Links: 2013-05-14

News links for 14 May 2013

German finance minister against idea of ECB buying ABS: magazine | Reuters

Mario Draghi specifically said the ECB would not buy ABS. SO this is complete politics. It’s clear that the Germans want to limit the ECB as much as possible.
“Germany’s finance minister has signaled his opposition to any move by the European Central Bank to buy asset-backed securities to help indebted states, telling his party it would amount to “covert state financing”, according to German magazine Spiegel.”

Bullish on Community Bank Stocks –

“A veteran investor expects a wave of bottom-up consolidation to provide plenty of opportunities for investors.
I see it as a pig-in-the-python analogy. In other words, the credit pig has been passing through the bank python, and the loans that were made post-2008 have been of much better quality. So we are destined to have improving and benign credit comparisons for the next several years. For surviving institutions, credit quality is now a tail wind. We consider the crisis to be over, from a credit-quality point of view, and we’ve gone back to our comfort zone, which is market-neutral investing in our hedge fund and long-term investing in our private-equity fund.”

Anat Admati: the bankers are naked – video interview | Comment is free |

“Anat Admati, co-author of The Bankers’ New Clothes, argues that the dangers inherent in the banking system before the financial crisis have not been properly dealt with. She argues that banks should not be treated as special cases by the markets and that most of them are still far too reliant on debt to fund their activities”

Wealth gap can’t keep growing | David McWilliams

“The top 1 per cent of Americans now own a staggering 40 per cent of the country’s $54 trillion of wealth. This is an extraordinary figure. When taken together with the fact that wages as a proportion of national income have been falling in the US since the 1980s, we see a vision of a society where the average person’s income is faltering, yet the wealth of the super-rich has never been more extreme. As a result of the fall in the share of output represented by wages, the share represented by profits has gone up sharply, and corporate America is now sitting on more cash than ever before.
This can’t continue. The pendulum will move back in favour of the average worker. The only questions are how . . . and when? Will it be gradual or sudden? Remember, the last time we saw such disparities between the hyper-rich and the average guy was at the beginning of the Great Depression.”

Risks to China recovery seen as factory output underwhelms | Reuters

“Annual industrial output grew 9.3 percent last month, according to data released by the National Bureau of Statistics on Monday, up from a seven-month low hit in March but still missing market expectations for a 9.5 percent expansion.
“Economic activity remains weak,” said Liang Youcai, a senior economist at the State Information Centre, a government think-tank.
“We now expect second-quarter gross domestic product growth of around 7.8-7.9 percent if there are no stimulus measures.”
Monday’s data dealt a further blow to investors’ hopes for a decisive revival of the world’s second-largest economy, following last month’s announcement that growth unexpectedly cooled in the first quarter of the year to 7.7 percent.
Growth in fixed-asset investment, an important driver of China’s economy, also disappointed in April. Investment rose 20.6 percent in the first four months from the same period a year ago, compared with expectations for a 21 percent rise.
Only retail sales met market expectations, growing 12.8 percent in April from a year ago.”

UBS: Profit Margins – Business Insider

“Corporate profit margins are near their all-time highs.
Stock market bears believe that margins will inevitably contract, crushing profits and ultimately bringing down stocks.
However, UBS’s Jonathan Golub is convinced any mean reversion in margins won’t happen any time soon.
“Our work shows that rising capacity utilization is positively correlated with higher operating margins,” wrote Golub in a new note to clients.  “Based on historical patterns we believe each has further upside potential.””

REIT wave in Canada is no concern, says Jim Flaherty | Property Post | News | Financial Post

“Canadian Finance Minister Jim Flaherty said he’s not worried by the recent wave of businesses spinning off real estate assets into tax-preferred trusts.
Canadian Tire, the country’s largest sporting goods retailer, said May 9 it will create a $3.5 billion real estate income trust, or REIT, in an initial public offering this fall, becoming the eighth company to either sell or propose such an IPO this year.”

Chart: S&P 500 Negative Guidance – Business Insider

The rising market is about multiple expansion right now.
“Q1 earnings season is wrapping up with 92% of the S&P 500 having already reported their earnings.
“In aggregate, companies have exceeded EPS estimates, modestly missed on revenues, and continued to issue negative guidance,” notes Morgan Stanley’s Adam Parker.
Regarding that last point, Parker adds that the negative-to-positive guidance ratio is at a multi-year high of 4.1.  The average since Q1 of 2005 is 2.4.
“Negative 2013 guidance has driven analyst estimates lower,” said Parker. “Over the past month, analysts have revised down their 2013 S&P 500 estimates 0.3%.”

The Center of the Universe » REINHART: Regarding Hilsenrath//+ Retail Sales

“I believe the central message, which is what I have described in earlier notes: Fed officials want to put as much volatility as possible back into the market before starting to raise rates, provided financial conditions otherwise remain supportive to sustained expansion. They’ll take opportunities to do so on the back of an equity market rally. But Jon Hilsenrath is not the means they will do so.”

What Does Japan Mean For The Rest of the World? – Tim Duy’s Fed Watch

“In my view, Abenomics has been remarkably centered on the domestic economy.  The impact on the Yen is almost an afterthought, whereas in the past policymakers would have turned to intervention to directly support the economy.  This looks like policymakers finally realized that such a policy approach wasn’t working and they need to change gears to a frontal-assault on domestic policy levers.”

David Cameron faces EU cabinet crisis as ministers break ranks | Politics | The Guardian

“Michael Gove and Philip Hammond say they would vote to leave European Union”

Cameron to rush out draft bill on EU vote –

“David Cameron will on Tuesday rush out a draft bill for an EU referendum in a bid to defuse growing acrimony among Conservatives over his strategy for renegotiating Britain’s relationship with Brussels.
The move came under pressure from 100 Tory MPs who had been expected to back an amendment to last week’s Queen’s Speech calling for a bill committing to a plebiscite on EU membership.”

Past Pedophile Links Haunt German Green Party – SPIEGEL ONLINE

“In the 1980s, some members of Germany’s Green Party advocated the legalization of sex with minors. Now the party wants to come to terms with this dark chapter via an independent review of internal documents — some of which show that the influence of pedophiles on the young party was much stronger than previously thought.”

Retail sales gain shows some strength in economy | Reuters

“Retail sales unexpectedly rose in April, pointing to underlying strength in the economy and leading forecasters to bump up second-quarter growth estimates.”

DOJ: We don’t need warrants for e-mail, Facebook chats | Politics and Law – CNET News

“An FBI investigation manual updated last year, obtained by the ACLU, says it’s possible to warrantlessly obtain Americans’ e-mail “without running afoul” of the Fourth Amendment.”

Under sweeping subpoenas, Justice Department obtained AP phone records in leak investigation – The Washington Post

“In a sweeping and unusual move, the Justice Department secretly obtained two months of telephone records of journalists working for the Associated Press as part of a year-long investigation into the disclosure of classified information about a failed al-Qaeda plot last year.
The AP’s president said Monday that federal authorities obtained cell, office and home telephone records of individual reporters and an editor, AP general office numbers in Washington, New York and Hartford, and the main number for AP reporters covering Congress in what he called a “massive and unprecedented intrusion” into newsgathering activities.”

Grammar errors? The brain detects them even when you are unaware

“Your brain often works on autopilot when it comes to grammar. That theory has been around for years, but University of Oregon neuroscientists have captured elusive hard evidence that people indeed detect and process grammatical errors with no awareness of doing so.”

Blame bond markets, not politicians, for austerity –

“It was not Angela Merkel, chancellor of Germany, or other political leaders who pushed austerity on to Italy, Spain, Greece and the others. It was private lenders, beginning in the autumn of 2011, who declined to finance further borrowing by those countries. Then they stopped financing portions of their banking systems. In other words, markets triggered the Eurozone crisis, not politicians. The fiscal and banking restructuring that followed was the price of rebuilding market confidence.”

A response to Martin Wolf | The A-List

“In further responding, let me emphasize that my argument is not pro-austerity or anti-austerity. Not at all. Rather, the main point which I tried to make is that financial markets originally pushed austerity onto the weaker nations, not politicians. A careful review of the timeline in this eurozone financial crisis bears this out.”

AP calls government’s record seizure a ‘massive and unprecedented intrusion’ – Open Channel

“The Justice Department used a secret subpoena to obtain two months of phone records for Associated Press reporters and editors without notifying the news organization, a senior department official tells NBC News, saying the step was necessary to avoid “a substantial threat to the integrity” of an ongoing leak investigation.”

Indiana Farmer Loses Fight Over Monsanto Seed Patent –

“Mr. Walters said small farmers would have to take their cause to Congress, seeking an amendment to patent law authorizing them to plant patented seeds they lawfully obtain.
Monsanto, of St. Louis, operates on both ends of the soybean market. It markets the herbicide glyphosate, under the brand Roundup, and also sells Roundup Ready seeds, which have been genetically modified to resist the chemical. Farmers can spray Roundup on fields planted with Roundup Ready seeds, confident the crop will survive.”

Brad DeLong : I Confess Clive Crook Is Getting to Me: Bloomberg Has Some House-Cleaning to Do Weblogging

“It’s the absence of quotation marks in his columns that is doing it to me.
There are, I am starting to think, three kinds of columnists: those who quote people in order to show that they have properly construed the arguments they are praising or criticizing, those who quote people out of context in order to misconstrue their arguments, and those who don’t quote anybody at all.”

Krugman, DeLong and Radical Centrism – Bloomberg

“Brad DeLong has commented on my beef with Paul Krugman. I’m reluctant to engage, to be honest, because his post exemplifies the intemperance I’m addressing. Once an admirer, I gave up on his commentary a long time ago. You get a sense of the problem from his post about me. He illustrates it with a picture of a clown. He also wants me fired. “Bloomberg has some house-cleaning to do,” he says — charming, and from a tenured academic, to boot.”

Bloomberg users’ messages leaked online –

“More than ten thousand private messages sent between users of Bloomberg’s financial terminals have leaked online, undermining the company’s attempts to restore faith in its ability to keep client data confidential as it scrambles to allay clients’ privacy concerns.
Two long lists showing confidential Bloomberg messages between traders at dozens of the world’s largest banks and their clients have been online for several years, the Financial Times has learnt.”

Europeans losing faith in EU, French disillusioned: survey | Reuters

“In a survey of 7,600 people in eight EU member states, Pew Research Center found rapidly declining confidence in the European project and growing disagreements over key parts of it between Germany, France, Britain and other major nations, a dangerous combination that could splinter European unity.
“The prolonged economic crisis has created centrifugal forces that are pulling European public opinion apart, separating the French from the Germans and the Germans from everyone else,” the survey’s authors said.
“The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis. The European project now stands in disrepute across much of Europe,” they added.”

Associated Press says U.S. government seized journalists’ phone records | Reuters

“The Associated Press on Monday said the U.S. government secretly seized telephone records of AP offices and reporters for a two-month period in 2012, describing the acts as a “massive and unprecedented intrusion” into news-gathering operations.”

CMHC: Canadian housing crash could force banks to bail out insurer | FP Street | News | Financial Post

“John Reucassel, an analyst at BMO Capital Markets, said in a recent note to clients that the banks could have to pitch in and support the agency that now supports them, in the event that the CMHC went bust.
“It appears to us that the CMHC is reasonably well capitalized and positioned to meet the challenges from a housing slowdown,” Mr. Reucassel said in his May 10 comment. “However, investors may be concerned that, in a severe downturn, Canadian banks may either a) need to recapitalize the CMHC; or b) absorb some of the losses.””

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