Links: 2013-05-21

Germany sees economy improving ‘markedly’ in second quarter – The Globe and Mail

“Germany’s central bank expects the country’s economy to improve “markedly” in the second quarter — a development that could boost the wider euro zone as it struggles to get out of recession.
The Bundesbank said Tuesday that Europe’s largest economy should expand more robustly after a weak first three months of the year. Germany grew only 0.1 per cent in the first quarter in part because cold weather delayed the construction season.”

But Wait. Didn’t Yahoo Try a Deal Like This Before? –

“The lesson of GeoCities raises this question about Tumblr: How can a company with zero profits (actually, multimillion-dollar losses) and just $13 million in revenue be worth $1.1 billion?
Inside Yahoo, officials dismiss the comparison to GeoCities. Instead, they compare the Tumblr deal to Google’s purchase of YouTube — that is, Yahoo’s management believes that Tumblr is one of a rare few transformative sites on the Internet. Google paid $1.6 billion for YouTube when it too made no money. At the time of that deal, it seemed heretical. Now, it seems genius.
To Yahoo, Tumblr is the equivalent of beachfront property. With more than 100 million user-generated blogs on Tumblr, there is no question that it brings Yahoo a younger audience. It adds a sense of hipness to a company that had lost its sense of cool.”

BBC News – Pound falls after surprise dip in inflation

“The pound has fallen after lower fuel prices led to a lower-than-expected inflation rate of 2.4% for April.
This was down from 2.8% in March, according to the Office for National Statistics, and the first drop since September 2012.” | Greek bond yield curve disinverts

“The Greek government bond yield curve returned to an uphill shape on Tuesday, as investors continued to price out default risks after last week’s sovereign ratings upgrade by Fitch.
The difference between Greece’s 30- and 10-year yields turned positive to last trade at 3 basis points, with the curve disinverting again for the first time in about three years.
When short-term yields trade higher than longer-term yields the market is pricing in increased near-term default risks. Just before Greece’s debt restructuring in March 2012, 10-year yields were 15 full percentage points higher than their 30-year counterparts.”

Ireland says not to blame for Apple’s low tax rate | Reuters

“Ireland said on Tuesday it was not to blame for Apple Inc’s low global tax payments after the U.S. Senate said the company paid little or nothing on tens of billions of dollars in profits stashed in Irish subsidiaries.”

Google Checkout Nixed In Favor of Google Wallet | TechCrunch

“Google Checkout is being sunsetted as the company focuses on shaping Google Wallet into a viable PayPal rival. Google Commerce announced today that Google Checkouts will be retired on November 20.
Google suggests that merchants who do not have their own payment processing transition to Braintree, Shopify or Freshbooks, which are offering discounted rates for Google Checkout users. U.S. merchants who do have their own payment processing can apply for Google Wallet Instant Buy. Developers selling through Google properties will automatically transition to the Google Wallet Merchant Center in the next few weeks.”

BBC News – Irish potato famine pathogen identified

“Scientists have used plant samples collected in the mid-19th Century to identify the pathogen that caused the Irish potato famine.”

Iceland’s post-Crisis economy: A myth or a miracle? | vox

“Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked against it. The new government comprises the same parties that were originally responsible for the Crisis. What’s going on? This column argues that this switch is, in fact, logical given the outgoing government’s mishandling of the economy and their deference towards foreign creditors.”

Slovenian Bonds Extend Rally as Investors Shrug Off Fitch Cut – Bloomberg

“Slovenia’s benchmark bonds rallied, pushing the yield to the lowest in almost two weeks, as investors disregarded a credit rating cut by Fitch Ratings amid government efforts to pull the nation out of a recession.
The yield on the dollar-denominated bonds maturing in 2022 dropped three basis points, or 0.03 percentage point, to 5.3 percent, the lowest since May 9, as of 9:25 a.m. in the capital Ljubljana. The yield retreated 2 basis points last week, the fifth weekly drop. Slovenia’s credit score was cut one level to BBB+ by Fitch on May 17, the third-lowest investment grade, with a negative outlook amid a worsening economic situation and a widening budget deficit.
“I don’t expect this downgrade to have a pronounced impact on the bonds as the credit is already trading as sub-investment grade and a one-notch downgrade still leaves Fitch far behind the market’s assessment of Slovenia’s creditworthiness,” Abbas Ameli-Renani, an emerging markets economist at Royal Bank of Scotland Plc in London, said in an e-mailed note May 17. “Crucially, Standard & Poor’s maintains an A- rating on Slovenia, which allows local banks to use their government bond holdings as top-quality collateral with the European Central Bank.””

Yahoo, Tumblr, and the Loyalty Factor – Ben Gomes-Casseres – Harvard Business Review

“Mayer can take a page from the book of Albert Hirschman, one of the most original thinkers on political economy of the last century. Against the backdrop of civil strife and war in the late 1960s, Hirschman wrote that when faced with declining institutions, consumers have two choices: Exit and go elsewhere with their support or dollars, or use the power of voice to generate change from within. These two choices are mediated, he explains, by members’ loyalty to the institution. Loyalty makes people more likely to stay and work for change from inside. But loyalty is also a product of how effective a consumer’s voice is likely to be; it does not stem from feeling locked-in or having no possibility of exit.”

BBC News – China ‘cannot be free rider on trade’

“”China has become a very big economy and they have to take responsibility, just as we do, for the global trading system,” Mr De Gucht told the BBC.
“Very important in taking responsibility for a global trading system is [to] follow a number of disciplines with respect to export credits, with respect to dumping, subsidies, cheap capital and so on and so on.
“You cannot be one of the biggest economies in the world and a free rider at the same time.”
The EU is holding 18 trade investigations into China.”

China yuan near 19-year high versus US dollar as exchange reserves grow | South China Morning Post

“The yuan traded within 0.2 per cent of a 19-year high yesterday, amid speculation capital inflows would spur appreciation.
China might face “large scale” inflows of speculative funds in the next few years, which would drive asset prices higher and push up consumer prices, Su Ming, deputy head of the Ministry of Finance’s research institute for fiscal science, said in an article published yesterday in People’s Daily. New-home prices rose last month in 68 of 70 cities tracked by the government, data showed on Saturday.
“When the property outlook is improving, more people tend to bring capital into China,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp.
“Authorities see that as a risk, creating a stronger exchange-rate environment than what they are happy with.””

Bankia compensation qualms signal loss of faith in Spain’s banks | Reuters

“Many duped savers at Spanish lender Bankia (BKIA.MC) are shunning a state-supervised compensation scheme in favor of expensive lawsuits, prolonging a mis-selling scandal and complicating efforts to restore faith in the banking system.” | Suicide rate climbs 26.5 percent in 2011 from 2010; greatest rise in women

“A staggering 104.8 percent more women committed suicide in 2011 compared with the previous year, while the overall rate of people taking their own lives grew by 26.5 percent (from 377 to 477) in the same period, according to the Hellenic Statistical Authority (ELSTAT) and non-governmental organization Klimaka.
According to ELSTAT, 477 suicides were reported in 2011, out of which 393 concerned men and 84 women. The figures show that 172 suicides occurred in Attica (compared with 109 in 2010), followed by 53 in Central Macedonia, 37 in Crete and 36 in Western Greece with the rest in other parts of the country.”

Yahoo: Expect Ads On Tumblr To Ramp Up Significantly In 2014 | TechCrunch

“CFO Ken Goldman said that ad revenues from Tumblr will be “modest” this year — the acquisition is not expected to close until the second of of 2013 — but that they will “ramp up” in 2014 “and beyond.” “We do think those revenues will start monetizing materially [and] will contribute to revevenues in 2014 and beyond,” he said on the call, “not just standalone for Tumblr but also incrementally, helping Yahoo to growth.””

U.S. says concerned with charges against Egyptian journalists | Reuters

“The United States on Monday expressed concern over defamation charges brought against two Egyptian journalists critical of President Mohamed Mursi and called on the government to condemn actions that stifle freedom of expression.”

UK exit from EU would be ‘loss/loss scenario’, warns Goldman Sachs – Telegraph

“Mr Daly said a UK exit would “come with a significant economic cost to the UK” because it is “highly integrated” with the EU. The economist noted that trade with the other 26 members of the EU accounts for 16pc of UK GDP.
He dismissed those who argue that Britain could negotiate a trade deal with the EU once it had left. “Given the size and importance of the UK economy, it is unlikely that the UK could negotiate the same access to the EU single market that Switzerland and Norway have achieved,” he said. “In particular, the UK’s ability to conduct business in financial services across the European Union is likely to be severely compromised by a departure from the EU.”
The damage would extend to the EU too, since the UK is the eurozone’s largest trading partner, accounting for 4pc of the bloc’s GDP.”

DOJ’s secret subpoena of AP phone records broader than initially revealed – Open Channel

“The Justice Department’s secret subpoena for AP phone records included the seizure of records for five reporters’ cellphones and three home phones as well as two fax lines, a lawyer for the news organization tells NBC News.”

BBC News – Apple ‘among largest tax avoiders in US’ – Senate committee

“Apple has been accused of being “among America’s largest tax avoiders” by a Senate committee.
The committee said Apple had used “a complex web of offshore entities” to avoid paying billions of dollars in US income taxes.
Apple chief Tim Cook will go before the panel on Tuesday. In prepared testimony Apple said it did not use tax gimmicks.”

Banks are not a special case on debt-equity ratio –

“Changing the tax code, and trying to counter bankers’ distorted incentives, as Prof Roe suggests, would be highly desirable. In addition, requiring institutions whose distress or failure would cause significant collateral damage to use much more equity is essential for protecting the public from unnecessary risks. Non-banks rarely have less than 25 or 30 per cent equity, and there is no justification for allowing banks to maintain less only because they want to.”

Italy’s industrial output falls back to 1970s – Telegraph

“Mr Napolitano said the hardships faced by the people have become excruciating, and demanded a spate of measures to boost growth and halt the relentless rise in unemployment.
The plea came after fresh data showed industrial production in March fell 7.6pc from a year earlier, dropping for the 15th consecutive month. New orders fell 10pc.
The Istat data agency reported earlier that exports continued to fall in the first three months of the year and are down 6pc since last year, dashing hopes for a trade boost to offset the collapse in internal demand. This is in stark contrast to Spain, where exports have held up well.
Ten of thousands marched in Rome over the weekend to protest austerity measures with placards saying “we can take no more”. They were led by increasingly militant trade unions, left-wing politicians and the Five Star movement of comedian Beppe Grillo, the biggest party in parliament.”

A rare peek into a Justice Department leak probe – The Washington Post

“At a time when President Obama’s administration is under renewed scrutiny for an unprecedented number of leak investigations, the Kim case provides a rare glimpse into the inner workings of one such probe.
Court documents in the Kim case reveal how deeply investigators explored the private communications of a working journalist — and raise the question of how often journalists have been investigated as closely as Rosen was in 2010. The case also raises new concerns among critics of government secrecy about the possible stifling effect of these investigations on a critical element of press freedom: the exchange of information between reporters and their sources.
“Search warrants like these have a severe chilling effect on the free flow of important information to the public,” said First Amendment lawyer Charles Tobin, who has represented the Associated Press, but not in the current case. “That’s a very dangerous road to go down.””

The European Central Bank: The ECB can’t substitute for periphery financial reform | The Economist

“European banks in the periphery have many fundamental problems. With the euro area in recession and asset quality deteriorating, they remain significantly under-capitalised. In some cases, their governance is problematic. Many remain dependent on ECB facilities for funding, and thereby lack sustainable business models. Regulatory uncertainty abounds.
Viewed from the macroeconomic perspective, the banking sector is still too big and the private sector excessively indebted.
Treating these fundamental problems requires a “root-and-branch” reform of the European banking system, in the periphery and beyond. But the ECB does not have the instruments to implement such a comprehensive reform.”

France must reform or face punitive measures: EU’s Oettinger | Reuters

“France should only be granted more time from the European Commission to cut its deficit if it also introduces reform measures, EU Energy Commissioner Guenther Oettinger was quoted saying on Monday.”

WordPress’ Mullenweg Says 72,000 Blogs Imported From Tumblr in 1 Hour – Kara Swisher – Media – AllThingsD

“Despite largely anecdotal media speculation, it’s not clear how the acquisition of Tumblr by Yahoo for $1.1 billion will be greeted by users of the New York blogging service.
But rival blogging service WordPress’s founder Matt Mullenweg posted a blog last night that said that imports from Tumblr to his service on Sunday had risen from a typical 400 to 600 blog posts an hour to more than 72,000.

The Market Is Not the Economy: What the Fed Misses

“Whatever course it chooses, the Federal Reserve will have to grapple with the reality that while its policies have helped levitate stocks, they’ve been considerably less effective at expanding the economy.
While rising equity prices help add to total growth, the stock market is not the economy.”

Scandal! : Columbia Journalism Review

“Avoid Over-Hyped Historical Analogies. Likening every scandal to Watergate or Iran-contra is akin to equating every disappointing movie with Ishtar or Heaven’s Gate. Maybe someday the nation will be confronted with another lawless paranoid president or have to deal with a Marine colonel conducting a rogue foreign policy out of the White House basement. But until then, leave the exaggerated worst-crime-in-human-history references to metaphor-challenged politicians bloviating on cable TV news.
Ask the Right Questions. The most useful Watergate catchphrase remains Howard Baker’s, “What did the president known and when did he know it?” Still, a president can also create a set of attitudes within his own administration that can lead to abuses without direct involvement or knowledge from the Oval Office.”

Does the eurozone have a monetary policy transmission mechanism? Or rather a liquidity leak?

“Ryan Avent suggests allowing banks to swap their risky commercial loans for safer assets.  Other ideas propose running QE on packages of small to mid-sized loans or accepting those loans as collateral at the ECB.  Of course these assets are difficult to price and also moral hazard problems would loom.  If the ECB is not “overpaying” for the small loans, they won’t be encouraged.  If the ECB is overpaying, there are plenty of Sicilian businessmen who have friends at the local bank.  The mere lending isn’t enough, the projects also need to be good ones, because in these cases we are talking about tackling issues in the real economy.  Can a long-distance ECB collateral support operation spur good, growth-inducing projects?  It is easy to see why the Germans might be skeptical.”

Why ‘The Great Canadian Short’ is a buying opportunity – The Globe and Mail

I don’t have a view on this but I do think you need to hear this view because the short Canada story is very topical at the moment.
“The “sell Canada” trade is getting crowded. The number of voices recommending investors either steer clear of our stock market or even bet against it is on the rise, but the pessimism has an upside: In a world of fully-valued stock markets, Canada is looking like a bargain.”

Is the Stock Android Galaxy S4 Better Than a Nexus?

“Yesterday at Google I/O, the company announced something it hasn’t before: a stock version of an existing Android handset. Is it better than a Nexus, though? Yes…and no.”

El Banco de España declara secreta un acta oficial sobre el colapso de Cajasur | Andalucía | EL PAÍS

The Bank of Spain is keeping secret the documents related to the failure of Cajasur in Andalusia.

An acquisition is always a failure | PandoDaily

“The party ended in 2006, when we sold our company to IAC, a conglomerate owned by media mogul Barry Diller. Bit by bit, the youthful energy that created so much value was siphoned off. Whereas we’d once been free to work on whatever seemed interesting, we now found ourselves in vaguely defined middle-management roles, sitting through pointless meetings where older doofuses who didn’t understand the Web challenged our intuitions and trivialized our ambitions.
Not understanding the nature of IAC, I assumed it was only a matter of weeks before I persuaded my new bosses to adopt our way of thinking of a better approach to consumer tech, with less structure and more play, an exploratory mindset that, through trial-and-error, produces very tangible real-world value. After all, this was how we created the company that *they* bought. “

Caja Madrid prestó a Blesa 421.000 euros incumpliendo la Ley de Cajas | Economía | Edición España |

Apparently Caja Madrid loaned its ex-head Miguel Blesa 421,000 euros in 2004 without properly noting this and telling the Madrid government. He is now in jail.

Blesa es el primer banquero en la cárcel por los abusos que causaron la crisis | Economía | EL PAÍS

Caja Madrid head Miguel Blesa is the first top Spanish banker to face jail since the bank crisis began. He was head from 1997-2010.

Germans blame poor Eurovision showing on Merkel and austerity – European News | Latest News from Across Europe | The Irish Times – Mon, May 20, 2013

“Germans lamented their unexpectedly poor showing at the Eurovision Song Contest, blaming chancellor Angela Merkel’s tough stance in the euro zone crisis for their failure to win any points from 34 of the 39 countries voting.
Denmark’s Emmelie de Forest won the event, watched by around 125 million people across Europe, with 281 points while German act Cascada was 21st out of 26 countries, getting just 18 points from Austria, Israel, Spain, Albania and Switzerland.
“There’s obviously a political situation to keep in mind – I don’t want to say ‘this was 18 points for Angela Merkel’,” said Germany’s ARD TV network coordinator Thomas Schreiber.”

Four key Hillary Clinton staffers from 2008 unlikely to sign on for 2016 bid – The Washington Post

“Howard Wolfson, the 2008 communications director for Hillary Rodham Clinton, has said he will not return for a 2016 presidential campaign. Neither, for that matter, will Neera Tanden, the campaign’s policy director. Ditto for Mark Penn, the chief strategist, and Patti Solis Doyle, the embattled campaign manager.
As core members of a dysfunctional “Team of Rivals,” these top advisers were seared, scattered and, to different degrees, forged by the 2008 experience. Haunted by the failures in management and messaging, they have worked hard to get over their shattered White House dreams and rejection by a Democratic base enamored with Barack Obama. They express their requisite hope that Clinton will run and win, but also their lack of interest in jumping back in.” | Greece’s New Orders Index in Industry down by 12.7% in March

“The New Orders Index in Industry in March 2013 fell by 12.7 percent compared to a year earlier, the Hellenic Statistical Authority (ELSTAT) said on Monday.”

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