Links: 2013-02-21

News links for 21 February 2013

Ireland Hoping for Deal on Bailout Repayments – WSJ.com

“Ireland’s success in refinancing part of its huge European Central Bank debt has raised hopes that the country can now persuade European finance ministers to reschedule repayments on its €67.5 billion ($90.19 billion) bailout, possibly as early as next month.

Such a move would help ensure that the troubled euro-zone nation emerges from its bailout on schedule at the end of 2013, experts said.”

Latvia to apply for eurozone membership within weeks | Business | The Guardian

“PM Valdis Dombrovskis says formal application to become 18th eurozone country will be made early next month”

ekathimerini.com | Greece’s weakened workforce starts to crack

“Not only are Greece’s 1.35 million unemployed unable to make ends meet, but a growing number of those still employed are struggling to feed, heat and clothe themselves — and pay the increasingly hefty taxes the government is relying on to turn the economy around.

Greece’s largest union, the GSEE, has called a general strike Wednesday to protest a new series of austerity measures. It warns that the labor force — which includes a large public sector — has been too badly weakened to help the battered country recover.”

Spanien verfehlt Haushaltsdefizitziel – NZZ.ch, 20.02.2013

This Swiss article notes that while the Spanish deficit for 2012 was under 7%, this is still higher than the negotiated target of 6.3%, a target which was increased from 5.5% after much negotiation. So the Spanish have utterly failed in meeting their objectives in 2012. THis should be noted despite the happy talk and the lower spreads.

Tesco voted worst supermarket by shoppers – Telegraph

10 years ago Tesco was top of the class, replacing Sainsbury as the best supermarket in Britain. Waitrose was not a factor. Times change quickly. Note that Warren Buffett is a Tesco investor. Aldi and Ligl are both German brands that have done well due to the appeal of their discount approach.

“Tesco has been voted the most unpopular supermarket, according to a survey by Which?, with Waitrose topping the list.”

More on Japan’s Ponzi Monetary Approach – PRAGMATIC CAPITALISM

I am going to disagree here. The Japanese guns blazing approach is working for now and that means as a serious international investor, you will have underperformed if you had avoided Japan. How long can this go on? Longer than you can underperform without it hurting loner-term performance

“Japan’s long-term economic outlook remains challenging.  If you’re going to allocate your portfolio to Asia I have to ask myself – “why invest in a bad house in a good neighborhood”?”

Greece general strike brings country to standstill – video | World news | guardian.co.uk

“Greek public and private sector workers hold a 24-hour general strike in the first industrial action of 2013 against the country’s austerity policies. The nationwide strike is in protest against pension and wage cuts imposed by Antonis Samaras’s government as part of conditions underpinning the country’s bailout. The strike was organised by two unions which represent about 2.5 million workers”

Bulgaria succumbs to euro deflation curse – Telegraph Blogs

“Another euro-pegged government defending an overvalued exchange rate bites the dust, a reminder that the underlying economic and social disaster across the Europe’s Arc of Depression is still getting worse.”

Bulgarian government resigns amid protests over high electricity costs | World news | guardian.co.uk

“Prime minister Boiko Borisov announces resignation after measures aimed at calming nationwide protests fail”

Dying Alone Becomes New Normal as Japan Spurns Confucius – Bloomberg

“Itoko Uchida, 82, was counting on the nephew she raised to support her in old age. He refused, forcing her to pay for a sponsor to join the 420,000-long queue of Japanese waiting for a nursing home bed.

With no relatives willing to help, the Tokyo widow had to spend 710,000 yen ($7,600) on a professional service to be her guarantor and assist with an application to a nursing home, she said. An erosion of traditional Confucian values in Japan means fewer elderly are being cared for at home by relatives — a fact neither Uchida nor Japan’s government were fully prepared for.”

Say it with me now. Data caps are about profits, not recovering fixed costs — Tech News and Analysis

“The cable industry has tweaked its justification for capping broadband, but a report from the Open Technology Institute is having none of it.”

China jobs freeze as Apple cuts orders – FT.com

“Foxconn, the world’s largest contract electronics manufacturer, has imposed a recruitment freeze across most of its factories in China as it slows production of Apple’s iPhone 5.

The suspension in hiring by China’s largest private-sector employer and the biggest assembler of Apple products, is the first such countrywide move since the 2009 downturn, prompted by the financial crisis. It underscores the weakening demand for some Apple products, which has put pressure on the US company’s battered share price.”

Prime Hong Kong office rents fell 24pc in 2012: Cushman & Wakefield | South China Morning Post

“London’s West End has assumed Hong Kong’s mantle as the world’s most expensive place to lease an office, after rents in Central fell sharply last year as a result of the global economic downturn, which put a stop to the expansion plans of many financial institutions.

A study by Cushman & Wakefield found that the average annual occupancy cost for a grade A office space in Hong Kong – which includes rent, management fees and property tax – dropped 24.6 per cent year on year to US$184 per square foot per year, making it the second-most expensive in the world.”

JPMorgan Leads U.S. Banks Lending Least Deposits in 5 Years – Bloomberg

“The biggest U.S. banks including JPMorgan Chase & Co. and Citigroup Inc. are lending the smallest portion of their deposits in five years as cash floods in from savers and a slow economy damps demand from borrowers.

The average loan-to-deposit ratio for the top eight commercial banks fell to 84 percent in the fourth quarter from 87 percent a year earlier and 101 percent in 2007, according to data compiled by Credit Suisse Group AG. Lending as a proportion of deposits dropped at five of the banks and was unchanged at two, the data show.”

CIBC and National Bank downgraded at Barclays | Trading Desk | Investing | Financial Post

“The negative earnings impact household deleveraging will have on Canadian banks prompted Barclays to downgrade both CIBC and National Bank of Canada.

Analyst John Aiken noted the smaller of Canada’s big six banks are generally more concentrated in domestic retail banking and therefore most vulnerable in light of the anticipated slowdown in consumer loan growth.”

High-Yield Hunger Fattens Bank Profits – Deal Journal – WSJ

“The seemingly unstoppable appetite for Asian high-yield bonds is proving to be big business for banks.

In just the opening weeks of 2013, banks in Asia, excluding Japan, have earned $200 million arranging sales of this risky debt, almost as much as the $251 million they made during all of last year. Selling debt now brings in more money than selling equities, traditionally a bigger source of income.

The boom is driven by investors who are hungry for the higher yields offered on these so-called junk bonds, which carry low credit ratings or sometimes none at all. That investor appetite is spurring companies from Chinese property developers to Indonesian energy firms to rush to market with debt issues. In recent weeks, a Macau casino operator and a Philippine conglomerate have also tapped the market.

“There’ll be definitely more high-yield bonds to come,” said Terence Chia, co-head of debt syndication for Citigroup Inc. in Asia.”

La dette de la Belgique s’élève à 369 milliards d’euros | Fil info Economie – lesoir.be

Belgian government liabilities now stand at 369 billion euros. For some reason, no one is talking about Belgium but the debt levels there are very high.

Republicans Will Lose on the Sequester – The Daily Beast

“Republicans should not try to reshape the government of the United States from the House of Representatives. That always fails. Instead, they should be focusing on these two missions:

A) Work to temper and mitigate the worst of the president’s agenda – and especially the tax increases and regulations coming in Obamacare, and

B) Begin now to frame the 2014 and 2016 choice in ways advantageous to Republicans.

What they are doing now makes neither tactical nor strategic sense. The likeliest outcome of the sequester fight for Republicans is yet another after yet another political defeat.”

A Revolving Door in Washington That Gets Less Notice – NYTimes.com

“For lobbyists, the real targets are regulators and staff members for lawmakers.”

U.S. Banks Bigger Than GDP as Accounting Rift Masks Risk – Bloomberg

“Warning: Banks in the U.S. are bigger than they appear.

That label, like a similar one on automobile side-view mirrors, might be required of the four largest U.S. lenders if Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., has his way. Applying stricter accounting standards for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are — or about the size of the U.S. economy — according to data compiled by Bloomberg.

“Derivatives, like loans, carry risk,” Hoenig said in an interview. “To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there.”

U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. That can underestimate the risks firms face and affect how much capital they need.

Using international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. would double in assets, while Citigroup Inc. would jump 60 percent, third- quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion.”

Property prices pose biggest risk to stability of Hong Kong economy | Reuters

As in Sweden, here the stress is on macroprudential regulation. Spain was seen to have had good macroprudential regulation pre-crisis. But that has gone a bit pear-shaped since. Hong Kong’s numbers were some of the worst in the Economist’s recent global housing survey.

“Just three months after Hong Kong rolled out a tough new round of property cooling measures, home prices have again climbed to record highs with demand unusually strong for new flats over the normally quiet Lunar New Year holiday break.”

LivingSocial Gets a Much-Needed $110 Million Boost – Digits – WSJ

“Despite more than doubling revenue last year to $536 million, the Washington, D.C., company posted a $650 million net loss for the year, compared with a loss of $499 million a year earlier, according to a filing last month from LivingSocial investor Amazon.com Inc.

Amazon said then it valued its 29% LivingSocial stake at $52 million, suggesting LivingSocial’s a book value was $179 million. As recently as September, Amazon said LivingSocial’s book value was $324 million, and nearly $1 billion in June.”

Lance Armstrong refuse finalement de collaborer avec l’Usada

Lance Armstrong will not testify under oath before USADA

Rise in U.S. gasoline prices blamed on speculators – UPI.com

“Speculation in commodities markets is in part to blame for the steady rise in U.S. gasoline prices, a petroleum trade group official said.

Motor group AAA reports U.S. drivers paid, on average, $3.75 for a gallon of regular unleaded gasoline Tuesday, up 15 cents compared to the same time last week.

A series of refinery outages, a switch to more expensive summer blends of gasoline and higher oil prices are also behind the price increase.

Mark Griffin, president of the Michigan Petroleum Association, told the Detroit Free Press that spring price fluctuations are normal but usually not this early.

“This year it seems to be a couple of weeks early,” he said. “And what drives most of it is speculation; the oil markets start speculating that the demand is going to come and that drives (prices) up.””

Guest post: Forget currency wars, we are in the middle of a trade war | beyondbrics

“Once central bank action fails in this covert trade war through currency manipulation and bank bailouts, governments will be forced to take direct action through subsidies, tariffs and other trade barriers. References to currency wars will soon be replaced with trade wars as global imbalances come to the forefront again.”

Apple likely to debut $199 iPhone as low-cost smartphone market hits $135B in 2013

“A Piper Jaffray analysis of global unlocked smartphone prices solidifies the firm’s expectation that Apple will launch a low-cost iPhone later this year, with the new handset purpose-built to compete in the untapped market estimated to be worth $135 billion in 2013. “

For $19, an Unlimited Phone Plan, Some Flaws – Walt Mossberg – Personal Technology – AllThingsD

“The Defy XT is a chunky device with a lower-resolution screen than any current iPhone or leading Android model. It comes with only about 2.5 gigabytes of usable storage, compared with a more typical 16GB on other phones, though you can expand the storage by buying a larger memory card. It has a relatively small 3.7-inch display. And when it isn’t on Wi-Fi, it can only use an older-type, slow, 3G network. Plus, it runs a clunky, old version of Android called Gingerbread that was released two years ago.

Republic says it plans to roll out several better phones running current versions of Android and much faster networks, including the best — 4G LTE — starting in late summer.”

Google Works on Launching Retail Stores – WSJ.com

“Google Inc. has been developing plans to launch retail stores in the U.S., said people familiar with the matter, in another sign the company is studying Apple Inc.’s playbook for building a consumer-electronics brand.”