Links: 2013-02-24

News links for 24 February 2013

The links of particular note today are the ones on bank capital featuring Anat Admati’s recommendations and the ones on France. As I wrote in November, it is not possible to believe France could get away with its governance approach while Spain and Italy were cutting. This is going to be a real problem for the euro zone in 2013 because it will determine how and whether deficit targets are relaxed and under what conditions. In my view, France is now a member of the periphery. The yield uptick may soon follow.

BBC News – Why speaking English can make you poor when you retire

Interesting theory. I am sceptical though.

“Prof Chen says his research proves that the grammar of the language we speak affects both our finances and our health.

Bluntly, he says, if you speak English you are likely to save less for your old age, smoke more and get less exercise than if you speak a language like Mandarin, Yoruba or Malay.”

Pound Drops to Lowest Since July 2010 on Ratings Cut, King – Bloomberg

“The pound slid after Moody’s downgrade in the last half- hour of trading in New York yesterday, dropping 0.6 percent to $1.5163, the lowest since July 2010. It brought the week’s decline to 2.3 percent. The currency had fallen 1.8 percent the previous week. Sterling depreciated 1 percent to 86.99 per euro after reaching 87.65 pence on Feb. 20, the weakest since October 2011.”

Apple Loss to Einhorn Raises Pressure for Investor Payout – Bloomberg

“U.S. District Judge Richard Sullivan in Manhattan yesterday granted Greenlight’s request to stop a Feb. 27 vote that would require shareholder approval before the company could issue a new class of preferred shares. Following the ruling, Apple said it would pull the proposal from its shareholder meeting.

Einhorn has used the lawsuit to drum up support among fellow investors to get Apple to return some of its $137.1 billion in cash and investments back to shareholders. The push comes as Apple’s stock has declined 36 percent from a record in September on concern that growth is slowing.”

Spain, France to miss debt goals as euro zone stays in recession | Reuters

“The EU’s executive said the euro zone economy, which generates nearly a fifth of global output, would shrink 0.3 percent in 2013 after a 0.6 percent fall last year, blaming a lack of bank lending and record joblessness for delaying the recovery.

That represented a marked downgrade of the Commission’s prediction from November that the euro zone would grow this year.

The main laggard was Spain, which badly missed the 6.3 percent of GDP target for 2012 with a result of 10.2 percent. While that included 3.2 percent of GDP cost to recapitalize banks, even at 7.0 percent the deficit was above target.

This year, Madrid will have a deficit of 6.7 percent rather than the 4.5 percent set for it. And unless policies change, Spain will have a gap of 7.2 percent in 2014 against the target of 2.8, the Commission said.

French Finance Minister Pierre Moscovici said he would talk to Brussels about pushing back the deficit-cutting timetable and now aims to hit 3 percent of GDP in 2014 not this year.

Portuguese Prime Minister Pedro Passos Coelho also chipped in, saying Lisbon needed an extra year to get its budget deficit under 3 percent given a weaker than expected economy.”

Labour lead over Tories up to 12% in advance of Eastleigh, poll finds | Politics | guardian.co.uk

“Opinium/Observer poll: Labour enjoying 41% support compared with 29% for Conservatives and 13% for Ukip”

Existing home sales edge higher, inventory at 13-year low | Reuters

“The National Association of Realtors said on Thursday that existing home sales rose 0.4 percent last month to a seasonally adjusted annual rate of 4.92 million units.

That was the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire.

Analysts polled by Reuters had forecast a 4.9 million-unit rate.”

Lance Armstrong will be sued by Justice Department to recover funds | Sport | The Guardian

“In adding its name to the lawsuit, the Department of Justice said that $31m of taxpayers money was handed over on a “contractual promise to play fair and abide by the rules”. But team riders including Armstrong “knowingly” violated the agreement with the US Postal Service (USPS) by taking banned substances, according to government lawyers.

It is now seeking damages from Armstrong, his team manager Johan Bruyneel and holding company Tailwind Sports.”

France is a ‘problem child’, says Merkel ally – Telegraph

“”The French must save to become more capable of acting. They must of course also make economic reforms,” Michael Fuchs, deputy chairman of the Christian Democrats’ parliamentary group said.

“They must change the working hours. You know that the French still have the 35-hour week. That can’t work when in Switzerland people work 42 hours, in Germany 40 hours,” he complained on Deutschlandfunk radio.”

Edward here. In November, I asked “Question: can France get away with continued high deficits when Spain and Italy are cutting?”

https://www.creditwritedowns.com/2012/11/france-time-bomb-heart-of-europe.html

Here’s what Fuchs is saying:

“”Unfortunately France is a problem child in the euro, since other countries have done their homework substantially more intensively. Spain, also Italy under (outgoing Premier Mario) Monti…,” he said.”

Hong Kong doubles stamp duty to cool property market – Telegraph

“Hong Kong’s new measures include a doubling of stamp duty on the city’s most expensive properties, up to 8.5pc from 4.25pc, and replacing a HK$100 (£8.40) flat fee with a 1.5pc tax rate for property worth up to HK$2m.

The provisions, which aim to deter overseas buyers who take on speculative investments in Hong Kong property, do not extend to permanent residents with a genuine need for housing.

Property prices in the Asian financial hub have surged 120pc from a low in 2008, according to government officials.”

Spanish firemen and locksmiths refuse to evict homeowners – Telegraph

I have linked to stories on this in the past

“With Spain’s unemployment rate over 26pc, the country has seen a huge amount of homeowners default on their rents or mortgage payments, prompting a wave of repossession by government-backed banks.

However, following several suicides some locksmiths are no longer willing to carry out banks’s orders to evict people from their houses.”

The year-old iPhone 4S was world’s 2nd most popular smartphone in Q4 — Tech News and Analysis

“Both the iPhone 5 and iPhone 4S outsold Samsung’s Galaxy S III juggernaut, which after five months of availability, sold 15.4 million units during the fourth quarter.”

Big banks are as risky as ever, economist warns – CBS News

“”Even without a crisis, it’s a system that is living on the edge,” Admati said in an interview.

The result: Banks often lend too much, leading to periods of wild speculation, or too little, as lenders pass up worthy loans because they can make larger profits on riskier activities. In both cases the economy suffers. Banking is “too highly indebted, and it leaves people subject to all kinds of ups and downs and booms and bust,” she added. “There are indications that the financial system is becoming bigger and bigger and more knotted up in the sense of interconnectedness.”

Admati warns that one explosion could topple the entire system.”