News links for 15 February 2013
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“Internet giant investigates abuse claims by foreign workers in its German warehouses”
This is a report I heard about on the German daily public TV news program Tagesschau. The report from the German public TV station ARD uncovers some shocking goings on at Amazon.de. This is the second such Amazon story out of Europe that I have seen as we also saw one in the UK reported by the FT.
The Federal Deficit Chart That Should Embarrass The Budget Hawks – Investors.com
“To be specific, CBO expects the deficit to shrink from 8.7% of GDP in fiscal 2011 to 5.3% in fiscal 2013 if the sequester takes effect and to 5.5% if it doesn’t. Either way, the two-year deficit reduction — equal to 3.4% of the economy if automatic budget cuts are triggered and 3.2% if not — would stand far above any other fiscal tightening since World War II.
Until the aftermath of the Great Recession, there were only three such periods in which the deficit shrank by a cumulative 2% of GDP or more. The 1960-61 and 1969-70 episodes both helped bring about a recession.
Far steeper deficit cuts during the demobilization from World War II and in 1937-38 both precipitated economic reversals.”
Isda nationalisation of SNS Reaal a credit event? Yes it is | FT Alphaville
“SNS Reaal’s sub expropriation was a restructuring credit event after all, according to 14 of the 15 Isda determinations committee members on Wednesday”
Whistleblower’s plea for honesty | In English | EL PAÍS
“Six months ago, he formally abandoned the Popular Party (PP) – the political grouping which he had represented as a deputy in Congress from 1996 to 2000. Now many of his former party colleagues are angry, baffled and even hurt by the actions of Jorge Trías Sagnier.
Trías Sagnier has become a major nuisance, a contributor to the ruling party’s current crisis. This whistleblowing lawyer and writer ignited outrage across the country when he published a column in EL PAÍS last month in which he alleged first-hand knowledge of top PP officials getting cash in envelopes on top of their regular salaries.”
Apple Inc watch computer team said to be about 100 strong | FP Tech Desk | Financial Post
“Apple Inc. has a team of about 100 product designers working on a wristwatch-like device that may perform some of the computing tasks now handled by the iPhone and iPad, two people familiar with the company’s plans said.”
Apple Inc. Q4 share plunge fueled by big hedge funds | Investing | Financial Post
“Some of the biggest hedge funds that helped make Apple Inc a stock market darling lost faith and dumped their stakes in the fourth quarter, fueling the massive drop in the iPhone maker’s share price.
Noted stock pickers including Leon Cooperman, Eric Mindich and Thomas Steyer unloaded billions of dollars of Apple shares between September 30 and December 31, according to disclosure documents filed on Thursday.”
Apple at Cheapest Since 2000 Signals Buy to Gamco, Thornb – Bloomberg
“The cheapest Apple Inc. shares in 12 years are encouraging some of the world’s biggest investors to bet that the stock will rebound after losing 33 percent of its value on concern about slowing profit growth.
The world’s largest company by market value is trading at a 29 percent discount to the Standard & Poor’s 500 Index, near the widest gap since December 2000, data compiled by Bloomberg show. While analysts have cut price targets by 21 percent since the stock peaked in September, the shares would rise 41 percent to $661 if investors valued the stock at the price-earnings ratio of the S&P 500, the data show.”
Retiring at 75 or 80 could be the norm – Telegraph
“Experts have hailed a “self-employment revolution” among older workers, highlighted by new figures from the Office for National Statistics (ONS).
A total of 367,000 people have become their own boss in the past five years, taking the total to 4.2 million. More than 300,000 of these self-starters were aged over 50. There are now 345,000 people working for themselves in the over-65s age bracket.
It is not just entrepreneurialism that is thriving. The number of people working beyond state pension age has nearly doubled over the past 20 years to 1.4 million, the ONS said last year.
Younger generations bemoan this trend in the belief that jobs are being “stolen”. This is not the case, according to “lump of labour fallacy” theory – the belief that there is a fixed number of jobs in the economy. Most economists argue instead that the economy expands, broadly, with the size of the workforce – one of the reasons for so much apathy in Westminster about immigration.”
Rio and the $115bn capital return | FT Alphaville
My general comment here is that mergers often destroy capital that could be returned to shareholders. This is what David Einhorn is afraid of with Apple, that they will find a non-productive use of capital. The larger the cash on balance sheet, the more it should be discounted because of the prospect of it being use non-productively.
“nterestingly the company has spent $110bn on capex and net M&A (acquisitions less divestments) over the past ten years and this compares to the company’s current market cap of around $115bn. Rio has paid around $18bn in dividends and buy backs less the rights issue is positive $4bn. At least in theory the company could have adopted this strategy in the past and perhaps avoided ~$35bn in impairments.
We already forecast dividends of around $76bn and capex of $76bn, which on our conservative long-term forecasts (copper $6,500 and iron ore $81 real) would interestingly still leave the company in a net cash position of around $79bn by 2023. In our view the numbers work, and Rio could commit to returning around $115bn in cash to shareholders with minimal shrinkage to its business (although this is a separate debate).”
This is not 1994 | FT Alphaville
“In support of why this time is different, Perkins notes that back in 1994 Fed communication was extremely secretive, there was a huge disconnect between markets and the Fed, the Fed believed there was a bubble in bonds and shortly after the first Fed hike the economy began to boom.
Whereas today: the Fed is obsessed with transparency, so there is no disconnect between markets and the Fed, the economy is suffering from a savings glut rather than a bond bubble, and the Fed is much less interested in battling runaway inflation.
Moreover, notes Perkins, Bernanke knows the economy is vulnerable to rising bond yields. “
Global financial assets, there are lots | FT Alphaville
“(Charts from Deutsche Bank)
Confession: I guessed $150tn before being put out of my misery by Robin Wigglesworth. I’d feel bad if this wasn’t a best guess, which DB do admit — “the following numbers should not be treated as gospel truth but as an attempt to grasp the scales of magnitudeof the world’s financial markets.”
Anyway, here’s the same stock as a percentage of global GDP”
U.S. Funds Score Big by Betting Against Yen – WSJ.com
“Some of the biggest U.S. hedge-fund investors have made billions betting against the yen, exploiting Japan’s determination to weaken its currency and boost its economy.
Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months. George Soros, who made a fortune shorting the British pound in the 1990s, has scored gains of almost $1 billion on the trade since November, according to people with knowledge of the firm’s positions. Others reaping big trading profits by riding the yen down include David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point LLC and Kyle Bass’s Hayman Capital Management LP, investors say.”
Former BlackBerry C.E.O. Sold All Company Shares – NYTimes.com
“Jim Balsillie, the former co-chief executive and co-chairman of BlackBerry, has sold all of his shares in the struggling company, a regulatory filing indicated on Thursday.
Mr. Balsillie’s arrival at what was then called Research in Motion in 1992 and his personal investment of $125,000 saved the company in its early days. But Mr. Balsillie’s latest investment move means that he will not gain if the new line of BlackBerry 10 phones revive the company’s fortunes.”
MacBook Pro Retina with 3 Years of AppleCare now as low as $1,539; some bundles cut by $750
“Following Apple’s MacBook Pro with Retina display price cuts on Wednesday, Apple Authorized Reseller and AppleInsider sponsor B&H Photo similarly slashed the prices of their exclusive bundles, including the 13-inch Retina MacBook Pro with 3 years of AppleCare extended protection, which now starts at just $1,539; some 15-inch Retina MacBook Pro AppleCare bundles were also cut by as much as $770.”
Albert Edwards On European Stocks – Business Insider
“”Investing say, in European equities, on a ten year view at current valuations will probably result in good long term returns– the single biggest determinant of long term returns being the valuation at the entry point,” he writes. “That view has not changed.””
Apple’s Price Cut A Symptom Of What’s Wrong At The Company – Business Insider
“The price cut reveals that consumers won’t rush to buy the latest greatest Apple product just because Apple made it. The price-value tradeoff has to be reasonable. And in the case of the MacBook Pro, it apparently wasn’t.
This problem — the price-value tradeoff — has become an issue for Apple far beyond laptops.”
IMF: Canada could make case for more interest rate cuts | Economy | News | Financial Post
““Our outlook for the Canadian economy is relatively a rosy one,” said Roberto Cardarelli, who heads IMF’s Canadian operations.
“The main reason for our optimism is that we expect export growth to strengthen as the recovery in the U.S. economy gradually steps up pace,” he told reporters in Ottawa, following the report’s release.
“And we expect a more sustainable and less uncertain global recovery to unleash capital spending that Canadian firms have been postponing for a while now, despite extremely favourable financing conditions.”
The weak outlook for economic growth, along with inflation now at a tame 0.8% — well below the central bank’s 2% target — pushed back calls for the resumption of interest rate hikes until at least 2014.”
Griechenland : Jugendarbeitslosigkeit steigt auf über 60 Prozent – Nachrichten Wirtschaft – DIE WELT
Youth unemployment in Greece is now almost 62%.
Berkshire to Earn 9% Interest on Preferred Shares in Heinz Deal – Deal Journal – WSJ
“Berkshire and 3G will each own half of the equity in the company, with stakes valued at over $4 billion each, according to people familiar with the terms. In addition, Berkshire will get about $8 billion of preferred shares in exchange for putting up more than $12 billion to help finance the deal, the people said.”
Iceland regains investment grade status | World news | guardian.co.uk
“Iceland’s rehabilitation after several years as a pariah in the global financial markets gathered pace last night after ratings agency Fitch said the island nation’s debts had regained investment grade status.
Fitch said Iceland’s debts had been upgraded to BBB from junk after a strong recovery from the financial crisis.
Reykjavik’s meteoric recovery comes after its 300,000 residents were told they would be locked out of the world’s financial markets for decades after they refused to rescue a group of bankrupt banks in 2008.
Unlike Ireland, Portugal and Spain, the Icelandic government let the country’s banks become insolvent rather than spend tens of billions of pounds on bailout funds.”
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