Links: 2013-02-25

News links for 25 February 2013

BBC News – Mortgage market hit by January’s cold weather, BBA says

“Poor weather in January curtailed mortgage approvals while borrowers continued to play safe on loans and overdrafts, the major banks have said.

There were 32,288 mortgages approved for house purchases during the month, down on December and 14% lower than January 2012.

The British Bankers’ Association (BBA) also said that loan and overdraft repayments outstripped new borrowing.”

BBC News – Sterling steadies after Moody’s downgrades UK’s AAA rating

“During early trading on Monday, sterling dropped as low as $1.5069 against the dollar, before recovering to $1.514. Against the euro, the pound hovered around 16-month lows with the pound worth 1.148 euros”

Samsung to launch flagship Galaxy S4 at March 14 event

“Invitations were sent out on Monday to a Samsung media event scheduled for March 14 in New York, where the company is expected to unveil its response to the iPhone 5: the flagship Galaxy S4.

The device is expected to feature a 4.99-inch SuperAMOLED display, 2 gigabytes of RAM, a 13-megapixel rear camera, 2-megapixel forward facing camera, and Android 4.2.2 Jelly Bean.”

Boston Fed President: Banks May Not Have Enough Crisis Capital

“Jamie Dimon, the chief executive of JPMorgan Chase, once referred to the new capital requirements as “anti-American.”

In a speech given in Seoul Monday, Boston Federal Reserve president Eric Rosengren dealt a lethal blow to this objection. He pointed out that during the financial crisis of 2007-2009, several banks suffered such extreme capital erosion that the new requirements may actually be too low.

Rosengren cited a soon to be issued paper by the Boston Fed estimating the losses at 26 of the largest banks during the crisis. Half of those banks would have suffered losses equal or greater to 200 basis points of their capital. Eight had losses greater than 450 basis points. “

European Companies Stockpile $475 Billion as Outlook Dims – Bloomberg

“European companies are hoarding more than three times the cash they held a decade ago as the region heads for a second year of recession, putting them at risk of losing out to U.S. rivals boosting acquisitions and investment.

Cash holdings at the 265 European companies in the Stoxx Europe 600 Index, excluding banks and insurers, to have reported 2012 results totalled $475 billion at the end of last year, according to data compiled by Bloomberg. That compares with $136 billion in 2002 and is 14 percent more than in 2011″

Indian Bond Yields Near 31-Month Low as Lower Deficit Predicted – Bloomberg

“Finance Minister Palaniappan Chidambaram, who will present his annual budget to parliament on Feb. 28, will seek to narrow the shortfall to 4.8 percent of gross domestic product in the year starting April, from this year’s goal of 5.3 percent, according to a Bloomberg survey of analysts and investors. That would be the least since the 12 months through March 2008. India has scaled back energy subsidies since September, acting to shore up public finances and avoid a sovereign downgrade.

“The government’s ongoing push for fiscal consolidation is likely to limit bond sales next year,” said Nagaraj Kulkarni, a Singapore-based fixed-income strategist at Standard Chartered Plc. “That would be perceived positively by the markets and our recommendation is that investors buy 10-year government bonds.”

The yield on the 8.15 percent notes due June 2022 was little changed at 7.80 percent in Mumbai, according to the central bank’s trading system. It touched 7.78 percent earlier, the lowest level since July 2010.”

Spain’s Caixabank to cut 3,000 jobs | Reuters

“Spanish lender Caixabank said on Monday it would cut about 3,000 jobs to improve its efficiency after it made several acquisitions in the past three years.”

China manufacturing grows at slowest pace for months | South China Morning Post

“The mainland’s manufacturing activity grew this month at the slowest pace in four months, hitting optimism about a recovery in the world’s second-largest economy, a private survey has shown.

The HSBC flash purchasing managers’ index (PMI) for China retreated from a two-year high of 52.3 in January to 50.4 in February, according to a preliminary survey issued by HSBC and Markit Economics yesterday. The figure also lagged behind the median estimate of 52.2 of 11 analysts surveyed by Bloomberg.”

China’s Huawei unveils ‘world fastest smartphone’ Ascend P2 | South China Morning Post

“China’s Huawei, the No 3 smartphone maker behind giants Samsung and Apple, unveiled on Sunday a new mobile, the Ascend P2, which it claims is the fastest in the world.

Sharp-cornered and thinner than a pencil at 8.4mm, the company said it can achieve speeds of 150Mbps, fast enough to download a two-hour high-definition movie in less than five minutes.

The mobile, which has a 4.7-inch, high-definition screen, has a powerful 1.5GHz quad-core processor and is able to use the fourth-generation high speed mobile networks being rolled out worldwide.”

Mish’s Global Economic Trend Analysis: Italy Senate “Ungovernable”; No Coalition Possible

“There are 315 total seats and the total above is only 301. Although 14 seats remain, not even a Monti-Bersani coalition in addition to those 14 seats would bring Bersani’s total to 158.”

A dollar bully | FT Alphaville

“Dear everyone, this article is based on a questionable premise: that the dollar is about to head off on another bull run. We know this may not happen. Thanks, us.

The argument is from UBS’s George Magnus who’s looked back at previous dollar bull markets. He sees another one coming on the back of improving cyclical and structural factors, and the chance that the Fed will be one of the first central banks to exit QE (dubious face here):

That bull market, which he suggests might last until 2015, would have profound consequences for emerging markets as flows reversed aggressively.

It doesn’t take too much of a backward look to spot the dangers. The first dollar bull market in the 1980s had a detrimental effect on Latin America, and those associated with the second bull market in the 1990s contributed to the Asian crisis and was triggered by the dollar’s appreciation against the yen.”

Karzai orders US special forces out of Afghan province – Asia – World – The Independent

“The Afghan President, Hamid Karzai, has ordered American special forces to leave a province of Afghanistan within two weeks, amid allegations that locals working on behalf of the foreign troops have committed acts of torture.”

Gibbs: I was told not to acknowledge existence of drone program | The Ticket – Yahoo! News

“Robert Gibbs, President Barack Obama’s former press secretary, says that he was once instructed by the White House not to acknowledge the administration’s use of drones.

“When I went through the process of becoming press secretary, one of the first things they told me was, you’re not even to acknowledge the drone program,” Gibbs said on MSNBC’s “Up With Chris Hayes” on Sunday. “You’re not even to discuss that it exists.”

Or, to paraphrase an oft-quoted line from David Fincher’s 1999 film “Fight Club”: The first rule of the drone program is you do not talk about the drone program.”

A government at the mercy of events –

Martin Wolf is in paradigm here with this comment. He gets it.

“The decision by Moody’s to cut the rating of the UK government from triple A to double A1 is neither surprising, nor informative nor, in itself, damaging. But it is humiliating for the coalition government. It indicates that its programme of fiscal austerity is failing, on its own terms. Since cutting the deficit and retaining the triple A rating were its overriding policy objectives, this has to be politically damaging. Alas, without a strong economic recovery, the position is likely to get worse. The government has put itself at the mercy of events.

Above all, it is not clear what a rating for a sovereign that borrows in its own fiat (government-made) money actually means. Unless it chooses to do so, such a sovereign cannot default on the debt denominated in its own currency. Presumably, the downgrade implies enhanced inflation or exchange-rate risks. “

The Political Importance of Elizabeth Warren by Simon Johnson – Project Syndicate

“Implementation depends on regulators – some of whom are very good, while others remain in thrall to the big Wall Street banks. The issues are detailed and technical, and the financial lobby has deployed a small army of highly paid experts on a mission of delay, dilution, and diversion. The process is still subject to political supervision, but many politicians are easily bamboozled when the conversation really gets into the weeds.

This is why newly elected Senator Elizabeth Warren of Massachusetts is already proving so effective”

Labour is responsible for AA Britain – Telegraph Blogs

“Brown was gunning fiscal policy at 5pc of GDP over the safe speed limit, and he did so long enough to embed an unsustainable structure into the economy.

His fiscal excesses made the household credit bubble even worse – not helped by 120pc mortgages, home equity withdrawal of 4.5pc of GDP each year, and other idiocies – leaving the economy with a deleveraging crisis that will grind onto into the 2020s.”

A Stein in Bernanke’s shoe: Is there a bubble in corporate bonds? | MacroScope

“Financial markets are again on edge about the direction of Fed policy following the surprisingly hawkish minutes of the January meeting released last week, even if most still expect the central bank to keep buying bonds at the current $85 billion monthly pace at least until the end of the year.

Federal Reserve Board Governor Jeremy Stein, an academic economist who joined the central bank last May, surprised Fed-watchers in his latest speech by focusing entirely on the risks of recent monetary stimulus and saying very little about its benefits. In particular, Stein, a corporate finance expert, raised the possibility that a bubble might be forming in the corporate bond markets, which has seen yields fall to record lows and issuance to record highs.”

Alpha.Sources – When Safe Havens Fall

CLaus has a list of what a safe haven really is. His point here is that the UK does not fit the definition. It fits it less so today than at points in the recent past. I disagree with his definition. In my view, a safe haven is a currency that has large, liquid markets as he states. But other than that the most important thing is that it have substantially all government liabilities in its own sovereign currency and that its real government yields are as high or higher than equivalent yields elsewhere. The point is you want to protect against default risk by investing in a currency areas risk-free assets and mitigate currency risk. That’s what safe haven risk is all about. The other stuff is irrelevant.

Sober Look: The Fed to face challenges as it ultimately exits the unprecedented monetary expansion

Will the Fed have to take a loss on excess reserves? I am sceptical. I believe the Fed will hold to maturity, pay an increase rate on excess reserves and let its balance sheet roll off. Even if they do sell, it is not clear they would do so at a loss. And finally, we don’t know if the Fed will EVER end its zero rate program and excess reserves with it. In my view, there is too much idle speculation about how this is going to happen and what the effect on the Fed’s balance sheet will be.

China flash PMI: reasons to be down, reasons to be cheerful | beyondbrics

“With a reading of 50.4 (just above the 50 threshold that separates contraction and expansion), there’s something in it for bulls and bears alike.

The February mark is a dip from January’s 52.3, and the lowest reading for four months (see chart). The new export orders sub-index was 49.8 – below the 50-mark, showing that China’s exports are still on the softer side.

On the other hand, the overall PMI mark is still in positive territory, having struggled to break 50 for most of 2012.”

How Google did the right thing with the NASCAR crash video, and why it matters — paidContent

“After a fan posted a video of a horrific crash at a NASCAR event, the organizer removed it claiming copyright infringement, but Google over-ruled the company — an example of a decision that happens all too rarely.”

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