Links: 2013-03-12
News links for 12 March 2013
Sverige har deflation | Sverige | SvD
Sweden recorded price declines that put inflation at -0.2% in February
Politico hits 1,000 Pro subscriptions and plans to launch a magazine — paidContent
“Politico is tight-lipped on what a subscription to Pro actually costs. Subscription fees vary based on the type of organization (government, nonprofit and so on) and how many employees it has, as well as the number of coverage areas an organization wants. Nieman Journalism Lab reported last year that an individual subscription starts at $3,295 a year, with group memberships starting at $8,000 for five people and one coverage area.”
When Facebook ‘Likes’ Can Shed Light – WSJ.com
“While far from perfect, the record of Facebook “Likes” was in many ways as accurate as a personality test, researchers said.
The researchers found, for example, that “Likes” for Austin, Texas; “Big Momma” movies; and the statement “Relationships Should Be Between Two People Not the Whole Universe” were among a set of 10 choices that, combined, predicted drug use. Meanwhile, “Likes” for swimming, chocolate-chip cookie-dough ice cream and “Sliding On Floors with Your Socks On” were part of a pattern predicting that a person didn’t use drugs.”
Jim O’Neill: Stocks Are Not A Bargain – Business Insider
“CAPE is short for cyclically adjusted price-earnings ratio, which divides the S&P 500 by 10-year average earnings. At 23.6, the U.S. CAPE is well above the long-term average of 18.7.”
Graph of the day: Who benefits from a stock-market boom?
“yes, a rising stock market is a good sign — but the direct benefits will mostly accrue to a relatively small handful of Americans, at least at first.”
Paulson Said to Explore Puerto Rico as Home With Low Tax – Bloomberg
“John Paulson, a lifelong New Yorker, is exploring a move to Puerto Rico, where a new law would eliminate taxes on gains from the $9.5 billion he has invested in his own hedge funds, according to four people who have spoken to him about a possible relocation.”
More U.S. Profits Stay Abroad, Saving on Taxes – WSJ.com
“A Wall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year. That shielded more than 40% of their annual profits from U.S. taxes, though it left the money off-limits for paying dividends, buying back shares or making investments in the U.S. The 60 companies were chosen for the analysis because each of them had held at least $5 billion offshore in 2011.
The practice is a result of U.S. tax rules that create incentives for companies to maximize the earnings, and holdings, of foreign subsidiaries. The law generally allows companies to not record or pay taxes on profits earned by overseas subsidiaries if the money isn’t brought back to the U.S.”
ROSENBERG: Stock Mrkt Earnings Recession – Business Insider
“He argues that this is not an earnings-driven rally. Rather, it has been driven by multiple expansion. In other words, the ratio of the S&P 500 to earnings is on the rise.
On a weekly basis, using reported quarterly earnings (four-quarter moving total), the P/E multiple is approaching 18x, a two-year high, and a two point expansion from a year ago. So it is a multiple expansion-led rally, not an earnings-led rally, and saying ‘multiple expansion’ today is no different than talking about ‘Fed balance sheet expansion.’ The two are synonymous.”
DutchNews.nl – Continuing crisis leads to record bankruptcies in February
“A total of 755 Dutch companies went bankrupt in February, the highest number ever recorded in a single month, the national statistics office CBS said on Monday.
The figures do not include one-man operated companies, the CBS said.
The CBS usually calculates the bankruptcy rate on the basis of three-month periods, because of strong fluctuations in the number of company court sittings.
Taking this into account, the February average would be 680, the highest total since records began in 1981, the CBS said.”
La production industrielle française a reculé de 1,2% en janvier
French industrial production declined by 1.2% in January.
What’s Fueling the Housing Boom in Vegas?
“The Las Vegas market is being fueled by investors, but even the investors can’t find the great bargains anymore. While the economy has improved some, the drop in foreclosures is really due to a new law that went into effect in Nevada last year; it criminalizes faulty foreclosures. Banks have therefore tried to do more short sales and loan modifications. Foreclosures in Nevada dropped 36 percent in 2012 from the previous year, according to RealtyTrac, but the distress is still there.
“People in Las Vegas talk about shadow inventory to the point where nobody really wants to talk about it anymore, said Mike Brunson, a local appraiser. “People will argue and say it isn’t, but I can name a dozen people off the top of my head who have been in their houses for over three years without a payment.”
Brunson called Las Vegas the Titanic of the real estate market. It was once thought unsinkable, and even now that the worst is over, he still thinks the market is on a well-provisioned life raft, not on solid ground.”
What is Modern Monetary Theory, or “MMT”? – New Economic Perspectives
This article was good on some of the descriptive elements. But it lost its way when it started into the policy proposals. For me, the best way of looking at MMT is to understand what it has to say about the limits or lack thereof of fiat money. Policy options are another question. What is also missing here is the whole discussion about the role of private debt in creating the crisis.
Did Intrade Do an MF Global? « naked capitalism
“What on earth is going on? My best guess is that the margin posted by traders was not held, as it should be, in segregated accounts separate from company funds. When bets are made on this market, both parties must post margin equal to their worst-case loss, so that neither is subject to counterparty risk. In effect, each party is taking a position against the exchange, but these positions are exactly offsetting so the exchange bears no risk. To ensure that all promised payments can be made, these funds must be held in the form of cash, insured deposits, or safe dollar-denominated securities such as Treasury bills. They cannot be invested in risky assets, and cannot be used for the payment of salaries or expenses.”
Kuroda Says Bank of Japan Will Consider Buying Derivatives – Bloomberg
“Bank of Japan governor nominee Haruhiko Kuroda said that the central bank will consider buying derivatives if he’s confirmed as governor and signaled a readiness for a quick expansion in monetary stimulus.
“We will carefully consider such a proposal,” Kuroda, the Asian Development Bank chief, said in response to a lawmaker’s question in his second Diet confirmation hearing today. Opinions vary on the merits of buying assets such as swaps, Kuroda said, adding that he wants to discuss easing “soon” and bond purchases are likely to remain the key tool.”
Speed cameras are a scam, Ohio judge rules | Internet & Media – CNET News
“A judge in Ohio says what so many have been thinking, but never expected to hear from a judge. He described them as “nothing more than a high-tech game of 3-card Monty.””
SEC nominee White promises unrelenting enforcement | Reuters
“White built a reputation as a hard-nosed Manhattan federal prosecutor before moving into private practice for the past 10 years, defending major Wall Street figures, including JPMorgan and former Bank of America Chief Executive Kenneth Lewis.
In pledging to aggressively go after individuals who violate the law, White appeared to be getting out in front of critical questions she will likely face on Tuesday, both on the SEC’s record and her recent defense work.”
How to Get Ahead on Facebook Without Really Trying – Newsweek and The Daily Beast
“This is what Facebook ads are really selling: your friendships. Though sidebar ads can be better targeted on Facebook than on most websites, they still suffer from what marketers call “banner blindness”: with so much going on, readers tend to simply tune out the advertising. Sponsored Stories, on the other hand, show up in exactly the thing you’re paying attention to: your newsfeed. Moreover, they come with the imprimatur of your friends, which makes you more receptive to the idea of clicking. Analysis from multiple sources show that users are more likely to engage with Sponsored Stories—which feature your friends front and center, and the brands as an afterthought—than with ads, where the primary focus is the marketing content.”
Is There Life After Work? – NYTimes.com
“I didn’t start out with the goal of devoting all of myself to my job. It crept in over time. Each year that went by, slight modifications became the new normal. First I spent a half-hour on Sunday organizing my e-mail, to-do list and calendar to make Monday morning easier. Then I was working a few hours on Sunday, then all day. My boundaries slipped away until work was all that was left.
Inevitably, when I left my job, it devastated me. I couldn’t just rally and move on. I did not know how to value who I was versus what I did. What I did was who I was.”
A narrow path ahead for Europe: And it’s France and Germany, again | Mecpoc
“n the creation of EMU, France has always resisted on surrendering too much national sovereignty, without fully grasping that defending political sovereignty without a national currency is pointless.
And today, only France and Germany, with Italy out of the game as a result of its paradoxical (at best) politics, can find a new political compromise to save the euro. The prospects are slim though, as new proposals and ideas at European summits advance at a much slower speed than social malaise and poverty in Europe.”
macroblog: You Say You’re a Homeowner and Not a Renter? Think Again.
“What do rising home prices mean for OER and, ultimately, the behavior of the CPI? Well, it’s rather hard to say because the link between home prices and OER isn’t particularly strong.
Not definitive enough for you? OK, how about this: We think the recent rise in home prices will more likely lean against the rise in OER for the near term as the growing demand for home ownership provides some competition to the rental market. But, in time, these influences will give way to the asset market fundamentals, and rents are likely to accelerate as returns on real estate investments are reaffirmed.”
‘Reaching for Yield’ Trade Getting Crowded, and Riskier – MarketBeat – WSJ
““There is some evidence that the low rates of return available on liquid and safe assets, such as cash and Treasuries, are forcing institutions to search for yield by buying riskier assets, such as corporate bonds,” Paul Dales, senior U.S. economist at Capital Economics, wrote this morning, noting the Fed’s Flow of Funds report last week showed non-financial companies issued a record $782 billion in the fourth-quarter.
“Over two-thirds of these bonds were bought by life insurance funds, mutual funds and exchange-traded funds,” Dales wrote. “This was possible in part only as these institutions reduced their holdings of safer assets, such as cash, commercial paper and government-sponsored mortgage-backed securities.” For example, corporate bonds now comprise 11.7% of all the assets held by ETFs, Dales pointed out, up from 7.5% at the end of 2010.”
Calculated Risk: Business Cycles and Markets
This article is great at showing why recessions matter for investors. The reality is that stocks do falter when the economy turns down, sometimes badly. Especially n a bear market, when multiples contract, you want to avoid being in a risk-on position as the economy hits a trough.
Pressure mounts for Apple repatriate $40B in overseas cash
The anecdote here on Apple Spain losing money despite extraordinary sales gains comes from an El Pais story on taxes I highlighted a couple of weeks ago.
“Apple is avoiding paying $13.8 billion in taxes on overseas earnings by doing what a growing number of large U.S corporations are doing with their foreign cash: keeping it away from U.S. shores.”
“According to several sources close to the situation, the nifty news reading app Pulse is in advanced talks to be acquired by a major “platform” company.
I’ve been trying to track down who among many suitors who have looked at acquiring the mobile-focused startup that allows a user to read content from a variety of online sources, narrowing the field down to a handful.
Several sources have told me that Microsoft and Yahoo have been engaged in talks with the startup, which currently claims it has 20 million users from across the globe, who read more than 10 million stories a day. But a range of other possible acquirers is long — from Facebook (unlikely) to Gannett (likely too pricey) to Amazon (interesting!).
But sources close to the situation tell me that the winner for Pulse is likely to be one that has emerged as a content powerhouse of late: LinkedIn. “
En el primer año de reestatizada, las ganancias de YPF cayeron 12% – 12.03.2013 – lanacion.com
In its first year after expropriation by the Argentine government, YPF showed a decline of 12% in earnings.
Republicans to unveil $4.6tn of cuts – FT.com
“Republicans in the US House of Representatives are set to unveil a staunchly conservative fiscal package that would slash government spending by $4.6tn over a decade and balance the budget within 10 years, with spending and revenues each worth 19.1 per cent of the economy.
On Tuesday, Paul Ryan, chairman of the House budget committee and former Republican vice-presidential nominee, will for the third consecutive year present a budget that cuts deeply into US social programmes, while sparing defence and not raising any new revenue beyond tax rises on the wealthiest Americans agreed in January.”
Shanghai Races to Clean River Where 2,800 Dead Pigs Were Found – Bloomberg
“More than 2,800 dead pigs have been pulled from the Songjiang and Jinshan sections of the Huangpu river, the government said yesterday. It didn’t provide an update on the number of carcasses in today’s statement. Preliminary investigations showed the dead pigs, which include piglets and mature hogs, had floated down the river from neighboring Zhejiang province, it said.
The discovery of the hogs is the latest scare in China, where leaders have come under criticism for the handling of health and environmental issues”
“Central banks have become crucial but controversial participants in currency markets”
China Passenger-Vehicle Sales Top Estimates as India Demand Dips – Bloomberg
“Car sales in China and India, where one in three people in the world live, are diverging. Ford Motor Co. (F) and Hyundai Motor Co. (005380), which reported deliveries in China surged more than 40 percent during the first two months, introduced new variants and offered discounts helping the car market buck the slowing growth seen in overall Chinese retail sales and industrial output. In India, the two automakers posted declines in sales.
“The numbers reconfirm that India is still a minor operation in the global scheme of things, whereas earnings for companies are very dependent on China,” said Ashvin Chotai, managing director of Intelligence Automotive Asia in London. “The only similarity between India and China are their large populations.””
Moody’s: Positive trend in Italian corporate bond issuance set to continue
“”We expect the positive trend in bond issuance among Italian corporates to continue because they are diversifying their funding sources given the likelihood the country’s banks will remain more selective when lending,” says Paolo Leschiutta, a Vice President – Senior Credit Officer in Moody’s Corporate Finance Group and author of the report. “We also expect continued investor appetite for corporate bonds compared to financial institution ones, which are perceived as more directly correlated with sovereign risk.”
Italian corporate bond issuance set a record in 2012, with a total of EUR29.8 billion worth of bonds issued, up 98% in value terms and almost double the number of issuances from 2011. The syndicated loan market was largely flat in terms of value but the number of transactions fell significantly. Despite some Italian banks recently regaining access to funding sources, Moody’s believes that bonds will remain popular because the lending risk has re-priced since the credit crunch.
Moody’s expects small to medium enterprises (SMEs) in Italy to benefit from the growing bond market, thanks to a government scheme that eases access to the capital markets.”
Pimco’s Gross Cuts MBS, Treasurys, Adds ‘Junk’ – WSJ.com
“Bill Gross, manager of the world’s biggest bond fund, cut mortgage-backed securities and Treasury bonds holdings last month while increasing holdings of junk debt.
The share of Treasury bonds in the $288.2 billion Total Return Fund at Pacific Investment Management Co. was 28% at the end of February, compared with 30% in January, according to data released Monday afternoon on the company’s website. The Treasury debt holdings include regular Treasury bonds and Treasury Inflation-Protected Securities.
The share of mortgage-backed securities fell to 36% in February from 37% in January and 42% in December. It was the eighth-straight month in which Mr. Gross cut MBS exposure, though these securities still account for the largest share of the fund.
In contrast, the share of junk bonds, or those rated below BBB- but carrying higher yields than Treasury bonds and investment-grade corporate bonds, ticked up to 3% from 2% in January.”
Closing Bell, March 11, 2013 – Business Insider
“It’s worth noting that the markets are establishing new highs as earnings growth expectations continue to come down. The technical term for this phenomenon is “multiples expansion” as the price-to-earnings ratio is increasing. When multiples are expanding, stocks are getting more expensive.
There was no major economic news to move that markets today. However the market pundits sounded off loudly.
In a recent note to clients, economist David Rosenberg argued that this was not a stock market driven by earnings growth. He continues to believe this rally has been driven by the Fed. “
Canadian housing prices to rise “lacklustre” 2 per a year: TD | Toronto Star
“Most Canadians’ biggest investment — their home — is likely to show a “lacklustre” 2 per cent annual rate of return over the next decade, a report by TD Economics predicts.
“In other words home price gains should simply match the pace of inflation,” the report says.
However, houses will still outperform most other kinds of investments, with the exception of the stock market, the report released Monday says.”
Moody’s requests comment on approach to rating Canadian residential mortgage pools
“Moody’s Investors Service is seeking market participants’ comments on a proposal affecting how it analyzes the credit risk of Canadian non-insured mortgage pools. Moody’s plans to use the proposed approach in conjunction with its existing methodologies to rate Covered Bond and Asset Backed Commercial Paper (“ABCP”) transactions backed by those pools.
Moody’s invites participants in the structured finance market to review and comment on the Canadian-specific features and assumptions the report outlines, and which the agency proposes to use in its approach to analyzing Canadian mortgage pools. Comments are welcome through 15 April 2013, which should be sent to [email protected].
Moody’s residential mortgage collateral analysis model (Moody’s Individual Loan Analysis, or “MILAN”) is a key element of the agency’s loan- and portfolio-level evaluation. Calibrating MILAN for Canada primarily entailed benchmarking the Canadian residential real-estate market to other jurisdictions that also use MILAN. In this case, Moody’s has adapted parameters from the Australian implementation of MILAN; using Australia MILAN as a benchmark for Canada is very appropriate, because of similar factors affecting both countries”
“A severe economic shock, such as the kind that hit Japan in the early 1990s and California and Nevada in 2006, would have to knock Canadian housing prices down by 44% to cause securities linked to Canadian mortgages to lose the highest ratings assigned by Moody’s Investors Service.
Such a house price decline, were it to happen, would be driven primarily by the phenomenal upswing in Canadian home prices over the past decade, Moody’s said.
Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.”
Banks saved, but Europe risks losing a generation | Reuters
“Europe has spent hundreds of billions of euros rescuing its banks but may have lost an entire generation of young people in the process, the president of the European Parliament said.”
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