Links: 2013-03-21
Wow! There are a lot of links in today’s links post. ALl of them are good
News links for 21 Mar 2013
Gillard Calls Leadership Contest For Today as Labor Party Lags – Bloomberg
“Prime Minister Julia Gillard called a ballot for the leadership of the Labor party after a senior member of her government said it can’t win elections due in six months from its current position in opinion polls.
The ballot of the Labor caucus for a new leader and deputy leader of the governing party will take place at 4:30 p.m. local time in Canberra today, Gillard told parliament.”
Japan Posts Longest Run of Trade Deficits in Three Decades – Bloomberg
“Japan posted its longest run of trade deficits in three decades as exports fell in February, underscoring challenges for Bank of Japan (8301) Governor Haruhiko Kuroda in reviving the world’s third-biggest economy.
Shipments dropped 2.9 percent from a year earlier, the Finance Ministry said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a 1.7 percent decrease. Imports rose 11.9 percent, leaving a trade shortfall of 777.5 billion yen ($8.1 billion).”
J.P. Morgan to Issue Its First Mortgage Bond Since 2007
“J.P. Morgan Chase & Co. ( JPM ) is planning to sell $616 million in residential mortgage-backed securities in its first step into the market since 2007, according to two firms rating the issue.
The move is also the first since the financial crisis for a U.S. commercial bank into the market for private RMBS, which don’t carry a government guarantee.
J.P. Morgan’s issue is backed by 752 jumbo loans originated primarily by itself and First Republic Bank, Fitch Ratings said in its presale document. Fitch said the loans are “high-quality,” a trait that has been the norm amongst the few other private RMBS that have been issued since the crisis by Credit Suisse Group and real estate investment firm Redwood Trust (RWT.)
But Fitch was critical of how J.P. Morgan moved to reduce its exposure to loans in the deal.
The so-called representations and warranties, or assurances of the quality of the loans, are “sigificantly diluted” by conditional language that reduces lender’s liability and limits on how long an investor may ask a lender to repurchase a faulty loan due to fraud, Fitch said.”
Russian business deals on hold – FT.com
“Billions of dollars in Russian business transactions via Cyprus are on hold because of the shutdown of the country’s financial system as bankers and lawyers work feverishly to salvage the deals.
While the island is home to billions of dollars in Russian deposits, it is believed to be more important as a hub for investment and trade in Russia. Last year around $120bn in Russian investment transactions went through Cyprus, which offers better tax treatment for capital gain and dividend payments, according to the Russian central bank.”
Surprise U.S. Housing Demand Catches Industry Off-Guard – NYTimes.com
“After six years of waiting on the sidelines, newly eager home buyers across the country are discovering that there are not enough houses for sale to accommodate the recent flush of demand.”
Cyprus Bailout-Stupidity-Short-Sightedness-Something Else? – Cyprus.com
“First, some background that most people know partially but not completely:
1. The Cyprus sovereign has not been particularly profligate. Debt to GDP as late as last year was in the low 70% range, lower than Germany, etc. While the last Communist government ran unnecessary fiscal deficits, the new government was elected with a more or less ‘austerity’ orientation
2. The issues with the Cyprus sovereign have come from the bailout of the banking system.
The banking sector in Cyprus is being portrayed in the mainstream press as a monstrosity of risky banks for Russian mobsters. I think it is important to put it in context:
(a) Banking assets are about 7.1x GDP relative to the EU average of 3.5x GDP and similar to Ireland and Malta.
Luxembourg, by contrast, where Anglo-Saxon firms do their tax arbitrage has banking assets of 21x GDP. So, Cyprus’s exposure is similar to that of an economy that has large financial services sector, but that still has a real economy too. It is not Luxembourg nor the Cayman Islands nor the Bahamas nor the Channel Islands and so on.”
Puerto Rico slides toward insolvency | MuniLand
“Dark clouds are hanging over Puerto Rico. Its projected 2013 deficit follows a likely 2012 deficit and twelve preceding deficits stretching back to 2000. The economy has not been generating sufficient tax revenue to support the services that the government has been providing to citizens. The difference has been made up by borrowing in the bond market and loans from the Puerto Rico Government Development Bank.”
Adblock Plus Re-Launches After Being Pulled from Google Play, Now Offers Automatic Updates
“The team behind Adblock Plus isn’t taking Google’s decision to pull ad-blocking apps from Google Play lying down. Today they’ve unveiled a new version that bypasses Google Play for updates, offers more ad-blocking features, and can be downloaded and installed directly.
Even if you already have Adblock Plus installed, you’ll want the latest version. It comes with automatic updates, so as filtering rules improve and new bug fixes or features are added, you’ll get them as soon as they’re available. “
PIMCO sees opportunity in European commercial property | Reuters
“The head of PIMCO’s mortgage credit portfolio management team said the firm is targeting direct commercial real estate investments and non-securitized loans, which carry greater risk but higher return potential.”
“With an estimated $31bn (£21bn) held in Cypriot banks by Russian banks, businesses and individuals, as well as up to $40bn in loans to Cyprus-registered firms, Russia has been gripped by fear since the crisis began to unfold, with state-run television transmitting rare live reports from outside the Cypriot parliament.
Yet the Kremlin’s reputation for seeking hard assets abroad in exchange for aid prompted speculation that negotiations were dragging as it bargained for stakes in offshore gas fields and Cypriot banks. Gas fields discovered in 2011 could be worth many times Cyprus’s GDP but the exact potential revenue stream is uncertain.
Much speculation has fallen on Gazprom, the state gas monopoly that has often been dubbed a tool of Kremlin foreign policy. A spokesman shrugged off speculation that it was seeking exploration rights for gas deposits in the Mediterranean. “There have been a lot of fantasies in the press,” a Gazprom spokesman, Sergei Kupriyanov, said. “We have made no proposals.” He said no Gazprom officials took part in Wednesday’s talks.
The appearance in Moscow of George Lakkotrypis, Cyprus’s minister for energy, commerce, industry and tourism, only fuelled the speculation. Cypriot officials said he was visiting a tourism exhibit.”
BBC News – Cyprus government ‘to present bailout plan B on Thursday’
“The president of Cyprus is meeting political leaders to hammer out a “Plan B” to shore up debt-laden banks – a condition for securing a huge bailout.
Cyprus’s banks, which have been shut all week to prevent mass withdrawals, are to stay closed until next Tuesday.
Politicians have been scrambling to find a way forward after an unpopular levy on bank deposits was rejected by parliament on Tuesday.”
Pinterest Acquires Mobile Startup Livestar – Mike Isaac – Mobile – AllThingsD
“Pinterest announced Wednesday it had acquired Livestar, the small mobile-focused recommendations startup. Livestar’s three-engineer team will join Pinterest, but CEO Fritz Lanman will not; he’ll move on to another yet-to-be-announced startup, while maintaining an advisory role at Pinterest. Terms of the deal were not disclosed, and Livestar will shut down its services immediately.”
BBC NEWS | UK | UK Politics | 1975 economic fears are laid bare
I was researching this issue because it shows that a sovereign currency does not prevent a nation from going cap in hand to the IMF.
“Harold Wilson was warned in 1975 that Britain’s economy faced “possible wholesale domestic liquidation”, newly released Cabinet papers reveal.”
As Men Lose Economic Ground, Clues in the Family – NYTimes.com
“The decline of two-parent households may be a significant reason for the divergent fortunes of male workers, whose earnings generally declined in recent decades, and female workers, whose earnings generally increased, a prominent labor economist argues in a new survey of existing research.”
Big trouble from little Cyprus – FT.com
“Let us start with why some bank restructuring was inevitable. The government of Cyprus is both highly indebted and responsible for a banking sector that is surely too big to save. According to the IMF, gross government debt reached 87 per cent of gross domestic product last year and would reach 106 per cent of GDP by 2017, without the bailout. The sovereign credit rating is also far below investment grade: Standard & Poor’s rates Cyprus CCC+. That is not surprising: the banking sector still has assets over seven times GDP. (See charts.)
The banks stand on the edge of collapse. But it is the European Central Bank that has pulled the plug by threatening not to accept Cypriot government debt as collateral against liquidity support. Banks have to be recapitalised. Taxpayers cannot do this, on their own. Without taxing depositors, the proposed rescue package would have had to be €17.2bn, instead of €10bn, or close to 70 per cent of GDP. This would have brought sovereign debt to some 160 per cent of GDP: an unsustainable burden.”
The End of Private Schools? – Amanda Erickson – The Atlantic Cities
“The number of students enrolled in private schools has dropped precipitously in the last decade, from 5.3 million children in 2002 to 4.7 million in 2012. In 2005, 10.7 percent of children were in private school; that number fell to 10 percent in 2010.
The knee-jerk reaction to this news is to blame the recession. But according to new research from Stephanie Ewert of the U.S. Census Bureau, the real reason for this shift isn’t belt-tightening (in fact, Ewert found that short-term economic highs and lows have very little impact on private school enrollment), but rather the rise of charters, especially in major cities.”
Cyprus Boosts Moscow as City Sees Investor Cash Returning – Bloomberg
“Moscow is counting on changing perceptions of Cyprus as a haven for Russian companies and investors to help fulfill its goal of becoming a global financial center, according to a minister in the city’s government.
“It’s totally changed the perception of Cyprus and it’s a good thing for Russia,” Sergey Cheremin, head of Moscow’s department for economic and international relations, said in an interview at Bloomberg’s headquarters in New York yesterday. “It shows those Russians who keep their accounts in Cyprus that it’s not a heaven, it’s a hell. It will encourage a lot of Russian companies to concentrate their resources in Moscow.””
Walking back from Cyprus | vox
“Eurozone leaders’ radical step of putting insured depositors in Cypriot banks in harm’s way was not their only option. This column argues that none of the alternatives were pleasant but some were less ominous.”
Cyprus: Will the Mouse That Roared be Gored? (Updated) « naked capitalism
“The EU was utterly unprepared for this rebellion. Heretofore, threat of withholding of funds and financial armageddon were sufficient to bring legislatures and national leaders to heel. Anastasiades, by contrast, didn’t even try to keep Parliament voting until the results changed. The finance minister tendered his resignation as an admission of failure but Anastasiades rejected it and has him negotiating with the Russians, at a minimum to restructure a €2.5 billion loan from 2011 but clearly to see if Russia will ride in to the rescue.”
FedEx profit drops worse-than-forecast 31% – Earnings Results – MarketWatch
“Parcel delivery firm FedEx Corp. on Wednesday reported a 31% drop in quarterly profit as it slashed its outlook for the year, citing a customer shift to cheaper overseas deliveries.”
Chancellor George Osborne joins Twitter on Budget day and hit with wave of abuse – Independent.ie
“Like an army of backbench hecklers, Twitter users subjected the Chancellor’s new @George_Osborne account to a torrent of abuse, despite the fact he has currently posted only one tweet: “Today I’ll present a Budget that tackles the economy’s problems head on helping those who want to work hard & get on.””
French authorities raid Lagarde’s flat – FT.com
“French investigators have raided the Paris home of Christine Lagarde, head of the International Monetary Fund, in a probe into allegations that she acted illegally in approving a €400m compensation payment made to a prominent supporter of Nicolas Sarkozy when she was French finance minister
Ms Lagarde has denied any wrongdoing in the case, which stems from her role in an arbitration process to settle a long-running legal action by Bernard Tapie, a colourful multimillionaire French businessman, against Credit Lyonnais, a state-owned bank.”
Osborne says BoE may need to use unconventional monetary policy | Reuters
“British finance minister George Osborne said on Wednesday that he was changing the Bank of England’s remit and that the central bank may need to use unconventional monetary policy along with inflation targeting.”
“The IMS needs a multipolar evolution, but it will not happen anytime soon. Managing a multi-polar global economy without additional “global reserve currencies”, more representative of the rise of emerging markets, will present serious challenges. In the future, the global financial system is likely to have less national currencies (not all of the approximately 180 currencies existing today are likely to last), a few monetary zones of regional significance, and more than one reserve currency. For the system to be redesigned, a coordinated adjustment at the global level is needed, with the G-8 to allow a change in the geopolitical monetary hierarchy. As the new financial architecture needs coordinated global answers, a reformed IMF should play a key role in helping distribute benefits, costs and responsibilities. Of course, national and regional politics can lead to sub-optimal global outcomes. Until this process is complete, expect uncertainty and volatility to stay.
Over the next decade, the USD will not lose its reserve-currency status and will remain the major investment currency. In the short term, there is a lack of viable alternatives and the USD will remain a key “unit of account” and “medium of exchange”. Still, its centrality in the global monetary system will be gradually re-appraised. “
Eurozone economic downturn deepens – FT.com
“The Flash Eurozone Composite Purchasing Managers’ Index, which makes up about 85 per cent of the final reading and is seen as a reliable economic growth indicator for the bloc, fell from February’s 47.9 to 46.5 in March.
That was lower than all forecasts in a Reuters poll of 23 economists and far short of median expectations for a small rise to 48.2. The index has been below the 50 mark that separates growth from contraction for all but one of the past 19 months.
Having already contracted since the second quarter of last year, Markit said the latest PMI data suggested the eurozone economy would shrink 0.3 per cent in the current quarter.”
Cypriots prefer euro-zone exit over EU tax: report – MarketWatch
“An overwhelming majority of the citizens in Cyprus would rather leave the euro zone than accept an unprecedented levy on bank deposits as part of bailout package, Greek daily Ekathimerini reported on Thursday, citing a survey by Prime Consulting. The survey found that 91% of the Cypriots back the government’s decision to reject the proposed bank-deposit tax, while 67% preferred a euro-zone exit along with stronger ties to Russia. “
Sorry Google; you can Keep it to yourself — Tech News and Analysis
“It might actually be good, or even better than Evernote. But I still won’t use Keep. You know why? Google Reader.
I spent about seven years of my online life on that service. I sent feedback, used it to annotate information and they killed it like a butcher slaughters a chicken. No conversation — dead. The service that drives more traffic than Google+ was sacrificed because it didn’t meet some vague corporate goals; users — many of them life long — be damned.”
China HSBC Flash PMI climbs to 51.7 after holiday dip | South China Morning Post
“Growth in China’s vast manufacturing sector picked up in March, a preliminary survey of factory managers showed on Thursday, recovering from a holiday-driven dip the month before but still short of January’s strong performance. The HSBC Purchasing Managers’ Index for March revived to 51.7 in March from 50.4 in February, but remained below a two-year high of 52.3 reached at the beginning of the year.”
International Monetary Fund in 1976 – HM Treasury
“09 December 2005
Request:
Please disclose information relating to negotiations between the UK Government and the International Monetary Fund in 1976. In particular the documentation relating to the so-called “letter of intent” signed by Denis Healey, the then Chancellor of the Exchequer, and sent to the IMF.
Disclosure:
The International Monetary Fund made a loan to the UK Government in 1977. This release gives an insight into the process by which the loan was negotiated in late 1976. It includes the letter of intent as specifically requested. This letter sets out the conditions agreed between the IMF and the UK concerning the loan. A number of books have already been published on this issue but this FOI release has some historical interest.”
1976 sterling crisis details made public – FT.com
“The crisis was a defining moment in British political and economic history, destroying public confidence in Labour’s economic competency and paving the way for Margaret Thatcher’s rise to power.
Lord Healey told the IMF of “the social contract with the trades union movement” that had reduced the average increase in earnings from 27.6 per cent in 1975 to 13.9 in 1976. The truce between the unions and the government unravelled three years later, precipitating a series of strikes dubbed the Winter of Discontent.
Lord Healey was forced to approach the IMF after the value of the pound declined by nearly 25 per cent against the dollar in nine months. After 26 meetings between October and December, the cabinet agreed to request a £2.3bn loan – at that point the largest the IMF had made – in return for £2.5bn in spending cuts and the sale of £500m of BP shares.”
Google Keep Takes Aim At Evernote — And Also Apple – ReadWrite
Jittery Spaniards Seek Safety in Bitcoins – Businessweek
Times paywall drastically hits reach as it sinks below Indy and Standard | The Wall Blog
U.S. Oil Production to Exceed Imports, a First Since 1995 – Bloomberg
Cyprus: capital controls imposed to prevent crisis spreading to the rest of eurozone – Telegraph
Fed Holds – Tim Duy’s Fed Watch
Two Detroit pension fund officials indicted | Reuters
Amazon Rumored To Be Working On A $99 7-Inch Kindle Fire HD | TechCrunch
J.P. Morgan to Issue Its First Mortgage Bond Since 2007
Want to Be Happier? Stop Doing These 10 Things Right Now
Budget 2013: Help to Buy mortgage scheme ‘will create a housing bubble’ – Telegraph
“The Government has earmarked billions of pounds to help homebuyers get on to the property ladder and then move up, in a move that critics say will create a huge house price bubble.”
Housebuilder shares climb on home buying measures – Telegraph
“Shares in housebuilders dominated the risers in London today after the Government unveiled new plans to help families up the housing ladder.
Under the new Help to Buy scheme, prospective house buyers with a 5pc deposit on the value of the property they are seeking to purchase will be eligible for a Government guarantee for a further 15pc, Chancellor George Osborne announced.
Separately, plans for five-year interest-free loans for people who want to purchase new builds worth as much as £600,000 were also disclosed today. The raft of proposals to bolster the housing market lifted shares in the mid-cap home builders across the board.
Barratt Developments climbed 7.3pc, Taylor Wimpey rose 6.3pc, Persimmon advanced 5.4pc, Bellway gained 4.1pc and Redrow put on 3.8pc.”
A do nothing, blame everyone else Budget – Telegraph
Roger Bootle: “Has the Chancellor been reading Gibbon’s Decline and Fall of the Roman Empire?”
Americans Cut Restaurant Spending as Taxes Bite: EcoPulse – Bloomberg
“Restaurants are reeling from their worst three months since 2010, as American diners spooked by higher payroll taxes cut back on eating out.
Sales at casual-dining establishments fell 5.4 percent last month, after declining 0.6 percent in January and 1.6 percent in December, according to the Knapp-Track Index of monthly restaurant sales. This was the first three months of consecutive declines in almost three years, with consumers caught in a “very emotional moment,” said Malcolm Knapp, a New York-based consultant who created the index and has monitored the industry since 1970.”
Fed Maintains $85 Billion Pace of Monthly Asset Purchases – Bloomberg
“The Federal Reserve will keep up its bond buying at a pace of $85 billion a month even as the world’s largest economy and the job market pick up.”
Sugar, not fat, exposed as deadly villain in obesity epidemic | Society | The Guardian
“It’s addictive and toxic, like a drug, and we need to wean ourselves off it, says US doctor”
Budget 2013: Osborne pins hopes on corporation tax cut for businesses | UK news | The Guardian
“Cut in tax rate from April 2015 will cost the exchequer an extra £400m in 2015-16, rising to £800m after that”
Budget 2013: great for housebuilders, terrible for retailers | UK news | The Guardian
“It was a glorious budget for housebuilders, an inevitable disappointment for infrastructure firms and a minor catastrophe for retailers.
In this period of extended mourning for HMV, shopkeepers were confident their long-standing complaints over business rates might finally be heard. A freeze was the hope; a cap at 2% was the expectation. Neither happened and so this year’s 2.6% increase will proceed.
The chancellor’s refusal to budge on business rates will remove the shine from many of his other measures, including the cut in the rate of corporation tax to 20% in 2015 and the new “employment allowance” that will reduce national insurance bills for small businesses.
Capping business rates at the target inflation rate of 2% would have cost £140m, the CBI calculated in its budget submission. In other words, very little in the context of the national insurance sweetener. In a budget full of helpful tweaks for business, a minor handout on rates was a strange omission.
Housebuilders, though, don’t have to worry. The UK now has an interventionist mortgage policy to match its ultra-loose monetary policy. The Help to Buy scheme follows the FirstBuy and NewBuy schemes and is bigger than anything seen in the past.
The chancellor estimated it would fund £130bn of new mortgages over three years, equivalent to the current annual volume of mortgage lending. That’s a very big scheme, assuming it takes off.”
This budget is just as I feared | Alistair Darling | Comment is free | The Guardian
Alastair Darling: “Are we in the midst of a lost decade? Five years ago I caused some controversy when, in an interview with the Guardian, I said the downturn would be more profound and long-lasting than people expected. That’s why I was prepared to use the spending power of government to support our economy to get growth going. Once that was established, we could get borrowing and debt down.
The economy, growing in 2010, has now stalled. It has grown by just 0.7% since then, compared with a forecast of 5.3%. Only three other G20 countries have grown more slowly. The independent Office for Budget Responsibility admits that the economy will grow by only half the rate it forecast just three months ago. Growth is likely to remain flat for the foreseeable future.
No wonder then that borrowing reduction is wildly off course. The chancellor is borrowing £245bn more than he planned in 2010. And he is borrowing more this year than last. “
Hedge funds to reap rewards on Cyprus default bet | Capital City | IFRe
“The market price of a Cypriot sovereign bond due to mature in just over two months suggests a gamble by hedge funds that the country will avoid a default will pay off.
The €1.4bn 3.75% bond, due to be redeemed on June 3, is bid at 83% of its face value, signalling that the market expects creditors will be paid in full even though a €10bn bailout hangs in the balance.”
EFSF taps Cyprus-backed bond to complete Q1 funding | Capital City | IFRe
“The European Financial Stability Facility (EFSF) surpassed its €16.5bn Q1 funding target on Wednesday, with what looks likely to be the issuer’s last tap of an outstanding bond guaranteed by Cyprus.”
Russians snap up luxury homes on Spanish coast | South China Morning Post
“Russians are snapping up luxury villas surrounded by lush vegetation along Spain’s rugged Mediterranean coast, drawn by a mild climate and relaxed lifestyle, proving the country’s ailing economy with a much-needed boost.
Sergei Maslov, 53-year-old real estate developer, and his wife Larissa, 51, from Novosibirsk in Siberia are part of this wave of Russian investors with deep pockets who are being welcomed with open arms by Spanish officials.”
BBC News – Apple brand less ‘inspiring’, survey says
“Smartphone rival Samsung is now seen as equally “inspiring” in the US, says the survey by consultancy Added Value.
Analysts fear Apple may have lost its way since its visionary co-founder, Steve Jobs, died in October 2011.
While Apple’s brand still scores more highly overall, Samsung’s is more consistently appreciated across the world, particularly in East Asia, says Added Value, part of Sir Martin Sorrell’s WPP group.
Apple’s reputation for market-leading innovation took a knock after the iPhone 5 was seen as an iteration of an earlier design rather than a characteristic step-change.”
Five Takeaways From Fed Decision – Real Time Economics – WSJ
“Here are some quick takeaways from the Federal Reserve’s latest decision to keep its policies in place.”
Medvedev lambasts EU over Cyprus levy – FT.com
“Russian prime minister Dmitry Medvedev lambasted the EU’s handling of the Cyprus debt crisis, comparing a plan for a levy on bank deposits to the expropriations under the Soviet Union.
However, Moscow has yet to offer any concrete help to the Cypriot government, which is anxiously seeking alternative ways to fund an international bailout after the island’s parliament voted against a bank deposit levy plan hatched with the eurozone.”
ECB Said Likely to Delay Vote on Emergency Cyprus Bank Lending – Bloomberg
“Cypriot banks have relied on ELA funding from their own central bank since they were cut off from regular ECB refinancing operations in June following the downgrading of the country’s credit rating by all three major rating firms to junk status.
The ECB, which must sanction the ELA loans, agreed to a two-month extension in January and was due to take another decision on the issue at the mid-March meeting, one of the people said.”
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