Links: 2013-01-30
Italië betaalt laagste rente sinds 2010 bij uitgifte oblig… – De Standaard
Italy pays the lowest yield since October 2010 on its ten-year bonds. The yield is now 4.17% versus 4.48% in December. For three-year paper, the yield is 2.94% versus 3.26 at the end of December
Standard & Poor’s confirme la note de la Belgique et sa perpective négative | Fil Info – lesoir.be
S&P reaffirmed its AA rating for Belgium as well as its negative outlook. S&P does not think it’s a sure thing that Belgium reaches its deficit goal of 2.2% of GDP in 2013. Growth of less than 0.7% could mean the Belgians have to impose more austerity. Then, there are the bank guarantees for KBC, Dexia and BNP Paribas Fortis
Euro hits 14-month high against dollar – The Irish Times – Wed, Jan 30, 2013
“The euro hit a 14-month high versus the dollar today, rising above $1.3500 and reaching its highest level since December 2011.
The euro rose to as high as $1.3508 on trading platform EBS, and was last up 0.1 per cent from late US trade yesterday at $1.3504. The $1.3500 level has been viewed as key technical resistance, and a clear bounce beyond that could set the euro up for more gains, analysts say.”
Junk Euphoria Crosses Pacific as Sharp Worry Fades – Bloomberg
“Japan’s junk bonds are joining the global rally as optimism over Prime Minister Shinzo Abe’s economic stimulus boosts investor appetite for riskier debt.
Sharp Corp.’s 0.846 percent bonds due 2014 soared to 77 yen per 100 yen face value on Jan. 28, from 46 yen two months ago, according to JS Price data. The notes of junk-rated Tokyo Electric Power Co., Nippon Sheet Glass Co. and Kawasaki Kisen Kaisha Ltd. (9107) also climbed. Global non-investment grade debt has gained to a record 105 cents on the dollar, Bank of America Merrill Lynch index data dating back to 1997 show.
Investors are seeking higher returns, emboldened by Abe’s plans for 10.3 trillion yen ($113 billion) of fiscal stimulus and global monetary easing that has contributed to record inflows into funds that own speculative-grade debt.”
Fitch warns over China’s local government debt | South China Morning Post
“The creditworthiness of bonds issued by some inland Chinese provinces is reaching alarming levels, affecting their ability to repay debt given their less robust economic fundamentals which limit tax income and access to bank loans amid tighter borrowing criteria, Fitch said on Tuesday.
The debt burden in Hubei, Jilin, Hainan and Hunan were too high according to Terry Gao, associate director of International Public Finance at Fitch. The debt-to-fiscal-revenue ratio for Hubei province, for example, reached as high as 136 per cent last year.”
BBC News – Spain’s recession worsens in the fourth quarter
“The downturn in the Spanish economy worsened in the final three months of 2012, as output fell 1.8% from a year earlier, official data has indicated.
Output shrank 0.7% from the previous quarter – the worst performance in Spain since the 2009 global recession.”
Government Appetite Growing for Twitter User Data | Threat Level | Wired.com
“Twitter said Monday that just 19 percent of federal and state government requests for user data were accompanied by probable-cause search warrants during the six months ending in December 2012.
In all, the San Francisco-based micro-blogging service, in its second so-called transparency report, said there were 815 demands for Twitter account-holder data. Twitter did not say what type of user data was sought in those 815 requests, but it likely includes a mixture of e-mail addresses associated with accounts, IP logs, tweets and direct messages.”
“In spite of its $21 billion in sales, Amazon underperformed compared to analysts’ expectations. Of course expectations were high thanks to the usual holiday shopping bump for retail and e-commerce, but Amazon was expected to hit $0.27 EPS and $22 billion in revenues, and Amazon instead underperformed, coming in at $0.21 and $21 billion, respectively.
That may not sound like a lot, and Amazon executives clearly think there isn’t much to be worried about, especially considering the company has $8 billion in cash. That’s nothing to scoff at, clearly, but there’s also the fact that the company’s net income decreased by 45 percent in the fourth quarter and growth is slowing. Amazon saw just $97 million in net profits in Q4. Yes, $97 million. That would be a big win for a company with $1 billion in revenue, but I’m probably not going out on a limb to say that it’s a red flag when you’re doing $21 billion.”
No hurrah for Latvia’s euro zone drive | South China Morning Post
“Unfazed by the euro-zone crisis, Latvia is poised to pass key legislation Thursday paving the way for a request for EU approval of its entry as the zone’s 18th member on January 1, next year. But very few Latvians are cheering.
Many are worried the currency switch could bring even more hardship to this ex-Soviet republic of two million people, still recovering from the world’s deepest recession in 2008-9, which saw a cumulative slump of 25 per cent.
A December survey by DNB bank showed just eight per cent of respondents backed rapid euro adoption: 42 per cent preferred to wait, while 41 per cent opposed the move outright. The remaining nine per cent were undecided.”
Sundance Doc ‘Muscle Shoals’ Features Bono, Aretha, Rolling Stones | Movies News | Rolling Stone
The film unpacks the town’s musical significance by focusing on the two primary local studios – Fame and Muscle Shoals Sound – as well as the colorful personalities behind those studios, including producer Rick Hall and the house band the Swampers. (Lynyrd Skynyrd fans will remember the town’s shout-out on “Sweet Home Alabama” and Ronnie Van Zant’s line, “Now Muscle Shoals has got the Swampers . . .”).
But the documentary’s real highlights are the musings of the musicians who recorded there. Performers including Bono, Aretha Franklin, Keith Richards, Mick Jagger, Jimmy Cliff and Steve Winwood reflect on what made the town “magic,” as Bono puts it. Artists were not only prolific in Colbert County, but their recordings were often infused with a recognizable sound Camalier describes as a “funky, soulful, propulsive kind of groove.
“For 15 years, the World Travel Awards have been selecting the “World’s Leading Airline” for flying first class.”
Gold coins discovered beneath pub – The Irish Times – Tue, Jan 29, 2013
“The 81 coins, which date from the reigns of Charles II, James II, William and Mary and William III, were unearthed by builders on Main Street in Carrick-on-Suir while carrying out groundworks .
It has been described by the National Museum of Ireland as “one of the most significant finds of 17th century gold coins ever found in Ireland”.”
Spain’s crisis strategy under fire as economy buckles again – Telegraph
“The country’s retail sales plunged 10.7pc in December from a year earlier as austerity bites deeper, one of the worst months since the crisis began.
The Spanish car lobby (Anfac) said the country’s output of vehicles has fallen below 2m for the first time since 1993, crashing 17pc last year. The industry has shrunk by a third since the boom.
Ominously, car exports plunged even faster at 18pc, dimming hopes that foreign trade can lift the economy out of slump as internal demand shrinks. While Spanish exports have been a bright spot over the past three years – keeping pace with German exports – the momentum has faltered due to lack of investment.
Citigroup said it now expects Spain’s economy to contract by 2.2pc this year and another 2pc in 2014, pushing unemployment to 28pc.”
BBC News – Catalonia asks Spain for further 9bn euros bailout
“The independence-minded region of Catalonia has asked the Spanish central government for an extra 9bn euros (£7.7bn) in bailout money.”
Democrats look at replacing ‘sequester’ cuts – MarketWatch
“Senate Democrats are considering swapping looming automatic spending cuts with a series of incremental cuts, if they are coupled with measures to raise revenue, Senate Majority Leader Harry Reid said Tuesday.
“We believe that there are different ways of doing sequestration,” Reid told reporters, using Washington-speak for the automatic cuts set to kick in on March 1 without congressional action.”
Amazon Q4 Revenues Up 22 Percent, But Softer than Expected – Tricia Duryee – Commerce – AllThingsD
“Amazon said its revenue totaled $21.27 billion in the fourth quarter, falling short of analysts expectations, which were projecting revenue of $22.3 billion.
Amazon’s number, however, was in line with its own guidance. The e-commerce giant was forecasting net sales between $20.25 billion and $22.75 billion, representing a jump of 16 percent to 31 percent.
Historically, Amazon has been able to grow at twice the rate of the overall e-commerce market during the fourth quarter, and since eBay filed strong results, it was expected to do the same. But with sales growing only 22 percent year over year, the company missed that typically reliable benchmark.”
Spanish retail sales slump 10.7% as austerity hurts consumers | World news | The Guardian
“Retail figures in Spain have fallen for 30 successive months, the decline accelerating since latest austerity measures applied”
A Miami Clinic Supplies Drugs to Sports’ Biggest Names – – News – Miami – Miami New Times
“check out the main column, where their real names flash like an all-star roster of professional athletes with Miami ties: San Francisco Giants outfielder Melky Cabrera, Oakland A’s hurler Bartolo Colón, pro tennis player Wayne Odesnik, budding Cuban superstar boxer Yuriorkis Gamboa, and Texas Rangers slugger Nelson Cruz. There’s even the New York Yankees’ $275 million man himself, Alex Rodriguez, who has sworn he stopped juicing a decade ago.”
Willem-Alexander, onze aanstaande koning :: nrc.nl
Twenty-five historical pictures of the soon-to-be King of the Netherlands. According to former Prime Minister Lubbers, his Grandmother Juliana who abdicated for Beatrix in 1980 was at one time concerned whether he was fit to be king.
Trillion dollar deficits are sustainable for now – unfortunately | Economists’ Forum
Here, Makin and Hanson confuse currency users and currency issuers in comparing Spain and the US. The key difference is the central bank as the OMT shows. It’s all about currency sovereignty.
“An abrupt spending sequester at a rate of about $110bn per year ($1.1tn over 10 years) scheduled to begin March 1 could cause a US recession, coming as it does on top of tax increases worth about 1.5 per cent of GDP enacted in January. The April deadline for a continuing resolution to fund federal spending could lead to a fight that shuts down the government, placing a further drag on growth.”
Workers Spent More of Payroll Tax Cut Than They Intended – Real Time Economics – WSJ
“In a new study, economists at the Federal Reserve Bank of New York come down on one side of this debate: They find lowering the withholding rate — the method used in the Obama Administration’s 2011 and 2012 payroll-tax cuts — led U.S. workers to spend a bigger chunk of their extra income — and more than they intended to.”
QE a ‘monumental mistake’, pensions experts say | Business | guardian.co.uk
“MPs told QE has squeezed individuals’ incomes and forced companies to divert cash to pension funds rather than investing”
How the Economists Got It Wrong
“The American Economic Association (AEA) met January 7-9 in Boston, for a millennial program distinguished by its attention to international policy issues, most particularly financial crises (as in Asia) and the failure of the so-called “economic transition” (as in Russia).
And yet, in this odd rush to relevance, something was curiously awry. Apart from a panel including former World Bank chief economist Joseph Stiglitz, the meetings featured almost no one with a record of criticizing the institutions that gave us the Asian crisis or the transition failure. Instead, they were dominated–in session after session–by the architects of the present world order, including Yeltsin advisers Andrei Shleifer and Anders Aslund, the International Monetary Fund’s Stanley Fischer, and U.S. Treasury Secretary Lawrence Summers. Even the arch-speculator Myron Scholes appeared. Never, perhaps, has such a luminous crowd gathered to discuss so disastrous a set of its own failings.”
Calculated Risk: Comment on House Prices, Real House Prices, and Price-to-Rent Ratio
“There is a clear seasonal pattern for house prices, and earlier this year I predicted that the Case-Shiller indexes would turn negative month-to-month in October on a Not Seasonally Adjusted (NSA) basis. That is the normal seasonal pattern.
Also I expected smaller month-to-month declines this winter than for the same months last year. Sure enough, Case-Shiller reported that the Composite 20 index NSA declined slightly in October, and also declined slightly again in November (a 0.1% decline). In November 2011, the index declined 1.3% on a month-to-month basis, so this is a significant change.
Over the winter the key will be to watch the year-over-year change in house prices and to compare to the NSA lows in early 2012. I think the house price indexes have already bottomed, and will be up over 6% or so year-over-year when prices reach the usual seasonal bottom in early 2013.”
China averts local government defaults – FT.com
“Chinese banks have rolled over at least three-quarters of all loans to local governments that were due to mature by the end of 2012, an indication of the immense challenge facing China in working down its debt load.
Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to pay them back, a shortfall that could cast a shadow over Chinese economic growth.”
Eurozone banking union is deeply flawed – FT.com
“Rescue mechanism presents a very significant danger, write Hans-Werner Sinn and Harald Hau
Largely ignored by public opinion, the European Commission has drafted a new directive on bank resolution which creates the legal basis for future bank bailouts in the EU. While paying lip service to the principle of shareholder liability and creditor burden-sharing, the current draft falls woefully short of protecting European taxpayers and might cost them hundreds of billions of euros. Further lobbying by banks is likely to make things only worse.
The new banking union plans may thus turn out to be another large step towards the transfer of distressed private debt on to public balance sheets – something which pleases the capital markets and may help to explain their new confidence.”
France ‘totally bankrupt’, says labour minister Michel Sapin – Telegraph
“Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.
“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.””
Japan’s lessons for America’s budget warriors – Economics – AEI
“Japan’s huge debt buildup, like America’s, has occurred alongside widespread cries of unsustainability and warnings of an imminent bond market collapse, soaring inflation and interest rates, and financial calamity. The actual outcome has defied the predictions, as many sad speculators who have bet on a collapse in the Japanese government bond (JGB) market can attest. The interest rate on five-year JGBs, Japan’s benchmark rate, has dropped steadily from 4 percent in 1994, after the bubble burst, to a mere 20 basis points (0.2 percent) today (figure 5). The comparable US rate has dropped even more sharply from 7 percent in 1994 to about 0.8 percent today. The postbubble experiences of both Japan and the United States do not support the widespread claim that large deficits and debt increases cause a spike in government borrowing costs.
Japanese inflation has turned to a persistent deflation that has sharply reduced tax revenues because taxes are levied on nominal income. The yen value of GDP has remained virtually stagnant since 1992 (figure 3), far weaker than the average US nominal growth rate of 4.7 percent. “
QEternity, the FDIC guarantee, liquidity and a pumpkin | FT Alphaville
“just when there’s a whole bunch of new deposits being formed, one important and elastic store of value is extinguished. Not only does this decrease the number of safe stores of value in the market, it potentially pushes deposits into other much more constrained and inelastic collateral markets, such as MBS and Treasuries.”
The return of negative US repo rates | FT Alphaville
“the only time government debt truly becomes risky is if the economy fails to grow sufficiently to allow the government to sterilise and cover expenses (at the current sanctioned tax rate) — at least without contracting overall money supply or raising taxes, all of which stand to contract demand and the economy further.
In these circumstances the best course of action is either to print more money, and in this way overcome the interest repayment shortfall without having to change the prevailing tax rate, or alternatively lower taxes — a move that allows more of the money collected to be directed towards interest payment rather than the sterilisation of government spending. In other words, the government can compensate for deflation by upping money supply directly or cutting taxes. Either option keeps the equilibrium.
What we have in the US however is something of a hybrid of the two situations. More “money printing” — which theoretically should allow the government to cover interest repayments no matter what — is coming at the cost of safe government assets in the market place and is driving repo rates negative. This is because there is a ceiling on how many new assets can be created to keep the equilibrium in check.”
Bank of America Foreclosure Reviews: Why the Cover-Up Happened (Part IIIB) « naked capitalism
“This post is the second half of Part III in our Bank of America foreclosure review whistleblower series. Part III focuses on how the confusion and high cost of the foreclosure reviews weren’t simply the result of overly ambitious targets and poor design, oversight, and implementation of the reviews. These reviews never could have been done properly due to significant gaps and inaccuracies in the borrower records at Bank of America. That meant the only possible course of action was a cover-up.”
Bank of America Foreclosure Reviews: Why the Cover-Up Happened (Part IIIA) « naked capitalism
“As we described in earlier posts in this series (Executive Summary and Part II), OCC/Federal Reserve foreclosure reviews meant to provide compensation to abused homeowners were abruptly shut down at the beginning of January as the result of a settlement with ten major servicers. Whistleblowers from the biggest, Bank of America, provide compelling evidence that the bank and its independent consultant, Promontory Financial Group, went to considerable lengths to suppress any findings of harm to homeowners.
These whistleblowers, who reviewed over 1600 files and tested hundreds more in the attenuated start up period, saw abundant evidence of serious damage to borrowers. Their estimates vary because they performed different tests and thus focused on different records and issues. When asked to estimate the percentage of harm and serious harm they found, the lowest estimate of harm was 30% and the majority estimated harm at or over 90%. Their estimates of serious harm ranged from 10% to 80%.”
“But even if Apple is … downshifting from growth to value, however slowly, the Street would do well to pause a moment amid its current panic and consider the level of customer loyalty that the company’s iOS platform likely commands. Because iOS is sticky, and it’s sticky in a way that drives increasing value to Apple.
Users of iOS are spending a ton of money in the iTunes ecosystem. Indeed, Deutsche Bank analyst Chris Whitmore estimates that, cumulatively, they’ve spent some $54 billion on content and apps. In other words, there are a lot of iOS device owners out there who have made significant financial investments in Apple’s mobile ecosystem, enough to make them think twice about switching to a rival platform.”
Microsoft Office 365 Home Premium Arrives (Half A Decade Too Late) | TechCrunch
“In 2006, Google announced its first public release of what later became Google Docs, today known as Google Drive. It’s 2013, and only now does it feel like Microsoft is fighting back. Microsoft today announced the reinvention of its Office flagship application for consumers, with the debut of Office 365 Home Premium. The service – yes, it’s a subscription-based service – includes support for up to five devices, all the familiar Office applications like Word, Excel, PowerPoint, OneNote, etc., etc. – as well as additional online storage in Sky Drive (20 GB), and 60 free minutes to use on Skype each month.
The suite, which works on Windows tablets, PCs, and Macs, is available for $99.99 annually, which works out to US $8.34 per month. The Office 365 University edition for students, faculty and staff, is a reduced rate of $79.99 per year.”
Microsoft Lets Users ‘Rent’ Office – WSJ.com
“Microsoft Corp. is about to find out whether people will buy the company’s software the same way they pay for cable television.
The company on Tuesday started offering consumers a new version of Office—the widely used bundle of personal-computer applications—that for the first time arrives along with an option to “rent” the software for a monthly fee, similar to how people subscribe to cable or to Netflix Inc.’s movie service.
Microsoft is pushing hard to get most people to opt for Office 365, as the subscription version is known, for an upfront annual fee of $99.99, or $9.99 a month for a pay-as-you-go option. (People buying Office along with a new computer can pay a $79.99 annual subscription for Office 365.)”
A Look at Case-Shiller, by Metro Area – Real Time Economics – WSJ
“Nineteen of the 20 cities posted annual increases in November. Just New York notched an annual decline. Even with the slower winter season, 10 cities posted monthly increases. On an adjusted basis, only New York reported a monthly decline.”
Consumer Confidence Hits Lowest Level Since November 2011 – Real Time Economics – WSJ
“Smaller paychecks and a darker view of labor markets brought U.S. consumer confidence this month to its lowest reading since November 2011, according to a report released Tuesday.
The Conference Board, a private research group, said its index of consumer confidence fell further to 58.6 in January from a revised 66.7 in December, first reported as 65.1. The January decline was the third consecutive fall and brought confidence to its lowest reading since November 2011.
Economists surveyed by Dow Jones Newswires had expected the index to fall only to 64.0.”
Home Prices Climb by Most in Six Years as U.S. Market Firms – Bloomberg
“Home prices in 20 U.S. cities rose in November from a year earlier by the most in more than six years, indicating the U.S. housing rebound is gaining ground.
The S&P/Case-Shiller index of property values increased 5.5 percent from November 2011, the biggest year-over-year gain since August 2006, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 5.6 percent advance.”
Poland’s Slowing Economy Raises Contraction Fears – WSJ.com
“The data have sparked concerns that Poland could be heading toward its first economic contraction since 1991, in the immediate aftermath of a rapid transition from central planning to a free market.
In 2012, fixed investment growth plunged, to 0.6% from 9% a year earlier, due to waning business confidence and the government’s effort to keep public spending and debt from spiraling out of control. The purchasing power of consumers working in the corporate sector fell, with wage growth eradicated by price inflation.
Growth was also hit by demographic trends, such as the aging population and many in the working-age group leaving the country in search of a better life elsewhere, the statistics office said. Migration from Poland continued rising in 2012. Of some 38.5 million Poles, more than 2 million work abroad, mostly in the U.K. and Germany—where work permits from Polish nationals aren’t required—and the U.S.
Flagging growth has prompted calls for more rapid interest-rate cuts from the Polish central bank, which began an easing cycle in November. Nevertheless, the bank’s benchmark rate of 4% is one of Europe’s highest and the rate-setting council is divided over how far the easing process should go.”
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