Gray speaks with Maryam Nemazee on Bloomberg Television's "Countdown." (Source: 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); } }); }); //]]> |
2024-01-19 | Bloomberg | Stock-Index Futures Maintain Gains as Initial Unemployment Claims Decrease | U.S. stock-index futures maintained gains after government data showed jobless claims decreased last week to the lowest level in almost four years. Futures on the Standard & Poor’s 500 Index expiring in March rose 0.4 percent to 1,306.9 at 8:32 a.m. in New York. Jobless claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed today in Washington. The median forecast of 41 economists in a Bloomberg News survey projected 384,000. A Labor Department spokesman said the decrease reflected the usual volatility seen during this time of year. Futures climbed earlier as results from Bank of America Corp. to Morgan Stanley and EBay Inc. reassured investors that the recovery in the world’s largest economy remains intact. The S&P 500 has rallied 4 percent in 2012, its best start to a year since 1987, as U.S. economic reports and speculation that China will loosen monetary policy outweighed concern that downgrades of European nations will worsen the debt crisis. U.S. companies are struggling to top analysts’ estimates for profits, data compiled by Bloomberg show. Earnings-per-share for the 24 companies that reported results since Jan. 9 has shrunk 9.7 percent, with more than 40 percent of these firms missing forecasts, the data show. To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net |
2024-02-25 | Bloomberg | U.S. Stocks Fall Most Since November on Italian Elections | U.S. stocks fell, giving benchmark indexes their biggest losses since November, as partial election results spurred concern about prospects for a stable government in Italy and a worsening of Europe ’s debt crisis. Lowe’s Cos. tumbled after forecasting profit this year that trailed analysts’ estimates amid sales to clear slower-moving merchandise. Chesapeake Energy Corp. (CHK) slumped 6.8 percent after agreeing to sell a stake in an Oklahoma oilfield to China Petrochemical Corp. for less than one-third of its estimated value. ITT Educational Services Inc. tumbled 17 percent after disclosing that U.S. regulators subpoenaed documents related to private loan programs for its students. The Standard & Poor’s 500 Index retreated 1.8 percent to 1,487.85 at 4 p.m. New York time. The benchmark measure advanced as much as 0.7 percent earlier today. The Dow Jones Industrial Average decreased 216.40 points, or 1.6 percent, to 13,784.17. About 7.4 billion shares changed hands on U.S. exchanges today, or 18 percent above the three-month average. “We don’t want to see more chaos out of Europe,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland , said in a phone interview. His firm oversees more than $20 billion. “Any question about whether or not Italy would be committed to austerity measures after the elections gets investors concerned.” Stocks erased gains on concern Italy may be left with a hung parliament as partial election results suggested Silvio Berlusconi may have built a blocking minority in the Senate to deny victory to Pier Luigi Bersani. Bersani, who led in opinion polls throughout the two-month race, campaigned to maintain the budget rigor of outgoing Prime Minister Mario Monti. Bets Japan ’s Prime Minister Shinzo Abe will nominate a central bank chief who favors stimulus pushed stocks higher earlier today. Spending Cuts This week’s March 1 deadline to avoid automatic U.S. spending cuts may get investors’ attention. It marks another fiscal showdown between President Barack Obama and congressional Republicans. If Congress doesn’t act, federal spending will be reduced by $85 billion in the final seven months of this fiscal year and by $1.2 trillion over the next nine years. The S&P 500 has gained 4.3 percent this year as U.S. lawmakers agreed on a compromise on taxes in January and amid better-than-estimated corporate earnings. About 75 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.7 times reported earnings, below the average since 1954 of 16.4. ‘Capital Spending’ “Continued earnings momentum and rising corporate confidence suggest improved capital spending this year,” said James Paulsen , the chief investment strategist at Minneapolis- based Wells Capital Management, which oversees about $325 billion. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 34 percent to 18.99. The gauge had the biggest jump since August 2011 after sliding to the lowest level since April 2007 on Feb. 19. All 10 groups in the S&P 500 fell today as financial and commodity shares had the biggest losses. The Morgan Stanley Cyclical Index, which includes shares of companies most tied to economic growth, slid 2.5 percent, the most since June 25. A measure of 11 homebuilders in S&P indexes dropped 3.9 percent. Lowe’s Slips Lowe’s tumbled $1.81 to $35.86 for the biggest drop since August. The second-largest U.S. home-improvement retailer said profit this year will be about $2.05 a share, below the average analyst estimate of $2.10. Spending on store improvements and hiring will also weigh on profitability in 2013, Chief Financial Officer Robert Hull told analysts today on a conference call. Chesapeake Energy declined $1.39 to $19.11. Sinopec, as China’s second-largest energy producer is known, will pay $1.02 billion in cash for a 50 percent interest in 850,000 acres Chesapeake controls in the Mississippi Lime formation, the companies announced in separate statements. The price equates to $2,400 an acre, less than the $7,000 to $8,000 at which Oklahoma City-based Chesapeake valued the asset in a July presentation. ITT Educational tumbled $3.10 to $15.53. The Securities and Exchange Commission demanded documents relating to “actions and accounting” for the private loan programs, which helped students pay for education costs that weren’t covered by state, federal and other funding sources, Carmel, Indiana-based ITT said Feb. 22 in a filing. Dynavax, Affymax Dynavax Technologies Corp. dropped 32 percent to $2.01. The drugmaker seeking to bring its first product to market fell after U.S. regulators rejected the company’s hepatitis B vaccine. Affymax Inc. sank 85 percent to $2.42 after the drugmaker and partner Takeda Pharmaceutical Co. voluntarily recalled an anemia treatment for kidney dialysis patients after reports of three fatal reactions. Hertz Global Holdings Inc. (HTZ) gained 1.7 percent to $19.04. The largest publicly traded U.S. auto-rental chain projected profit and sales that beat estimates as it benefits from its acquisition of Dollar Thrifty Automotive Group Inc. BlackBerry, formerly known as Research In Motion Ltd (BB) ., added 0.5 percent to $13.25. Sales of BlackBerry 10 devices are above the company’s “ambitious” expectations and production has been increased, chief executive officer Thorsten Heins told Frankfurt Allgemeine. Digital Books Barnes & Noble Inc. added 11 percent to $15.06 after Chairman Leonard Riggio said he will offer to buy the stores and website of the chain he founded more than 40 years ago as it struggles to navigate the rising popularity of digital books. Zynga Inc. rose 7.5 percent to $3.43. The biggest maker of online social games surged on optimism that other U.S. states may follow Nevada in legalizing real-money gambling over the Internet. CME Group Inc., the world’s largest futures exchange, has approached Deutsche Boerse AG (DB1) to consider beginning talks on a merger, according to four people familiar with the situation. A combination of Chicago-based CME and Deutsche Boerse (DB1) would unite the biggest futures exchanges in the U.S. and European markets. CME shares have rallied 15 percent this year, giving it a market capitalization of $19.4 billion. Deutsche Boerse climbed 1 percent through Feb. 22, bringing its value to 9 billion euros ($11.9 billion). The companies met again last month to debate whether to begin formal takeover talks and haven’t yet made a decision, the people said. No offer has been made, nor have terms been discussed, they said. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@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 |
2024-12-08 | Bloomberg | Dart, DMCI, Eton, Hanjin, Mandiri, ZTE Corp.: Asia Ex-Japan Equity Preview | The following companies may have unusual price changes today in Asian trading , excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise. Australia & New Zealand Banking Group Ltd. (ANZ AU): Australia’s third-largest bank by market value said lending profitability will be under pressure for at least 18 months as funding costs rise after the global financial crisis. Of the bank’s A$100 billion ($98 billion) of funding, about A$20 billion was borrowed at cheaper rates before the slowdown, and margins will narrow as that is replaced, ANZ Bank said in a submission to a Senate inquiry. The stock fell 1.5 percent to A$23.15. Bank of Queensland Ltd. (BOQ AU): The bank increased its forecast for bad and doubtful debt expense to A$85 million to A$90 million for the first half of 2011. Bank of Queensland also narrowed its 2011 net profit after tax guidance to a range of A$210 million to A$230 million. The stock fell 3.3 percent to A$11.91. Dart Energy Ltd. (DTE AU): The gas explorer spun off from Arrow Energy Ltd. said its takeover of Apollo Gas Ltd. (AZO AU) is “unconditional” and will commence with the purchase of Apollo’s remaining shares. Dart decreased 3 percent to A$1.145. Apollo fell 7.2 percent to A$0.84 Eton Properties Philippines Inc. (ETON PM): The builder owned by Philippine tobacco and airline tycoon Lucio Tan started selling units in a 34-storey residential tower in Makati, the nation’s main financial district. The stock decreased 1.9 percent to 3.63 pesos. Hanjin Heavy Industries & Construction Co. (097230 KS): The South Korean received an order for $114.9 million to build a runway and other facilities at an airport in Oman. It will take about 22 months to complete the project, Hanjin Heavy said in a regulatory filing. The stock advanced 1.3 percent to 34,450 won. Hyundai Engineering & Construction Co. (000720 KS): Hyundai Group is considering a sale of its Seoul headquarters to raise funds for a controlling stake in Hyundai Engineering, Maeil Business Newspaper reported on its website, citing an unidentified industry official. The stock fell 2.1 percent to 66,600 won. IP Converge Data Center Inc. (CLOUD PM): The Philippine provider of manage data services and business solutions will start trading today after completing the sale of 45.47 million shares in an initial public offering at 4.20 pesos each. IPVG Corp. (IP PM), which owns IP Converge, decreased 2.6 percent to 1.53 pesos. Neo Solar Power Corp. (3576 TT): Taiwan’s third-largest solar cell maker by market value plans NT$10 billion ($331 million) of capital expenditure next year, Chairman Quincy Lin said in a briefing in Taipei. The stock advanced 1 percent to NT$74.5. PT Bank Mandiri (BMRI IJ): Indonesia’s biggest bank by assets plans to buy a general insurance company after its rights offer next year, President Director Zulkifli Zaini said. Mandiri also expects a lending growth of 20 percent to 22 percent next year, Zaini said. Mandiri fell 0.7 percent to 6,750 rupiah. Semirara Mining Corp. (SCC PM): The largest Philippine coal producer has agreed to sell its stakes in DMCI Power Corp. and DMCI Mining Corp. for 327 million pesos, a stock exchange filing showed. The stock increased 2.4 percent to 183 pesos. DMCI Holdings Inc. (DMC PM), owner of Semirara and the buyer of the assets, gained 1 percent to 36.60 pesos. Taiwan Semiconductor Manufacturing Co. (2330 TT): The world’s largest contract manufacturer of chips said it bought NT$859 million of equipment and facilities from Uangyih-Tech Industrial Co. The stock was unchanged at NT$68. ZTE Corp. (763 HK): China’s second-biggest telecommunications equipment provider invested 10 million kuna ($1.7 million) in infrastructure improvement for Croatia’s alternative operator H1 Telekom d.d., Poslovni reported. ZTE gained 0.2 percent to HK$31. To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net . |
2024-04-03 | Bloomberg | Obamacare `Repeal and Replace' Still Light on `Replace' | Yuval Levin and Bloomberg View columnist Ramesh Ponnuru argue in the cover story of the current National Review that “repeal and replace” should remain the conservative mantra on the Patient Protection and Affordable Care Act. The law is so unworkable, they say, that it can’t be molded into something workable; conservatives must focus on outright replacement. This puts Levin and Ponnuru in opposition with conservative think-tankers such as Tevi Troy and Paul Howard, who are now arguing for a political strategy of reforming the law. When someone tells you a health-care policy is terrible, the most important question is “compared with what"? And so it’s disappointing that Levin and Ponnuru devoted just three paragraphs of their 3,100-word piece to discussing how a replacement for the Affordable Care Act might look. They provide too little detail to convince the reader that their plan for “replace” would be less horrible than the parade of horribles they spend much of the piece arguing are reasons for repeal. In their brief discussion of policy alternatives, Levin and Ponnuru have a lot of overlap with the eight-point list put forward last summer by Ben Domenech, who served on the staff of the Department of Health and Human Services during the George W. Bush administration (and sometimes blogs about Malaysia ). Domenech says his list shows that “the policy-bereft media” is propagating a myth that Republicans do not have a health-policy alternative to the Affordable Care Act. But as Bloomberg View columnist Ezra Klein pointed out in response to Domenech this morning, these eight ideas are so off-point that they don’t constitute a replacement for the act at all. For example, Levin, Ponnuru and Domenech argue that sale of health insurance policies should be allowed across state lines. Health insurance costs vary widely by state, in part because some states mandate kinds of coverage that others do not; the idea is that interstate sale will increase competition and reduce costs. As Klein notes, coverage mandates aren’t mostly an issue of states requiring acupuncture coverage. They exist because otherwise consumers could tailor health plans to the actual health risks they face, which would undermine the risk-pooling purpose of health insurance. Being able to buy a plan without coverage for lead poisoning is great if you know you won't be exposed to lead, but if only people with lead poisoning are interested in plans that cover lead, such plans will become prohibitively expensive. States use coverage mandates to assure that insurance is available that provides the coverage individuals need, and the mandates act as mechanisms of transfer from the healthy to the sick. If interstate sale were allowed, healthy people would shift toward the states that allow the greatest degree of medical underwriting and coverage exclusions, causing a “death spiral” in insurance pools in other states. Pretty soon, insurance would only be sold in a handful of low-regulation states, much like South Dakota and Delaware have come to dominate credit-card issuance for borrowers all over the U.S. And what would the effect of that be? Klein quotes the Congressional Budget Office on a proposal to allow interstate sale: “The legislation ‘would reduce the price of individual health insurance coverage for people expected to have relatively low health care costs, while increasing the price of coverage for those expected to have relatively high health care costs,’ CBO said. ‘Therefore, CBO expects that there would be an increase in the number of relatively healthy individuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage.’” This makes Levin’s and Ponnuru’s plan a problematic “replacement” for Obamacare, inasmuch as it would make it harder for sick people to get access to health care instead of easier. Levin and Ponnuru, like Domenech, also call for block-granting Medicaid and capping its expenditures. As Klein points out, this would lead to fewer poor people having health coverage. Levin and Ponnuru should have explained how they intend to make this change without making it harder for poor people to get care. I am not Levin's or Ponnuru's editor, and if they don’t want to put forward detailed and defensible alternatives, they don’t have to. But since the right’s biggest problem on health policy is its actual and perceived lack of seriousness about addressing the problem of access to care, I think it would have been prudent for them to spend more space explaining how their own ideas would help people and less space rehashing why Obamacare is going to ruin the U.S.'s health-care system. Perhaps they can start by responding to Klein’s piece and explaining why a health-reform vision along their lines would not end up shafting the poor and the sick. (Josh Barro is lead writer for the Ticker. Follow him on Twitter.) |
2024-08-27 | Bloomberg | Zurich Insurance’s Wauthier Committed Suicide, Police Say | Pierre Wauthier, chief financial officer of Zurich Insurance Group AG (ZURN) , probably committed suicide at his home, according to police. He was 53. An autopsy to determine the cause of death “clearly pointed to a suicide,” Marcel Schlatter, a police spokesman for the canton of Zug, Switzerland, where Wauthier lived and was found dead yesterday, said by telephone today. He declined to disclose further details out of consideration for the family. Wauthier is the second top Swiss executive in five weeks to have taken his life after Carsten Schloter, 49, chief executive officer for Swisscom AG (SCMN) , Switzerland’s biggest phone company, was found dead at his home on July 23. Wauthier, a married father of two, was appointed CFO at Switzerland ’s largest insurer in September 2011 after previous roles as group treasurer and head of centrally managed businesses. “The board of directors, group executive committee and all of our colleagues are deeply saddened and pass on our condolences to the family and relatives,” Chief Executive Officer Martin Senn said in a statement yesterday. Schlatter said that Wauthier lived in Walchwil, a municipality on the eastern shore of Lake Zug. The citizen of Britain and France had joined Zurich Insurance in 1996. Vibhu Sharma, group controller, will take over as CFO on an interim basis, according Zurich Insurance. Wauthier, who held a master’s degree in international finance from l’Ecole des Hautes Etudes Commerciales and a Masters in private law from the Sorbonne University in Paris, began his career at KPMG in 1982, according to Zurich Insurance’s website. He worked for two years at the French Ministry of Foreign Affairs and joined JPMorgan Chase & Co. (JPM) in 1985, before taking on the job at Zurich Insurance. Zurich Insurance, based in Zurich, said on Aug. 15 that floods in central Europe and tornadoes in the U.S. contributed to a 27 percent decline in second-quarter net income to $789 million, missing analysts’ estimates. To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-02-14 | Bloomberg | Cameron to Meet U.K. Insurers to Discuss Rising Car Premiums | U.K. Prime Minister David Cameron will meet representatives of insurance companies today to discuss ways to reduce the number of lawsuits, with the goal of cutting car premiums. The average cost of insuring a car rose 17 percent last year to 410 pounds ($650), according to Cameron’s office. The average premium for a young male driver is almost 3,000 pounds, with young women paying just over half that. Insurers say much of this is the result of record numbers of people suing for whiplash injuries, which the Association of British Insurers says adds 90 pounds to the average premium. The government will pledge to cut the number of whiplash claims by requiring more medical evidence. It will also reduce the fees lawyers can earn from small personal injury claims. The meeting will take place at 5 p.m. in Cameron’s London office. “I am determined to tackle this damaging compensation culture which has been pushing up premiums,” Cameron will say, according to his office. “I want to stop trivial claims, free up businesses from the stranglehold of health-and-safety red tape and look at ways we can bring costs down.” Lawmakers blamed insurers last month for “sharp practices” including colluding with no-win no-fee lawyers and car-rental firms to ramp up costs for rivals. To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net ; To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net . |
2024-03-15 | Bloomberg | U.S. Corporate Credit Swaps Hold; Jefferies Finance to Sell Debt | A gauge of U.S. corporate credit risk held as data showed U.S. industrial production rose in February while consumer confidence slumped this month, signaling the economic recovery may be uneven. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, rose 0.4 basis point to a mid-price of 78.7 basis points at 4:07 p.m. in New York , according to prices compiled by Bloomberg. The gauge closed yesterday at the lowest level since Jan. 11, 2010. Output at factories, mines and utilities climbed 0.7 percent, the most in three months and exceeding the median projection in a Bloomberg survey, figures from the Federal Reserve showed today in Washington. The Thomson Reuters/University of Michigan preliminary sentiment index for March fell to 71.8, below the median estimate of 78 expected by 67 economists surveyed by Bloomberg. “Consumer sentiment is just one data point,” Mirko Mikelic , a senior portfolio manager at Fifth Third Asset Management in Grand Rapids , Michigan, said today in a telephone interview. “You’re seeing a little bit of a reaction, but overall, everything is heading in a positive direction, particularly in the U.S.” Jefferies Offering The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Jefferies Finance LLC, a commercial-finance company linked to Jefferies Group LLC (JEF) , plans to raise $500 million with a sale of seven-year notes. Jefferies Finance intends to issue the securities for general corporate purposes, according to a person familiar with the offering who asked not to be identified, citing lack of authorization to speak publicly. The unit originates and syndicates primarily secured loans to corporate borrowers. Jefferies Group, the New York-based investment bank, created the firm as a joint venture in 2004 with Babson Capital Management LLC and Massachusetts Mutual Life Insurance Co., according to a regulatory filing. The risk premium on the Markit CDX North American High Yield Index rose 4.6 basis points to 393 basis points, Bloomberg prices show. DirecTV Swaps The cost to protect the debt of a unit of DirecTV (DTV) against default dropped to a record low after the company pulled out of bidding for Vivendi SA’s Brazilian phone and Internet subsidiary, GVT, forgoing an option to add more services in South America. The five-year credit-default swaps that protect the debt of DirecTV Holdings LLC and DirecTV Financing Co. dropped 8.8 basis points to 133.6 basis points as of 4:01 p.m. in New York, Bloomberg prices show. DirecTV, the biggest U.S. satellite-TV carrier, and a group of private-equity firms had made preliminary offers to acquire the Brazilian business, people with knowledge of the matter said. Paris-based Vivendi (VIV) halted the planned sale on dissatisfaction with the bids it received, according to a company spokesman. The average relative yield on speculative-grade, or junk- rated, debt added 1.1 basis points to 489.3 basis points, Bloomberg data show. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s. To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-05-25 | Bloomberg | Shearman, Dewey, Allen & Overy, Drinker: Business of Law | Dow Chemical Co., the largest U.S. chemical maker by sales, said an arbitration panel ruled Kuwait must pay $2.16 billion in damages because it canceled a 2008 agreement to buy a stake in the company’s plastics business. Law firm Shearman & Sterling LLP represented Dow in the arbitration. The firm’s team was led by international arbitration partners Henry Weisburg in New York, Emmanuel Gaillard in Paris, Jon Greenblatt in Washington , Richard Kelly in London and Chris Ryan in Washington. The award by the London-based International Court of Arbitration doesn’t include costs or interest and is final and binding, Midland, Michigan-based Dow said yesterday in a statement. The timing of the payment and other terms of the agreement are confidential, Nancy Lamb, a Dow spokeswoman, said in an e-mail. “Anything north of $1 billion is a pleasant surprise,” said Hassan Ahmed , a New York-based analyst at Alembic Global Advisors. “I don’t think the market was giving Dow any credit for an imminent settlement.” Kuwait’s Petrochemical Industries Co., under pressure from lawmakers, canceled a contract to form a 50-50 venture with Dow’s plastics unit in December 2008. The failure of the so- called K-Dow venture deprived Dow of a $9 billion payment during the global financial crisis, almost derailed its 2009 purchase of Rohm & Haas Co. (DOW) and forced the company’s first dividend cut. “We are studying what legal action is available to pursue,” Petrochemical Industries Chairwoman and Managing Director Maha Mulla Hussein said in a telephone interview. The company is a unit of state-owned Kuwait Petroleum Co. For more, click here. News Dewey’s Downfall Speeded by Pay Deals; Clean-Up May Take Years Dewey & LeBoeuf LLP, a law firm with 103 years of history, collapsed in a matter of weeks. Cleaning up the debris may take years. A trickle of partner defections in March turned into a torrent, with at least 250 of Dewey’s 304 partners having now found new jobs. All five senior partners named to a new chairman’s office in March have left, and the firm faces a criminal probe. The staff at the firm’s Manhattan offices has been gone for more than a week. Joff Mitchell of Zolfo Cooper, a restructuring company, is running things. Mitchell’s task is to wind the firm down while dunning former clients for bills they have little incentive to pay in full. That’s bad news for the firm’s creditors, including bank lenders owed at least $75 million and bondholders owed $125 million or more. Other creditors range from partners who got pay guarantees worth about $100 million to the firm’s janitors, who have sued for about $300,000 in unpaid bills. “The Dewey debacle has all the orderly progression of the Great Chicago Fire,” said Ed Reeser, a former managing partner for the Los Angeles office of Sonnenschein Nath & Rosenthal LLP, who’s now a consultant. Including a bankruptcy, he said, “I wouldn’t be surprised if the wind-down took a minimum of six to seven years. It could take 10.” Dewey & LeBoeuf was the result of a 2007 merger between Dewey Ballantine, a firm dating from 1909 whose most famous partner was two-time Republican presidential candidate Thomas E. Dewey, and LeBoeuf Lamb Greene & MacRae. Created to enter the club of powerhouse international law firms, Dewey collapsed amid a culture characterized by a lack of disclosure and controls where an inner circle of partners reaped most of the rewards. “The combination of outsized debt and widely spread pay guarantees divorced from performance put the firm in a situation with almost zero margin for error,” said Bruce MacEwen, a lawyer and law-firm consultant at Adam Smith Esq. LLC in New York. “Markets have a habit of punishing firms in that posture.” Dewey, which at the time of the merger had 1,300 lawyers, offices in 25 cities and revenue of more than $900 million, is the biggest U.S. law firm to fail, Reeser said. Other firms that have collapsed in the past, including Brobeck, Phleger & Harrison LLP in 2003 and Heller Ehrman LLP in 2008, are still unwinding their debts and obligations, Reeser said. More than 50 former Dewey partners have hired lawyer Mark Zauderer of Flemming Zulack Williamson Zauderer LLP to protect their interests, he said. He’ll do such things as sue former managers or defend his clients from lawsuits to claw back pay they received, according to a person familiar with his hiring. Since Dewey’s legal bills secure its bank loans, lenders including JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) didn’t immediately put Dewey in bankruptcy involuntarily because they saw more chance of collecting the bills outside of court, according to a person familiar with the firm’s finances. Bankers now think a bankruptcy is needed to establish the pecking order for creditors, the person said. JPMorgan and Citigroup declined to comment on Dewey’s financial position. For more, click here. Firm News Allen & Overy announces Vietnam Opening With Mayer Brown Partner Allen & Overy LLP announced plans to open two offices in Vietnam, one in Ho Chi Minh City and the other in Hanoi, after regulatory approvals. Dao Nguyen, a Vietnamese lawyer who was formerly managing partner of Mayer Brown LLP in Vietnam, was hired to head the new offices. “Vietnam is rapidly establishing itself as a key jurisdiction within Southeast Asia and is of increasing interest to international companies and investors,” Thomas Brown, Allen & Overy’s Asia Pacific managing partner, said in a statement. Nguyen, who will join later in the year, focuses on corporate and commercial matters, particularly real estate, foreign investment in Vietnam and dispute resolution, according to her biography on Mayer Brown’s website. Mayer Brown issued a statement thanking Nguyen for her service and saying, “Our Hanoi and Ho Chi Minh offices will continue to operate as usual. Mayer Brown JSM has been operating in Vietnam since 1994, and we remain deeply committed to having a strong presence in this important growing market to continue serving all our valued clients.” John Marsden will serve as the interim managing partner for the firm’s Vietnam office. With the addition of the two new offices, Allen & Overy will have 42 offices in 29 countries around the world. Moves Drinker Biddle Adds Dewey Corporate Partner in New York A Dewey & LeBoeuf LLP partner and another lawyer joined Drinker Biddle & Reath LLP’s corporate & securities practice group in New York. Partner Joseph L. Seiler III, a corporate lawyer, focuses on serving insurance and insurance holding companies on public and private securities offerings and financings, as well as mergers and acquisitions and restructurings. He also advises private and public clients in the leisure, manufacturing and technology industries, among others. In January, Drinker Biddle added a group of insurance regulatory lawyers, which included three partners. The new additions bring the total number of lateral hires in the firm’s New York office to eight since July 2011, the firm said. “When you have an opportunity to add lawyers who can complement your existing practice while building out new offerings, you do it,” Alfred W. Putnam, Jr., Drinker Biddle’s chairman, said in a statement. Robert C. Juelke, chairman of Drinker Biddle’s corporate and securities practice group, said, “Our clients have been asking us more and more to help them with their insurance transactional work. These additions allow us to better meet their needs.” Drinker Biddle has 650 lawyers in 11 offices nationwide. Restructuring Partner Joins Gibson Dunn’s Los Angeles Office Gibson, Dunn & Crutcher LLP hired restructuring partner Jeffrey Krause in the Los Angeles office. Previously, he was at Stutman, Treister & Glatt. Krause has handled debtor and creditor committee representations, as well as representations of examiners appointed in bankruptcy cases, and secured and unsecured creditors. His recent matters include representation of the official committee of unsecured creditors in In Re Azabu, representation of Ranch Capital and the investment vehicle it formed to fund the reorganization plan for Hawaiian Airlines, and representation of Falcon Industries in its Chapter 11 reorganization, the firm said. Gibson, Dunn has more than 1,000 lawyers and 17 offices in the U.S., Europe , the Middle East , Asia and South America. Litigation MBIA Tells Court Restructuring Protects All Policyholders MBIA Inc.’s (MBI) 2009 restructuring was approved by New York regulators because it protected all policyholders, including the banks challenging the decision, Marc Kasowitz , an attorney for the bond insurer, told a trial judge. Banks suing MBIA can’t prove their argument that the approval of the restructuring was “arbitrary and capricious,” Kasowitz, with Kasowitz Benson Torres & Friedman LLP representing Armonk, New York-based MBIA, told a state judge yesterday in Manhattan. “The banks are throwing as much money as they can at the wall in the hope that something will stick,” Kasowitz said. Justice Barbara Kapnick of state Supreme Court is hearing a nonjury trial on claims by Bank of America Corp. and Societe Generale SA (GLE) that the February 2009 approval of MBIA’s proposal by then-Superintendent Eric Dinallo was based on inaccurate and incomplete information and should be annulled. More than a dozen financial institutions sued MBIA and the state insurance department in 2009 over the restructuring. Bank of America and Societe Generale are the only banks left in the litigation after JPMorgan Chase & Co., Morgan Stanley, UBS AG and other banks dropped out. The banks claim the restructuring exposed them to losses as policyholders by transferring $5 billion in assets out of an MBIA unit that insured risky mortgage debt. The case being tried by Kapnick is a challenge to the approval brought under the state’s Article 78 law, which allows challenges of administrative decisions. Bank of America and Societe Generale have another lawsuit pending against MBIA, and MBIA is suing Bank of America over mortgage loans. David Holgado, a lawyer in state Attorney General Eric Schneiderman’s office, earlier this week asked Kapnick to dismiss the lawsuit, saying the approval was rational and based on an “extraordinary” analysis by a former Insurance Department official, Jack Buchmiller. Kasowitz said yesterday that the approval was based on a yearlong state investigation that included weeks of on-site review at MBIA’s headquarters. The banks’ arguments that the restructuring was a “secret plan” of which they were not notified conflicts with statements issued in February 2008 after MBIA first announced the proposal |
2024-03-15 | Bloomberg | Clinton Announces $2 Billion of New Egypt Aid in Cairo | U.S. Secretary of State Hillary Clinton announced a $2 billion aid package for Egypt to bolster its economy while the nation considers new government structures following the ouster of former President Hosni Mubarak’s regime. “The Egyptian people have made clear that their country’s economy must provide opportunities for all Egyptians,” Clinton said, adding that economic reform is as important as political reform. “The United States will support their efforts,” she said. The Obama administration’s move to stabilize Egypt comes as turmoil sweeps the region from North Africa across to the the Persian Gulf. Israeli troops intercepted a shipment of arms bound for Egypt and the Gaza Strip today; Bahrain declared a three-month state of emergency as a second round of Gulf forces arrived in the country and news reports said hundreds had been injured; and forces loyal to Libyan leader Muammar Qaddafi closed in on rebel strongholds. Clinton arrived in Cairo four days before Egyptians vote on a constitutional referendum that will determine whether parliamentary and presidential elections are held in June and August. Some opposition groups say the referendum doesn’t go far enough to advance democracy. In what may be a nod to opposition criticism of how swiftly the referendum is being held, Clinton said that successful balloting takes time. Time to Organize “While democracy requires elections, elections require preparation, including time for new parties to organize and build support, so the Egyptian people have a real choice when they go to vote,” Clinton said at a press conference with Egyptian Foreign Minister Nabil al-Arabi. She called for Egyptians to strengthen other elements needed for a “thriving democracy.” She cited a need for constitutional reforms, lifting the emergency law, support for an independent judiciary and free press, and protections for civil society, so it has the freedom to operate. She met with civil society leaders later in the day. “All Egyptians will need to be part of the work ahead,” Clinton said. Clinton said she “applauded” the announcement today that Egypt will dismantle the State Security Investigations Services. She and al-Arabi discussed efforts to rebuild the security forces “on the principles of respect for the rights of all citizens without the recourse to violence,” Clinton said. Concrete Help A thrust of her message was that the U.S. was ready to offer concrete help to Egypt, not just rhetoric. “One of the best ways to create jobs is to support small and medium-sized enterprises, which represent 99 percent of the jobs in Egypt,” Clinton said. The U.S. aims “to encourage foreign direct investment that will help these businesses grow,” she said. The Overseas Private Investment Corporation will provide as much as $2 billion to encourage private sector investments in the Middle East and North Africa, Clinton said. The U.S. Export- Import Bank has also approved $80 million in insurance cover to support letters of credit issued by Egyptian financial institutions, on top of $90 million in previously announced emergency economic aid. Pending approval by Congress, a U.S.-Egypt Enterprise Fund would be created with $60 million to stimulate private sector investment and provide businesses with access to low-cost capitol. Clinton and al-Arabi discussed preparation for the referendum and the role of the military, which stepped in to take control of the country Feb. 11, after President Hosni Mubarak left office. Clinton praised military leaders as acting “patriotically and responsibly.” To contact the reporter on this story: Nicole Gaouette in Cairo at ngaouette@bloomberg.net. To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-02-11 | Bloomberg | Treasuries Head for Second Weekly Loss Before Consumer Confidence Report | Treasuries headed for a second weekly decline, making them the biggest losers among the world’s largest bond markets this month, on speculation an industry report today will show consumer confidence is rising. U.S. government securities maturing in more than a year have handed investors a 1.5 percent loss this month, the worst performance of 26 sovereign bond markets tracked by the European Federation of Financial Analysts Societies and Bloomberg. Morgan Stanley, one of the 20 primary dealers required to bid at the government debt sales, recommended Treasury Inflation Protected Securities in a report. “The momentum for yields to push higher is very strong,” said Zeal Yin, who helps oversee the equivalent of $51.8 billion as an investor at Shin Kong Life Insurance Co., Taiwan ’s second- largest life insurer. “The U.S. economic data are very good.” Ten-year Treasuries yielded 3.70 percent as of 1:48 p.m. in Singapore , according to BGCantor Market Data. The 3.625 percent note due in February 2021 traded at a price of 99 11/32. Ten- year yields increased seven basis points this week. Shin Kong Life holds fewer Treasuries than the percentage in the benchmark it uses to gauge performance, Yin said. Financial markets were closed in Japan for a holiday. Treasury futures contracts, the dollar and the Swiss franc rose as protests in Egypt and a decline in Asian stocks boosted demand for safer assets. President Hosni Mubarak defied calls for his immediate resignation as thousands of people crammed into central Cairo. Ten-year futures advanced 5/32, or $1.56 per $1,000 face amount, to 118 9/32. The dollar and the franc each strengthened 0.2 percent against the euro. The MSCI Asia Pacific Index of shares slid 0.9 percent, dropping for a third day. Nine-Month High Treasuries are starting to become attractive after the 10- year yield climbed to a nine-month high earlier in the week, said Chungkeun Oh, a fixed-income trader in Seoul at Industrial Bank of Korea, South Korea ’s largest lender to small and mid- sized companies. “The U.S. economy is still patchy,” Oh said. He plans to buy 10-year notes if the yield rises to another five basis points 3.75 percent, he said. A basis point equals 0.01 percentage point. The Federal Reserve is scheduled to purchase $6 billion to $8 billion of Treasuries due from August 2016 to January 2018 today as part of its plan to sustain the economic expansion, according to its website. The University of Michigan consumer sentiment index rose to 75 this month from 74.2 in January, according to a Bloomberg survey before the report today. First-time claims for jobless insurance fell to the lowest since July 2008, the Labor Department said yesterday. General Motors Co. and Chrysler Group LLC, may award some managers bonuses of as much as 50 percent of their salary, three people familiar with the plans said. Quicker Inflation Core inflation has bottomed and will move gradually higher this year,” Morgan Stanley said in a report yesterday by strategists Anton Heese, Igor Cashyn and Rachael Featherstone. Short-maturity TIPS offer the best value, they wrote. So-called core consumer prices, which exclude food and energy, increased 0.8 percent in December from a year earlier, the Labor Department said Jan. 14. The gain was 0.6 percent in October, a record low based on figures that start in 1958. TIPS have fallen 2.1 percent in February, headed for their steepest loss since October 2008, indexes compiled by Bank of America Merrill Lynch show. That same month credit markets froze following the collapse of Lehman Brothers Holdings Inc. Wider Spread The difference between yields on five-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2 percentage points. It was the most in nine months based on closing levels. Treasuries fell yesterday after the U.S. sold $16 billion of 30-year bonds, the last of three auctions this week totaling $72 billion of debt. “The bias seems to be towards higher rates now with economic numbers generally coming in better than expected,” said Larry Milstein, managing director in New York of government debt trading at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “People are getting defensive and positioning themselves for higher rates.” To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net |
2024-12-18 | Bloomberg | Credit Suisse Said to Cut Dubai Investment Banking Business | Credit Suisse Group AG (CSGN) , whose second-largest shareholder is the Qatar Investment Authority, is cutting its investment banking business in Dubai to focus on Qatar and Saudi Arabia , a person familiar with the matter said. Two bankers will move to Doha from Dubai as part of plans to shift the regional investment banking department headquarters to Qatar, the person said, asking not to be named as the news isn’t public. The bank will also cut about three positions in Dubai and transfer another as it moves its equities business to Riyadh , the person said. Bassam Yammine, MENA investment banking department co-head, already left the bank, the person said. Qatar and Credit Suisse are boosting ties after the nation took a 6 percent stake in the Zurich-based bank, bought its London headquarters and formed asset manager Aventicum Capital Management. The country, which has the world’s third-largest gas reserves, is snapping up assets to reduce its energy dependency and has $30 billion to invest this year, Qatar Investment Authority board member Hussain Al Abdulla said in April. “Credit Suisse remains committed to providing a range of banking services to the MENA region,” the bank said yesterday in a statement in response to questions on the cuts, referring to the Middle East and North Africa region. “We continue to be proactive about monitoring the size of our business relative to client opportunities and market conditions. This involves realigning resources to growth areas and adjusting capacity to meet client needs and to manage costs across our businesses.” Cost Cuts The bank said in October it will trim an additional 1 billion francs ($1.09 billion) in annual costs by the end of 2015, adding to a 1 billion-franc savings program from July and 2 billion-franc cut in expenses achieved since last year. Credit Suisse rose 0.9 percent to 22.72 Swiss francs as of 2:28 p.m. in Zurich, after earlier gaining 1.5 percent. The bank announced in November 2011 that it was planning to expand in Qatar this year by providing asset-management services to local and international investors. The bank’s board of directors met in Qatar about a year ago and earlier this year shifted staff to Doha from Dubai, two people familiar with the matter said in September. Credit Suisse has only been an underwriter for two bond deals in the Gulf Cooperation Council valued at $67 million, according to data compiled by Bloomberg. This makes it the 40th underwriter in the region out of 46, the data shows. Industry Slump Credit Suisse Chief Executive Officer Brady Dougan is trimming staff to pare costs amid an industrywide slump that’s prompted more than 300,000 job losses in the past two years. The bank last month shook up its investment-banking unit to speed the process, merging asset management with the private bank. The government-run Qatar Financial Center Authority, charged with expanding the country’s financial services industry, announced a strategy in 2010 to make Qatar a hub for asset management and reinsurance. Hasnain Malik, Citigroup’s head of research for the Middle East and North Africa, left the bank in recent weeks and won’t be replaced, according to two people familiar with the matter, asking not to be named as the departure wasn’t made public. To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net ; Stefania Bianchi in Dubai at sbianchi10@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net or Alaa Shahine at asalha@bloomberg.net |
2024-11-02 | Bloomberg | Diamond Bank Plans to Sell All Non-Banking Units, Comply With Revised Rule | Diamond Bank Plc , a Nigerian lender, said it will sell all of its non-banking units to comply with revised central bank rules that don’t allow the institutions to offer multiple services. “We have taken a decision to divest from all the non- banking subsidiaries in line with the new banking model,” the Lagos-based company said in an e-mailed statement today. Diamond has units operating in insurance, mortgages, stock- broking and share registration, it said. The Central Bank of Nigeria in September asked the nation’s lenders to sell their non-banking units or adopt a holding company model. All financial institutions regarded as universal banks have to prepare plans to comply with the policy not later than 90 days from Oct. 4, the central bank said. The rules form part of reforms to the banking industry, which amassed bad debts of about $10 billion that threatened to collapse some of the operators. The central bank fired the chief executive officers of eight of the country’s 24 lenders last year and used 620 billion naira ($4.1 billion) to bail out the industry. Diamond Bank passed a central-bank audit and didn’t receive part of the bailout package. Diamond will grow its loan book by a further 10 percent before the end of the year, extending credit to companies operating in manufacturing, construction and general commerce, it said. Non-performing loans dropped by 2 percent to 59.1 billion naira in the three months to September, it said. Energy, general commerce, and finance and insurance industries accounted for more than 71 percent of all non- performing loans “and this is a reflection of the impact of the economic downturn of 2009,” it said. Diamond Bank shares retreated for a third day, dropping 0.7 percent to 7.6 naira by the 1:31 p.m. close in Lagos, according to data compiled by Bloomberg. To contact the reporter on this story: Vincent Nwanma in Lagos via Accra at vnwanma@bloomberg.net. To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net . |
2024-08-30 | Bloomberg | Royal Bank Joins CIBC in Raising Dividends as Profits Increase | Royal Bank of Canada and Canadian Imperial Bank of Commerce raised their dividends after reporting third-quarter profits that beat analysts’ estimates. Royal Bank, the country’s biggest lender, said profit for the period ended July 31 rose 73 percent to C$2.24 billion ($2.26 billion), or C$1.47 a share, from C$1.29 billion, or 83 cents, a year earlier. CIBC said profit rose 42 percent to C$841 million, or C$2 a share. Royal Bank and Canadian Imperial join Bank of Montreal (BMO) and Bank of Nova Scotia (BNS) in raising dividends this week as gains in consumer lending helped the country’s biggest banks report earnings that beat estimates. Royal Bank and Scotiabank posted record profits. Royal Bank said it earned C$1.31 a share excluding items, beating the C$1.18-a-share average estimate of 15 analysts surveyed by Bloomberg News. CIBC, Canada’s fifth-biggest bank, said it had adjusted earnings of C$2.06 a share, beating the C$1.96 a share average estimate of 15 analysts. Toronto-Dominion Bank (TD) , the second-largest lender, and Montreal-based National Bank of Canada (NA) , the No. 6 lender, also report today. Canadian banking profit at Toronto-based Royal Bank rose to a record C$1.13 billion, up 27 percent from a year ago, on growth of deposits, mortgages and loans. International banking, which includes Caribbean banking and RBC Investor Services, had a C$31 million loss compared with profit of C$18 million a year earlier. Profit at the RBC Capital Markets investment-banking business rose 88 percent to C$486 million, from C$259 million a year earlier. Wealth management profit fell 19 percent to C$156 million, from C$192 million, while insurance rose 27 percent to C$179 million. Royal Bank unexpectedly raised its dividend 5.3 percent to 60 cents a share, its first increase since March. CIBC increased its payout for the first time in a year, to 94 cents. (Royal Bank will hold a conference call to discuss earnings at 7:30 a.m. Toronto time at +1-416-340-2217 or +1-866-696-5910 passcode 1853457 or at www.rbc.com/investorrelations/ir_events_presentations ). (CIBC will hold a conference call to discuss results at +1-416-340-2217 or +1-866-696-5910 passcode 3201624 starting at 8:30 a.m. Toronto time.) To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net |
2024-04-04 | Bloomberg | Treasuries Advance as Fed's Lockhart Cites Headwinds to Economic Recovery | Treasuries rose for a second day as Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. recovery faces headwinds, reducing speculation the central bank will cut its $600 billion debt-buying program. U.S. six-month bill rates fell today to a record low amid a scarcity of short-term debt. Two-year notes gained, pushing yields to a one-week low, as Chicago Fed President Charles Evans said the amount to be purchased in the central bank’s stimulus program may be “about the right number.” Fed Chairman Ben Bernanke is scheduled to speak at 7:15 p.m. in Atlanta. “We saw pretty harsh reaction last week to some of the hawks,” said Brian Edmonds , head of interest rates at Cantor Fitzgerald LP in New York, one of 20 primary dealers that trade with the U.S. central bank. “We don’t think the chairman will say we’ll raise rates quickly. We expect the Fed will raise rates, but not as soon as some of the time horizons people were saying last week.” Yields on benchmark 10-year notes fell two basis points, or 0.02 percentage point, to 3.42 percent at 5:12 p.m. in New York , according to Bloomberg Bond Trader prices. The 3.625 percent security maturing in February 2021 rose 6/32, or $1.88 per $1,000 face amount, to 101 22/32. The yield touched 3.52 percent on April 1, the highest level since March 9, a day after reaching last week’s low of 3.4 percent. Two-year note yields dropped four basis points today to 0.76 percent. Thirty-year bond yields fell one basis point to 4.48 percent after earlier touching 4.46 percent. Bill Rate Tumbles Rates on six-month bills tumbled to 0.1099 percent, according to Bloomberg Bond Trader prices. That exceeded the previous record of 0.1109 percent set in November 2009. Six- and three-month bill rates have dropped as the Treasury cut to $5 billion from $200 billion the amount of outstanding Supplementary Financing Program bills it sells on behalf of the Fed in a program set up in 2008 to help prop up the financial system. The reduction was made because of concern the federal debt limit was approaching. At the same time, changes in Federal Deposit Insurance Corp. fees on banks stoked demand for short-term debt. The rate on three-month bills tumbled to as low as 0.0304 percent, the least since January 2010. U.S. auctions today of $32 billion of the securities and $30 billion of six-month bills today drew rates of 0.05 percent and 0.13 percent, also the lowest since January 2010. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities known as the break-even rate, increased to as much as 2.55 percentage points, the widest level since March 9. ‘Serious Imbalances’ “With each quarter, the recovery is increasingly well established,” Lockhart said today in the text of a speech in West Palm Beach , Florida. “However, underlying the recovery there remain serious imbalances that have not been corrected.” Evans said in an interview with CNBC that improvement in the U.S. economy means the Treasury-purchase program is about the right size. The program, which the Fed ordered in November, is scheduled to last through June. “I thought going into the asset-purchase program that we might need to do more than $600 billion eventually but $600 billion was a good start,” Evans said. “It’s quite likely that $600 billion could be about the right number.” Lockhart’s and Evans’s remarks came after New York Fed President William C. Dudley told reporters April 1 he would be surprised if the central bank didn’t finish its purchases, the second round in a strategy called quantitative easing. Exit Effort The statements followed comments last week by other policy makers that an earlier end to stimulus is needed. Treasuries fell March 31 after St. Louis Fed President James Bullard said at a dinner in London the previous day the central bank may need to begin exiting from record levels of monetary accommodation, even amid uncertainties in Japan and the Middle East. Philadelphia Fed President Charles Plosser told reporters on April 1 in Harrisburg, Pennsylvania , that “it’s certainly a possibility” the central bank may have to raise interest rates before the end of the year. The Fed has kept its benchmark at zero to 0.25 percent since December 2008. U.S. payrolls added 216,000 workers last month, more than forecast, figures from the Labor Department showed April 1. Shouldn’t Alter Plans Dudley said last week in San Juan , Puerto Rico , that faster-than-expected payroll growth shouldn’t alter the Fed’s program to buy Treasuries to prop up the recovery. “I don’t see any reason to pull back from that yet,” he said. Traders lowered bets today that policy makers will raise borrowing costs at their January meeting. Fed funds futures showed a 46.3 percent chance of an increase in the target lending rate, compared with 52.5 percent odds a week ago. The Fed bought $8.03 billion in Treasuries today maturing from November 2016 to March 2018 in the purchase program. It’s scheduled to purchase $6.5 billion to $8.5 billion tomorrow of U.S. debt maturing from May 2018 to February 2021. The Treasury Department will conduct its regular schedule of securities auctions in the event of a government shutdown, a government official said today. The official spoke to Bloomberg News on condition of anonymity because he’s not authorized to speak publicly. Congress is working on a 2011 budget to avoid a shutdown when the current spending authority ends April 8. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net ; To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-06-11 | Bloomberg | China Bond Market Ready for Takeoff After Bold Moves | China is the opposite of other major economies when it comes to companies’ ability to raise money by issuing bonds. China’s 4.2 trillion yuan ($666 billion) corporate bond market is just 9 percent of its gross domestic product. In the U.S., the $7.9 trillion in fixed-income securities is equal to more than half the size of economic output. The government wants to change that, to give corporate bonds a bigger role in boosting growth and to divert risk from the state-owned banking system that provides 75 percent of the nation’s credit. A mature bond market also would provide funding for capital-hungry small businesses that have few options beyond the unregulated world of shadow banking, which officials are seeking to wrestle under control. Guo Shuqing, the 56-year-old head of the China Securities Regulatory Commission, has taken steps to consolidate regulatory power over bonds since he became chairman seven months ago. He’s set up an office to study new products, and in May the CSRC, the equivalent of the U.S. Securities and Exchange Commission, said it’s considering introducing municipal bonds. In early June, Guo launched a plan to allow small and medium-sized companies to sell debt comparable to speculative-grade bonds in other market. “International experience shows that overreliance on bank credit in a financial system can, under certain circumstances, lead to systemic risk,” Guo told the official People’s Daily newspaper in March, saying that the bond market, which provides 13 percent of China’s debt, “seriously” lags behind the demands of the real economy and needs to develop. Power Grab Three government agencies now split control over the bond market, including the CSRC, the National Development and Reform Commission and the central bank. The CSRC is pushing ahead with unifying all of the regulators’ separate bond-disclosure, credit-rating, investor-protection and entry standards, according to a May 31 statement on its website. Guo’s unilateral power grab may create conflict, said Fraser Howie , Singapore-based managing director of CLSA Asia- Pacific Markets who co-authored the book “Red Capitalism” on China’s financial system. “Clearly there are others who are going to want to have a say when it comes to the fixed-income world,” Howie said. “What he needs to do is pick fights he can win.” If anyone can, it may be Guo. As head of the State Administration of Foreign Exchange in 2001-2005, he pushed through reforms by forging relationships between departments and building support, according to Hong Weizhi, a former spokesman for SAFE who worked with the chief regulator. Bringing Together “Maybe only he can bring things together, only he can persuade relevant departments,” Hong said. “You need not worry when you hand a job to him. He attaches great importance to coordination and always puts state interests before his own agency’s.” In April , the three bond-market regulators held their first meeting to coordinate policy on corporate securities, according to the central bank’s website. “In the long run there should be a unified supervision of this market,” said Wang Ge, an executive director in debt capital markets at Goldman Gaohua Securities Co., Goldman Sachs Group Inc.’s joint venture in China. “Investors are eager to invest in corporate bonds, but the market is not sophisticated enough to allow them to hedge credit risk.” Junk’s Debut Guo’s moves would change that. The introduction of junk bonds could allow China to have its first default, which would then allow the market to price the risk of a company going bankrupt and instill confidence in the market. So far, local governments or banks have bailed out any company that risked defaulting on its publicly traded bonds. The debut sale went ahead as a private placement on June 8, with a 50-million- yuan offering by Suzhou Huadong Coating Glass Co., based in the eastern province of Jiangsu, according to a release on the Shanghai Stock Exchange. “For a mature bond market we should allow some firms to go bust,” said John Sun, managing director at Citic Securities International in Hong Kong. “The high-yield issuers will be small companies, so the impact on the whole market will be small, but psychologically it can impact the market sentiment because it’s never happened before.” Although foreign banks, through joint ventures, can trade in bonds and underwrite them on the CSRC-regulated bond market via the two stock exchanges in Shanghai and Shenzhen, they mostly remain shut out of underwriting on the interbank market , which is 20 times larger and closed to individual investors. Only HSBC Only HSBC Holdings Plc has won approval to underwrite non- financial debt on the interbank bond market, and has yet to lead manage any sales. The London-based bank is the top underwriter in Hong Kong of so-called Dim Sum bonds, denominated in China’s currency and sold offshore, according to data compiled by Bloomberg. HSBC declined to comment on Guo’s reforms or potential for expansion for foreigners. “It’s awfully hard to see a foreign bank getting in, in a big way, in the early stages because the large local institutions are going to have to dominate to ensure that it works,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “A Chinese corporate would feel they have a better chance of success with a big local institution. That’s the law of the jungle.” Foreign Underwriting Foreign banks do stand to profit from the expansion of the domestic bond market as more Chinese companies are also allowed to sell Dim Sum bonds in Hong Kong. In addition to HSBC, Standard Chartered Plc, also London-based, along with BNP Paribas SA of France and Deutsche Bank AG of Germany have been the top underwriters of 227 billion yuan worth of debt since Baosteel Group Corp. became the first mainland non-financial company to sell yuan bonds in Hong Kong in November. Another four offerings are in the pipeline after being approved by the NDRC in April. “European banks in China welcome the efforts made so far by the regulators to establish a strong liquid domestic bond market,” Dirk Moens, secretary general of the European Union Chamber of Commerce in China, said in a statement that urged China to “clarify the approval process and grant faster access to those qualified banks.” Guo, a visiting scholar at Oxford University in 1986-87 who makes speeches in fluent English, has been pushing open China’s capital markets to foreign investors, an effort that had languished under his predecessor. Market Priming In April, the CSRC announced an almost tripling of the amounts allowed for U.S-dollar and yuan-qualified foreign institutional investors seeking access to China’s otherwise- closed markets. That money can be used to buy bonds sold through the stock exchanges. As of the latest figures available in March, 14 percent of the foreign investment had funneled to debt. “He has done a lot for the first several months since he took over this position,” said Zhiming Zhang, Hong Kong-based head of China research at HSBC. “He’s rolling out a lot initiatives, but it’s all strictly within the CSRC.” For years China’s bond market has meant shuffling money between state organs, with state-owned companies selling their paper to state-owned banks at controlled interest rates and banks holding the bonds on their books. Regulators have cornered different segments of the market: the NDRC primarily approves bond issuances of state-owned companies connected to local governments and the central government; the People’s Bank of China, or central bank, approves unlisted companies’ bonds; the CSRC handles companies already listed on the exchanges. Expanding Reach Back in 2009, the central bank had begun its own plan for small businesses to issue notes in an attempt to allow a wider range of companies to sell debt. Today, only 17 percent of private companies currently issue bonds rated AA- and above, according to data from HSBC. Guo’s junk-bond plan expands the reach. It allows small and medium-sized companies to access funds, and investors to receive yields as much as three times the bank-lending rate. Companies, including unlisted ones, could also sell debt without administrative approvals, allowing the market to decide credit risk rather than the state. “Commercial banks are very conservative in bond investing, so it’s not likely they will hold a large portion of the SME bonds,” said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co., naming mutual funds and insurance companies as the potential investors. “That shifts risk away from the banks.” Few Tools More than 68 percent of bond investors are banks, according to Chinabond, the nation’s bond clearing house. Currently in China there are few tools to hedge credit risk. Trading in new credit-default products introduced in 2010, known as credit-risk mitigation warrants, has never taken off. Shandong Helon Co. (000677) , a small fiber maker in eastern China that listed on the stock exchange, avoided default on its 400- million-yuan bond in April, despite being technically insolvent since September and reporting a loss of more than 1 billion yuan last year. Its overdue loans account for 582 percent of its assets. Guo started early as a reformer. Born in 1956 in sparsely populated Inner Mongolia just ahead of China’s Great Leap Forward, Guo was dispatched to a rural work team during the Cultural Revolution in the 1970s. He published his first article, “Investigations on Reforming the Chinese Economy,” in 1984 while a Master’s student in Marxist and Leninist theory. He sent the article unsolicited to the State Council’s committee on economic reform hoping they could learn from it, according to an introduction he wrote for a collection of essays published in 2008. Politician’s Manner Having worked in a number of state institutions, including as vice governor of landlocked Guizhou province and as a deputy in the central bank, Guo has a politician’s manner. In his first speech as securities regulator in November to a Caixin magazine conference in a hotel in Beijing’s central business district, he advocated allocating more resources to rural areas. Since then he has continued advocating for expanding the bond market. Li Yang , vice president of the Chinese Academy of Social Sciences , the top state-supported research body, echoed the need in a forum in May, as cited by the official Xinhua news agency. He warned that corporate debt has exceeded warning levels, and companies could default on bank loans if the economy slows. The central bank, the People’s Bank of China led by Zhou Xiaochuan , who had headed the China Construction Bank Corp. before Guo, manages the interbank market. Zhou led the first meeting of the inter-ministerial coordination mechanism for corporate bonds in April. Fast Track The NDRC, the country’s economic planning agency which used to be the center of China’s Soviet-style planned economy, approves most bonds to fund infrastructure projects. Such borrowing was crucial for China’s 2008 stimulus and led local governments to rack up 10.7 trillion yuan in debt, 27 percent of China’s GDP, from banks and bond sales, according to a June 2011 audit. The NDRC plans to allow at least 500 billion yuan in a record for corporate-debt issuance this year, double the 2011 amount, according to a summary of a private talk by an NDRC official viewed by Bloomberg News. It has adopted a fast-track process for sales of public-housing debt by local governments, an official familiar with the decision said. China has overwhelmingly relied on state-owned bank credit for its economic growth since reforms to the planned economy began in 1978. The ratio of all the financing in the economy to gross domestic product reached an all-time high of 44 percent in the first quarter of 2011, according to HSBC. Weaning Off In the early 1990s, Korea managed to wean state-owned borrowers off bank lending, Kim Eng Tan, a credit analyst at Standard & Poor’s LLC said. “They had a problem with state-owned companies financing only from banks, but when the bond market started, all the big companies rushed to the bond market, leaving the banks with no customers, freeing them up to lend to small and medium-sized companies,” he said. “If you free the largest conglomerates to go to the bond market you solve the SME problem.” In China’s system, that would require coordination among regulators that have overseen separate aspects of the bond market for more than a decade. “When Guo stepped in he said we need more flexibility, we need to encourage more products in this market,” Citic Securities’ Sun said. “He’s a very capable guy. When he was in China Construction Bank he did a good job there, but of course at his current position a lot of politics will be involved.” Guo’s writings have demonstrated that he’s aware of the challenge. In his essay introduction, he noted the difficulties. “Changing the settled mindset and behavior of those involved in economic activity and leaders,” Guo wrote, “is not a simple study class, where you can attend some training sessions and finish the task.” -- Henry Sanderson. With assistance from Dingmin Zhang in Beijing. Editors: Sheridan Prasso, Andrew Monahan To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at +86-10-6649-7548 or hsanderson@bloomberg.net ; To contact the editor responsible for this story: Shelley Smith at +852-2977-6623 or ssmith118@bloomberg.net |
2024-01-18 | Bloomberg | U.K. FCA Will Adapt Rules Using Consumer-Behavior Data | The U.K. financial regulator is in talks with a banking association to limit how long consumers have to file payment-protection insurance claims, for which banks have reserved more than 9 billion pounds ($14.3 billion). The U.K. Financial Services Authority will consult with the public before changing its rules on PPI claims, according to an e-mailed statement today. The British Banking Association has offered to fund an advertising campaign to explain to customers how to complain about illegally sold PPI in return for a cut-off date for compensation claims, the agency said. “Our key priority is to ensure consumers are protected, so the FSA Board would need to be convinced that any proposals would be in the interests of consumers,” the London-based FSA said. The BBA lost a 2011 court challenge of the FSA’s guidelines on how lenders should handle consumer complaints over payment- protection insurance, opening the door to claims over past PPI sales. Around 95 percent of payment-protection insurance policies were sold inappropriately, said Martin Wheatley, the U.K.’s chief markets regulator, in a speech last year. The BBA wants “to ensure that where customers have been mis-sold that they should receive all the compensation that they are entitled to,” the group said in an e-mailed statement. The insurance is used to cover payments on credit cards and mortgages in case of illness or unemployment. Customers who bought PPI rarely compared prices and terms or switched providers, and usually weren’t aware they could have purchased it from other companies, the U.K.’s Competition Commission has said. PPI generated as much as 5.5 billion pounds in annual revenue for U.K. banks in 2011, with about 6.5 million policies sold in 2006, the FSA has estimated. To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-05-13 | Bloomberg | Beverly Hills Lures Wealthy Investors Seeking Trophy Apartments | Beverly Hills, the California enclave known for its celebrity residents and Rodeo Drive boutiques, is luring wealthy individuals seeking real estate investments, driving up prices for trophy apartment buildings in the city. A 24-unit multifamily complex, located one block from the Four Seasons Hotel Los Angeles at Beverly Hills , sold in March for $7.5 million, giving its buyer a lower return than similar buildings in the U.S. The property is a mile (1.6 kilometers) from the home of Doug Ellin, creator of HBO ’s “Entourage,” and two miles from actor Billy Bob Thornton’s house. Buyers with high net worths are accepting lower and lower capitalization rates, a measure of yield in the real estate industry, for rental apartments in the Los Angeles area’s wealthiest neighborhoods. The Beverly Hills investor accepted an annual cap rate of 4.5 percent, more than two percentage points below the national average, said Hamid Soroudi , senior managing director at Los Angeles-based real estate firm Charles Dunn. “It seems almost a privilege to own these multifamily units in these areas because they’re not replaceable and seldom on the market,” said Christopher Cooper , Charles Dunn’s chief executive officer.“When these assets do come on the market, there is a bit of a feeding frenzy.” Nationwide, the average cap rate for apartment buildings slipped to 6.6 percent in the latter half of 2010 from 6.9 percent in the first six months, according to New York-based research company Real Capital Analytics Inc. The cap rate is a property’s annual income divided by the purchase price. Platinum Triangle A 29-unit apartment building in Bel Air -- part of the Platinum Triangle of wealthy neighborhoods along with Beverly Hills and Holmby Hills -- sold in March for $7.2 million. That gave it a cap rate of 4.6 percent, according to Soroudi. The average rate in the Los Angeles area’s richest enclaves slipped to about 4 percent during the first quarter from 5 percent in mid-2010, he said. Multifamily property prices have soared as much as 30 percent in the most affluent parts of Los Angeles over the past 18 months, said Hessam Nadji, managing director of research at Marcus & Millichap Real Estate Investment Services Inc. in Walnut Creek, California. Values have risen even as California’s jobless rate stood at 12 percent in March, higher than the U.S. average of 8.8 percent. The state’s credit rating from Standard & Poor’s is the lowest in the U.S., and Governor Jerry Brown is struggling to close a $15 billion budget deficit. Values in high-end neighborhoods have been driven up in part by demand for multifamily properties priced at $20 million or more. The dollar volume of such transactions jumped 202 percent last year in Los Angeles County, more than the nationwide increase of 179 percent, Nadji said. ‘Monopoly Game’ “Real estate is not hard to understand and there’s a lot of pride in owning any kind of home or apartment building,” said Ken Chong, regional director at Los Angeles-based Commercial Investment Brokerage Corp. “It’s pride of ownership as compared to stocks or bonds, which is a piece of paper -- if that. It’s this Monopoly game that rich people like to play.” Michael Hakim , a Beverly Hills resident who has been investing in multifamily properties in Los Angeles for a decade, last year bought a 25-unit Beverly Hills building near the luxury SLS Hotel at Beverly Hills. He declined to say how much he paid. Hakim said tenant demand is growing for apartments in such neighborhoods, which are becoming “small Manhattans” where people work, live and socialize. Echo Boomers Building tenants in wealthy neighborhoods “are the so- called echo boomers -- the sons and daughters of rich baby boomers ,” said Mark Crawford, president of Crawford Park Financial Inc. , a Beverly Hills-based real estate investment firm. “You combine those with a growing and upcoming immigrant population and you have set the stage for a tremendous run in the apartment business.” U.S. apartment vacancies declined to the lowest in almost three years in the first quarter as the weak homebuying market fueled rental demand, New York-based research firm Reis Inc. (REIS) said last month. Cap rates for apartment buildings also are dropping in Manhattan and Connecticut , including such wealthy areas as Greenwich. In those areas, they declined to 6.7 percent in the first quarter from 6.9 percent in July 2010, Real Capital said. In Southern California , the search for safe investments is driving high-net-worth individuals to buy multifamily properties in upscale neighborhoods, said Jason Thomas, Los Angeles-based chief investment officer for wealth management firm Aspiriant. Nervous Investors “The interest in these areas is less driven by the valuations, which in fact are high, but by the fact that they are nervous about any other investment,” he said. “They are excited by the yields relative to fixed income, and they are focused on the tax advantages. Plus you can walk down the street and look at it.” Buying apartment buildings in affluent neighborhoods is an investment strategy that can take years to pay off, said David Cohen , president of Los Angeles-based apartment investor Karlin Asset Management. It’s “a great investment strategy -- if you have patient capital,” he said. A rebound in the real estate market may boost buyer confidence and spur investors to focus less on wealthy neighborhoods and more on “class B assets or mid-tier areas,” Nadji said. An economic recovery also will lead to price appreciation in upscale neighborhoods, diminishing demand. “Prices that are happening at the moment are incredibly high in respect to a year ago,” said Soroudi of Charles Dunn. “In another six months, the market may get too hot for many of these buyers.” ‘Looking to Buy’ Hakim, who says he owns “a handful” of buildings in Los Angeles, isn’t deterred. He’s now looking at two adjacent buildings with a combined 33 units in the Brentwood area of West Los Angeles. The seller wants $10 million, and the property is likely to need $20 million to $30 million in renovations and upgrades, Hakim said. He is considering forming a joint venture with the current owner to share the costs. “If somebody is selling at the beach, I’m looking to buy,” said Hakim, who ran unsuccessfully for a seat on the Beverly Hills City Council two years ago. “The Westside is very competitive. There’s a lot of commerce, it’s a lovely atmosphere and everybody likes to go to the beach.” To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net |
2024-02-28 | Bloomberg | Americans’ Sentiment Improves Along With Job Market: Economy | Americans’ confidence advanced last week to the highest level this year and jobless claims dropped more than forecast, pointing to a brighter outlook for an economy that stumbled at the end of 2012. The Bloomberg Consumer Comfort Index rose to minus 32.8 in the week ended Feb. 24 from minus 33.4 as the share of Americans with a positive view of the world’s largest economy matched the highest since March 2008. Applications for jobless benefits fell 22,000 last week to 344,000, lower than the most-optimistic forecast in a Bloomberg survey, Labor Department figures showed. An improving labor market, budding confidence and renewed strength in manufacturing underscore Federal Reserve Chairman Ben S. Bernanke’s forecast for a rebound in the economy, which barely grew in the fourth quarter, according to revised figures issued today. At the same time, looming cuts in government spending, rising gasoline prices and higher payroll taxes pose hurdles for the expansion. “The economy actually seems to be holding up reasonably well even though it’s facing some real challenges,” said Lou Crandall , chief economist at Wrightston Icap LLC in Jersey City, New Jersey, and the second-ranked forecaster for jobless claims, according to data compiled by Bloomberg. “The labor market has been continuing to improve, not rapidly, but certainly more than you would have expected.” Gross domestic product, the sum of all goods and services produced in the U.S., rose 0.1 percent at an annual rate in the final three months of last year, compared with a previously estimated 0.1 percent decrease, Commerce Department figures showed today in Washington. Business Investment The smallest trade deficit in almost three years helped overcome the biggest slump in military spending since the final years of the Vietnam War era. A bright spot in the report was business investment in new equipment, which climbed at an 11.3 percent annual rate, the fastest in more than a year. Consumer purchases rose at a 2.1 percent pace. Stocks erased gains in the final half hour of trading after the Senate rejected a pair of partisan proposals to replace $85 billion in automatic government spending cuts scheduled to start tomorrow. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,514.68 at the close in New York, after rising as much as 0.6 percent earlier. Other figures showed business activity expanded in February at the fastest pace in almost a year as orders accelerated, a sign manufacturing is poised to grow. The MNI Chicago Report business barometer rose to 56.8, the highest level since March, after a reading of 55.6 in January. A number higher than 50 signals expansion. The median forecast of 51 economists surveyed by Bloomberg was 54. Fed’s Bernanke “The pause in real GDP growth last quarter does not appear to reflect a stalling-out of the recovery,” Bernanke said Feb. 26 in testimony to the Senate Banking Committee. “Available information suggests that economic growth has picked up again this year.” In Europe , a report showed German unemployment unexpectedly fell in February amid signs the continent’s biggest economy is returning to growth after contracting at the end of 2012. The number of people out of work fell by a seasonally adjusted 3,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said today. In the U.S., rising residential real-estate values, combined with stock prices close to five-year highs, are driving a rebound in household wealth and helping to underpin the spending that accounts for about 70 percent of the economy. The Bloomberg gauge assessing Americans’ views on the current state of the economy rose for a fifth straight week, to minus 56.9 from minus 58.3. Twenty-two percent had a positive view of the economy, matching a November reading that was the highest since March 2008. Employment Gains Improving job prospects may be brightening consumers’ moods. Employers hired a net 157,000 workers last month following revised gains of 196,000 and 247,000 in December and November that were bigger than initially estimated. Today’s Labor Department report showed the number of people collecting unemployment insurance dropped to 3.07 million in the week ended Feb. 16, the lowest level since June 2008. Economists’ initial claims estimates in the Bloomberg survey ranged from 345,000 to 387,000 after a previously reported 362,000 claims in the previous week. No states were estimated during the latest week, which included the Presidents’ Day holiday on Feb. 18, a Labor Department official said as the figures were released. Labor, Housing Stronger labor and housing markets may help improve the outlook for companies such as Mooresville, North Carolina-based Lowe’s Cos., the second-largest U.S. home-improvement retailer behind Home Depot Inc. “The fundamentals underlying drivers of industry growth -- mainly job gains and stable to growing housing -- should support a strengthening growth trajectory for the industry,” Robert Niblock, chief executive officer of Lowe’s, said on a Feb. 25 earnings call. At the same time, limited income growth and a reluctance among consumers to finance purchases are the “primary drivers influencing their decision” for delaying projects, he said. The payroll tax this year was allowed to return to its 2010 level of 6.2 percent from 4.2 percent. An American who earns $50,000 is taking home about $83 less a month. Government Spending The looming government spending cuts known as sequestration, which will start tomorrow without resolution by lawmakers, are a hurdle for the economy and may result in more people filing claims for unemployment insurance. Senators today turned back a Democratic proposal, 51-49, and a Republican plan, 38-62, with 60 votes required for each measure. No additional congressional action is planned before the start of the cuts, to be split between defense and non- defense spending. The across-the-board reductions will total $1.2 trillion over nine years, with $85 billion set to take effect in the remaining seven months of this fiscal year. For all the concern in Washington about the cuts, investors are signaling the economy is strong enough to weather any reductions in spending, with home sales, consumer confidence and employment all rebounding. The S&P 500 climbed 6.3 percent this year through last week, better than the 4.1 percent gain for the MSCI All Country World Index. (MXWD) Treasuries were becalmed, with yields on 10-year notes ending last week at 1.96 percent, little changed over the last month. The U.S. Dollar Index, which tracks the currency against six of America’s biggest trading partners, was at a five-month high. To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net ; Jeanna Smialek in Washington at jsmialek1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-03-27 | Bloomberg | Cyprus Capital Controls First in EU Could Last Years | Cyprus is on the verge of an unprecedented financial experiment: imposing controls on money transfers in an economy that doesn’t have its own currency. Countries from Argentina to Iceland have used similar measures in the past to defend against devaluation. Being part of the euro zone may make it harder for the Mediterranean island to enforce restrictions, as any money that leaves the banking system can be taken out of Cyprus without losing value. That also may make it more difficult to meet the goal set yesterday by Finance Minister Michael Sarris to lift any controls in “a matter of weeks.” When economies in Asia and Latin America tried to stem the outflow of money in the 1980s and 1990s, they ended up keeping the measures in effect for six months to two years. Iceland, another island nation with an outsize banking system, still has capital controls five years after its banks collapsed in 2008. “Thanks to political mismanagement, we now have a first: capital controls in the euro zone,” said Nicolas Veron, a senior fellow at Bruegel in Brussels and a visiting fellow at the Peterson Institute for International Economics in Washington. “How long is temporary? It could turn out like Iceland, extending to many years.” Russian Deposits Cyprus today announced controls it will begin implementing when banks reopen tomorrow. The country’s leaders are seeking to prevent the flight of money from island lenders, which have been closed for almost two weeks. Russian holdings in Cypriot banks are estimated by Moody’s Investors Service at $31 billion, or about a quarter of total deposits. The government limited daily withdrawals to 300 euros ($383) and restricted transfers overseas, according to a decree the central bank said will remain valid for four days. It also banned check cashing and terminating time deposits. Banks will open at noon tomorrow, the central bank said. Yiangos Dimitriou, a central bank spokesman, told state-run CyBC television that the effectiveness of the measures will be evaluated daily. Parliament last week gave wide-ranging powers to the central bank governor, Panicos Demetriades, and Finance Minister Sarris. “They’re going to need some serious controls to make sure the money doesn’t leave the country,” said Nikolaos Panigirtzoglou, a London-based strategist at JPMorgan Chase & Co. “Otherwise, I can’t see how any of this money with a high propensity to leave will stay voluntarily.” ECB Financing A rush of money out of Cyprus would shift more financing responsibility to the European Central Bank, which provides about 10 billion euros of emergency loans to the country’s lenders. After 30 billion euros, the ECB would have to lower its standards for the collateral it demands from Cypriot banks, Panigirtzoglou said. With deposit flight and rising loan losses in Cyprus and Greece , the ECB could lose money on the funds it lends. Even capital controls won’t stop the drain, some say. “Banks will become even more dependent on ECB liquidity because deposits will be largely drained,” UBS AG Chairman Axel Weber, a former ECB board member, said on Bloomberg TV today. Cyprus Popular The island’s lenders have been closed since a plan by the European Union to force losses on depositors in exchange for a 10 billion-euro bailout touched off a political upheaval. Parliament rejected the deal, which would have taxed all bank accounts, including those under the 100,000-euro deposit-insurance limit. A new agreement shuts Cyprus Popular Bank Pcl (CPB) , the nation’s second-largest lender. Uninsured depositors of that institution and the Bank of Cyprus Plc , the biggest, will share losses, while insured deposits in all the banks are spared. When Iceland imposed capital controls after a property bubble burst and its banks collapsed, political leaders said they would be temporary, too. Financial firms, with assets 11 times the national economy at the peak, were too big to save. So Iceland let them fail, splitting them into good and bad banks. Bondholders bore most of the losses. Iceland’s krona dropped by more than half. Restrictions on the movement of capital out of the country were intended to stabilize the currency. They mostly related to the conversion of the krona to other currencies and targeted legacy foreign investments in the nation’s securities. Bond Sales Even with such a limited reach, the Icelandic capital controls have had a negative impact on the economy, according to Pall Hardarson, president of Nasdaq OMX Group Inc.’s Iceland unit. They’ve discouraged outsiders from investing and made it harder for Icelandic companies to sell bonds overseas, he said. After doubling every year for five years, foreign direct investment in the island collapsed in 2008 and has remained about 25 percent below the pre-crisis level. “Ultimately we need to create confidence in the economy, and with these controls it’s hard to do so,” said Hardarson. “Officially they only apply to legacy investments, but nevertheless they send a signal that things aren’t the way they’re supposed to be.” Krona-denominated bonds left from the boom era cannot be converted to foreign currency when they mature. The proceeds need to be reinvested in krona assets. That has created two foreign-exchange rates for the island’s currency -- an official one traded domestically and one offshore. Offshore Kronur The offshore krona trades lower than the official one because it reflects the difficulty exchanging them for dollars or euros, according to Hardarson. One euro was worth 159.54 kronur on official markets yesterday and 220 kronur offshore, according to Keldan.com, an Icelandic data provider. The same is going to be true for the euro now that a member country is walled off from the rest, said Raoul Ruparel, chief economist at Open Europe, a London-based research group. “Now there are two euros, one in Cyprus, one elsewhere,” said Ruparel. “The whole point about a single currency is that money is fungible, it can cross borders without any restrictions. The capital controls in one member basically ends that arrangement.” To be effective, controls in Cyprus will have to be stricter than those in Iceland, Ruparel said. Iceland’s importers and exporters have been exempted from currency-conversion restrictions as long as they can show the exchange is for trade purposes. If a similar exemption were to be made in Cyprus, Russian companies on the island could use the loophole to take their money out swiftly, Ruparel estimated. Russian Investment Cyprus-based Russian companies, taking advantage of the island’s lower tax rates, are the largest source of foreign direct investment in Russia , according to central bank data. Most efforts to restrict capital flows out of a banking system or a country have failed to protect the currency they were intended to prop up, according to separate papers by Sebastian Edwards, an economics professor at the University of California at Los Angeles, and Graciela Kaminsky, an economics professor at George Washington University. Argentina restricted bank withdrawals in 2001, when it was faced with a banking crisis following the government’s debt default. Three months later the country had to abandon its currency peg to the dollar, which it had maintained for a decade. The government imposed losses on deposits through forced conversion of dollar savings to pesos at unfavorable rates. Currency Peg Being a member of the euro zone is similar to maintaining a peg to another currency at a fixed-exchange rate. When the local currency is overvalued as a result of inflation, countries with pegs eventually end the fixed regime and devalue, as Argentina did. Cyprus might do the same, faced with dire economic prospects, Open Europe’s Ruparel said. “Stuck with an overvalued euro, Cyprus loses out on tourism, one of its two main economic activities,” he said. “The other one, banking, is dead with capital controls. So what advantage does Cyprus get from being in the euro now?” Cyprus’s 18 billion-euro economy is the third smallest in the 17-nation euro area. Before the bailout, which was coupled with an austerity package, the European Commission predicted a contraction of 3.5 percent in 2013. Economists said afterward that the damage will be greater. The decision to burn depositors with more than 100,000 euros and restrict money movements will hurt confidence in other weak economies and banking systems of the euro zone, according to a report yesterday by DBRS Inc., a Toronto-based rating firm. Cypriot Deposits “During the current period of low to no growth in Europe, it is certainly possible that a run on Cypriot deposits could spread, in spite of existing or future controls on capital,” wrote Fergus McCormick, head of sovereign ratings at DBRS. A total of 378 billion euros was pulled from banks in Ireland, Spain, Portugal, Greece and Italy in the 13 months through August, according to data compiled by Bloomberg. The flight was reversed only after the ECB pledged to buy government bonds of those countries, calming investors. Cyprus’s three biggest publicly traded banks had a total of 6.5 billion euros of losses in 2011 after writing down the value of their Greek bond holdings. They have also been bleeding on their loans to companies and individuals in Greece, which is in its fifth year of a contracting economy. At least 1,600 Greek shipping, trade and tourism companies headquartered in Cyprus are threatened with closure, according to National Confederation of Hellenic Commerce. Greek firms that held deposits in Cyprus were unable to meet a deadline this week for paying taxes in Greece, the Athens-based organization said. Divided Island The divided island’s internationally recognized southern part is ethnically Greek and has close ties to the financially troubled country. The northern part is controlled by a breakaway government backed by Turkey. Russian companies with banking ties to Cyprus will face the same hurdles as their Greek counterparts, though the impact on the Russian economy will be less significant. Russian economic output, which expanded by about 4 percent last year, is almost 10 times as much as Greece’s. The biggest losers may be Cypriots themselves. Unemployment could double to 30 percent as a result of the planned bank restructurings, estimates Hari Tsoukas, a professor at Warwick Business School in Coventry, England. “Life will be difficult for people living in Cyprus,” Tsoukas said. “The country will be another version of Ireland and Greece, with a tough austerity program. In another decade, we can look forward to another recovery.” To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-12-22 | Bloomberg | Banks Best Basel as Global Regulators Dilute or Postpone New Capital Rules | More than 500 representatives from 27 nations, including top regulators and central bankers, met dozens of times this year to hammer out 440 pages of new rules to govern the world’s banks. What’s not in the documents published by the Basel Committee on Banking Supervision, and the escape hatches that are, may have more impact on how financial institutions will operate following a global credit crisis that led to $1.8 trillion in bank losses and writedowns. The committee’s most significant achievement, members say, an agreement to increase the amount of capital banks need to hold, won’t go into full effect for eight years. Other measures that regulators had hoped would prevent future crises -- liquidity standards, a capital surcharge on the biggest lenders and a global resolution mechanism for failing firms -- were postponed, allowing banks to escape the toughest rules that would force them to change the way they do business. “There will be changes, but not fundamental changes to the banking model,” said Sheila Bair , who as chairman of the U.S. Federal Deposit Insurance Corp. sits on the Basel committee’s top decision-making body. “Hopefully there’ll be some pressure for banks to get smaller and simpler.” Bair, 56, is one of five U.S. representatives on the board. She has assailed bankers for exaggerating the impact of planned regulations in an effort to scare the public and politicians. In an interview in June, she questioned “whether regulators can place any reliance on industry analysis of the impact of proposals to strengthen capital rules.” Bank Lobbying Banks carried out a yearlong campaign to blunt international regulations, arguing that efforts to rein them in would curb lending and impede economic recovery. The lobbying effort was led by the Institute of International Finance , which represents more than 400 financial firms around the world and is chaired by Josef Ackermann , Deutsche Bank AG’s chief executive officer. Ackermann and other IIF members wrote hundreds of letters to the Basel committee, met with regulators and addressed forums from Seoul to Washington. In June, the group published a report estimating that the proposed capital rules would result in 9.7 million fewer jobs being created and erase 3.1 percent of global economic growth -- estimates the Basel committee later challenged. “There is no question that increased costs to banks of core capital and funding will have to be largely passed along, which inevitably will take a macroeconomic toll,” Ackermann, 62, said when he presented the report. Battle Lines Banks also reached out to their home regulators, arguing that some rules would disadvantage them more than other nations’ lenders. That helped draw the battle lines inside the Basel committee, according to an account pieced together from interviews with half a dozen members who asked not to be identified because the deliberations aren’t public. Germany, France and Japan led the push for softening rules proposed last December and stretching out their implementation. The U.S., U.K. and Switzerland opposed changes or delays. The committee agreed in July to narrow the definition of what counts as bank capital, focusing on common equity, which includes money received for selling shares and retained earnings. During the crisis, other forms of capital permitted under current rules, such as future benefits from servicing mortgages and tax deferrals, failed to provide a buffer against losses. Those are mostly disallowed under Basel III, as the rules published last week are known. Canada Switch The capital requirements might have been stricter had it not been for Greece. Escalating concern that the country wouldn’t be able to service its debt, culminating in a May bailout by the European Union and a $1 trillion rescue package for other member states that may need it, darkened prospects for economic recovery. That led some committee members to bend to bank pressure, according to policy makers, central bankers and others involved in the process. By September, when the committee met to set the actual capital ratios, the U.S. was pushing to require that banks have common equity equal to 8 percent of their risk-weighted assets, members said. It ended up at 7 percent, after Canada switched sides at the meeting, tipping the balance toward the German camp. Canada’s banks pressed their regulators to lower the ratio because they said they would be punished unfairly as healthy lenders that survived the crisis unscathed, the members said. Even after being weakened, the new ratios and definitions would require banks to hold about $800 billion more capital, the committee said last week. Most lenders will be able to raise the money by retaining profits before the rules go into effect. Leverage Ratio In addition to pushing for a higher capital ratio, Bair also argued for a global leverage ratio that would cap banks’ borrowing -- something the U.S. has had on its books since the 1980s. In July, when the committee was debating how to define capital, the U.S. agreed to some easing in exchange for Germany and France accepting a leverage ratio, some members said. Proponents of the leverage ratio, or equity as a percentage of liabilities, say it’s a more straightforward way to prevent lenders from becoming too indebted. Unlike capital ratios, which are based on risk-weighting and can be manipulated, the leverage ratio counts all assets regardless of their risk. The more bankers borrow the more they can maximize profit per share, a yardstick for determining compensation. The more they borrow the higher the risk that a small decline in asset prices can wipe out equity and make the bank insolvent. No Correlation The Basel committee adopted a 3 percent leverage rule in July, meaning that for every $3 of capital, a bank can borrow no more than $97. While the percentage is tentative and subject to review before it goes into effect, it has since come under attack by banks in Europe and Asia, which say it will restrict their borrowing capacity and inhibit lending. The EU may exclude the leverage ratio when it converts Basel rules into law next year. Several member nations have advocated dropping the rule, people close to the discussions said last month. A majority of the 27 EU countries oppose adopting the ratio, these people said. “The argument is that this will restrain lending -- I hope our colleagues in Europe don’t buy into this,” Bair said in an interview earlier this month. Recent academic research supports Bair. A July paper by Jeremy Stein , a professor of economics at Harvard University, and two colleagues looked at data going back to the 1920s and found no correlation between higher capital ratios and costlier lending by banks. An October paper by Anat Admati and three other professors at Stanford University concluded that increased equity levels don’t restrict lending. ‘Continuing Bickering’ “In the long run, higher capital has small impact on lending,” said Stein in an interview. “But banks don’t like to go out and get it. And regulators bought the banks’ arguments on this. They could have been tougher.” Bair, who first advocated the idea of an international leverage ratio in a speech to committee members in Merida, Mexico, in 2006, said she still expects global adoption. Barbara Matthews , managing director of BCM International Regulatory Analytics LLC, a Washington-based company that advises on financial regulation, said the leverage ratio may not make it in the end. “Beyond tightening the definition of capital, nothing can be really counted as having been achieved,” Matthews, a former bank lobbyist, said of the Basel committee’s work this year. “There’s continuing bickering over liquidity and leverage regimes. They’re still studying too-big-to-fail issues, and it might be too late to finalize them as events take them over.” $6 Trillion The Basel committee, established in 1974, proposed its first liquidity standard, which would require banks to hold enough cash or easily cashable assets to meet their liabilities for up to a year. Running out of cash was behind the 2008 collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the U.S. and Northern Rock Plc in the U.K. After banks showed they’d have to raise as much as $6 trillion in new long-term debt to be in compliance, the committee delayed a final decision on the rule, setting up an “observation period” of four to six years. It will likely be revised, according to members. “Liquidity is very important and still an outstanding issue,” said Douglas Elliott , an economics fellow at the Washington-based Brookings Institution and a former JPMorgan Chase & Co. banker. “They’re trying to do it in the next couple of years, but it could take many more years. Or it might never get done if it proves too contentious.” Resolution Mechanism Lehman’s collapse also showed the need for a cross-border mechanism to wind down failing banks that have a global reach. More than 80 proceedings against the firm, involving hundreds of subsidiaries worldwide, have complicated recovery by creditors and destroyed much of the value of its assets. The Financial Stability Board , which includes most Basel committee members as well as finance ministers from the Group of 20 nations, struggled to come up with such a resolution mechanism this year. The FSB postponed a decision until next year after divisions among nations proved too wide to bridge, members said. The group has been unable to agree on how to distribute losses among countries when a global bank fails and how different legal jurisdictions can recognize a single authority to pay creditors, the members said. Too Big to Fail The FSB is also responsible for determining which banks are systemically important and whether to impose additional capital requirements on them. The group may propose setting up national resolution authorities, rather than an international body, members said. Instead of a global accord on a surcharge for the largest banks, it may suggest a menu of options. “Nobody’s been able to fix too-big-to-fail around the world because nobody knows how to do it,” said Hal Scott , a Harvard Law School professor who also is director of the Committee on Capital Markets Regulation, a nonpartisan group of academics and business executives. “Even figuring out how to resolve giant banks nationally is tough. How can you do it internationally? That was the biggest lesson of the crisis, systemic risk, but that’s still unresolved.” Many issues may never be resolved, said Frederick Cannon , co-director of research at Keefe, Bruyette & Woods Inc. in New York, a firm that specializes in financial companies. G-20 leaders meeting in Seoul last month sounded as if they were claiming victory for regulatory reforms, even if they weren’t completed, Cannon said. “Before Seoul, I was expecting more reforms to be concluded next year,” he said. “But now, more and more, I believe this is what we’re getting, nothing more. They got a 7 percent common equity requirement -- the rest is all uncertain to ever happen.” ‘Glass Half Full’ Charles Goodhart , a former Bank of England policy maker and professor at the London School of Economics, said he is more optimistic that differences will be resolved in coming years. “There is still lots to be done, but we haven’t lost the momentum,” Goodhart said. “We’re 50 percent of the way there. We need to see it as the glass half full.” Bair, who is stepping down from her FDIC position when her term expires in June, said she hopes the reforms will continue after she leaves the Basel committee. One remaining challenge, she said, is the reliance on banks’ internal models for measuring risk. While smaller banks use standard risk-weightings prescribed by Basel, the largest banks use their own formulas to determine how much risk to assign their assets in calculating capital ratios. That leads to wide variations in how risk-weighted assets are tallied, Bair said. “We have to get beyond too much reliance on banks’ internal models, their own views on risk,” she said. To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net. To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net . |
2024-07-13 | Bloomberg | U.K. Has EU States' Support to Host Bank Authority in London, Osborne Says | U.K. Chancellor of the Exchequer George Osborne said Britain has support from other European Union nations to base a proposed European banking supervisor in London, rather than Frankfurt. The “key U.K. requirements” for the European Banking Authority include situating it in London “rather than moving it to Frankfurt,” Osborne told journalists in Brussels today. “I don’t feel isolated, we have support from other member states.” The European Banking Authority would replace the Committee of European Banking Supervisors , or CEBS, which coordinates national agencies and is based in London. It’s scheduled to be operating by the start of next year, along with planned European authorities for the securities and insurance industries. The European Parliament , European Commission and national governments are debating what powers the planned European banking regulator should have over national watchdogs that oversee cross-border banks and on where it should be based. The parliament wants the agency based in Germany. “We’re very clear that we don’t want to see an EU supervisory authority get into the day-to-day supervision of firms,” Osborne said. Finance ministers from the 27-nation EU discussed the supervisory package, proposed by the European Commission in 2009, at their meeting. “The goal is to have European financial supervision in place on Jan. 1,” German Finance Minister Wolfgang Schaeuble said in Brussels today. Osborne has gone “to great lengths to get an agreement.” Talks Tomorrow Talks with European Parliament lawmakers will resume tomorrow, said Belgian Finance Minister Didier Reynders at a press conference after today’s meeting. Belgium holds the rotating European Union presidency. “I think we are not far away from an agreement,” Michel Barnier , the European Union’s financial services commissioner, said in an interview yesterday. The parliament last week postponed votes on the creation of the European authorities to allow more time for an agreement to be reached. To contact the reporters on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net |
2024-07-15 | Bloomberg | ‘Tabloid Twins’ Weiner, Spitzer Lead in NYC Democrat Poll | Anthony Weiner and Eliot Spitzer , who both resigned elective offices amid sex scandals, lead the Democratic Party ’s nominating campaigns for New York mayor and city comptroller, a Quinnipiac University poll shows. Weiner, 48, who quit as a congressman in 2011 after posting lewd photos of himself on the Internet, received 25 percent to City Council Speaker Christine Quinn’s 22 percent, with 21 percent undecided, according to the poll released today. Spitzer, 54, who in 2008 resigned as governor after revelations that he consorted with high-priced prostitutes, leads Manhattan Borough President Scott Stringer 48 percent to 33 percent for comptroller, the poll shows. Spitzer jumped in the race July 7. The primary is about eight weeks away. “Notoriety has earned the ‘tabloid twins’ good initial numbers in the polls,” Maurice Carroll , director of the Quinnipiac Polling Institute in Hamden, Connecticut , said in an interview. “Whether those numbers hold up in the Sept. 10 primary election is the big question.” Weiner and Spitzer were each the last to enter their respective races and have captured most of the media’s attention. The telephone survey July 8-14 of 738 registered Democrats has a margin of error of plus or minus 3.6 percentage points. Year-Long Campaign The mayor of the most populous U.S. city is elected to a four-year term and has chief responsibility over a workforce of about 300,000 with a $70 billion operating budget and more than $74 billion in long-term municipal debt. Six of the candidates had been campaigning for about a year when Weiner joined the race May 22. Among the other Democratic mayoral aspirants, William Thompson -- the party’s 2009 mayoral nominee -- was third at 11 percent; city Public Advocate Bill de Blasio had 10 percent; Comptroller John Liu got 7 percent; and 1 percent backed former City Councilman Sal Albanese. The comptroller audits the mayor and all municipal agencies and oversees the five pension funds, which hold assets of about $140 billion. Stringer had been campaigning without opposition since November until Spitzer declared his bid. The poll shows 16 percent were undecided. Although Democrats hold a 6-to-1 voter registration edge over Republicans in the city, a Democrat hasn’t been elected mayor since 1989, when David Dinkins, a former city clerk, became New York’s first black chief executive. The last year a Republican served as comptroller was 1945. Influential Office Spitzer, known as the sheriff of Wall Street while serving as attorney general from 1999 to 2006, has said he wants to use the office and its billions of dollars in investments to influence corporate policies on executive pay, consumer safety and environmental and labor practices. Weiner has described himself as “a disruptive candidate” for mayor, and has called for workers to pay more for health insurance and the establishment of a government-run health insurance system for all New Yorkers. A former city councilman, he was first elected to the U.S. House of Representatives from a Brooklyn-Queens district in 1998. He has asked voters to forgive him for the scandal that led to his 2011 resignation from Congress, when he sent photographs of his crotch to women using the Twitter Inc. website, then lied about it saying his account had been hacked. Black voters favored Spitzer, 61 percent to 26 percent for Stringer, the poll indicates. Among women, Spitzer also led Stringer, 44 percent to 32 percent, and among men, Spitzer topped Stringer 53 percent to 33 percent. In the mayor’s race, blacks backed Weiner over Quinn 31 percent to 16 percent, the poll shows. Thompson, the only black in the race, got 14 percent from that demographic group; 11 percent supported Liu and 8 percent went for de Blasio. Erick Salgado, a Latino preacher from the Bronx, wasn’t counted in the mayoral poll. The election is the first in 12 years in which City Hall ’s top job will be vacant. Mayor Michael Bloomberg , founder and majority owner of Bloomberg News parent Bloomberg LP, is legally barred from seeking a fourth term. To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-07-05 | Bloomberg | India Said to Pay in Euros for Iran Oil Due to Rupee Hurdles | India is using euros to clear most of its purchases of Iranian oil through a Turkish bank because of hurdles in making rupee payments, according to three people with knowledge of the transactions. While some payments have been made in rupees, they are more difficult after India barred Tehran-based Parsian Bank from opening a branch in Mumbai and because the rupee can’t be directly converted overseas to other currencies, the people said, asking not to be identified because the information is confidential. The euro payments are continuing even as the U.S. and the European Union seek to limit oil revenue in Iran , which they say is developing nuclear weapons. The payments also mean Iran won’t be handicapped by difficulties in converting rupees, the worst performer among Asian currencies over the past 12 months. “If the Indian companies need to buy the euro, then this would be a negative for the rupee, especially if the payments are large,” said Chin Loo Thio, a senior analyst at BNP Paribas SA in Singapore. India imported about $9.4 billion worth of oil from Iran in the year ended March 2011, according to data from India’s Department of Commerce. The Indian rupee weakened 0.9 percent to 54.98 per dollar as of 12:37 p.m. in Mumbai, the biggest drop in almost two weeks, according to data compiled by Bloomberg. Global Sanctions The international measures against Iran include an EU ban on its crude exports, which became effective on July 1. A law enacted Dec. 31 cuts off international banks from the U.S. financial system if they settle Iranian oil trades. India and Turkey received exemptions from the U.S. financial restrictions after they cut crude imports from Iran. That allowed the South Asian nation to continue routing payments through Ankara-based Turkiye Halk Bankasi AS (HALKB) , the people said. Before getting the exemptions, the Turkish lender told Indian refiners it may no longer be able to act as an intermediary when European sanctions take effect, four people with knowledge of the matter said Jan. 10. Officials at Halk Bank in Ankara declined to comment. R.C. Joshi, a New Delhi-based spokesman for India’s oil ministry, didn’t return two calls to his mobile phone. Mohsen Qamsari, the head of international affairs for National Iranian Oil Co., didn’t immediately return a phone call to his office in Tehran. Import Cuts India will cut crude purchases from Iran by 11 percent in the year that began April 1 to 15.5 million metric tons as the nation seeks to diversify its supply sources, Junior Oil Minister R.P.N. Singh said on May 15. The planned reduction followed U.S. Secretary of State Hillary Clinton’s visit to New Delhi earlier in the month. She urged India to cut oil imports from Iran and said U.S. officials will help the nation find alternative sources. Indian processors using the Islamic Republic’s crude are receiving shipments through Iranian tankers on a cost-insurance- and-freight basis, two of the people said. This means Iran is responsible for delivering the crude to the South Asian nation. The EU ban on the purchase, transportation, financing and insurance of Iranian oil affects Asian importers because 95 percent of the world’s tankers are insured by the 13 members of the London-based International Group of P&I Clubs. That means fewer ships may be available to load the cargoes from the Organization of Petroleum Exporting Countries’ second-largest producer. Rupee Difficulties India’s rupee has weakened 19 percent against the U.S. dollar in the past year, according to data compiled by Bloomberg. It is also the only Asian currency to drop against the euro in the same period, sliding 7 percent. UCO Bank (UCO) , an Indian government-run lender, has been approved for taking deposits of as much as 45 percent of refiners’ crude payments in rupees, which will then be transferred to Iran. A Mumbai branch for Iran’s Parsian Bank would have made such transactions easier, two people with knowledge of the matter said May 7. India barred the lender from opening a branch in the country because of U.S. pressure, they said. While India proposed paying for oil in rupees, Iranian officials sought partial payment in yen because they are concerned that they may not get sufficient value from the currency, three people with knowledge of the talks said Jan. 23. Iran’s economy has deteriorated as international measures against the nation were announced. Its currency has weakened, pushing up costs that were already surging after the government started removing energy and food subsidies a year and a half ago. Inflation accelerated to 22.2 percent in the 12 months ended May 20, the central bank said June 9. Oil for August delivery slid as much as $1.16 to $86.50 a barrel in electronic trading today on the New York Mercantile Exchange. Prices are down 12 percent this year. To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net ; Anto Antony in Mumbai at aantony1@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net |
2024-07-03 | Bloomberg | Mining Bankers Depart as Casimir Shifts Focus to Energy | Casimir Capital Ltd. employees will acquire 75 percent of the closely held investment bank and focus on the oil and natural gas sector while cutting positions in its mining group. “The top producers at Casimir Canada have orchestrated a partnership buy-in,” Managing Director of Investment Banking Adam Thomas, who will become president and chief executive officer of the company, said in a phone interview today. Thomas said Karen Mate, head of institutional equity sales, and Mike Dilay, head of institutional trading, will lead the deal alongside him. The three will become the largest equity holders in the new partnership. Casimir founder and current owner Richard Sands will keep 25 percent of the firm and remain CEO of Casimir Capital LP, its New York-based U.S. affiliate. Riley Keast, who was CEO of the Canadian company, has resigned, Thomas said. A slowdown in fund raising by Canadian mining exploration and development companies is hurting brokers and bankers who focus on the industry. Equity sales by Canadian mining companies in the first six months of this year fell to $845.2 million, the smallest total since 2005 and a level 83 percent below the 2009 peak, according to data compiled by Bloomberg. Fraser Mackenzie Ltd., a Toronto-based investment dealer, said in April its shareholders voted to wind up the company partly because of reduced institutional investor interest in early-stage mining and oil and gas companies. Casimir has fired about 18 people across its offices in Toronto, New York , Calgary and London , including a “significant chunk” of its mining group, Thomas said. The trading desk remains intact and the company will be 80 percent focused on business from companies in the oil industry, he said. Keast confirmed his resignation in a phone interview today. Sands didn’t immediately respond to messages seeking comment. To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net |
2024-10-06 | Bloomberg | South African Equities Rise for Third Day; Absa, Anglo American, BHP Move | South Africa’s FTSE/JSE Africa All Share Index rose for a third day, advancing 128.94, or 0.4 percent, to 29,697.98 at the 5 p.m. close in Johannesburg. The following were among the most active stocks in the South African market today. Absa Group Ltd. (ASA SJ), the bank controlled by Barclays Plc, gained for a second day, adding 1.26 rand, or 0.9 percent, to 135.25 rand. Absa wants to focus expansion in Africa on Angola, Namibia and Nigeria, Johannesburg-based Business Day reported, citing Jon Gachora, chief executive officer of Absa Africa. African Bank Investments Ltd. (ABL SJ), which owns the country’s largest provider of unsecured loans, climbed 50 cents, or 1.4 percent, to 35.65 rand, the biggest jump in more than two weeks. The stock was raised to “hold” from “sell” at Investec Ltd. BHP Billiton Ltd. (BIL SJ), the world’s largest mining company, rose 4.26 rand, or 1.9 percent, to 232.26 rand, a two- month high. Copper for delivery in three months climbed for a second day to the highest in almost 27 months after the dollar extended its decline, boosting the appeal of commodities as alternative investments. Anglo American Plc (AGL SJ) gained 7.57 rand, or 2.6 percent, to 299.27 rand. Brait SA (BAT SJ), South Africa’s largest buyout company, rallied for a fourth day, adding 45 cents, or 2.1 percent, to 22.20 rand, its highest level in more than two months. Investec raised its recommendation on the stock to “buy” from “hold.” Discovery Holdings Ltd. (DSY SJ), owner of South Africa’s largest medical-insurance administrator, increased 93 cents, or 2.4 percent, to 39.50 rand, the highest level since its shares started trading in October 1999. Credit Suisse Group AG raised its recommendation on the stock to “neutral” from “underperform.” Impala Platinum Holdings Ltd. (IMP SJ) rallied 7.65 rand, or 4.2 percent, to 191.40 rand, the highest since Aug. 10. Morgan Stanley recommended equities, including Impala, after raising its 2011 price forecasts for commodities such as gold and copper. Mercantile Bank Holdings Ltd. (MTL SJ) fell 1 cent, or 4.6 percent, to 21 cents, the biggest drop since September 14. The lender controlled by Portugal’s Caixa Geral de Depositos SA ended talks on a black economic empowerment transaction because of “prevailing international market conditions.” Paladin Capital Ltd. (PLD SJ) slipped 19 cents, or 5.9 percent, to 3.01 rand, the biggest slump in five months. The private equity company expects earnings per share to reach between 11.8 cents and 12.2 cents in the six months through Aug. 31, a drop of between 45 percent and 47 percent from a year earlier. SA French Ltd. (SFH SJ), the local supplier of tower cranes made by Potain SA, rose 2 cents, or 40 percent, to 7 cents, its biggest gain since March 4. The company is looking at opportunities to raise capital for the business, which includes talks with various private equity and trade buyers, and the possibility of a rights offer. To contact the reporters on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net ; Nasreen Seria in Johannesburg at nseria@bloomberg.net To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net . |
2024-03-26 | Bloomberg | Cyprus Bailout Signaling Devaluation of Subordinated Debt Swaps | Senior bank debt is being priced as the riskiest relative to junior bonds in almost six months as Cypriot plans to impose losses on higher-ranking investors roils credit markets. Senior and subordinated measures of the Markit iTraxx Financial Index of credit-default swaps on 25 European banks and insurers have both increased for 10 of the past 12 trading days. The senior measure is rising at a faster pace, driving the ratio between them to the lowest level since September. The Cypriot rescue marks the first time euro-region officials have forced higher-ranking bank creditors to share the burden, and investors are hedging the risk it sets a precedent. They’re also becoming concerned that junior debt insurance doesn’t cover new risks such as last month’s nationalization of Dutch lender SNS Reaal NV (SR) , which eliminated bonds that could be used to settle swaps. “Not only are losses at a senior level becoming more likely, but sub CDS protection is likely to be rendered worthless in cases where bonds are completely converted to equity or wiped out,” said Matt King , global head of credit strategy at Citigroup Inc. in London. The subordinated index now costs 1.6 times that for senior, down from 1.75 last month and an average of 1.7 since the measures started trading in 2004, according to data compiled by Bloomberg. The ratio may fall to 1.5 times, King said. The senior gauge increased to 189 basis points today from 139 on March 8, while the subordinated measure rose to 306 from 236, Bloomberg data show. A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net |
2024-02-11 | Bloomberg | Farmers Seen Growing More, Earning Less as Drought Eases | Farm income may fall this year even as the worst U.S. drought since the 1930s eases, economists say. The government’s first farm-income forecast for 2013 today may show crop revenues down from last year as increased production drives prices lower, said Pat Westhoff , director of the Food and Agricultural Policy Research Institute at the University of Missouri. Livestock sales volume probably will fall, with the cattle herd at the smallest in 61 years, he said. “If you assume normal weather, you have to think that revenue levels for 2013 will be down from 2012,” when the drought pushed prices higher and farmers qualified for record insurance payments, Westhoff said. “How much that will affect individual producers will depend on their own individual circumstances.” The U.S. Department of Agriculture in November estimated farm net income for 2012 at $114 billion, down from a record $117.9 billion in 2011 as the drought devastated crops and forced ranchers to cull herds. That figure will be updated today. Farm expenses are higher, with costs including Monsanto Co. seeds up 5.2 percent in January from a year earlier, according to the USDA. Still, Andrew Beck, chief financial officer of Agco Corp ., maker of Massey Ferguson tractors, said in a conference call last week that farmer profits should be enough to “support healthy demand” for his company’s products. Crop Insurance Farmers last year made up for drought-related crop losses with record insurance payouts. With claims still to be processed, government-subsidized payments from companies including Ace Ltd. and Wells Fargo & Co. for 2012 crop losses have already surpassed $13.6 billion , exceeding the $10.84 billion paid out for 2011, at the time the highest ever, the USDA said Feb. 4. Indemnities may reach $16 billion, then drop to $10.1 billion for this year’s crops, according to a congressional estimate. While the drought is lingering over much of the Great Plains, rains have improved prospects further east, with Illinois, traditionally the second-biggest corn producer after Iowa, free of severe dryness, according to the U.S. Drought Monitor. Still, even in areas where soil moisture has been replenished, the effects of the drought may linger in the minds of some farmers, said Bob Young , chief economist for the American Farm Bureau Federation. Rain Needed “It affects people’s thinking, and there was so much corn planted last year you may see some acres go to other crops simply because of farmers’ rotations,” said Young, who said profits could still top $100 billion this year. Still, many farmers will simply put 2012 behind them, he said. “Corn returns continue to look pretty good,” he said. “It’s all going to come down to spring rains. If we don’t have timely rains, we’ll be in trouble.” Livestock income, the second-biggest source of revenue after crops, may be limited by a need for ranchers to hold onto animals and rebuild cattle herds, said Terry Detrick , who raises cattle, wheat and rye near Enid, Oklahoma, and is president of the Oklahoma Farmers Union. Besides having less to sell, Detrick said his income will be limited this year because wheat he would normally market is being fed to cattle because of a lack of grass. “I bet I haven’t had 2 inches of rain since last June,” said Detrick, 68, in a telephone interview. “It’s going to take two or three years of good rains for things to come back.” Today’s estimates for 2013 will be revised in August, just before major crops are harvested. 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 |
2024-04-15 | Bloomberg | Ignore Long-Term Forecasts Assuming No Medicare Fix | How much should you worry about the level of federal government debt in 2075? The Congressional Budget Office forecasts deficits and debts out that far, and the numbers are eye-popping. According to the CBO, total debt is on a trajectory to reach 700 percent of gross domestic product. The implication, of course, is that we are on an unsustainable path. Either we’ll face some sort of dramatic fiscal disaster or the government’s debts will more gradually become an unbearable burden. Either way, the budget and our political inability to bring it under control will surely derail growth. Or will it? Forecasting is difficult, and looking out 65 years is essentially impossible. Would it have been smart if lawmakers made fiscal decisions in 1940 based on what they thought might happen in 2005? A projection in 1940 might have anticipated the huge fiscal costs of World War II, but probably would have underestimated the strong growth of the postwar period that reduced debt relative to GDP. It almost certainly would have missed the dominant demographic change of that period -- the jump in U.S. births from 20 to 24 per 1,000 in 1946, a rate that remained high until the early 1960s. Other changes with first-order effects on the national debt include a big increase in the female labor force , the creation of Medicare and the rise in life expectancy. Today’s 65-year- olds can expect to live three years longer than those who turned 65 in 1970. Heck, the Red Sox even won the World Series. Zero Weight We should put essentially zero weight on the precise numbers in any 65-year forecast, and we certainly shouldn’t make dramatic or disruptive changes today because some form of straight-line projection implies that health care will eat the economy. There is an undeniable problem with health care, but this is more about the way the entire medical industry operates, not just what the government spends. For example, the main problem with the original approach to Medicare (USBOMDCA) by Representative Paul Ryan , the Wisconsin Republican who is chairman of the House Budget Committee, was flagged by the Congressional Budget Office last year. By shifting costs to individuals, the Ryan plan would actually increase health spending as a percentage of GDP. Ryan has since modified his plan by raising the cap on what the government would pay for seniors’ health care. Unfortunately, the CBO hasn’t assessed the effect this would have on total spending. In my assessment, however, the CBO’s point still holds -- shifting costs to individuals may discourage frivolous purchases but moves the balance of pricing power decisively toward providers and insurers. Health care is a relatively concentrated market. Depending on the locality, either hospitals or insurance companies have significant pricing power. The federal government already pays the health-care costs of about 100 million Americans through Medicare, Medicaid, the veterans’ health system and other programs. Without question, the government could use its market power more effectively and run these programs better. In any case, the average person’s market power is far less than the government’s, giving individuals little control over what they pay. Pooling a large number of people makes it possible to hold down underwriting risk; try insuring five people compared with 5,000. Of course, rising health-care costs are unsustainable, but here’s a bold prediction: We’ll fix it. The International Monetary Fund’s September 2011 fiscal monitor offers a big hint on how to do this. At the back of the report, in the third and fourth columns of Statistical Table 9, the IMF reports on how increases in health-care spending will affect the budgets of industrialized countries and emerging markets. However you look at it, the U.S. is an outlier. Single Payer Every country is different, but all the countries with a grip on future health-care costs have some version of universal health care in a single-payer system. This is often mixed with coverage by private insurers, which aren’t necessarily chased out of business. Doctors earn high wages and other health-care providers still turn a nice profit in many of these systems. Suggestions that the U.S. move to a single-payer system are often met with howls of “death panels” and other dire predictions. All the same, we’ll fix health care along these lines because, otherwise, the private sector will become completely uncompetitive. (I write more extensively in my new book about Medicare.) The people running American businesses talk a great deal about how the U.S. tax system puts companies and their employees at a disadvantage relative to other countries. They make some good points and we should overhaul corporate taxes, preferably as part of a broader set of tax reforms that strengthen the revenue base. In 20 years, any adverse competitive effects of the tax system will likely be swamped by the high costs and other disadvantages of the health-care system. Business leaders have to get a grip on this issue. Let’s start by phasing out the tax exemption for employer-provided health care (and use half the proceeds to reduce payroll taxes). This should help push the U.S. away from fee-for-service and toward a health system that will better serve the private sector and entrepreneurs in a global economy. (Simon Johnson, a professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics, is co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.” The opinions expressed are his own.) Read more opinion online from Bloomberg View. Today’s highlights: The View editors on signs Iraq is veering away from democracy and the National Rifle Association ’s role in encouraging gun sales and use; William D. Cohan on restoring faith in Wall Street as the key to an economic recovery; Kellie McElhaney on how Apple should change its behavior; Albert R. Hunt on Mitt Romney’s potential vice presidential choices ; Vali Nasr on positive developments in Pakistan ; and Iain Begg on redefining Europe ’s social safety net. To contact the writer of this article: Simon Johnson at sjohnson@mit.edu To contact the editor responsible for this article: Paula Dwyer at pdwyer11@bloomberg.net |
2024-10-10 | Bloomberg | Silver-Laden WWI Shipwreck Found by Salvager | Odyssey Marine Exploration Inc. (OMEX) , which last month located a sunken World War II cargo ship laden with silver, said it discovered a shipwreck from World War I that may also contain a consignment of the precious metal. The SS Mantola, a British vessel sunk by a German submarine on Feb. 9, 1917, was located about 100 miles (161 kilometers) from where the SS Gairsoppa was found last month, Tampa, Florida-based Odyssey said today in a statement. The Mantola, sitting 2,500 meters (8,200 feet) below the surface of the North Atlantic, holds about 600,000 ounces of silver, the company said, citing an insurance claim paid out by the British government. Odyssey plans to start salvage operations at both ships in 2012. The search for the Mantola was possible because of an early finish at the Gairsoppa, found 300 miles off Ireland’s coast, keeping costs “low,” the company said. The Gairsoppa holds an estimated 7 million ounces of silver, an amount that would be the largest known precious-metal cargo ever recovered from the sea, Odyssey said Sept. 26. Under salvage contracts with the U.K., Odyssey retains 80 percent of the net silver value recovered. At current prices, the Gairsoppa’s silver is worth about $224 million and Mantola’s is worth about $19 million. Odyssey rose 6.5 percent to $2.80 at the close in New York. Silver futures for immediate delivery in New York climbed 3.6 percent to $32.110 an ounce. To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net |
2024-02-09 | Bloomberg | PepsiCo Unions Seek NLRB Help to Combat Company’s $50 Tax on Fat, Smoking | Teamster union members at PepsiCo (PEP) Inc. in upstate New York are seeking National Labor Relations Board help to fight the company’s health-care policy that charges employees $50 a month when they smoke or have medical issues that may trigger weight gain. Three International Brotherhood of Teamsters locals, representing about 300 drivers, sales agents and warehouse workers in Binghamton, Latham and Syracuse, complained to the labor board in October. PepsiCo is hindering the union’s effort to shop for a health plan without a “sin tax,” said Ozzie Martucci, secretary-treasurer of Teamsters Local 669. “We’re against that type of tax, frankly,” Martucci said yesterday in a phone interview. “It feels wrong to tax workers if they are overweight or happen to have diabetes or smoke, and we wanted to look elsewhere for different insurance.” PepsiCo (PEP) workers can avoid the fee if they join programs to stop smoking or lose weight, said Dave DeCecco, a company spokesman. “These programs enable our associates and their families to live a healthier lifestyle,” he said. The fee is applied to smokers, as well as to workers who have diabetes, hypertension, high blood pressure or asthma, conditions that often lead to being overweight, he said. U.S. companies adding financial incentives and penalties to control workers’ health-care management rose 50 percent from 2009 to 2011, according to a survey of 355 employers by Towers Watson and the National Business Group on Health. The use of penalties may double this year, with 38 percent of respondents saying they plan to punish people who miss targets linked to cholesterol levels or body-mass index, the study showed. Data Dispute The New York Teamsters locals turned to the NLRB, which mediates disputes between employers and workers, after the company refused to turn over gender and age demographics the unions needed to shop for an alternative health plan, violating the labor agreement, Martucci said. The NLRB is reviewing the case. “We have always been willing to provide the unions with as much information as possible,” DeCecco said. “We will collaborate with the NLRB to determine the best way forward, balancing the unions’ desire for information with our need to protect the privacy of our employees.” The NLRB regional office in Buffalo, where the complaint was filed, told PepsiCo it would issue a complaint unless they settled the matter -- a step that is “standard practice” in such cases, Nancy Cleeland , the board’s Washington spokeswoman, said. “Unless there is a settlement, the NLRB will issue a complaint saying it unlawfully withheld the information,” she said. The NLRB is not weighing in on the sin tax. To contact the reporters on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net ; To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net |
2024-03-04 | Bloomberg | Record Food Prices May Persist as Economic Growth Boosts Demand, IMF Says | Record worldwide food prices may remain high because the output response needed to ease supply concerns may take years, the International Monetary Fund said. Increasing incomes in developing countries have boosted demand for meat and dairy, requiring more grain for livestock feed and land for grazing animals, Thomas Helbling, an adviser for the IMF’s research department, and Shaun Roache, an economist, wrote in an article. Rising demand for biofuels and adverse weather also have tightened food supplies, the IMF said. “Over time, supply growth can be expected to respond to higher prices, as it has in previous decades, easing pressure on food markets, but this will take time counted in years, rather than months,” according to the article published yesterday in the agency’s Finance & Development magazine. The global food price index, compiled by the United Nations ’ Food & Agriculture Organization, surged to a record in February as all food groups except sugar rose, the agency said yesterday. Rising food costs and corruption sparked political unrest across North Africa and the Middle East, ousting leaders in Tunisia and Egypt , the largest buyer of wheat. “There’s a risk that the current price spike could persist for longer than the 2007-2008 experience,” Luke Mathews , a commodity strategist at Commonwealth Bank of Australia (CBA) , said in a phone interview from Sydney today. “There are more commodities involved in this current spike and that means it’s going to take longer to rebuild the inventories of all those back up to what we would deem safer levels.” Futures Surge Corn futures in Chicago surged 92 percent in the past year as rising demand for livestock and ethanol in the U.S. pushes the global stocks-to-use ratio to the lowest in 37 years. Wheat jumped 65 percent in the past year after drought last year in Russia and Eastern Europe prompted countries to restrict exports. Dry weather curbed corn output in the U.S., and floods in Asia have restricted rice supplies, the IMF said. Global inventories for all grains will drop 13 percent before the next harvest, the U.S. Department of Agriculture estimates. That’s the first decline since 2007. Surging food prices the following year sparked more than 60 riots from Haiti to Egypt. Increasing demand is causing isolated food shortages and accelerating inflation in developing countries even as it boosts farmers’ incomes and shifts planting strategies. Rice Supply While stockpiles will decline, supplies of rice, the staple food for more than half of the world’s population, may be sufficient to avert a repeat of the 2008 crisis, Abdolreza Abbassian , a senior economist at the FAO, said yesterday. “Probably rice is the commodity which is separating us from a food crisis,” Abbassian said by phone. “I’ve never loved rice more than now.” That may not be the case for long. The price of rice may advance as consumers seek cheaper substitutes for wheat, according to the International Rice Research Institute. “If drought in China continues, that would affect rice lands and could adversely affect rice supplies,” the institute’s Director-General Robert Zeigler said in a Bloomberg Television interview today. Drier-than-normal conditions are expected across the North China Plain through next week, AccuWeather Inc. said in a March 3 forecast. “Rice typically lags behind wheat prices by a few months,” Zeigler said. “As people substitute rice for wheat, that just increases demand” for rice, he said, reiterating comments that he made on Feb. 11. Prices May Drop Rough-rice futures gained 7.22 percent in the past year, trailing the jump in wheat, and almost erasing its premium to the rival cereal. At today’s prices, a ton of rough rice will buy 1.03 tons of wheat, compared with the average 1.3 tons in the past five years, according to Bloomberg data. Global farm prices including wheat, soybeans and sugar may drop from next year as their advance prompts farmers to boost planting, potentially cutting record food costs, the Australian Bureau of Agricultural & Resource Economics & Sciences, a government forecaster, said in a report March 1. The surge in food prices in 2008 was cut short after the global financial crisis pushed the world economy into recession and slowed demand, Mathews said. It will take the same “type of economic calamity” to curb demand for food enough to allow farmers to keep pace with production, he said. Three-quarters of the global growth in demand for major crops in the past decade has been in emerging markets, according to the article. High food costs still have the biggest impact on developing countries , where consumers spend a greater percentage of their incomes on food, the IMF said. Rebuilding Stockpiles Food output will have to climb by 70 percent between 2010 and 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption, the FAO forecast. Producing 1 kilogram (2.2 pounds) of pig meat can take 3.5 kilograms of feed, USDA data show. It will take at least two years of good harvests to rebuild food stockpiles that were drained after drought and excessive rains damaged crops in some of the world’s biggest exporting nations, Dominic Schnider, director for wealth management research at UBS, said March 2. “The world may need to get used to higher food prices,” Helbling and Roache wrote. “Policy makers, particularly in emerging and developing economies, will likely have to continue confronting the challenges posed by food prices that are both higher and more volatile than the world has been used to.” To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net ; Luzi Ann Javier in Singapore at ljavier@bloomberg.net To contact the editors responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net James Poole at jpoole4@bloomberg.net |
2024-07-04 | Bloomberg | Taiwan Jobs Sucked to China by Failure to Mimic Singapore Economic Model | A decade ago, Wu Wen-nan earned $726 a month at a Taiwan factory run by Foxconn Technology Group, maker of Apple Inc.’s iPhones and iPads. Today, he peddles magazines and takes handouts from a charity. “I lost my job after the company moved production lines to China,” said Wu, 47, as he sold copies of “Big Issue” magazine by a Taipei subway stop. Homeless for much of the past year, he’s been unemployed since losing his Foxconn job 10 years ago. “I don’t have the skills needed for the big change.” Wu belongs to a generation of Taiwanese who relied on the island’s success as a manufacturing center, from clothing and Mattel Inc.’s Barbie dolls in the 1960s to computers and HTC Corp. (2498) mobile phones in the past three decades. Policy makers’ slowness in easing investment rules and boosting finance, transport and tourism has hampered the creation of new jobs and restrained income growth. As warmer ties with former civil-war foe China encourage an exodus of factories to the lower-cost mainland, Taiwan’s failure to develop new growth industries has caused it to fall behind Singapore and Hong Kong. That has bolstered opposition claims that the economic embrace with China championed by President Ma Ying-jeou has hurt workers. He is running neck-and-neck with opposition leader Tsai Ing-wen ahead of the January election. “Taiwan has done too little, too late,” said Chu Wan-wen, a research fellow in Taipei at government-funded institute Academia Sinica and author of “Globalization and the Taiwan Economy.” “Taiwan’s competence in the service sector is quite limited because it opened up the sector too late.” Winners, Losers The risks have partly been masked by a rebound in exports since the 2009 global recession, including a surge in shipments to the mainland that helped stimulate one of the world’s fastest expansions last year. Overseas sales are equal to more than two- thirds of the economy of Taiwan, home to the world’s biggest contract makers of semiconductors and laptop computers. While electronics manufacturers including HTC and Foxconn benefit from producing at a lower cost on the mainland and reaching the Chinese market, Taiwanese companies tied to the domestic market, such as retailer Uni-President Enterprises Corp. (1216) , have reported smaller sales gains. Uni-President, Taiwan’s biggest food supplier based in Tainan, posted 18 percent revenue growth in 2010. By contrast, Foxconn’s flagship company, Taipei-based Hon Hai Precision Industry Co., had a 53 percent sales increase. Job Market HTC, which overtook Finland ’s Nokia Oyj this year as the world’s third-largest phone maker by value, reported record profit and sales for the three months ended March 31. The Taoyuan, Taiwan-based smartphone maker said today it posted second-quarter revenue of NT$124.4 billion ($4.3 billion), beating the NT$118.9 billion average of 20 analyst estimates compiled by Bloomberg. The island ended a mainland-investment ban in 1991. Since then, officials have approved 38,685 projects, creating an estimated total of at least 7.7 million jobs in China, data compiled by the Economy Ministry’s Investment Commission show. Foxconn alone employs more than 1 million people in China. By comparison, Taiwan had 2.9 million manufacturing jobs as of May. Taiwan’s unemployment rate of 4.4 percent, while less than half that of the U.S., compares unfavorably to competitor economies. It’s more than twice as high as Singapore ’s and exceeds levels in Hong Kong and South Korea , which along with Taiwan form the International Monetary Fund’s group of newly industrialized economies. Joblessness is about four times higher than a low reached three decades ago, while household income adjusted for inflation was lower in 2010 than in 2000. ‘Structural Problem’ “It’s not a cyclical problem, it’s a structural problem,” said Mark Williams , an economist at Capital Economics Ltd. in London and a former adviser on China to the U.K. Treasury. “A lot of big employers have moved across the Taiwan Strait , and there have not been enough new job creations to offset that.” Manufacturing’s share of gross domestic product fell to 26.3 percent last year from 30.4 percent in 1991. Factory jobs accounted for 27 percent of total employment last year, from 35 percent in 1987. Fixed-asset investment growth on the island averaged 0.06 percent annually in the 10 years through 2010, versus 7.5 percent in the previous decade. While Singapore and Hong Kong have also seen a decline in the importance of manufacturing to their economies, Singapore has lured pharmaceutical and biotechnology investments, and opened two casinos, to spur growth. Hong Kong has attracted China’s biggest companies to list on its stock exchange. English Lacking “The government needs to speed up to shift its economy from low-margin, low-value manufacturing services to high-margin, high-value services,” said Wu Chung-Shu, chief economist at Taipei-based Chinatrust Commercial Bank and a former consultant at the Asian Development Bank. Another competitiveness hurdle is a relative lack of English compared with Hong Kong and Singapore, which were British colonies. Wu, the former Foxconn worker, said “I don’t have a good education, I don’t know English.” “Taiwan isn’t a very internationalized place,” said Scott Chen, an economist at Bank SinoPac in Taipei. “Its English proficiency trails behind that in Hong Kong and Singapore, and when multinationals want to set up their Asia centers, Taiwan is always a low priority.” Stocks to Buy Ma, 60, is trying to stoke growth by allowing more Chinese tourists to visit as he aims for re-election on a platform of improved economic ties with China. Taiwan allowed organized Chinese tour groups to start coming in 2008 and on June 28 let individual travelers from the mainland visit for the first time in more than six decades. The tourism bureau expects visitors from its neighbor to increase about 29 percent this year to as many as 2.1 million. The Taiex Tourist Index, which tracks eight companies, has surged 30 percent in the past year, according to data compiled by Bloomberg. The benchmark Taiex stock index has climbed 20 percent, while the 33-member Other Electronic Industry Index has gained 2.2 percent. “We are expecting the contribution of mainland visitors to Taiwan’s service sector to pick up exponentially,” said Donna Kwok, an economist in Hong Kong at HSBC Holdings Plc., Europe ’s biggest bank. “Not only do we expect them to spend more on retail, but increasingly a future avenue of growth could include mainland visitors spending more in terms of medical services, education services, and other services inside the economy.” Big Neighbor Ma’s opening to the mainland includes reductions in barriers to commerce, with a trade deal signed in June 2010 that will cut tariffs on more than 800 products this year and boost access to services including banking, securities and insurance. China, which views Taiwan as part of its territory, is the island’s closest market. Its population of 1.3 billion dwarfs Taiwan’s 23 million. Relations between the two have historically been strained since the Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong ’s Communists in 1949. The deepening in ties with the mainland hasn’t been universally welcomed. The opposition rallied tens of thousands of people in the capital in June 2010 to protest the Taiwan- China trade accord that took effect this year, saying it will damage the local economy and undermine the island’s autonomy. DPP presidential candidate Tsai, 54, has benefited from the growing dissatisfaction among Taiwanese voters, with the most recent polls showing a statistical dead heat. Ma would get 44 percent of votes to Tsai’s 39 percent, the TVBS survey of 1,158 adults conducted June 16 to 20 showed. It had a 2.9 percentage point margin of error. Fallen Behind A former student at the London School of Economics, where she earned a doctorate in law, Tsai has yet to specify her own economic program or outline how she would boost jobs. “My main concern with Taiwan is that the world has totally changed and their mindset has not changed yet,” said investor Jim Rogers , chairman of Rogers Holdings, adding that he hasn’t invested in Taiwan “in a while.” “Other Asian countries like Singapore have opened up so much more,” he said. “Taiwan, because of its history, while it’s changing dramatically, unbelievably has still not opened its economy fast.” To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net. To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net |
2024-05-13 | Bloomberg | Dodd-Frank Consumer Bureau Changes Approved by U.S. House Panel | Republicans on the House Financial Services Committee advanced three bills today to reshape the Consumer Financial Protection Bureau, turning the tables on Democrats who approved the agency in party-line votes last year. Lawmakers led by Representative Spencer Bachus , the Alabama Republican who leads the panel, are pushing changes to the Dodd- Frank Act, the regulatory overhaul they’ve targeted since taking control of the House in January. The Republicans have proposed about a dozen bills to revise the new rules, which they were nearly unanimous in opposing when Dodd-Frank was passed in July. The three bills approved today are “important pieces of legislation, all of which will promote greater certainty for our economy and job creators,” Bachus said yesterday. After more than 10 hours of debate yesterday over the CFPB measures and a bill to re-authorize the National Flood Insurance Program, Bachus put off until May 24 consideration of an 18- month delay of derivatives rules mandated by Dodd-Frank. The bill would push implementation of rules for the $583 trillion over-the-counter swaps market -- many of them due by July -- to December 2012. The Republican measures, even if they are approved by the full House, are likely to face opposition from the Senate, which remains in Democratic hands, and from President Barack Obama , who initiated the regulatory overhaul in response to the worst financial crisis since the Great Depression. Republican Questions The CFPB, which Obama proposed after financial firms were accused of predatory practices in mortgage and credit-card lending, has faced questions from Bachus and his colleagues over its funding and potential reach. The Republican bills would clamp down on the bureau by replacing its as-yet-unnamed director with a bipartisan, five-member board, delaying its scheduled July 21 start date and making it easier for bank regulators to veto bureau rulemakings. The proposals have been criticized by consumer groups as a way for Republicans to gut the bureau and undermine Elizabeth Warren , the Harvard University law professor serving as an Obama adviser to shape the agency she’s credited with conceiving. “This legislation completely disregards and denies the causes of the regulatory failures that led to the current financial crisis,” a group of consumer groups and labor unions, including the AFL-CIO and the National Community Reinvestment Coalition, said in a May 3 letter to committee members. Necessary Checks Representative Shelley Moore Capito, a West Virginia Republican, said the bills are necessary checks on the power of bureau that will play a large role in financial markets. “Whether we like it or not, the bureau will likely be the financial product regulator for the foreseeable future,” said Capito, who leads the financial institutions subcommittee. Representative Barney Frank of Massachusetts and the committee’s Democrats have attacked the bills as delay tactics aimed at weakening consumer protection. The Democrats offered several amendments to change the measures, including one that would require that the president appoint Warren as the chairman should a commission be installed. “Make no mistake, by expanding the ability for banking regulators to veto the CFPB, I believe that my Republican colleagues are far less concerned about the stability of the banking system, and far more concerned about hurting bank profitability,” Representative Maxine Waters, a California Democrat, said. 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 |
2024-12-01 | Bloomberg | FHA Insurance Fund May Need Fannie-like Bailout, Hensarling Says | The Federal Housing Administration , which backs about a third of U.S. home loans, could require billions of dollars in taxpayer aid if the housing market continues to deteriorate, a Republican lawmaker said. The agency, which provides liquidity by protecting lenders against borrower defaults, could follow in the footsteps of Fannie Mae and Freddie Mac, the mortgage companies that were taken into government conservatorship in 2008, Representative Jeb Hensarling said at a House hearing today. “FHA is a disaster in the making and if we don’t do something it may become the next Fannie and Freddie,” said Hensarling, the fourth-ranking House Republican. “If the FHA was a private financial institution, likely someone would be fired or fined and the institution would find itself in receivership.” Hensarling made his remarks during a hearing by the House Financial Services Committee, where lawmakers questioned Obama Administration officials about a report that showed the FHA’s insurance fund could run out of money if home prices continue to fall. Housing and Urban Development Secretary Shaun Donovan acknowledged risks facing the FHA, which is a part of his agency. “We have significant concerns about the level of the fund,” Donovan told the committee. He also said the agency’s condition “is remarkably resilient in the wake of the extraordinary turmoil in the housing market.” Chance of Failure Last month, House and Senate lawmakers increased the maximum size of FHA-insured loans to $729,750 from $625,500, a move opposed by Hensarling and other Republican leaders. For the first time in history, loan limits are higher at FHA than at Fannie Mae and Freddie Mac (FMCC) , Donovan said, which could cause more homebuyers to seek FHA loans. The limits “need to come down,” he told the committee. The FHA’s insurance fund is fed from premiums paid by borrowers. Last month, an independent actuarial analysis concluded that the net worth of the fund stood a 50 percent chance of falling to zero or near zero, which could force it to seek taxpayer support for the first time. The agency’s capital ratio, a measure of the FHA’s Mutual Mortgage Insurance fund’s ability to withstand losses, fell to 0.24 percent from 0.50 percent a year earlier and 3 percent in 2008. The FHA has failed to meet the legal minimum 2 percent ratio for three straight years. For the year ended Sept. 30, the fund held $33.7 billion, up $400 million from a year earlier. Growing Share The FHA has increased its share of the mortgage market in the wake of the 2008 credit crisis as private funding for mortgages has dried up. To boost reserves, it raised its insurance premiums to their highest ever and improved the quality of its loans by holding borrowers and lenders to higher standards. If the mortgage fund can’t cover losses on loans, a 1990 law gives the agency “permanent and indefinite” funding from the Treasury to cover outstanding loan guarantees, Donovan said. Fannie Mae and Freddie Mac , the companies that own or guarantee more than half of U.S. home loans, have drawn more than $170 billion from a U.S. Treasury Department lifeline since they were seized by regulators in September 2008. 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 . |
2024-03-10 | Bloomberg | Wisconsin Assembly Sends Union Bill to Governor Amid Protests | The Wisconsin Assembly voted to give final passage to a bill curbing collective bargaining for most government workers that was stalled for weeks when Democratic senators fled to Illinois to prevent a quorum. The measure, which exempts police and firemen, limits bargaining to wages, not benefits or working conditions. Unions would be subject to recertification votes every year, requiring 51 percent of members, not just those voting. Automatic withdrawals to pay union dues would be prohibited. Governor Scott Walker , a 43-year-old first-term Republican, said the measure would generate $30 million in savings this fiscal year and $300 million in the next two years. The bill calls for workers to pay more toward pensions and health insurance. He said he will sign the measure as soon as he is able. “Walker has chosen to take on the people who teach our kids to read, who plow our roads during blizzards, who help the sick and infirm live with dignity and who rush into burning buildings,” Karen Hickey, a Wisconsin AFL-CIO spokeswoman, said in a statement before vote. “None of these are people who give up easily.” To contact the reporter on this story: Tim Jones in Madison at tjones58@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-02-11 | Bloomberg | Court Dismisses Larry Hagman's Ruling Over Citigroup | Citigroup Inc ., the third-largest U.S. bank by assets, won’t have to pay almost $12 million in damages in a case involving actor Larry Hagman after a California court dismissed an arbitration ruling. Judge Michelle R. Rosenblatt in Los Angeles on Feb. 9 vacated the Financial Industry Regulatory Authority arbitration board’s decision because one of the arbitrators didn’t disclose he had been involved in a similar lawsuit in 2007, according to court filings. The Finra case was filed in May 2009 and involved the mishandling of investment accounts of Hagman and his wife. The board ruled in October that New York-based Citigroup must pay $1.1 million in compensatory damages and donate $10 million of punitive damages to charities chosen by Hagman, 79. The bank was also told to pay Hagman, who played the oil tycoon J.R. Ewing in the 1980s television show Dallas ,” about $460,000 for attorney fees and other costs. “We think the result is absurd, and feel very comfortable that the appellate court will reverse it,” Philip Aidikoff, a lawyer for Hagman at Aidikoff, Uhl & Bakhtiari, said in an interview. He said he plans to file an appeal “immediately.” “We’re pleased with the court’s decision,” said Alexander Samuelson , a Citigroup spokesman. Peter Steinbroner, a member of the arbitration board, and his wife had petitioned in bankruptcy court against an investment partner who had allegedly breached his fiduciary duty and caused substantial losses in the Steinbroner’s retirement funds, according to the court filing. Steinbroner said in a Finra form that he hadn’t been involved in a dispute involving the same subject matter in the last five years, the filing said. Hagman’s case involved the breach of fiduciary duty resulting in losses of $1.35 million. Asset Allocation Steinbroner’s 2007 dispute “didn’t involve the securities industry, didn’t involve asset allocation, which is what this case is about,” Aidikoff said. The Finra case was against the Smith Barney brokerage, which was held within Citigroup Global Markets before Morgan Stanley purchased a controlling stake in a joint venture with Smith Barney last year. A Smith Barney broker, Lisa Detanna, put Hagman and his wife, Maj, now 82, into a life insurance policy with annual premiums of $168,000, according to the Finra statement of claim. The Hagmans also told Detanna in 2005 that they needed income- producing investments that would protect their principal, according to the claim. By June 2008, their accounts were about 69 percent invested in equities. The arbitration board said it enforces punitive damages under its authority if a company “has engaged in serious misconduct,” according to the ruling. The board didn’t provide a reason for its decision. Hagman has appeared in movies and television shows for more than 50 years, according to the website IMDB.com. He played Anthony Nelson in the TV show “I Dream of Jeannie” and was nominated for two Emmy awards and four Golden Globes for his role in “Dallas.” To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net. To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net . |
2024-09-07 | Bloomberg | Protest Not Policy in India Parliament as Coal Fuels Logjam | India ’s parliament session ended today with deadlock between the government and opposition over coal contracts unresolved and Prime Minister Manmohan Singh ’s legislative agenda in tatters. The monthlong sitting passed just four of 30 bills lined up for approval by the Congress party-led administration, making it the least productive in 17 months. Protests over the mining awards wiped out the last 13 days of the session, heightening political polarization that has taken its toll on an economy growing at near its slowest pace in three years. “The government has completely stopped working,” said Laveesh Bhandari, director of Indicus Analytics Pvt. Ltd., an economics research firm in New Delhi. “The two most powerful people in Congress -- Sonia and Rahul Gandhi -- have refused to take things head on,” exacerbating the sense of drift, he said. The main opposition Bharatiya Janata Party is demanding Singh resign and the cancellation of coal block permits after the nation’s chief auditor said a decision not to auction the assets may have lost the government $33 billion. Federal investigators have charged five companies with providing false information to obtain licenses in an echo of an allegedly corrupt 2008 mobile-phone scandal that still plagues Singh, 79. The government described the auditor’s coal findings as “flawed,” saying it adopted a transparent process that aimed to attract investment and keep the prices of electricity low. Graft probes, revolts by coalition allies unwilling to back plans to lift curbs on foreign investment in retail, insurance and pensions and opposition protests in parliament have plunged the government into almost two years of firefighting. Plunging Popularity An opinion poll last month by Nielsen and the India Today magazine said Singh’s alliance may lose nearly one third of its parliamentary seats if an election were held now and would most likely be ousted from power. While Congress has 18 months to go before it must face the electorate in a nationwide ballot, state polls in Gujarat and Himachal Pradesh are due by December. Eight provincial elections will be held next year. Singh and Finance Minister Palaniappan Chidambaram are under pressure to boost the economy as elevated inflation saps growth and political gridlock deters investment, with a weak monsoon and a slump in the rupee further dimming the outlook. Inflation, stoked by food costs, has exceeded 7 percent for most of 2012. The Reserve Bank of India in July raised its inflation forecast for the year ending March 31 to 7 percent from 6.5 percent, and reduced its GDP growth estimate to 6.5 percent from 7.3 percent. ‘Hyenas Gather’ Standard & Poor’s and Fitch Ratings have cited risks such as the fiscal deficit in warning they may strip Asia ’s third- largest economy of its investment-grade credit rating. Failure to resolve the impasse in parliament has sidelined proposals to change rules on how companies, including steelmakers such as South Korea ’s Posco and ArcelorMittal (MT) , acquire land for projects. Investment plans have been stalled by farmers’ protests demanding greater compensation. “When the buffalo is wounded the hyenas gather and that is exactly what is happening,” said Prem Shankar Jha, an independent political analyst in New Delhi. “The BJP is trying to force this government, thinking if it has an early election they will capitalize on it.” Only 30 percent of the parliament session that started Aug. 8 was spent on debates or legislation, according to the New Delhi-based PRS Legislative Research think-tank. Mockery Singh said the BJP’s disruption was making a mockery of India’s parliamentary democracy. “Those who prevent parliament from functioning disable the voice of the people,” Singh said in a statement in New Delhi today. “I urge all right minded Indians to stand up and unite against the forces of anarchy and disruption.” Mukhtar Abbas Naqvi, a leader of the BJP, said the party would take its protests against what he called an arrogant and corrupt administration to the streets. Congress President Sonia Gandhi has accused its principal rival of “blackmail” and holding parliament to ransom. “Let us stand up and fight, fight with a sense of purpose and fight aggressively,” she told party lawmakers Aug. 28. Renewed speculation that Gandhi’s son, Rahul, may finally accept Singh’s repeated invitations to join the government have prompted expectations of a cabinet reshuffle. To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net ; Andrew Macaskill in New Delhi at amacaskill@bloomberg.net To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net ; Peter Hirschberg at phirschberg@bloomberg.net |
2024-05-06 | Bloomberg | Unemployment Benefit Cut Adds to Drag on U.S. Spending: Economy | Dentral Smith had to say no when her granddaughter asked for a treat on the way home from school. The government’s cut in unemployment payments leaves her with less spending money. “It was a setback,” said Smith, a 45-year-old Philadelphian who has been out of work since November. “My granddaughter, she said ‘Nanna, you’ve got your wallet.’ And I said, ‘Yeah, there’s nothing in it.’” Federally funded benefits paid to the long-term unemployed were lowered by 10.7 percent starting March 31 as part of reductions to planned government spending called sequestration. Benefit cuts will affect about 1.8 million workers, based on Labor Department data , and add to the drag on consumer spending from a payroll tax increase that took effect in January. The reductions will shave about $2.4 billion from the unemployment trust fund this fiscal year, according to an Office of Management and Budget report. While that’s not enough to have a measurable impact on $11 trillion in annual consumer spending nationwide, the effect will be magnified in places with large numbers of long-term unemployed and in states with generous programs, such as Hawaii. “The impact is going to be felt more severely in states that pay adequate benefits,” said Maurice Emsellem, policy co- director at the New York-based National Employment Law Project , which advocates for issues including economic security for low- wage workers and the unemployed. The cuts will mean “there is less money circulating in the economy. Folks spend every dime of their benefit.” Highest Stakes States with the most at stake include Alaska , California , Connecticut, Michigan and New Jersey , all with 2 percent or more of their labor forces on long-term benefit, according to a Pew Charitable Trusts analysis. Those five states together accounted for $2.75 trillion in gross domestic product in 2011, or 21 percent of the U.S. total, according to data compiled by Bloomberg. Pennsylvania , with 1.8 percent of its workforce receiving extended benefits, has already started sending smaller checks to people like Smith. Administrative issues are stalling implementation of the cuts in most other states. Consumers are also feeling the pinch of a higher payroll tax rate after the levy that funds Social Security reverted in January to its 2010 level of 6.2 percent from 4.2 percent. For households earning $50,000 a year, that translates to about $80 less a month in disposable income. Consumer Spending That’s taking a toll on the consumer spending that accounts for about 70 percent of the economy. Personal spending cooled in March after the strongest gain in five months, Commerce Department data showed. Purchases advanced 0.2 percent compared with a 0.7 percent increase in the prior month. Mark Zandi , chief economist at Moody’s Analytics in West Chester , Pennsylvania, said because households quickly spend their benefits checks, the multiplier effect that money has on GDP one year after a policy change is around 1.5. Because of that, cuts to unemployment insurance have a larger impact on the economy than the official dollar loss suggests. “If you cut unemployment insurance, then the economic impact is outsized,” Zandi said. “This is not a lot of money in the great scheme of things. When you combine it with all of the other cuts and the higher taxes, it’s going to have an impact.” Fed’s Statement The Federal Reserve said May 1 that fiscal policy has been restraining U.S. economic growth and said it is prepared to increase purchases of securities if necessary to stimulate job creation. So far, investors have signaled little concern that sequestration will be a drag on growth. Stock indexes are near record highs, with the Dow Jones Industrial Average crossing 15,000 for the first time last week, while the Standard & Poor’s 500 (SPX) Index closed above 1,600, also a first, on May 3. The U.S. dollar index is up 3 percent for the year. Stocks were little changed today in the U.S. In Europe , reports today showed euro-area services and manufacturing output shrank for a 15th straight month in April and retail sales fell in March as the 17-nation economy struggled to emerge from recession. The sequestration cuts affect federally funded benefits, known as Emergency Unemployment Compensation , that kick in for people out of work more than 26 weeks, when state benefits typically run out. About 15 percent of unemployed workers receive fully federally funded benefits, according to the Pew study. Economic Downturn The EUC program was enacted in 2008 as unemployment was rising amid the deepest economic downturn since the Great Depression. Congress has renewed it since, most recently extending it through 2013. Americans can now receive 14 to 47 additional weeks of emergency benefits, with duration tied to state unemployment levels. The amount an individual is paid depends on prior earnings, length of employment and state policies. Consumption in states with higher payments will take a greater hit from reduced emergency benefits, Emsellem said. In Hawaii, for instance, benefits average $10.76 per hour assuming a 40-hour week, according to data compiled by Bloomberg. In Alabama , average pay is $5.11 hourly. Lower-Paying Jobs Unemployment insurance reductions could also force people to settle for lower-paying jobs rather than holding out for perfect positions. While that could help lower the jobless rate , which stood at 7.5 percent in April, it also can leave valuable job skills to atrophy. The U.S. economy added 165,000 jobs in April, up from 138,000 in March, the Labor Department reported last week. Still, 11.7 million Americans were jobless in April, compared with 6.8 million in May 2007, before the last recession began. The number of long-term unemployed, or those out of work for 27 weeks or more, declined by 258,000 to 4.4 million in April. The group accounts for 37 percent of unemployed workers, Labor Department figures show. People try harder to find jobs when benefit payments are smaller, studies have shown. A 2008 analysis by Alan Krueger, now chairman of President Barack Obama ’s Council of Economic Advisers , and Andreas Mueller, then a Stockholm University economist, found that “across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits .” Desperation’s Impact John Dodds, who works with job seekers at the nonprofit Philadelphia Unemployment Project , said benefit reductions could cause some of the long-term unemployed using his service to settle for low-paying jobs more easily. That’s not ideal, he said. “It’s not like people can afford to work at minimum wage, but at some point desperation sets in,” he said. “It’s better if people use the skills they’ve been trained for.” In any case there aren’t enough openings in Philadelphia for everyone who needs a job, Dodds said. Philadelphia County’s unemployment rate hung at 10.6 percent at the end of 2012. In California, the reductions will affect about 400,000 people , and because their implementation was delayed until April 28, benefit cuts will total a steeper 18 percent for the rest of fiscal 2013. That will mean about $54 less from the average $298.87 weekly unemployment allotment in California, according to Bloomberg calculations based on U.S. Labor Department data. Smith, the jobless grandmother, said while the cuts to her benefits are spurring her to watch her spending, she isn’t settling for a job yet. Living with her pregnant daughter, she benefits from a temporary cushion because she pays no rent. “I’m not as selective, but I am selective,” she said. “It’s kind of hit me hard. It’s a whole lot gone.” To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-03-30 | Bloomberg | SEC Votes to Seek Comment on Dodd-Frank Risk-Retention Rule | The U.S. Securities and Exchange Commission voted to seek comment on a Dodd-Frank Act measure that would require lenders and bond issuers to keep a 5 percent stake in loans they package for sale to investors. The proposal, part of a joint rulemaking with five other federal regulators, was approved by SEC commissioners in a 5-0 vote at a meeting today. The Federal Deposit Insurance Corp. and the Federal Reserve released the rule for comment yesterday. Lawmakers put the risk-retention provision in Dodd-Frank, the regulatory overhaul enacted last year, aiming to eliminate weak underwriting practices and risk-based incentives blamed for fueling the subprime mortgage crisis. The proposal includes exemptions for some business, auto, real estate and home loans. In addition to the SEC, FDIC and the Fed, the Department of Housing and Urban Development, Federal Housing Finance Agency , and the Office of the Comptroller of the Currency also need to approve the rule before it is formally passed. The SEC’s public comment period on the proposed rule will last through June 10, the agency said. To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net . |
2024-04-29 | Bloomberg | Don’t Buy the Slippery-Slope Argument on Guns | In 1991, the economist Albert Hirschman published a biting, funny and subversive book, “The Rhetoric of Reaction,” whose principal goal was to provide a kind of reader’s guide to conservative objections to social reform. Hirschman wanted to demonstrate that such objections are pervasive, mechanical, routinized and often unconvincing. Hirschman used the words “perversity” and “futility” to describe his best examples of reactionary rhetoric. Conservatives often object that reforms will turn out to be perverse, because they will have the opposite of their intended effect. For example, those who oppose increases in the minimum wage contend that such increases will worsen unemployment and thus hurt the very people they are intended to help -- a clear example of perversity. Alternatively, conservatives argue that reforms will do nothing to solve the problem that they purport to address. For example, those who oppose gun-control legislation contend that such laws will fail to decrease gun-related deaths -- a clear example of futility. Hirschman agreed that such arguments are sometimes right, and he emphasized that progressives have routine rhetorical moves of their own. But his primary goal was to try to inoculate people against arguments that, while seemingly forceful, come out of a kind of reactionary’s playbook, and that shouldn’t be accepted until we have scrutinized them. Pernicious Argument Illuminating though it is, Hirschman’s account misses an especially pernicious example of the rhetoric of reaction: the slippery-slope argument. According to that argument, we should reject Reform A, which is admittedly not so terrible, because it would inevitably put us on a slippery slope to Reform B, which is really bad. Examples are all around us. The federal government shouldn’t require background checks for gun purchasers because, if it does, it will be on the path toward banning gun ownership. The Supreme Court shouldn’t force states to recognize same-sex marriages because, if it does, it will have to require states to recognize polygamous marriages. Barack Obama ’s administration shouldn’t intervene in Libya because, if it does, it will turn the U.S. into the globe’s policeman, intervening whenever it likes. The government shouldn’t require people to buy health insurance because if it does, it will eventually require people to exercise and buy broccoli. The problem with slippery-slope contentions is that despite their occasional rhetorical force, they are often silly. To appreciate the problem, it is important to see that these arguments come in two quite different forms. Some versions are purely logical. The claim is that if you undertake Reform A, you are logically committed to Reform B, as well. Other versions aren’t logical but empirical. The claim is that if you undertake Reform A, you will probably end up undertaking Reform B, as well, not because of logic but because of the likely unfolding of events. As a matter of logic, slippery-slope arguments can be convincing. If you say you oppose racial segregation in public schools in New York , you are almost certainly committed to opposing racial segregation in public schools in Los Angeles. In many cases, however, your support for Reform A doesn’t commit you to support Reform B. Those who believe that government shouldn’t discriminate against gay men and lesbians, and thus should allow same-sex marriages , needn’t think that the right to marry should be extended to polygamous couples. If you favor background checks for gun purchasers, you can also believe that the Second Amendment provides firm protection for the right to own guns. Lazy Logic When they claim logical necessity, slippery-slope arguments can be lazy. Reform B is often a lot different from Reform A, and with a little work, the difference is easy to identify. Empirical slippery-slope positions aren’t self-evidently wrong. If the government requires background checks before people can buy guns, maybe it will be more willing to consider other restrictions on gun ownership. Maybe a humanitarian intervention in Libya will make the U.S. more likely to undertake other humanitarian interventions. But the opposite could easily be true. After requiring background checks, the government may be more reluctant to impose other restrictions on gun ownership. One humanitarian intervention may well decrease the national appetite for other humanitarian interventions. When opponents argue against Reform A by saying it will lead to Reform B, it is often best to assume that the slippery- slope argument is merely a rhetorical move. It isn’t the real reason they oppose Reform A. When they point to the supposedly slippery slope, it is only because they know a lot of their fellow citizens favor Reform A -- so they try to scare them by changing the subject and talking about Reform B instead. (Progressives, and not only conservatives, like to exploit this strategy.) As the date of publication approached, Hirschman tried to change the title of his book from “The Rhetoric of Reaction” to “The Rhetoric of Intransigence.” His publisher dissuaded him, arguing that book buyers wouldn’t be attracted to the word “intransigence.” Fair enough, but it’s a good word. Slippery- slope arguments usually reflect intransigence. Let’s not be fooled by them. (Cass R. Sunstein, the Robert Walmsley University Professor at Harvard Law School , is a Bloomberg View columnist. He is the former administrator of the White House Office of Information and Regulatory Affairs, the co-author of “Nudge” and author of “Simpler: The Future of Government.” The opinions expressed are his own.) To contact the writer of this article: Cass R. Sunstein at csunstei@law.harvard.edu. To contact the editor responsible for this article: Katy Roberts at kroberts29@bloomberg.net . |
2024-07-02 | Bloomberg | Solvency II Needs to Reflect European Bond Risks, Pimco Says | New rules for insurers in Europe need to better reflect risks of holding European government bonds , according to Pacific Investment Management Co., which manages the world’s largest bond fund. “We expect that the Solvency II rule, under which all government bonds within the European Economic Area are regarded as risk-free, will be adjusted before the end of this year,” Matthieu Louanges, head of European insurance asset management at Pimco in Munich, said in an interview. “We would expect a differentiation using country ratings, for example.” European regulators plan to impose common capital standards for insurers in Europe through rules known as Solvency II from next year , with full application coming in 2014. The rules require insurers not to set aside any capital for holdings of sovereign debt from countries within the European Economic Area, which includes the 27 members of the European Union as well as Iceland, Liechtenstein and Norway. “The haircut on Greek bonds was the final evidence that this zero- capital rule has to be adjusted,” Louanges said. Pimco expects Solvency II to be modified to take account of conditions in individual countries, so that Italian insurers could hold Italian bonds at lower capital requirements than their German counterparts, he said. ‘Re-localization’ “A re-localization of insurers’ government bond investments is happening already, and local government bonds have always been the preferred benchmark for insurers,” Louanges said. He helps manage more than 200 billion euros ($252 billion) in assets for European insurers at Newport Beach , California-based Pimco. Pimco, a unit of Munich-based Allianz SE (ALV) , Europe’s biggest insurer, has seen “tremendous growth” in mandates to manage assets on behalf of other insurers, especially in Switzerland , France , Italy and the U.K., Louanges said. While the majority of funds at Pimco’s insurance asset- management unit in Europe still come from Allianz, the third-party business is growing at a rate of around 20 percent, he said. “European insurers in general are under increasing pressure because of the low interest-rate environment, and as their book reserves on fixed-income securities and equities are much lower than in the past,” Louanges said. “After a period of redistribution of the investment risks out of the periphery into the core of Europe, we have seen a trend to diversify the investments outside the euro zone , in global corporate bonds or emerging markets .” ‘Clear Picture’ Louanges said he expects to get “a clear picture of how Solvency II will look” by the end of the year. The Solvency II rules are being developed by the European Commission and the Frankfurt-based European Insurance and Occupational Pensions Authority, or Eiopa , along with local regulators. One point of discussion within the EU is a phasing in of the new capital rules for life insurers over seven years under a proposal made by Burkhard Balz, a German member of the European Parliament who is steering the legislation. “This would be extremely difficult to implement, as insurers would have to separate old contracts from new ones in their portfolios,” Louanges said. Solvency capital ratios of European insurers “started to slightly decrease” this year because of the low interest rates , Frankfurt-based insurance watchdog Eiopa said in its Financial Stability Report published on June 11. Increasing pressure on insurers in Europe may also lead to more consolidation as some companies boost their capital ratios by selling some non-core businesses, Louanges said. Allianz agreed on June 8 to acquire the property and casualty assets belonging to Groupama SA’s Gan Eurocourtage industrial insurance unit for slightly more than 100 million euros. The Paris-based insurer is scaling back some businesses after it swung to a loss last year on Greek debt writedowns. To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net |
2024-09-21 | Bloomberg | Principal Bets on Commercial Property as Bond Yields Fall | Principal Financial Group Inc. (PFG) , the seller of life insurance and retirement products, said it’s turning to real estate to increase investment income as near record-low yields pressure returns from bonds. “The debt market is very strong, the equity market is growing” in commercial property, Chief Investment Officer Julia Lawler said in a presentation to investors today. “The fundamentals continue to improve, largely because there’s a lot of supply constraints.” Principal expanded its commercial mortgage-loan portfolio to $9.2 billion as of June 30 from $8.8 billion six months earlier. The loans are about 14 percent of the Des Moines, Iowa- based company’s invested assets. Insurers are seeking alternatives to bonds after the Federal Reserve vowed to maintain interest rates near record lows to stimulate the U.S. economy. The yield on the 10-year Treasury has dropped to 1.75 percent from 3.29 percent at the end of 2010. Lower interest rates may decrease operating earnings by as much as $70 million, based on the third-quarter review of actuarial assumptions, the company said today in a regulatory filing. The insurer slipped 1.4 percent to $27.92 at 4 p.m. in New York trading, cutting its gain this year to 14 percent. The Equal-Weighted U.S. Composite Index of commercial property increased 5.9 percent in July from a year earlier as a smaller ratio of sales were distressed, CoStar Group Inc. said last week. Relative yields on senior top-rated securities backed by commercial mortgages fell 1.77 percentage points in the past year to 1.19 percentage points more than Treasuries, according to a Barclays Plc index. ‘Great Performer’ Lawler said her firm has profited by acquiring real estate and attracting new tenants. “We opportunistically buy distressed properties, lease them up and sell them,” she said. “It’s been a great performer for us.” Principal is also looking to emerging-market debt to boost returns, she said. Dollar-denominated emerging market government bonds pay 2.94 percentage points more than U.S. Treasuries, according to JPMorgan Chase & Co.’s EMBI Global Index. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Susanna Pak in New York at Spak10@bloomberg.net ; To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-27 | Bloomberg | Payroll Tax Cut Heads for Lapse as Lawmakers Doubt Policy | Four months after reaching a bipartisan agreement to extend a payroll tax cut through 2012, U.S. lawmakers and President Barack Obama are showing little fervor for continuing the break, which puts about $1,000 a year in an average worker’s pocket. House Republicans don’t plan to include it in a bill they want to pass next month that would extend Bush-era income tax breaks expiring at the end of the year. In his speeches, Obama praises the payroll provision without proposing to keep it. “I doubt that there is any enthusiasm for taking that issue up prior to the end of the year,” said Representative Tom Price of Georgia, chairman of the Republican Policy Committee. The collective shrug for a policy designed to encourage consumer spending and growth comes even as the U.S. economy shows signs of continuing weakness. The unemployment rate has declined by 0.1 percentage point since February and gross domestic product increased by 1.9 percent in the first quarter. Democrats and Republicans have similar -- and differing -- reasons for their reluctance. Leaders in both parties worry that the payroll tax cut could eventually undermine the Social Security trust fund. Republicans say the tax break hasn’t done much good. Money in Pocket “I’m all about making sure people have more money in their pocket,” said Representative Patrick Tiberi, an Ohio Republican on the Ways and Means Committee. Still, he said, “no one has shown anybody that the payroll tax has helped the economy.” House Republicans say they will vote in July to extend all of the expiring tax cuts first enacted in 2001 and 2003, preventing a year-end increase in tax rates for income, capital gains , dividends and estates. Those rates, Tiberi said, are the ones constituents mention to him when they cite uncertain tax policy as a reason for delaying investment decisions. Obama rallied public support and put pressure on Congress to extend the payroll tax cut through 2012. He sometimes mentions the law during speeches, taking credit for it. Still, he hasn’t sought another extension, ruled one out or explained what should happen to the provision at the end of 2012. Temporary Measure “The payroll tax cut was intended to be a temporary measure to give middle class families relief during these difficult economic times,” Amy Brundage , a White House spokeswoman, said in an e-mailed statement. She added that the administration has proposed other tax policies to benefit those workers, including extensions of the current income tax rates for all but the highest earners and expanded tax credits for low-income workers and families with children. Though the tax cut didn’t lead to economic growth, letting it lapse would hurt the taxpayers who are benefiting, said J.D. Foster, a senior fellow at the Heritage Foundation , a Washington organization that favors limited government. He said Obama was correct when he said that early 2012 was a terrible time to raise taxes. “If Republicans are paying attention, they’re going to realize that all of those families, a lot of them, vote,” Foster said. “And they might want to think about not raising taxes on middle-class families.” The tax, dedicated to Social Security, applies only to the first $110,100 of wages in 2012. The U.S. kept Social Security’s trust fund whole by borrowing from the general fund, which runs a deficit. ATM Machine Some Democrats may be reluctant to support payroll-tax cut extensions because of concerns about using the tax dedicated to Social Security as “kind of an ATM machine,” said Representative Jan Schakowsky , an Illinois Democrat who is a co- chairwoman of Obama’s presidential campaign. “There are some who worry that if they were to become a permanent fixture, that could damage the Social Security trust fund,” Schakowsky told reporters and editors at a Bloomberg Government luncheon yesterday. Congress first passed the payroll tax cut in December 2010, as part of a deal between Obama and Republicans that extended expiring income tax cuts. Employees now pay 4.2 percent of their wages, instead of the usual 6.2 percent, meaning that a worker making $50,000 a year who is paid twice a month saves $41.67 in every paycheck. Under Pressure Democrats and Republicans sparred over the payroll tax cut at the end of 2011 and beginning of 2012. Republicans initially paired a one-year extension with spending cuts and then relented under pressure from Obama for a deficit-financed break. “Allowing this tax cut to expire would make people’s lives harder right now,” Obama said Feb. 14 in urging Congress to pass the year-long extension. “It would make their choices more difficult.” The final bill passed the House 293-132 and the Senate 60-36, including support from a majority of House Republicans. The expiration of the payroll tax cut represents more than 15 percent of the so-called fiscal cliff facing at the end of 2012. The combination of scheduled spending cuts and tax increases would probably push the economy into recession if Congress doesn’t alter some of those policies, according to the Congressional Budget Office. Senator Max Baucus , chairman of the Senate Finance Committee, said he thought the payroll tax cut helped the economy. He didn’t commit to seeking an extension. “Everything’s on the table,” said Baucus, a Montana Democrat. “It all depends on all the various provisions and tradeoffs.” Economic Weakness Because the case for the payroll-tax cut was based on economic weakness, Democratic calls for an extension could also indicate continued sluggishness as Obama seeks re-election. Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee, said Republican action or inaction between now and the end of the year will determine whether the payroll tax cut is necessary. “It is up to Republicans in Congress to move to help economic growth now,” he said in an e-mailed statement. Republicans make two main arguments against extending the payroll tax cut. They say it doesn’t work and that it undermines Social Security. “It’s always good when you let people keep more of their hard-earned money,” said Representative Geoff Davis, a Kentucky Republican. “But the bigger question is the damage done to the long-term solvency of Social Security.” Divided on Effect Economists are divided over the effects of the payroll tax cut. The tax cut “essentially evaporated” when it first took effect in 2011, said Dean Maki , chief U.S. economist at Barclays Plc in New York. The benefits, he said, were outweighed by higher income-tax bills, rising gasoline prices and the expiration of a tax credit more targeted at low-income workers that had been part of the 2009 stimulus law. “It didn’t provide as much of a boost to economic activity as many expected,” Maki said. In a CBO analysis of policy options for economic growth, payroll tax cuts ranked ahead of business tax cuts and infrastructure spending and behind aid to unemployed workers. CBO estimates that every dollar in payroll tax cuts raises the gross domestic product by 16 cents to one dollar. The payroll-tax cut puts money directly in the hands of consumers who are likely to spend it, said Ethan Pollack, a senior policy analyst at the Economic Policy Institute , a Washington group that favors ideas that benefit low- and middle- income workers. Consumer Spending “In the short run, we want additional consumer spending because that will create jobs and get the economy back on track,” said Pollack, who said he would prefer more aid to states and expanded unemployment insurance, both of which are more politically difficult. “If the question is, is it better to have the payroll-tax holiday or nothing, I would say it’s better to have it.” Maintaining that the payroll tax cut reduces the balance of money in the Social Security trust fund is bogus, Foster said, because of the general fund transfers. Republicans also sometimes argue that financing Social Security from the general fund damages the conceptual link between the tax and benefit sides of the program. “Your hurt the integrity of the system when you are replacing that money with general fund money,” Tiberi said. Representative Bill Pascrell, a New Jersey Democrat, said he wants to extend the payroll tax cut and expand it to employers, as Obama proposed last year. Like employees, employers typically pay 6.2 percent of wages toward Social Security; that rate hasn’t changed. Expanding the payroll tax cut is better, Pascrell said, than extending income tax cuts for high earners. Foster, of the Heritage Foundation, said Congress should wait to let the payroll-tax cut expire until the economy has recovered and lawmakers start overhauling the tax code. “This becomes a driver for tax reform ,” he said. “And this becomes part of the mix.” 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 |
2024-02-26 | Bloomberg | Gold’s Cycle Seen Turned by Goldman Sachs as ETP Holdings Drop | The cycle for gold prices, which climbed for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal. The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800. Goldman reversed an assumption exchange-traded products holdings will expand in 2013, analysts Damien Courvalin and Jeffrey Currie wrote in a Feb. 25 report. Gold has dropped 5.1 percent this year as economic data improved, equities advanced and some U.S. central bankers sought more flexibility in their stimulus program. An inevitable unwind of gold’s 12-year bull market has begun, Credit Suisse Group AG said in a Feb. 21 report. ETP holdings are poised for the biggest monthly decline since January 2011. “The turn in the gold cycle has likely already started,” the Goldman analysts wrote in the report, after predicting an end of gold’s bull run in a Dec. 5 note. “The latest collapse in gold ETF holdings stands in sharp contrast to our assumption that ETF positions were likely driven by longer-term allocation rather than short-term trading.” Gold futures for April delivery rose 0.2 percent to $1,589.40 an ounce on the Comex at 10:30 a.m. in New York. Prices are poised for a fifth monthly drop in what would be the worst run since 1997. Holdings in ETPs, also known as exchange- traded funds, fell to a five-month low of 2,536.289 metric tons yesterday and have shrunk 2.9 percent this month, data compiled by Bloomberg show. Soros Sells Billionaire investors George Soros and Louis Moore Bacon cut their stakes in gold ETPs last quarter, while John Paulson maintained his share, government filings showed this month. Global holdings reached a record 2,632.5161 tons on Dec. 20. Gold futures fell to $1,554.30 on Feb. 21, the lowest since June 29, after minutes from the U.S. Federal Reserve’s January meeting showed debate over the pace of asset purchases. Chairman Ben S. Bernanke is due to testify before U.S. lawmakers today and tomorrow as the central bank buys $85 billion of assets a month in a third round of so-called quantitative easing, or QE3. “Our economists believe that the downside risks to their forecasts have diminished while the uncertainty about the size of QE3 is high,” the Goldman report said. “We believe that a shift has occurred over the past few months with conviction in holding gold waning quickly.” Real Assets Many of the reasons for owning gold remain intact, Morgan Stanley analysts including Peter Richardson wrote in a note yesterday, citing currency debasement and rising inflation expectations. The metal may have a sharp rally as investors seek so-called real assets, Elliott Management Corp., the hedge fund founded by Paul Singer , said in a document accompanying its fourth-quarter report to investors on Jan. 28. Russia and Kazakhstan expanded their gold reserves for a fourth straight month in January, according to International Monetary Fund data. Central banks will again be strong buyers this year after boosting purchases 17 percent to 534.6 tons last year, the most since 1964, according to the World Gold Council. Data from the U.S. showed that builders broke ground on the most single-family homes in more than four years last month, while a manufacturing index climbed to a nine-month high. The Dollar Index (DXY) , a gauge against six counterparts, has risen 2.7 percent this year, reaching the highest level since August today. Gold tends to trade inversely to the currency. In Europe , German business confidence rose to a 10-month high in February, adding to signs that Europe’s largest economy is improving. To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-06-18 | Bloomberg | Banco Santander Is Said to Bid $2.5 Billion for 300 RBS Branches in U.K. | Banco Santander SA , Spain’s biggest bank, offered as much as 1.7 billion pounds ($2.52 billion) to buy more than 300 bank branches from Royal Bank of Scotland Group Plc and bolster its existing British network, according to a person familiar with the plans. A transaction may be concluded within weeks, said the person, who declined to be identified because the details are confidential. Santander has presented an offer and doesn’t know when the tender process will end, the Santander, Spain-based lender said today in a statement. The branch network would “fit like a glove” for Santander, Matias Inciarte , a vice chairman at the bank, said yesterday. Santander has boosted its presence in the U.K. with acquisitions of lenders including Alliance & Leicester Plc since taking over Abbey National in 2004. It has 1,300 U.K. outlets. The disposal follows a European Union ruling last year which forced the Edinburgh-based bank to shed outlets as a consequence of 45.5 billion pounds received in state aid. The sale is “yet another nail in the coffin of the diverse financial services sector which consumers have long benefited from,” said Rob MacGregor , national officer of the Unite trade union. “On the basis of market competition on the high street, this sale is bad news.” Officials at RBS and Santander declined to comment on the price offered. Santander added 276,000 new British bank account customers in the first quarter as it rebranded 1,000 Abbey and Bradford & Bingley branches with its own name. Santander was Britain’s third largest deposit-taker with 25 million customers and the U.K.’s second-largest lender by stock of mortgages last year. ‘Sole Bidder’ The Spanish bank is the sole remaining bidder for 318 British bank branches, a person briefed on the situation said yesterday. National Australia Bank Ltd. and Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, earlier dropped out of the bidding for the RBS branches. The RBS network offered for sale is composed of RBS branches in England and Wales, originally branded Williams & Glyn’s, and its Natwest branches in Scotland. It also agreed to sell other units including insurance and Global Merchant Services, its credit card payment processing unit. To contact the reporters on this story: Paul Tobin in Madrid at ptobin@bloomberg.net ; Jon Menon in London at jmenon1@bloomberg.net. Banco Santander has offered to buy RBS branches to bolster its presence in U.K. Photographer: Jason Alden/Bloomberg Enlarge image Banco Santander Vice Chairman Lucas Schifres/Bloomberg Santander group Vice-Chairman Matias Rodriguez Inciarte. Santander group Vice-Chairman Matias Rodriguez Inciarte. Photographer: Lucas Schifres/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); } }); }); //]]> |
2024-09-10 | Bloomberg | U.S. Sept. NAHB/First American Improving Markets Index (Text) | Following is the text of the Housing Opportunity Index from the National Association of Home Builders. The number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released today. This is up from 80 metros that were listed as improving in August and includes representatives from 33 states as well as the District of Columbia. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Markets added to the list in September include such geographically diverse locations as Tucson, Ariz.; Jacksonville, Fla.; Springfield, Ill.; Greenville, N.C.; and Bend, Ore. “The number of improving housing markets grew by 19 in September as 68 metros retained their spots, 31 new metros were added and just 12 dropped off the list,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.” “More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase,” observed NAHB Chief Economist David Crowe. “That said, overly tight lending conditions for builders and buyers continue to slow this process considerably.” “Combined with recent positive reports on builder confidence, housing starts and new-home sales, the September IMI adds to the growing consensus that housing is finally moving in the right direction, which in turn is spurring more potential buyers to get off the fence,” added Kurt Pfotenhauer , vice chairman at First American Title Insurance Company. The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six months following those measures’ respective troughs before being included on the improving markets list. A complete list of all 99 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in September, is available at www.nahb.org/imi. Editor’s Note: The NAHB/First American Improving Markets Index (IMI) is released on the fourth business day of each month at 10:00 a.m., ET, unless that day falls on a Friday - in which case, the index is released on the following Monday. A full calendar of future release dates can be found at www.nahb.org/imi. Source: National Association of Home Builders http://www.nahb.com/facts/economics/housingopindex |
2024-01-02 | Bloomberg | European Stocks Climb as German Manufacturing Exceeds Estimates | European (SXXP) stocks gained on their first trading day this year, following the Stoxx Europe 600 Index’s first annual loss since 2008, as a measure of German manufacturing beat estimates and a gauge of utilities rose. Siemens AG (SIE) increased 2 percent for the second-biggest contribution to the Stoxx 600’s advance (SXXP). RWE AG (RWE) , Germany’s second-largest utility (RWE) , climbed after Cheuvreux included the stock in its selected list of German stocks for 2012. The Stoxx 600 rose 1.1 percent to 247.15 at the close in London. The U.S. and U.K. markets are closed today for the New Year’s holiday. “On the first day of the year, a lot of investors, having cleaned their portfolios, have liquidity to invest,” said Arnaud Scarpaci , a fund manager at Agilis Gestion SA in Paris, which oversees about $84 million. “Germany can be seen as a safe haven because it has stronger growth than other countries. People are investing in industries with a lot of visibility, such as utilities.” A measure of German manufacturing climbed to 48.4 in December, beating the median economist estimate (PMITMGE) for a reading of 48.1. The purchasing managers’ index (PMITMGE) compiled by Markit Economics had a reading of 47.9 in November. European (SXXP) stocks climbed in the last week of 2011 as reports from the U.S. showed the recovery in the world’s largest economy is gathering pace and as optimism grew that euro-area policy makers will contain the debt crisis. The second straight week of gains helped trim last year’s loss to 11 percent (SXXP). The index entered a bear market (SXXP) in August and had its worst third quarter since 2002, dropping 17 percent (SXXP) , as U.S. leaders wrangled over cutting the deficit and euro-area policy makers remained divided on their response to the debt crisis. Euro-Area Debt Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. National leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin on Jan. 9 to work out the details. In her New Year’s address, Merkel said she expects turbulence in 2012 as she does “everything” to save the euro and end the debt crisis. Greek Prime Minister Lucas Papademos said in his New Year’s message that the country faces a difficult year and must continue efforts to stay in the euro. In the U.S., the S&P 500 (SPX) was virtually unchanged last year. The benchmark gauge lost 0.04 points to 1,257.6 in 2011, its smallest annual change since 1947. National benchmark indexes advanced in 14 of the 15 western European markets that opened today. Germany’s DAX Index added 3 percent. France’s CAC 40 Index gained 2 percent. U.S. Payrolls Report A report this week will probably show that hiring in the U.S. accelerated in December for a second month, a sign that the country’s improving labor market will bolster consumer spending in early 2012, economists said. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists in a Bloomberg News survey before the Labor Department release on Jan. 6. Another report (NAPMPMI) this week may show manufacturing picked up in the U.S., economists said. Siemens, Henkel Climb Siemens, Europe’s largest engineering company (SIE) , added 2 percent to 75.44 euros. A gauge of chemical makers (SXXP) increased 1.8 percent, with the preferred shares of Henkel AG, the maker of industrial adhesives and Persil washing powder, increasing 3.3 percent to 46.06 euros. ThyssenKrupp AG (TKA) , Germany’s biggest steelmaker (TKA) , jumped 4.5 percent to 18.52 euros. RWE advanced 5.3 percent to 28.60 euros, its largest gain in two months. The company is among German stocks on Cheuvreux’s selected list for 2012. Sunways AG (SWW) surged 21 percent to 1.87 euros as China ’s LDK Solar Co. said it intends to take over the company. Sunways said LDK will buy a 33 percent stake and has offered to purchase the remaining equity for 1.90 euro per share. Q-Cells SE rallied 5.4 percent to 54.6 euro cents. Wacker Chemie AG (WCH) , the second-biggest maker of solar-grade silicon, jumped 6 percent to 65.85 euros. SolarWorld AG (SWV) climbed 3.1 percent to 3.35 euros as Chief Executive Officer Frank Asbeck told Euro am Sonntag that the company will meet its full-year target of more than 1 billion euros in sales. Asbeck described fourth-quarter sales as “pleasantly good.” Automakers Rise Carmakers rose 3.4 percent for the biggest gain among the 19 industry groups in the Stoxx 600 (SXXP). Daimler AG (DAI) increased 4.3 percent to 35.37 euros. The carmaker said that it has delivered more than two million Mercedes sport-utility vehicles since their launch. The company wants to produce a record 988,110 Mercedes-Benz brand vehicles in Germany in 2012, Automotive News Europe reported yesterday, citing internal company documents. Vestas Wind Systems A/S (VWS) , the world’s biggest wind turbine maker, jumped 9.6 percent to 67.95 kroner. Jyske Bank A/S raised its estimate for the company’s 2011 order intake to 7,025 megawatts from 6,600 megawatts. Veolia Environnement SA (VIE) added 5.5 percent to 8.94 euros, the stock’s biggest gain in more than a month. The company has drawn interest for its U.K. water business from bidders including Allianz SE and Canada’s Borealis pension fund, the Sunday Times reported, without citing anyone. Enel SpA climbed 2.6 percent to 3.23 euros. Terna SpA jumped 6.1 percent to 2.76 euros, its biggest increase since 2008. Mediobanca SpA said that Italy’s new regulatory framework for electricity transport and distribution tariffs is overall positive. Nutreco, Icade, Storebrand Nutreco NV (NUO) advanced 2.3 percent to 51.99 euros, a sixth day of gains for the longest winning streak in six months. The world’s biggest maker of fish feed had its shares upgraded to “selected list” (NUO) from “outperform” at Cheuvreux. Icade SA slipped 1.4 percent to 59.93 euros. Groupama SA, the French insurer hurt by Greek sovereign-debt losses and declining stock holdings, said its board agreed to merge its stake in Silic SA with Caisse des Depots et Consignations’ Icade unit. Storebrand ASA (STB) fell 3.5 percent to 30 kroner. Norwegian insurance companies received 6,000 claims after storm Dagmar swept over Norway during the Christmas holiday. Separately, the Norwegian Ministry of Finance yesterday proposed cutting a tax exemption on equities held in some life insurance portfolios, Pareto Securities AS said in a note to clients. The proposal will weigh on Storebrand’s earnings, Pareto said. YIT Oyj (YTY1V) advanced 3.4 percent to 12.80 euros, the highest price in more than two months. The company won an order to make foundations and provide maintenance for 90 wind-power plants in Finland from TuuliWatti Oy. -- With assistance from Julie Cruz in Frankfurt. Editors: Will Hadfield, Srinivasan Sivabalan To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-03-04 | Bloomberg | Welcome the Robot Revolution, but Beware | Robots are evoking some deep economic anxiety these days. They’re routinely mastering human tasks -- driving cars, trading securities, diagnosing diseases - - that not long ago appeared permanently beyond their capabilities. And as automated technology advances at an exponential rate, more and more jobs, in more and more fields, will be done by intelligent machines in the very near future. This transition will involve some scary trade-offs. Growth and productivity will probably accelerate, and low-cost, high- quality goods will probably proliferate. But many workers will find their skills obsolete and their ability to compete diminished. Unemployment could be exacerbated. Wage stagnation for the middle class could persist or worsen. And inequality seems likely to widen. For all that, we remain optimistic. Throughout history, technology -- from the steam engine to electricity to the computer -- has upended old ways of doing business and created useful and edifying new fields of human endeavor. This long cycle of creative destruction suggests, however, that the robot revolution will be a time of significant turmoil. And that the more we prepare for it now, the better off we’ll be. Be Flexible As the digital economy churns through old industries, workers will need to become increasingly creative and open to change, and governments will need to grow more nimble in encouraging innovation and cushioning the blow for those left behind. As Erik Brynjolfsson and Andrew McAfee argue in their book “ Race Against the Machines ,” the guiding principle for revamping public policy as this revolution unfolds is flexibility. That means, first, preserving labor-market flexibility by fighting the urge to inhibit job losses in industries where robots will inevitably displace humans. A smarter way for the government to encourage hiring is to start shifting from taxes on employment, like the payroll tax, and toward taxes on consumption and pollution, like carbon. Investing in education, as always, will be critical. Expanded worker-training and placement programs would help ease the burden of changing jobs and better align workers’ skills with what employers need. And reforms that help make health-insurance policies more portable would be a boon to workers looking to try new fields. Second, the government needs to do a better job of encouraging innovation. It may seem paradoxical that one way to mitigate the stresses of surging innovation is yet more innovation. But the key to the next economy will be people who can think of new fields, new applications and new businesses that robots can complement. Entrepreneurs will create whole new categories of jobs -- many of which we haven’t imagined yet -- by combining human ingenuity with the efficiency and precision of robot labor. Entrepreneurialism will thus become an increasingly essential skill. Congress can help by resisting the urge to regulate new industries overzealously, keeping taxes on small businesses low and making it easier to start new companies. It should also reform the immigration system by expanding H-1B visas for temporary workers, ensuring that those who graduate from U.S. universities with advanced degrees in science, technology and math automatically qualify for green cards, and by creating a “startup visa” to encourage foreign entrepreneurs who have attracted investment or revenue in the U.S. to stay and create jobs. Perhaps the best investment the government can make to encourage innovation for the robot economy is in research and development. That requires increased funding for government research centers, such as the National Science Foundation. More important, it means spurring private investment by making the R&D tax credit, which businesses use to help fund research projects, permanent. The credit has been perpetually at risk of expiring since its inception in 1981. Making it permanent would give companies an incentive to plan long-term research and would yield social and economic benefits that almost certainly exceed its cost to taxpayers. Fixing Patents Third, the outdated American patent system needs to be further overhauled to crack down on patent trolls while ensuring it remains accessible to independent inventors. The U.S. Patent and Trade Office should require more clarity from applicants for software patents, reject more infringement claims based on bogus patents, shorten patent terms and seek more input from outside experts. Such changes should encourage innovation rather than litigation. Finally, robots will probably worsen inequality by shifting income from workers toward owners of capital. This process, known in economics as “capital-biased technological change,” is already under way: After holding roughly steady for decades, the share of income that accrues to labor declined markedly in the past 10 years, partly due to increased automation. One solution, as we’ve argued before, is to start taxing investment income at the same rate as wages, while eliminating or significantly reducing the corporate-income tax. Another option is strengthening the social safety net, preferably in ways that increase the returns to low-paid work. The earned-income tax credit is one such program, and ought to be expanded. But orthodox redistribution alone will ultimately be insufficient, and if carried too far could be counterproductive. Here’s a more radical idea. Fresh thinking is needed on how to give low-income workers a stake of their own in the nation’s stock of capital while shielding them from undue financial risk. Done right, an equity-based component in Social Security benefits would be a step in the right direction. Along the same lines, some have suggested that the children of poor families should be granted a modest portfolio of stocks at birth, with lockup provisions. The point is that we need to fundamentally rethink how the government addresses inequality in the new economy. History suggests that as creative destruction works its ruthless magic, the efficiencies robots yield will eventually lead to new jobs, new discoveries, new ways of enjoying life. They may free us to do ever more satisfying work. But as Brynjolfsson and McAfee warn , “There is no economic law that says that everyone, or even most people, automatically benefit from technological progress.” That’s one more reason to start preparing now. The robot revolution may be liberating, but it won’t be bloodless. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-03-14 | Bloomberg | Spice’s Modi Holds $200 Million on View Dollar Will Appreciate | Spice Global Chairman Bhupendra Kumar Modi said he raised his U.S. dollar holdings to $200 million, or a 10th of his $2 billion net worth, as he expects the currency to appreciate against the euro, pound and yen. Modi said there’s a “currency war” and many countries are following the U.S. in measures that would depreciate their currencies. This may help drive gains in the dollar, prompting him to boost his holdings in the currency, he said. He declined to quantify the increase. The yen, pound and euro have fallen against the dollar this year amid signs that the U.S. economic outlook is improving. The U.S. Federal Reserve has faced criticism from foreign officials, including Brazilian Finance Minister Guido Mantega, who in October, said that its monetary policies have weakened the dollar, threatening to fuel a “currency war” of competitive devaluations. “The Americans were the first to devalue their currency and bring interest rates to zero,” said Modi, whose Singapore- based Spice Global has invested in industries including telecommunications and financial services. “They set the trend and now many other countries are also going to depreciate their currency as a way to increase exports, GDP and competitiveness.” The Fed expanded assets to a record exceeding $3 trillion and pushed down the benchmark interest rate close to zero. Recovery Signs U.S. economic data is pointing to a recovery. Sales at the country’s retailers climbed twice as much as forecast in February, according to Commerce Department figures this week, showing improving job prospects are helping consumers and the economy overcome higher taxes and gasoline prices. The number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in almost two months, according to data yesterday, adding to signs the labor market is strengthening. Modi, 64, who became a Singapore citizen in January 2012, said as much as 70 percent of his assets are invested in real estate in cities including New York, London and the Southeast Asian island state. He also has properties in Mumbai and Delhi. “I invest mainly in the global cities,” he said in an interview yesterday in his office in Singapore’s financial district, which overlooks the city’s Marina Bay. Modi, who made his fortune from mobile-phone services in India , is among a growing number of wealthy individuals in Asia. The region had 3.37 million millionaires in 2011, more than in North America for the first time, according to a report last year by Capgemini and RBC Wealth Management. Singapore had the world’s largest proportion of millionaire households in 2011, according to a Boston Consulting Group report. Modi’s Singapore-based Spice Global has invested in industries including telecommunications and financial services. He said he also invested in gold and other precious metals, declining to give a more detailed breakdown of his assets. To contact the reporters on this story: Klaus Wille in Singapore at kwille@bloomberg.net ; Sanat Vallikappen in Singapore at vallikappen@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-12-13 | Bloomberg | Pentagon Budget Is a Weapon Against Iran, Terrorists | With the threat of more than $500 billion in Pentagon sequestration cuts looming next month, congressional haggling over details of the 2013 defense authorization bill may seem like shuffling deck chairs on the Titanic. Still, the U.S. military needs to pay its bills, and Congress has a few significant issues to iron out on the package. The two versions of the authorization bill passed by the House and the Senate are close -- they differ on spending by only $4 billion on packages totaling more than $550 billion. Now the House-Senate conference committee can make the bill easier for the president to sign, and better for national security, by making the right call on reconciling their respective versions. It must hash out the agreement immediately -- failure to send the bill to the White House by the end of the year would mean starting over in the new Congress. The biggest issue is a House measure that would deny money for the Defense Department to transfer or release detainees held at Guantanamo Bay, Cuba, to the U.S. or its territories. It would also require the secretary of defense to notify Congress 90 days before sending any detainee to a foreign country. Both rules are part of a misguided and cowardly effort to keep President Barack Obama from making good on his long-delayed promise to shut down Gitmo. Senate conferees should persuade their House colleagues to drop the requirements. They should also push for acceptance of an amendment prohibiting the detention without charge of U.S. citizens or legal permanent residents suspected of terrorism and captured within the U.S., a critical tweak to our unfortunate but necessary policy of detention in the fight against global terrorism. The House version would also require that a missile-defense system be deployed on the East Coast before 2016, ostensibly to guard against an Iranian attack. Supporters point to a recent National Research Council report that foreign-based antimissile systems intended to knock out an Iranian weapon at launch will probably be less effective than domestic systems that would strike later in flight. That may be true, but it doesn’t mean Iran is technologically close to having a nuclear-tipped threat to the New Jersey shore. The project can wait. There are also several contentious matters having to do with women in uniform. One no-brainer is to keep a Senate provision that would allow female troops the use of military insurance to cover abortions in cases of rape. The final law should also keep a requirement that the Pentagon report to Congress with proposals to increase the role of women in combat. Given that half of all military suicides -- which occurred this year at a rate of one a day -- are committed with privately owned guns, the House was smart to include a measure that would let commanders and mental-health professionals ask troops about the private weapons they own and encourage them to be stored safely on base. This is not, as some Second Amendment absolutists have suggested, a stealth gun-control measure. The House version would prohibit the military from using alternative energy sources that cost more than traditional fossil fuels. Such energy-security measures have been overhyped (we’re skeptical of Navy Secretary Ray Mabus’s vision of fielding a “Great Green Fleet” ), but the military’s relatively modest research program is worth keeping even if it isn’t yet saving money. Last, and most important in terms of our immediate national security, are a number of well-designed Senate proposals to increase sanctions against Iran. These would blacklist Iran’s energy, shipping and ship-building sectors, and make it harder for companies involved in them to get insurance. Although these industries are controlled by the Iranian regime and its thugs in the Revolutionary Guards Corps, and indirectly support Iran’s nuclear program, the White House opposes the measures, saying they would complicate other efforts to coordinate sanctions with our European allies. Actually, these punishments are overdue, and the legislative branch is right to push the executive on them. Congress ignored many of the biggest financial issues facing the Pentagon: base closings, major troop reductions, the future of megadollar programs such as the Ford-class supercarrier, reforming retirement benefits and the Tricare health-care system. It won’t have that luxury much longer; with or without sequestration, getting the U.S. fiscal house in order will mean an end to military spending at more than 4 percent of gross domestic product. Still, Congress can act now to make a few good, politically painless decisions to put the Pentagon on a better track. To contact the Bloomberg View editorial board: view@bloomberg.net . |
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