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2024-07-26 | Bloomberg | Treasuries Advance on Speculation Fed Will Maintain Bond-Buying | Treasuries rose for a second day on speculation the Federal Reserve led by Chairman Ben S. Bernanke won’t signal a change next week in its program of $85 billion a month in bond purchases. Benchmark 10-year securities fluctuated earlier as a gauge of July consumer confidence exceeded forecasts. U.S. debt is poised to end two weeks of gains after the U.S. sold $99 billion of notes over the previous three days, including seven-year debt at the highest yield since July 2011. Analysts predict data next week will show American home prices rose at the fastest in seven years in May and the jobless rate fell this month. “I don’t expect any surprises from the Fed given how many times Bernanke’s spoken in the past six weeks,” said Gary Pollack, who manages $12 billion as the head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “They’re going to reiterate the talking points that we’ve heard.” U.S. 10-year note yields fell one basis point, or 0.01 percentage point, to 2.56 percent at 2:37 p.m. in New York, according to Bloomberg Bond Trader data. The price of the benchmark 1.75 percent security maturing in May 2023 rose 3/32, or 94 cents per $1,000 face amount, to 93. The yield has increased eight basis points this week. Treasuries handed investors a loss of 0.2 percent since the end of June, with the securities poised for a third monthly decline, the Bloomberg U.S. Treasury Bond Index (BUSY) shows. For the year, the index has fallen 2.6 percent. The MSCI World Index of shares has returned 5.9 percent in July and 13 percent in 2013, including reinvested dividends. Economic Data The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment increased to 85.1 in July from 84.1 the prior month. The median forecast in a Bloomberg survey called for 84 in the final July gauge after a preliminary reading of 83.9. The S&P/Case-Shiller index of U.S. home prices rose 12.4 percent in May from a year earlier, which would be the biggest gain since February 2006, a separate Bloomberg survey showed before the report on July 30. The U.S. unemployment rate fell to 7.5 percent in July from 7.6 percent in June, while payrolls climbed by 185,000, according to economists before the Labor Department releases the figures on Aug. 2. “Even if the headline payroll gain is near consensus, the market is not accounting for the risk of a sudden drop in the unemployment rate ,” Barclays Plc strategists led by Rajiv Setia in New York wrote in a research note. “Investors should brace themselves for the likelihood of a further selloff.” Yields on 10-year notes are likely to climb faster than those on 30-year bonds, the analysts forecast. Trading Levels Treasury trading volume at ICAP Plc, the largest inter-dealer broker of U.S. government debt , increased to $352 billion yesterday, the highest level since July 17 and above this year’s average of about $320 billion. Volatility in Treasuries as measured by the Merrill Lynch Option Volatility Estimate MOVE Index increased to 82.6 yesterday from 80.2 the previous day. The gauge has fallen from 117.89 on July 5, which was the highest since December 2010. Primary dealers won 34.9 percent of the $29 billion of seven-year notes auctioned yesterday, the least since December 2010. The securities were sold at a high yield of 2.026 percent, up from 1.932 percent at the previous auction on June 27. Investors submitted a below-average number of bids at the $35 billion offerings of two-year notes on July 23 and five-year notes on July 24. ‘Trending Up’ “The primary-dealer community wasn’t left with a whole lot of supply to distribute,” said Ray Remy , head of fixed income in New York at Daiwa Capital Markets America Inc., which as one of the Fed’s 21 primary dealers is obligated to bid in U.S. debt sales. “That’s why the market is trending up a little bit.” The Fed purchased $1.46 billion of Treasury bonds maturing from February 2036 to November 2042 as part of its quantitative-easing program intended to stimulate growth through capping borrowing costs. The central bank, which has been buying $85 billion of bonds each month, will probably start trimming purchases in September, according to a Bloomberg News survey. The Federal Open Market Committee next meets to review policy on July 30-31. The central bank has kept its target for overnight bank lending in a range from zero to 0.25 percent since December 2008. The FOMC said in a June 19 statement that leaving the federal-funds rate in that range “will be appropriate at least as long” as unemployment remains above 6.5 percent and the forecast for inflation in one-to-two years doesn’t exceed 2.5 percent. Bernanke said on July 17 the jobless rate isn’t the only measure of labor-market health. To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net To contact the editor responsible for this story: Robert Burgess at rburgess@bloomberg.net |
2024-07-30 | Bloomberg | Central Banks’ Unorthodox Actions Are Cutting Lending | The unintended consequences of financial policy intervention are providing fresh evidence for chaos theory’s idea that the flap of a butterfly’s wings can spark a tornado on the other side of the world. Five years into the age of deleveraging, financial markets have become addicted to central bank intervention, from the U.S. Federal Reserve to the European Central Bank and beyond, aimed at stimulating growth. Markets anticipate further action, with the Fed, ECB and Bank of England committees meeting on monetary policy this week. But no flap of a central banker’s wings goes quite as expected. Take China ’s heroic 2008-2009 stimulus program, which helped fight back a global recession. It also led to huge overinvestment and bad debt, and the policy is now viewed by many economists as an error. Similarly, the ECB’s long-term multibillion-euro refinancing operation, announced in December 2011, saved Europe ’s banking system from a funding crisis. But it created a dangerous web of links between an overleveraged banking sector and already indebted sovereigns. Official lending rates are close to zero, and their manipulation, the traditional mainstay of monetary policy, is effectively impotent. The new go-to tool for central bankers, quantitative easing, is suffering from declining marginal returns. Unorthodox Action As the International Monetary Fund economist Manmohan Singh notes in a working paper published this month, the Fed’s quantitative easing policy replaced long-term Treasuries with short-term bills or cash, which circulate less quickly through the system as collateral for bank funding. The bottom line is that the very actions central banks and regulators have been taking to increase confidence in the banking sector might be undermining banks’ ability to lend. Although central bank actions have lowered longer term borrowing costs, this has not spurred credit demand. Businesses and households are either so frightened or so overleveraged that they’re saving and cutting debt, no matter how cheap it is to borrow. In part because lending remains weak, and in part because some of their own efforts are starting to work against them, central banks are forced to become increasingly unorthodox in their efforts to stimulate growth. In one measure announced last week, the Bank of England , together with the U.K. Treasury, started a “funding for lending” initiative, in effect channeling central bank money directly to consumers and businesses -- an unprecedented move. The ECB has made some of the most striking innovations, yet these do not seem to be boosting bank lending either. At its meeting in July, for example, the ECB cut its deposit rate to zero in an effort to get more than 800 billion euros ($980 billion) -- equivalent to 8 percent of the euro area’s gross domestic product -- that commercial banks had parked in the ECB’s accounts out into the wider economy. The amount held on deposit at the ECB declined by more than half, but the money didn’t flow into new lending. Instead, some depositors started using the central bank’s reserve facility, which also pays zero rates but offers better liquidity. Other investors drove Austrian, Dutch, Finnish and German two-year bond yields negative as they rushed to place their cash. They also took on more risk, either by buying longer-term paper (five-year German bund yields fell by 0.12 percentage points in the two weeks after the cut) or by investing in riskier short- term paper (AA-rated French two-year bond yields fell by 0.28 percentage points). Even yields on Bulgarian six-month euro- denominated bonds halved in the two weeks after the ECB action. Lower Yields These ripples in the market have reduced yields available on the high-quality bonds that banks are required to hold, and cut the spread between short- and long-term interest rates to a three-year low. Both outcomes make it less profitable for banks to lend. Of course, the fall in profits from bank lending is not the sole fault of the ECB. New regulatory capital requirements, designed to make banks safer and boost confidence in the system, require banks to deleverage and cut lending. McKinsey & Co. estimates that the return on equity for retail banks has dropped to 6 percent (from 10 percent) as a result of new regulatory requirements. The question today is not whether the ECB’s latest action in cutting deposit rates will boost lending, but whether it will unintentionally crimp lending further. A number of euro- denominated money-market funds were forced to close to new entrants after the ECB’s deposit rate cut, because returns after fees became negative. Further closings could cut off an important source of funding for the banking sector. Now some ECB members are discussing the possibility of introducing negative deposit rates. This would send investors on a renewed hunt for yield, and leave banks with the options of lending, hoarding physical cash in vaults or paying for the privilege of holding cash at the ECB. That’s a stark choice, but it still might not boost loan growth. A survey of the ECB’s money-market experts suggested that 75 percent of banks would not change their behavior, even with a negative rate. If this proves to be the case, central banks may need to get more daring still. And each new action will risk new unintended consequences. Central bankers have taken bold actions in recent years to stave off systemic collapse and to try to fight slow growth. But chaos theory teaches us that dynamic systems are sensitive and unpredictable. From now on, central bankers need to pay more heed to what the real impact of their policy measures will be. Improving Confidence There are ways of boosting growth and lending without having to experiment with untested policies. Investors’ aversion to risk, banks’ aversion to lending and business’ aversion to borrowing are as much about a lack of confidence in the future as anything else. Firmer statements of support from central bankers, politicians and regulators could go a long way toward solving this crisis of confidence. ECB President Mario Draghi ’s promise last week to do “ whatever it takes ” to preserve the euro was a case in point, and led to a sharp rally in risk assets. Similar pledges to act as the euro area’s lender of the last resort and tolerate higher inflation would be just as beneficial -- and without having to leap further into the unknown. (Alexander Friedman is global chief investment officer at UBS AG and Kiran Ganesh is a cross-asset strategist for UBS Wealth Management, overseeing $1.6 trillion. The opinions expressed are their own.) Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today’s highlights: the editors on housing as a campaign issue and on why Italians should deepen Monti’s reforms and reject Berlusconi ; Meghan L. O’Sullivan on Mexico’s energy reforms ; William Pesek on Japan ’s attempts to weaken the yen ; Ramesh Ponnuru on why Republicans will win the tax debate ; Carrie Lingo on the excitement of women’s field hockey. To contact the writer of this article: Alexander Friedman at alex-friedman@ubs.com. To contact the editor responsible for this article: Marc Champion at mchampion7@bloomberg.net . |
2024-02-06 | Bloomberg | European Stocks Drop on Concern Over Italian Austerity | European stocks declined, reversing earlier gains, as an opinion poll in Italy showed the anti- austerity campaign of Silvio Berlusconi has boosted the former premier’s popularity before this month’s elections. UniCredit SpA and Intesa Sanpaolo SpA led a drop in Italian shares. Vinci SA, Europe’s biggest builder, slid 3.3 percent after posting a decline in 2012 profitability. ArcelorMittal climbed 1.1 percent. Volvo AB jumped 4.2 percent even after fourth-quarter profit fell as the company predicted its North American and European markets will improve this year. The Stoxx 600 fell 0.4 percent to 284.52 at the close, after earlier rising as much as 0.4 percent. The equity benchmark has still gained 1.7 percent this year as U.S. lawmakers agreed on a budget deal and data signaled the world’s largest economy is recovering. “Why is Berlusconi gaining in the polls? It is because he has a populist campaign that goes completely against” Prime Minister Mario Monti’s policies, said Jacques Porta , who helps manage $627 million at Ofi Patrimoine in Paris. “It’s a very, very negative signal vis-a-vis Germany. It’s legitimate to see the market falling.” Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to 0.3 percentage points, the poll by Tecne institute for SkyTG24 showed. That is lower than the survey’s margin of error of 4 percentage points. Berlusconi has gained in popularity before the Feb. 24-25 elections as he promised to cut taxes and end a levy on first homes implemented by Monti’s government. Monti has accused Berlusconi of trying to buy votes. Earnings Scorecard Stocks earlier rallied as companies from ArcelorMittal to Hargreaves Lansdown Plc posted earnings that beat estimates. About 52 percent of the 182 western European companies that have posted earnings in the current reporting season beat analysts’ projections for profit, according to data compiled by Bloomberg. Of the 207 that have posted sales, 53 percent exceeded sales forecasts. In the euro area, Germany won’t stand in the way of aid for Cyprus so long as the Mediterranean nation fulfills the criteria to qualify for help from Europe’s bailout fund, Deputy Finance Minister Steffen Kampeter said. Kampeter’s comments are the strongest signal yet that Chancellor Angela Merkel’s government won’t risk the market turmoil that could result from any rejection of help for Cyprus. National benchmark indexes slid in 14 of the 18 western European markets. Germany’s DAX fell 1.1 percent. France’s CAC 40 lost 1.4 percent. The U.K.’s FTSE 100 gained 0.2 percent. Italian Stocks Italy’s benchmark FTSE MIB Index slipped 0.7 percent. UniCredit declined 1.7 percent to 4.28 euros, while Intesa Sanpaolo retreated 1.6 percent to 1.39 euros. Vinci dropped 1.21 euros to 35.41 euros. The company reported a drop in 2012 profitability and said business will stagnate this year because of the economic slump. Net income as a percentage of sales dropped to 5 percent from 5.2 percent a year earlier, the company said. Vinci also said it expects revenue to be “flat” in 2013. ArcelorMittal rose 13 euro cents to 12.56 euros. The world’s biggest steelmaker said earnings before interest, taxes, depreciation and amortization dropped to $1.32 billion in the fourth quarter from $1.71 billion a year earlier. That surpassed the median estimate of $1.25 billion in a survey of analysts. The company expects Ebitda in 2013 to exceed last year’s $7.1 billion as it ships more steel. Volvo Gains Volvo added 3.90 kronor to 96.85 kronor even after saying fourth-quarter profit dropped 84 percent. The world’s second- biggest truck manufacturer reported Ebit of 1.12 billion kronor ($177 million), lower than the average analyst estimate of 2.47 billion kronor. Volvo said it expects the North American and European markets to improve in 2013. Hargreaves Lansdown jumped 11 percent to 817 pence, its highest price ever. The retail stockbroker reported first-half pretax profit of 93.7 million pounds ($147 million), beating analysts’ projection for 91 million pounds. Pohjola Bank Oyj, the publicly traded unit of co-operative banking and insurance group OP-Pohjola, slid 5.7 percent to 11.67 euros after warning of possible loan losses. That was the stock’s biggest decrease in 15 months. Pohjola said prospects for growth in its loan portfolio are “dimmer” than last year. Elisa Oyj tumbled 5.4 percent to 16.14 euros, the most since Oct. 19. The Finnish wireless carrier posted fourth- quarter sales of 396 million euros, missing the average analyst estimate of 405.6 million euros. Ebitda in the first half of 2013 will be slightly less than last year, the company said in a statement. Eurasian Natural Resources Corp. jumped 9.1 percent to 375.6 pence. The Kazakh metal producer said ferro-alloy and iron-ore production rose in the fourth quarter. The number of shares changing hands in companies listed on the Stoxx 600 was 16 percent higher than the average of the past 30 days, data compiled by Bloomberg showed. 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 |
2024-03-02 | Bloomberg | Coface Says It Dropped Plan to Start European Ratings Company | Coface SA, the credit-insurance unit of Natixis SA, dropped a plan to open a European ratings company and said it will focus on its main business. Coface had net income of 61 million euros ($84 million) in 2010, compared with a 163 million-euro net loss a year earlier, the Paris-based company said in an e-mailed statement today. Coface is seeking an “autonomous development,” it also said. To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net. To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans{ at eevans3@bloomberg.net . |
2024-05-27 | Bloomberg | India May Raise Diesel Rates to Cut $44 Billion Loss | (Corrects fuel in first paragraph of story originally published on May 26.) India may increase diesel, kerosene and cooking gas prices to support state-run refiners facing revenue losses of 2 trillion rupees ($44 billion) this fiscal year, an oil ministry official said today. Energy shares surged. A panel of ministers led by Finance Minister Pranab Mukherjee will meet on June 9 and discuss prices following crude oil’s rise, the person said, asking not to be identified before a public announcement. Oil & Natural Gas Corp. was the biggest gainer on the benchmark stock index on expectations higher fuel prices will lower its subsidy burden. Mukherjee faces a dilemma as he aims to cut the government’s fuel subsidy bill, which topped 400 billion rupees last year, while curbing consumer prices that jumped 8.66 percent in April. “A diesel price increase seems imminent as refiners’ revenue losses are very large and oil prices continue to be high,” D.K. Aggarwal, chairman of SMC Wealth Management Services Ltd., said by telephone from New Delhi. “The government has to balance fiscal deficit, growth, and the immediate monster of inflation.” Indian Oil Corp., the nation’s biggest refiner, increased gasoline prices on May 15 for the first time in four months to cut losses from selling fuels below cost. That was less than the required 10.5 rupees a liter, the company said in a statement on May 14. Oil Prices State-owned ONGC, the nation’s biggest energy explorer, rose 4.6 percent to 274.45 rupees in Mumbai trading today, ending four days of losses. The company sells crude oil at a discount to the state refiners to partly compensate them for below-cost fuel sales. Indian Oil rose 1.5 percent to 307.75 rupees at the close in Mumbai compared with a 1.1 percent increase in the benchmark Sensitive Index. Bharat Petroleum Corp. gained 2.1 percent and Hindustan Petroleum Corp. 0.7 percent. Reliance Industries Ltd. (RIL) , which operates the world’s biggest refining complex and fuel outlets in India, gained 3.1 percent to 933.85 rupees. The price of diesel sold by Reliance isn’t controlled by the government. Crude oil in New York trading has climbed 10 percent this year and reached a high of $113.93 a barrel on April 29, hurting India’s state-run refiners. The July contract on the New York Mercantile Exchange was down 47 cents, or 0.5 percent, at $100.85 a barrel at 10:39 a.m. London time. Indian state refiners currently lose 4.8 billion rupees a day selling fuels below cost, according to a statement on the oil ministry’s website. The shortfall is 14.66 rupees a liter on diesel, 28.28 rupees a liter on kerosene and 329.73 a 14.2- kilogram bottle on cooking gas, according to the statement. India’s wholesale price index has stayed above 8 percent for 16 consecutive months, according to data compiled by Bloomberg. The nation plans to narrow the fiscal deficit to 4.6 percent of gross domestic product in the year ending March 31, from 5.1 percent in the previous 12 months. To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net |
2024-05-22 | Bloomberg | Oklahoma’s Senators Opposed 2011 FEMA Funds, Sandy Aid | Oklahoma’s two Republican senators, Tom Coburn and James Inhofe , may be in an awkward position: their tornado-devastated state needs help from the U.S. disaster relief agency whose plea for funds they rejected in 2011. Coburn and Inhofe voted in September 2011 against a bill to provide $7 billion to help finance the Federal Emergency Management Agency ’s relief fund. Coburn unsuccessfully sought to reduce other federal programs to pay for it. “We have plenty of areas we can cut,” Coburn said at the time. He and Inhofe also voted “no” in January when Congress completed a $60.2 billion aid plan for victims of Hurricane Sandy in the northeastern U.S. The May 20 tornado cut a swath of devastation 20 miles long that ran through Moore, a city of about 55,000 south of Oklahoma City. Authorities said at least 24 people were killed, and Governor Mary Fallin said entire blocks were wiped out. President Barack Obama called it “one of the most destructive tornadoes in history.” The day after the storm, Coburn’s spokesman, John Hart , said the senator wanted any new disaster-relief aid for Oklahoma to be covered by cuts elsewhere in the federal budget. The stance drew little support from fellow lawmakers. Coburn addressed his position in an interview today on the “CBS This Morning” program. “Any time we do an emergency supplemental bill we ought to pay for it,” he said, adding that his constituents “don’t want us to charge our everyday living expenses to their kids.” Sandy Delay A similar demand by some House Republicans delayed federal relief for two months after Hurricane Sandy devastated parts of New Jersey , New York and Connecticut on Oct. 29 and killed more than 100 people. Federal disaster aid typically is passed as emergency funding that isn’t offset by reductions in other government spending. “This is not a time for political retribution,” New Jersey Governor Chris Christie , who criticized fellow Republicans over the delay in providing disaster aid after Hurricane Sandy, said today while urging swift aid for Oklahoma. In times of natural disasters, he told reporters, “Americans stand up for Americans.” Inhofe told MSNBC yesterday that the Hurricane Sandy aid package was “totally different” than what might have to be provided to Oklahoma residents. The Sandy bill “had things in the Virgin Islands, they were fixing roads there, they were putting roofs on houses in Washington, D.C.,” he said. ‘Exploiting’ Tragedy “Everybody was getting in and exploiting the tragedy that took place” in the Northeast, Inhofe said. “That won’t happen in Oklahoma.” Lawmakers said the FEMA funding issue is unlikely to come up soon in Congress because the agency says it has enough money to pay for immediate recovery efforts. The fund’s balance is $11.6 billion, said FEMA spokesman Dan Watson. “If any money is needed, we are going to take care of it; this is an emergency,” Senate Majority Leader Harry Reid , a Nevada Democrat, told reporters. The House Appropriations Committee today voted to add $6.2 billion to the disaster relief fund in the 2014 fiscal year that starts Oct. 1. The provision was part of a $38.9 billion spending measure the panel approved to finance the Homeland Security Department next year. Senator John McCain , a critic of wasteful government spending, said Congress should approve disaster aid without any strings attached if budget offsets aren’t possible. ‘Laudable’ View “I respect Senator Coburn’s view,” said McCain, an Arizona Republican. “It’s laudable and I would support such a thing, but if we can’t, the important thing is to get assistance to these people as soon as possible.” “I don’t think disasters of this type should be offset” by other budget cuts, House Appropriations Committee Chairman Hal Rogers, a Kentucky Republican, told reporters. “We have an obligation to help these people.” The 2011 debate over giving FEMA an additional $7 billion occurred after the showdown in Congress over extending the government’s borrowing authority. Congress eventually approved a lower amount of disaster aid. Skepticism among Republicans about the Hurricane Sandy aid package led House Speaker John Boehner to cancel a scheduled Jan. 1 vote on it. That led to a chorus of criticism from Democrats and Republicans from the region. Christie called fellow Republicans in Congress “know-nothings” and blamed Boehner for the delay. Eventual Passage Congress passed the first installment of federal aid for Sandy victims on Jan. 4. Coburn, Inhofe and McCain voted against the $60.2 billion package Congress completed on Jan. 28. Coburn “has had the same position on disaster aid offsets since the Oklahoma City bombing” in 1995, Hart said in the e-mail, referring to the attack on a federal building that killed 168 people. Coburn “will not change his longstanding position,” Hart said in a later e-mailed statement. He said the senator opposed prior disaster-aid bills because such funding shouldn’t be used to pay for a “wish list of parochial or backlogged priorities that have nothing to do with helping victims.” Coburn, re-elected to his second term in 2010, has said he won’t run again for the Senate in 2016. Boehner said yesterday, “We will work with the administration to make sure they have the resources they need to help the people of Oklahoma.” The speaker, an Ohio Republican, cut off questioning at a news conference when reporters pressed him about any Republican demands to offset new emergency funds with spending cuts. Calling FEMA Fallin, a Republican, said in a press release and a message posted on Twitter that individuals and business owners who need help can call FEMA at 1-800-621-FEMA. During four years in Congress before becoming governor in 2011, Fallin voted in favor of a 2007 emergency supplemental spending measure that included disaster-relief funds for Gulf Coast areas devastated by Hurricane Katrina in 2005. Three of Oklahoma’s all-Republican five-member House delegation voted against aid for Hurricane Sandy victims at least once in January. Freshmen Markwayne Mullin and Jim Bridenstine voted on Jan. 4 against temporarily raising the government’s flood-insurance borrowing authority to allow continued payment of property-damage claims by Hurricane Sandy victims. Oklahoma Republicans Tom Cole, Frank Lucas and James Lankford voted for the measure. Moore is in Cole’s district. On Jan. 15, Lankford joined Bridenstine and Mullin in voting against the $60.2 billion aid package for Sandy victims that was supported by Cole and Lucas. ‘His Community’ Representative Nita Lowey of New York, the top Democrat on the House Appropriations Committee, said that while several members of the Oklahoma delegation had voted against aid for Hurricane Sandy, “Tom Cole voted for it and it’s his community” that was struck by yesterday’s tornado. “I don’t want to spend a lot of time in funding fights here,” Cole said today on “CBS This Morning.” “My objective is to make sure the people get the help they need.” Senator Jeff Sessions of Alabama, the top Republican on the Budget Committee, said in an interview that emergency spending should be approved without offsets “if you can’t do it under your existent budgetary limits.” Still, he said he favored finding budget cuts when approving disaster aid. To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net ; Roxana Tiron in Washington at rtiron@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-11-18 | Bloomberg | Telephone Surveillance Challenge Rejected by High Court | The U.S. Supreme Court turned away a challenge to the Obama administration’s spying practices, leaving intact an order that required Verizon Communications Inc. (VZ) to turn over records of its customers’ domestic phone calls. The justices today said they won’t hear arguments from the Electronic Privacy Information Center, which argued that a national-security court exceeded its authority by ordering Verizon to provide the call data. The case represented the Supreme Court’s first opportunity to review the surveillance program since former government contractor Edward Snowden began releasing information about the extent of data and communications swept up by the National Security Agency. EPIC, as the Washington-based privacy group is known, faced a high hurdle in its bid for Supreme Court review because it took the unusual step of filing its complaint directly with the high court. In urging the justices not to intervene, the Obama administration pointed to similar suits that have been filed at federal trial courts. EPIC, a Verizon customer, challenged an April 2013 order issued by a judge on the Foreign Intelligence Surveillance Court. The order centered on “metadata” -- call logs showing phone numbers, time and duration. The case is In Re Electronic Privacy Information Center, 13-58. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-04-30 | Bloomberg | Canada Feb. Gross Domestic Product Report (Text) | The following is the text of the February GDP report released by Statistics Canada. Real gross domestic product grew 0.3% in February, the same pace as in January. Mining, quarrying, and oil and gas extraction was the main source of growth in February. Goods production expanded 0.9% in February, owing mainly to increases in mining, quarrying, and oil and gas extraction and in manufacturing. Construction, utilities, as well as the agriculture and forestry sector also grew. The output of service industries edged up 0.1%, mainly as a result of gains in arts and entertainment, the public sector (education, health and public administration combined) and the finance and insurance sector. In contrast, accommodation and food services, administrative and professional services and wholesale trade declined. Mining, quarrying, and oil and gas extraction expands Mining, quarrying, and oil and gas extraction expanded 2.2% in February, a fifth consecutive monthly increase. Mining and quarrying (excluding oil and gas extraction) grew 6.4% as a result of a significant increase in output at potash mines. Metallic mineral and coal mining were also up in February. Oil and gas extraction rose 1.0%, as a result of increases in oil production. This follows a 0.2% decline in January. Support activities for mining and oil and gas extraction (+1.2%) also advanced, with increases in drilling and, to a lesser extent, rigging services. Manufacturing output increases again Manufacturing output was up 0.8% in February, following a 0.6% gain in January. Durable goods production grew 0.7% with increases in transportation equipment, non-metallic mineral products, and computer and electronic products. Non-durable goods production increased 1.0% in February. Growth in chemical, food as well as clothing and leather products more than offset declines in paper and petroleum and coal products manufacturing. Construction increases Construction increased 0.2% in February. Engineering and repair construction advanced, as did residential and non- residential building construction. The output of real estate agents and brokers decreased 0.8% in February, as activity in the home resale market was down. The finance and insurance sector advances The finance and insurance sector rose 0.2% in February, mainly as a result of an increase in financial investment services. Wholesale trade declines while retail trade edges up Wholesale trade was down 0.2% in February, after rising 0.5% in January. The main declines were in the wholesaling of machinery, equipment and supplies, of personal and household goods and of farm products. These declines outweighed gains in the wholesaling of motor vehicles and parts as well as of food, beverage and tobacco products. Retail trade edged up 0.1% in February. Increased activity at general merchandise stores and at motor vehicles and parts dealers was almost offset by declines at clothing and clothing accessories stores, gasoline stations, as well as furniture and home furnishings stores. Other industries The arts and entertainment sector increased 3.3% in February after growing 4.0% in January, mainly the result of a continued rebound following the end of a labour dispute in professional hockey. In contrast, accommodation and food services were down 1.0%, in parallel with a decrease in the number of international travellers to Canada. The public sector (education, health and public administration combined) edged up 0.1%. Utilities rose 0.4%, with increases in the demand for both electricity and natural gas. Note to readers The monthly gross domestic product (GDP) by industry data at basic prices are chained volume estimates with 2007 as the reference year. This means that the data for each industry and each aggregate are obtained from a chained volume index multiplied by the industry’s value added in 2007. The monthly data are benchmarked to annually chained Fisher volume indexes of GDP obtained from the constant-price input-output tables up to the latest input-output tables year (2009). For the period starting with January 2010, the data are derived by chaining a fixed-weight Laspeyres volume index to the prior period. The fixed weights are 2009 industry prices. This approach makes the monthly GDP by industry data more comparable with the expenditure-based GDP data, chained quarterly. All data in this release are seasonally adjusted. For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends ( http://www5.statcan.gc.ca/bsolc/olc-cel/colc-cel?catno=11-010 - X201000311141&lang=fra). For more information about monthly national GDP by industry, see the National economic accounts ( http://www.statcan.gc.ca/nea-cen/index-eng.htm ) module on our website. To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-06-11 | Bloomberg | Are Americans Saving Too Much or Too Little? | Almost no one in the U.S has enough retirement savings, the New York Times warned us on Sunday, "not even people who have put away $1 million." There are a couple of reasons for this. First, people aren't putting aside enough during their working years, a problem since at least the early 1980s. And the recent decline in real interest rates means that those meager savings aren't going as far as they used to. Social Security and Medicare can help offset these shortfalls, especially for the vast majority of Americans who have far fewer savings than the Times's hypothetical couple. Those programs can keep people out of penury but won't ensure a comfortable standard of living for most of us. The conclusion I got from reading the article is that most U.S. households need to start saving as much as possible as soon as possible. Yet this conclusion stands in direct contradiction to what many economists have been (counterintuitively) arguing since the global downturn began in 2007. According to them, the economy's weakness can be attributed to excessive saving by households and businesses. In response, these economists recommend that governments push their citizens to save less. The best-known formulation of this view probably comes from former Treasury secretary Larry Summers: Summers's phrasing is catchy but vague. He believes, as I do, that the retrenchment of the private sector should be accommodated by heightened public borrowing. That stabilizes the total amount of spending in the economy while making it easier for people to accomplish their savings objectives. Some economists, however, think that households and businesses should be pushed to borrow and spend with as much abandon as they did during the go-go years. Nayarana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, has been the leading intellectual advocate of this position. He has repeatedly argued that the Fed must lean against U.S. households' newfound desire to save by keeping interest rates " unusually low " for many years. Low rates could be helpful if they encourage foreigners to sell U.S. financial assets. That would make goods and services denominated in dollars relatively more competitive in international markets. In theory, this would increase the incomes of many Americans without requiring anyone to do anything unwise. However, no amount of monetary easing has managed to accomplish this so far. The dollar is actually less competitive against a trade-weighted basket of foreign currencies than it was before crisis. In practice, therefore, the Fed's low rates seem aimed principally at U.S. households and businesses. According to Kocherlakota and others who share his basic view, there is always a set of interest rates that produces acceptable rates of unemployment and inflation. The level of these "equilibrium" interest rates is affected by people's savings preferences and by the relative supply of "safe" places to put your money. During the crisis, it became apparent that many assets previously considered "safe" were actually quite risky, including subprime mortgage bonds and Greek sovereign debt. At the same time, people who had been conned by the promises of the so-called "Great Moderation" into saving too little and putting too much of their savings into risky assets realized that they needed more insurance against the unexpected. Together, these forces have pushed down "equilibrium" real interest rates. That's why people like Kocherlakota have argued that the Fed needs to remain "accommodative" for a very long time. I'm skeptical of this approach, especially given the available alternatives such as broad-based tax cuts. Regardless of which side you are on, the contradiction between the personal finance experts and the central bankers suggests that the Fed will fight an uphill battle for a very long time. (Matthew C. Klein is a contributor to the Ticker. Follow him on Twitter .) |
2024-02-15 | Bloomberg | Egypt Credit-Insurance Outlook ‘Not Alarming,’ Euler CEO Says | The outlook for credit insurance in Egypt and Tunisia is not “alarming or catastrophic,” said Wilfried Verstraete, chief executive officer of Euler Hermes SA , the world’s largest trade-credit insurer. “As of today we have not seen any increase of claim notifications in Egypt and Tunisia,” Verstraete said in an interview. “For the moment, we have not cut our exposure dramatically in these countries.” The Paris-based unit of Allianz SE is following the situation “very closely” and has taken “appropriate measures” to contain risks, he said. Egypt’s finance minister, Samir Radwan, said yesterday the country’s budget deficit will widen to about 8.4 percent -- less than some analyst’s estimates -- as spending increases and economic growth slows after President Hosni Mubarak ’s decision to step down. The protests that culminated in the Feb. 11 ouster of Mubarak have led businesses to shut down, scared off tourists and pushed up borrowing costs. Egypt’s uprising followed the Jan. 14 toppling of Tunisian President Zine El Abidine Ben Ali. For the Tunisian and Egyptian economies, “the upswing could be extremely important once you have more clarity about the democratic transition,” Verstraete said. To contact the editor responsible for this story: Fabio Benedetti-Valentini at fabiobv@bloomberg.net. To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net . |
2024-04-05 | Bloomberg | Tip to Wall Street on Medicare Rates Draws Scrutiny | Senator Charles E. Grassley said he will investigate how an investor services firm specializing in so-called political intelligence got early word of a Medicare-rate decision that led to a surge in health insurer stocks. At issue is a private e-mail from the Washington research firm Height Analytics LLC to its Wall Street clients that Medicare rates, scheduled to drop under a preliminary decision, would increase instead. The e-mail hit at 3:40 p.m. on April 1, followed by a sharp rise in the stocks of insurers such as Humana Inc. (HUM) that participate in the Medicare program. Grassley, an Iowa Republican and his party’s top member on the Judiciary Committee, yesterday wrote the head of the U.S. Centers for Medicare and Medicaid Services demanding the timeline of a decision to reverse a planned cut to rates Medicare pays insurance companies. While it’s not clear where the information to Height Analytics came from, the letter asked the agency about anybody who might have been told of the news early, including the administration and members of Congress. “This raises questions regarding political intelligence brokers’ ability to gather information from CMS in order to predict market moving events,” Grassley said in the letter. Past inquiries to Medicare have found the agency had “loose procedures for dealing with outside firms,” Grassley said in the letter. April 9 Response He asked for a response by April 9, when Marilyn Tavenner , acting administrator of the agency, is expected to appear before the Senate Finance Committee for a hearing on her nomination to head the agency permanently. The committee announced her confirmation hearing on April 2, a day after Medicare announced its rate decision. The disclosure of the planned rate reversal by Height Analytics to clients sent shares of Humana and other insurers up as much as 9.5 percent on April 1, 40 minutes before the U.S. agency was able to make its own official announcement after the market closed. Medicare typically releases information after the market closes to prevent such stock swings. One of Height’s founders is Andrew Parmentier, a former staffer for the House Financial Services Committee and previously an aide to former House Majority Leader Dick Armey. “Does the political intelligence industry have advance knowledge of internal agency decision-making?” Grassley, a Republican from Iowa, asked in a statement yesterday. “Did that come from the agency, Congress, or the White House? And if so, that’s unfair to everyday investors.” Stock Mixed Shares of health insurers in Medicare Advantage were mixed today. UnitedHealth Group Inc., of Minnetonka, Minnesota , rose less than 1 percent to $62.10 (UNH) at the close in New York. Humana, based in Louisville, Kentucky , fell 1.7 percent to $78.27 and Indianapolis-based WellPoint Inc. (WLP) declined less than 1 percent to $67.99. The incident has drawn scrutiny on the world of political intelligence firms, which sell investor clients information about what action government agencies or legislators are likely to take. Grassley has proposed having firms like Height register their employees, much as lobbyists have to do now. “We have a right to know who’s in the business of political information, intelligence gathering,” Grassley said in an interview with Bloomberg TV yesterday. “We need to know that the same way we have a right to know who lobbies Congress.” Height Response In an e-mail response to questions, Parmentier wrote: “We are confident our April 1 report was based on good research, conducted in accordance with the laws, rules and regulations governing the securities industry.” After the Height memo was sent out, about 4 million shares for Louisville, Kentucky-based Humana changed hands in the last 20 minutes of trading on April 1, according to data compiled by Bloomberg. That’s equivalent to $305 million in market value and compares with a daily average volume of 2.17 million shares over the past year. The timing of the memo, as well as the plausibility that the government might reverse itself, is what caused the markets to swing the way they did, said Jeff Jonas , an analyst with Gabelli & Co. in New York who said he doesn’t subscribe to Height’s notes. “We know this administration wanted to make health reform work and didn’t want to cause massive disruption in the market,” Jonas said in a telephone interview. “There was also a case of pretty unprecedented lobbying by the House and Senate. That’s why the impact was probably a lot greater than normal.” Significance Growing Given the potential stock swings, firms like Height are growing in Washington, as is the whole industry of expert advice and intelligence, said Les Funtleyder, president of the investment advisory division at New York-based Poliwogg LLC “Results like this tend to build credibility,” Funtleyder said in a telephone interview. “You make a call like this, and people start to pay attention. You make a couple of good calls, and if you can deliver a product that enables people to make money, people will flock to you.” It may be hard for the government to stop the flow of information from Washington to Wall Street. The Government Accountability Office, a nonpartisan arm of government that serves as the investigative arm of Congress, released a report yesterday on political intelligence firms that said it was difficult to find out exactly how deep the firms had penetrated. “The prevalence of the sale of political intelligence is not known and therefore difficult to quantify,” the agency said in the report. “Even when a connection can be established between discrete pieces of government information and investment decisions, it is not always clear whether such information could be definitively categorized as material.” ‘Two Standards’ There’s little question, though, that the information can offer an advantage, said Erik Gordon , a professor at the Ross School of Business at the University of Michigan in Ann Arbor. “We have two standards here -- we have a standard for inside information coming from business corporations, and no standard for it coming from the federal government,” Gordon said. “The standard for the federal government should be higher, instead of non-existent.” The Height memo outlined the firm’s belief “that a deal has been hatched to protect Medicare Advantage rates,” according to the copy received by Bloomberg News. The note suggested the deal may be aimed to “smooth the confirmation” of Tavenner, who President Barack Obama has chosen to head the CMS. Key Rate The announcement by the CMS said a key rate used to determine payments insurers get for running the government’s Medicare Advantage plans would be boosted by 3.3 percent, instead of trimmed by 2.2 percent. The about-face by the Medicare agency came after insurers and Republican lawmakers complained that the Obama administration relied on faulty accounting assumptions in proposing the cut. Height describes itself as a “privately-held capital markets firm that provides research, advisory and investment banking services,” according to its website. Humana gained about 1.8 percent on April 1 before jumping as much as 9.5 percent after 3:40 p.m. and closing up 8.6 percent before the announcement. Humana gets 66 percent of its revenue and 58 percent of profit from Medicare Advantage, leading the industry, according to estimates by Cowen & Co. analysts. To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net ; To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-08-10 | Bloomberg | Knight Holders Face Funding Options in Hotspot, Direct Edge | The investors who bailed out Knight Capital Group Inc. (KCG) may wring more value from the firm by selling its currency platform and stake in Direct Edge Holdings LLC. Hotspot FX, the foreign-exchange trading system acquired in 2006, would get as much as $300 million in a sale, according to JPMorgan Chase & Co. Its 19.9 percent of Direct Edge Holdings LLC may be worth $80 million, said Raymond James & Associates Inc. While the company’s U.S. broker-dealer has $300 million in excess capital, Knight can’t rule out more losses from lawsuits and diminished business, it said yesterday in a filing. Chairman and Chief Executive Officer Thomas Joyce avoided insolvency with an agreement to sell convertible securities to six investors for $400 million, a “permanent solution” for Knight’s funding issues, he said in a telephone interview Aug. 6. The six investors, whose stake is worth more than $800 million on paper, may find it tempting to boost the payout even more with sales. “Management will probably take a fresh look at the company beyond just internal controls,” Michael Wong , a Chicago-based analyst with Morningstar Inc., said in a phone interview. “There is the potential for them to sell off some assets.” Knight, whose market-making unit executes about 10 percent of U.S. equity volume, said in a government filing that last week’s mishap may spur more losses. Should its customers and trading partners lose confidence, Knight’s reputation and business may suffer, the firm said. Lawsuits and regulatory probes may also cost money, it said. Capital Needs “Knight resolved its capital needs through the transaction announced Monday,” Kara Fitzsimmons, a spokeswoman for Knight, said in an e-mail yesterday. “It is sufficiently capitalized.” The stock has tumbled 72 percent from its $10.33 closing price before the Aug. 1 software malfunction caused it to spew out orders into the market, triggering a trading loss that will total $270 million after tax, according to a filing. The stock slid 5.5 percent to $2.90 in New York today. Among Knight’s rescuers, Jefferies Group Inc. (JEF) bought $125 million of convertible stock, according to a regulatory filing by Knight. Automated trading firm Getco LLC and Blackstone Group LP (BX) , a private equity company, bought $87.5 million each. Broker TD Ameritrade Holding Corp. (AMTD) got $40 million, and investment bank Stephens Inc. and brokerage Stifel Nicolaus & Co. took $30 million each, the filing showed. Strategic Investment “We saw the Knight opportunity as a good strategic investment for our company,” Kim Hillyer , a spokeswoman at TD Ameritrade, said in an e-mail. “Beyond that, we think it’s premature to speculate about what we might or might not do in the future.” Richard Khaleel, a spokesman at Jefferies, declined to comment. Stifel bought its stake because it was an “attractive” financial investment, said Ronald J. Kruszewski, chairman, president and CEO of Stifel Financial Corp. (SF) , said in a conference call Aug. 8. Getco invested because Knight is a “very valuable company,” Daniel Coleman , its chief executive officer, said in a phone interview Aug. 6. Peter Rose , a spokesman for Blackstone, said in an e-mail, “Any comment at this stage would be premature.” Frank Thomas, a spokesman for Stephens, didn’t immediately return a call seeking comment. Market Maker Knight spent the last decade expanding from a market maker that mainly handled orders from individuals sent by brokers to a financial services company with institutional clients, electronic trading services, and businesses in fixed income and currencies. The company provides research and asset management and got into the reverse mortgage business in 2010. The trading malfunction raises concern about risk control and may limit how much investors are willing to pay for shares relative to earnings, JPMorgan analyst Kenneth B. Worthington wrote in a note. Stock in Knight was valued at 6.8 times annual profit on July 31, according to data compiled by Bloomberg. “The company was already trading in the mid-single digits given the lack of transparency, and valuations as a going concern will likely fall meaningfully,” he wrote in the Aug. 6 note. “Given this perspective, we expect investors will look to value the Knight pieces, expecting the parts may be divested at more opportune times.” Trading Volume Businesses Knight acquired over the last seven years may be worth $600 million, including $300 million for Hotspot FX based on the valuations of its competitors and taking into account increased trading volume, which has tripled since 2006 when Knight bought the business for $77.5 million, according to Worthington. Sandler O’Neill & Partners LP’s Richard Repetto estimated in an Aug. 7 note that Hotspot’s value could be about half Worthington’s figure. The currency platform reported $28 billion in average daily volume in the first half of 2012, he wrote. Assuming this could lead to about $48 million in revenue and $10.3 million in post-tax profit this year, Repetto said Hotspot would be worth $155 million after applying a 15 times multiple on earnings. Direct Edge Knight’s stake in Direct Edge may be worth as much as $100 million in cash, Repetto wrote. The exchange was valued at $390 million in 2008 when International Securities Exchange Holdings Inc. bought a 31.5 percent stake in the company, according to Repetto. Assuming the sale price could be as much as $500 million, this could generate up to $60 million in an accounting gain, he said. Retail brokers including TD Ameritrade have a “vested interest” in Knight’s survival to ensure that the amount of payment for order flow they receive from wholesalers doesn’t decrease, Patrick O’Shaughnessy, a Chicago-based analyst at Raymond James , wrote in a note to clients dated Aug. 6. Selling some of Knight’s “non-core” businesses, including Direct Edge, its EdgeTrade unit and BondPoint, may generate almost $300 million, O’Shaughnessy wrote in a separate note, adding that it was a “very rough guess.” Knight’s investors are making too much money from the transaction to be considering deals now, said Jeffrey Meyerson, market maker and senior managing director at Sunrise Securities Corp., in a phone interview. ‘Shrewd Deal’ “I’d be surprised if they have a concentrated strategy to break the firm up,” Meyerson said in phone interview. “The investors made a very shrewd deal and got some very cheap equity. They’ll want to grow the company to sell their stock.” The rescue was probably more of a “buy low opportunity” than a plan to eventually split up the company, Larry Tabb , chief executive officer of research firm Tabb Group LLC in New York, said in a phone interview. “There’s a high likelihood they’re not breaking up, given the investors that they have,” Tabb said. “If it had been bought by one or two private equity guys, I would say it would get broken up. But you’ve got a whole consortium of different people,” he said. “They would have a really hard time splitting up all the Knight assets.” Knight hadn’t done any new strategic planning as of Aug. 6, Joyce said in an interview. Budgets and strategies would be set over the normal schedule toward the end of the year. The “footprint” of the company would “remain intact for a while,” he said. “Once the internal review of the trading error is completed, we would expect the board and management to re- evaluate the model and strategic direction,” Christopher Allen , an analyst at Evercore Partners Inc. in New York, wrote in an e- mail yesterday. “We would not be surprised if there was increased scrutiny of any businesses that generate only marginal profitability relative to their capital usage.” To contact the reporters on this story: Nina Mehta in New York at nmehta24@bloomberg.net ; Inyoung Hwang in New York at ihwang7@bloomberg.net ; Julia Leite in New York at jleite3@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-11-17 | Bloomberg | Insurers Gave U.S. Chamber $86 Million Used to Oppose Obama's Health Law | Health insurers last year gave the U.S. Chamber of Commerce $86.2 million that was used to oppose the health-care overhaul law, according to tax records and people familiar with the donation. The insurance lobby, whose members include Minnetonka, Minnesota-based UnitedHealth Group Inc. and Cigna Corp. of Philadelphia, gave the money to the Chamber in 2009 as Democrats increased criticism of the industry, according to a person who requested anonymity because laws don’t require identifying funding sources. The Chamber got the money from the America’s Health Insurance Plans as the industry urged Congress to drop a plan to create a competing government-run insurance plan. “Clearly the secrecy was important to industry,” Sheila Krumholz , executive director of the Washington-based Center for Responsive Politics, said in an interview. The group tracks money in politics and isn’t affiliated with a political party. “Eighty-six million dollars is an astonishing sum,” she said. The spending on the Chamber exceeded the insurer group’s entire budget from a year earlier and accounted for 40 percent of the Chamber’s $214.6 million in 2009 expenditures. The spending reflects the insurers’ attempts to influence the bill, which the Congressional Budget Office estimates will provide coverage to 32 million previously uninsured Americans, after Democrats in Congress and the White House put more focus on regulation of the insurance industry. U.S. Disclosure Law The $86.2 million paid for advertisements, polling and grass roots events to drum up opposition to the bill, said Tom Collamore , a Chamber of Commerce spokesman. The Chamber said in a statement it used the funds to “advance a market-based health-care system and advocate for fundamental reform that would improve access to quality care while lowering costs.” The organizations disclosed the funding yesterday in annual tax records required under U.S. law. The Chamber ’s records show it received $86.2 million from a single group, which a second person briefed on the transaction by those involved identified as Washington-based America’s Health group. Insurers gave the $86.2 million to the Chamber in August 2009, funded by health insurers, said the first person. Early that month, America’s Health Chief Executive Officer Karen Ignagni said Democrats were trying to “demonize” insurers. Only Amounts Required Tax forms require organizations to list only the amounts granted or received from other groups, not the organizations’ identities. Health insurers expressed opposition to parts of the health-care legislation while they conferred with congressional Democrats writing the bill and the White House. At the same time, the Chamber of Commerce was advertising its opposition. The Chamber spent $45.5 million on a campaign against the bill in 2009, according to TNS Media Intelligence/Campaign Media Analysis Group, an Arlington, Virginia-based company that tracks political advertising. The Chamber began in March 2010, weeks before the bill became law, another $10 million effort focused on pressuring lawmakers to vote against the bill. Blair Latoff, a spokeswoman for the Chamber, wouldn’t say how much of the money was spent in 2009 and how much, if any, was used in 2010. “With so much at stake we, like other major stakeholders, invested in advocacy,” Robert Zirkelbach , a spokesman for the insurers, said in an e-mail. “We supported a number of leading health-care advocacy organizations and coalitions that shared our views.” He declined to answer other questions on the money. ‘Breathtaking’ Amount The amount is “breathtaking,” said Trevor Potter , the head of the political activity practice at Washington law firm Caplin & Drysdale. The $86.2 million dwarfs other large donations given to the Chamber, such as a $15.4 million 2008 transaction whose contributor isn’t identified, as well an anonymous $4.5 million contribution in 2009, according to records. By funneling the money through the Chamber, insurers were able to remain at the table negotiating with Democrats while still getting the bill criticized. “It enables you to have it both ways,” Potter said in a phone interview. “They clearly thought the Chamber would be a more credible source of information and advertising on health-care reform, and it would appear less self-serving if a broader business group made arguments against it than if the insurers did it,” said Potter, a former chairman of the Federal Election Commission. Critics Pounce The Center for Responsive Politics’ Klein said that the public would have been “better served” by insurers disclosing the money when they gave it. “Perhaps this key debate would have progressed differently if the true source of the chamber’s spending had been known at the time,” Klein said. The White House criticized the insurer money in a blog post. Insurers were “desperate to preserve their ability to discriminate against you if you had a preexisting condition, drop your care when you got sick and limit the amount of care you could receive in a year or a lifetime,” wrote Stephanie Cutter , assistant to the president for special projects. Representative Pete Stark , a California Democrat who helped write the health-care law in the House, criticized the insurer spending in a letter to fellow members of Congress. “That $86 million in attack ads could have been better spent to reduce insurance premiums,” he wrote. U.S. ChamberWatch, a Washington group that has been critical of the Chamber of Commerce, called the $86.2 million transaction “breathtakingly” large. “The U.S. Chamber has given up the right to call themselves the voice of American business; they are the voice of the insurance industry,” Christy Setzer, the group’s spokeswoman, said in a statement. Insurance company members of America’s Health that didn’t respond to questions about whether they gave money to the 2009 effort were: Jim Turner, a spokesman for Louisville, Kentucky- based Humana Inc .; Tyler Mason , a spokesman for UnitedHealth Group; Mohit Ghose , a spokesman for Hartford, Connecticut-based Aetna. Kristin Binns , a spokeswoman for Indianapolis-based WellPoint Inc ., and Cigna spokeswoman Gloria Barone declined to comment. To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net ; To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net |
2024-10-12 | Bloomberg | Goldman May Drop Bank Status Over Volcker Rule, Hilder Says | Goldman Sachs Group Inc. (GS) and Morgan Stanley may consider dropping their status as bank holding companies to avoid expenses tied to the Volcker rule, said David Hilder , an analyst at Susquehanna Financial Group LLP. The rule in its current form would impose costs on lenders and drive capital to non-bank market makers, causing the two New York-based firms to consider whether to stop being banks, Hilder said in a note yesterday, when four regulatory agencies issued a 298-page draft of the rule for public comment. Goldman Sachs and Morgan Stanley were the biggest U.S. securities firms before they converted to bank holding companies after the September 2008 bankruptcy of Lehman Brothers Holdings Inc. Both became subject to regulation by the Federal Reserve and won access to central bank programs such as the discount window, which are designed to protect deposit-taking banks. “The regulators have proposed a massive new compliance burden on banks to prove that their market-making activities are just that, and not proprietary trading in disguise,” wrote Hilder, who’s based in New York. “If these regulations are adopted in anything close to their proposed form, there will be large additional costs imposed on banks as market-makers that will not apply to market-makers not owned by banks.” David Konrad, a bank analyst at KBW Inc., said Goldman Sachs and Morgan Stanley (MS) are unlikely to change their status as bank holding companies to dodge the Volcker restrictions. ‘Protecting Deposits’ “If they tried to do that, Congress would amend the rule to say systemically important banks rather than bank holding companies,” Konrad said in a phone interview. “This is part protecting deposits, but also part too-big-to-fail. I don’t think there’s any interest from the investment banks in doing that, and I don’t think it would serve that purpose.” Goldman Sachs Chief Financial Officer David Viniar said Jan. 21, 2010, the same day President Barack Obama announced his support for the Volcker rule, that it was “unrealistic” to imagine the firm won’t be a federally supervised bank. Goldman Sachs and Morgan Stanley made “modest profits” from pure proprietary trading, which is why they willingly shut down those desks, David Trone , an analyst at JMP Securities, wrote in a note today. The rule’s draft indicates regulators won’t interfere with customer flow trading, he wrote. Goldman Sachs may be hurt by provisions that limit investments in hedge funds and private equity, Trone wrote. Had those restrictions been in place in recent years, they would have cost the firm about $700 million, or 9 percent, of annual earnings, he wrote. ‘Crown Jewel’ Businesses The rule, named for former Fed Chairman Paul Volcker , was included in last year’s regulatory overhaul to rein in risky trading that helped fuel the 2008 credit crisis. The central bank, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency worked with the Securities and Exchange Commission on the draft issued yesterday. Morgan Stanley climbed 45 cents, or 2.9 percent, to $15.84 in New York Stock Exchange composite trading. Goldman Sachs advanced 2.5 percent to $99.11. Increased regulation and capital rules may mean the largest banks have to split off some “crown jewel” businesses, said Roy Smith , a finance professor at New York University’s Stern School of Business and a former Goldman Sachs partner. “You have to ask which parts of the business are they simply not going to be able to continue to do or maintain the talented people who do it because those guys would have better options if they left the firm and went to a hedge fund,” Smith said. “You don’t want to be left with the third team running your expensive market-making trading desk.” It’s too soon to say whether banks affected by the rule would have to break up to remain competitive and the costs of the proposal are likely to shift some business to smaller players, Glenn Schorr , a Nomura Holdings Inc. analyst, wrote in a note today. Companies and investors are likely to push back during the comment period to “dial back” some parts of the rule, he wrote. Stephen Cohen , a Goldman Sachs spokesman, and Morgan Stanley’s Mark Lake declined to comment. 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: David Scheer at dscheer@bloomberg.net |
2024-04-03 | Bloomberg | U.S. Stocks Fall as Energy, Financials Tumble on Economy | U.S. stocks fell, dragging the Standard & Poor’s 500 Index down from a record, as financial and energy shares tumbled after oil plunged and worse-than-estimated data spurred concern over economic growth. Bank of America Corp. and Morgan Stanley dropped more than 2.7 percent as financial shares tumbled the most among 10 S&P 500 groups. Energy companies sank as oil prices slid the most in more than four months after inventories climbed. An S&P gauge of homebuilders fell 3.3 percent, with PulteGroup Inc. slipping 4.3 percent. Zynga Inc. rallied 15 percent after saying it will introduce real-money online gambling in the U.K. The S&P 500 fell 1.1 percent to 1,553.69 at 4 p.m. in New York , for the biggest decline since Feb. 25. The Dow Jones Industrial Average lost 111.66 points, or 0.8 percent, to 14,550.35. The Russell (RTY) 2000 Index dropped 1.7 percent to 918.71, extending its loss for the week to 3.5 percent. About 7.2 billion shares changed hands on U.S. exchanges, 14 percent above the three-month average. “The two data points that came in below expectations have spooked the equity markets today,” Chad Morganlander, a Florham Park , New Jersey-based fund manager at Stifel Nicolaus & Co., said in a phone interview. His firm oversees about $130 billion of assets. “People are focused on Friday’s jobs report and the ADP number made investors more skittish.” Companies boosted employment by 158,000 workers in March, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 39 economists surveyed by Bloomberg called for a 200,000 gain. Jobs Report The data come before the non-farm payrolls report from the Labor Department on April 5, which may show employers hired a net 195,000 workers for the month, according to the median forecast of 87 economists surveyed by Bloomberg. The Institute for Supply Management ’s index of U.S. non- manufacturing businesses, which covers almost 90 percent of the economy, fell to 54.4 in March from 56 in the prior month, the Tempe, Arizona-based group said today. The median forecast of 73 economists surveyed by Bloomberg was 55.5. Readings above 50 signal expansion. The survey covers industries ranging from utilities and retailing to housing, health care and finance. U.S. benchmark equity gauges rose to their highest closes ever yesterday as concern over Europe ’s debt crisis eased and U.S. factory orders topped forecasts. The S&P 500 rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market, according to data compiled by Bloomberg. Earnings Season Investors will begin to focus on first-quarter earnings reports beginning next week, with Alcoa (AA) Inc. scheduled on April 8 to be the first company in the Dow to report results. Profits among S&P 500 companies are forecast to decline 1.9 percent for the period, for the first retreat since 2009, according to estimates compiled by Bloomberg. In January, analysts forecast earnings growth of 1.2 percent. Profit expanded by 8 percent in the fourth quarter of 2012. The Chicago Board Options Exchange Volatility Index (VIX) , which measures the cost of using options as insurance against losses, jumped 11 percent to 14.21 today. The gauge, known as the VIX, is down 21 percent for the year. Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index (CYC) down 1.4 percent and the Dow Jones Transportation Index (TRAN) 1.3 percent lower. Intel Corp. declined 1.9 percent to $21.05 and General Electric Co. retreated 1.5 percent to $23. The KBW Bank Index (BKX) slumped 2 percent as all 24 of its members declined. Bank of America lost 2.8 percent to $11.81. Morgan Stanley fell 2.7 percent to $21.11. JPMorgan Chase & Co. slipped 2.4 percent to $46.85. Commodities Plunge Oil and metals led the S&P GSCI index of 24 commodities to a 2 percent drop, the largest decline since November. Crude registered its biggest drop of the year, falling 2.8 percent to $94.45 a barrel, after a government report showed that U.S. oil stockpiles climbed to the highest level in more than 22 years. Gold futures sank 1.4 percent, to the lowest since June and on the brink of a bear market. Energy (S5ENRS) companies declined 1.6 percent as a group. Exxon Mobil Corp. slumped 0.7 percent to $89.93 and Chevron Corp. tumbled 1 percent to $117.78. Phillips 66, the largest U.S. independent refiner by revenue since its spinoff from ConocoPhillips last year, dropped 6.6 percent to $62.46. Tesoro Corp., the independent petroleum refiner based in San Antonio , slid 5 percent to $52.26 and Marathon Petroleum Corp. declined 4.8 to $81.39. EPA Rules Refiners (S5OILR) in the S&P 500 have tumbled more than 10 percent as a group this week, their worst slump since 2011, after the Environmental Protection Agency proposed rules aimed at cutting the sulfur in gasoline. The EPA said its standards will prevent as many as 2,400 premature deaths annually by 2030. The rules will require an additional $10 billion in infrastructure investment and $2.4 billion in annual operating costs, according to the American Fuel & Petrochemical Manufacturers trade group. All of the 11 stocks in the S&P Supercomposite Homebuilding Index retreated. The ADP payroll report showed no jobs growth in the construction industry in March. The index has fallen 9.8 percent since reaching a five-year high on March 20. KB Home (KBH) , the best-performing stock among U.S. homebuilders this year, fell 5.5 percent to $20.02 today. PulteGroup slipped 4.3 percent to $19.01. The Bloomberg U.S. Airlines Index (BUSAIRL) capped its biggest three- day decline since October 2011, falling an additional 2.1 percent today. Nine of the 10 companies in the index slid, as Delta Air Lines Inc. dropped 2.5 percent and United Continental Holdings Inc. erased 2.5 percent to $28.66. ConAgra Falls ConAgra Foods Inc., the Omaha, Nebraska-based packaged- foods manufacturer, slipped 1.9 percent to $34.85 after it reported third-quarter earnings that missed analysts’ estimates. Operating profit from consumer foods fell to $284.4 million from $331.3 million for the same period a year ago. Global Payments Inc. (GPN) lost 9.2 percent to $44.52. The bank- card processor said revenue was $578.7 million in the three months that ended in February, compared with the average analyst estimate of $581 million. Zynga, which makes games for Facebook Inc.’s social network, rose 15 percent to $3.53. The company said the two new real-money games, called “ZyngaPlusPoker” and “ZyngaPlusCasino,” will be available to players in the U.K. from today. Facebook added 3.3 percent to $26.25. To contact the reporters on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-01-20 | Bloomberg | Van Hollen Wants to End Hedge-Fund Tax Break (Transcript) | Representative Chris Van Hollen of Maryland , ranking Democrat on the House Budget Committee, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt ,” airing this weekend, that Congress should eliminate a tax break for private-equity and hedge- fund executives to pay for extending a payroll tax cut for workers. (This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.) AL HUNT: We begin the show with the ranking member on the House Budget Committee, Democratic Congressman Chris Van Hollen of Maryland. Thank you for joining us, congressman. REPRESENTATIVE CHRIS VAN HOLLEN: Great to be with you, Al. HUNT: The president gives a State of the Union next Tuesday. The White House has said, other than the payroll tax , they really don’t expect much to happen this year, so this session really is all about politics. VAN HOLLEN: Well, I wish I could say that we’d have a more productive session this year, but given the history of the House Republican leadership on so many of these issues, it’s hard to say that would happen. For example, the president has had his jobs package in front of the House now since last September. And with the exception of the payroll tax cut, or the two-month piece that we already put in place, they haven’t taken any action on that. HUNT: Do you think the Republicans will wage a big fight over that in February? Or they were burned in December, will they just go through the motions? VAN HOLLEN: I don’t know. It depends on what lessons they learned or, more importantly, I guess, what the Tea Party wing of the House Republican Party - (CROSSTALK) HUNT: What’s your sense now, though? You talk to them a little bit. VAN HOLLEN: Well, I know a lot of them have been on record in the past not wanting to do a payroll tax cut, which is always curious, since they’ve always been in favor of tax cuts for the folks at the very top. But in any event, the question is going to be whether they try and add all these extraneous provisions, unrelated provisions, as they did before. HUNT: And you don’t have - VAN HOLLEN: I don’t know yet. We have not had a conference meeting. Our first conference will be held on next Wednesday - Tuesday or Wednesday. HUNT: There’s also the question of how to pay for it. You’ve talked about higher levies on bank transactions and oil and gas. How about carried interest that private equity and hedge funds get? Pete Peterson, Warren Buffett all say it’s indefensible, could raise some money. Would you be willing to consider putting that in there, to change carried interest on your income? VAN HOLLEN: Not only would I consider it, I think that we should, because if you look at a lot of the hedge fund activities, these are people who are not putting their own capital at risk. They’re not putting their own dollars in the mix. They’re getting a special deal that’s not available to other people in the economy. Obviously, it’s become an issue in the presidential race. HUNT: Could it become part of the payroll tax pay-for? VAN HOLLEN: I think it should. HUNT: It should? VAN HOLLEN: Now, you know, I don’t know if our Republican colleagues will go along. I believe it should be part of it. I think it’s an inequity in the tax code and it needs to be fixed. HUNT: OK. VAN HOLLEN: And just for clarification, it’s not a - I wasn’t proposing a tax on bank transactions. This is the - a fee on the big banks to recoup the TARP money that they received. No, but there’s - it’s an important distinction, that’s all. HUNT: You’re absolutely right. You’re right. I misstated it. A number of your colleagues in the House - Democrats - say that this White House has been politically tone-deaf when it comes to dealing with Democratic members of Congress. There are increasing complaints. Is that a fair criticism? And are they learning? Are they getting their act together? VAN HOLLEN: I don’t think it’s a fair criticism, personally. I mean, I’ve heard it. I, in fact, think that the White House has done a good job, especially in the last four or five months, of communicating very clearly what their position is, what they’re doing in following through. HUNT: Congressman, what are the political implications if the Supreme Court should throw out the Obama health care measure? VAN HOLLEN: Well, first, let me say what I think the implications for the country would be. I mean, you’d have about 30 million people who now would not get affordable health insurance. You would also - if they threw out the whole thing - throw out all the patient protections that were part of the bill, making sure that people could stay on their parent’s insurance until they’re age 26, making sure that kids couldn’t be discriminated against based on pre- existing conditions. And I think that, if that were to happen, the Supreme Court were to do that and you were to take it into the election, there are a lot of people who have already begun to benefit from some of the patient protection provisions in the health care bill that all of a sudden would realize that it - it meant more to them than they realized. HUNT: So it would boomerang? VAN HOLLEN: I think it would be terrible for the country. I think politically - I don’t - I don’t think - I know Republicans may think they would benefit somehow from that politically. I don’t believe that’s the case. In fact, I think - HUNT: And Democrats even can benefit politically, even though you don’t want it to happen? VAN HOLLEN: Well, I think Democrats would - would point out the good things that were in the bill, the patient protection provisions, the fact that it actually helps close the donut hole for Medicare prescription drugs. I mean, if they really threw the whole thing out wholesale, a lot of Americans are going to stand to lose a lot in terms of their health care protection and coverage, especially the people who will get more affordable care when it fully kicks in. HUNT: Let’s take a look at national politics. From the vantage point of a Democrat, who do you hope the Republicans nominate? Who would be the easier to beat or who would be the toughest to beat? Ask it the other way. Mitt Romney or Newt Gingrich ? VAN HOLLEN: Well, Al, one thing I’ve learned, not surprising, is don’t wade into Republican politics, because the guy that you think you may be advantaging or harming by your comments, the other guys can use - (CROSSTALK) HUNT: OK, assess them, then. Let me ask you to assess them as potential nominees. VAN HOLLEN: Well, look, I mean, obviously, Romney is the current frontrunner in the Republican race, but he has huge vulnerabilities. And his major vulnerabilities is the sense that he’s just out of touch. And we’ve heard about the whole issue with Bain Capital , and he made a big mistake trying to argue he was a job-creator. What he was, was a guy who tried to maximize return for his investors, mostly very wealthy investors. That’s fine; that’s what he’s supposed to do. But by trying to argue that he was, in fact, this big jobs creator, you then have all these stories about how they went into some of these ventures, essentially, you know, cleaned out some of the pension funds, they took a big return in many cases, and then you have the further point where his tax policy , when it comes to capital gains , is something that would give him, Mitt Romney, an additional huge tax break. HUNT: So that’s his problem. How about Newt Gingrich? VAN HOLLEN: Well, Newt, obviously, has all sorts of issues that his own colleagues have raised. You know, Rick Santorum pointed out that Newt has sort of taken every different position on the map. Obviously, he has a particular issue with respect to social conservatives, but it doesn’t appear to have made a difference so far in South Carolina. But, look, Newt has obviously been an unsteady hand. I think Rick Santorum raised the right question, which is, you know, you don’t know what he’s going to say two hours from now. HUNT: Democrats complained bitterly when the Republicans tried to impeach Bill Clinton over allegations of sexual misconduct. Is it unfair that Newt Gingrich then is facing some of the same criticism now? VAN HOLLEN: Well, the issue with Newt Gingrich has been, in many ways, the difference between what he says and what he does. I mean, it’s a hypocrisy issue. I mean, what you have in Newt Gingrich is somebody who was impeaching Bill Clinton, but at the same time, obviously, had all these issues going on in his personal life. Look, I’m going to leave that - HUNT: Having an affair while he was speaker of the House. That’s a - that’s a - VAN HOLLEN: While he - while he was speaker of the House and while he was engaged in impeachment proceedings against the president based on the president’s associations. In any event, these are obviously all issues for the voters to judge, but I think the big issue in this election is going to be who’s best for jobs and the economy and who’s most in touch with, you know, the American people. HUNT: OK, for Barack Obama to win, what does the unemployment rate have to be in November? VAN HOLLEN: Well, I think people have to have a sense that things are improving. I don’t think the specific number is as important with the - HUNT: But it has to be coming down? VAN HOLLEN: - with the direction the country feels it’s going in, in terms of the economy. HUNT: Chris Van Hollen, thank you so much for being with us today. VAN HOLLEN: Thank you. HUNT: And when we come back, all eyes on South Carolina. Bloomberg reporters join us from Charleston. ***END OF TRANSCRIPT*** THIS TRANSCRIPT MAY NOT BE 100% ACCURATE AND MAY CONTAIN MISSPELLINGS AND OTHER INACCURACIES. THIS TRANSCRIPT IS PROVIDED “AS IS,” WITHOUT EXPRESS OR IMPLIED WARRANTIES OF ANY KIND. BLOOMBERG RETAINS ALL RIGHTS TO THIS TRANSCRIPT AND PROVIDES IT SOLELY FOR YOUR PERSONAL, NON-COMMERCIAL USE. BLOOMBERG, ITS SUPPLIERS AND THIRD-PARTY AGENTS SHALL HAVE NO LIABILITY FOR ERRORS IN THIS TRANSCRIPT OR FOR LOST PROFITS, LOSSES OR DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF SUCH TRANSCRIPT. 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2024-07-26 | Bloomberg | PVI Advances Most in a Week on Talanx Stake Sale: Hanoi Mover | PVI Holdings (PVI) , Vietnam ’s second- largest insurer by market value, climbed the most in a week after saying it completed the sale of a 6.8 percent stake to Talanx AG. The shares rose 1.2 percent to 16,600 dong as of the close on the Hanoi Stock Exchange, the biggest advance since July 19. The benchmark VN Index gained 0.5 percent. Hanoi-based PVI sold the stake for 560 billion dong ($27 million), it said in an e-mailed statement today. Talanx, Germany ’s third-biggest insurer, now owns 31.8 percent of the Vietnamese company. The stake will be held by HDI-Gerling Industrie Versicherung AG, a unit of Talanx, according to the statement. PVI will use the funds to capitalize a new life-insurance subsidiary and to strengthen the capital base of other units. HDI-Gerling will be able to nominate three members of the board of directors and two members of PVI’s supervisory board, according to the statement. Talanx bought an initial stake in PVI in August for 1.9 trillion dong to get a foothold in the Southeast Asian nation’s growing non-life insurance market. PVI shares have dropped 9.8 percent this year, compared with the benchmark index’s 18 percent gain. To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-12-20 | Bloomberg | Muni Supply Will Increase by 10%, Deutsche Bank’s Pollack Says | The municipal-bond market will continue to experience record-low interest rates in the first half of 2012, followed by higher yields if the Federal Reserve implements a third round of asset purchases known as quantitative easing, said Gary Pollack, head of fixed-income trading at Deutsche Bank AG (DBK) ’s Private Wealth Management unit in New York, which manages $12 billion in bonds. He was interviewed at Deutsche Bank’s midtown office for today’s issue of the Bloomberg Brief: Municipal Market newsletter. Q: What do you forecast for municipal-bond supply in 2012? A: About $340 billion, or about a 10 percent increase from this year. That’s due to rates remaining low, so you’ll see more refinancing. That has been the big increase in 2011. And then you’ll see some more capital projects getting financed with low interest rates. I’ve always said that capital financing of projects is a good way to boost the local economy, so if you’re running for re-election, why not build something? That’s what they’ve all done in the past, dating back to the pharaohs. Q: What revenue bonds do you like? A: I love special-tax bonds. They don’t go through the general operating fund of the municipality, so it removes the risks of the operations of the municipality, like possible downgrades or headline risk. And the coverage ratios are huge. States like Illinois , New York and California have these. Certain localities have it, like Washington D.C., New York City , and even Puerto Rico has a sales-tax bond. It’s great. I couldn’t get enough. And it’s triple tax-exempt. So I like these a lot. Certainly I like water, sewer and electricity. Residents have to pay -- otherwise they don’t get their service. And during tough economic times, it’s a pretty inelastic demand. Q: What universities do you like, and what were your thoughts on century-bond sales this year? A: In higher education, I like the larger universities and colleges. Century bonds are a great from the issuer’s point of view. But do you want to buy a 100-year bond when interest rates are at their lowest level in the past 100 years? I wouldn’t do that as an investor, but from their point of view, it’s great. I’m sure there’s some pension fund out there that needs a long-term liability who will match that with this asset. The duration of a 100-year bond is not that much different than a duration of a 30-year bond when you start to discount it. Q: Do you like both public and private universities? A: Yes I do. I like public ones like Michigan , Texas and Cal. And the private ones, I like the 50 best schools in the United States , just because of the natural demand to go there, both here in the U.S. and internationally. They really have a monopoly on higher-education services, and it’s price-inelastic. Q: Would you look at bonds like Detroit ’s water system? A: I tell my clients when we look at an essential-service bond, we still look at the geographic and underlying economic base of the issuer. If I don’t like that, I’m not going to buy the water and sewer bond. Now that might be foolish, but from a client point of view it shows a conservative nature that we’re not going to take undue risks, and that there’s plenty of other essential-service revenue bonds I can buy. To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net. To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-11-04 | Bloomberg | Detroit Emergency Manager Spars With Bankruptcy Judge | Detroit ’s emergency manager ended 10 hours of testimony in a federal court by defending his decision to put the city into bankruptcy instead of trying to persuade unions to negotiate over cuts to pensions and other benefits. Kevyn Orr denied that he was trying to “mislead anyone” at a public meeting on June 10 when he told a retiree that municipal pensions were “sacrosanct” under Michigan law. Orr has since argued that federal bankruptcy law allows him to cut pensions even though a clause in the state constitution bars such reductions. U.S. Bankruptcy Judge Steven Rhodes asked Orr what he would tell the retiree today. “I would say his rights are subject to the supremacy clause of the U.S. Constitution,” Orr said. “That is a bit different from sacrosanct isn’t it?” Rhodes asked in response. Orr said it wasn’t different because he also told people at the meeting that all creditors of the city, including employees and retirees, must be prepared to accept cuts. The bankruptcy’s opponents, including unions and retiree groups, are trying to show that Orr and state officials, including Governor Rick Snyder, acted in bad faith in filing the case under Chapter 9 of the U.S. Bankruptcy Code, which covers municipalities. Rhodes must decide whether the city is eligible to remain in bankruptcy court, where it’s protected from lawsuits and other legal actions that might disrupt reorganization efforts. Show Insolvency To remain in bankruptcy, the city must show that it’s insolvent, that it’s entitled under state law to file for bankruptcy, that it tried to negotiate with creditors or was unable to do so, and that it intends to file a plan to adjust its debts. Retirees and unions say Orr never tried to negotiate with them and that Snyder violated the Michigan constitution by authorizing a bankruptcy that could cut payments to the city’s pension system. The unions and retirees began mounting their case by calling Shirley Lightsey, a former city worker who leads one of Detroit’s retiree associations. Under questioning by a city attorney, Lightsey acknowledged that she didn’t have authority to negotiate cuts to retiree benefits that would be binding on members of her organization, the Detroit Retired City Employees Association. “I’ve never had the authority to do binding and I’ve never asked the membership for authority,” Lightsey said. Orr testified that the bankruptcy was necessary partly because the unions refused to negotiate with him over possible cuts to retiree pension and health insurance benefits. The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit). To contact the reporter on this story: Steven Church in U.S. Bankruptcy Court in Detroit at schurch3@bloomberg.net To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net |
2024-07-13 | Bloomberg | Hartford Profit Falls to $24 Million on Natural Disasters, Asbestos Costs | Hartford Financial Services Group Inc. (HIG) , the seller of life insurance and property-casualty coverage, said second-quarter net income plunged on catastrophe claims and the cost of asbestos liabilities. The company declined in extended trading. Second-quarter net income was about $24 million, according to a statement today from Hartford, based in the Connecticut city of the same name. The insurer, which said the results it announced today were preliminary, had net income of $76 million in last year’s second quarter. U.S. property-casualty insurers including Allstate Corp. (ALL) and State Farm Mutual Automobile Insurance Co. took losses on a U.S. tornado season that killed more than 150 people in Joplin, Missouri , and leveled parts of Tuscaloosa, Alabama. Hartford had $447 million in disaster costs from 12 events in the quarter. “Results were affected by severe U.S. catastrophe activity,” Chairman and Chief Executive Officer Liam McGee said in the statement. Hartford fell 70 cents, or 2.7 percent, to $24.90 in extended trading at 5:03 p.m. in New York and had dropped 3.4 percent at today’s close on the New York Stock Exchange since Dec. 31. The company plans to report complete results Aug. 3. Reserves, Charges Hartford added $290 million to reserves to cover asbestos liabilities on policies it wrote in prior years after getting an increase in claims tied to the deadly cancer mesothelioma. Hartford took a $73 million after-tax charge related to a discontinued software project. It recorded a $74 million after- tax charge on the sale of lender Federal Trust Corp. Hartford reported zero core earnings per share, calculated by excluding some investment results and discontinued operations. It had a $52 million gain on the resolution of a tax matter related to dividend deductions in 1998, 2000, 2001. Hartford’s investment portfolio had a net unrealized gain of about $800 million at the end of June. The net unrealized loss was $161 million at the end of March, according to the first-quarter earnings statement. Hartford had “strong top-line growth” selling property and casualty coverage to companies, McGee said in the statement. It didn’t provide sales results. 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 |
2024-01-25 | Bloomberg | Morrison, Paul Hastings, Jones Day: Business of Law | Morrison & Foerster LLP opened an office in Singapore, which will be led by Eric Piesner, firmwide managing partner for Asia and head of the firm’s Asia real estate practice. “We already have a substantial base of business with a Singapore nexus, including clients with M&A, real estate, project finance, dispute resolution, TMT, private equity and tax needs,” Piesner said in a statement. “We see our presence in Singapore as an opportunity to further help clients in these and other areas.” The office is MoFo’s fifth in Asia and 16th worldwide. The firm also has offices in Hong Kong , Beijing, Shanghai and Tokyo. The firm’s recent transactions in Asia include SoftBank’s $20.1 billion acquisition of a 70 percent stake in Sprint Nextel. Firm lawyers have also worked on Wal-Mart’s Global e-Commerce division’s increased investment in China’s Yihoadian as well as Hitachi’s $4.8 billion sale of Hitachi Global Storage Technologies to Western Digital. Piesner, who focuses his practice on cross-border real estate transactions throughout Asia, is joined in the office by Tokyo corporate and tax partner Eric Roose, along with several associates. Fees Glaxo Accord Said to Spur Lawyer Fight Over $143 Million in Fees GlaxoSmithKline Plc (GSK) ’s settlement of Avandia drug cases triggered a challenge by nine law firms who object to a bid by lead attorneys for almost three-quarters of a $143 million fee fund, including one seeking about $2,700 per hour, according to two people familiar with the matter. Attorneys suing on behalf of users of the diabetes medicine, who said it caused heart attacks and strokes, filed objections to the fee request in Philadelphia federal court, said the people, who asked not to be identified because the matter isn’t public. The contested amount is sought by a court- appointed group of plaintiffs’ lawyers picked to recommend how much attorneys in the cases should be paid, the people said. Six law firms on that fee committee asked for 71 percent of the fund set aside by U.S. District Judge Cynthia Rufe for the Avandia cases before her, according to the people. The committee lawyers put the most time and money into efforts to collect evidence that Glaxo allegedly mishandled warnings about Avandia’s risks, Dianne Nast, a lawyer who led the group, said in an interview. “These were the folks who were the most active in working on the case, so it’s only natural they are in line for a larger share of the fees,” Nast said. The fee fund, between 6 and 7 percent of the total settlement, according to the people, means the total accord may be worth more than $2 billion. As a result, the average payout for the 40,000 users of Avandia involved in the litigation would be about $50,000 -- before legal fees. Joseph Zonies , a Denver-based attorney who served as one of the lead lawyers in the Avandia cases before Rufe, is slated to collect more than $24.4 million, the highest recommended fee, according to the people. Zonies put in more than 18,000 hours of work on the case and his fee would amount to $1,341-an-hour for his efforts, the people said. He declined to comment on the fee recommendation. Another lawyer, Vance Andrus , is seeking almost double that per-hour amount, according to the people. Plaintiffs’ lawyers in product liability cases work on a contingency fee basis. While per-hour calculations may be much higher than attorneys who regularly work at an hourly rate, lawyers who work on contingency are often forced to spend millions of dollars of their own money to pursue a case and aren’t guaranteed payment in the end, unless they win or settle. Benedict Morelli, a New York-based lawyer who according to the court’s docket objected to the fee recommendations, and Samuel Lanham, a Maine attorney who also objected, didn’t return calls for comment on their objections. Glaxo, the U.K.’s biggest drugmaker, has said it paid more than $3 billion to settle federal and state government claims that it illegally marketed Avandia, once the world’s best- selling diabetes pill, and other medications. The lawyers on the fee-advisory group headed by Nast included Zonies, Andrus, Thomas Cartmell, Bryan Aylstock , Stephen Corr , Paul Kiesel and Bill Robins III , according to court records. Cartmell, Andrus and Kiesel declined to comment on the fee recommendations. Aylstock, Corr and Robins didn’t return calls seeking comment. For more, click here. News Obama Takes Oath as Lawyers Open Offices to Clients A crowd of hundreds of thousands of people, a smattering of celebrities and many Republicans, gathered yesterday to witness President Barack Obama take his second oath of office on the steps of the U.S. Capitol. Some lawyer-lobbying firms opened their offices to clients and other guests, who could grab a meal or a drink, and watch the festivities on television. Holland & Knight LLP’s new offices overlooked the end of the parade route on Pennsylvania Avenue, and offered guests mini-paninis and popcorn, while K&L Gates LLP, a couple of blocks away, had chili and carrot and celery sticks for its visitors. “Public policy is shaped in a lot of different venues, in a lot of different discussions and in a lot of different formats,” said Manny Rouvelas, a partner at K&L Gates. Among those in attendance at the Capitol on the chilly, overcast morning, were rap artist Jay-Z, actress Angela Bassett and former House Speaker Newt Gingrich , who unsuccessfully sought the Republican nomination last year to challenge Obama. A batch of senators in their inaugural finery stood near the president. Republican Senator Orrin Hatch of Utah sported a cowboy hat. Arizona Senator John McCain , the president’s 2008 Republican challenger, snapped pictures of the crowd with his smartphone. Singers John Mayer and Katy Perry also made their way through the crowd. “Proud,” Perry told reporters when asked how she felt about being at the inauguration. “We are made for this moment and we will seize it so long as we seize it together,” Obama said as applause rose. For more, click here. Paul Weiss Report Says NBA Should Consider Replacing Hunter New York law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP said National Basketball Association players should consider replacing Billy Hunter as their union chief after he focused on personal interests ahead of the organization. Hunter, 70, didn’t do anything illegal, the law firm said after conducting a nine-month investigation. It said Hunter failed to manage conflicts of interest and hid the fact that his contract as executive director of the National Basketball Players Association wasn’t properly approved. “Mr. Hunter’s actions have also called into question his stewardship of union resources, reflected poor judgment or raised serious doubts about his interest in policies and procedures to protect the union’s interests,” Paul, Weiss said in the report. The firm said in a statement that it reviewed thousands of documents, including financial and governance records and e- mail. It said it also interviewed more than three dozen people, including union employees, vendors and executive committee members. Hunter, who took over the union in 1996, said in an e- mailed statement that he was pleased the 229-page report “recognized that I have not engaged in criminal acts nor was I involved in misappropriation of union funds.” Theodore V. Wells Jr., co-chairman of the litigation department at Paul, Weiss who led the investigation, said in a statement that Hunter wasn’t given an advance copy of the firm’s findings. “This has been a truly independent review,” he said. For more, click here. Chicago’s Biggest Office Project Since 2008 Gets Anchor Tenant The law firm McDermott Will & Emery LLP agreed to be the anchor tenant for a 45-story office tower that Hines and the real estate arm of Canada’s biggest pension-fund manager are building in Chicago. McDermott, with offices in 19 cities globally, will lease 225,000 square feet (20,900 square meters) in the planned skyscraper, known as River Point, the law firm said Jan. 17 in an e-mailed statement. The developers broke ground last week for the building, which will be the city’s first such project since the 2008 financial crisis, according to the statement. “We received a very attractive package from the developer,” Jeffrey Stone, co-chairman of the law firm, said in a telephone interview. “We’re catching the market in a good place at a good time.” Demand for office space in the nation’s third-largest city is climbing. Chicago’s office- vacancy rate was 18.7 percent in the fourth quarter, down from a high of 19.1 percent in the first quarter of 2011, according to Reis Inc. (REIS) , a New York-based real estate research firm. Moves Paul Hastings , Jones Day , K&L Gates: Non-U.S. Partners Paul Hastings LLP hired Weil Gotshal & Manges LLP’s London capital markets and hedge funds practice group head James Cole and Dewey & LeBoeuf LLP’s former co-chairman of the global renewable and clean energy industry sector group, Lorenzo Parola. Cole advises investment banks, hedge funds and financial institutions on capital markets and distressed investment opportunities. Parola who joins in Milan from Grimaldi Studio Legale, the Italian successor firm of Dewey, provides transactional assistance, finance and regulatory advice on energy issues -- from mergers and acquisitions, to project finance, project development and construction law to regulatory work, among other matters. Jones Day also announced last week a high profile hire, in Mexico. Former General Counsel for Grupo Mexico , Alberto de la Parra, joined the firm as partner in the banking and finance practice. As general counsel, de la Parra also served as Secretary of the Board of Directors for Grupo Mexico from 2007 until 2012 and was member of the Board of Southern Copper Corporation. In Poland , K&L Gates LLP hired Lech Gilicinski as a partner in its banking and finance practice. Gilicinski, who joins the Warsaw office, focuses his practice on restructuring and bankruptcy. He was previously at Wierzbowski Eversheds. Sheppard Mullin, Morgan Lewis , Seyfarth: U.S. Lateral Moves The chairman of the ABA Health Law Section and former co- chairman of Shook, Hardy & Bacon LLP’s government enforcement and compliance group, David L. Douglass, joined the Washington office of Sheppard, Mullin, Richter & Hampton LLP. Douglass is a partner in the firm’s government contracts, investigations and international trade practice group and the firm’s health-care practice. Another practice chairman, Lawrence H. Mirel, co-chairman of Wiley Rein LLP’s insurance regulation and legislation group is moving firms. He will join Nelson Levine de Luca & Hamilton LLP in the firm’s Washington office as a partner in the insurance regulation practice. Mirel, who has more than 25 years of insurance-related experience, spent more than six years as the Commissioner of Insurance, Securities and Banking for the District of Columbia. Marc S. Voses also joined the firm’s New York office as a partner in the insurance coverage practice. He was a partner in the New York office of Edwards Wildman Palmer LLP. Morgan, Lewis & Bockius LLP hired a team of three lawyers from Dorsey & Whitney LLP, including partners Ellen S. Bancroft and Bryan S. Gadol and a counsel. The three join the firm’s business and finance practice in Irvine. Bancroft, who represents public and private companies and investors in mergers and acquisitions and private financings, as well as issuers and underwriters in initial public offerings and registered follow- on and secondary public offerings, led Dorsey & Whitney’s California corporate group. Gadol has experience in mergers and acquisitions, private equity, joint ventures, securities offerings and venture capital transactions. Littler Mendelson PC added John Scalia as a shareholder in its Northern Virginia office. Scalia joins the firm from Greenburg Traurig LLP where he focused his practice on representing government contractors and technology companies in the Northern Virginia business community. K&L Gates LLP added Tae Rhee as a partner in the corporate practice in Portland. Most recently, he was executive vice president and general counsel of 20/20 Communications Inc. in Dallas. Two partners joined Mayer Brown LLP. Korean lawyer Min Ho Lee joins Mayer Brown as partner in the Washington litigation and dispute resolution practice. Lee was a partner at the Korean law firm Lee & Ko, where he focused on international arbitration and antitrust law. Jason Osborn rejoined the firm in Washington as a partner in the tax controversy practice. He was previously working in the Internal Revenue Service Office of Associate Chief Counsel, most recently as senior technical reviewer in the transfer pricing branch, and before that, as a team leader in the Advance Pricing Agreement Program. Seyfarth Shaw LLP announced that Jeffrey Cunningham has returned as a partner in the corporate department in Atlanta. Cunningham joins the firm from Foltz Martin LLC, where he was a partner and leader of the firm’s corporate practice and administrative matters. He was previously with Seyfarth from 2000-2008. Bond lawyer Richard “Dick” L. Sigal has joined McKenna Long Aldridge LLP’s public finance group as a partner in New York. Sigal will help to strengthen and grow the firm’s practice nationally through his experience managing and developing significant finance legislation. Sigal previously was a partner at Hawkins Delafield & Wood LLP in Hartford, Connecticut. Corporate and securities lawyer Stuart Nayman has joined Hand Baldachin & Amburgey as a partner. Previously, Nayman was a partner at Wilmer Hale Pickering Hale and Dorr LLP in New York. Video How Bryan Cave Translates Financial Data Into Stories Bryan Cave LLP strategic technology partner John Alber explains how his firm has built a software program called the Rosetta Project, which translates the firm’s financial data into narratives that explain how well a partner’s practice is performing and why. “Lawyers can relate to stories where they’re the protagonist -- the obstacles that they face or the opportunities that they face can be presented as tales, rather than a collection of numbers,” he says. Alber tells Bloomberg Law’s Lee Pacchia that a sample report might say “Bob Smith had a great year last year. His collections were 20 percent above the previous year and his profitability is improving. The reason his profitability is improving is because he’s made some changes in leverage. But he’s got some opportunities” to improve his pricing. Terminal Users: Click here to play now. 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 |
2024-05-09 | Bloomberg | Reichmann’s Canary Wharf Vision Is at Investors’ Cost | (Corrects seventh paragraph of story published March 25 to show that 47 percent loss is based on reinvested dividends; adds London Docklands Development Corp. as seller in 20th.) Canary Wharf took less than 25 years to fulfill Paul Reichmann’s vision of building a “mini Wall Street ” in the U.K. to rival the City of London financial district. Investors are still waiting for their reward. In the 1980s, the Canadian developer turned a derelict site on the Isle of Dogs, 3.6 miles (5.8 kilometers) by car from the Bank of England , into the home of Britain’s tallest office tower. Yet Canary Wharf ’s shares fell 11 percent from their 1999 initial public offering to the end of a takeover battle in 2004. Since then, shareholders of Songbird Estates Plc (SBD) , the group that won control, have lost almost half their money, based on calculations by Harm Meijer, an analyst at JPMorgan Chase & Co. (JPM) “I don’t think anyone has criticized Reichmann, Olympia & York or Canary Wharf for what they have left as a legacy,” said Carl Gough, an analyst at London-based Matrix Group Ltd. He recommends his clients “add” Songbird shares because they are cheap. “Investors, depending on when they got in or out, have not enjoyed that bigger-picture success.” JPMorgan, which employs more than 11,000 people in the U.K. capital, is moving to Canary Wharf in 2012 from the City of London, joining firms such as HSBC Holdings Plc, Credit Suisse Group AG (CSGN) and Bank of New York Mellon Corp. Those companies are paying rents that are at the biggest discount to London’s main financial district in 13 years, property broker CB Richard Ellis Group Inc. (CBG) estimates. Earnings Jump Songbird’s 2010 results, published today, reflect JPMorgan’s purchase of its new London base for 495 million pounds ($796 million) and an increase in the value of its properties. The company said net income more than doubled to about 278 million pounds and reported net asset value of 187 pence a share, matching analysts’ estimates. Songbird closed at 141 pence yesterday. That compares with a closing price of 139.12 pence on Oct. 9, 2009, when Songbird completed an 895 million-pound share sale. Land Securities Group Plc (LAND) , the U.K.’s largest real estate investment trust, climbed 16 percent during that period. British Land Co., the No. 2 REIT, gained 20 percent. A Songbird shareholder who bought in 2004 would have lost 47 percent of the total investment, assuming reinvested dividends, according to Meijer, who has an “overweight” rating on the stock. ‘Selective Arithmetic’ “This analysis of performance is selective arithmetic based on assumptions which are unlikely to affect the vast majority of investors’ experiences,” Songbird Chairman David Pritchard said in an e-mail today. Investors who didn’t reinvest their payouts would have received 105 pounds in cash dividends by the time of the refinancing in 2009 for every 100 pounds invested at the time of the takeover, Pritchard said. Shareholders who took part in the refinancing were showing a profit on their investment, he said. Songbird paid 658 million pounds of dividends to its investors in four payments between November 2005 and June 2008, the company said. The four biggest investors are Qatar Holding LLC, China Investment Corp., New York investor Simon Glick and Morgan Stanley Real Estate Funds. Together, they own about 72 percent of the stock. Morgan Stanley (MS) , Glick, British Land, Qatar’s sovereign wealth fund and Saudi Prince Alwaleed Bin Talal made up the group that defeated Reichmann and Brascan, now known as Brookfield Asset Management Inc., in 2004. The Chinese sovereign fund first disclosed a stake in 2009 after the share sale. ‘Semi-Private’ “It’s a semi-private company,” said Matthew Churstain, a London-based analyst at Peel Hunt LLP with a “buy” recommendation on Songbird. “With all the sovereign and political risk, investors want more liquid stocks.” Songbird has a 69 percent stake in Canary Wharf Group Plc, the company that owns 17 office buildings in the district and operates the remaining 18. The properties have space of 15.9 million square feet (1.5 million square meters), equivalent to slightly more than the area covered by Hyde Park in central London. Canary Wharf Group has local government approval for another 8.5 million square feet. “London still leads New York as a global financial center and it certainly wouldn’t be if we didn’t have Canary Wharf with its capacity for big trading floors,” said Stuart Fraser, chairman of the City of London’s policy and resources committee. Top Spot London retained its top spot, ahead of New York and followed by Hong Kong , in the ninth Global Financial Services Index , published March 21. London has ranked top since the survey, which rates financial centers for banking, asset management, private banking, insurance, professional services and regulation, started in 2007. In December, JPMorgan bought the former offices of Lehman Brothers Holdings Inc. in Canary Wharf to use as its European headquarters for investment banking. That means only four investment banks will still have their main U.K. offices in the City of London: Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc (RBS) , UBS AG and Deutsche Bank AG. (DBK) “The JPMorgan deal is a perfect example of why companies move to Canary Wharf,” George Iacobescu, Canary Wharf Group’s chief executive officer, said in a telephone interview. “It’s one of the best three or four buildings in London.” Diverging Rents Iacobescu, 65, was first appointed by Reichmann, an 80- year-old Canadian, to oversee the construction of Canary Wharf in 1988. He has been CEO of Canary Wharf Group since 1997. Reichmann, who declined to be interviewed, started developing the site, now just 12 minutes from the Bank of England using the Docklands Light Railway , in 1987, taking advantage of government tax breaks to regenerate rundown areas. His family company, Olympia & York, which was based in Toronto, bought the land from the London Docklands Development Corp., an organization created by the government to revive the district, Credit Suisse Group AG and Morgan Stanley. The two banks were among the first tenants to move there in 1991. G. Ware Travelstead, Credit Suisse’s property adviser, secured the site’s status as an enterprise zone before selling the project rights to Reichmann. A year later, the development was bankrupt. Reichmann got sufficient support from investors including Glick and Prince Alwaleed to buy it back in 1995. He sold shares to the public four years later. Rents for prime Canary Wharf offices rose 7.2 percent to 37.50 pounds a square foot last year, according to CB Richard Ellis , while those in the City climbed 26 percent to 55 pounds. The 32 percent gap is the widest since 1997. Former Marshland Canary Wharf is part of Docklands. The financial district was originally marshland and, even now, a large part of the area is undeveloped. Some potential tenants have been put off by the unfavorable location and limited transport links, according to property broker DTZ Holdings Plc. (DTZ) “Not everyone wants to go there because of where it is,” said Martin Davis, head of U.K. research at the company. In contrast to the City of London, offices in Canary Wharf are usually built to order, which helped keep the vacancy rate in the offices owned by the company down to 2.9 percent at the end of last year. That compared with 6.8 percent in the district known as the Square Mile. Land Securities, British Land and Canary Wharf itself are trying to take advantage of rising rents in the City by starting to construct office properties before lining up tenants. Transport Links The Crossrail transport link will increase Canary Wharf’s capacity to handle rail passengers by about 50 percent to 300,000 passengers a day and will cut the journey time to the City to seven minutes. Canary Wharf is contributing 150 million pounds to the cost of the 500 million-pound Crossrail station being built on the estate. “Crossrail will be a massive help,” said Matrix’s Gough. “If there is one event that will take the location to the next stage of its growth, it will be 2017.” To contact the reporters on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net ; Tom Bill in London at tbill2@bloomberg.net. To contact the editors responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net ; Andrew Blackman at ablackman@bloomberg.net . |
2024-08-06 | Bloomberg | Swiss Stocks Retreat; Swiss Re, Nestle SA Lead Declining Shares in Zurich | Swiss stocks fell after a report showing lower-than-expected private job creation in the U.S. stoked concern that the global economy is slowing. Swiss Reinsurance Co., the world’s second-largest reinsurer, dropped 4.6 percent. Nestle SA, the world’s largest food company, retreated 1.1 percent. The Swiss Market Index of the biggest and most actively traded companies declined 0.6 percent to 6,336.57 at 3:20 p.m. in Zurich, for a 2.2 percent gain this week. The measure earlier gained as much as 0.6 percent. The SMI has rebounded 6.6 percent from this year’s low on July 5, as investors speculated on a continued increase in corporate profits even as the economic recovery slows down. The broader Swiss Performance Index also fell 0.6 percent to 5,608.18 today. U.S. private payrolls that exclude government agencies rose by 71,000 in July, less than the 90,000 forecast in a Bloomberg survey of economists, Labor Department figures in Washington showed today. Payrolls grew by 31,000 in June, less than the 83,000 previously reported. Swiss Re , the world’s second-largest reinsurer, dropped 4.6 percent to Swiss 45.34 francs. JPMorgan Chase & Co. cut the shares to “neutral” from “overweight,” while Helvea reduced its rating to “accumulate” from “buy,” both citing the company’s weakening profitability. Nestle dropped 1.1 percent to 50.50 francs. To contact the reporter on this story: Alexis Xydias at axydias@bloomberg.net |
2024-03-01 | Bloomberg | Gross Says ISDA Yet to Make Final Call on Greek Default-Swaps | Pacific Investment Management Co.’s Bill Gross , whose firm is a member of the committee that decides whether default insurance on Greek debt will pay out, said the group will probably make one more decision on the issue. The International Swaps & Derivatives Association said today that credit-default swaps tied to Greek debt won’t be paid out after it was asked to rule whether part of the nation’s $170 billion bailout was a credit event. The group said the European Central Bank ’s exchange of Greek bonds for new securities exempt from losses being imposed on private investors hasn’t triggered $3.25 billion of outstanding credit-default swaps. “It’s not a slam dunk,” Gross, manager of the world’s biggest bond fund, said today in a Bloomberg television interview on “Surveillance Midday” with Tom Keene. “We expect the next few days, perhaps next few weeks, to ultimately send the ISDA committee back for one final vote.” ISDA’s determinations committee, which also includes JPMorgan Chase & Co., said the switch didn’t constitute subordination, one of the criteria for a payout under a restructuring event. Pimco, which oversees more than $1 trillion in assets, doesn’t own any debt of Greece , Gross said. A swaps payout may still happen if Greece uses collective action clauses on private investors who refuse to take losses on their debt holdings, according to ISDA’s rules. Officials including former ECB President Jean-Claude Trichet have opposed triggering swaps because they’re concerned traders would be encouraged to bet against failing nations and worsen Europe ’s debt crisis. Aggrieved Parties “We don’t see anything wrong with it,” Gross said of an ISDA ruling that would trigger default swaps to pay out. “These technical legal problems would really denigrate the entire market and ultimately will affect the market for CDS if one side is aggrieved as opposed to the other.” It costs $7.3 million in advance and $100,000 annually to insure $10 million of Greek debt for five years, signaling a 95 percent probability of default within that time. Greek 10-year bonds slumped to a record 19.14 cents on the euro after the ruling. Credit-default swaps on Greece now cover $3.25 billion of debt, down from about $6 billion last year, according to the Depository Trust & Clearing Corp. That compares with a swaps settlement of $5.2 billion on Lehman Brothers Holdings Inc. in 2008. “It seems to us that there has to be a final result in terms of the exchange,” Gross said from Pimco’s headquarters in Newport Beach , California. “At that point things will happen from the standpoint of the EU and things will happen from the standpoint of Greece that are not known yet. At that point, I would expect the committee to go back and to make one final judgment based upon those ultimate results.” To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net ; Tom Keene in New York at tkeene@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-02-16 | Bloomberg | Morgan Stanley, UBS, Goldman May Be Cut in Moody’s Review | UBS AG, Credit Suisse Group AG (CSGN) and Morgan Stanley’s credit ratings may be cut by as many as three levels by Moody’s Investors Service, which is reviewing 17 banks and securities firms with global capital markets operations. Goldman Sachs Group Inc. (GS) , Deutsche Bank AG (DBK) , JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) are among companies that may be downgraded by two levels, Moody’s said in a statement, adding that the “guidance is indicative only.” Moody’s today cut some European insurers’ ratings based on risks stemming from the region’s sovereign debt crisis. The potential downgrades, which may raise borrowing costs and force banks to increase collateral, put the ratings company at odds with bond investors, who are sticking with bets that new capital rules and trading limits will make the financial firms safer in the long run. Funding costs have climbed for banks worldwide as Greece’s debt woes roil markets. “In the next two years, these big banks will be less robust than they used to be, that’s for sure,” Jim Antos, a Hong Kong-based financial analyst at Mizuho Securities Co., said by telephone. “For any bank that has to raise capital today, it’s already very difficult. This makes it just that much more expensive and difficult.” Barclays Plc (BARC) , BNP Paribas (BNP) SA, Credit Agricole SA, HSBC Holdings Plc (HSBA) , Macquarie Group Ltd. (MQG) and Royal Bank of Canada may also be cut by two levels, Moody’s said. Bank of America Corp. (BAC) , Nomura Holdings Inc. (8604) Royal Bank of Scotland Group Plc and Societe Generale SA may be lowered by one grade, it said. Evolving Challenges “Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” Moody’s said. “These difficulties, together with inherent vulnerabilities such as confidence- sensitivity, interconnectedness and opacity of risk , have diminished the longer-term profitability and growth prospects of these firms.” The 43-member Bloomberg Europe Banks and Financial Services Index fell 0.2 percent as of 4:45 p.m. local time in London. Credit Suisse’s 2.25 billion euros ($2.95 billion) of 3.875 percent bonds due in 2017 fell 0.4 percent to 103.58 cents on the euro today, according to Bloomberg Bond Trader prices. UBS (UBSN) ’s 1.5 billion euros of 3.125 percent notes maturing in 2016 fell 0.6 percent to 100.58 cents on the euro, the prices show. Bond Prices UBS, Switzerland’s biggest bank, has a long-term rating of Aa3 at Moody’s, and a three-level downgrade would reduce it to A3, the fourth-lowest investment grade. Domestic rival Credit Suisse is currently rated one level higher than UBS at Aa2 at the group level, while its operating subsidiary Credit Suisse AG is rated Aa1. New York-based Morgan Stanley is A2, and a three- level cut would drag it to Baa2, the second-lowest investment grade. “Today’s announcement by Moody’s does not immediately affect UBS’s ratings” because it has been on review since September, the Zurich-based bank wrote in an e-mailed statement to Bloomberg News. “UBS’s financial position is strong and a source of competitive advantage.” Spokesmen for Morgan Stanley (MS) , New York-based JPMorgan and Charlotte, North Carolina-based Bank of America declined to comment on the review. Spokesmen in Singapore for London-based Barclays, Frankfurt-based Deutsche Bank (DBK) , Zurich-based Credit Suisse and Edinburgh-based RBS also declined to comment, as did Macquarie in Sydney and Nomura in Tokyo. Spokesmen for Paris- based BNP Paribas and London-based HSBC weren’t available to comment. ‘Unwarranted’ Inclusion “Our inclusion is unwarranted,” Toronto-based Royal Bank of Canada said in a statement. “This action does nothing to help investors differentiate between strong banks and weak ones. RBC’s credit rating and capital base are among the strongest of all banks globally.” As well as UBS, Credit Suisse, Macquarie and Nomura were already on review before today and those examinations are being extended, Moody’s said. A one-level downgrade for Nomura would push its long-term rating to Baa3, one grade above junk. Citigroup has “a strong capital base, robust structural liquidity and ample reserves,” said Jon Diat, a spokesman for the New York-based bank facing a cut to as low as Baa2. The review by Moody’s “is likely to have very limited consequences on financial markets, which have adjusted over the past few months to a new environment in which banks’ ratings overall are lower,” said Kate Henley, a spokeswoman for Societe Generale in Hong Kong. A one-level cut would bring the Paris- based bank to A2, still the sixth-highest investment grade. Additional Collateral The maximum downgrades, if they were followed by similar actions from other ratings companies, would force the five U.S. banks to post at least $19 billion in additional collateral and termination payments, as of Sept. 30. That relates to derivative liabilities which feature credit-rating triggers. The banks estimated the amounts in their third-quarter regulatory filing and will update the figures in their annual reports released in the next few weeks. The threat of downgrades hasn’t deterred investors from buying financial debt. The response is similar to that taken in August when financial markets dismissed the U.S.’s loss of AAA status at Standard & Poor’s by pushing the yield on the 10-year Treasury note to a record-low 1.6714 percent seven weeks later. Bank bonds from the U.S. to Europe and Asia have returned 5.8 percent from the end of November through Feb. 13, poised for the biggest three-month gain since the period ended September 2009, according to Bank of America Merrill Lynch index data. Downgrade Expected “The downgrade is unlikely to shake the market a lot as this has been expected for quite some time,” said Lewis Wan, Hong Kong-based chief investment officer of Pride Investments Group Ltd., which manages $250 million of assets. “The banking industry -- including investment banks, retail banks and commercial banks -- will run their business more conservatively because of the increasingly tougher regulations.” Moody’s wrote on Jan. 19 that credit profiles of many global lenders are weakening amid worsening government finances, economic uncertainty and higher funding costs. Richard Noonan, a spokesman for S&P in Melbourne, said the company unveiled fresh criteria for assessing banks worldwide in November and implemented a number of rating actions. “We’re always looking at bank ratings, and they’re under constant review by our analysts,” Noonan said in a telephone interview. Fitch Ratings Matt Robinson, a spokesman for Fitch Ratings in Sydney, declined to comment on Moody’s action. Fitch released a Feb. 13 report on its decision to review in the fourth quarter of 2011 large banks around the world, which “resulted in a significant increase in the number of rating downgrades,” he said. Moody’s took action on European insurers today on risks tied to the region’s sovereign debt and banks. Allianz SpA (R) , the Italian unit of Allianz SE (ALV) , Europe’s largest insurer, had its insurance financial strength rating cut to A1 from Aa3 with a negative outlook, Moody’s said separately today. The company affirmed the insurance financial strength rating for Allianz, AXA SA (CS) , Aviva Plc (AV/) and their subsidiaries, while changing their outlook to negative because of weaker economies in the euro area. To contact the reporters on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net ; Stephanie Tong in Hong Kong at stong17@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Chitra Somayaji at csomayaji@bloomberg.net |
2024-11-12 | Bloomberg | Esurance Shuns Auto Insurer Drag Race With Geico | Esurance, the online car-insurance seller owned by Allstate Corp. (ALL) , is betting that bundling auto and home policies will help it compete with Berkshire Hathaway Inc. (BRK/A) ’s Geico unit and Progressive Corp. (PGR) Esurance started underwriting homeowners coverage in Wisconsin and plans to expand the offering to other states, Chief Executive Officer Gary Tolman said in an interview in San Francisco last week. The strategy can distinguish the company as car-insurance competitors sell home policies from other carriers and don’t offer the same discounts, he said. “We need to provide a better value proposition than Geico or Progressive,” said Tolman, 62. “To get into a drag race with them in the auto market, we’re not going to win.” Progressive and Geico have flooded the airwaves with ads to emphasize the convenience of shopping online and trumpet cost savings. Geico alone spent more than $1 billion on marketing last year. That’s helped win customers in the $178 billion U.S. auto-insurance market. The gains have come at the expense of competitors. Sales have been stagnant for U.S. auto insurers for a decade and more than half the advertising outlay has come from carriers that didn’t increase their share, consulting firm McKinsey & Co. wrote in a report this year. Berkshire and Progressive were the third- and fourth-largest auto insurers in the U.S. by policy sales last year, according to A.M. Best data compiled by Bloomberg. Allstate’s lead as the No. 2 underwriter of the coverage has narrowed in the past five years, while State Farm Mutual Automobile Insurance Co. remains the largest. Restoring Growth Allstate had been losing customers for its namesake brand of auto policies when Chief Executive Officer Thomas Wilson bought Esurance in 2011. The acquisition gave the Northbrook, Illinois-based insurer access to an expanding business as it sought to restore growth in its unit that distribute policies through agents. Being able to sell home coverage through Esurance is a competitive advantage for Allstate, said Jim Shanahan, an analyst at Edward Jones & Co., in response to comments Wilson made last month about the online unit’s strategy. Shanahan recommends buying the stock. “It’s powerful to have the ability to underwrite in-house,” Shanahan said in a phone interview. “Progressive, Geico -- they have to go outside the organization to identify homeowners partners.” Esurance is offering average discounts of 10 percent on homeowners policies if paired with auto coverage. By bundling the products, the company expects to increase the percentage of customers who stick with the insurer, Tolman said. Underwriting Losses Esurance has posted underwriting losses since the acquisition. It spent $1.17 for every premium dollar collected in the three months ended Sept. 30, compared with $1.19 a year earlier, according to data on Allstate’s website. Those figures can mislead, Tolman said. Though insurers book the costs of winning customers up front, a new policyholder can contribute to profit for years. “We’re paying money to acquire an auto person, and it’s expensive,” he said. “If you get additional revenue, it helps spread the cost.” Adding homeowners policies could hurt return on equity. Claims from the business can be volatile, so carriers often hold a higher ratio of capital to premiums in home insurance than with auto coverage. Residential policies had been a drag on Allstate’s results until last year, when the business posted its first annual underwriting profit since 2007. Severe weather in the past decade boosted claims costs and led the insurer to exit some markets, buy reinsurance and raise rates. Those actions were part of the reason that policy count fell for Allstate-brand car coverage, Wilson has said. With the homeowners business mostly fixed, the number of auto policies in force has climbed for two straight quarters, the insurer said last month. Esurance’s new policies won’t initially be sold in Florida and California , where disaster risks are higher, Tolman said. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-11-11 | Bloomberg | Flug Shekel Sales Sapped by Best Flows Since ’06: Israel Markets | Israeli companies are on course to attract more foreign inflows this year than at any time since 2006, undermining central bank efforts to curb the shekel’s gains and help the export-driven economy. Direct investment from abroad increased to more than $9 billion in the first nine months of 2013, matching the total for all of last year, according to data from the Bank of Israel. Bank Leumi Le-Israel Ltd. (LUMI) , the country’s second-largest lender, expects flows to reach $13.5 billion by year-end, the largest amount since 2006. With the most startup firms per capita of any country in the world, cash is pouring into Israel as investors from Google Inc. (GOOG) to Cisco Systems Inc. (CSCO) buy local companies, helping the shekel beat every major currency versus the dollar. While that underlines how the economy is growing at twice the pace of the U.S., it’s likely to sap the impact of central bank Governor Karnit Flug’s $5.6 billion of foreign currency purchases. “A risk to an economy driven by foreign trade is the appreciation of the shekel, which is fueled by large inflows,” Gil Bufman, the chief economist at Bank Leumi Le-Israel, said by phone from Tel Aviv on Oct. 15. “The Bank of Israel ’s recent efforts to stem currency gains won’t be enough to change the trend of direction.” Exports Drop Exports, which make up 34 percent of gross domestic product and have been Israel’s growth engine for the past decade, will drop 1.1 percent this year as the rising currency makes the nation’s goods more expensive abroad, according to the Bank of Israel. The shekel has appreciated 5.6 percent versus the dollar this year, the most among 31 major currencies tracked by Bloomberg. It weakened less than 0.1 percent to 3.5360 a dollar at 11:59 a.m. in Tel Aviv. The central bank plans to use shekels to buy $2.1 billion this year and $3.5 billion in 2014 in foreign currency to offset the impact on the currency from the start of natural gas production in March. The bank has also this year made discretionary foreign currency purchases to moderate shekel gains. The purchases compare with more than $19 billion in 2009 and $12 billion in 2008 spent under former Governor Stanley Fischer , according to Bank of Israel data. Flug, who was nominated as Fischer’s successor on Oct. 20 after more than three months as caretaker governor, purchased currency worth $835 million in September to help stem the shekel’s appreciation. The currency still advanced 2.7 percent that month. “The amount of $3.5 billion a year is very small,” Bufman said. “More will be needed and the new governor will need to reassess the bank’s foreign currency policy and the cost of intervention.” Least Bearish Tel Aviv-based Check Point Software Technologies Ltd. (CHKP) said on Oct. 21 the impact of currency fluctuations, mainly the shekel’s gains versus the dollar, trimmed third-quarter results by about $3 million. Drug exports from companies including from Teva Pharmaceutical Industries Ltd. (TEVA) fell 50 percent in the most recent quarter from the same three months a year ago, the Israel Export & International Cooperation Institute said Oct. 16. Traders are the least bearish on the shekel in more than two months. They paid a 1.16 percentage-point premium today for contracts granting them the right to sell the shekel over options to buy the currency, three-month 25-delta risk reversal rates show. That was the least since Aug. 26. Israeli high-tech companies raised $660 million from local and foreign investors in the three months through September, the highest quarterly amount since 2000, according to a survey by the IVC Research Center & KPMG Somekh Chaikin on Oct. 15. That brought the total for the first nine months of the year to $1.6 billion, up 12 percent from 2012. Google, the world’s largest search engine, purchased map-software provider Waze Inc. in June for about $1.1 billion. Cisco bought Intucell Ltd., another software maker, in January for about $475 million. ‘Amazing Year’ “This year has been an absolutely amazing year in terms of the big size of deals, which we are not likely to see on the same scale in 2014,” Oren Bar-On, a senior partner at Ernst & Young in Tel Aviv, said by phone on Oct. 23. “I am not sure how much impact these deals have on the shekel as most of the money is going to U.S. or other foreign investors.” Mergers and acquisitions among venture-backed Israeli companies are headed for the highest level in 10 years, increasing 43 percent to $4 billion this year, according to Ernst & Young Israel. In the U.S., the value of such deals in the first nine months of this year dropped 58 percent to $9.2 billion, according to the National Venture Capital Association. Facebook Facebook Inc. (FB) is ready to make its third and largest acquisition in Israel by purchasing Onavo Ltd., a mobile-analytics startup firm, the two companies said last month. Adap.tv, Israel’s video advertising platform, was bought by AOL Inc. (AOL) in August for $405 million. “As part of these deals, money will be converted into shekels to pay taxes and other items and thus the inflows are impacting the foreign exchange,” Bufman said. “Foreign investment isn’t limited to the high-tech industry as we are also expecting deals in other industries” such as insurance and energy, he said. Israel’s current account surplus increased five-fold to $1.79 billion in the second quarter from a year earlier, the Jerusalem-based Central Bureau of Statistics said in September. Gas production will add as much as $3 billion to the surplus this year, according to the central bank. “The huge amount of investment at a time of a positive current-account and foreign-portfolio inflows is clearly a challenge for the Bank of Israel,” Murat Toprak , head of European, Middle East and African currency strategy at HSBC Bank Plc, said by phone from London on Oct. 31. To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-04-24 | Bloomberg | Development Partners to Boost Africa Investments by $750 Million | Development Partners International, a London-based private equity fund that invests in sub-Saharan Africa , plans to spend as much as $750 million on projects in the region over seven years, said Chief Executive Officer Runa Alam. The fund is looking for investment opportunities in banking, insurance, oil and gas, telecommunications and pharmaceuticals, she said in an interview in Accra, Ghana’s capital, yesterday, on the sidelines of a forum on venture capital in Africa. DPI is interested in “a whole spectrum of products and services demanded by Africa’s developing middle class,” Alam said. The company has invested $400 million in the past four years in nine companies across Africa, including Kenya, Nigeria and Ghana, she said. To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net To contact the editor responsible for this story: Emily Bowers at ebowers1@bloomberg.net |
2024-03-02 | Bloomberg | EU Leaders Declare Crisis Turning Point as Focus Starts Shifting to Growth | European leaders declared a turning point in the Greece-fueled debt crisis, shifting their focus away from the budget-cutting spree that has dominated two years of rescue operations. With a second Greek aid package wrapped up and the euro region slipping into recession, the leaders committed to a pro- growth agenda that sits uneasily with a deficit-control treaty that was signed today at the 17th summit since the outbreak of the crisis. “We’re not out of the economic crisis yet but we are turning the page of the financial crisis,” French President Nicolas Sarkozy told reporters after the Brussels summit. European leaders are on guard against a repeat of the false dawn of mid-2010 after Greece ’s first bailout and the setup of a rescue fund. A phase of market calm was jolted by German demands for bond writeoffs that rattled investors, forcing Ireland and Portugal to fall back on emergency aid. The next tests include Spain’s defiance of deficit- reduction targets, a wrangle over the size of the rescue fund and pleas for more International Monetary Fund backup, all flanked by the multi-year effort of stepping up Greece’s aid and then making sure it gets paid back. Greece’s 130 billion-euro ($172 billion) second package, confirmed on the eve of the summit, brought to at least 386 billion euros the sums committed or disbursed by European governments and the IMF to keep the euro -- a currency designed to last forever -- intact. ECB Cash Added to that are 219.5 billion euros spent by the European Central Bank to buy the bonds of struggling countries, and another 1 trillion euros in unprecedented ECB loans to tide the banking system through the crisis. “It’s a reassuring picture which is still very fragile because we have a lot of uncertainty and the countries of Europe have to persevere,” ECB President Mario Draghi said at the summit. “It’s a much much better picture than we had until November.” The Euro Stoxx 50 Index (SX5E) has advanced to a seven-month high and yields on Spanish and Italian government bonds have plunged as investor concerns that the single currency was at risk eased. “For the short term the risk of contagion has been eliminated, but the deeper problems are still there,” Zsolt Darvas, an economist at the Bruegel research institute in Brussels, told Bloomberg Television today. Debt Swap The next hurdle is to line up private investors to take losses of more than 70 percent on Greek bonds in a bond exchange, the key plank in a strategy to reduce Greece’s debt to about 120 percent of gross domestic product by 2020, a figure still double the euro-area limit. Finance ministers will hold a March 9 teleconference to review the outcome of the swap offer. The incentive for bondholders is that a refusal to take part might lead to even bigger losses. Whether there is a fallback position was left open. Luxembourg Prime Minister Jean-Claude Juncker said there is a back-up plan for Greece, Finnish Prime Minister Jyrki Katainen said there isn’t, and Sarkozy called talk of yet more aid an “odd declaration.” Prime Minister Helle Thorning-Schmidt of Denmark , one of 10 EU countries outside the euro, concluded: “Everyone knows that we are not completely finished in terms of the Greek situation, but everyone understands that we take substantial steps in a positive direction. For the first time in many, many months this is not a crisis summit.” ‘Unique’ Case Leaders labeled Greece a “unique” case, promising that bond writedowns are a thing of the past, in a reversal of the strategy demanded in late 2010 by Chancellor Angela Merkel of Germany , Europe ’s dominant country. Merkel executed another reversal at the summit, agreeing to speed the payments into the planned 500 billion-euro permanent rescue fund barely a year after she won a deal to slow them down. “We are still in a fragile situation,” Merkel said. ‘This situation has calmed down a bit, but the crisis is hardly over and further steps will be required to get there.’’ Under pressure from world leaders and the IMF to reinforce the European firewall, the euro’s stewards pledged to pay the first two annual installments into the fund this year. Known as the European Stability Mechanism, the permanent fund will go into operation in July. Fund Installments The timing of the remaining three installments to bring it up to its 500 billion-euro capacity will be set later in March, along with a decision whether to add on the 250 billion euros left in the temporary rescue fund, the European Financial Stability Facility. The month will also bring an austerity-versus-growth confrontation, as the signers of the freshly minted fiscal treaty weigh whether to push back Spain ’s deficit-cut timetable as it struggles through its second recession since 2009. “For the credibility of the whole operation, I think it is necessary that we maintain these budgetary targets,” said EU President Herman Van Rompuy , who was named to a second 2 1/2- year term at the summit. “If we don’t do that in a consistent fashion, then we will be punished by the markets.” The tension is between abiding by the EU’s fiscal corset and the economic logic of forcing more cuts on a country suffering unemployment over 20 percent. After most leaders left the EU building, Spanish Prime Minister Mariano Rajoy scuttled his target of a 4.4 percent deficit in 2012, aiming for 5.8 percent instead. ‘Sovereign Decision’ “I didn’t communicate the deficit target to the heads of state, nor do I have to,” Rajoy said. “This is a sovereign decision taken by Spain.” Spanish bonds fell today, with 10-year yields rising 4 basis points to 4.91 percent, exceeding Italy ’s for the first time since August. The next move lies with the European Commission, which will decide whether Rajoy’s re-affirmation of reaching the EU deficit limit of 3 percent of GDP next year entitles it to leniency in 2012. To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-09-16 | Bloomberg | SEC Watchdog to Refer Ex-Counsel’s Madoff Work to Justice | The U.S. Securities and Exchange Commission’s inspector general plans to ask the Justice Department to review whether the agency’s former top lawyer violated conflict-of-interest laws, according to three people with knowledge of the watchdog’s findings. H. David Kotz, the inspector, is completing his report on ex-general counsel David Becker ’s possible conflicts and it is expected to be released next week, said the people, who spoke on condition of anonymity because the matter isn’t public. Kotz and congressional investigators have been probing why Becker was allowed to work on SEC policies related to the Bernard Madoff fraud after inheriting profits from the Ponzi scheme. Kotz opened his probe after Becker and his brothers were sued by the court-appointed trustee in the Madoff bankruptcy case to recover $1.5 million in what he termed fictitious profits. When he joined the agency in 2009, Becker told Chairman Mary Schapiro and William Lenox, then the agency’s ethics counsel, about his family’s Madoff investment. Lenox told Becker in May 2009 that he didn’t have a financial conflict of interest and could work on the matter. Becker, who left the SEC in February, declined to comment today, as did SEC spokesman John Nester. Compensation Fund As general counsel, Becker advocated that Madoff victims be compensated for losses from an SEC-overseen insurance fund using a formula that adjusted for inflation. The argument, which hasn’t been adopted by the trustee, could have made it less likely that the trustee would seek to reclaim profits from Becker. In a letter to lawmakers in March, Becker said he was “confident that any fair review of my actions” will show he worked in the best interests of investors and the SEC. Schapiro told a House panel earlier this year that she wished Becker had recused himself. Stephen Gillers, a professor at New York University School of Law who specializes in legal ethics, said any criminal case would be difficult to make because Becker did what he was supposed to do: he raised the issue and obtained clearance from the ethics officer. “I can’t see this as a criminal prosecution,” Gillers said. “We can question the judgment of everyone involved, but lapses in judgment are not a crime.” Ethics Counsel Gillers said that any “fault here has to be laid at the door of the ethics counsel” whose advice was “sketchy” and “pretty aggressive.” Former SEC Chairman Harvey Pitt , who is representing Lenox in the matter, defended his actions. “Mr. Lenox had handled issues exactly like this one for 18 years, and his advice was thoughtful, correct and has been mischaracterized repeatedly by those who have spoken out about it without being encumbered by any information about what transpired,” Pitt said. Kotz has referred other matters to criminal authorities, including allegations that SEC officials backdated leasing documents to hide a missed deadline and that two employees engaged in insider trading. The Justice Department doesn’t necessarily have to open a case based on the referral. Representative Darrell Issa , a California Republican who is chairman of the Oversight and Government Reform Committee, and Representative Randy Neugebauer , a Texas Republican who heads a Financial Services subcommittee on investigations, have spearheaded a congressional review of the matter. Neugebauer’s panel and an Oversight subcommittee have scheduled a joint hearing for Sept. 22 to coincide with the expected release of Kotz’s report. Becker, 64, worked as a clerk for former U.S. Supreme Court Justice Stanley Reed after graduating from Columbia University School of Law, where he was editor-in-chief of the law review. He was the SEC’s general counsel from 1999 to 2002 before rejoining the agency in 2009. After leaving the SEC in February, he returned to law firm Cleary Gottlieb Steen & Hamilton LLP as a partner. For Related News and Information: To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net ; Joshua Gallu in Washington at jgallu@bloomberg.net To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-04-23 | Bloomberg | Travelers Rallies as Profit Climbs, Exceeds Estimates | Travelers Cos. (TRV) , the second-largest U.S. commercial insurer, led the Dow Jones Industrial Average higher after reporting first-quarter profit that beat analysts’ estimates on wider margins. The insurer surged 3.9 percent to $87.86 at 9:43 a.m. in New York. Net income rose to $896 million, or $2.33 a share, from $806 million, or $2.02, a year earlier, New York-based Travelers said today in a statement. Operating profit, which excludes some investment results, was $2.31 a share, beating the $2.02 average estimate of 21 analysts surveyed by Bloomberg. Chief Executive Officer Jay Fishman, 60, is charging some customers more for coverage and changing policy terms to boost underwriting margins as low bond yields and severe weather pressure earnings. The insurer earned an underwriting profit of 11.5 cents per each premium dollar in the first quarter, compared with 7.8 cents a year earlier. “Underlying underwriting margins increased across all our business segments,” Fishman said today on a conference call with analysts. The improvement was “in large measure a result of the pricing and underwriting action we have taken over the last few years.” The insurer also benefited from lower costs tied to natural disasters after suffering record claims from Superstorm Sandy in the fourth quarter. Catastrophes cost Travelers $65 million in the first three months of 2013 after tax and net of reinsurance, compared with $109 million a year earlier. Net investment income fell to $542 million from $593 million a year earlier. Lower reinvestment rates on the bond portfolio and a decline in income from alternative investments, such as private equity, real estate partnerships and hedge funds, contributed to the drop. American International Group Inc. (AIG) , the largest U.S. commercial insurer, is scheduled to report first-quarter results on May 2. New York-based AIG advanced 2.4 percent. To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-08-06 | Bloomberg | Treasury 3- to 30-Year Yield Difference Widens Before Auctions | The difference between yields on Treasury three-year notes and 30-year bonds widened to the most in almost two years before the U.S. sells the securities as part of its auctions this week. The so-called spread increased to 3.14 percentage points, the highest level since September 2011, according to closing price data compiled by Bloomberg. The gap signals investors are demanding higher yields to own bonds instead of riskier assets with potentially greater returns, such as stocks, as the economy grows. The U.S. is scheduled to sell $32 billion of three-year notes today, $24 billion of 10-year debt tomorrow and $16 billion of 30-year bonds on Aug. 8. “The economy is improving,” said Hajime Nagata, who helps oversee the equivalent of $120.3 billion as an investor in Tokyo at Diam Co., a unit of Dai-ichi Life Insurance Co. “Thirty-year bonds are not favorable. People prefer to hold stocks.” Benchmark 10-year yields were little changed at 2.65 percent as of 8:15 a.m. London time, according to Bloomberg Bond Trader data. The price of the 1.75 percent note due in May 2023 was at 92 10/32. Yields were 0.60 percent on three-year notes and 3.74 percent for 30-year bonds. U.S. notes and bonds due in a decade or more are the world’s worst-performing government securities, indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies show. The securities fell 10 percent in the three months ended yesterday, the biggest loss of 144 indexes. Comparative Returns Notes due in one to three years were little changed. Shorter-maturity Treasuries tend to track what the Fed does with its benchmark interest rate , which banks charge each other on overnight loans. Policy makers have kept the target for the rate in a range of zero to 0.25 percent since 2008. Stocks in the MSCI All-Country World Index returned 2.7 percent including reinvested dividends, according to data compiled by Bloomberg. The Reserve Bank of Australia cut its benchmark interest rates by a quarter point to a record low of 2.5 percent. The nation’s 10-year yield rose 14 basis points to 3.74 percent. The last U.S. three-year auction on July 9 drew bids for 3.35 times the amount of debt offered. The average for the last 10 sales is 3.44 times. Indirect bidders , the investor class that includes foreign central banks, bought 35.6 percent of the securities, the most at the monthly auctions since September. Improving Economy Treasuries fell yesterday as a report showed service industries expanded more than forecast in July, adding to signs the U.S. economy is improving and boosting speculation the Federal Reserve will reduce its stimulus program by year-end. The Institute for Supply Management ’s non-manufacturing index increased to 56 July from 52.2 the prior month. The median forecast in a Bloomberg News survey of economists called for a gain to 53.1. Data today will show the trade deficit shrank and job openings increased, according to the surveys. The Fed is buying $85 billion of Treasuries and mortgage debt each month to put downward pressure on interest rates. Volatility in Treasuries as measured by the Merrill Lynch Option Volatility Estimate MOVE Index fell to 72.66 basis points yesterday, approaching the lowest level since May. The average in 2013 is 67 basis points. Treasury trading volume at ICAP Plc, the largest inter-dealer broker of U.S. government debt , was $197.8 billion. Volume this year has averaged $317.9 billion. “Yields should slowly trend higher in response to better growth conditions, resulting in poor total returns,” Bob Doll , a senior investor at Nuveen Investments Inc., wrote on the company’s website yesterday. The Fed will “will begin to gradually wind down” its bond purchases after its September meeting, according to Doll, who helps oversee $224 billion at Chicago-based Nuveen. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net |
2024-08-06 | Bloomberg | Illinois Charges Ex-Premier Bank Officers With Loan Fraud | Four ex-Premier Bank executives were charged with fraud for soliciting bribes for loans, hiding poor financial conditions and using federal bailout money in a scheme that cost taxpayers $70 million when the bank failed. The defendants, former directors and officers of state-chartered Premier Bank of Wilmette, Illinois , were arrested at their homes on July 10 and arraigned today in Cook County Criminal Court on a multi-count indictment, Illinois Attorney General Lisa Madigan said in an e-mailed statement. The bank failed more than a year ago, resulting in a loss of $64.1 million to the Federal Deposit Insurance Corp., Madigan said. The case couldn’t be immediately confirmed through court records. Defendant Zulfikar Esmail of Evanston, Illinois, engaged in a criminal shakedown scheme, demanding bribes and ownership stakes for his children from a grocer seeking loans and lines of credit, Madigan said. Esmail also ordered construction work to be done at his home and had invoices made to show the work was done on the bank, she alleged. Bank officers submitted fraudulent reports to the state misrepresenting the bank’s financial condition, and received $5.6 million in taxpayer money from the Troubled Asset Relief Program to further the scheme, Madigan said. There was no listing for Esmail in directory assistance. To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-11-29 | Bloomberg | HSBC Set to End Quest to Build Retail Banking in Korea | HSBC Holdings Plc (HSBA) may end a 14-year quest to build retail banking operations in South Korea by closing or selling branches in Asia’s fourth-largest economy. Europe’s biggest lender by market value is reviewing options for the local retail unit, Hyonjin Suh, a Seoul-based spokeswoman, said in an e-mail today. London-based HSBC is considering shuttering the operations, the Yonhap news agency reported, citing officials and regulators it didn’t identify. HSBC is at a crossroads in Korea after KDB Financial Group Inc. abandoned plans to take over the business in July. Chief Executive Officer Stuart Gulliver , who is seeking to revive profitability and save as much as $3.5 billion in costs, this year decided to exit consumer banking in Japan. The lender said last week it’s also in talks to divest its $9 billion stake in Ping An Insurance (Group) Co., China’s second-largest insurer. “It must be tough for HSBC to be competitive in retail banking in Korea with its small scale,” said Sung Byung Soo, a Seoul-based analyst at Tongyang Securities Inc. (003470) “With the government seeking to address a rising household debt burden, growth prospects in retail banking seem slim for local and foreign banks.” South Koreans’ borrowing and credit purchases swelled to a record 937.5 trillion won ($864 billion) in the third quarter, central bank data show. The government announced measures such as requiring banks to boost fixed-rate loans and setting limits on credit-card lending last year to curb household debt. Expansion Attempts HSBC has failed in at least three attempts to build up its Korean retail banking business since it began the operations in 1998. In 1999, the U.K. lender walked away from talks with the Korean government to buy SeoulBank. In 2005, it lost a bid for Korea First Bank to Standard Chartered Plc. HSBC also abandoned a $6 billion bid to acquire Korea Exchange Bank (004940) in 2008 after authorities left the transaction in limbo for more than a year. KDB, South Korea ’s largest state-owned banking group, said earlier this year that talks on buying HSBC’s local retail business broke down because of conditions related to employment. KDB Chairman Kang Man Soo in April had agreed to buy the lender’s assets and debt at 11 South Korean branches. HSBC, whose history in Korea dates back to 1897, had 25 trillion won of assets in the country as of Dec. 31, according to its website. The bank is selling assets or exiting businesses in markets including Japan and Thailand as it retrenches amid tighter capital rules and the sovereign debt crisis in Europe. “Korea remains an important market for HSBC; we continue to invest in developing our Korean global banking and markets” units, Gareth Hewett , a Hong Kong-based spokesman for HSBC, said in an e-mailed statement. “Until we have taken a decision, we will continue to concentrate on delivering a high level of service to our customers.” To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-05-31 | Bloomberg | Rain-Delayed Corn Farmers Prefer Sowing Late to Idle Land | Corn farmers from Iowa to North Dakota who delayed planting because of unusually heavy rain may stick with plans to sow crops well beyond the date for optimum yields, rather than switch to soybeans or leave fields fallow. “I’m going to try to plant corn until June 10 before deciding to switch to soybeans or file an insurance claim,” said Mark Imoehl, 46, who farms 1,800 acres of corn and 1,100 acres of soybeans in Castalia, Iowa. “The 50 percent of the corn that is planted has good yield potential, and I just need some dry weather to get the rest planted.” Corn futures are up 10 percent in the past two weeks as planting delays fueled concern that output would fall short of the record crop forecast by the U.S. Department of Agriculture. While 86 percent of the land was sown as of May 26, that’s behind the pace in 2012, when 99 percent was completed, USDA data show. The U.S. is the world’s largest grower and exporter. Midwest rainfall was three times normal in April and May, including 17.67 inches since March 1 in Iowa, the top U.S. corn grower, that was the wettest on records going back to 1873, according Harry Hillaker, the state climatologist. That left 13.6 million acres unplanted, including 6.4 million in Iowa, Minnesota, North Dakota and Wisconsin , USDA data show. Because yields are highest when corn is sown by mid-May, planting may be as much as 4 million acres less than the USDA’s forecast, according to Roy Huckabay at the Linn Group in Chicago. Starting tomorrow, most farmers with government-subsidized crop insurance can file claims that pay 60 percent of coverage for land that was unplanted because of rain. Alternatively, growers can plant and then file to get 60 percent to 85 percent of coverage for losses at harvest, though the payout is reduced the later the claim is filed. The last option is to switch to soybeans, which can be planted later in the year and have a June 10 to June 20 start for insurance claims. Yield Outlook While planting corn in June can reduce yields by 20 percent, the increased soil moisture offers optimism for a big crop and rebuilding U.S. inventories that are headed for a 17-year low, Citigroup Inc. said in a May 29 report. Last year’s drought, the worst in the U.S. since the 1930s, cut corn production by 13 percent and helped send payouts on crop- insurance claims surging 59 percent to a record $17.27 billion, the USDA reported on May 28. This year, the government forecast a 31 percent rebound in production to a record 14.14 billion bushels as farmers said they intended to sow 97.28 million acres, the most since 1936. As of May 26, 86 percent was planted, compared with a five-year average of 90 percent. Areas still unsown included 2.1 million acres in Iowa, 1.6 million each in Minnesota and Wisconsin, and 1.1 million in North Dakota. Planting Claims Based on the past six years of crop-insurance claims, farmers idled on average 1.43 million corn acres when wet weather prevented planting, with a peak in 2011 at 3 million, data from the USDA’s Risk Management Agency show. Corn futures for delivery in December, after the U.S. harvest, rose 1.6 percent to $5.715 a bushel at 12:32 p.m. on the Chicago Board of Trade. Prices reached an 11-month contract low of $5.12 on May 21. The crop-insurance base price, used as a benchmark for claims, is $5.65, established by the average futures close in February. Farmers in Illinois will plant past the insurance deadline because of the potential for high returns with improved soil moisture, said Scott Docherty, the general manager for Top Flight Cooperative in Monticello, Illinois, which buys more than 34 million bushels of corn and soybeans annually in five counties from Decatur to Champaign. Yields may average 165 bushels an acre, up from 117 bushels last year and near the 10-year average, and may reach 185 bushels with normal weather over the next three months, Docherty said. Concerns Dissipating “Market concerns about the much delayed start to the U.S. corn planting cycle seem to be dissipating,” Aakash Doshi, a Citigroup analyst, said in a May 29 report. “Price risks should be to the downside” as December futures fall to $5, Doshi said. Farmers probably will sow 96.5 million acres and boost output to a record 13.98 million bushels on yields of 158.5 bushels an acre, Doshi said. Inventories at the end of August 2014 will double from a year earlier to more than 1.9 billion bushels, the analyst said. Some farmers that paid higher premiums on policies that provide 85 percent coverage and have lower costs for fertilizer and rents are already making the decision to file claims tomorrow. Abandoning Land Greg Studeman, 51, who farms 1,200 acres with his brother near Plato, Minnesota , says he can net about $200 an acre from crop insurance, compared with the expected loss of $90 an acre if he plants after tomorrow, because of lower yields. In 2011, when he planted after June 1, yields were 125-140 bushels, down from an average of more than 180. After planting 830 acres this year, he expects to idle the remaining muddy fields because the farm got as much as 7 inches of rain this week. Acreage abandoned because of rain in northern areas may be offset by the yield gains for crops already in the ground, according to Huckabay, an executive vice president at Linn Group. Prices also are under pressure from record harvests in Brazil and Argentina and improving prospects for crops in Russia, Ukraine and Europe , he said. U.S. export sales in the marketing year that ends Aug. 31 are forecast to fall to the lowest since 1972, the USDA said May 10. “It’s unlikely corn can build a lasting rally with record supplies coming out of South America ,” Huckabay said. “Farmers should be more aggressive selling this planting rally with the overall improvement in soil-moisture reserves. It would take a drastic shift to hot, dry conditions in July and August to damage yield potential.” To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-07-16 | Bloomberg | Letta Says EU Members Underestimate ‘Huge Risk’ of U.K. Exit | Italian Prime Minister Enrico Letta said the chances of the U.K. leaving the European Union are being underestimated by members, who should start planning now for the changes needed to keep the group intact. “In the European Union countries we are under-evaluating the risk in two, three years of having the U.K. out of Europe ,” Letta said today in a question-and-answer conversation at Chatham House in London. “It is a huge risk.” U.K. Prime Minister David Cameron and his Conservative Party are pushing for a referendum on EU membership. Letta, in his third month as premier, described himself at Chatham House as a “committed pro-European.” He will meet Cameron tomorrow. “We need treaty changes to allow the U.K. to remain on board with a different link with Brussels,” Letta said. “We have to prepare a discussion on trying to prevent this risk.” Letta, 46, is urging the EU to embrace flexibility for non-euro members, like the U.K., as he pushes for greater integration among the 17 countries participating in the monetary union. At an EU summit in Brussels last month, Letta called on euro allies to advance plans to build a banking union. “We need an arrangement that can accommodate countries that want to move toward greater political and economic integration and countries who are satisfied with cooperation around the single market,” Letta said. Backlash The EU has faced a backlash in public sentiment in countries hardest hit by recession in the last two years. In Italy , the euro-skeptic Five Star Movement of Beppe Grillo won a quarter of the votes in February elections, upending the traditional balance of power. Five Star now acts as the main lawmaker opposition to the ruling alliance led by Letta and former Prime Minister Silvio Berlusconi. Letta said he is concerned about an EU “legitimacy crisis” in the eyes of voters and vowed to work with the U.K. on reforming the union. “We both need a Europe that is more concrete, less rhetorical, more suited to the current global economy,” Letta said. “One of the main irritants is a bureaucratic and intrusive European Union regulation. We can cooperate together on that regulation simplification and how to make the European common institution leaner and more efficient.” To contact the reporter on this story: Andrew Frye in Rome at afrye@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-11-01 | Bloomberg | MGIC Rallies as Freddie Mac Insurance Clash Eases | MGIC Investment Corp. (MTG) led a rally of mortgage guarantors after the company reached a preliminary deal with Freddie Mac to resolve a coverage dispute that threatened to prevent the insurer from backing some loans. MGIC jumped 16 percent to $1.99 at 10:05 a.m. in New York. Philadelphia-based Radian Group Inc. (RDN) climbed 15 percent after reporting its first profit in four quarters. Radian and MGIC have outlasted rivals such as PMI Group Inc. and Triad Guaranty Inc. that were prohibited by regulators from selling new coverage after capital fell short or the missed standards imposed by Freddie Mac. Milwaukee-based MGIC will make payments to Freddie Mac over four years under the arrangement, which was announced yesterday, the deadline for reaching a deal over how much coverage the insurer must provide on groups of loans it backed for the government-sponsored mortgage firm. MGIC is “pleased with the spirit of cooperation all parties have again demonstrated” in reaching the preliminary accord, Chief Executive officer Curt Culver said in a statement late yesterday. “While there can be no guaranty the open matters can be successfully resolved, I am hopeful we will continue to make progress.” Genworth Financial Inc. (GNW) , which backs mortgages and sells life insurance, advanced 5.4 percent. Old Republic International Corp. (ORI) climbed 1.4 percent. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-09-28 | Bloomberg | Dubai Shares Fall a 2nd Day on Concern September Gains Overdone; Oil Drops | Dubai shares declined for a second day on speculation gains this month are overdone and as global markets fell on concern that economic growth may slow. Crude oil dropped, ending a four-day rally. Emaar Properties PJSC retreated 0.8 percent after the builder of the world’s tallest tower postponed a board meeting. Gulf News reported Indian officials blamed Emaar’s local unit for poor facilities at the Commonwealth Games village. The share have surged 16 percent this month. Dubai Islamic Bank PJSC, the biggest shariah-compliant lender in the United Arab Emirates, decreased for the first time in four days. The DFM General Index slipped 0.5 percent to 1,690.19 at the 2 p.m. close in Dubai, trimming the gain for September to 14 percent. “Keeping in mind September’s strong performance for the market, it is natural to see profit-taking,” said Marwan Shurrab , assistant fund manager and chief trader at Gulfmena Alternative Investments Ltd. in Dubai. “We follow international markets, so if they sell off, we sell off. Nevertheless the bullish sentiment is still intact.” European stocks slipped for a second day before reports that may show gains in American home prices slowed in July and consumer confidence this month cooled. Crude oil declined after analysts forecast an increase in U.S. gasoline supplies, signaling demand recovery in the world’s largest crude user may falter. Oil retreated as much as 1.3 percent to $75.53 a barrel. The six nations of the Gulf Cooperation Council supply about a fifth of the world’s oil. Emaar MGF Dubai’s measure jumped 6.2 percent since Dubai World, one of three main holding companies, said Sept. 10 that 99 percent of creditors agreed to alter the terms on $24.9 billion of debt. Twenty-one shares including Emaar were added to the FTSE’s Global Equity Index after the close on Sept. 17 as the U.A.E. was classified as a secondary emerging market, also helping push up local stocks this month. Emaar retreated to 3.77 dirhams. The company postponed its board meeting until tomorrow to discuss its performance and matters of “importance.” Delhi Chief Minister Sheila Dikshit and organizing committee chairman Suresh Kalmadi have blamed Emaar MGF for problems at the Commonwealth games village, Gulf News reported today. Emaar MGF said housekeeping issues by the organizers are behind the “current controversy.” Dubai Islamic, up 24 percent in September, slipped 1.7 percent to 2.30 dirhams. The Bloomberg GCC 200 Index dropped 0.2 percent, Saudi Arabia’s Tadawul All Share Index fell 0.7 percent and Bahrain’s gauge retreated 0.2 percent. Oman’s MSM 30 Index lost 0.3 percent and Abu Dhabi’s measure slipped 0.1 percent. Qatar’s index rose 0.2 percent and the Kuwait SE Price Index gained 0.6 percent. To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net or To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net . |
2024-04-04 | Bloomberg | Eight Hurricanes May Form in Atlantic Basin in 2011, U.K. Forecaster Says | The Atlantic basin’s storm season may be more active than usual with eight hurricanes forming in 2011, insurer-backed U.K. forecaster Tropical Storm Risk said. Four of those will become “major” systems, blowing at a minimum of 111 miles (179 kilometers) an hour, the research group said today in an e-mailed statement. Altogether at least 14 storms may blow at 39 miles (63 kilometers) an hour or more, the level that qualifies them to be named, the forecaster said. In a typical year the region comprised of the Atlantic Ocean and adjoining land has 10 to 11 storms, with 6 being strong enough to rank as hurricanes and 3 as major systems. The U.S., which wasn’t hit by a hurricane-strength storm in 2010, may not escape this year, according to the group, which predicted two hurricanes will be among four named storms to hit the biggest economy in this year’s June 1-Nov. 30 season. Tropical Storm Risk last year correctly predicted an active season, though its May 25 call for 16 named storms to form was short of the 19 that eventually hit the Atlantic. It also forecast that eight hurricanes would form and 12 did. The London-based group is affiliated with University College London and is backed by the insurers Aon Benfield, RSA Insurance Group Plc and Crawford & Co. To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net. To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net . |
2024-01-06 | Bloomberg | Shell to Tow Grounded Alaska Drill Rig 30 Miles in Recovery Plan | Royal Dutch Shell Plc (RDSA) plans to tow the drilling rig that ran aground in Alaska about 30 miles to a safe harbor after naval architects determined the vessel is safe to move. The Kulluk, which ran aground after breaking from a tow boat during a storm on Dec. 31, will be moved to Kiliuda Bay, where more tests can be conducted, according to a Jan. 5 statement on the website of the Unified Command in Anchorage. The timing depends on weather, tides and readiness. The vessel remains upright with its fuel tanks intact, according to the statement. It is grounded near Sitkalidak Island, on the north edge of Ocean Bay, about 60 miles (97 kilometers) southwest of Kodiak, Alaska. “Salvage teams are currently aboard the vessel and preparing for the recovery operations,” the Unified Command said. “Safety remains the number one priority and will drive all facets of the operation.” The accident is the latest setback in Shell’s efforts to tap Arctic oil. Environmental groups said Jan. 3 they would ask President Barack Obama to suspend all current and pending Arctic drilling permits until operators prove they can work safely in the region’s harsh conditions. The Unified Command system includes the U.S. Coast Guard, Alaska Department of Environmental Conservation, Kodiak Island Borough and Shell. As much as 143,000 gallons of diesel and about 12,000 gallons of other refined oil products are currently stored on board the Kulluk, according to the website. The U.S. Army sent two Chinook helicopters to the area on Jan. 5 to help transport equipment for the recovery, according to the Sunday Telegraph. To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-08-08 | Bloomberg | Greece’s Power Generator Tests Euro Fitness Amid Blackout Threat | In the mountains of northern Greece lies an $800 million power plant whose future may help determine whether the country can salvage its euro status. The facility near Florina, a town known as “Where Greece Begins,” is the most modern of four production units that state-controlled Public Power Corp. SA (PPC) is scheduled to sell to competitors to meet four-year-old European Union demands that the country deregulate its energy market. The most powerful Greek union is now threatening nationwide blackouts at the height of the summer tourist season to derail the plan. “We will make saving PPC a cause for all Greeks,” Nikos Fotopoulos, head of the 18,000-strong GENOP union, said last month in his Athens office adorned with photos of communist revolutionaries including Vladimir Lenin and Leon Trotsky. “We fight our battles with faith and passion, and we fight them hard. A serious state must control businesses of strategic importance.” While on the surface PPC is another tale of Greek conflict during the worst economic crisis of modern times, it encapsulates how Greece has found itself at the sharp end of Europe ’s struggle to keep the euro intact and what the country still faces to defend its place in the currency. Founded in 1950 to distribute domestically generated electricity to Greek citizens, PPC is a microcosm of political protection, vested interests and reliance on foreign financing that have defined the economy for decades. Resisting Change It is the country’s biggest employer and its eight plants fired by the soft, brownish-black coal called lignite meet half of Greece’s power demand. PPC is fighting to keep its monopoly on the fuel, which is so vital to the company it’s in the process of moving a whole village to mine more of it. “PPC has a very strong union that so far has hindered changes,” said Stefanos Manos, a former New Democracy industry minister who stood in the last election for his own party. “The government needs a clear strategy of what it wants to achieve in the energy sector in general and with the company in particular. I have yet to see evidence of that.” Since forming a government after the June 17 election, the second in six weeks, Prime Minister Antonis Samaras and his ministers have been in talks with the EU, European Central Bank and International Monetary Fund to keep aid flowing during the fifth year of recession. They are working on identifying 11.5 billion euros ($14.2 billion) of further budget cuts and are 3.5 billion euros to 4 billion euros short of the target, Finance Minister Yannis Stournaras said this week. Selling Assets Samaras, 61, has vowed to make the sale of state-owned assets a priority and last month appointed former PPC Chief Executive Officer Takis Athanasopoulos as chairman of the organization managing the privatization program. Athanasopoulos, 68, a U.S.-trained business manager and university professor, battled Fotopoulos, 48, at PPC during his tenure over issues ranging from job cuts to teaming the company with partners such as Germany ’s RWE AG. (RWE) PPC employs 20,000 people, compared with about 38,000 in the mid-1990s, and is now restricted to one new hire for every 10 departures. “We are determined, as a government of three parties, to press on with structural changes, with state-asset sales,” Samaras told reporters on July 26. His New Democracy party has formed a coalition with Democratic Left and Pasok, the socialist group traditionally backed by the unions. Reform Credentials PPC is a test of Samaras’s ability to prove to the euro area and IMF that Greece is meeting their demands to open markets to competition, scale back the state and cut red tape. The asset-sale program also may involve lowering the state’s stake in PPC to a minority from the current holding of 51 percent. The company’s shares collapsed by 61 percent in the past year and its net debt at the end of the first quarter stood at 4.85 billion euros. Greece first has to resolve a dispute with the EU over PPC that predates the debt crisis. The fight centers on Greece’s failure to heed EU competition rules and affects the Melitis electricity plant near Florina in the northern Greek region of Macedonia, a focal point of the 1946-1949 civil war in which communist forces were defeated. Melitis, with a Russian-built generator and emissions- control technology from German units of France ’s Alstom SA (ALO) , is PPC’s state-of-the-art prized asset. Lignite Mines EU regulators ordered Greece in March 2008 to loosen PPC’s stranglehold on lignite, saying competitors face unfair market barriers. The EU said Greece violates European law by giving PPC “quasi-exclusive” access to the coal. PPC depends on lignite, among the most polluting fuels, to help compensate for losses in its natural-gas business. The Athens-based company said its cost of production is about half as much in lignite as in cleaner gas. Greece is the third- largest lignite producer in the EU after Germany and Poland , according to the European Association for Coal and Lignite. “We don’t consider giving existing lignite units to private groups an investment in, and contribution to, the country,” Fotopoulos, the union leader, said in a July 26 interview. “The only winners from giving ready-made lignite factories to private groups are the private groups.” Political Change The previous New Democracy government proposed to meet the EU’s 2008 deregulation order by expanding mining capacity. Seeking to give competitors to PPC access to 40 percent of exploitable Greek lignite reserves, the government decided to invite bids for exploitation rights at four deposits, including one called Vevi from which the nearby Melitis plant is counting on getting supplies. Greek elections in October 2009 produced a Pasok government that pulled the plug on that plan, which EU regulators had approved two months earlier. The Pasok government of former Prime Minister George Papandreou , pledging to promote cleaner energy, ended up preparing to sell four existing PPC power units, including Melitis, and to limit new exploitation rights to the nearby Vevi deposit, which had been mined until about 10 years ago. The Pasok plan remains on the table as the new Samaras administration evaluates options. The other three units on the sale list include two at the Amindeo power station southeast of Melitis and one in Megalopolis in southern Greece. “The government is committed to proceeding with the privatization of PPC in an organized fashion,” Assimakis Papageorgiou, Greece’s deputy energy minister, said in an Aug. 1 e-mail. He declined to elaborate on the plans, saying they are still being developed. Ticking Clock Time is pressing not just for the government, which is scrambling to meet an Aug. 20 deadline to repay 3.1 billion euros of debt held by the ECB, but also for Melitis. It has been forced to take stopgap steps, including importing coal, after losing supplies from two nearby lignite mines. One mine, Achlada, which furnished more than half of Melitis’s lignite in 2011, shut down temporarily earlier this year as Greece’s economic slump deepened. The other, Klidi, closed four years ago after a hillside collapsed. The 330-megawatt unit at Melitis, whose technology limits discharges of pollutants such as sulfur dioxide, nitrogen oxides and dust particles, is getting some of its lignite from as far away as Turkey and Bulgaria , according to Constantinos Tzeprailidis, operation department manager at the plant. Natural Wealth “It’s a little difficult,” Tzeprailidis said in a July 28 interview in his office that looks onto countryside where sheep graze and wheat, corn and sunflowers grow. “It’s a shame to have national wealth that’s not exploited.” About 75 kilometers (47 miles) south of Melitis, amid the lignite mines that make up Greece’s energy heartland in the Kozani area, PPC’s hunger for the fuel is more conspicuous. The landscape is marked by active open-pit mines that supply larger, older, PPC power stations nearby. These include Agios Dimitrios, the company’s largest lignite-fired station that alone meets about 20 percent of Greece’s electricity consumption, and Ptolemaida, the oldest station where power generation began in 1959. “We work 24 hours a day, 365 days a year,” Olga Kouridou, director of mining for PPC in the region, said on July 27 as she approached a 50-meter precipice in the area’s largest mine. A German bucket-wheel excavator, the size of a multi-story building, churned the earth and dozens of dump trucks roared down the makeshift dirt roads. “We don’t stop at all. We have enormous activity,” she said. Moving Earth Residents of the nearby village of Mavropigi can attest to that. The village, whose name in Greek means “black source,” is due to be moved within months to make way for an expansion of mining by PPC. Mavropigi will be the sixth village in the Kozani area to be relocated since the 1970s because of mining. Dimitris Emmanouil, a retired construction worker who was born in Mavropigi in 1941 and got married there, said he and other residents hear the ground moving at night as a result of the digging for lignite. “It’s dangerous now because the soil is slipping,” he said on July 27 while seated at a table in a closed-down café in Mavropigi, where earthquake-like faults in the ground are visible. “There’s no other choice. The village has to go.” PPC needs the lignite under Mavropigi and surrounding fields for a planned 1.4 billion-euro unit at the Ptolemaida plant, according to Ioannis Kopanakis, an Athens-based general manager for generation at PPC. The company is asking German development bank KfW to arrange a 700 million-euro loan and intends to fund the rest itself, he said. “The matter has gone to the highest decision-making levels in Germany,” Kopanakis said in a July 30 interview. “We expect progress in these issues in the near future.” This is the kind of project that PPC representatives say highlights the company’s importance to Greece, boosting investment, jobs and technological expertise. “It’s the last producer on this scale that is left in Greece,” said Kouridou, the mining director in the Kozani region. “We need to keep that. If this stops, the whole area will lose out, but so will Greece.” To contact the reporters on this story: Jonathan Stearns in Kozani, Greece, at jstearns2@bloomberg.net ; Natalie Weeks in Athens at nweeks2@bloomberg.net To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net ; Jerrold Colten at jcolten@bloomberg.net |
2024-05-23 | Bloomberg | Solar Insurers Turn Kingmakers Over Panel Survival Doubts | When True Green Capital Management LLC chose a solar panel maker for a rooftop installation in New Jersey , the firm’s biggest concern was whether the manufacturer would survive long enough to guarantee the equipment. The New York-based private equity fund made its Chinese manufacturer buy insurance to back the 25-year warranty on its panels to close the contract. If the supplier went bust, PowerGuard Specialty Insurance Services of California would ensure the panels installed performed as promised. “Frankly, we see insurance as crucial,” said Bo Wiegand, principal at the fund, who declined to name the supplier of the installation near Carteret, citing a confidentiality agreement. “Many of these companies, even some of the more recognizable name brands, likely won’t be operating in 10 to 15 years. They may get acquired, they may go out of business. We just don’t know.” In the past year, lenders and investors started demanding extra protection from suppliers after at least 11 U.S., German and French solar equipment-makers failed, including Solyndra, backed by a $535 million U.S. government loan. The solar industry is suffering its biggest shakeout yet, beset with 53 percent production overcapacity and collapsing profit margins. The industry’s turmoil means Munich Re , the world’s biggest reinsurer, and two Southern California rivals are playing a hand determining which panel-makers survive as First Solar Inc., (FSLR) Suntech Power Holdings Co. (STP) and competitors fight for orders. Munich Re’s Stance Munich Re as well as PowerGuard of Irvine , California, and SolarInsure Inc. of Costa Mesa , California, say they are among the few to offer the niche product and have turned away more than a dozen panel makers seeking coverage in the last year. The three companies say the majority of panel sales still take place without outside warranty insurance as most manufacturers don’t carry coverage. They declined to name which manufacturers hold policies. “The Solyndra situation changed a lot in the sector,” said Ara Agopian, president of SolarInsure, which declined to sell coverage to Solyndra about a year before it went bust in September. “Developers and their lenders are asking who is insured and who’s not. Insurance helps in winning an order.” Solar Frontier KK, a Tokyo-based thin-film panel-maker owned by the Japanese refining arm of Royal Dutch Shell Plc (RDSA) , said its coverage from Munich Re gives it an edge. “This is a weapon we were able to acquire ahead of competitors,” Senior Vice President Atsuhiko Hirano said in an interview, contending that his company may be the only Japanese panel-maker that’s insured. “Especially during a shakeout period abroad like now when it’s tough for companies to keep going, customers are concerned if manufacturers can follow through.” Silicon Valley Cues Solar manufacturers took a cue from Silicon Valley, from where many of the industry’s executives hailed, when they began offering warranties on panel performance similar to those offered by early silicon chipmakers, said Mike McMullen, founding principal at PowerGuard. The warranties were intended to reassure investors that a new, unfamiliar technology would perform as expected on projects requiring big, upfront investments with payback periods that span decades. Solyndra’s customers, which include PepsiCo Inc. (PEP) and Coca- Cola Co., may be among the earliest in the solar industry to learn such warranties in some cases may offer little protection after the company went bankrupt. Solyndra’s modules, based on a unique cylindrical design that differed from traditional flat panels, came with a 25-year warranty that guaranteed its equipment would generate at 90 percent or more of peak output for the first 10 years and at no less than 80 percent for the remainder. Bankruptcy Potential “Every time we have a bankruptcy, it opens up people’s eyes,” McMullen said. “There’s no component you can change out for Solyndra.” Under accounting rules, manufacturers are required to set aside cash to cover expected warranty claims. Munich Re began offering manufacturers insurance after calculating such reserves are probably inadequate because even one serial defect, which usually span several production years, could potentially bankrupt a company. “In recent months, one or two solar manufacturers have had to disclose warranty claims,” said Christian Scharrer, Munich Re’s head of green technology solutions. “There’s a clear need to manage the warranty risks balance sheet-wise.” Warranty Claims First Solar of the U.S., the largest thin-film panel maker, has seen warranty costs escalate after manufacturing defects from 2008 to 2009 prompted more than 5,000 customer claims, according to Angelo Zino, New York-based analyst for Standard & Poor’s. In February, it set aside $37.8 million for increased warranty claims, saying its modules may suffer “increased failure rates in hot climates.” First Solar’s warranties are backed by reserves and the company sees no reason to use a third-party insurer, spokesman Ted Meyers said. “If they go out of business, who has to eat that? Their clients,” PowerGuard’s McMullen said. “It’s not acceptable to say we have all this cash on the side to meet warranties because that could all disappear in bankruptcy proceedings.” Agopian estimates that no more than 25 percent of the top panel makers are covered. Chinese companies are more likely to be insured than their U.S. or European or Japanese rivals, according to PowerGuard’s McMullen and Agopian. Third-Party Coverage Bloomberg News identified through interviews, statements and press releases at least eight companies that have purchased some form of third-party insurance. They include LDK Solar Co. (LDK) , Canadian Solar Inc. (CSIQ) , China Sunergy Co., (CSUN) Japan ’s Solar Frontier, Solairedirect SA of France, Taiwan’s NexPower Technology Corp., Signet Solar Inc. and SolFocus Inc. Some of the largest such as First Solar aren’t covered, with many saying it’s not necessary as they’re financially sound. The Bloomberg Large Solar index tracking 17 companies in the industry slumped 75 percent the past year through May 22. Customers of Suntech, the world’s biggest crystalline panel maker, don’t see the value in third-party insurance, Chief Commercial Officer Andrew Beebe said. Sharp Corp., (6753) Japan’s largest thin-film module maker, also doesn’t “see the need to be insured because we don’t foresee shutting our solar business,” spokeswoman Miyuki Nakayama said May 7 by phone. Kyocera Corp., (6971) Japan’s biggest crystalline panel maker, is focused on quality and doesn’t plan to get insurance, spokeswoman Sanae Iwasaki said May 8. Make or Break SunPower Corp. (SPWR) , the second-largest U.S. panel maker, declined to say whether it was covered in an April 14 e-mail. Norway’s Renewable Energy Corp. said in an April 13 e-mail that it’s exploring third-party insurance. Third-party insurance could make or break a deal that East West Bancorp Inc. (EWBC) is working on in Florida , said Don Danh, senior vice president of emerging markets at East West Bank , which set up a $47 million fund in February with U.S. Bancorp to finance 14 solar projects. “It’ll be contingent on whether it carries insurance,” Danh said by phone on May 3. With growing demand for protection amid speculation of further consolidation in the industry, insurance offerings are expanding. Assurant Inc. (AIZ) , a Phoenix-based supplier of homeowner’s insurance, began offering coverage this month that eases investors’ concerns about warranties being upheld. Munich Re introduced a new policy in January so that lenders and investors can buy their own coverage against supplier insolvency. Previously, Munich Re only sold policies to manufacturers and bankruptcies weren’t covered. To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net |
2024-10-21 | Bloomberg | Cheap European CLOs Offer Investor ‘Carrots,’ Citigroup Says | European collateralized loan obligations are undervalued and investors should take advantage of the biggest discount to U.S. deals this year to boost holdings of the debt, Citigroup Inc. analysts said. An average AA rated CLO in Europe trades at 64 percent of face value, compared with about 76 percent in the U.S., analysts wrote in a note to clients Oct. 20. Securities rated A trade at 53 percent in Europe versus 68 percent in the U.S. “Euro CLO liabilities look cheap,” according to the analysts led by Ratul Roy in New York. He cited three “carrots” to tempt investors: the declining cost to convert dollar payments into euros and their discount to both U.S. deals and the debt used to collateralize the notes. European CLOs have been tainted by the region’s spreading sovereign crisis, though the funds have about 13 percent of their assets in peripheral countries, according to Citigroup. CLOs package high-yield loans into securities of varying risk and return, including equity portions designed to absorb losses first and protect holders of top-rated bonds. The cost for European banks to fund in dollars rose further today, with the three-month cross-currency basis swap at 93.6 basis points below the euro interbank offered rate from 91.5 basis points yesterday, according to data compiled by Bloomberg. CLOs in Europe also trade at a wider discount to leveraged loans -- the collateral for the notes -- than in the U.S., Citigroup said. The average price for European CLOs is 81 percent of face value, while loans are quoted at about 90 percent. U.S. CLOs are at 83 percent with loans at 90 percent. Issuance Push Sales of U.S. CLOs are likely to pick up in the fourth quarter as the funds exploit a 150 basis-point increase since mid-July in the premium loans pay over benchmark rates, Citigroup said. The widening has exceeded that of new CLOs, which have increased an average 80 basis points. A basis point is 0.01 percentage point. That may push full-year CLO issuance in the U.S. to $12 billion compared with about $5 billion in 2010, Citigroup said. CLOs are attractive relative to high-grade corporate bonds, the analysts said, with spreads at the widest this year. “It might be time for insurance companies to come back” after they bought about $5 billion of CLOs in the first half of the year, they said. “Unless rates turn negative, we do not see much upside in corporate bond returns.” To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net |
2024-10-09 | Bloomberg | Munich Re’s Asset Manager Targets Real Estate Lending, REITs | Munich Re’s asset-management unit plans to invest more in real estate lending and REITs as returns from direct property investments come under pressure and banks cut their loan portfolios. The company is turning to real estate investment trusts and is exploring “options for commercial real estate lending to offer our clients low-risk and stable long-term returns,” Guenter Manuel Giehr, management board member and global head of real estate for Munich Ergo AssetManagement GmbH, said in an interview in Munich. MEAG, the asset manager for the world’s biggest reinsurer and its primary insurance unit Ergo Versicherungsgruppe, plans to increase its 5 billion-euro ($6.5 billion) real estate lending portfolio by about 20 percent over the next two to three years, said Giehr. Opportunities may arise as European banks cut their 2.4 trillion euros of lending to real estate companies to meet tighter capital regulations. “The trend in real estate lending is favorable as banks need to disband or reduce such portfolios to comply with Basel III rules,” Giehr said. “The market will be reallocated over the next two years or so and insurers’ asset managers consider the senior segment as most appealing.” European banks will cut real estate lending by about 25 percent to meet tighter rules agreed by the Basel Committee on Banking Supervision , Morgan Stanley wrote in a March report. About 4 percent of MEAG’s 226 billion euros of assets under management are invested in real estate, including as much as 250 million euros in REITs. Retail Parks MEAG’s focus in property acquisitions is on “large-scale specialist retail parks in regions that do not appear to be too attractive on the first glance, but where a current return of 7 percent per year is achievable,” Giehr said. Logistics centers or harbors and airports also offer potential, he said. “Residential real estate currently receives enormous attention from private investors, which has led to a drastic increase in price levels ,” Giehr said. “In view of potential recession risks, we find the purchase of pure office properties currently somewhat difficult to justify.” REITs, which invest in a portfolio of property assets, are also an attractive asset class for MEAG, said Giehr. “REITs offer more transparency, better liquidity and add to our portfolio diversification,” said Giehr, who is targeting 10 percent of MEAG’s real estate assets for such investments. “REITs satisfying our valuation criteria, including an analysis of the underlying property portfolio, will be picked up at any opportunity, especially in markets abroad such as the U.S., Switzerland , Japan , Hong Kong or Singapore .” The Bloomberg Real Estate Investment Trust Index (BBREIT) , which tracks 111 REITs based in the U.S. and Canada has gained 13 percent this year, after advancing 4.1 percent in 2011 and 25 percent in 2010. 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 |
2024-07-24 | Bloomberg | Thunderstorms, High Winds May Strike Massachusetts Coast | Thunderstorms that delayed some air traffic in Chicago early today may move east, taking high winds, hail and heavy rain to Washington and the mid-Atlantic, according to the U.S. Storm Prediction Center. The East Coast from Delaware to South Carolina has a 30 percent chance of experiencing damaging winds as the front moves from the Midwest to the Atlantic later today, according to the center in Norman, Oklahoma. The coastline from Massachusetts to South Carolina, including New York and Boston , has a 15 percent chance, the center’s forecast said. Severe thunderstorms between the large airline hub cities of Chicago, New York and Atlanta often disrupt air travel throughout the U.S. Such fast-moving storms, which may include tornadoes, accounted for about $8.8 billion in insured losses in the U.S. in the first six months of 2012, according to the Insurance Information Institute in New York. Some flights to Chicago’s airports were delayed early today because of passing thunderstorms, according to the Federal Aviation Administration website. Any cool air the storms bring with them will be short-lived along the mid-Atlantic, as temperatures in Washington are expected to reach 99 the day after tomorrow, according to the National Weather Service. Eastern Cooling By next week, the East Coast from the Canadian Maritimes to North Carolina may be experiencing more seasonal temperatures, according to Matt Rogers , president of Commodity Weather Group LLC in Bethesda, Maryland. “The East Coast sees some occasional heat bursts, especially in the short term, but mainly average seasonal to slightly above normal for the 6- to 15-day period,” Rogers said. The East Coast may remain seasonal through most of the rest of August, while the heat and drought in the Midwest will probably continue, according to the latest long-range forecast from Weather Services International in Andover, Massachusetts. “With cooler-than-normal temperatures expected along the East Coast in August, natural gas prices could see some late- summer price weakness, as gas inventories begin to approach last year’s record level by the end of the month,” said Chris Kostas , a senior power and gas analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts, who contributed to the WSI forecast. Midwest Rainfall For the next two weeks, passing thunderstorms may bring some relief to the drought-parched Midwest. The region will probably lag behind the normal amount of rainfall, said Joel Widenor, co-founder of Commodity Weather. Temperatures are expected to remain 5 to 8 degrees above normal throughout the region during the period, he said in a note to clients today. The normal average temperature in New York for Aug. 1 is 78, according to MDA EarthSat Weather in Gaithersburg, Maryland. It’s 74 in Boston; 80 in Washington; 85 in Houston; 76 in Chicago ; 80 in Atlanta; 67 in Seattle and 76 in Burbank, California. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net |
2024-03-08 | Bloomberg | Stocks Advance With Commodities as Greece Moves Closer to Swap; Euro Gains | Stocks (MXWD) rose, sending the Standard & Poor’s 500 Index to its biggest back-to-back rally of the year, while commodities gained and the euro strengthened as Greece moved closer to completing its debt restructuring. The S&P 500 advanced 1 percent to close at 1,365.91, with the two-day advance erasing its 1.5 percent drop on March 6. The Dow Jones Industrial Average increased 70.61 points to 12,907.94. The euro appreciated 0.9 percent to $1.3271, while the yen weakened against all 16 most-traded peers. Yields on 10- year U.S. Treasury notes increased four basis points to 2.02 percent. The S&P GSCI Index climbed 0.8 percent as 17 of its 24 commodities advanced. Greece’s government got about 85 percent of bondholders to swap their holdings of the country’s debt for new securities in the biggest restructuring in history, a banking official said. Stocks (MXWD) also rallied as German industrial production grew 1.6 percent in January, while U.S. Labor Department data showed jobless claims remained at a level consistent with an improving economy. European Central Bank President Mario Draghi said surveys confirm signs of stabilization in the euro-area economy. “There are plenty of things to worry about, but it is hard for investors to ignore multiple signals of optimism,” Ann Miletti, who helps oversee $209 billion as portfolio manager for Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin , said in an e-mail. “News that the Greek bond deal looks close to being approved is a positive for the global markets and domestically the data that is coming in continues to show hints of improving trends,” she said. “The data points make it seem like we have a good chance to continue to march higher.” Rebound After Tumble The S&P 500 climbed for a second day after slumping 1.5 percent on March 6, its worst drop since Dec. 8. Applications for unemployment insurance increased to 362,000 last week, Labor Department figures showed. Economists forecast 352,000 claims, according to the median estimate in a Bloomberg News survey. The Labor Department will report monthly jobs data tomorrow, with economists forecasting an increase of 225,000 private jobs and total non-farm payrolls growth of 210,000. Alcoa Inc., Caterpillar Inc. and DuPont Co. rose at least 1.7 percent to lead gains in 26 of 30 stocks in the Dow. Monsanto Co. and General Electric Co. added at least 1.4 percent commodity producers and industrial shares led gains among all 10 of the main industry groups in the S&P 500. The S&P 500, which reached an almost four-year high last week, has rallied 24 percent from last year’s low in October and is up 8.6 percent in 2012 in its best start to a year since 1998. ‘Race Is Still On’ “While we may have stumbled for a day or two, I think the race is still on,” Laszlo Birinyi , founder of the Westport, Connecticut-based firm Birinyi Associates Inc., said on Bloomberg Television’s “In the Loop with Betty Liu.” He reiterated his call that the S&P 500 has the potential to reach a record 1,700 this year should economic growth surprise investors. “Stay with it, don’t try to get too cute, don’t be defensive, and keep the possibility of a really good market on the table.” American International Group Inc. retreated 3.9 percent as the U.S. Treasury Department said it is selling $6 billion in shares of the bailed-out insurer. The Stoxx Europe 600 Index climbed 1.6 percent as 10 shares advanced for each that fell. European Aeronautic, Defence & Space Co. (EAD) rallied 11 percent to a five-year high after doubling its dividend and predicting earnings will climb. Gemalto NV jumped 8.8 percent as the inventor of the smart chip used in bank and phone cards forecast revenue and operating profit will increase this year. ‘Signs of a Stabilization’ The 17-nation euro rose against 10 of 16 major peers, appreciating 1.6 percent against the yen. The ECB kept its benchmark interest rate unchanged and Draghi said “the risk environment has improved enormously” as recent surveys “confirm signs of a stabilization” in the euro-area economy. The outlook is “still subject to downside risks,” he said. The pound rose 0.6 percent versus the dollar as the Bank of England kept the benchmark rate at 0.5 percent and maintained its bond purchase target. The yen fell the most against the Norwegian krone and Mexican peso, losing at least 1.8 percent versus each. Japan ’s gross domestic product shrank an annualized 0.7 percent in the fourth quarter, compared with an earlier estimate for a 2.3 percent contraction. Italian bonds rallied, with the extra yield investors demand to hold the nation’s 10-year debt instead of benchmark German bunds falling 16 basis points to a six-month low of 3.01 percentage points. The Spanish-German yield spread narrowed six basis points to 3.26 percentage points. The yield on the bund advanced three basis points, snapping a two-day decline. Default Swaps The cost of insuring against default on European sovereign debt fell for a second day. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments dropped 5.8 basis points to 348.5. Greek Finance Minister Evangelos Venizelos will hold a press conference at 1 p.m. Athens time tomorrow. Preliminary indications after the deadline for the swap expired at 10 p.m. in Athens showed that as much as 155 billion euros of the 177 billion-euro Greek-law bonds were offered, according to the official in Athens, who declined to be identified. Another 12 billion euros of 18 billion euros of debt under non-Greek law was also tendered, the official said. Another 7 billion euros of debt from state-owned companies guaranteed by the government was also offered, the official said. The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and tame the debt crisis that has roiled Europe for more than two years. Debt-Swap Rules Under the rules of the exchange, investors holding at least 50 percent of the eligible bonds must vote on the swap, and 66 percent of those must agree to amend the bonds to enable the government to impose collective action clauses, said Christoph Rieger , Commerzbank’s head of fixed-income strategy. Oil increased 0.4 percent to $106.58 a barrel. U.S. lawmakers proposed new measures against Iran’s nuclear program , while Barclays Capital said shipments from the Persian Gulf nation have dropped by up to 400,000 barrels a day. The MSCI Emerging Markets Index (MXEF) rose 1.7 percent, snapping a three-day slump. Hon Hai Precision Industry Co. (2317) led Apple Inc. suppliers higher after the U.S. company introduced a new version of its IPad. China’s Shanghai Composite Index (IFB1) increased 1.1 percent. Vietnam’s VN Index (VNINDEX) sank 2.8 percent, the biggest drop among major stock benchmarks tracked by Bloomberg, after the government raised gasoline prices. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net ; Michael P. Regan in New York at mregan12@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-02-21 | Bloomberg | ResCap Sues AIG, Allstate Over Repayment Priority | Residential Capital LLC sued AIG Asset Management LLC, Allstate Insurance Co. and other mortgage- bond buyers to prevent them from collecting money ahead of other creditors in the company’s bankruptcy. Mortgage investors who lost money on securities they bought from ResCap shouldn’t be given priority over unsecured creditors, ResCap said in a complaint filed Feb. 19 U.S. Bankruptcy Court in Manhattan. The lawsuit is a response to an attempt by affiliates of AIG, Allstate, Massachusetts Mutual Life Insurance Co. and Prudential Insurance Co. of America to get paid before unsecured creditors, ResCap said. Should the insurers succeed, they may end up collecting twice for almost identical claims at the expense of unsecured creditors, ResCap said. Elevating the investor claims “will have numerous inequitable effects,” according to the complaint. Scott Shelley, a lawyer for the bond buyers, didn’t immediately respond to an e-mail requesting comment on the complaint. ResCap filed for bankruptcy last year, partly to help it resolve lawsuits brought by investors that purchased mortgage bonds backed by $226 billion worth of home loans. The lawsuits claimed the bonds lost value because many of the loans were bad. Ally Settlement ResCap and its parent company, Ally Financial Inc. (ALLY) , have proposed settling with the 392 trusts that purchased the securities by giving investors an $8.7 billion claim in ResCap’s bankruptcy case. Some of the entities that ResCap sued would collect money under both that settlement and a motion that AIG, Allstate and the other entities filed in bankruptcy court in November, according to the complaint. Creditors have objected to the settlement, which would allow investors to try to collect as much as $8.7 billion, depending on how much money ResCap raises through asset sales. In October, the company auctioned its loan portfolio and loan- servicing business for about $4.5 billion. The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court , Southern District of New York (Manhattan). To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net |
2024-07-24 | Bloomberg | China to Punish Hospital Staff as Kickback Crackdown Widens | China will punish 39 hospital employees for taking illegal kickbacks from drugmakers amid a widening investigation of corruption in the country’s $350 billion health-care market. The hospital staff received inducements totaling 2.82 million yuan ($460,000) from two pharmaceutical companies between January 2010 and December 2012, China’s official Xinhua news agency reported yesterday, citing the National Health and Family Planning Commission. Regulators will “severely crack down” on fake medications, forged documents and bribery, the China Food and Drug Administration said last week. China’s efforts to clean up its health-care market have included an investigation of GlaxoSmithKline Plc. (GSK) , the U.K.’s biggest drugmaker. “This is another step forward as the government progresses in its medical reform plan,” said Jason Siu, a health-care analyst with RHB OSK Securities Hong Kong Ltd. “They’ve spent more than 800 billion yuan on health care since 2009 and they’re trying to streamline their procurement and subsidy costs.” China’s government budgeted 850 billion yuan in April 2009 for a health-care overhaul to reduce the costs of essential drugs and provide more than 90 percent of the population with basic health insurance. Spending in the three years since then had exceeded 1.1 trillion yuan, Xinhua reported in March 2012. Union Chairman In the crackdown on the hospital workers, nine doctors who directly received kickbacks were dismissed, suspended or had their licenses revoked, according to the report. Cases involving the vice chairman of the hospital’s trade union, along with two people in charge of two pharmaceutical companies involved, have been transferred to the judicial system for handling, Xinhua reported, without identifying the drugmakers. Glaxo faces allegations it traded in sexual favors and had spurious travel and meeting expenses amounting to 3 billion yuan, the ministry said last week. Bribery was one of the main reasons drug prices were at a falsely high level in China, Gao Feng, head of the economic crimes investigations unit of the Public Security Ministry, said at a briefing on July 15. Abbas Hussain, Glaxo’s head of emerging markets , said after meeting with government officials in Beijing that some employees may have broken China’s laws. He pledged to make corporate changes that will deliver cheaper medicines, according to an e-mailed statement from the company dated July 21. AstraZeneca Plc (AZN) , the U.K.’s biggest drugmaker after Glaxo, said July 22 that an employee was the focus of a “local police matter” in Shanghai. There’s “no reason” to believe the individual case is related to any other investigations, the London-based drugmaker said. An AstraZeneca employee in Shanghai is under police investigation on suspicion of hacking into computer systems, the official People’s Daily reported today. Three messages left today at the public relations department of the company’s China offices weren’t returned. To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net |
2024-02-08 | Bloomberg | Barclays CEO’s Ethics Talk Drowns Out Silence on Profit | Barclays Plc Chief Executive Officer Antony Jenkins’s pledges to shred the legacy of his predecessor and fix the lender’s culture are distracting from the difficulty he has in reviving profit at Britain’s biggest investment bank. Jenkins, who took over after Robert Diamond departed in the wake of the bank’s fine for rigging Libor, is set to reveal the conclusions of his six-month review of the lender’s operations at London’s Royal Horticultural Halls on Feb. 12. While he may cut about 2,000 jobs, pledge to reform culture and reduce pay to boost returns, he’s unlikely to follow UBS AG and eliminate entire business lines, according to investors and analysts. That’s because the securities unit that Diamond built out of the remains of Barclays De Zoete Wedd over the 15 years from 1996 still contributes about half of the lender’s profit. Still, return on equity at the unit, a measure of profitability, has shrunk by 23 percent in the past two years as regulators force lenders to hoard more capital. U.K. regulators are also planning to force the country’s lenders to erect firebreaks separating their consumer and investment banks, a plan that may increase the securities unit’s cost of funding, according to analysts. “It’s going to be a promise deferred,” said Julian Chillingworth , who manages 17 billion pounds ($27 billion) at Rathbone Brothers Plc in London. “There’s a lot of moving parts, and he doesn’t have much control over a lot of them.” ‘Values Leaders’ Jenkins, 51, has asked 1,000 employees to become “values leaders,” responsible for carrying a code of conduct to the lender’s 139,000 employees. Those who don’t want to adhere to it should leave, he has told workers. He also pledged to eliminate units that don’t make enough money or pose a reputational risk and told lawmakers he will resign in the event of a “grave regulatory event” while he is in charge. “We must never again be in a position of rewarding people for making the bank money in a way which is unethical or inconsistent with our values,” Jenkins said in a memo to employees last month. A Barclays spokesman declined to comment. Barclays will defer all 2012 awards for the bank’s 1,200 managing directors at the investment bank and pay bonuses up to 65,000 pounds in cash for more junior staff, according to a person with knowledge of the plans. Managing directors’ bonuses for 2012 will all be deferred and paid in one-third installments from 2014 to 2016, half in cash and half in shares, said the person, who asked not to be identified as the plans aren’t yet public. Junior Staff For more junior staff, awards greater than 65,000 pounds and less than 250,000 pounds will see 35 percent of the total deferred and paid half in cash and half in stock. Any bonus over 250,000 pounds will be deferred, with half being paid in cash and the rest in stock, the person said. The shares rose as much as 1.7 percent to 297.50 pence in London and traded at 295.45 pence at 10:32 a.m. local time. They have gained about 13 percent this year, making them the best- performing of Britain’s five biggest lenders. Lloyds Banking Group Plc and HSBC Holdings Plc are up 8.9 percent and 10 percent, respectively, in that period. ‘Muddle Through’ Changing the ethics may be easier than reviving profit. The bank, which is also reporting full-year earnings, will post a net loss of 155 million pounds for 2012, compared with a profit of about 3 billion pounds a year earlier, according to the median estimate of five analysts surveyed by Bloomberg. Barclays this week increased provisions for improperly sold loan insurance and interest rate swaps by 1 billion pounds. “They’ll have to just muddle through and make some noises about culture,” said Colin McLean , CEO of Edinburgh-based SVM Asset Management, who helps manage 700 million pounds and sold his stake in the lender after it was fined for manipulating Libor in June. “I’m not sure they will do anything other than limited cutbacks in the investment bank.” Shareholders shouldn’t expect Barclays to repeat the example of Switzerland’s biggest bank, UBS , which in October retreated from capital-intensive trading businesses at the investment bank and announced plans to cut about 10,000 jobs, said Chirantan Barua , an analyst at Sanford C. Bernstein & Co. “UBS has about 35 percent of its capital in investment banking compared to 65 percent at Barclays,” London-based Barua said. “Running down something like fixed income would be very expensive” for Barclays. Instead, Jenkins may seek to cut pay expenses, he said. Job Cuts Barua estimates that the average bonus for employees of the investment bank may drop to 50,000 pounds by 2014 from 100,000 pounds in 2011, while about 3,000 jobs may go. “Given there’s an oversupply of bankers globally I think they can afford to reduce compensation quite a lot and retain talent,” said Cormac Leech , an analyst at Liberum Capital Ltd. in London. Barclays started eliminating some European investment banking jobs in December and may make cuts in Asia, people with knowledge of the matter said last month. About 2,000 jobs may go, they said. Barclays employs about 24,000 at its investment- banking unit globally. In the third quarter, the investment bank contributed 937 million pounds, or 49 percent, of pretax profit, according to data compiled by Bloomberg. Fixed income, currency and commodities revenue over the same period was 1.58 billion pounds out of 6.87 billion pounds for the lender, or about 23 percent. ‘Aggressive’ Culture Jenkins’s plan to overhaul what he describes as an “aggressive” culture comes after the bank was fined 290 million pounds for manipulating the Libor benchmark interest rate in June. That led to the departure of the bank’s CEO, Chairman Marcus Agius and Chief Operating Officer Jerry Del Missier. Separately, on Feb. 3 the bank’s finance director and general counsel agreed to step down. Rich Ricci , the head of the investment bank, and one of the last remaining executives of the old management, in November said the bank may curb businesses that harm the bank’s reputation, such as tax advisory and agricultural commodities trading. Some “outlying” activities at the bank that aren’t “socially useful” will be pulled back, Chairman David Walker told the Parliamentary Commission on Banking Standards in London this week. A sale of the investment bank hasn’t been discussed by the board, Jenkins said at the time. Jenkins in October told analysts he’s seeking returns above the cost of equity, as the Basel III rules increase capital requirements. The bank will trim areas of low profitability, removing 15 percent or 40 billion pounds of risk-weighted assets at the investment bank and reduce required capital by 4 billion pounds, wrote Mark Phin , an analyst at Keefe, Bruyette & Woods, in a note to investors on Jan. 30. The bank is unlikely to make changes to its U.K. consumer and business banking unit or its wealth or cards units, which are in-line with or above earlier targets, wrote Phin. There is scope for cost cutting at the continental European unit, which includes Spanish and Italian consumer banks, and the corporate bank outside the U.K., he wrote. To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-05-03 | Bloomberg | HSBC May Free $25 Billion of Capital on U.S. Sale, Analysts Say | HSBC Holdings Plc (HSBA) , Europe’s biggest bank, may improve its return on equity by selling assets in the U.S. and freeing $25 billion of capital, according to analysts at Barclays Capital. The bank may seek to sell branches and its credit-card business in the U.S., wrote analysts led by London-based Rohith Chandra-Rajan in a note to investors today. “A reduction in the scale of these businesses could free up about $25 billion of capital for use in the higher return and faster growth emerging markets businesses,” wrote Chandra- Rajan. The bank may also raise $5 billion from the sale of its 16 percent stake in Ping An Insurance (Group) Co. of China “where we see the least operational overlap,” he wrote. HSBC Chief Executive Officer Stuart Gulliver on May 11 is holding a “strategy day” to tell investors about his plans for the bank, following his promotion in January. Banks including Barclays Plc (BARC) are reviewing their businesses as regulators force lenders to hold more capital to prevent another financial crisis. HSBC will explain how it will reduce costs to between 48 percent and 52 percent of revenue over a two-to-three year period, from 55 percent in 2010, the Barclays Capital analysts said. The bank in February cut its return-on-equity profitability target to between 12 percent and 15 percent, instead of 15 percent to 19 percent, as full-year earnings missed estimates. To contact the reporters on this story: Jon Menon in London at jmenon1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net ; |
2024-08-24 | Bloomberg | Admiral Tumbles as Insurer Sets Aside Money for Past Claims | Admiral Group Plc (ADM) , the U.K. car insurer that owns the confused.com website, posted first-half pretax profit that missed analyst estimates after it held back more cash to cover claims from previous years. The stock fell. Pretax profit climbed 27 percent to 160.6 million pounds ($265 million) in the first half, the Cardiff, Wales-based insurer said in a statement today. That missed the 163 million- pound median estimate of eight analysts surveyed by Bloomberg. Admiral, which has 2 million U.K. customers, has won market share by undercutting rivals’ prices in the last 18 months due to its lower costs and more profitable underwriting record. For every pound of premium, Admiral paid out 90.4 pence in claims in the first half, up from 83 pence in the year-earlier period. The results show that the insurer may be being hurt by rising costs from personal injury claims in past years, analysts said. “Having dodged the U.K. bodily injury deterioration bullet for a number of quarters, Admiral’s results appear to show that this situation has finally caught up with them,” Joy Ferneyhough, a London-based analyst at Banco Espirito Santo SA, wrote in a note to clients. Holding back cash for the claims “raises plenty of new concerns for investors,” she said. Shares Drop Admiral dropped as much as 8.5 percent in London, the most since December 2008, and was down 7.5 percent at 1,420 pence at 9:37 a.m. Before today, the insurer was valued at 21 times this year’s estimated earnings, compared with the average 8.7 price to earnings ratio of the FTSE 350 Insurance Index. “A potentially lower growth rate would imply a lower stock rating,” said Marcus Barnard , a London-based analyst at Oriel Securities Ltd. with a “hold” rating on the stock. The amount of capital Admiral released from its reserves dropped to 4 million pounds from 17.3 million pounds in the year-earlier period. The insurer generates about half of its profit from policy add-ons such as legal cover and referral fees, which are earned by selling customer details to personal-injury lawyers and car- hire firms. About 5 percent of the insurer’s profit comes from referral fees, Finance Director Kevin Chidwick told reporters on a conference call today. Admiral will pay a first-half dividend of 39.1 pence a share, 20 percent more than the same period in 2010. Chief Executive Officer Henry Engelhardt, who owns 14 percent of the firm, will earn about 15 million pounds from the payout, according to data compiled by Bloomberg. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-08-10 | Bloomberg | CWA Union, Verizon Appeal to Congress Amid 4th Day of Strike | The Communications Workers of America , which represents 35,000 workers at Verizon Communications Inc. (VZ) out on strike, appealed to Congress for support in the four-day-old labor dispute. “We ask you to write Verizon President Lowell McAdam and urge him to respect collective bargaining rights and not to destroy middle-class jobs,” the union said in a letter sent yesterday to congressional offices in the northeast and mid- Atlantic regions, where about 45,000 workers began striking Aug. 7. The International Brotherhood of Electrical Workers represents about 12,500 additional Verizon who have walked out. Verizon, the second-largest U.S. phone company, yesterday also sent a letter to congressional offices in affected districts as well as leaders in both houses of Congress. “The world is changing,” the New York-based company said. “Verizon and its union-represented employees need to work together to adjust rules and policies that threaten to limit the company’s ability to compete in the broadband marketplace.” Verizon’s conflict with the two unions escalated yesterday with workers staging protests and the company saying it will offer $50,000 rewards to stop vandalism. Workers picketed Verizon locations throughout its region, with more than 200 gathering in front of the company’s New York headquarters. The workers in Manhattan booed as people walked in and out of the office and chanted, “When they say, ‘give back,’ we say ‘fight back.’” Reward Ads Verizon said it will begin advertising the rewards for information about vandalism to its network and equipment after at least a dozen acts of sabotage. The advertisements will begin in local markets today, said Peter Thonis , a company spokesman. In Delaware, Verizon yesterday filed a lawsuit against local unions that asks a state judge to issue injunctions to stop demonstrators from blocking entrances in Newark and Dover, Delaware, shutting off power, and using “crazy glue” to jam fence mechanisms and service-truck locks. Verizon “has suffered serious disruption and curtailment of its business” from the strikers’ acts, according to its complaint filed in Delaware Chancery Court in Wilmington. The CWA said in a statement Aug. 8 that it “does not condone illegal action of any kind, and instructs its members to conduct all strike activities in accordance with labor law.” Expired Agreement Verizon and the unions are at odds over a new contract to replace one that expired at midnight on Aug. 6. The company, facing a decline in its traditional landline phone business, is seeking work-rule changes and monthly health-care payments. Workers contend they shouldn’t have to make substantial concessions as profits rise and executive pay remains healthy. Verizon is having “high-level” negotiations with the unions, Thonis said in an interview. The striking employees represent about a quarter of Verizon’s staff. Verizon’s stock may drop during the strike, though it may recover once the action is over and therefore not be harmed in the long term, based on its pattern during a labor dispute in 2000, said Jonathan Atkin, an analyst at RBC Capital Markets in San Francisco. He rates Verizon shares “outperform.” The company’s larger and more profitable wireless unit is unaffected by the strike. Verizon fell 63 cents, or 1.8 percent, to $33.66 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have declined 5.9 percent this year. The company has trained more than 40,000 managers and contractors to step into the roles of union workers and minimize any delays or disruptions in service calls and installations. ‘Contract Constraints’ In an Aug. 7 statement, McAdam, Verizon’s president and chief executive officer, said the company needs concessions from unions because of the division’s customer losses and eroding profitability. He also cited competition from cable-TV providers that don’t have similar “contract constraints, enabling them to be more nimble and flexible meeting customer needs.” Verizon’s competitors also include AT&T Inc. (T) , the biggest U.S. phone carrier and second-largest wireless operator. AT&T has proposed acquiring Deutsche Telekom AG’s T-Mobile USA, allowing it to surpass Verizon Wireless as the No. 1 U.S. mobile carrier. In an interview last month, McAdam, 57, said changing the union contract would benefit workers because lower costs would help the business compete. “If we do that, I think the union will have a much stronger future because the company will be stronger,” he said. Verizon’s revenue and profit fell last year as declines in the landline business offset growth in wireless. The number of fixed lines, including residential and business customers, slid 8.2 percent to 26 million at the end of last year, extending declines since 2003. During the same period, wireless subscribers more than doubled to 94.1 million. First Since 2000 The strike is the first at Verizon in 11 years. Although Verizon’s unions authorized walkouts in 2008 and 2003, they haven’t gone out on strike since 2000. That 18-day standoff affected 28 million customers and cost Verizon $40 million in revenue. The company settled the dispute by agreeing to a 12 percent wage increase over three years. At the New York protest yesterday, Dennis Swarbrick, a 54- year-old technician who said he has worked at Verizon for 20 years, said he is concerned about the company’s demands because his son is going to college in a few weeks and he has other financial obligations. “I have a mortgage,” he said. “I have car insurance. I work week to week. What am I going to do next week when the bills come?” Laura Randall, a technician who said she has worked at Verizon for 11 years, said forgoing pay in order to strike “is going to hurt,” though she plans to picket Verizon locations “as long as it takes to get a fair deal.” The lawsuit is Verizon of Delaware Inc. v. Communications Workers of America , CA6766, Delaware Chancery Court (Wilmington). To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net |
2024-01-11 | Bloomberg | HSBC Has Nothing Further to Disclose on Ping An Disposal | HSBC Holdings Plc (HSBA) , faced with growing concern its plan to sell a $9.4 billion stake in Ping An Insurance (Group) Co. will fail, said it has no material information to disclose about the negotiations. “HSBC confirms that it is not aware of any information which must be announced to avoid a false market” in its own shares, the London-based bank said in a statement yesterday prompted by Hong Kong’s market regulators. The announcement of the proposed sale “remains accurate,” the lender said. Concern is growing that Chinese regulators may block the transaction, according to Goldman Sachs Group Inc. analysts Mancy Sun and Ning Ma. The sale is part of HSBC Chief Executive Officer Stuart Gulliver ’s plan to boost returns by selling assets to focus on growing economies in which the bank has the greatest market share. The China Insurance Regulatory Commission is leading a preliminary review of the application for the transaction, the watchdog said in a statement yesterday. Separately, China Development Bank , which had agreed to help finance the purchase by Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group Co., canceled its loans, China’s Caixin Online reported Jan. 8. “If HSBC had some bad news to tell the market, they would, I think,” Sandy Chen, an analyst at Cenkos Securities in London , said by telephone. “I think there’s some room in there for other lenders to step in.” HSBC rose 1.2 percent to HK$84.15 in Hong Kong trading today, while Ping An gained 0.3 percent to HK$68. The benchmark Hang Seng Index increased 0.5 percent. HSBC agreed on Dec. 5 to sell its 15.6 percent holding in Ping An to four subsidiaries of CP Group in two phases. The first stage, comprising shares valued at about HK$15 billion ($1.9 billion), was scheduled for Dec. 7. The sale of the remaining shares requires approval from CIRC by Feb. 1, or else an extension of the accord. To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-08-28 | Bloomberg | Asian Stocks Snap Losing Streak Before Bernanke Speech | (Corrects Malaysian Airline System item in story published Aug. 27) Asian stocks rose this week, snapping four weeks of losses, as exporters and commodity shares gained on speculation U.S. Federal Reserve Chairman Ben S. Bernanke would foreshadow measures to shore up the U.S. recovery. Asian stocks swung between gains and losses throughout the week as companies across the region reported mixed profit results. Bernanke said yesterday the U.S. central bank still has tools to stimulate an economic recovery, without giving details. The recovery is likely to improve in the second half of this year, he told an annual forum in Jackson Hole, Wyoming. Li & Fung Ltd. (494) , a supplier of toys and clothes to U.S. retailers including Wal-Mart Stores Inc., increased 3.8 percent. Samsung Electronics Co., the world’s second-biggest maker of mobile phones by sales, rose 2.4 percent in Seoul after Steve Jobs resigned as chief executive officer of rival Apple Inc. China Life Insurance Co., the nation’s No. 1 insurer by market value, tumbled 11 percent and Chinese automaker BYD Co. sank 20 percent after they reported lower profit. “Equity markets are not only looking toward the Jackson Hole speech but also at the real economy,” said Pu Yonghao, chief investment strategist at UBS Wealth Management in Hong Kong. Recent data “are all pointing toward slower growth, if not recession,” he said in a Bloomberg Television interview yesterday before Bernanke spoke. Stocks Rise The MSCI Asia Pacific Index rose 0.7 percent this week to 120.31 The gauge tumbled 14 percent in the previous four weeks as equity indexes in Australia, Hong Kong and Shanghai entered a so-called bear market, tumbling at least 20 percent from their peaks. Investors fled equities amid concern Europe ’s debt crisis is worsening and U.S. economy will slow following its credit downgrade by Standard & Poor’s. Stocks in the Asian benchmark are valued at about 12 times estimated earnings on average, compared with 11.8 times for the S&P 500 and 9.4 times for the Stoxx 600. Japan ’s Nikkei 225 (NKY) Stock Average gained 0.9 percent this week, even after Moody’s Investors Service lowered Japan’s sovereign-credit rating, citing “weak” prospects for cutting the country’s debt burden. South Korea’s Kospi Index climbed 2 percent. Factory Output Hong Kong’s Hang Seng Index (HSI) advanced 0.9 percent this week after a report showed China’s factory output may contract at a slower pace in August, easing concern the mainland’s economy is slowing. Shanghai’s Composite Index added 3.1 percent. Australia’s S&P/ASX 200 Index jumped 2.4 percent this week, after falling as much as 3.5 percent. Singapore’s Straits Times Index rose 0.5 percent. Li & Fung rose 3.8 percent to HK$13.20 in Hong Kong, while Canon Inc. (7751) , the world’s largest camera-maker by market value, advanced 2 percent to 3,535 yen in Tokyo. Central bankers from around the world met in Jackson Hole at the conference sponsored by the Federal Reserve Bank of Kansas City on Aug. 26. That’s the same place where Bernanke triggered financial rallies a year ago when he said the Fed was prepared to “do all that it can” to ensure economic recovery. Bernanke’s appearance a year later comes as U.S. manufacturing weakens, consumer confidence tumbles and the unemployment rate holds above 9 percent. The introduction of further quantitative easing “will provide a short-term relief to the market,” Hong Kong-based Pauline Dan, chief investment officer at Samsung Asset Management, which oversees about $72 billion, said before the meeting. Supporting Growth “Investors are hoping the Fed will show its commitment to supporting growth,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., on Aug. 23. The company manages almost $100 billion. “There’s a real risk of disappointment if some sort of strong commitment doesn’t appear.” Samsung Electronics, Apple’s biggest competitor in smartphones and tablet computers, surged 6.8 percent to 726,000 won in Seoul this week after Steve Jobs resigned as Apple chief executive officer. BHP Billiton Ltd. (BHP) , the world’s No. 1 mining company, gained 3 percent to A$38.64 this week in Sydney, while Inpex Corp. (1605) , Japan’s No. 1 energy explorer, jumped 3.7 percent to 492,500 yen in Tokyo. Glencore International Plc, the world’s largest listed commodity trader, surged 5.9 percent to HK$47.50 in Hong Kong. Oil Advances Oil advanced for the first time in five weeks on speculation that economic stimulus in the U.S. will bolster demand in the world’s largest energy consuming nation. Crude oil for October delivery rose 7 cents to settle at $85.37 a barrel on the New York Mercantile Exchange yesterday. The London Metal Index of prices for six metals including copper and aluminum advanced 2.5 percent this week. Among stocks that fell, China Life tumbled 11 percent to HK$19.18 this week in Hong Kong after saying first-half profit fell 28 percent from a year earlier. Of the 624 companies in the Asia-Pacific index that reported net income from July 11 to by 6:35 p.m. on Aug. 26, 45 percent reported earnings that exceeded analysts’ estimates while 33 percent fell short. BYD, an automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., dropped 20 percent to HK$15.98 after saying its first-half profit tumbled 89 percent. Malaysian Airline System Bhd., the national carrier, sank 9.6 percent to 1.50 ringgit in Kuala Lumpur after posting a second straight quarterly loss. Standard Chartered Plc, the U.K.’s second-biggest bank by market capitalization, sank 1 percent to HK$168.30 and French cosmetics maker L’Occitane International SA sank 5 percent to HK$17.06 this week in Hong Kong amid concern the region’s sovereign debt crisis will worsen after German Chancellor Angela Merkel said she’ll resist pressure to back common euro-area bonds as a means to solve the region’s debt crisis. To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net ; Jonathan Burgos in Singapore at jburgos4@bloomberg.net. To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-08-13 | Bloomberg | Brazil Soccer Body May Lose Half of Profit in Bank Failure | Brazil ’s soccer federation may lose half its 2012 profit following the collapse of a bank that had been at the center of a government graft scandal, according to a person familiar with the matter. Confederacao Brasileira de Futebol , or CBF, deposited about 30 million reais ($13.14 million) with Belo Horizonte-based Banco Rural over the last decade, said the person, who asked not to be identified because the information is private. Brazil’s central bank liquidated Rural this month citing “serious” legal violations. The potential loss of its investments in Rural is happening as CBF, the private body that controls Brazil’s national team, prepares for the World Cup next year when Brazil hosts sports’ most-watched event and seeks a record-extending sixth title. Rural, which specialized in lending to small and medium-size companies, was closed after “successive losses generated abnormal risk to creditors,” the central bank said Aug. 2. Rural executives, including former Chief Executive Officer Katia Rabello, were convicted last year by the Supreme Court of money laundering and mismanagement of a financial institution as part of the high court’s ruling in the so-called Mensalao case. Officials from the ruling Workers’ Party -- including former cabinet chief Jose Dirceu under President Luiz Inacio Lula da Silva -- were found guilty by the Supreme Court of using embezzled public funds and fraudulent loans from Rural to buy votes in the Congress from 2003 to 2005. 2012 Sales Folha de S.Paulo said the CBF’s chief financial officer and treasurer were fired. “This is an internal situation and we are not making any comment,” said a CBF official, who requested anonymity in line with the organization’s policy. CBF, which had 2012 sales of 382 million reais and net income of 55.6 million reais, risks losing the majority of its money held at Banco Rural because of the terms of the bank’s liquidation. The central bank declined to comment, according to an e-mailed statement. Brazil’s deposit insurance fund guarantees Rural’s certificate of deposit, local agricultural letters of credit and deposits of as much as 250,000 reais. Amounts above 250,000 reais will be evaluated by the liquidator, according to a Rural statement on its web page. The deposit insurance fund also guarantees investments in the so-called DPGE, a local bank note, of as much as 20 million reais. Rural was the eighth Brazilian mid-size bank liquidated by the central bank or bailed out by deposit insurance fund since 2010 in the wake of the financial crisis. Banco Panamericano SA was the first to be rescued after authorities investigated it on accounting irregularities. The majority of the CBF’s banking is done with sponsor Banco Itau, said the person with knowledge of the matter. Banco Itau paid 30.1 million reais to sponsor the CBF, and the Brazil soccer team, in 2012. To contact the reporters on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net ; Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net |
2024-10-03 | Bloomberg | Serbia and IMF Working on Plan to Fix Finances, Cut Debt | Serbia is working on a plan with the International Monetary Fund to trim its fiscal gap by as much as 1.6 billion euros ($2.2 billion) by 2016 to assuage investors and stop its credit rating from sliding deeper into junk. Finance Minister Lazar Krstic said talks with an IMF mission in Belgrade this week “started in a positive manner” and a “wider negotiating mission” may return in the near future. The Fund refused to start talks on a possible aid deal with Belgrade in May when it said this year’s budget shortfall could jump to as much as 8.3 percent of gross domestic product unless measures were taken. After two recessions in three years undercut tax revenue and drove the fiscal shortfall wider, the biggest former Yugoslav republic is trying to right its public finances and rein in rising borrowing costs. It needs 4 billion euros in financing by mid-2014, equivalent to 13 percent of GDP, to finance the budget and service debts. “In order to stabilize public debt by 2016 we need to have fiscal consolidation of around 1.5 percent of GDP a year,” Krstic said in an interview yesterday. The savings will be achieved “through structural reforms” in public administration, state-run companies, health and education and financing. They may not necessarily translate into an equivalent drop in the fiscal deficit, Krstic said. Yields on Serbian 10-year Eurobonds maturing in 2021 fell three basis points, or 0.03 percentage point, to 6.587 percent on yesterday, compared with 4.8 percent in January, according to data compiled by Bloomberg. The cost of insuring the debt with five-year credit-default swaps rose two points to 374 yesterday. Maneuvering Space Krstic, a former McKinsey & Co. associate principal and Yale graduate, assumed his post last month after Prime Minister Ivica Dacic revised the 2013 budget and revamped his cabinet. Krstic said Serbia’s government “still has some maneuvering space” before seeking an IMF deal. He said the government will unveil measures to trim the deficit on Oct. 7. Serbian deputy Prime Minister Aleksandar Vucic said in Belgrade today that the IMF wanted Serbia to save 800 million euros in the next two years and cut the deficit by 2.25 percent to 2.5 percent over the same period. The government is considering various borrowing options to keep financing costs under control and Krstic, who took office a month ago, is keen on assuring investors that “we will consolidate public finances,” he said. The possibilities include a $1 billion Eurobond, domestic borrowing or a loan from the United Arab Emirates of as much as $3 billion, which would help replace some old expensive debts, he said. Selling a Eurobond, the fourth since September 2012, won’t be cheap, Krstic said. “Fed tapering, capital outflows from emerging markets over recent weeks, weaker bond demand and a shift from bonds to equity makes our borrowing more expensive,” Krstic said. He is considering different markets and currencies, weighing future foreign exchange risk against anticipated macroeconomic developments. Plans are taking into account “new market realities,” he said. The government’s plan to narrow the deficit and public debt could convince bond investors to take lower yields, while also keeping Serbia’s credit ratings intact, Krstic said. The country is rated BB-by Standard & Poor’s and Fitch, while Moody’s assigned non-investment grade B1 rating to Serbia’s local and foreign-currency bonds on July 14. The government is currently cutting discretionary spending to cut the budget gap to 4.7 percent of GDP, Krstic said. The IMF says that, even with consolidation measures, the shortfall will be 6.5 percent of annual output. To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net |
2024-11-26 | Bloomberg | Panamericano Fraud Probe Prompts Brazilian Banks to Review Loan Purchases | Banco Panamericano SA’s fraud probe is prompting at least two of Brazil’s larger lenders to review internal rules on buying credit portfolios, said the president of the nation´s association of small and medium-sized banks. “Some banks are studying the rules for credit portfolio trades and accounting procedures to make sure there aren’t others engaged in acrobatics like Panamericano,” Renato Martins Oliva, who heads Associacao Brasileira de Bancos, said in a telephone interview from Sao Paulo on Nov. 22. Federal prosecutors opened a fraud investigation into Sao Paulo-based Panamericano, the nation’s 21st-largest lender by assets, this month after the central bank found accounting irregularities related to loan sales that resulted in a 2.5 billion real ($1.45 billion) bailout. Panamericano shares sank 38 percent since Nov. 4 while the yield on its bonds due in 2020 climbed to 9.5 percent from 6.9 percent, according to Trace prices. The bank, founded by media mogul Silvio Santos and focused on providing consumer finance and auto loans to lower-income clients, will disclose third-quarter earnings by Dec. 15 after delaying the report following the bailout, Chief Executive Officer Celso Antunes da Costa said today. Shareholders approved a new 11-member board today and Maria Fernanda Coelho , the chief executive officer of Caixa Economica Federal, as its chairwoman. Panamericano, whose main shareholders are Caixa, the state- controlled savings bank, and Grupo Silvio Santos, replaced its board and named a new chief executive officer after the investigation began. Shares Fall Panamericano slipped 0.6 percent to 4.78 reais. MSCI Inc.’s index of Brazilian bank shares fell 1.4 percent, with all lenders falling except for state-run Banco do Brasil SA. Panamericano’s dollar bonds due in 2020 fell 0.5 cent on the dollar to 94.75, pushing up the yield to 9.3 percent, according to Trace. Oliva said he couldn’t name the banks reviewing their internal policies. “We are reviewing constantly the regulations and looking for ways to improve the regulations,” central bank President Henrique Meirelles said in a Nov. 17 interview in Brasilia. “There’s nothing new here. The question here is more a question of internal controls by the part of the shareholders, the major shareholders.” With Caixa taking control of Panamericano, “now it’s going to be a different ball game,” Meirelles said. Portfolios Brazil´s banking association known as Febraban said in a statement that it plans on helping disclose information on the buying and selling of credit portfolios by lenders. “Brazilian banks are studying the creation of a unit to compile information about credit and loan markets,” Febraban said in an e-mail today. “The objective would be to register information about credit portfolios negotiated between banks.” The probe by central bank officials and prosecutors began after Banco Central do Brasil discovered about 2.1 billion reais of losses from improper accounting of sales of credit portfolios, while the bank identified another 400 million reais owed to it from the credit-card unit of its controlling shareholder, Grupo Silvio Santos, Meirelles said in the interview. Central bank regulators found that the 1.6 billion reais of net assets booked by Panamericano was actually negative 900 million reais, Supervision Director Alvir Hoffmann said Nov. 10. The bank was recording as assets loans it had sold to other institutions and there is evidence that loan portfolios were sold more than once, Hoffmann said. Redemptions Costa said in an interview today that Panamericano received about 200 million reais more from clients and lenders daily than redemptions since Nov. 19. The bank was losing as much as 200 million reais a day from redemptions after the bailout was disclosed on Nov. 10, a bank official who asked not to be named in accordance with company policy said at the time. Grupo Silvio Santos borrowed money from the nation’s deposit insurance fund to rescue Panamericano. “We´ve seen net inflows, we´ve had money coming in since last Friday, and that is already a strong signal that the initial uncertainties are dissipating,” Costa said. The buying and selling of loan portfolios among banks hasn’t been affected by the Panamericano investigation, said Gabriel Jorge Ferreira , the head of Brazil’s deposit insurance fund, known as Fundo Garantidor de Credito. “We haven’t had absolutely any evidence of that,” Ferreira said in an interview Nov. 23 in Sao Paulo. “Banks are improving their control systems, which seems reasonable to me.” To contact the reporter on this story: Felipe Frisch in Sao Paulo at ffrisch1@bloomberg.net To contact the editor responsible for this story: Francisco Marcelino at mdeoliveira@bloomberg.net |
2024-10-20 | Bloomberg | RBC Unit Fined by Finra in U.K. Over Sales of Reverse Convertible Notes | Royal Bank of Canada’s RBC Wealth Management unit will pay $690,000 to resolve a brokerage regulator’s claims that a U.S. unit sold unsuitable financial products to elderly clients and others with modest net worth. Ferris, Baker Watts Inc., which was acquired by RBC in 2008, failed to supervise brokers who sold so-called reverse convertible notes to about 2,000 retail investors from 2006 to 2008, the Financial Industry Regulatory Authority said today. The company also failed to monitor the accounts to ensure they properly reflected customers’ needs, Finra said in a statement. Regulators have increased scrutiny of financial products after retirees and pension funds claimed losses on investments they didn’t understand. Reverse convertibles are structured notes that pay set interest rates generally higher than those of corporate bonds, while giving issuers the right to repay investors with shares if the underlying stock plummets. “Reverse convertible notes are complex investments that often entail significant risk of loss and also involve terms, features and risks that can be difficult for retail investors to evaluate,” James Shorris , Finra’s acting enforcement chief, said in the statement. The sales to elderly customers and those with “modest assets” were “unsuitable,” he said. In one instance, Ferris, Baker Watts sold an 86-year-old retired social worker five reverse convertibles for $10,000 each, making up 25 percent of her portfolio, Finra said. The firm also sold five reverse convertibles to a 20-year-old clerk who was earning less than $25,000 a year, the regulator said. RBC Wealth Management, without admitting or denying Finra’s allegations, agreed to pay a $500,000 fine and about $190,000 in restitution to 57 account holders, the Washington-based regulator said. A call to RBC wasn’t immediately returned. Banks have sold $5.3 billion of reverse convertibles to U.S. investors this year, according to data compiled by Bloomberg. RBC has sold about $474.2 million of the notes this year, the data show. To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net. To contact the editors responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net . |
2024-11-19 | Bloomberg | ING Wins More Time From EU to Sell Its Insurance Business | ING Groep NV (INGA) , the biggest Dutch financial-services company, won more time from European Union regulators to sell its insurance operations and pledged to repay state support by 2015. The shares rose. The European Commission said today that it extended the deadline for ING to divest the businesses , originally set for the end of 2013, because of current market conditions. ING said today that the new timeline means it must sell more than half of its insurance arm in Europe by the end of 2015 and dispose of the rest by the end of 2018. “It’s good news,” said Corne Aben, an Amsterdam-based fund manager at Optimix Vermogensbeheer NV, which manages about 1 billion euros ($1.3 billion), including ING shares. “That increases flexibility, which means they’ll be able to get better prices for the units they want to sell.” EU regulators were forced to re-examine the terms of ING’s rescue by the Dutch government after the company won a court challenge that overturned their 2009 decision. ING sought to change the original plan as Europe ’s debt crisis worsened and regulations became tougher, disrupting markets and making it harder to sell assets. ING said it agreed to sell more than 50 percent of its Asian insurance and investment-management operations by the end of next year, and dispose of the rest by the end of 2016. It must divest at least 25 percent of its U.S. arm by the end of 2013, more than half by the end of 2014 and the rest by 2016. Shares Rise The Brussels-based regulator also approved ING’s plan to create a new Dutch retail bank and extended a ban on the company making acquisitions or undercutting rivals on price at its ING Direct Europe unit. ING shares advanced 2.3 percent to 6.70 euros at 2:31 p.m. local time, the biggest gain in more than a month. That outpaced the 1.9 percent rise by the Stoxx Europe 600 Insurance index. Chief Executive Officer Jan Hommen said on a conference call that it’s not in shareholders’ interest to pay a dividend yet, and that “many priorities” must come first, including repaying the Dutch state and bolstering capital levels. “It’s important that they now can avoid forced sales at lower prices,” Optimix’s Aben said. “So much money is concerned with these asset sales. To me, that outweighs the fact that the restructuring, and possibly dividend resumptions, will take longer.” European IPO ING plans to sell the European insurance assets through an initial public offering, the company said. It filed for a share sale of its U.S. division on Nov. 9. ING will combine the commercial operations of WestlandUtrecht Bank, which has 36.4 billion euros of Dutch mortgages, with the retail banking activities of its Nationale- Nederlanden insurance unit. Stricter capital requirements had scared off potential buyers as ING sought to comply with previous EU orders to sell WestlandUtrecht. The combination will create a new retail lender that the EU said would ensure competition in the concentrated Dutch market. The new Nationale-Nederlanden Bank will get 2.6 billion euros in WestlandUtrecht Bank mortgages, while the other 33.8 billion euros will be retained in a separate unit at ING Bank. ING said the reorganization will cause “a number of redundancies.” Keeping Mortgages “It’s good to hear” that ING won’t have to sell WestlandUtrecht, while keeping so much of the mortgage book “prevents a large divestment loss,” said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International. ING received a 10 billion-euro bailout by the Dutch state, triggered as subprime mortgage assets held at its U.S. unit plunged. It has returned 7 billion euros, with 2 billion euros in interest and premiums, to date. “We are pleased that the agreement announced today gives us more time and flexibility to complete the required restructuring, while leaving our strategic objectives unchanged,” Hommen said in the statement. ING will withdraw its appeal of the Commission’s earlier decision at the EU General Court in Luxembourg, Hommen said today, while the Commission will continue its appeal against the Luxembourg court ruling of March 2012 for “principal legal reasons.” The outcome won’t change today’s agreement, ING said. EU governments spent 1.6 trillion euros to shore up banks from 2008 to 2010 amid the crisis that followed the collapse of Lehman Brothers Holdings Inc. The EU must approve large state subsidies and can impose conditions on any aid given. Dutch Bailout Among other disposals scuppered by the financial crisis, Royal Bank of Scotland Group Plc may seek more time from EU regulators to sell 316 U.K. branches after Banco Santander SA (SAN) abandoned its planned 1.7 billion-pound ($2.7 billion) purchase on Oct. 12. RBS was required to sell the outlets by 2014 as an EU condition of its British bailout. ING said it will repay the Dutch government 3 billion euros in state aid with a 50 percent premium, starting with the first payment of 1.125 billion euros on Nov. 26. It will make three more payments in November 2013, March 2014 and May 2015, and may speed up repayments “if possible and prudent under the prevailing economic circumstances.” After the final repayment, the Netherlands will make a return of 12.5 percent on its investment, ING said. “The agreement ensures that the taxpayer is rewarded appropriately for the support he has given,” Dutch Finance Minister Jeroen Dijsselbloem said in a letter today. To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net ; Maud van Gaal in Amsterdam at mvangaal@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-07-28 | Bloomberg | Aetna Sees No Earnings Boost From CVS Caremark Pharmacy Deal Until 2012 | Aetna Inc. , the third-largest U.S. health insurer, doesn’t expect its new pharmacy-benefit contract with CVS Caremark Corp. to increase earnings until 2012, said Chief Financial Officer Joseph Zubretsky. Under the agreement, announced yesterday, Woonsocket, Rhode Island-based CVS will administer $9.5 billion in annual drug spending. Aetna will retain ownership of its own pharmacy- benefits unit, as well as decisions over what drugs to cover, while CVS will handle distribution of the medicines and other services. Aetna expects the deal to result in drug-cost savings for customers. It will also lead to lower administrative expenses, bring in new customers, and result in a higher pharmacy penetration for the company, Zubretsky said in a conference call with investors today. While these gains will be offset next year by integration costs, the company expects to see an earnings benefit of 30 cents a share in 2012, he said. “Some investors may be disappointed that Aetna elected an outsourcing services contract over an outright sale” of its pharmacy unit, given the precedent of WellPoint Inc.’s $4.7 billion sale of its pharmacy-benefit management business last year, said Matthew Borsch , an analyst at Goldman Sachs & Co., in a note to investors today. Aetna fell 81 cents, or 2.9 percent, to $27.55 at 4 p.m. in New York Stock Exchange composite trading. The company raised its full-year profit forecast on April 29, citing lower-than- expected health spending. Guidance Raised Aetna increased its 2010 profit forecast yesterday after a milder-than-expected flu season and improved coordination with doctors helped reduce medical costs. Operating earnings may reach $3.05 to $3.15 a share, Hartford, Connecticut-based Aetna said. That’s more than the $2.75 to $2.85 predicted in April. Aetna raised its guidance after lower-than-projected costs added 30 cents a share to second-quarter earnings. Second-quarter net income rose 42 percent to $491 million. Adjusted for the lower costs, earnings of 75 cents a share topped the 73 cent average of 16 analyst estimates compiled by Bloomberg. Those gains may be tempered in the second half by the costs of complying with the U.S. health overhaul enacted in March and a seasonal pattern of higher medical costs, Zubretsky said today. The company will have transaction expenses of $50 to $60 million in the second half, he said. “Aetna is clearly concerned about second half earnings,” said Carl McDonald , an analyst at Citigroup Global Markets Inc., in a note to clients today. The number of people enrolled in Aetna’s medical plans in the second quarter fell 2.4 percent to 18.6 million from a year earlier. The company expects enrollment to decrease by 220,000 members over the rest of the year, mostly due to “economic attrition,” Zubretsky said today. Ronald Williams , Aetna’s Chief Executive Officer, told CNBC today that he is “not yet seeing” companies hiring. To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net. July 28 (Bloomberg) -- Ronald Williams, chief executive officer of Aetna Inc., discusses the company’s second-quarter profit, increased 2010 forecast, costs and the impact of the economy on the health-care insurance industry. Aetna, the third-largest U.S. health insurer, increased its 2010 profit forecast a second time after a milder-than-expected flu season and improved coordination with doctors helped reduce medical costs. Williams talks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (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); } }); }); //]]> |
2024-09-07 | Bloomberg | RBC Backed Away From Canadian Acquisitions, CEO Nixon Says | Royal Bank of Canada (RY) , the country’s largest bank, has backed away from recent Canadian takeover opportunities because they didn’t meet the company’s goals, Chief Executive Officer Gordon Nixon said. “They were inconsistent with our domestic distribution strategies and our margin and risk objectives,” Nixon said today at a banking conference in Toronto hosted by Scotia Capital. He didn’t say which companies were involved. Royal Bank, which gets more than half of its earnings from Canadian banking, will continue to look for ways to expand its asset base in Canada , Nixon, 54, said. Royal Bank will also use market turmoil to make “strategic acquisitions” in areas such as wealth management and investment banking, he said. “We are monitoring the challenging competitive landscape closely, watching for opportunities to accelerate our growth in core businesses, geographies and client segments while maintaining a conservative approach in recognition of very unstable economic conditions in the United States and Europe ,” Nixon said. He reiterated a previous comment that the global banking sector faces “significant headwinds” driven largely by fiscal and economic challenges in the U.S. and Europe. “In this environment, it is our objective to ensure that we are well-positioned to grow our earnings and to take advantage of global dislocations without putting us at extreme risk from uncontrollable external shocks,” Nixon said. To contact the reporters on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net ; Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net ; Rick Green at rgreen18@bloomberg.net |
2024-09-16 | Bloomberg | The Feel-Good Promise of Wellness Programs | It has been a tough couple of months for Pennsylvania State University ’s new wellness program, Take Care of Your Health. In July, the university introduced the plan as a modification of the health coverage it offers employees. For good reason, those employees aren’t pleased. Beginning this fall, in order to avoid a $100 monthly surcharge for their health insurance, all nonunionized employees will have to submit health-history information via the online database WebMD, complete an annual health exam, and participate in periodic biometric scans that include measurement of cholesterol, blood-sugar and blood-pressure levels, body mass, and waist circumference. Spouses and domestic partners of employees will also have to comply with all but the biometric scan to avoid the surcharge. And tobacco users will have to pay an additional $75 a month. Programs such as Penn State ’s are not uncommon. According to an analysis by the Rand Corp. , half of all large organizations -- those with 50 or more employees -- have wellness plans. In general, such programs use financial incentives to encourage employees to monitor and improve their health through designated assessments and lifestyle-modification programs. Some wellness programs use financial incentives to motivate compliance, like getting employees to complete a health-risk assessment. Others use them to penalize poor performance -- for example, charging people more for smoking or having a high body mass index. Penn State’s includes both components, as do those of many other large employers. Unusual Severity Penn State’s program, however, is unusually severe. The $100 a month penalty for noncompliance is more than double the average for such programs. The Affordable Care Act may spur more employers to adopt wellness programs with large penalties; it raises the legal limit on penalties that employers can charge for health-contingent wellness programs to 30 percent of total premium costs. Penn State’s motivation is understandable. Health-care spending is the fastest-growing component of workplace compensation. These expenses have grown particularly rapidly in Pennsylvania , where they increased 8.4 percent a year from 2008 to 2010. According to the report, Pennsylvania ranks among the highest-cost regions in the nation for health care, after controlling for demographic factors. For the benefit of its employees, as well as in response to competitive pressures, employers like Penn State should attempt to control health-care spending. In this light, it’s natural for employers to consider wellness programs to motivate employees to monitor and improve their health. To the extent such programs reduce spending, studies show that those reductions benefit employees in the form of higher wages. Whether wellness programs work as intended or not, let’s recognize what they also do: They increase the cost of coverage for some employees. That saves employers money but by shifting costs to workers. Those who bear the brunt of this increase are the less healthy employees, who also tend to be those of lower socioeconomic status. Now let’s consider what wellness programs might do: reduce health-care spending and improve health. In general, the evidence is weak that they will. Why? Conceptually, factors within workers’ control make only a small contribution to rising health-care costs, so there’s only so much such a program can do, even if it works perfectly. Empirically, the track record of wellness programs’ efficacy is mixed at best. In a recently released white paper, health economists Dennis Scanlon and Dennis Shea reviewed the evidence on what drives health-care cost growth. A leading factor is health-care technology. Expansion of third-party payment (i.e. insurance coverage) and income growth have also, historically, played large roles. The evidence suggests that disease prevalence may explain 25 percent of health-care spending growth, only a portion of which is due to modifiable lifestyle factors. Disappointing Research So, yes, wellness programs designed to motivate lifestyle modifications may, theoretically, help control the growth of health-care spending, but only a little. How we live is just one component, and it’s far from the largest one. It raises the question of just how much an organization can reduce spending by focusing on wellness. The research to date is disappointing. For a variety of reasons, most studies of wellness programs are of poor quality and consider only their short-term effects, leading to results that can’t be trusted. Many, such as those that Penn State cites as evidence in support of its program, are written by the wellness industry itself -- hardly an unbiased source. More rigorous studies find that wellness programs in general don’t save money. With few exceptions, they often don’t improve health, either. The additional screenings that such programs encourage can lead to overuse of care, pushing spending higher without improving health. Given all of this, why are wellness programs so pervasive? Our hypothesis is that it’s a form of supplier-induced demand: The wellness industry is doing a good job of pushing its product. Understanding research is challenging, and it’s relatively easy for a marketing representative to cite glorious-sounding results. Health and wellness are important; no doubt advocates of wellness programs are well-meaning. But it’s also big business: The industry generates $6 billion annually. The temptation to overpromise and underdeliver is clear. Before Penn State or any organization puts its faith in a wellness program to deliver lower spending and better health, such programs need to be more rigorously assessed. There is a clear role for research; we should look harder before we leap. So far, there is insufficient evidence that wellness programs, as currently designed and implemented, save money or generally improve health. Penn State’s plan would hardly be the first time Americans bought something that may not work as well as advertised. Companies should reconsider the reasons that they are so eager to have them and whether they’re really worth the investment. (Austin Frakt is a health economist with the U.S. Department of Veterans Affairs. Aaron Carroll is a professor of pediatrics at Indiana University School of Medicine.) To contact the writers of this article: Austin Frakt at frakt@bu.edu; Aaron Carroll at aaecarro@iupui.edu. To contact the editor responsible for this article: Christopher Flavelle at cflavelle@bloomberg.net . |
2024-01-30 | Bloomberg | FDIC Sues Ex-Officers of Merced’s County Bank Over $42 Million in Loans | The Federal Deposit Insurance Corp. sued former officials of County Bank in Merced, California, part of Capital Corp. of the West , claiming their mismanagement caused $42 million in losses through bad loans. Named in the suit, filed Jan. 27 in federal court in Fresno, were former County Bank Chief Executive Officer Thomas T. Hawker; John J. Incandela, Dave Kraechan, and Edwin Jay Lee, who are former vice presidents; and Edward Rocha, the former chief operating officer and bank president. “Defendants caused or allowed County to make imprudent real estate loans,” the FDIC said in the complaint. The bank, which was established in 1977 and provided residential construction loans in California’s central valley, failed in 2009, according to the complaint. The FDIC is receiver for the bank. “Management repeatedly disregarded the bank’s credit policies and approved loans to borrowers who were not credit worthy” or lacked sufficient collateral, the FDIC alleged. The former officers either had no phone number listed or had an unlisted number, and couldn’t immediately be located for comment on the lawsuit. The case is FDIC v. Hawker, 12-CV-00127, U.S. District Court, Eastern District of California (Fresno). To contact the reporter on this story: Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-08-30 | Bloomberg | Basketball Seeks Support in Soccer-Mad Britain Before 2012 Summer Olympics | Basketball is an afterthought in soccer-mad Britain, where professional teams sometimes have to share gym practice space with badminton games as the sport’s two national squads prepare for their first Olympic appearance since 1948. As host of the 2012 London Summer Games, the British men’s basketball team led by Chicago Bulls forward Luol Deng and its women’s team will be included in the field. Still, most of their countrymen don’t know Britain has a pro basketball league. “If you asked them to name a team, they’d say the Harlem Globetrotters,” Mike Davies, alliances director of the British Basketball League, said in a telephone interview. The British men’s team, which qualified for the 24-nation European championships that begin today in Lithuania , ranks 56th in the International Basketball Federation’s world rankings , below Mali and Cape Verde. The British women don’t even make FIBA’s list. The country lacks basketball traditions, such as the college rivalries familiar in the U.S. “For university games, we might get somebody’s girlfriend out to watch,” said Henry Wilkins, 20, who plays guard for a local basketball club as well as for Leeds Metropolitan University. The biggest-drawing team in the British Basketball League, the Newcastle Eagles, averages about 2,500 fans a game. That’s fewer than the attendance for fourth-division English soccer league teams, and can make finding and keeping a venue difficult. “To be honest, they could probably make more money from one night with a well-known pop singer than if they have 20 home games with us throughout the season,” Davies said. Manchester United , the record 19-time English soccer champion, attracts more than 76,000 fans per game to its Old Trafford stadium, while the English national squad’s home, Wembley in north London, can hold 90,000 for soccer and rugby. Insurance Costs Britain also faces insurance woes caused by the National Basketball Association lockout, which is forcing international teams to pick up a bigger share of costs. Britain couldn’t afford insurance for the European championships for Detroit Pistons guard Ben Gordon, who was born in London. Because of the labor dispute, national teams would have to pay all of an NBA player’s insurance, rather than sharing those costs. That would have meant a potential cost of 120,000 pounds ($195,000) or more for Gordon from a national team that has an annual budget of 2 million pounds, said Chris Spice, performance director for British Basketball. “We paid about a third the price, for better coverage” before the lockout, Spice said in an interview following Britain’s 96-70 exhibition win against the Netherlands on Aug. 7. Spice said he hopes the NBA labor dispute will be settled or outside funding can be obtained to allow Gordon to play in the Olympics next July. Games Host The last time Britain competed in basketball at the Olympics was in 1948, when the Summer Games also were held in London. The men’s team finished 20th of 23, beating only Ireland, after warmup contests against squads such as the YMCA. “It was a different world,” said Lionel Price, 84, a retired industrial developer who still lives in London. “We were happy to win, but if you didn’t, it was no big deal.” The British men’s and women’s basketball teams have the same goal -- reach the quarterfinals in 2012 and then play well enough to qualify for the 2016 Rio de Janeiro Olympics. “It’s time we qualify on our own right,” said Julie Page, the 28-year-old captain of the women’s team and a Manchester, England, native who attended Eastern Washington University in Cheney, Washington. A British women’s team including members of the Olympic squad went 1-4 at the World University Games this month in Shenzhen, China , including an 85-33 loss to the U.S. team that won the gold medal. Warmup Win The men’s team posted a 1-4 record at a warmup tournament at London’s Olympic Park this month, defeating China and losing by one point to Australia and two points to Serbia. “We want to compete, we want to prove to the world that we belong,” said Pops Mensah-Bonsu, a 27-year-old forward who’s played for teams ranging from the NBA’s Toronto Raptors to Italy ’s Benetton Treviso. “You come out to support us, and we’ll show you we’re legitimate.” Price, the last surviving member of the 1948 Olympic basketball team, met the members of the current British squad and looks forward to watching them play next year. “I don’t think they’ll win a medal, but they’re very enthusiastic and a nice bunch of chaps,” he said. “I told them, it’s not the winning and the losing, but being able to play. They’ll never be able to take that away from them.” To contact the reporter on this story: David Altaner in London at daltaner@bloomberg.net To contact the editor responsible for this story: Christopher Elser at at celser@bloomberg.net |
2024-03-31 | Bloomberg | Japan Cheap for Herro After Biggest Topix Swings in Two Years | The biggest price swings in Japanese equities in two years have left valuations in the Topix index close to the lowest levels since the collapse of Lehman Brothers Holdings Inc. Historical volatility for the Topix jumped to 48.36 last month, the highest level since December 2008, according to 30- day data compiled by Bloomberg. The benchmark measure of 1,667 Japanese companies trades at 14.7 times reported profit, down 8.7 percent from February. David Herro of Harris Associates LP, Morningstar Inc.’s international stock fund manager of the decade, is betting shares are cheap enough to overcome slower growth after Goldman Sachs Group Inc. cut its estimate for Japan’s gross domestic product expansion almost in half. Concern the nation’s biggest earthquake on record would cripple the world’s third-largest economy pushed the index down the most in 10 months in March, wiping out about $446 billion in share value. “As more and more of this uncertainty surrounding the disaster clears up, it’ll be a good place for people to invest,” said Herro, chief investment officer of international equities at Harris Associates, which oversees about $62 billion in Chicago. “The real potential is for people to take a second look at these valuations.” The price-earnings ratio for the Topix has slipped below the MSCI World (MXWO) Index, which tracks stocks in 24 developed markets, for the first time since November, when the Japanese equity measure began a 21 percent rally through February. Profit for companies in the Topix may rise 10 percent in the next 12 months, according to analyst estimates compiled by Bloomberg. Bigger Swings Historical volatility, which measures the size of daily swings in stocks, currencies and commodities, rose from a four- year low of 9.58 in January in the Topix. It averaged 17.88 during 2010, according to data compiled by Bloomberg. The Nikkei 225 Stock Average Volatility Index jumped 68 percent last month to 32.90, including the biggest one-day gain on record on March 14. The gauge, based on prices for Japanese option, implies a 9.4 percent swing in the Nikkei 225 in the next 30 days, data compiled by Bloomberg show. The magnitude-9 earthquake and tsunami that hit Japan last month has killed 11,532 people and left 16,441 missing, based on data from the National Police Agency in Tokyo. Damaged reactors at the Fukushima Dai-Ichi plant leaked radiation into seawater and farmland in northern Japan and sent shares of operator Tokyo Electric Power Co. down 78 percent since March 10, the day before the quake. Rebuilding Costs Japan’s government estimated last month that rebuilding costs may reach 25 trillion yen ($302 billion), almost four times the cost of Hurricane Katrina’s damage in the U.S. Mining and construction companies have posted the biggest gains in the Topix since the earthquake, climbing 14 percent and 6.8 percent through March 31 for the biggest gains among 33 industries. While the Topix has rebounded 13 percent since reaching a two-year low on March 15, its 3.3 percent loss in 2011 is the biggest among benchmarks for 24 developed countries, according to data compiled by Bloomberg. Jason White, a Baltimore-based portfolio specialist with T. Rowe Price Group Inc.’s international equity team, which invests in Japanese stocks as part of managing $70 billion, said he remains “underweight” Japan shares on concern the economy may weaken. “We haven’t been wholesale buyers across the board,” said White. “We obviously don’t know what the long-term effect on the economy will be.” Slower Growth Economists at Goldman Sachs cut their estimate for Japan’s economic growth for the year beginning today to 0.7 percent, from a previous forecast of 1.3 percent, and said gross domestic product will fall between April and June, according to a March 29 report. Toyota Motor Corp., the world’s largest automaker, may delay the production of at least 500,000 vehicles in Japan because of a shortage of parts and electricity, according to Advanced Research Japan. Valuations for Japanese stocks already reflect the prospect for weaker economic growth, said Thornburg Investment Management Inc.’s William Fries. The Topix last month came within 9 percent of erasing all the gains since global markets bottomed from the financial crisis in March 2009. “We added to some of our favorite names,” said Fries, who oversees $28 billion in Santa Fe as manager of the Thornburg International Value Fund, which beat 93 percent of peers since 2006. “The macro-environment will be negative for the near- term, but for the companies that we hold, we think that’s reflected in the stock prices.” Currency Intervention Japan sold 692.5 billion yen from Feb. 25 to March 29, the Ministry of Finance said yesterday in Tokyo, showing the nation’s efforts to bring the currency down from a postwar high. The yen climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade. The yen traded at 82.74 per dollar at 2:50 a.m. Tokyo time today, compared with 82.98 on March 10, a day before the earthquake. The Japanese government said there’s no evidence insurance companies were repatriating assets from abroad due to the risk of radiation leaks from a quake-crippled nuclear plant. International investors purchased about 890 billion yen in shares of Japan companies during the week ended March 18, the most since records began in 2005, according to data compiled by the Ministry of Finance. They withdrew 13.3 billion yen in stock last week. “Unless there’s a renewed deterioration in the Fukushima power plant or something more fundamental causing further damage to the Japanese economy, then shares in Japan are a reasonably good value,” said Shane Oliver , head of investment strategy at AMP Capital Investors Ltd., manages $98 billion in Sydney. “The likely scenario will be that the Japanese market continues to recover, but not in a straight line.” To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Inyoung Hwang in New York at ihwang7@bloomberg.net To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net ; Nick Baker at nbaker7@bloomberg.net |
2024-07-30 | Bloomberg | Cuomo Said to Subpoena Genworth, Unum as Insurer Probe Widens | New York Attorney General Andrew Cuomo subpoenaed Genworth Financial Inc. , Unum Group and an insurer acquired by France’s Axa SA as the state widens a life- insurance fraud probe, said a person briefed on the demands. New York Life Insurance Co., Northwestern Mutual Life Insurance Co. and Guardian Life Insurance Co. of America also were ordered to turn over information, the person, who declined to be identified because the subpoenas hadn’t been publicly disclosed, said yesterday. Cuomo is probing profits insurers earn on death benefits that the carriers retain on behalf of the families of deceased policyholders including military personnel. More than 100 carriers earn investment income on $28 billion owed to life insurance beneficiaries, Bloomberg Markets magazine reported this week. Cuomo announced an investigation yesterday into what he called “secret profits” and said he subpoenaed MetLife Inc. and Prudential Financial Inc. His probe follows reviews by the New York State Insurance Department and U.S. Department of Veterans Affairs. “It is shocking and plain wrong for these multinational life insurance companies to pocket hundreds of millions in profits that really belong to those who have lost family members,” Cuomo said in a statement yesterday. “The insurance industry appears to be hoarding millions that belong to military families whose loved ones have made the ultimate sacrifice.” MetLife, which retains about $10 billion of death benefits, said today that the accounts being probed by Cuomo are popular with clients. ‘They Love It’ “The beneficiaries have full access to their funds,” MetLife Chief Executive Officer Robert Henrikson said in a conference call with analysts. “Our accountholders tell us they love it.” Henrikson said his firm hadn’t yet been subpoenaed. Genworth said that almost all of the beneficiaries who have retained-asset accounts opted to keep their money with the insurer. Beneficiaries have the choice of what to do with the funds, and if they don’t respond to an inquiry from the insurer, the money is held by the company, said Tom Topinka , a spokesman for Richmond, Virginia-based Genworth. He said the company has received a subpoena. Richard Jones , a spokesman for Guardian, New York Life’s William Werfelman and Northwestern’s Jean Towell said their companies received subpoenas. Unum, Axa “We are not aware of a subpoena, but we will certainly cooperate in every way should we receive one,” said Jim Sabourin , a spokesman for Chattanooga, Tennessee-based Unum. Axa’s Chris Winans , who was asked about the Paris-based firm’s MONY unit, had no comment. Prudential Chief Executive Officer John Strangfeld said the Newark, New Jersey-based company is in talks with Veterans Affairs to address the agency’s concerns. By holding beneficiaries’ funds and allowing access on demand, the insurer provides security to its clients, he said in a statement. “Beneficiaries are vulnerable targets for abusive sales tactics,” he said yesterday. “We believe that the Alliance Account takes the pressure off beneficiaries to do something with the money -- a situation that may lead to imprudent and expensive investment decisions.” Defense Secretary Robert Gates pledged to help Veterans Affairs in its probe. Representative Patrick Murphy , a Pennsylvania Democrat and veteran who served in Bosnia and Iraq, wrote Strangfeld asking that the company disclose the amount of profit earned on the retained benefits and “return that money to the beneficiaries.” Fallen Heroes Prudential paid survivors like Cindy Lohman, the mother of a slain Army sergeant, 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings. Insurance companies may be violating a federal bank law, Bloomberg Markets reported. A 1933 statute makes it a felony for any company to accept deposits without state or federal authorization. “Until today I actually believed that the families of our fallen heroes got a check for the full amount of their benefits,” Gates said yesterday. “I will be very interested in the outcome of the VA investigation.” MetLife, the biggest U.S. life insurer, and No. 2 Prudential place death benefits in interest-bearing accounts and issue IOUs to survivors. Insurers market the accounts as a service to allow bereaved beneficiaries time to think about what they’ll do with the payout. Carriers make money by investing the funds in bonds and keeping the difference between returns and the interest they credit to the accounts. No FDIC Backing The National Association of Insurance Commissioners, a group of state regulators, said yesterday it will reexamine rules about what life insurers must disclose to policyholders about retained-asset accounts. The New York insurance watchdog plans to probe whether any rules would prohibit insurers from providing the accounts, which aren’t guaranteed by the Federal Deposit Insurance Corp. State regulators are supposed to back life policies by raising money from insurers that do business in their state. There are no public records showing how much companies are holding in retained-asset accounts, Bloomberg Markets reported. “It appears that the substantial interest earned on these accounts mostly benefit and enrich the insurers at the expense of the families to whom the money really belongs,” Cuomo said. “Beneficiaries are not adequately informed by the insurers of the details of these accounts including the fact that the insurers are making huge profits at the expense of the grieving family.” To contact the reporters on this story: David Evans in Los Angeles at davidevans@bloomberg.net ; Andrew Frye in New York at afrye@bloomberg.net. Andrew Cuomo, New York attorney general, speaks during a news conference in New York. Photographer: Andrew Harrer/Bloomberg July 29 (Bloomberg) -- Bloomberg's David Evans talks about New York Attorney General Andrew Cuomo's fraud probe into the life insurance industry. Cuomo's office subpoenaed Prudential Financial Inc. and MetLife Inc. for information about profits on death benefits retained from the families of deceased policyholders including military personnel. Cuomo’s investigation was prompted by a Bloomberg Markets magazine report and follows a review by the New York State Insurance Department. Evans speaks with Margaret Brennan and Scarlet Fu on Bloomberg Television's "InBusiness". (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); } }); }); //]]> |
2024-03-21 | Bloomberg | Mauritius Foreign Investment Rose 59% Last Year, Bank Says | Foreign direct investment in Mauritius surged 59 percent last year, the Bank of Mauritius said. Investment reached 13.95 billion rupees ($487 million), compared with 8.8 billion rupees a year earlier, the Port Louis- based central bank said in a statement on its website today. It was the biggest inflow since 2005, according to the bank. The U.K, India and France were the main sources of investment in 2010, the bank said. Finance and insurance, real estate, healthcare and construction attracted most of the investment. To contact the reporter on this story: Kamlesh Bhuckory in Port Louis at kbhuckory@bloomberg.net. To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net . |
2024-10-06 | Bloomberg | Exchanges Will Raise U.S. Health-Care Costs | Ignore the inevitable startup glitches. The new health-insurance exchanges will work just fine -- in the sense that all government health-care programs work: Many people will ultimately become dependent on them for coverage. That won’t mean the exchanges have fulfilled their promise, however. Forget the superficial comparisons to a commodity exchange, an online retailer or even a bulletin board. The health exchanges won’t resemble any other marketplace. Over time, rather than encourage insurance providers to offer ever more attractive and affordable policies, the exchanges are poised to push up the cost not only of insurance but also of health care itself. That means, if the history of U.S. health-care policy is any guide, the exchanges’ very “success” will have the effect of limiting access to care for the 30 million people who are estimated to remain uninsured. Why are things set to go so badly? Because the architects of the health-care exchanges have relied on three crucial assumptions, all of which are probably wrong. First, they have assumed that if insurers are prevented from competing on benefit design or on underwriting, they will compete on price. But why should they compete at all? Limited Competition The exchanges embody what seems like a simple trade: In return for many new customers, insurers accept broad restrictions on their freedom to design and market policies. The biggest requirement is that they agree to insure at the same policy price any and all customers, regardless of their health (with only small formulaic adjustments for age and smoking). From a consumer point of view, that sounds great, and indeed it’s one of the most popular elements of the Affordable Care Act. But from the insurer’s perspective, it courts disaster. With too many sick or high-risk people in its pool an insurer can lose money. So the insurer’s smartest approach is to set premiums high enough to make a profit even if it winds up with a lot of sick beneficiaries. Competition among insurers is supposed to counteract this incentive, but the exchanges can perversely limit competition. The same pricing transparency that makes it easy for consumers to shop enables insurers to make sure they don’t charge less than their competitors do. This is how airlines take advantage of their electronic exchanges. It’s not as if insurance is currently a competitive market; even most private companies have trouble getting more than one bid for employee coverage. Rather than compete aggressively for customers, insurers can use exchanges to informally divide the market among themselves at high premiums. Understanding Health Insurance Exchanges The designers of the health-care exchanges have also assumed that consumers, by shopping for the best deal, will drive down premiums. However, a major flaw in the design of insurance subsidies will insulate almost all of the initial customers -- the estimated 20 million subsidized households -- from concern about how much their policies cost. Now, it’s not supposed to work this way. Only those Americans who don’t get insurance at work and who have income that puts them between 100 percent (138 percent in Medicaid expansion states) and 400 percent of the federal poverty level are eligible for exchange subsidies. As income rises within this bracket, the subsidy shrinks. But in practical terms, everyone who is subsidized has an infinite subsidy that will make them insensitive to premium levels. How can that be? Let’s take an example. A family of four at 138 percent of the poverty level ($32,499) has its premium capped at 3.29 percent of income or $1,071. The rest is subsidy. So, if the cost of a silver plan is $10,000, the subsidy for this family is $8,929. A family at 400 percent of the poverty level ($94,200) has to pay up to 9.5 percent of its income for a plan, or $8,949. So the same $10,000 premium carries a subsidy of only $1,051. Insurer’s Perspective But now look at those two families from the insurer’s perspective. A $10,000 plan already costs more than the maximum amount either family would pay. If the insurer raises the premium to $10,001, both families get $1 in additional subsidy. If it raises premiums to $11,000, both families get $1,000 in additional subsidy. In other words, no matter how much an insurer raises rates, a subsidized household pays zero more. The second-cheapest silver plan is the benchmark for setting subsidies. How can insurers push up premiums artificially on this plan when there are platinum, gold and bronze plans also for sale? Again, easy. By law, these other plans differ from silver primarily by the amount of beneficiary cost-sharing. So the insurer can simply price a silver plan as high as possible, and then adjust the premiums for the other plans accordingly. If these prices end up being too high to attract any actual customers, who cares? Why would an insurer lose the opportunity to share 20 million price-insensitive customers just to compete for a smaller number (the Congressional Budget Office estimates 4 million by 2016) of low-profit price-sensitive ones? There’s one more big assumption about the exchanges at work: that the price of health insurance passively mirrors the price of health care. But there’s plenty of evidence that insurance itself can drive up the cost of care -- when both insurers and beneficiaries are undisciplined in controlling prices. In what may be the single greatest source of unintended consequences in the Affordable Care Act, insurers are now required to spend at least 80 percent of revenue from premiums on care. Superficially, this means that if they set premiums too high, they will have to eventually refund much of the money that they don’t end up spending on care. But let’s say you’re running an insurance company. You can find ways to spend more money on beneficiaries’ health care -- say, with more generous definitions of free preventive care, more expansive rehabilitation services or higher reimbursement rates on doctors’ services -- and keep 20 percent of the all money you bring in. Or alternatively, you can spend less on care and give refunds. Easy choice. Wrong Incentives In the end, we have incentives for insurers not to compete, for customers not to care about price, and for insurers to drive up the cost of care. Not much of a marketplace, is it? Of course, it’s still possible that unsubsidized people will flock to the exchanges (especially if many middle-income Americans lose access to coverage at work), rebalancing insurers’ competitive interests. Or that the growing cost-sharing in all insurance will continue to moderate overall demand for services. Or that insurers will figure out clever ways to segregate price-insensitive (subsidized) buyers from price-sensitive ones. What’s more likely, though, is that the exchanges will fit into a long pattern of U.S. health-care policy: They will serve a constituency (a policy triumph) while driving up the cost of care (which will be blamed on external factors). When Medicare was enacted in 1965, seniors spent about 10 percent of their income on health care and worried about the cost. Today, seniors spend almost double that -- about 17 percent of their income -- on health care and, of course, still worry about cost. Medicare exceeded its budget projections from day one, and its unlimited-entitlement structure led to an explosion in the volume of care. Nevertheless, the program is hailed as a great success in many corners, and its beneficiaries consider it irreplaceable. The new exchanges will undoubtedly also be hailed as a success -- no matter how much havoc their perverse incentives cause. (David Goldhill, the president and chief executive officer of the cable TV network GSN, is the author of “Catastrophic Care: How American Health Care Killed My Father -- and How We Can Fix It.”) To contact the writer of this article: David Goldhill at dgoldhill@gsn.com. To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net . |
2024-04-22 | Bloomberg | European Insurers May See ‘Golden Year’ as Disasters Push Prices | Europe ’s biggest insurers and reinsurers, including Allianz SE (ALV) and Zurich Insurance Group AG (ZURN) , are using last year’s losses from natural catastrophes and auto underwriting to increase policy prices. Allianz, Europe’s biggest insurer, expects higher profit this year, helped by the “high single-digit price increase” it secured for German motor insurance in 2011. Zurich Insurance, Switzerland ’s biggest insurer, reported that general insurance rates rose by more than 3 percent last year. The record $105 billion of natural disaster claims that depressed earnings last year may give insurers and reinsurers that help them shoulder risks for clients the leverage to push through property and casualty price increases. That will help counter the effect of low interest rates , which are crimping investment returns. Yields on German 10-year bunds fell close to an all-time low this month. “2012 could become a golden year for insurers and reinsurers off the back of last year’s high claims,” said Michael Haid, an equity analyst at MainFirst Group in Frankfurt. “Insurers and reinsurers need to show they can push through price increases if they want to assure investors they can succeed in the low interest rate environment.” Net income at Munich-based Allianz may double to 5.29 billion euros ($7 billion) this year, according to the mean estimate of 23 analysts surveyed by Bloomberg. Only two of the 39 analysts who rated the stock in 2012 have sell ratings while 23 say buy, according to data compiled by Bloomberg. Steady Process Profit at Zurich Insurance, which had major catastrophe losses of $1 billion last year, is expected to climb 12 percent to $4.22 billion, according to analysts, who have 10 times more buy than sell ratings on the shares. “Price increases that were pushed through last year will help net income this year,” said Stefan Schuermann, a Zurich- based analyst with Vontobel Holding AG. “Price increases are likely to continue in many markets, which is a slow, steady process.” The 28-company Bloomberg Europe 500 Insurance Index climbed 9.8 percent this year, led by Swiss Re AG (SREN) and Munich Re with gains of 23 percent and 21 percent respectively. Allianz rose almost 15 percent and Zurich Insurance 13 percent. The index declined more than 13 percent in 2011. Global property insurance rates “continued to firm” in the first three months of the year, underpinned by last year’s catastrophe losses, Marsh & McLennan Cos. (MMC) , the world’s second- biggest insurance broker, said in a report this month. ‘Solid Growth’ Allianz is seeing “favorable price effects in several markets” and expects “solid growth” in its property-casualty segment, Chief Executive Officer Michael Diekmann said last month in the Munich-based insurer’s annual report. The company aims to boost operating profit by as much as 11 percent this year. In motor insurance, Germany ’s biggest segment of P&C coverage, premium income climbed 3.5 percent to 20.9 billion euros last year as the average policy price rose for the first time since 2004, the GDV industry association said on April 18. Motor insurance rates are still at a level comparable to the beginning of the 1980s, the association said. Insurers are trying to cut costs and boost prices amid slowing economic growth and market turmoil, said Axel Lehmann, chief risk officer at Zurich Insurance. Changing Times “Since the end of the Second World War we have had continuous growth, but these times are changing,” Lehmann said in an interview. “To overcome declining investment income insurers need to cut costs, improve their underwriting and focus on risk-adjusted prices.” Reinsurance rates rose in April 1 renewals, which focus on the Asia Pacific region, after last year’s losses from earthquakes and floods in Japan , Thailand and New Zealand , Marsh’s reinsurance broker Guy Carpenter & Co. said on April 5. About two-thirds of annual property and casualty reinsurance contracts typically come up for renewal in January, with the remainder renewed in April and July. Munich Re , the world’s biggest reinsurer, expects more price increases this year, particularly in loss-affected regions. The firm’s aggregate losses from natural catastrophes almost tripled to 4.5 billion euros last year. Primary property and casualty “prices are starting to rise, but are not yet enough to compensate for the interest rate decline,” Swiss Re, the world’s second-ranked reinsurer, said on April 17. Pricing trends are on an “improving track,” according to George Quinn , chief financial officer at Swiss Re, which had about $3.48 billion of large natural catastrophe claims in 2011. Catastrophe Looms While Aon Benfield estimates that natural disasters caused less than $3 billion of insured losses in the first quarter, compared with almost $53 billion in the year-earlier period, they remain a threat to earnings forecasts, said Christian Muschick , an analyst with Silvia Quandt Research in Frankfurt. The Atlantic hurricane season starts on June 1 and runs through the end of November. “Whatever happens on the pricing front will be overshadowed by the magnitude of catastrophe claims,” said Muschick. “One major hurricane hitting the U.S. could knock down earnings in one swift blow. Higher prices surely won’t be able to counter that.” To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net ; Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-02-19 | Bloomberg | Seinfeld on Rubio; ZZ Top on Pythons: Palm Beach Scene | “I’ve seen ’em,” said Paul Tudor Jones of the pythons that eat mammals from rabbits to deer in Everglades National Park. “I’m not afraid,” ZZ Top’s Billy Gibbons added of the reptile, which isn’t venomous. The hedge-fund manager and the rocker talked snake at the eighth annual Everglades Foundation benefit, held a few days after a month-long python hunt organized by the Florida Fish and Wildlife Conservation Commission. “The only thing scarier than pythons is letting thousands of rednecks with guns go shoot the pythons -- and I say that as a redneck,” said Carl Hiaasen , whose next book, “Bad Monkey,” comes out in June. Pythons are the least of the Everglades’ troubles, Hiaasen said. “The problem is pollution,” he said, “stuff coming off the sugar fields for 60 years.” “It’s us,” said singer Jimmy Buffett. The Feb. 15 event at the Breakers in Palm Beach raised more than $2 million to restore “the heart of Florida’s ecosystem and economy,” said Tudor Jones, the chairman and chief executive officer of Tudor Investment Corp. in Greenwich, Connecticut. Among the 600 guests were Peter Kiernan of Kiernan Ventures LLC, music executive Tommy Mottola , and Mario Gabelli , chief executive officer of Gamco Investors Inc. Asked if he ever had a stock like the python -- one he had too much of and couldn’t eliminate -- Gabelli replied, “Too many.” Kevin McCluskey , managing director of investments at Deutsche Bank Private Wealth Management in Palm Beach, in a vintage Lilly Pulitzer jacket, said he once shot a rattlesnake and would be glad to hunt python, though he’s more of a sailor. Gummy Gators Ferns and gummy alligators in martini glasses were part of the Everglades-themed decor. For event designer Jay Bell of DeJuan Stroud Inc. , the Spanish moss hanging from chandeliers recalled the beards of ZZ Top’s front men. The Texas musicians performed after a dinner of mini-tacos, “redneck” short ribs, and brownie sundaes served in chocolate guitar cases. The band also inspired the suggested attire, “cheap sunglasses and legs.” Highbridge Capital Management LLC co-founder Glenn Dubin kicked up a denim-clad thigh for a photograph. More ZZ Top-ready limbs belonged to his wife, Eva Dubin, and Kim Havlicek, wife of JPMorgan Private Wealth managing director and Palm Beach market manager Chris Havlicek. Barbara Nicklaus had the funkiest sunglasses, with oval lenses decorated like pineapples. Her husband, Jack Nicklaus , the golfer and course designer, serves on the board of the Everglades Foundation with Tudor Jones, its chairman. “He is unbelievably energetic,” Jack Nicklaus said. “When he believes in something, get out of the way.” Seinfeld’s Moron Jerry Seinfeld did 17 minutes of stand-up for the Everglades. In between riffs on the U.S. Post Office and Pop Tarts, he took aim at Florida’s Republican senator. “ Marco Rubio , that’s funny. What a moron,” the comedian said of the senator’s water grab during a speech after the State of the Union address. “I’m sure he’s a fine man and a wonderful statesman and a brilliant mind,” Seinfeld said, “but just get the water afterwards. You know, it was the little water, that’s what was sad about it. It was the Poland Spring that big. How about a glass of chardonnay? Look like you don’t give a damn.” ( Amanda Gordon is a writer and photographer for Muse, the arts and leisure section of Bloomberg News. Any opinions expressed are her own.) Muse highlights include John Mariani on wine. -- Editors: Jeffrey Burke , Manuela Hoelterhoff. To contact the writer on this story: Amanda Gordon at agordon01@bloomberg.net or on Twitter @amandagordon. To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net . |
2024-10-04 | Bloomberg | India Slowdown Thwarts Carmakers’ Sales Search Beyond U.S | With sales crashing in Europe and slowing in China, carmakers are looking for signs of growth beyond the U.S. market. In India , it’s not looking good. The holiday season, just under way there, typically accounts for about a quarter of new auto purchases. This year, the market is uncharacteristically moribund as the economy is projected to grow at its slowest pace in a decade. That’s especially tough for Hyundai Motor Co. (005380) and Tata Motors Ltd. (TTMT) , the second- and third-biggest carmakers by volume in India. “Everyone is counting on India to deliver future growth,” said Deepesh Rathore , the New Delhi-based India managing director of IHS Automotive, an industry-research company. “The festive season is a trigger for sales in the second half.” The run-up to the Hindu celebration of Diwali in mid- November typically sends consumption surging across India, where the proportion of car ownership is less than a third of that in China. This year, the economic slowdown, high borrowing costs and a fuel-price increase may make the holiday season the worst for auto sales since 2008, according to 7 out of 11 analysts surveyed by Bloomberg News. The Society of Indian Automobile Manufacturers , or SIAM, is considering cutting its forecast for 2012 sales growth for a second time this year, after already paring it back from about 12 percent to 9 percent in July. That’s weak growth for a market that doubled in size from 2008 to 2011, according to Bloomberg Industries data. Low Ownership With only 1.3 percent of India’s 1.2 billion people owning a car -- against China’s 4.4 percent and a global average of 14 percent -- the South Asian nation’s untapped potential is a lure for global carmakers. Spurred by 30 percent sales growth in the year ended March 2011, Ford Motor Co. (F) and Maruti Suzuki India Ltd. (MSIL) are among those adding capacity in Asia’s third-biggest auto market. Ford, which expects India to be among its three biggest markets by 2020, is spending 40 billion rupees ($765 million) on a factory able to produce an additional 240,000 vehicles and 270,000 engines a year by 2014. Maruti, the Indian unit of Japan’s Suzuki Motor Corp. (7269) , will open a sixth plant near New Delhi next year to boost annual capacity 17 percent to 1.75 million units. Now, carmakers are dropping prices and doling out sweeteners as they face the prospect of the worst festival season sales since the collapse of Lehman Brothers Holdings Inc. roiled markets worldwide. Car Discounts Hyundai, which is offering a discount of as much as 44,000 rupees on its 365,000-rupee i10 hatchback, said on Oct. 1 that its Indian sales last month declined 14 percent to 30,851 vehicles. Mumbai-based Tata Motors, maker of the world’s cheapest car, the Nano, saw an 18 percent drop in passenger- vehicle sales for September, while Toyota City, Japan-based Toyota Motor Corp. (7203) ’s India sales fell 5.4 percent. Volkswagen AG (VOW) cut prices on some variants of its lowest- priced models, the Polo hatchback and the Vento sedan, on Sept. 4. The Wolfsburg, Germany-based carmaker is offering low interest rates, free insurance, and added features, Arvind Saxena , managing director for passenger cars in India, said in e-mailed comments. Ford, of Dearborn, Michigan, is offering discounts on its Figo hatchback, including as much as 28,000 rupees on the diesel model. “We remain confident of the long-term potential of the Indian market,” Ford Managing Director Michael Boneham said in e-mailed comments. Cutting Forecast SIAM said Sept. 10 it may cut its full-year domestic car sales forecast as deliveries declined for the first time in the 10 months after Maruti Suzuki shut one of its factories because of a deadly riot. August local deliveries fell 19 percent to 118,142 vehicles. The group had already cut its forecast for car-sales growth to as low as 9 percent in July, from an April estimate of 10 percent to 12 percent growth. Car demand in India has been hurt by high gasoline prices and borrowing costs in a country where almost 80 percent of auto purchases are funded through loans. The nation’s central bank raised interest rates a record 13 times from March 2010 to October last year to rein in inflation. Headline inflation accelerated to 7.55 percent in August, the fastest in the BRIC group of largest emerging nations that also includes Brazil, Russia and China. Diesel Prices A 14 percent increase in diesel prices announced by the government Sept. 13 as part of measures to pare its subsidy bill and trim the budget deficit has further damped automobile purchases. Automakers have added diesel engine capacity and introduced new models as a price gap between gasoline and subsidized diesel spurred demand for the cheaper fuel. “When there is a such a sharp increase in fuel prices, customers hold off purchases,” said IHS Automotive’s Rathore. “Unfortunately, this increase in diesel prices has come at the wrong time, just before the festive season.” The Asian Development Bank said yesterday it cut India’s full-year economic growth forecast to 5.6 percent. That would be the slowest expansion in 10 years, according to data compiled by Bloomberg. The slowdown in India comes as the European debt crisis dragged the region’s auto market to its lowest level in 17 years. Also, Chinese passenger-vehicle sales in August trailed analysts’ estimates for a second month after consumers held off purchases in anticipation of more discounts. New Alto Carmakers and 3 of the 11 analysts polled by Bloomberg still said they expect new models and the discounts to help revive demand. General Motors Co. (GM) will introduce its Shanghai-designed Sail hatchback this month as it looks to newer models to bring back customers. Maruti, India’s biggest carmaker by volume, will introduce a new version of its best-selling Alto hatchback during the festive season. “Many automakers -- including us -- are introducing new models around the festive season,” said Lowell Paddock, GM’s president for India. “We’re cautiously optimistic that all of the attention this will create will increase showroom traffic.” Ford, which is offering incentives including insurance payments and free accessories, expects demand to revive before the end of the festival season. “We are upbeat about the festive period and have lined up various offerings,” said Boneham. The growth so far this year may signal a postponement of purchases to the festive season, according to Abhishek Gaoshinde, an analyst at Sunidhi Consultancy Services. “There is a lot of pent-up demand in the market,” said Gaoshinde, in a Sept. 26 telephone interview from Mumbai. “The festive season may see this demand being met, especially with the discounts available.” Others aren’t so optimistic. The “general inflationary trend, high fuel prices and interest rates” are damping demand, Hyundai’s India unit, which accounts for about 10 percent of the Seoul-based company’s global shipments , said in e-mailed comments. “Unless any major triggers get activated, market sentiment is not expected to improve very much.” To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net |
2024-02-21 | Bloomberg | PBOC Switch to Drain Cash Turns Citigroup Bearish | The People’s Bank of China ’s first draining of cash since June, seeking to damp a property-market revival, is prompting Citigroup Inc. (C) to predict one-year yields will rise faster than longer-term rates. The central bank sold repurchase agreements for the first time in eight months on Feb. 19, withdrawing capital from banks after they lent the most money in two years in January. The gap between one- and 10-year government yields has widened 26 basis points in the past four months to 87, after touching 88 on Feb. 19, the highest level since August 16, according to Chinabond. Comparable spreads across the so-called yield curve are 172 basis points in Brazil , 155 in Russia and one in India. “The PBOC regards the current liquidity conditions as overly loose,” said Weisheng He, a strategist in Shanghai at Citigroup. “Going into April, I expect the bond curve to bear- flatten,” he said, predicting the one-year yield will rise to 3 percent this year from 2.70 percent yesterday. The outlook for a flattening yield curve reflects the risks that excessive lending may fuel inflation in the world’s second- largest economy and lead to a property-market bubble. The central bank said on Feb. 6 that China must be alert to changes in price expectations and to imported inflation. China’s banks extended 1.07 trillion yuan ($172 billion) of loans in January, compared with 738 billion yuan a year earlier, the PBOC said on Feb. 8. Aggregate financing , which includes non-bank lending, climbed 914 billion yuan last month to a record 2.54 trillion yuan, central bank data show. Flatter Curve “It was probably the rapid increase in loans that prompted the central bank to fine-tune monetary policy,” said Chen Qi, co-head of fixed-income research at UBS Securities Co. in Shanghai. “Liquidity won’t be as ample as before, which will help push up short-term yields. It’s possible that the curve will flatten.” The yield on 10-year government bonds dropped four basis points this month to 3.57 percent, according to Chinabond, the nation’s second-biggest clearing house. The rate on one-year debt declined 11 basis points. Chinese developers were able to improve their liquidity at favorable costs because funding channels reopened, Standard & Poor’s said a report released yesterday. Home sales in China’s 10 biggest cities almost quadrupled to 8.5 million square meters (91.5 million square feet) in the first five weeks from last year, property data and consulting firm China Real Estate Information Corp. said on Feb. 19. Tighter Policy “The PBOC will try to tighten liquidity this year to counter rises in home prices and also to curb inflationary pressures at the consumer level,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “It will try to drain liquidity via open-market operations such as repos and bill sales. I also expect yields it offers in these operations to be increased.” The PBOC drained a net 910 billion yuan of capital this week, the biggest withdrawal since Bloomberg started compiling the data in 2008, after issuing 40 billion yuan of 28-day repurchase contracts and 10 billion yuan of 91-day repos. By contrast, the monetary authority pumped in a record 662 billion yuan of funds during the five days through Feb. 8, as cash demand surged before the Chinese New Year holiday. The seven-day repurchase rate , a gauge of interbank funding availability, has declined 24 basis points, or 0.24 percentage point, in February to 3 percent, according to the National Interbank Funding Center. The yuan weakened 0.07 percent to 6.2422 per dollar today. Stimulating Growth China “won’t tighten policy too much” as the government aims to shift the focus of the economy to domestic consumption, according to Stephane Monier, deputy global chief investment officer at Lombard Odier Asset Management, which manages $200 billion. The Geneva-based private bank is bullish on sovereign debt because of the prospects for yuan appreciation, he said. “There’s not a very strong argument for strong tightening,” Monier said in an interview yesterday in Hong Kong. “What would be wise for them is to continue the tightening by a moderate appreciation of the currency.” The finance ministry yesterday issued 26 billion yuan of 10-year government bonds at a yield of 3.52 percent, according to Chinabond. That compared with the median estimate of 3.565 percent in a Bloomberg News survey. The sale drew bids worth 2.86 times the amount on offer, the highest for the maturity since 2005, according to China International Capital Corp. data. Bond Demand “The strong demand for bonds in the primary market reaffirms the fact that the financial system is flooded with cash,” said Chen Jianheng, a bond analyst in Beijing at CICC, the nation’s biggest investment bank. “The resumed repo sales are only used to make liquidity not excessively loose. The central bank isn’t sending a tightening signal.” Consumer prices rose 2 percent from a year earlier in January, compared with 2.5 percent in the previous month, the statistics bureau said on Feb. 8. Ba Shusong , a researcher at the State Council’s Development Research Center, said inflation may accelerate to 3 percent in February, the China National Radio reported on the same day. Confidence in China’s economy has improved this month. Five-year credit-default swaps protecting China’s sovereign notes against non-payment fell 4.5 basis points in February to 64.5 as of Feb. 20 in New York , according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The world’s second-biggest economy expanded 7.9 percent in the fourth quarter, compared with 7.4 percent in the previous three months, China’s statistics bureau said on Jan. 18. The central bank will “mildly” drain capital from the financial system because the economic recovery is good so far, said Shi Lei, head of fixed-income research at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “The seven-day repo rate may rise to 3.3 percent after the PBOC resumed repo sales,” said Shi. “The rising funding costs will help damp companies’ demand for money a bit.” -- Judy Chen. With assistance from Kim Kyoungwha in Shanghai and Fion Li in Hong Kong. Editors: Sandy Hendry, Amit Prakash To contact the reporter on this story: Judy Chen in Shanghai at xchen45@bloomberg.net. To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net . |
2024-05-29 | Bloomberg | China Insurance Premiums Rise 24% in First 4 Months | China's insurance market expanded 24 percent to 253.2 billion yuan ($33 billion) in premiums in the first four months of 2007 from a year earlier, the regulator said. Premiums from life policies rose 19 percent to 164.1 billion yuan, the China Insurance Regulatory Commission said in a statement posted on its Web site today. Property and casualty cover generated premiums of 71 billion yuan, up 43 percent. Wu Dingfu , the regulator's chairman, is trying to ease rules to allow insurance companies to invest their funds more freely in the stock market to improve their returns. Preparations are under way to lift a ban that limits insurers' direct investment in the stock market to 5 percent of assets, he said April 12. China 's CSI 300 Index has doubled this year after more than doubling in 2006. Total assets held by China's insurers were 2.43 trillion yuan. Insurers had 758.9 billion yuan in bank deposits, up from 634.4 billion yuan in the first three months, and 1.47 trillion yuan in stocks, bonds and corporate debt, up from 1.41 trillion yuan in the first three months, the regulator said. To contact the reporter on this story: Jiang Jianguo in Shanghai at jjiang@bloomberg.net ; Josephine Lau in Beijing at jlau22@bloomberg.net To contact the editor responsible for this story: Tom Kohn at tkohn@bloomberg.net |
2024-10-20 | Bloomberg | Bank of America Bosses Find Friend in the Fed: Jonathan Weil | One of the reasons so many Americans are ticked off at the Federal Reserve is a lingering sense that it puts big banks’ interests above those of ordinary taxpayers. The news that the Fed is taking Bank of America Corp. (BAC) ’s side in a dispute over where to park some of the company’s holdings only reinforces that impression. Here’s the gist of the story, broken two days ago by Bloomberg News. Bank of America, which got hit with a credit- rating downgrade last month by Moody’s Investors Service, has moved an undisclosed amount of derivative financial instruments from its Merrill Lynch unit to its biggest commercial-banking subsidiary. The latter is loaded with insured deposits and has a higher credit rating than Merrill or the parent company. The Federal Deposit Insurance Corp. is objecting to the transfers. That part is easy to understand: More risk for the retail lender means more risk for FDIC-insured deposits, which ultimately are backstopped by the U.S. government. The Fed, however, has signaled to the FDIC that it favors the transfers. Shifting the derivatives to the commercial lender may let Bank of America avoid collateral calls and termination fees stemming from the rating downgrade. Some Merrill clients may prefer having their contracts with the higher-rated unit. In short, the Fed’s priorities seem to lie with protecting the bank-holding company from losses at Merrill, even if that means greater risks for the FDIC’s insurance fund. Pushing an Agenda Among the big questions we’re left with: Why is the Fed going to bat for Bank of America in the first place? If the FDIC doesn’t want its insurance fund exposed to potential losses from these investment-banking trades, why expose it? And how many other banks have managed to get the Fed to push their agenda in the same sort of way? Unfortunately, none of the actors here went on the record to explain what’s going on. We don’t know what kinds of derivatives these are, or even the dollars at stake, only that they are big enough to make the FDIC upset. The entire story would be playing out in secret were it not for some unidentified whistleblowers who seem to have this crazy idea that the public should be informed about what the regulators and Bank of America are up to. It’s not as if the FDIC’s deposit-insurance fund is flush with cash. It finally turned positive last June, when it finished with $3.9 billion of net assets, after seven consecutive quarters of negative balances. A surprise failure by even one community bank could easily wipe out that tiny surplus. Capital Doubts It’s also clear that the market harbors serious doubts about whether Bank of America has enough capital. Its shares trade for less than a third of the company’s common shareholder equity. Transferring the derivatives to the commercial-lending unit, where most of Bank of America’s derivatives are kept already, would let the holding company avoid a capital hit. For all we know, though, the derivative contracts Merrill wrote are far more exotic. Keep in mind: Merrill and Bank of America each needed two rounds of federal bailout money, back in 2008 and 2009. As for whether taxpayers are still on the hook now, sure, we’ve been told the Dodd-Frank Act passed by Congress last year would end federal bailouts of large banks. It doesn’t exactly do that, though. Taxpayer money still would be at risk in the event that the FDIC has to exercise its new resolution powers. Dodd-Frank lets the FDIC borrow money from the Treasury to finance a seized company’s operations for as long as five years. While the law says the FDIC is supposed to tap the banking industry to pay for any eventual losses, it’s hard to imagine the agency could ever charge enough to cover the costs from a failure at a company with $2.2 trillion of assets, or any other giant financial institution, for that matter. Plus, there’s always the chance Congress will change the law again. If neither the regulators nor Bank of America will explain what’s going on here, the only hope may be for Congress to start asking its own questions. Perhaps then we might find out why the Fed seems to believe it’s a good idea to let a huge bank-holding company avoid a blow to its capital by shifting more of its trading risks onto the retail crowd. Taxpayers deserve to know. ( Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.) To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-10-09 | Bloomberg | UN Advisers Say Global Social Fund Would Protect World’s Poor | Basic social protection could be provided to all the world’s poor at the cost of 2 percent of global gross domestic product, according to the United Nations’ advisers on extreme poverty and the right to food. Almost 80 percent of the world’s poor have no social safety net to protect them against the effects of unemployment, illness or disability, Olivier De Schutter, who reports to the UN on the right to food, and Magdalena Sepulveda, UN adviser on extreme poverty and human rights, wrote in a joint statement. The world had 868 million hungry people in the 2010-12 period, or 12.5 percent of its population, the UN’s Food & Agriculture Organization reported today. The advisers said the fund plan should be discussed at an FAO food-security meeting in Rome next week. “Food and other basics must not be left to the mercy of economic cycles,” De Schutter was cited as saying in the statement. “The world’s poorest citizens must be able to fall back on basic social protection.” De Schutter and Sepulveda called for the creation of a Global Fund for Social Protection that would be managed by an existing international agency such as the World Bank or set up as an independent organization, and funded by donations from developed countries. Such a global fund could close the funding shortfall for minimum social protection in least-developed countries, the UN advisers wrote. The fund could also help underwrite against the risk of excess demand triggered by major shocks by advising least- developed countries on private reinsurance, subsidizing premiums where necessary and by acting as a re-insurer of last resort, De Schutter and Sepulveda wrote. Social Protection “When the global financial crisis struck, governments stepped in to prop up banks that were deemed too important to fail,” they wrote in the statement. “The same logic must now be applied to basic social protection, which is too crucial to be denied.” The global fund would help move toward a system that’s more predictable for government budgets and households, and allow countries to put social-protection systems in place without a fear of insolvency caused by disaster, according to De Schutter and Sepulveda. Comprehensive social protection would have knock-on benefits such as advancing women’s rights, cash infusions for local economies and improved work productivity through health benefits, according to the UN advisers. To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net |
2024-02-24 | Bloomberg | Obama, Holder Cease Defending `Unconstitutional' Defense of Marriage Act | The Obama administration said it will no longer oppose court challenges to the Defense of Marriage Act, which prohibits the federal government from recognizing same-sex marriages for purposes of taxes, social security and other programs. U.S. Attorney General Eric Holder wrote yesterday to House Speaker John A. Boehner, an Ohio Republican, to announce the executive branch’s new position on the 15-year-old law. While Holder’s letter explains the administration’s objection to defending the law specifically in two lawsuits in federal courts in New York and Connecticut, he also said the Justice Department will advise courts handling other challenges to the act that the administration no longer supports it. “I will instruct department attorneys to advise courts in other pending Defense of Marriage Act litigation of the president’s and my conclusions” that the law’s definition of marriage as between a man and a woman is unconstitutional, Holder said in a statement. Members of Congress “who wish to defend the statute may pursue that option,” he said. In October, the administration said it was appealing rulings in federal court in Massachusetts that the act was an unconstitutional violation of states’ rights. Recent lawsuits challenging the law “have caused the president and the department to conduct a new examination,” according to the letter. In his statement, Holder said the law will remain in effect until Congress repeals it or a court issues a final ruling striking it down. Bill Clinton The marriage-defining act, popularly known as DOMA, was signed into law by President Bill Clinton in 1996. As of 2003, it affected 1,138 federal programs in which marital status was a factor in eligibility for benefits, according to a 2004 report by the federal government. Since the law was enacted, five states and the District of Columbia have approved gay marriage, while others allow civil unions. Michael Steel , a spokesman for Boehner, said in an e-mail he questions why President Barack Obama “thinks now is the appropriate time to stir up a controversial issue that sharply divides the nation” when “most Americans want Washington to focus on creating jobs and cutting spending.” Obama has long opposed the law, said Jay Carney, the White House press secretary. While the president views the law as unfair, he’s still “grappling” with his views on same-sex marriage, Carney said. Obama reviewed Holder’s recommendation on the issue “and concurred,” Carney said. No Such Precedent Holder said in his letter that defending the Defense of Marriage Act in the lawsuits at issue would require the Justice Department to support limiting marriage to heterosexual couples in cases where a regional federal appeals court has set no such precedent. Citing a history of discrimination against gays and lesbians, Holder said “the President and I have concluded that classifications based on sexual orientation warrant heightened scrutiny,” and must therefore be “substantially related to an important government objective.” Applying that standard, Holder said the legislative record underlying the law’s passage “contains numerous expressions reflecting moral disapproval of gays and lesbians and their intimate and family relationships -- precisely the kind of stereotype thinking the Equal Protection Clause is designed to guard against.” Edith Schlain Windsor, the plaintiff in the New York case, married another woman, the late Clara Spyer, in Canada in 2007, according to her complaint. While New York legally recognized their marriage, and afforded them the same protections as other married couples, the two women weren’t considered married under federal law, she said. Federal Tax Law The case claims that under U.S. tax law, the transfer of money and property doesn’t trigger any estate tax on a spouse who is widowed. Because of the Defense of Marriage Act, Windsor was forced to pay more than $350,000 in taxes that she wouldn’t have had to pay if her marriage to Spyer had been recognized under federal law, according to the complaint. Joanne Pedersen, who filed the Connecticut complaint, is a retired civil employee of the Department of the Navy’s Office of Naval Intelligence who married another woman in Connecticut in December 2008. Pedersen said she was denied permission to enroll her spouse, Ann Meitzen, in the Federal Employees Health Benefits Program because Meitzen didn’t qualify as a family member under DOMA. Pedersen said that while Meitzen, who has suffered from recurrent bouts of pneumonia, wanted to work only part-time, she can’t afford to give up her full-time job’s health insurance benefits, according to the complaint. ‘Leadership, Integrity’ Gay rights groups including the National Gay and Lesbian Task Force welcomed Holder’s announcement, while initial reaction among U.S. lawmakers was along partisan lines. New York Representative Jerrold Nadler, a Democrat, praised Obama and Holder for “their leadership, integrity and courage.” Their decision “marks the first time that the federal government has recognized that the law designed to harm gay Americans “cannot be justified,” Nadler, who has sponsored legislation to repeal the law, said in a statement. Lamar Smith, the Texas Republican who chairs the House Judiciary Committee, called the Justice Department’s decision to stop defending the law “irresponsible.” Smith said in a statement “this is the real politicization of the Justice Department when the personal views of the president override the government’s duty to defend the law of the land.” The cases are Windsor v. U.S., 1:10-cv-8435, U.S. District Court, Southern District of New York, and Pedersen v. OPM, 3:10- cv-1750, U.S. District Court, District of Connecticut. To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net. To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net . |
2024-07-22 | Bloomberg | ING’s Cuyegkeng Says Philippines May Raise Banks’ Reserve Ratio | Joey Cuyegkeng, a Manila-based economist at ING Bank NV, comments on the Philippine economy and monetary policy. He spoke at a press briefing today. Bangko Sentral ng Pilipinas may keep its benchmark interest rate unchanged at 4.5 percent at its July 28 meeting after two increases earlier this year, Cuyegkeng predicts. It may order lenders to set aside more money as reserves, he said. Cuyegkeng expects second-quarter economic growth of 4.8 percent to 4.9 percent and estimates full-year growth of 5.2 percent. Gross domestic product increased 4.9 percent from a year earlier in the first quarter, the Southeast Asian nation’s slowest pace of expansion since 2009 as exports eased and government spending faltered. On the economy: The Philippine economy’s “fundamentals continue to be strong. Growth is normalizing. Unfortunately, the government is quite stringent on the spending side. “Agriculture provided the growth in the first quarter and will probably do so for the rest of the year. But come the fourth quarter, the economy should find a new source of growth. “The government’s contribution to growth is missing. Underspending to me is a drag. The impact would have been a 1.8- percentage-point increase in gross domestic product had government spending stayed flat. That’s quite huge. Instead of growing at 4.9 percent, we could have grown at almost 7 percent. “One of the basic requirements for a credit rating upgrade is an acceleration of growth.” On monetary policy and inflation: “I think we’re on the end phase of rate hikes. The inflation trajectory has tapered off, but still on an uptrend. We’re looking at an average of 4.7 percent this year and next year at 4.6 percent, a mild downtrend. There’s more leeway for the central bank to continue to hold policy rates steady.” Should inflation “breach 5 percent, the central bank may do another insurance rate hike” likely in September. “It will likely be a pause for next week, but a reserve requirement hike is a possibility.” To contact the reporter on this story: Cecilia Yap in Manila at cyap19@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-12-12 | Bloomberg | Nippon Life Plans to Boost Private-Equity Holdings, Maintain Hedge Funds | Nippon Life Insurance Co. , Japan’s biggest life insurer with about 50 trillion yen ($640 billion) of assets, plans to invest more in private-equity funds and maintain its hedge-fund allocations. Less than 1 percent of the insurer’s assets are invested in private-equity and hedge funds, said Hiroo Sakuma, deputy general manager of the company’s credit and alternative investment department in Tokyo. Private equity accounts for twice the investments in hedge funds, he said, declining to give the size of each holding. Nippon Life invested about 100 billion yen in hedge funds as of March 2009, according to the company. Nippon Life is seeking to widen investments with alternative products after the global market rout WAS exacerbated by Europe ’s sovereign debt crisis. Sixty-four percent of investors surveyed by London-based Preqin Ltd. said that they were relatively unfazed by the latest disturbances in the global economy and attitudes toward private equity haven’t changed, while 23 percent said they have become more attractive. “We’re still planning to gradually increase our allocations to private equity, seeking opportunities that make sense,” Sakuma said in an interview in Tokyo on Dec. 9. “It’s been a very difficult market not just for us, but for the entire industry.” Nippon Life, which has joint head offices in Tokyo and Osaka , has been investing in alternative assets for more than a decade. It currently invests in more than 100 private-equity funds and about 30 to 40 hedge funds globally through its asset- management arms, according to Sakuma. Distressed in Europe For private equity, there may be opportunities for distressed investments in Europe as banks sell assets, said Hideya Sadanaga, the head of the external fund investment and cash management department at Nissay Asset Management Co., in the same interview. Nissay Asset is the asset-management unit of the insurer and helps manage alternative investments. Lured by the prospect of buying banks’ portfolios at discounts, U.S. hedge funds and private-equity firms such as Apollo Global Management LLC have raised about $7 billion targeting European distressed assets since 2009 and are seeking another $7 billion, according to Preqin. The Japanese insurer “will maintain” its investments in hedge funds at the same level it invested as of March this year, Sakuma said, declining to elaborate. No Specific Bets Nippon Life targets an average annualized return of more than 3 percent in yen terms over a market cycle for hedge-fund investments, Sakuma said. Eurekahedge Hedge Fund Index is down 3.7 percent so far this year through November, heading for its first annual loss since 2008, when the index posted a record decline of 10 percent. “New investments will depend on the situation with Europe,” Sakuma said. “Things are rapidly changing and it’s difficult to bet on any one specific strategy per se.” Strategies that exploit corporate events such as mergers, including long-short equity funds that bet on market catalysts, will be interesting investments among hedge-fund strategies, Sadanaga said. Nissay Asset also aims to expand its business by introducing alternative investments to Japanese pension funds, Sadanaga said. Japan has the world’s second-biggest pension market, with assets of $3.47 trillion after the U.S., according to Towers Watson & Co.’s 2011 Global Pension Asset Study. “Next year’s big theme will be absolute return investments,” Sadanaga said. “Demand for such products is definitely growing.” To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net ; Komaki Ito in Tokyo at kito@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net . |
2024-09-26 | Bloomberg | Boomers Face Caregiver Shortage as U.S. Offers New Rules: Jobs | Carolyn Gay, a certified nursing assistant of 20 years, says she wants to inspire teens to become caregivers to the elderly. “I’m getting older, and in another 10 years, I’m going to need one of these girls to look after me,” said Gay, 72, a Polk County, Florida , resident who speaks at area high-school career days. It’s not always an easy choice to advocate, she said. “It’s embarrassing to explain why the wages for this job are so low.” Well-prepared helpers for seniors and disabled Americans soon could be harder to find. The current workforce is aging, and low pay may make the career unattractive to entrants, said Catherine Ruckelshaus, legal co-director of the National Employment Law Project , which focuses on low-wage workers. Immigration changes that could alleviate future shortages are stalled in Congress. And while state rules exist, there are no federal training standards for personal-care aides. Need is escalating: By 2020 the U.S. will require 1.6 million more direct-care workers than in 2010, based on an analysis of Bureau of Labor Statistics data by the New York-based Paraprofessional Healthcare Institute. That’s a 48 percent increase for nursing, home-health and personal-care aides over the decade. “If people want their parents and grandparents to be able to be cared for at home, and they want that opportunity themselves, we need to make this job a competitive job in the marketplace,” said Steven Edelstein, national policy director at PHI, a nonprofit that provides consulting services and workforce development for home health-care workers and groups. “If we care about the quality of the services, we need to care about the training of the workforce.” Caregiving Profession The challenge is to make caregiving attractive as a profession while still providing affordable care, as responses to a Labor Department rule issued last week showed. Minimum-wage and overtime protections will be extended to most in-home care workers, Secretary of Labor Thomas Perez said Sept. 17. The change will apply parts of the Fair Labor Standards Act to many who aid the elderly and disabled in their homes. That workforce is 90 percent female and 56 percent minority, according to an analysis by the Washington-based Institute for Women’s Policy Research. On average, home-health aides make $10.49 an hour, nursing assistants earn $12.32 and personal-care aides are paid about $10, based on Bureau of Labor Statistics estimates. Travel Time While workers usually earn more than the federal minimum wage of $7.25 an hour, when they serve multiple clients their travel time often isn’t compensated and those extra hours could take them below that level, Edelstein said, adding this stands to change with the new rule. Regulations often take effect 60 days after being issued. This rule is delayed until Jan. 1, 2015, to give families that use home-care workers and state Medicaid programs time to prepare, according to Laura Fortman, principal deputy administrator for the Labor department’s wage and hour division. The U.S. Chamber of Commerce and Republican Representatives John Kline of Minnesota and Tim Walberg of Michigan are among those who say the change could make home help too expensive. “While the delivery of care has changed in recent years, the crucial need for affordable in-home companion care has not,” the lawmakers said in a Sept. 17 press release. “Faced with higher costs, some individuals will have no choice but to leave their homes and enter institutional living.” Public Dollars About 75 percent of home-care services are paid for with public dollars, PHI estimated based on U.S. Census Bureau data from 2010. A semi-private room in a nursing home costs about $6,235 per month, based on 2010 data compiled by the U.S. Department of Health and Human Services, or about $75,000 annually. In-home health aides cost $21 an hour on average, based on the data. That means a 40-hour week of care would cost $840, and a year about $44,000. Round-the-clock care, however, would be more expensive. The new overtime-pay requirement could hurt home-care businesses, since many clients require more than 40 hours worth of care, said Jay Perron, vice president of government affairs and public policy at the Washington-based International Franchise Association. If companies rotate caregivers to avoid paying time-and-a-half overtime, it could interrupt continuity of care, said Perron, whose group’s members include Interim HealthCare Inc., a care, hospice and medical-staffing company, among other home-care franchises. Profit Margin Such businesses usually make about a 5 percent to 7 percent profit margin after insurance, background checks and other costs, Perron said, and so have limited room to pay higher wages. “Home-care companies will have little choice but to employ workers part time rather than full time as Medicaid payment rates and consumers with limited incomes cannot afford higher costs,” Andrea Devoti, chairman of the National Association for Home Care & Hospice, a Washington-based nonprofit, said in a Sept. 17 statement. At the same time, the overtime rule could protect caretakers from being overworked, and having national requirements may improve industry oversight, Ruckelshaus said. Fifteen states provide both wage and hour protections to direct-care workers and an additional six and Washington D.C. require minimum wage, yet she said many lack resources for enforcement. First Step “It’s a good, really exciting first step,” said Jane Henrici, a study director at the women’s policy institute. “It’s not the end.” Demand for direct-care workers is outpacing labor-pool growth, PHI found. The average age of in-home health-care workers is now 44, based on a 2011 PHI analysis , and the number of women ages 25 to 54, the main labor pool from which direct-care workers are drawn, is projected to increase by only 2 percent in the decade ending in 2020, based on Bureau of Labor Statistics data. Immigration-law changes could help create a sustainable caretaker workforce. Immigrants make up 28 percent of in-home health-care workers, according to an analysis Henrici co-wrote, and an estimated one in five is undocumented. The high number of undocumented caregivers is a result of the limited legal immigration options, said Ai-jen Poo, director of the National Domestic Worker’s Alliance, which advocates for in-home workers’ rights. Immigration Bill The immigration bill that passed the Senate this year -- and has now stalled as it faces opposition in the House -- would create a W visa with a potential path to citizenship for low-skill workers, including home-care aides. The lack of federal training requirements for personal-care aides could also affect quality in-home help, Edelstein said. Certified nursing aides and home-health aides have more defined standards. “In some instances, we have personal-care aides who haven’t had any formal training administering medication,” Edelstein said, because clients can in some cases give aides permission to do so. Gay, who still works for private clients, says she remains in caretaking because she “loves it.” She is concerned with ensuring that future at-home caretakers are well-prepared to take care of her and her peers, she said. Even more, she said she wants home care to be a positive career choice for the high school students she knows. “They’re our future,” she said. To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-10-29 | Bloomberg | China's Stocks Fall on Inflation Concern After Posting Best Rally in World | China’s stocks , the best performer among global markets in October, fell today on the prospect the government will intensify measures to curb inflation and property speculation. The losses narrowed the biggest monthly gain since July 2009 for the Shanghai Composite Index. China Vanke Co. , the nation’s biggest developer, and Industrial & Commercial Bank of China, the largest lender, dropped at least 1.6 percent after the banking regulator asked lenders to guard against risks from property loans and the China Securities Journal reported banks had cut discounts on mortgage rates. Bank of Communications Co. slid to a two-week low after reporting profit that trailed analyst estimates. Citic Securities Co. led brokerages lower on concern the rally this month was excessive given the outlook for earnings. “Inflation is a persistent concern and there’s market talk that the October inflation number will be at a higher level,” said Wang Zheng , chief investment officer at Jingxi Investment Management Co. in Shanghai. “The rally for big-caps is probably coming to an end now as valuations are full after a 40 percent to 50 percent jump in less than a month.” The Shanghai Composite Index , which tracks the bigger of China’s stock exchanges, retreated for a fourth day, losing 13.74, or 0.5 percent, to 2,978.84 at the 3 p.m. close. Today’s losses pared gains for the month to 12 percent, the most among the 88 global indexes tracked by Bloomberg. The CSI 300 Index fell 0.5 percent to 3,379.98 today. Chinese stocks have surged on expectation central banks around the world will inject more cash into their economies to boost growth. The Shanghai gauge is still down 9.1 percent this year after the government raised bank reserve requirements and curbed lending growth to avert asset bubbles. Rate Outlook Property stocks fell the most in the Shanghai Composite today, with its benchmark measure losing 2 percent. Vanke dropped 1.6 percent to 9.70 yuan. Poly Real Estate Group Co. , the second largest, slid 4.9 percent to 14.26 yuan. Gemdale Corp., the fourth largest, dropped 2.7 percent to 6.84 yuan. Jingxi Investment’s Wang said consumer prices will probably rise by 3.8 percent in October. Inflation accelerated to 3.6 percent last month, the fastest pace in almost two years. The government’s full-year target for inflation is 3 percent. China’s rate increase on Oct. 19, the first since 2007, has done little to damp the outlook for inflation and growth in the economy, judging from the widening premium investors demand to hold 10-year bonds. The difference between yields on benchmark debt due in 2012 and notes maturing in 2020 grew 7 basis points in October to 129 after reaching a five-month high of 131 this week, according to data compiled by Bloomberg. Inflation Risk Preventing inflation should be made the government’s top priority, Yi Xianrong , a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, wrote in a commentary published in today’s China Daily newspaper. Credit expansion has continued this year on “a large scale,” fueling excess liquidity, Yi wrote. That’s led to increases in property prices and will “inevitably” also fuel gains in consumer prices, Yi wrote. “The tightening pressure hasn’t faded,” said Zhang Kun , a strategist at Guotai Junan Securities Co. in Shanghai, the nation’s second-biggest brokerage. “With looming inflation and high property prices, the government will follow up with measures such as raising interest rates. The rally will probably pause at this level.” Banks Decline ICBC slid 2.2 percent to 4.36 yuan. BoCom, part-owned by HSBC Holdings Plc, dropped 3.3 percent to 6.17 yuan, the lowest since Oct. 12. Its net income climbed to 9.18 billion yuan ($1.38 billion) from a restated 7.39 billion yuan a year earlier. That fell short of the 9.5 billion yuan median estimate of seven analysts surveyed by Bloomberg. Chinese banks need to “closely monitor” risks in property loans, Liu Mingkang , chairman of the China Banking Regulatory Commission said in a statement posted on the regulator’s website yesterday. Banks need to better manage liquidity risk and loans to local government financing vehicles, the statement said. With this month’s surge for Chinese stocks, the market values on the Shanghai and Shenzhen exchanges reached $3.79 trillion yesterday, surpassing Japan to be the world’s second- biggest stock market, according to data compiled by Bloomberg. Coal producers led the rally this month, with Yanzhou Coal Mining Co. gaining 60 percent as it reported a tripling in third-quarter profit from a year earlier. Citic, the nation’s largest brokerage by market value, has surged 46 percent this month on speculation the stock-market rally will drive trading income. It slid 4.9 percent to 15.51 yuan today, its biggest decline since June 29. Haitong Securities Co. retreated 4.5 percent to 12.44 yuan. Bull Market China has just entered the middle stage of a bull market, according to UBS AG. Small- and medium-sized stocks may outperform the market, John Tang , Hong Kong-based strategist at UBS, wrote in a report. The brokerage raised its recommendation on the insurance industry to “overweight” from “neutral” and the non-ferrous metal industry to “neutral” from “underweight,” according to the report. It cut the rating on consumer staples to “neutral” from “overweight.” China’s mutual funds boosted their equity allocations in the third quarter to above 80 percent, a so-called bull-market level, Shanghai-based Howbuy said. Average stock weightings of 342 funds in China reached 81.17 percent during the three months, according to a report by Howbuy, which didn’t provide comparative figures. Invest Overseas Hartford Financial’s Robert Froehlich said U.S. investors should invest overseas as a hedge against higher taxes after November congressional elections and increase their allocations in Chinese and Singaporean stocks. China is attractive because of “strong local consumer demand,” Froehlich, senior managing director at Connecticut- based Hartford Financial, which oversees $352 billion, said in e-mailed comments. “In addition business investment also remains strong. Good consumption along with good business investment will bode well for the economy and the market.” -- Zhang Shidong. With assistance from Chua Kong Ho in Shanghai. Editors: Allen Wan , Richard Frost 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: Linus Chua at lchua@bloomberg.net |
2024-06-18 | Bloomberg | Fed Seen Twisting to Risk Management to Spur U.S. Growth | Federal Reserve officials must choose this week between their best estimates and their worst fears of what will happen to the U.S. economy. Policy makers will bring new forecasts to their June 19-20 meeting and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year. Lurking in the background is the risk of increasing financial stress in Europe and stubbornly high U.S. unemployment that has remained above 8 percent for 40 consecutive months. All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan , which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen , the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York , used the phrase in the past month. “What we are hearing from Vice Chairman Yellen and President Dudley, and the minutes of the last meeting, is that there are more risks on the downside,” said Donald Kohn , the former Fed vice chairman who is now a senior fellow at the Brookings Institution. “The ability to combat weakness with interest rates at the zero lower-bound is limited and uncertain. In a situation like this, their reasoning is you might want to buy some insurance.” Extend Twist That insurance may come in the form of extending Operation Twist -- which JPMorgan Chase & Co. and Jefferies & Co. predict |
2024-02-03 | Bloomberg | Genworth Says Vancouver, Toronto Homes May See Correction | High-end housing markets in Toronto and Vancouver may see corrections, said Stuart Levings, chief risk officer at Genworth MI Canada Inc. (MIC) , a mortgage insurer. “We do believe the market is somewhat overvalued in certain regions, particularly at the high-end segments of Vancouver and Toronto,” Levings said today on a conference call to discuss quarterly results. “We expect these segments may see some correction over the next 12 to 18 months.” Genworth said yesterday fourth-quarter profit fell 7 percent to C$79 million ($79.4 million), or 80 cents a share, from C$85 million, or 80 cents in the year-earlier period. Canadian housing demand has softened, and low interest rates have helped to partially offset decreasing affordability, according to the Oakville, Ontario-based insurer. Demand will remain “subdued” this year, and mortgage originations will be little changed or “slightly down” in 2012, Levings said. Home prices will be little changed in the next 12 to 18 months, followed by marginal growth after that, he said. “We do not see an abrupt correction, but more of a soft landing, which bodes well for the long-term health of the market as a whole,” Levings said. Genworth’s chief executive officer Brian Hurley also said that the company won’t be affected by government limits on the amount of mortgage insurance that can be provided. “We have lots of room for new business,” Hurley said. “Capacity will not be an issue for us for this year, or going into 2013.” Canada Mortgage & Housing Corp. said Jan. 31 it is rationing mortgage insurance for lenders as the government’s housing agency approaches the legal limit for its ability to backstop loans. To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net |
2024-11-18 | Bloomberg | A Conservative Cure for Obamacare | The Patient Protection and Affordable Care Act is floundering. Conservatives who take satisfaction in that should be careful not to get ahead of themselves. The rollout problems -- however serious and continuing -- shouldn’t be confused with the law’s outright collapse. Even the administration’s recent capitulation (however humiliating) allowing plans to be “uncanceled” is a setback, not a surrender. The reality is that large constituencies are in place to work to preserve Obamacare. States that have embraced the law’s Medicaid expansion -- about half -- will fight tooth and nail to keep huge new federal subsidies in place. And the conservatives who are lambasting the disastrous rollout should realize that the electorate that is uninsured, getting large subsidies and generally older will also fight to keep their newly minted policies. Republicans would have to run the table in 2014 (hold the House, take the Senate) and win the presidency in 2016 to have any serious chance of repealing the law over strong Democratic opposition. In the interim, the administration has two more years to implement and prop it up. What strategy, then, would move us closer to the patient-and consumer-focused health-care system that conservatives desire while also recognizing the facts on the ground? Trojan Horse The answer might be simple: Propose changes that will make plans more affordable and drive enhanced competition among insurers and providers. In other words, make Obamacare a Trojan horse for conservative health-care reform. The administration of President Barack Obama has quietly introduced regulatory decisions that have made the exchanges a viable market for high-deductible, health-savings-account-eligible health plans. Shortly after the law passed, it looked like the administration would use regulatory rule-making to kill health savings accounts. But subsequent rules clarified that HSA-qualified plans were actually the default structure for bronze plans on the exchanges. (Some silver plans qualify, too.) Far from being driven to extinction, high-deductible, HSA-eligible plans have an opportunity to capture significant new market share on the exchanges. Based on data available for about 85 percent of exchange plans, about 77 percent have deductibles of more than $1,250 and qualify under Internal Revenue Service rules for a health savings account. For a 27-year-old purchasing coverage, the median HSA-eligible plan costs about $238 a month and typically comes with a deductible of about $3,600. The median plan without a high deductible, however, costs almost 30 percent more ($310) for a 27-year-old, though it has a significantly lower deductible (about $600). Over the course of a year, the choice of an HSA plan can lead to significant savings. Here’s why: The typical 20-something with insurance spends a median of $770 annually on health care (excluding premiums and over-the-counter drugs). Opting for an HSA-eligible plan costing $238 a month ($2,856 a year), the median 20-something ends up spending $3,626 in one year on health care ($770 plus $2,856). However, with a traditional plan, total spending jumps to $4,320 in one year ($600 in out-of-pocket spending plus $3,720 in premiums). In other words, the HSA plan holder comes out about 20 percent ($694) ahead. That savings can then be funneled into an HSA or other spending. Investing Savings There’s more. HSAs use pretax dollars. Assuming that the average 20-something who falls roughly into the 15 percent tax bracket covers her routine out-of-pocket health expenses with funds from her tax-free HSA account, she saves an additional $115. That brings the true net savings of a high-deductible health plan to $809. For a young person starting out with very low expected health spending, those savings can be invested in a moderate-yield index fund to build health equity over time (Vanguard’s S&P exchange-traded fund has a three-year average return of 16.26 percent). And there’s much more that can be done to make HSAs even more effective and attractive for all Americans. First, encourage more competition between insurance plans by repealing Obamacare’s community rating provisions (which were designed to make insurance less expensive for the sick and elderly) -– or at least expanding the age rating bands (limits on how much more insurers can charge the elderly than the young -– this raises costs for the young and reduces them for the elderly) from 3-1 to 5-1. Then, high-risk pools for the uninsured with costly medical conditions should be fully funded, capping premiums at 150 percent to 200 percent of standard premiums, with means-tested federal subsidies for low-income Americans. This would ensure coverage for uninsured Americans with pre-existing conditions, without driving up prices for younger and healthier applicants. Next, offer true consumer choice in terms of benefits and coverage. Obamacare requires coverage of several essential health benefits that drive up cost. Instead, basic coverage should focus on core health benefits such as wellness and prevention, physician care, hospital coverage and prescription drugs. Plans should also be allowed to offer higher deductibles to anyone younger than 35 or even 40. Last but not least, catastrophic plans should also be eligible for subsidies. The savings accrued from picking plans that are cheaper than the silver benchmark should be funneled into HSAs to offset future health expenses. This would provide a powerful incentive for Americans to gravitate into catastrophic plans, slow health-care inflation and encourage providers to become more transparent in pricing their services. Conservatives aren’t going to repeal or replace Obamacare anytime soon. But they can propose smart fixes that build on the HSA-friendly exchange architecture to make the law more consumer- and patient-friendly. Reform from the inside can set the stage for even bigger changes in the not-too-distant future. ( Paul Howard is a senior fellow and director of the Center for Medical Progress at the Manhattan Institute. Yevgeniy Feyman is a fellow at the Manhattan Institute’s Center for Medical Progress.) To contact the writers of this article: Paul Howard at phoward@Manhattan-Institute.org ; Yevgeniy Feyman at yfeyman@Manhattan-Institute.org. To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net . |
2024-02-10 | Bloomberg | Buffett Inflation Warning Borne Out by History: Chart of the Day | Investors who stuck with Treasury bills during billionaire Warren Buffett ’s tenure at Berkshire Hathaway Inc. would have seen most of their returns eroded by the effects of inflation. The CHART OF THE DAY shows how the value of $100 invested in three-month bills has changed since 1965, when Buffett took control of Berkshire and began transforming the textile maker into an insurance and investment company. Before inflation, a bill investor would have had $1,099.09 at the end of last year. The nominal return of about 11-fold is based on data compiled by Aswath Damodaran, a finance professor at New York University. After accounting for increases in the consumer price index , the real return on the holding would have been only 54 percent. The investor would have ended up with the equivalent of $154.38 in 1965 dollars. Buffett addressed inflation’s effect on investments in an article published yesterday on Fortune magazine’s website. The report was adapted from his annual letter to shareholders of Berkshire, based in Omaha, Nebraska , and cited the 47-year period since he took control of the company. Current interest rates “do not come close to offsetting the purchasing-power risk that investors assume” when they buy government debt, Buffett wrote. The CPI climbed 3 percent last year, causing real yields on every benchmark Treasury security except the 30-year bond to turn negative. To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-11-26 | Bloomberg | Generali to Boost Real Estate, Asset Management in Asia and Central Europe | Assicurazioni Generali SpA , Europe’s third-biggest insurer, plans to increase its real-estate holdings and boost asset-management in central and eastern Europe and Asia to raise profitability. The insurer seeks to expand its real-estate portfolio to 30 billion euros ($40 billion) “in the medium term” from 24.2 billion euros as of Sept. 30, the Trieste, Italy-based company said in a statement today. “Generali will focus its new investments not only to take advantage of the market cycle in European countries, but also to diversify the portfolio into areas offering attractive returns like the U.S.,” Generali said in the statement. “In China, it will begin investing the resources generated locally by the insurance business.” Generali aims to boost its assets under management in Asia, focusing on China, and in central and eastern Europe “to enhance support for its local operations.” In China, the Hong Kong-based joint venture with Guotai AMC will begin operations in early 2011, Generali said. Chief Executive Officer Giovanni Perissinotto , who led the purchase of 30 percent of Chinese asset manager Guotai last year, is trying to expand in emerging markets and eastern Europe to boost profitability following the global financial crisis. Generali aims to triple assets managed in Asia through its BSI private banking unit, targeting $15 billion of assets under management by 2013 from the current $5 billion, Perissinotto said during a speech at the company’s investor day in Venice today. They also plan to hire staffers in Hong Kong to boost inflow. The insurer fell as much as 3.2 percent in Milan trading, and was down 36 cents to 14.10 euros by 1:38 p.m., giving the company a market value of about 22 billion euros. The Bloomberg Europe 500 Insurance Index fell 3.4 percent this year, compared with Generali’s 25 percent decline. Generali’s third-quarter profit rose 13 percent to 440 million euros as earnings at its life-insurance unit increased, the company said on Nov. 11. Generali reiterated that it expects to report higher full-year operating margins and an increase in net income compared with 2009. To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-08-08 | Bloomberg | Treasury 30-Year Bonds Rise on Demand Speculation Before Auction | Treasury 30-year bonds rose as the U.S. prepared to sell $16 billion of the debt at yields close to the highest level at an auction of the maturity in two years. The yield on the benchmark 10-year note touched the lowest level this month after U.S. sold $24 billion of the securities yesterday and $32 billion in three-year notes the previous day, drawing above-average demand from foreign investors. Bond managers must adapt to a “new world” of near zero-round interest rates and the likelihood of lower total returns, Pacific Investment Management Co.’s Bill Gross wrote in his monthly investment outlook. “Given the indirect participation at the three-year and 10-year auctions, people are optimistic bonds will benefit from elevated non-dealer bidding,” said Ian Lyngen , a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. The yield on 30-year bonds fell three basis points, or 0.03 percentage point, to 3.65 percent at 12:11 a.m. in New York , according to Bloomberg Bond Trader prices. The 2.875 percent security due May 2043 added 17/32, or $5.31 per $1,000 face amount, to 85 31/32. The benchmark 10-year note yield fell two basis points to 2.58 percent, after touching the lowest level since July 31. Bond Pattern The 30-year bonds being sold today yielded 3.63 percent in pre-auction trading, compared with 3.66 percent at a previous auction of similar-maturity debt on July 11. That was the highest in almost two years. Investors in U.S. government securities have lost 2.6 percent this year, according to the Bloomberg U.S. Treasury Bond Index (BUSY) as of yesterday. U.S. debt gained 2 percent in 2012. The 30-year bond lost investors 11.9 percent this year, according to Bank of America Merrill Lynch Indexes. Reducing maturity isn’t the only potential strategy to win this new war, Gross wrote in his outlook, adding that investors should focus on “carry,” a strategy that involves capitalizing on yield-curve differences, volatility, credit spreads, maturity extension and currency variations. Another investor concluded that investors should sell bonds as the 30-year bull-run in fixed-income securities is drawing to an end. “We believe that this is a generational selling opportunity for investors in the 20-year Treasury and other long duration bonds,” James O’Shaughnessy, chief executive officer of O’Shaughnessy Asset Management in Stamford , Connecticut, wrote in a note to clients. “In my lifetime, I will never again see returns to the long bond as high as those achieved for the 10-, 20-, and 40- years through March 2009.” Investors should reduce bond maturity durations before it is too late, he added. Asset Allocation Institutional investors’ allocations to dollar-denominated bonds have dropped to the lowest level since 2007 as strategists at Morgan Stanley and JPMorgan Chase & Co. see a shift away from the debt that may fuel higher borrowing costs. Holdings by investors from pensions to endowments fell to 26.2 percent of assets in the second quarter, from 30.1 percent in the corresponding period of 2012, according to the Wilshire Trust Universe Comparison Service, which tracks plans that oversee $3.46 trillion. Morgan Stanley’s $1.8 trillion wealth management unit has been advising clients to cut bond allocations to the lowest in more than five years, Chief Investment Strategist David Darst said. The yield on 10-year Treasuries reached 2.75 percent on July 8 from a low this year of 1.61 percent on May 1, triggered by Federal Reserve Chairman Ben S. Bernanke , who rattled markets in May and June by outlining a plan to end the central bank’s unprecedented asset purchases. The Fed is buying $85 billion of Treasuries and mortgage debt each month to put downward pressure on interest rates. It purchased $3.22 billion of Treasuries maturing from August 2020 to November 2022 today. Policy makers are discussing whether the economy has improved enough for them to start reducing the purchases. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net |
2024-07-27 | Bloomberg | World’s Richest Gain $15.2 Billion as Global Markets Rise | The richest people on the planet added $15.2 billion to their collective net worth this week as global markets rose on speculation that Europe will move to ease borrowing costs in Italy and Spain. The week’s biggest gainer was Spanish retail tycoon Amancio Ortega , who added $3 billion to his fortune after Inditex, the world’s largest clothing retailer, announced plans to build a 753,000 square-foot logistics center in Spain’s Guadalajara province. Inditex shares were up 3.8 percent for the week. Ortega’s gain came as Spain’s unemployment rate reached 24.6 percent, the highest on record. With a net worth of $43.5 billion, the 76-year-old is Europe’s richest man, and ranks fourth on the Bloomberg Billionaires Index. “At the beginning of the week we had a flood of bad news, starting with Greece and culminating with Spain credit at all- time wides,” said Nelson Saiers, chief investment officer of Alphabet Management LLC, a New York-based hedge fund with more than $500 million under management. “When Mario Draghi came out midweek and said the ECB would do whatever it takes to protect the euro, that hit the brakes on the bad news and the market ripped,” he said, referring to the European Central Bank president. U.S. stocks rose, commodities climbed and the euro strengthened yesterday amid speculation that European policy makers may take steps to ease the debt crisis. Stocks were further bolstered after German Chancellor Angela Merkel and French President Francois Hollande said their countries are “bound by the deepest duty” to keep the euro area intact and that they will do “everything” necessary to protect the single currency. The Standard & Poor’s 500 Index posted a 1.7 percent gain during the week to close at 1385.97 in New York. The Stoxx Europe 600 Index climbed 0.64 percent. Facebook Falters Facebook Inc. (FB) co-founder and chief executive officer, Mark Zuckerberg , continued his slide down the ranks of the world’s billionaires as shares of the world’s largest social-networking company plunged to a record low after its first earnings report showed a slower sales gain and narrower profit margins. The 28-year-old’s fortune plummeted $2.5 billion during the week. His fortune now stands at $12.1 billion. Other Facebook shareholders also took a hit. Dustin Moskovitz, 28, who started the company with Zuckerberg from their dorm room at Harvard University, owns 133.7 million shares of the company’s Class B stock worth $3.2 billion, down $1.9 billion since the IPO. Eduardo Saverin, 30, has a $1.3 billion stake, down $760 million since the offering. According to a regulatory filing dated May 17, he owns 53.1 million shares of the company. Sean Parker owns 66 million Facebook shares valued at $1.6 billion. The 32-year-old persuaded Zuckerberg to move to California to focus on the company full-time in 2004. Batista Gains Eike Batista , the richest person in Brazil, gained $795 million this week amid a recovery in the shares of his commodity startups. His flagship oil company, OGX Petroleo (OGXP3) & Gas Participacoes SA, jumped 12.8 percent July 27 as crude prices rose for a fourth day. Batista’s shipbuilder, OSX Brasil SA (OSXB3) , rallied 11.2 percent yesterday after the company’s chief executive said it’s in advanced talks for a new contract to supply oil rigs. Batista’s net worth of $21.3 billion makes him the world’s 22nd-richest person. Jeff Bezos gained $820 million during the week. Shares of his Amazon.com Inc. (AMZN) , the world’s largest Internet retailer, gained the most in three months as investors bet that investments in its distribution network will pay off by the holiday season. Carlos Slim , 72, remains the world’s richest person. America Movil (AMXL) SAB, the largest wireless carrier in the Americas by subscribers, fell the most in eight weeks after a weaker Mexican peso and increasing competition damped quarterly profit. The Mexico City-based company reported a 46 percent drop in second-quarter net income after markets closed July 26. Slim’s fortune gained $1.4 billion for the week. He now has a net worth of $75.5 billion. Gates, Buffett Bill Gates is $12.7 billion behind Slim. The 56-year-old Microsoft Corp. (MSFT) co-founder’s fortune rose $600 million as shares of the Redmond, Washington-based company fell 1.2 percent during the week. Number three on the index is Warren Buffett , 81, who is worth $45.7 billion. The Berkshire Hathaway Inc. (BRK/A) chairman agreed to buy closely held Meadowbrook Meat Co. on July 26. Terms of the deal were not disclosed. The purchase would increase Buffett’s bet on food- distribution companies. In the past three years, Berkshire’s McLane Co. unit has bought Empire Distributors Inc., Horizon Wine & Spirits and Delta Wine & Spirits. The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York and listed in U.S. dollars. To contact the reporter on this story: Peter Newcomb in New York at pnewcomb2@bloomberg.net To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net |
2024-07-20 | Bloomberg | Minster Insurance Co. Files for Chapter 15 Bankruptcy Protection in U.S. | Minster Insurance Co. Ltd. sought bankruptcy protection from creditors in the U.S. The company, based in London, listed both debt and assets of more than $100 million in Chapter 15 documents filed yesterday in U.S. Bankruptcy Court in Manhattan. Chapter 15 protects foreign companies from U.S. lawsuits and creditor claims while reorganizing abroad. Minster and Malvern Insurance Co. Ltd., which also sought protection, are insurance and reinsurance companies that no longer write new business. Both companies are based in London and their assets are primarily located in England, court papers show. “The ultimate goal of each of the companies is to satisfy the claims” of creditors and “conclude the business of the companies sooner” than would be the case outside of bankruptcy, James Lee Saitch, foreign representative of Minster and Malvern, said in court papers. Minster is asking the U.S. Bankruptcy Court to recognize the proceeding currently pending before the High Court of Justice of England and Wales as a “foreign main proceeding,” according to court papers. The proceeding in the English Court commenced in 2009, according to court papers. The case is In re Minster Insurance Co. Ltd., 10-13899, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net . |
2024-03-23 | Bloomberg | John Thomas’s Belesis Aided Hedge-Fund Fraud, SEC Claims | Anastasios “Tommy” Belesis, founder of John Thomas Financial Inc., and Houston radio host George Jarkesy defrauded investors in two hedge funds, the U.S. Securities and Exchange Commission said. The two men, both 38, told investors the funds were independent from the brokerage then steered excessive fees to Belesis’s New York-based firm, the SEC said yesterday in a statement. The regulator said it started administrative proceedings against Belesis, Jarkesy, who managed the funds, and their firms. They could face punishments including disgorgement and financial penalties, the SEC said. Belesis worked with Jarkesy to raise two funds in 2007 and 2009, which peaked at $30 million under management, telling investors they would invest in microcap stocks, bridge loans and life-insurance policies, the SEC said. Jarkesy inflated the value of investments in disclosures and hired stock promoters to boost the price of shares, while Belesis and John Thomas Financial “willfully aided, abetted and caused” the hedge funds’ violations, according to the regulator. “Jarkesy disregarded the basic standards to which all fund managers are held,” Andrew M. Calamari, director of the SEC’s New York regional office, said in the statement. “Not only did he falsify valuations and deceive investors about the value of their holdings, but he bent over backwards to enrich Belesis at the funds’ expense.” ‘Belligerent Manner’ Belesis “intends to defend himself vigorously against these allegations,” said David Pitts of Argot Partners LLC, a spokesman for the brokerage chief. Jason Lewis, Jarkesy’s lawyer at Locke Lord LLP in Dallas, said his client denies the allegations. Bloomberg News reported on Feb. 25 that Belesis, who founded John Thomas in 2007, has raised millions of dollars for companies with about 200 brokers in a boiler room across the street from the New York Stock Exchange, where trainees stand as long as 14 hours a day barking memorized sales pitches for as little as $300 a week. The bald, muscular executive has built a public persona with appearances on business television, endorsements from celebrities and a role in the movie “Wall Street: Money Never Sleeps.” The SEC said in a complaint yesterday that Belesis repeatedly pushed Jarkesy for more fees, in a “profane and belligerent manner,” and tried to make the funds invest in companies his firm had interests in. On one occasion cited by the SEC, after Belesis yelled at the fund manager, Jarkesy tried to reassure him by saying in an e-mail: “We will always try to get you as much as possible, Everytime without exception!” 120 Investors The hedge funds, called John Thomas Bridge and Opportunity Fund LP I and II, have about 120 investors, the SEC said. The funds listed inflated valuations for their holdings on monthly statements, which were the basis for calculating Jarkesy’s fees, according to the regulators. The Financial Industry Regulatory Authority told Belesis last month he may face disciplinary action on a claim that he artificially inflated the price of a stock. A former John Thomas employee said in last month’s Bloomberg story that the regulator’s investigators had asked him about the brokerage’s trading in America West Resources Inc. (AWSRQ) Jarkesy was a director of America West until last year, according to a May regulatory filing by the Salt Lake City-based coal company. The Bridge and Opportunity funds lent $1.7 million to the company in 2010, the filing says. America West filed for bankruptcy last month. ‘Inconsequential Work’ Jarkesy negotiated arrangements in which companies would borrow money from the funds and divert some of the money to John Thomas as fees, the SEC said. The companies weren’t identified in the complaint. From 2008 to 2010, John Thomas was paid $488,750 in fees for four bridge loans, including two for which it did “nearly inconsequential work,” according to the regulators. Jarkesy and his firm also paid John Thomas $741,000 in brokerage commissions and about $2.5 million in placement fees, the SEC said. Jarkesy hosts a radio show that focuses on conservative politics and airs in Houston, Dallas, Atlanta, Miami, Minneapolis and San Francisco, said Charles Mefferd, vice president of operations for the Salem Radio Network, which distributes Jarkesy’s show. He broadcast last week from the Conservative Political Action Conference, an annual gathering of grassroots conservatives in Washington. To contact the reporters on this story: Zeke Faux in New York at zfaux@bloomberg.net ; Dave Michaels in Washington at dmichaels5@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-07-21 | Bloomberg | Fidelity National Profit Rises on Gain From Stake Sale, Mortgage-Rate Drop | Fidelity National Financial Inc., the largest U.S. title insurer by market share, had a fifth straight quarterly profit as it posted a gain on an asset sale and mortgage rates improved. Net income climbed to $139.6 million, or 61 cents a share, in the three months ended June 30, from $91.9 million, or 40 cents, a year earlier, the Jacksonville, Florida-based insurer said today in a statement distributed by PR Newswire. Fidelity sold a 32 percent stake in Sedgwick Claims Management Services Inc. in May. The sale led to a $98 million gain, Fidelity said. The transaction may have boosted earnings by 30 cents a share, said Mark Dwelle , an analyst with RBC Capital Markets. “The revenues were pretty in line with what we expected,” Dwelle said in a phone interview. “It was a good quarter but it wasn’t a great quarter.” Fidelity reported second-quarter revenue of $1.5 billion, down from $1.56 billion a year earlier. Fidelity fell 25 cents to $13.54 as of 4 p.m. in New York Stock Exchange composite trading, and has advanced less than 1 percent this year. The 24-company KBW Insurance Index , which includes Fidelity, has risen more than 4 percent this year. The average rate on a 15-year fixed mortgage fell to 4.05 percent this month from 4.12 percent a year ago, and the rate on a one-year adjustable mortgage declined to 7.17 percent from 7.20 percent. Book Value Book value, a measure of assets minus liabilities, was $14.93 a share on June 30, compared with $14.46 on March 31. Revenue from title premiums fell to $897 million from 1.04 billion a year earlier. “Lower mortgage rates and increased order activity will provide momentum as we move into the third quarter,” Fidelity Chairman William P. Foley said in the statement. Fidelity Chief Executive Officer Alan Stinson said in a May conference call that the consolidation of title-insurance brands during the quarter would save money if mortgage originations keep falling. The number of mortgage applications filed to purchase houses dropped in May to the lowest level since 1997, according to data from the Mortgage Bankers Association. Fidelity and rivals First American Financial Corp. , Stewart Information Services Corp. and Old Republic International Corp. have a combined 89 percent market share in U.S. title insurance, according to first-quarter data compiled by the Washington-based American Land Title Association, an industry group. ‘Oligopoly’ Stinson, who called the title-insurance industry an “oligopoly” last year, agreed to sell assets in Oregon and Michigan to settle a regulatory review into anticompetitive practices. The insurer’s 2008 purchase of bankrupt rival LandAmerica Financial Group Inc. reduced competition in five Oregon regions, including the Portland area, and in Detroit, the Federal Trade Commission said in a statement this month. The settlement will require Fidelity to sell assets including data used for underwriting in those regions. “We are probably in the best rate environment and best regulatory environment that we’ve been in for a long time,” Stinson said Sept. 16 at a Barclays Plc conference. “We are seeing some rationality in pricing. I think you’d expect that as the industry consolidates,” he said “The industry has become more or less an oligopoly.” Fidelity issued $300 million in notes in May. Proceeds from the debt, which matures in 2017, will be used to help pay off borrowings from a credit facility, the company said. Title insurers use their records and public documents to verify a seller is the home’s true owner and that the property is free from liens. They collect a one-time premium at the closing of the purchase and pay costs that may arise if someone disputes the new owner’s right to the property -- claiming, for instance, that the boundaries weren’t properly recorded. To contact the reporter on this story: Sarah Frier in New York at sfrier@bloomberg.net . |
2024-04-10 | Bloomberg | HSBC in Talks to Sell Operations in Pakistan, South Korea | HSBC Holdings Plc (HSBA) , Europe’s largest bank, said it’s in talks to sell operations in Pakistan and South Korea , part of the lender’s plans to exit businesses that aren’t large or profitable enough. The company is in talks with “a number of interested parties” about a sale of HSBC Bank Middle East Ltd.’s operations in Pakistan, the bank said in a statement today. HSBC has 10 branches in the country servicing about 33,000 consumers and companies, Brendan McNamara , a HSBC spokesman, said by telephone. He declined to comment on potential buyers. Separately, KDB Financial Group Inc., South Korea’s largest state-owned banking group, said yesterday it was in talks to buy HSBC’s consumer division in the country to boost its domestic banking unit’s deposit base. KDB said it will acquire HSBC’s 11 Korean branches, without giving a valuation of the purchase. “These discussions are ongoing,” HSBC said in a statement today. “HSBC remains committed to the Korean market and continues to invest in developing its Korean global banking and markets and corporate banking businesses.” HSBC, which plans to cut 30,000 jobs by the end of next year, is selling assets as the euro-area debt crisis saps profit and regulators demand bigger capital buffers. Chief Executive Officer Stuart Gulliver has announced about $6 billion of asset sales since May as the bank sheds jobs and redeploys capital in faster-growing markets. The bank last month said it would shut its consumer banking unit in Japan and on March 7 agreed to sell parts of its general insurance units in Asia and Latin America. To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-11-14 | Bloomberg | Failed Facebook Stock Deal Brokered From Jail Spurs Probe | Troy Stratos, a failed music producer and screenwriter, wasn’t going to let confinement in a California jail stop him from getting in on the Facebook Inc. (FB) craze. While awaiting trial on charges that he stole at least $7 million from the ex-wife of actor Eddie Murphy, Stratos tried to broker a private sale of 40 million shares in the social- networking company before it went public , he said under oath in his January bail hearing in federal court in Sacramento. Stratos said he was working as a middleman for Timothy D. Burns, the co-founder of a wealth adviser based in Conshohocken, Pennsylvania , who paid Stratos half of a $22.4 million fee before his arrest to locate the shares and complete the sale. The unlikely deal never came off. Burns, whose wealth- management firm oversaw $27 million in client money, never got his Facebook stock, which would have cost about $1.3 billion in the private market in the second half of 2011. Stratos didn’t get the rest of his fee. A federal grand jury is looking into the transaction, said David Weiner, Stratos’s lawyer. “I had intimate contacts that were Facebook shareholders , and I had an opportunity with legitimate Facebook buyers to put them together,” Stratos said in the hearing. The arrest, he said, complicated the deal by making him look like some “wild con man,” he said. Assistant U.S. Attorney Todd Pickles, the prosecutor on the case, declined to comment. Burns, 33, didn’t return multiple phone calls and e-mails. Will Nystrom, a Boston-based lawyer who is representing Burns and his firm in the Stratos matter, declined to comment. Capote Protégé Facebook is the latest venture to turn toxic for Stratos. Investors in a supposed comeback CD by his step-mother, the jazz singer Nancy Wilson, won a $2.1 million judgment against him in 2001. Stratos worked with Richard Hack, a protégé of author Truman Capote, on movie scripts including “Plantation,” about a wealthy sugar cane-growing family in Hawaii. Next Level Media, the Vancouver , British Columbia, company set up to make his films, shut in 2003 after failing to pay its bills, according to Tamara Hegan, Next Level’s former office manager. Burns is the founder of both ESG Wealth Management LLC, a registered investment adviser, and ESG Family Office, which caters to wealthy clans, managing their money and other affairs. ESG Family Office does estate planning, pays bills, plans events, finds sports tickets and gets access to exclusive clubs, according to its website. ESG Family Office said on its website that it represents 15 wealthy families with assets under administration of $3.75 billion. After working as an investment adviser at Morgan Stanley, Burns started the business in 2005, according to the website. He is a graduate of St. Joseph’s University, a Jesuit school in Philadelphia, and sits on the board at Kyle’s Treehouse, an autism organization in nearby Newtown Square. Pre-IPO Shares Burns tried to find sellers of pre-IPO Facebook shares through Soumaya Securities LLC, Stratos said at his Jan. 23 bail hearing. Soumaya is a Los Angeles-based company that Stratos set up in August 2011, according to California Secretary of State records. Soumaya’s chief executive officer was a man named Ken Dennis, Stratos said at the hearing. In the second half of 2011, Facebook employees and early investors were selling shares for an average price of $32 in private transactions, according to SharesPost Inc., which tracks non-public companies. ESG was looking for 40 million shares, said Weiner, Stratos’s lawyer in Cameron Park, California. Facebook went public at $38 in May and has fallen 48 percent since then. Walter Urban, another lawyer for Stratos, said his client is telling the truth about receiving the money from ESG. “It did take place,” Urban said. “There is documentation. What he testified to under oath is true.” Spent Fee While trying to close the Facebook deal, Stratos lived in a rented penthouse apartment in Marina del Rey, near Los Angeles, according to court documents. Stratos said at the hearing he spent the first half of his fee soon after getting it, paying old debts and trying to develop a restaurant and bar in Las Vegas. He also bought a Range Rover, a Chevrolet Camaro, and an Audi R8 convertible that cost more than $200,000. “I’ve spent the $11 million,” Stratos said. If the Facebook deal founders, “Soumaya will owe Mr. Burns and ESG Capital a refund,” Stratos said at the hearing. Louis Nader, a producer of the Kevin Spacey movie “Swimming with Sharks,” said Stratos paid him $680,000 up front last year to make a series of commercials he hoped to sell to Nike Inc. (NKE) The animated spots were supposed to show a creature collecting garbage in space, then finding a pair of Nike shoes and rushing off to Earth to get more. “It wasn’t a bad idea,” Nader said. Stratos disappeared in December before the spots were done, he said. Nicole Murphy Stratos said he was about to complete the Facebook transaction when he was arrested in December on charges that he took money from Eddie Murphy’s ex-wife, Nicole, starting in 2005. Stratos, who knew Nicole as a teenager in Sacramento, offered to invest her divorce settlement in Dubai and the United Arab Emirates. Instead, he transferred the money into his personal accounts, according to the U.S. Justice Department’s Dec. 16 indictment. Stratos has pleaded not guilty. Stratos kept working on the Facebook deal in jail, he said, dictating text messages to a third party to send to Burns. In those messages, Stratos claimed to be Ken Dennis, U.S. Magistrate Edmund Brennan in Sacramento said in a Jan. 31 order denying Stratos bail. Brokering closely held securities was a new business for Stratos. In the late 1990s, he persuaded a Hawaii real estate agent named Dennis Rush and some friends to invest $1.9 million in a CD and video featuring singer Nancy Wilson, who had married Stratos’s biological father. The idea was to spark a comeback like the one that made Tony Bennett popular with the MTV generation in the early 1990s, Stratos told Rush and the other investors. Stratos’s Disappearance They shot the video, and then Rush learned that Stratos didn’t own the rights to Wilson’s hit, “If I Had My Way,” as he’d claimed, Rush said in an interview. Rush said Stratos disappeared. Rush filed a complaint against Stratos in May 2000 and won a $2.1 million judgment against him in 2001. Stratos paid it in late 2011, Rush said. At the January bail hearing, Stratos said he used some of the money he got from Burns to pay Rush and other investors. Stratos had another bail hearing in September and remains in the Butte County detention center in Oroville. The case is U.S.A. v. Stratos, 2:11-CR-00537-LKK, U.S. District Court, Eastern District of California (Sacramento) To contact the reporters on this story: Anthony Effinger in Portland at aeffinger@bloomberg.net ; Katherine Burton in New York at kburton@bloomberg.net To contact the editors responsible for this story: Michael Serrill at mserrill@bloomberg.net ; Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-09-27 | Bloomberg | Penn State Football Revenue Up as Team’s Start Worst Since 2006 | Penn State’s football team, stung by sanctions that will last five years after the Jerry Sandusky child sex-abuse convictions, is off to its worst start since 2006. Its revenue-generating ability hasn’t slipped at all. Fans have bought 68,000 season tickets, about the same as last year; the 60 luxury suites at Beaver Stadium are sold out, and donations tied to ticket purchases are projected to reach a record $17.5 million this season, according to the school. “The NCAA put a cage around us, it’s just a fact,” acting Athletic Director David Joyner , a former Nittany Lions All- America lineman, said in an interview. “What I like to say is when somebody puts a cage around us, you have to become cage fighters. And that’s what we’re doing.” Following an investigation that showed university officials looked the other way after learning of Sandusky’s child molestation, the National Collegiate Athletic Association banned Penn State from the football postseason and reduced its annual scholarship allotment by 20 for each of the next four years; fined the athletic department $60 million over five years, and wiped out 112 football victories between 1998 and 2011. Joyner, 62, a physician who also wrestled at Penn State, said the school communicated with alumni and fans, talked with sponsors and held private meetings with key boosters about what it was doing to fix its failures and maintain its 31 sports. It then put new coach Bill O’Brien on a bus for a three- week, 18-city tour to face the fans and share his rebuilding plans. In Wilkes-Barre, Pennsylvania , 950 people showed up, and Penn State had to close the event. In Richmond, Virginia , 250 attended a 7 a.m. breakfast. Other stops drew 400-500 people, Joyner said. Alumni Passion “We have an extremely passionate alumni group,” Karen Peetz, 57, chairwoman of the State College , Pennsylvania, school’s trustees, said in an interview last week at Bloomberg LP’s headquarters in New York. “This is something people believe in. We think people will dig deep and say now is the time to support the university.” Penn State’s response so far received high marks along with a warning from Barry Scanlon , president of Witt Associates , a Washington-based crisis management consulting firm. Scanlon, whose company advised BP on restoring communities hit by the 2010 Gulf Coast oil spill and Virginia Tech after the campus shooting deaths there in April 2007, said Penn State has changed leadership, communicated with fans and alumni and shown humility. Those policies must be maintained, he said. “You can survive a losing season,” Scanlon said in a telephone interview. “You can’t survive a lost reputation.” Football Revenue The Nittany Lions generated $116.1 million in revenue in fiscal 2011 and turned a profit of $14.8 million, according to the school’s NCAA revenue and expenses report. Football accounted for $58.9 million in revenue and $43.8 million in profit, which helped support the school’s money-losing sports. The athletic program will borrow as much as $12 million annually each of the next five years to cover the NCAA fine, and the school will expect football to help pay the debt service. Joyner said contracts as long as 10 years will keep many sponsors in the fold, giving the school time to repair its reputation. The athletic department earned $55.2 million from royalties, licensing, advertisements and sponsorships in the fiscal year ending June 30, 2011, according to school documents. Sandusky was charged in November. Beyond Signs PNC Financial Services Group Inc., (PNC) based in Pittsburgh, has a year left on an agreement that includes signs and tickets to sports events, and banking services on campus. “Our relationship extends beyond signage,” said Fred Solomon, PNC’s vice president of external communications. “It includes helping Penn State students bank and develop financial management skills. The incident does not eliminate those needs.” State Farm Insurance Co., the U.S’s largest automobile insurer, dropped its sponsorship of the football team in July to show support for the victims, spokeswoman Arlene Lester said at the time. The company, which declined to say how much the deal cost, maintained support of men’s basketball at the school and college football overall. Penn State is 2-2 this season after beating Temple University on Sept. 22 at 107,000-seat Beaver Stadium, where students wore blue to support child sex-abuse victims. The start is the Nittany Lions’ worst since they were 2-2 six years ago. Head Coach O’Brien, 42, is in his first head-coaching job. He succeeded Joe Paterno , the late coach who was fired after 46 years because of his lack of action when told that Sandusky had sexually assaulted a boy in the football building’s shower room. Sandusky was convicted on 45 counts of abusing boys over a 15- year period and faces sentencing on Oct. 9. The University of Southern California and Ohio State University were punished by the NCAA in recent years for athletic rules violations. Both were stripped of football scholarships and banned from postseason play. Both are back in the Top 25 rankings, playing before sellout crowds after appealing to their fan bases and committing to reforms. “They have an opportunity to rally around the existing team,” Ohio State Athletic Director Gene Smith said of Penn State in a telephone interview. “The first year will be fine, then a question becomes, ‘How’s it go from here?’” USC Spending Pat Haden, a former Southern California quarterback who is now athletic director there, said the university faced its scandal straight on. President C.L. Max Nikias announced $123 million in athletics-related capital improvements right when the university was reeling from the sanctions. “It was a large statement for us,” Haden said. “We were not going to go away and hide and be embarrassed about what happened. We were going to build for the future.” Penn State President Rodney Erickson said in an interview that he is preparing for a possible revenue drop and the school is delaying capital-improvement projects, like a $13 million football scoreboard replacement. Under the sanctions, Penn State can’t cut back on non-revenue sports to save money. The athletic department has collected $282 million of a $300 million fundraising campaign and is projected to exceed the goal by the 2014 target date, Joyner said. “As one of the football players said, ‘The higher the heat, the stronger the steel,’” Joyner said. “The good word is that the base has been very much energized.” To contact the reporter on this story: Curtis Eichelberger in Washington at ceichelberge@bloomberg.net To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net |
2024-10-25 | Bloomberg | Bovespa Stocks Advance on Federal Reserve Loosening Prospects; Real Gains | Brazil’s Bovespa stock-index futures advanced, indicating the gauge may pare its first weekly decline since August, as investors speculated the Federal Reserve may announce further measures to bolster the economic recovery. Electric utilities Light SA and Eletropaulo Metropolitana SA may be active after Banco Santander SA recommended buying the shares. Cosan SA Industria & Comercio, the world’s biggest sugar-cane processor, may move after saying its net sales rose 32 percent in the second fiscal quarter. Usinas Siderurgicas de Minas Gerais SA may move after Brazil’s tax agency said it will curb imports of steel that may have been priced below the cost of raw materials used to make the alloy. Bovespa futures gained 0.9 percent to 70,940 at 8:19 a.m. New York time. The gauge fell on Oct. 22, extending last week’s drop to 3.2 percent, on concern higher interest rates in China and uncertainty in global currency markets may curb economic growth, offsetting a rally for steelmakers. The real rose 0.2 percent to 1.7017 per dollar. The Group of 20 finance chiefs pledged to avoid “competitive devaluation” at the end of a meeting in South Korea on Oct. 23. The G-20 meeting “has reaffirmed the status quo and going forward we are likely to see the Federal Reserve, the Bank of England and the Bank of Japan go on with quantitative easing,” said Kelvin Tay , the chief investment strategist for UBS AG Wealth Management in Singapore. Equities’ strength “has been largely driven by the fact that the U.S. dollar has actually weakened quite substantially against all major currencies since Ben Bernanke ’s Jackson Hole speech” at the end of August. Minimum Prices Steelmakers surged on Oct. 22 after Valor Economico reported that the tax authority would set minimum prices for 16 types of flat and long steel based on their costs of production. The agency said later that day that it won’t set minimum prices for the imports, denying the news report. Morgan Stanley cut Latin America’s rating to “underweight” in the brokerage’s global emerging markets model portfolio and raised Asia to “overweight.” Latin America “tends to underperform during corrective phases,” Jonathan Garner , Morgan Stanley’s Hong Kong-based chief Asian and emerging-market strategist, said in a report. “The main factors driving these changes are relative weaknesses in earnings growth and revision factors for Brazil and Mexico.” Morgan Stanley lowered its recommended weighting for Brazil to “equal-weight” from “overweight” and Mexico to “underweight” from “equal-weight,” while Chile was upgraded to “equal-weight.” Asia’s rating was increased as the brokerage raised China’s allocation, the report said. To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net. To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net |
2024-07-04 | Bloomberg | Asian Stocks Rise on U.S. Factory Data, Stimulus Optimism | Asian stocks rose for a sixth day, with the regional benchmark index recording its longest winning streak this year, as U.S. factory orders topped estimates and commodities climbed to a two-month high amid speculation central banks will act to boost economic growth. BHP Billiton Ltd. (BHP) jumped 2.1 percent to lead gains among commodity stocks as a surge in raw-materials prices boosted the earnings outlook at the world’s largest mining company. Komatsu Ltd. (6301) , a Japanese maker of construction equipment that gets 23 percent of sales in the U.S., rose 2 percent. Real Nutriceutical Group Ltd. (2010) soared 19 percent after billionaire Li Ka-shing increased his stake in the provider of health products. The MSCI Asia Pacific Index (MXAP) advanced 0.4 percent to 119.20 as of 5:20 p.m. in Tokyo. Five stocks rose for every three that fell. The gauge climbed to its highest level since May 10 after euro-zone leaders last week agreed to relax conditions for rescuing lenders, easing concern about the region’s debt crisis. The six-day advance is the longest run of gains since December. “There is some room for the rally to last for the next couple of weeks,” Kelvin Tay, Singapore-based chief investment officer for the southern Asia-Pacific region at the wealth management unit of UBS AG, said in a Bloomberg TV interview. UBS manages about $1.5 trillion globally. “Sentiment has turned positive. The priority has shifted toward growth from inflation. The hands of the central banks are not so tied and they can look at perhaps easing monetary policy as they try to help stimulate economies.” U.S. Growth Futures on the Standard & Poor’s 500 Index slid 0.2 percent today with U.S. markets closed for a holiday. The gauge climbed 0.6 percent yesterday to a two-month high after data showed U.S. factory orders rose in May for the first time in three months. Australia’s S&P/ASX 200 Index gained 1.1 percent and South Korea’s Kospi Index rose 0.4 percent. Japan’s Nikkei 225 Stock Average advanced 0.4 percent and the broader Topix Index increased 0.2 percent. China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index fell 0.1 percent. The International Monetary Fund yesterday cut its growth forecast for the U.S. economy as Managing Director Christine Lagarde said further monetary policy easing may be needed by the Federal Reserve if the situation deteriorates. The U.S. economy will grow 2 percent this year, the IMF said in a statement yesterday, cutting its previous 2.1 percent estimate. Interest Rates The European Central Bank and the Bank of England announce interest-rate decisions tomorrow. ECB officials will lower their benchmark rate by 25 basis points to a record low 0.75 percent, according to the median forecast in a Bloomberg survey of 57 economists. China may cut lenders’ reserve requirements three more times during 2012, by 0.5 percent each time, Shanghai Securities News reported on its website yesterday. Securities News cited a banking sector development report released by the China Banking Association yesterday. The Asian benchmark gained 4.3 percent this year through yesterday, compared with a 9.3 percent advance by the S&P 500 and a 5.3 percent increase by the Stoxx Europe 600 Index. Stocks on the Asian benchmark are valued at 12 times estimated earnings on average, compared with a multiple of 13.1 for the S&P 500 and 10.8 times for the Stoxx 600. BHP Billiton climbed 2.1 percent to A$32.47. Rio Tinto Group (RIO) , the world’s third-largest mining company, advanced 2.7 percent to A$58.97 in Sydney. The Thomson Reuters/Jefferies CRB Index of raw materials climbed 3 percent yesterday to its highest level since May 10. Exporters to the U.S. climbed. Komatsu advanced 2 percent to 1,902 yen. Li & Fung Ltd., which gets 60 percent of sales in the U.S., gained 0.9 percent to HK$15.08 in Hong Kong. Real Nutriceutical surged 19 percent to HK$2.05. Cheung Kong Holdings Chairman Li Ka-shing increased his stake in the company to 5.01 percent from 4.97 percent, according to a disclosure filing to the Hong Kong stock exchange. To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-04-18 | Bloomberg | Canada February Employment Insurance Report (Text) | The following is the text of Canada 's employment insurance report for Feb. released by Statistics Canada. In February, 628,900 people received regular Employment Insurance (EI) benefits, down 8,300 (-1.3%) from January and a fifth consecutive monthly decrease. The number of beneficiaries declined in all provinces except Prince Edward Island. Lower number of claims To receive EI benefits, individuals must first submit a claim. The number of claims provides an indication of the number of people who could become beneficiaries. The number of initial and renewal claims totalled 239,000 in February, down 2,700 or 1.1% from January. This was the third decline in four months. There were fewer claims in Manitoba, New Brunswick , Alberta, British Columbia and Quebec in February, while the number increased in Saskatchewan and Ontario. Fewer beneficiaries in most provinces In February, the number of regular beneficiaries declined in every province except Prince Edward Island. Over the past five months, the number of beneficiaries has been trending down in all provinces. The fastest rate of monthly decline in beneficiaries occurred in Saskatchewan, where it fell 5.1% (-600) to 11,200 from January. At the same time, the number decreased in Alberta by 2.9% (-1,300) to 43,100 recipients. In Manitoba, it declined by 2.7% (-390) to 14,300. In Quebec, 180,300 people received benefits in February, down 1.5% (-2,800) from January, while in Ontario, the number of beneficiaries edged down 0.6% (-1,100) to 191,500. The number of people receiving regular benefits in February remained virtually unchanged in Prince Edward Island at 8,500 (+0.1%). Sub-provincial and demographic overview Employment Insurance data by sub-provincial region, sex and age are not seasonally adjusted and are therefore compared on a year-over-year basis. Continued year-over-year declines in most large centres Between February 2010 and February 2011, the number of regular beneficiaries fell by 98,600 (-11.3%) at the national level, with decreases in 129 of the 143 large centres (see map). Large centres are those with a population of 10,000 or more. In Newfoundland and Labrador, the number of beneficiaries declined in all five large centres. The fastest rate of decrease occurred in St. John's, which fell by 12.4% (-800) to 5,600, the 11th consecutive month of year-over-year declines. The number of regular beneficiaries fell in 31 of 33 large centres in Quebec between February 2010 and February 2011. The fastest declines occurred in Saint-Georges, Sorel-Tracy, Granby, La Tuque and Rouyn-Noranda. There were 12.3% fewer beneficiaries (-10,700) in Montreal , the 12th consecutive month of year-over-year declines. In the census metropolitan area (CMA) of Quebec, the number of beneficiaries declined by 5.6% (-870) compared with February 2010. In Ontario, the number of regular beneficiaries has fallen in 38 of its 41 large centres since February 2010. The largest percentage declines occurred in Greater Sudbury, Tillsonburg, Belleville, Guelph and Thunder Bay. In Greater Sudbury, 44.4% fewer people (-2,600) received regular benefits, the eighth consecutive monthly year-over- year decline. In Toronto, 81,100 people received benefits in February, down 18.3% (-18,100) from the same month a year earlier. In Manitoba, the fastest decline over the past 12 months occurred in Winnipeg, down 17.0% to 8,200 in February. The number of beneficiaries decreased in all eight large centres in Saskatchewan. The most notable rates of decline occurred in Yorkton and Moose Jaw. In Regina, the number of beneficiaries decreased by 19.9% (-420) to 1,700, while in Saskatoon, 18.1% (-550) fewer people received benefits. In Alberta , 11 of the 12 large centres had fewer beneficiaries in February compared with February 2010. The pace of decline in the number of beneficiaries was fastest in Brooks, Camrose, Red Deer, Grande Prairie and Calgary. In Calgary, the number of beneficiaries fell by 30.2% (-6,100) to 14,000, while in Edmonton , it declined by 16.2% (-2,900) to 14,900. February marked the 11th consecutive monthly year-over-year decline for both CMAs. In British Columbia, most large centres had fewer beneficiaries in February than the same month a year earlier. The rate of decline was most pronounced in Fort St. John, Quesnel and Prince George. In Vancouver , 33,400 people received regular benefits in February, down 11.0% (-4,100), the ninth year-over-year monthly decline in a row. The number of beneficiaries fell by 5.6% (-250) to 4,300 in Victoria, the 11th consecutive monthly year-over-year decline. Demographic groups Faster year-over-year decline for men than women Between February 2010 and February 2011, the number of men receiving regular Employment Insurance benefits fell by 12.7% or 74,600, continuing the downward trend of year- over-year declines that began in March 2010. The number of male beneficiaries declined by 14.8% (-59,000) among those aged 25 to 54, and by 14.5% (-11,000) for men under 25 years old. The decline was much slower among men aged 55 and over, at 4.1% (-4,600). For women, the rate of decrease in the number of beneficiaries was 8.5% (-23,900), the largest of nine consecutive year-over-year percentage decreases. The number of female beneficiaries fell by 15.1% (-3,500) among those under 25 years old, and by 10.2% (-21,000) among women aged 25 to 54. In contrast, the number of female beneficiaries aged 55 and over edged up by 1.0% (+540). Note to readers All data in this release are seasonally adjusted unless otherwise specified. Each month, Statistics Canada provides analysis of the current labour market situation, using Employment Insurance (EI) statistics and other sources. Earlier this month, the Labour Force Survey (LFS) provided a picture of overall labour market conditions, including unemployment, total employment and those affected by changes in the labour market. In this release, Statistics Canada provides additional sub-provincial detail through the EI statistics. Details by industry will follow with data from the Survey of Employment, Payrolls and Hours. EI statistics are produced from an administrative data source from Human Resources and Skills Development Canada. These statistics may, from time to time, be affected by changes to the Employment Insurance Act or administrative procedures. The number of regular beneficiaries and the number of claims received for January and February 2011 are preliminary. In this release, large centres correspond to those with a population of 10,000 or more. The number of beneficiaries is a measure of all persons who received EI benefits from February 13 to 19. This period coincides with the reference week of the LFS. EI statistics indicate the number of people who received EI benefits, and should not be confused with data coming from the LFS, which provides information on the total number of unemployed people. There are always a certain proportion of unemployed people who do not qualify for benefits. Some unemployed people have not contributed to the program because they have not worked in the past 12 months or their employment is not insured. Other unemployed people have contributed to the program but do not meet the eligibility criteria, such as workers who left their job voluntarily or those who did not accumulate enough hours of work to receive benefits. The change in the number of regular EI beneficiaries reflects various situations, including people becoming beneficiaries, people going back to work, and people exhausting their regular benefits. |
2024-07-13 | Bloomberg | Petrobras Second-Worst Oil Shares After BP as Sale Delay Worries Investors | Petroleo Brasileiro SA is the world’s second-worst performing oil company this year, behind only BP Plc, on concern Brazil’s government will force the producer to pay more than investors originally expected for crude reserves. The value of the 5 billion barrels of reserves, which the government plans to swap for new stock, will determine the size of the state-run company’s planned share sale this year and may signal the extent to which President Luiz Inacio Lula da Silva ’s administration can increase control. A higher price may force Petrobras to sell more shares to pay for the oil, diluting minority shareholders , said Max Bueno , an analyst with brokerage Spinelli Corretora. “The government wants to go back to the populace and say ‘we have a fair value on the reserves’,” Ted Harper , who helps manage $6.8 billion at Frost Investment Advisors, said yesterday in a telephone interview from Houston. A postponement of the share sale, which moved it closer to the October presidential elections, “totally muddies the water and makes it potentially politically charged,” he said. Petrobras sank 27 percent in the first half of 2010, its worst start to a year since 1995. That compares with a 47 percent drop for BP , which faces tens of billions of dollars in damages from an April explosion that led to the biggest oil spill in U.S. history. Irving, Texas-based Exxon Mobil Corp., the largest U.S. oil producer, and Europe’s biggest, Royal Dutch Shell Plc, lost 16 percent and 10 percent, respectively. Rising Estimates Rio de Janeiro-based Petrobras may need to pay the government as much as $8 a barrel for reserves, or up to $40 billion, Credit Suisse analysts led by Emerson Leite said in a June 30 investor note. Earlier this year, the bank predicted Petrobras would pay $5 to $6 a barrel for the oil, or as much as $30 billion in new stock. Petrobras’s press office declined to comment on the share sale or recent share performance when contacted yesterday. Shareholders in a meeting last month authorized a total capital increase of 150 billion reais ($85 billion), including stock to be issued in exchange for the reserves. Petrobras has said it expects to raise as much as $25 billion from minority shareholders. Petrobras on June 22 delayed the sale until September, postponing cash needed for a $224 billion spending plan to develop the Americas’ largest oil find in three decades. The company said it needed to wait for the government’s valuation of the reserves before the public offering. ‘Lost Credibility’ “What’s been haunting the shares for weeks now is this high level of political intervention, and now it has lost credibility among shareholders” after the delay, Christopher Palmer , who oversees $5 billion as head of global emerging- market stocks at Gartmore Investment Management Ltd., said June 29 in an interview from London. “How many billions of dollars of shareholder value has been destroyed due to a lack of credibility and communication?” Brazilian presidential elections in October may lead the government to put a high price on the reserves to avoid a “political backlash,” Leite said. Brazil Energy Minister Marcio Zimmermann said yesterday through his press office in Brasilia that the government won’t interfere with the price of the reserves. The process won’t “suffer electoral influence,” he said, according to the press office. Lula and Dilma Rousseff , his party’s candidate, will “have a hard time justifying” a value below $30 billion for the oil, Eurasia Group analysts led by Christopher Garman said in a June 23 report. The opposition may argue it’s a “sweet-heart deal” for Petrobras and foreign investors during the campaign, he said. ‘Billions of Dollars’ If the government adds a “dollar or two” to the price per barrel, it will cause “billions of dollars in impact” on the size of the share offering and the reduction in earnings per share , Eric Conrads , a hedge fund manager at Mexico City-based Armada Capital SA, said in an interview on June 25. Petrobras fell 4 centavos, or 0.2 percent, to 27.19 reais at 1:30 p.m. in Sao Paulo trading. Petrobras’s loss this year is the second worst out of the world’s 35 biggest oil companies by market value, according to data compiled by Bloomberg. BP jumped the most in 20 months in London trading yesterday on speculation the company may succeed in halting the oil spill. BP extended its gains today, rising 2.9 percent to 410.35 pence. Petrobras plans to issue enough shares in the deal to allow the government and minority investors to maintain their stakes. Brazil’s oil regulator hired Gaffney, Cline & Associates to assess how much the reserves are worth. Americas’ Largest Find The swap and public offering are part of plans to finance the development of fields including the offshore Tupi, the Americas’ largest oil discovery since Mexico’s Cantarell in 1976. Petrobras may need to spend more than $224 billion after the BP spill in the Gulf of Mexico increased insurance premiums and deepwater drilling costs, Spinelli’s Bueno said in a telephone interview from Sao Paulo on July 8. Concern that deep-water drilling costs will jump is driving up the cost of protecting against a default by Petrobras , the largest oil producer in waters below 1,000 feet, relative to Petroleos Mexicanos, which has no output in deep waters. Credit default swaps that protect against non-payment by Petrobras over five years cost 177 basis points on July 9, or 35 more than its Mexican counterpart, according to prices compiled by CMA DataVision. The gap reached a 17-month high of 47 basis points, or 0.47 percentage point, on June 30, up from 19 on April 20, when London-based BP’s rig explosion in the Gulf of Mexico sent oil spewing into the ocean. To contact the reporter on this story: Peter Millard in Rio de Janeiro at Pmillard1@bloomberg.net President of Brazil Luiz Inacio Lula da Silva. Photographer: Paulo Fridman/Bloomberg May 28 (Bloomberg) -- Sarah Hunt, a portfolio manager at Alpine Mutual Funds, talks with Bloomberg's Adam Johnson about investing in oil stocks following the BP Plc oil spill in the Gulf of Mexico. (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); } }); }); //]]> |
2024-04-03 | Bloomberg | Arabica Premium Seen Higher on Robusta Supply Surge: Commodities | The premium paid for arabica beans favored by Starbucks Corp. (SBUX) over the robusta used by Nestle SA (NESN) may rally from a 20-month low because of a surge in supply from Vietnam , the biggest grower of the less costly coffee. Arabica fell 18 percent in New York this year on prospects for a record Brazilian crop as robusta rose 13 percent in London because of fewer cargoes from Vietnam. The premium dropped to 83.89 cents a pound on March 29, the lowest since July 2010. It will widen to $1.162 by the end of the year, the average of 18 analyst estimates compiled by Bloomberg shows. Farmers in Vietnam have been stockpiling robusta as a hedge against consumer prices that surged 23 percent in August, according to Macquarie Group Ltd. With inflation moderating to 14 percent in March and harvests about to start in Indonesia and Brazil , they may now accelerate sales, the bank predicts. Arabica is poised to rally 10 percent in the next three months, as drought in Brazil threatens the crop and demand from emerging markets strengthens, Goldman Sachs Group Inc. estimates. “People have focused on the shortage of robusta supplies, and that will change as the crops in Indonesia and Brazil come in and put pressure on the Vietnamese farmers to release their record crop,” said Keith Flury, an analyst at Rabobank in London. “The market is also seriously underestimating how tight the arabica supply-and-demand balance will be.” Arabica Rebound Arabica traded on ICE Futures U.S. fell 20 percent in the first three months of the year, the biggest quarterly decline in more than a decade, and reached a 17-month low of $1.7445 a pound on March 22. Futures that closed at $1.862 yesterday will reach $2 in three months, Goldman’s commodity research team, led by Jeffrey Currie in London , wrote in a report March 28. Robusta jumped 12 percent in the first quarter, the biggest gain in a year, and traded at $2,031 a metric ton (92.12 cents a pound) yesterday on NYSE Liffe. Prices will average $1,600 in the fourth quarter, 21 percent less than now, Rabobank’s Flury wrote in a report on March 27. Arabica is the second-worst performer this year in the Standard & Poor’s Spot GSCI Index of 24 commodities, behind natural gas. The gauge advanced 8.2 percent as the MSCI All- Country World Index of equities added 12 percent. Treasuries lost 1.2 percent, a Bank of America Corp. index shows. Starbucks Costs Higher arabica prices may raise costs for Seattle-based Starbucks and Waterbury, Vermont-based Green Mountain Coffee Roasters Inc. (GMCR) Cheaper robusta may help Vevey, Switzerland-based Nestle, which uses the variety to make Nescafe and has about 51 percent of the global instant-coffee market, according to Euromonitor International. Global robusta supply will exceed demand by 1.2 million bags in the year that begins in October, compared with a 1 million-bag shortage in the current season, according to Winterthur, Switzerland-based Volcafe. Each bag weighs 60 kilograms (132 pounds). Arabica output will outpace consumption by about 800,000 bags in 2012-2013, compared with a 6 million- bag deficit in the current season, the unit of ED&F Man Holdings Ltd., a London-based commodities trader, forecast in a quarterly report in February. The anticipated gains in arabica prices may be curbed by signs that economic growth is slowing, said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. Prices fell 18 percent in 2008, amid the worst global recession since World War II. The premium to robusta narrowed to as little as 26.1 cents in March 2008, data compiled by Bloomberg show. Slowing Growth The International Monetary Fund expects world growth to slow to 3.3 percent this year, from 3.8 percent in 2011, and Europe to contract 0.5 percent as it struggles to contain a debt crisis. The pace of the recovery in the U.S., the world’s biggest coffee user, has been “extremely sluggish,” Federal Reserve Chairman Ben S. Bernanke said on March 29. “Coffee is caught in a down trend,” Hellwig said. “We’re concerned with global growth stalling. There’s growth there, but we’re not seeing demand growth exceeding supply growth.” Hedge funds and other money managers have been betting on lower arabica prices since mid-February, Commodity Futures Trading Commission data show. They held a net-short position of 9,964 futures and options contracts in the week ended March 27. Funds increased their net-long position in robusta during the same week by 8.5 percent to 8,345 contracts, the most since NYSE Liffe started publishing the data in October. Speculator Holdings Wagers on robusta may be reversed once Vietnamese farmers accelerate shipments. They sold about 70 percent of the current season’s crop so far, preferring to hold on to beans, according to Volcafe. The start of harvests in Brazil and Indonesia next month and slower domestic inflation probably will spur them to reverse that trend, said Kona Haque , an analyst at Macquarie in London. Production in Indonesia, the third-biggest robusta grower behind Vietnam and Brazil, may rise 38 percent to 11 million bags in the season starting in April, the Indonesian Coffee and Cocoa Research Institute estimates. Arabica supplies may be tighter than futures markets are anticipating. While the government of Brazil, the largest grower, has forecast a record crop in the marketing year that begins in July, most of the gains will be in robusta and arabica output may actually decline, estimates Terra Forte Exportacao e Importacao de Cafe Ltda., the country’s second-largest exporter. More Robusta Growers of arabica, which will enter the higher-yielding half of a two-year production cycle in July, will collect 37.4 million bags, almost 11 percent less than they did in the previous peak year, Terra Forte predicts. Robusta output will climb to 16.5 million bags, from 14.3 million a year earlier, the Sao Joao da Boa Vista, Brazil-based company forecasts. The Brazilian government may stockpile beans to help farmers, Agriculture Minister Mendes Ribeiro Filho said in an interview in London on March 29. Brazil exported 27.4 million bags of arabica and 2.7 million bags of robusta in 2011, according to its coffee exporters’ council, known as Cecafe. Arabica inventories at ICE-monitored warehouses are 41 percent smaller than two years ago, before prices began a rally to a 14-year high in May 2011, exchange data show. Stockpiles may not be replenished soon because heavier-than-normal rainfall in Colombia , the second-biggest grower of the variety, damaged crops. Production may fall to as low as 7.5 million bags this season, a 36-year low, according to Andres Valencia, the marketing chief at the National Federation of Coffee Growers. “Robusta should weaken over time, as production is going to catch up,” John Stephenson , who helps manage $2.7 billion of assets at First Asset Investment Management Inc. in Toronto, said in an interview. “At the same time, you have demand growth in arabica and fairly tight inventories, so I would expect to see robusta fade a bit and relative strength in arabica.” To contact the reporters on this story: Marvin G. Perez in New York at mperez71@bloomberg.net ; Isis Almeida in London at ialmeida3@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-09-13 | Bloomberg | Buildmax, Datatec, Exxaro, MMI, RMBH: South African Equity Market Preview | The following stocks may rise or fall in South Africa. Symbols are in parentheses and prices are from the last close. The FTSE/JSE Africa All Share Index rose for the first day in three, gaining 176.96, or 0.6 percent, to 30,032.71 by the 5 p.m. close in Johannesburg. Buildmax Ltd. (BDM) : The construction equipment retailer said its loss per share for the six months through August would improve to between 0.3 cents and 0.5 cents per share from the reported loss per share of 31.6 cents the year earlier. The stock closed unchanged at 10 cents. Datatec Ltd. (DTC) : The Johannesburg-based computer services company holds its annual general meeting. Shares in the company rose 1.9 percent to 38.30 rand. Exxaro Resources Ltd. (EXX) : The coal miner and the National Union of Mineworkers meet at the Council for Conciliation, Mediation and Arbitration over a pay dispute. The stock gained 3.8 percent to 195 rand. Grand Parade Investments Ltd. (GPL) : The casino operator holds a special general meeting on its proposed restructuring. Shares advanced 0.3 percent to 3.09 rand. MMI Holdings Ltd. (MMI) : The South African insurance company created last year from the merger of Metropolitan Group Ltd. and Momentum Group Ltd. releases earnings for the year to June 30. Shares in the company added 1.5 percent to 16.77 rand. Pinnacle Technology Holdings Ltd. (PNC) : The computer and networking group said earnings per share for the year to June 30 rose as much as 60 percent over the 76.7 cents reported a year earlier. The stock closed unchanged at 8.50 rand. RMB Holdings Ltd. (RMH) : The investment company releases results for the year to June 30. Basic earnings per share for the 12 months to June 30 will rise to between 870 South African cents and 930 cents, the company said in a trading statement on Sept. 9. The stock gained 2 percent to 25.85 rand. Sasfin Holdings Ltd. (SFN) : The financial services company may release results for the year to June 20. Shares in the company closed unchanged at 32 rand. Ububele Holdings Ltd. (UBU) : The food-processing company reports results for the year to June 30. Basic earnings per share from all operations will be between 1.2 cents and 1.4 cents per share, or between 72 percent to 82 percent lower than the previous year, the company said in a trading statement on Sept. 8. The stock rose 7.1 percent to 30 cents. To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-06-03 | Bloomberg | MRI for $7,332 Shows Wide Variety in U.S. Medical Costs | The costs of outpatient hospital care vary widely for typical services such as an MRI, according to data released by the U.S. government. In New York , for example, hospitals charge $474 to $7,332 for a magnetic resonance imaging test of blood vessels, according to the data released today covering charges and Medicare payments for 30 common procedures that don’t require hospital admittance. The government released data in May showing similar variation in prices for in-patient services. Medicare, the government’s health-insurance program for the elderly and disabled, pays a fraction of the costs, called chargemaster prices, as do most commercial insurers such as UnitedHealth Group Inc. (UNH) For example, Medicare paid hospitals in New York no more than $441 on average for an MRI of blood vessels, regardless of the list price, according to the data. “A more data driven and transparent health-care marketplace can help consumers and their families make important decisions about their care,” Kathleen Sebelius , the U.S. health secretary, said in a statement. The pricing data was released in conjunction with the Obama administration’s fourth annual “Datapalooza” event, a conference at which the government encourages technology companies to make use of its health data. The cheapest average list price for an MRI in New York was the $474 at Bronx-Lebanon Hospital Center, while the most expensive was the $7,332 at Good Samaritan Hospital of Suffern, according to the data. Medicare paid Good Samaritan in Suffern about $4 more than Bronx-Lebanon for the procedure. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
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