Links: 2013-01-22

Google Inc. Announces Fourth Quarter and Fiscal Year 2012 Results – Investor Relations – Google

“Google Inc. reported consolidated revenues of $14.42 billion for the quarter ended December 31, 2012. Consolidated revenues would have been $15.24 billion had Motorola Home been included.”

Davos Doom Loses to Merkel-Draghi as Euro Defies Roubini – Bloomberg

“The debate over a Greek exit easily could reignite by year- end after Germany’s election, if Greece’s coalition government wobbles or if Spain and Italy appear less at risk of contagion, says Roubini.
Rogoff, a former International Monetary Fund chief economist, said in an e-mail last week that “all the ECB’s efforts will come to naught” if governments fail to foster a true fiscal, banking and political union.
Even some Davos attendees who bet on the euro nations sticking together warn that the turmoil soon could return.
“It’s clear many people overestimated the likelihood of a Greek exit, but now the danger goes in the other direction, in that markets are too sanguine that the volatility and political noise is behind us,” said Barry Eichengreen, a professor at the University of California in Berkeley. “I do not think the period of calm will last.””

El precio de la vivienda experimenta una bajada del 10% durante 2012 | Economía | EL PAÍS

Im Q4 2012, Spanish house prices fell the most on record since the end of the house price bubble. According to Spain’s development ministry this was only 9.8% down, year on year.

The practicalities of the currency wars | FT Alphaville

“if you are China or another poor EM country and you ease to offset US ease, commodity prices run up double quick and you face a real inflation problem.

US and UK are less vulnerable because the food component in CPI is smaller, they simply don’t care about inflation and they are happy if domestic asset markets bounce up. So they benefit from these soft wars.

If you are Canada or Australia you don’t mind the run-up in commodity prices but you worry that Vancouver and Sydney real estate is more expensive than Mayfair – so soft currency war, if you respond, carries risks.

Net, net – the soft war is less dramatic and more benign in short term but does not fully escape negative consequences if you are not a major economy, facing headlines to growth, with policymakers who are indifferent to both CPI and asset price inflation.”

Ireland, Portugal May Be First to Tap ECB Bond Buying Program –

“Ireland and Portugal could apply to the European Central Bank’s bond-buying program to facilitate their full return to the financial market while exiting their bailout program, European Economics Commissioner Olli Rehn said Tuesday.

Mr. Rehn’s comments are the latest sign of support from the European Union for Ireland and Portugal as the two countries examine a range of options to lower the cost of their debt financing while preparing to re-enter international bond markets. On Monday, the two countries said that they would request an extension to the maturity of loans they received from the euro-zone’s bailout funds that were set up in 2010.”

Verizon numbers hint Apple may have shipped more than 50M iPhones last quarter 

Dylan Grice: Putting His Mouth Where His Money Is | AdvisorAnalyst Views

“Capital is scarce. It is valuable. And so it is vulnerable. It is vulnerable to confiscation explicit and implicit, to competitive erosion and to bad ideas. The protection of honest capital thus requires honest thought: about the world, its dangers and opportunities, about our investments, about the nature of risk. Above all it requires honest thinking about ourselves, our capabilities and our limitations.”

Why the Guardian is launching a digital edition in Australia | Lean Back 2.0

“In the last ten years, the Guardian has moved from being the ninth most read newspaper in Great Britain to an online presence that makes it the third most read newspaper website in the world. Over the same period, print circulation has declined inexorably and, with it, print advertising revenues; this trend will continue.

At Guardian News & Media, we have a tradition of leading the way in digital. Our ‘open’ approach to journalism, which seeks to engage our readers in a much more collaborative relationship than traditional print journalism is able to do, is hugely popular with forward-looking individuals who are curious about the world and embrace technological change. This progressive audience leaves the Guardian particularly well-placed to develop its global reach; it is also very attractive to advertisers.”

Guardian Media CEO explains why the paper doesn’t like paywalls — paidContent

“Paywalls are being erected at hundreds of newspapers around the world, but Guardian Media CEO Andrew Miller says his newspaper is still opposed to a subscription wall because it wants to expand its readership as much as possible.”

Financial Times editor announces digital-first strategy | Media |

“The Financial Times editor, Lionel Barber, has announced plans to move the title to a digital-first strategy in a move he described as a “big cultural shift” for the business daily, and cut 35 jobs.

Barber said the FT will make a net headcount reduction of 25 – after hiring 10 journalists for digital roles – in an effort to save £1.6m this year as part of the strategy, outlined to staff in a memo on Monday, seen by MediaGuardian. He added that the FT needed to be “reshaped for the digital age”.”

Lionel Barber’s email to FT staff outlining digital-first strategy | Media |

“In order to engage more deeply with our readers, we need to introduce a more intelligent, balanced and efficient deployment of our investment and our people. So we are proposing a shift of some resources from night work to day and from print to digital. This requires an FT-wide initiative to train our journalists to operate to the best of their abilities. And it requires decisive leadership.

I am determined that we do everything we can to secure the FT’s future as a world class, financially sustainable news organisation. Our earlier decisions to raise prices, charge for content, and build a subscription business have proven to be bold and wise. While many of our rivals have struggled to find a profitable business model, and have therefore announced heavy job losses, we have been industry pioneers. This is not the moment to falter.”

Why Stimulus Has Failed by Raghuram Rajan – Project Syndicate

“the bust that follows years of a debt-fueled boom leaves behind an economy that supplies too much of the wrong kind of good relative to the changed demand. Unlike a normal cyclical recession, in which demand falls across the board and recovery requires merely rehiring laid-off workers to resume their old jobs, economic recovery following a lending bust typically requires workers to move across industries and to new locations.
CommentsThere is thus a subtle but important difference between my debt-driven demand view and the neo-Keynesian explanation that deleveraging (saving by chastened borrowers) or debt overhang (the inability of debt-laden borrowers to spend) is responsible for slow post-crisis growth. Both views accept that the central source of weak aggregate demand is the disappearance of demand from former borrowers. But they differ on solutions.”

Money Magic: Making Bonds Act Like Stocks –

“Pension funds across the U.S. are desperate to overcome low interest rates and churn out returns big enough to pay future retirees.

Now some hedge funds and money managers are pitching something they see as a Holy Grail: a strategy that often uses leverage to boost returns of bonds that usually occupy the low-risk, low-return portion of pension-fund investment portfolios.
Leverage relies on borrowing money or using derivatives to make large investments while putting up less cash. The tactic’s widespread use helped inflate the world-wide debt bubble that burst during the financial crisis, and it was blamed for ruinous losses at banks and securities firms.

But money managers such as Bridgewater Associates, the world’s largest hedge-fund firm, and a growing number of pension funds say this type of leverage is different.”

PIMCO | Economic Outlook – PIMCO’s Secular Forum Preview

“Not surprisingly, several interesting secular questions have already arisen within PIMCO.”

TweetDeck: Twitter Bosses Sent Closure Letter

“Sky News has obtained a letter sent to one of Twitter’s UK companies by the business regulator, giving it written warning of impending closure.

Cardiff-based Companies House sent the letter to the two American directors of TweetDeck, at their registered London address.
The letter, dated January 22, stated: “The Registrar of Companies gives notice that, unless cause is shown to the contrary, at the expiration of 3 months from the above date the name of TweetDeck Ltd will be struck off the register and the company will be dissolved.””

LG Optimus G Pro unveiled: 5-inch 1080p display, 1.7GHz S4 quad-core processor, 3,000mAh battery, and more

“It’s been rumored for more than a few weeks now and it looks like the LG Optimus G Pro has finally been unveiled this evening and in Japan no less. The device was officially announced by NTT Docomo with a handful of other devices and sports that rumored 5-inch, full HD 1080p display we’ve been hearing so much about. That means the G Pro delivers a nicely dense 440 ppi

Also on the menu is a 1.7GHz Snapdragon S4 Pro APQ8064 processor, 2GB of RAM, Android 4.1 Jelly Bean and a much demanded 3,000mAh battery. This makes for a device appox 1.5mm thicker than the original Optimus G (which had a 2,100mAh battery) but I’m sure the added junk in the trunk is a worthwhile trade-off.”

Apple’s iOS retains top spot in US with over 51% share of smartphone OS sales for Q4 2012

“Accounting for over a 51% share of all smartphone OS sales in the U.S., Apple’s iOS continues to be the market leader.”

Irland und Portugal verlangen spätere Rückzahlung von Hilfen –, 22.01.2013

According to this German-language Swiss article, both Ireland and Portugal are looking for a longer payback period of their EFSF bailout money. Apparently, the Irish Finance Minister has got together with his Portuguese counterpart to develop a common front in making the request.

Cost of borrowing on markets could fall if easing of bailout terms goes ahead, says Noonan – Irish, Business –

“The 17 Eurozone finance ministers last night agreed in Brussels that the loans to Ireland and Portugal under the European Financial Stability Facility (EFSF) would be examined by officials to see if their maturities can be extended.

Mr Noonan said the move could amount to billions of euro in savings.

Ireland received €17.7bn from the EFSF under the terms of the €67.5bn bailout in late 2010. Just over €12bn has been drawn down so far in different tranches with varying maturities.”

House prices in Dublin up 2.2pc last year after strong fourth quarter – Property & Mortgages, Personal Finance –

“According to the report, which analysed annual figures from the Property Price Register, 2012 also showed an increase of activity in the residential market across the country with over 21,725 transactions. This was up 27pc on 2011.

However, DNG said the building industry in Ireland shows increased signs of continued slowdown with the overall figure for registered completed buildings last year expected to just exceed 8,000 units in total compared to 10,480 for 2011.”

Home prices up ‘unsustainable’ 5.9% in 2012 – MarketWatch

“The value of American homes climbed 5.9% in 2012, the largest annual gain since the summer of 2006, or near the peak of the housing bubble, according to data released Tuesday by real-estate information provider Zillow Inc.”

Revolutionary Japan is suddenly the centre of world affairs – Telegraph 

UK retail sales fell in December | Business | The Guardian 

Crisis Erased in Europe Junk Bond Yield Premiums: Credit Markets – Bloomberg

Spain’s bankers to strike as job cuts loom | Reuters

“Workers at three of Spain’s bailed-out banks will stage strikes in coming weeks as they fight mass layoffs, unions said on Monday, spreading industrial unrest to a sector where walkouts have so far been rare.”

Welfare recipients hit record high | The Japan Times Online 

BBC News – Snow piles on problems for the UK economy

“With food especially, if customers cannot get to the shops or retailers do not have stock, then there will be an economic impact. “If you don’t buy today, you are not going to buy twice as much tomorrow to make up for it, so there are losses,” Mr Agg said. But better planning all round will lessen the economic downside, he believes.”

SPD and Green Victory in Lower Saxony Foretells Tough Fight for Chancellery – SPIEGEL ONLINE

“Whoever believed in recent days that the state elections in Lower Saxony would foretell a conservative victory in federal elections this autumn has been put in their place. Nothing is certain. Angela Merkel, the queen of opinion polls, and her conservative Christian Democratic Union (CDU), have crashed and burned in the state. And what happened to state Governor David McAllister could also happen to Angela Merkel. Losing a few votes can mean losing an election. Opportunity lost, game over.”

ECB’s Weidmann says bond buy conditions problematic: paper | Reuters

“Commenting on the reform conditions in the yet-to-be-activated OMT program, Weidmann told Swedish daily Dagens Nyheter: “It is an attempt to get governments to tackle the causes.”
“This makes it dependent on governments, which is problematic,” he said.”

Merkel ‘hurt’ by Lower Saxony poll defeat –

“The first person to pay for the poll result was Philipp Rösler, vice-chancellor and FDP leader, who agreed to make way for Rainer Brüderle, veteran parliamentary leader of the party, to be the lead candidate in the general election campaign. Mr Rösler, who serves as economy minister in Ms Merkel’s government, is blamed for having failed to restore the party’s fortunes.”

The Continual Failure to Understand the Balance Sheet Recession – PRAGMATIC CAPITALISM

“the (S-I) piece grows primarily through two pieces – household consumption AND private investment.  But what happened in the last recession?  Private investment and domestic consumption fell in unprecedented ways.  And while both are crawling back we’re still digging out of a deep hole.  So that left two sectors to bring us out of the hole.  The foreign sector in the USA is a current account deficit so it’s a drag  on growth.  That leaves the government sector to drive spending.”

Merkel’s Party Loses Lower Saxony Election Even as FDP Surges – Bloomberg

“German Chancellor Angela Merkel’s party lost control of Lower Saxony state as the Social Democrats and Greens took a single seat majority, buoying the opposition parties eight months before federal elections.”

BBC News – Algeria crisis: Hostage death toll ‘rises to 48’

“Five suspected Islamist attackers were reportedly arrested on Sunday.

The Algerian authorities had said on Saturday that all 32 hostage-takers had been killed. The suspected organiser of the attack, Mokhtar Belmokhtar, said 40 militants had taken part.”

Monti is not the right man to lead Italy –

“As for Mr Monti, my best guess is that history will accord him a role similar to that played by Heinrich Brüning, Germany’s chancellor from 1930 to 1932. He, too, was part of a prevailing establishment consensus that there was no alternative to austerity.
Italy still has a few choices open. But it has to make them.”

Calculated Risk: Predicting the Next Recession

Global house prices: Home truths | The Economist

“To gauge whether homes are cheap or expensive we use two measures, both of which compare current estimates with a long-run average (in most countries, going back to 1975). This average is our benchmark for “fair value”.

The first gauge is a price-to-rents ratio. This is analogous to the price-earnings ratio used for equities, with the rents going to property investors (or saved by homeowners) equivalent to corporate profits. The measure displays a massive range, from a whopping 78% overvaluation in Canada to an undervaluation of 37% in Japan. The other measure, the ratio of prices to disposable income per person, stretches from a 35% overvaluation in France to a 36% undervaluation, again in Japan.”

2013 Barron’s Roundtable, Part One –

“The members of the Barron’s Roundtable see a year of modest gains for U.S. stocks, trouble for bonds, and good news for gold. Also featured this week: the best investment bets of Felix Zulauf and Mario Gabelli. How to play deal stocks, and Japan.”

Simon Johnson: The Legacy of Timothy Geithner –

“Mr. Geithner came to Treasury in the middle of a severe financial crisis, a set of problems that he helped to create and then worked hard to prevent from worsening. As president of the Federal Reserve Bank of New York, starting in 2003, he watched over – and failed to defuse – the buildup of systemic risk. In fact, the New York Fed was relatively on the side of allowing large, seemingly sophisticated financial institutions to fund themselves with more debt relative to their thin levels of equity.

This was a major conceptual mistake for which there still has not been a full accounting. In fact, blank denial continues to be the reaction from the relevant officials.”

Number of the Week: Don’t Expect Too Big a Housing Boost – Real Time Economics – WSJ

“The homebuilding sector isn’t a large enough share of gross domestic product to move the growth needle. Even if residential construction, less than 3% of GDP, jumps 20% this year, the gain would add only between one-quarter to one-third percentage point to GDP growth.

Such a contribution wouldn’t even be big enough to offset the drag coming from higher taxes. Economists at Goldman Sachs forecast the $200 billion in tax increases related to the “fiscal cliff” deal will reduce annualized growth in consumer spending by one percentage point in the first half of 2013.”

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