Joined Feb 3, 2009
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A Podcast With XIE on Shanghai’s Markets “Should Be 2000 or Less”… Plus Another Podcast on Criticism of Krugman & Deficits by John Tamny
Business Headlines August 31, 2009
By Jennifer Sondag
Aug. 31 (Bloomberg) — Walt Disney Co. said it agreed to buy Marvel Entertainment Inc. for about $4 billion in a stock and cash transaction, gaining comic-book characters including Iron Man, Spider-Man and Captain America.
Marvel shareholders will receive $30 a share in cash plus 0.745 Disney shares, the companies said today in a statement distributed by Business Wire.
Disney is buying the company, also the owner of the X-Men series, after films based on Marvel characters set box-office records. The deal gives Disney ownership of more than 5,000 Marvel characters.
Disney fell 84 cents, or 3.1 percent, to $26 at 9:15 a.m. New York time, before U.S. exchanges opened. Marvel jumped 26 percent to $48.63.
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MRVL Announces a Deal With CHL
Mobile open mobile system phones (MRVL) 15.36 : Co announces that its communications and application processors were selected for the new line of handsets launched as part of China Mobile’s (CHL) Open Mobile System. China Mobile, the world’s largest mobile phone operator by number of subscribers, introduced the phones in Beijing earlier today.
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By Adria Cimino and Daniel Hauck
Aug. 31 (Bloomberg) — Stocks retreated from Shanghai to Frankfurt on speculation the six-month rally has outpaced prospects for earnings growth. The yen strengthened after yesterday’s landslide election victory by the Democratic Party of Japan.
The MSCI World Index of 23 developed nations slid 0.5 percent at 12:20 p.m. in London, trimming its fifth monthly advance since the end of February. Futures on the Standard & Poor’s 500 Index fell 0.6 percent, while China’s Shanghai Composite Index tumbled 6.7 percent, the most since June 2008, and entered a so-called bear market. The yen strengthened against all 16 most-traded currencies. The 10-year Treasury bond rose, pushing its yield 2 basis points lower.
Equities slid after valuations for Europe’s Dow Jones Stoxx 600 Index and the MSCI Asia Pacific Index reached the most expensive levels in six years, as investors speculated that lending curbs in China will damp growth in the world’s third- largest economy. The tumble in Chinese stocks increased demand for the relative safety of the yen. The Japanese currency was also boosted as the DPJ’s victory marked an end to single-party government that lasted almost unbroken for half a century.
“There’s a wide consensus saying that sentiment has been running ahead of fundamentals,” said Vincent Juvyns, a Brussels-based strategist at ING Investment Management, which oversees about $476 billion. The recovery in stocks “is probably too fast and too strong,” he said in a Bloomberg Television interview.
Rising Valuations
The Stoxx 600 fell 0.5 percent, reducing its monthly advance to 5 percent. The rally has driven the price-earnings ratio for the index up to 48.6, the highest level since June 2003, according to weekly data compiled by Bloomberg.
Allied Irish Banks Plc fell 7.4 percent on speculation that the Irish government may cut initial payments to lenders under a plan to buy 90 billion euros ($129 billion) of loans from them. Bank of Ireland Plc slid 11 percent…..
VIENNA (AP) – Oil prices fell to near $71 a barrel Monday as China’s stock market tumbled and commodities investors questioned whether the U.S. economy can recover strongly in the second half.
Sinking Asian stock markets were led by a 6.7 percent fall in China’s benchmark. Oil investors often look to stock markets as a barometer of sentiment about the economy.
Benchmark crude for October delivery was down $1.51 cents to $71.23 a barrel noon European electronic trading on the New York Mercantile Exchange. The contract Friday added 25 cents to settle at $72.74 after tumbling from near $75 earlier in the week.
Oil has traded near $70 a barrel for most of the last few months as investors struggle to gauge how robust the U.S. recovery will be. Crude has tried and failed several times, including last week, to break through the $75 level.
“Oil looks a little tired,” said Christoffer Moltke-Leth, head of sales for Saxo Capital Markets in Singapore. “We’re seeing an economic recovery, but that’s already been built into the price.”
The U.S. economy will likely have to grow at least 2 percent in the third quarter to enthuse traders and push the oil price past $75, Moltke-Leth said.
Noting that oil prices have moved in a tight range between $70 and $75 per barrel for most of August, Vienna’s JBC Energy said support has come “from a weaker dollar relative to the Euro and growing evidence that the global economy is picking up.
“On the other hand, fundamentals remain plagued by high stock levels,” said JBC in its daily newsletter.
Investors will be eyeing the U.S. unemployment report on Friday as a key indicator of the economy’s health. A high unemployment rate this year has undermined consumer confidence and hurt crude demand.
Oil could drift lower to near $65 a barrel during the next month on investor concerns the current economic recovery isn’t sustainable, Moltke-Leth said.
“We could see another dip next year when the fiscal stimulus starts to fade,” he said. “The consumer is still being careful.”
In other Nymex trading, gasoline for September delivery was down by close to 2 cents at $2.05 a gallon and heating oil plunged by almost 4 cents to $1.82 a gallon. Natural gas was steady at $3.04 per 1,000 cubic feet.
In London, Brent crude was down $1.46 at $71.46.
Democratic Party Sweeps Japan Strengthening the Yen, but Weakening Markets
By Masaki Kondo
Aug. 31 (Bloomberg) — The yen strengthened after the Democratic Party of Japan won yesterday’s national election by a landslide, marking an end to single-party government that lasted almost unbroken for half a century. Japanese stocks fell.
The yen appreciated to 132.26 per euro in Tokyo from 133.85 in New York on Aug. 28, and strengthened to 92.77 per dollar from 93.60. The Nikkei 225 Stock Average fell 0.4 percent to 10,492.53 at the 3 p.m. close on the Tokyo Stock Exchange, reversing an earlier gain of 2.2 percent. Bonds rose.
“Some are saying the market has fully reflected the change of government, but the change is too big to be priced in,” said Hisakazu Amano, who helps oversee the equivalent of $18 billion at T&D Asset Management Co. “The impact of the DPJ victory on company earnings is still uncertain and investors can’t decide what to buy or sell.”
The DPJ routed the Liberal Democratic Party in yesterday’s vote, capturing 308 of 480 lower-house seats. The DPJ has pledged to revive an economy emerging from its deepest recession since World War II by boosting child-care spending, cutting taxes and limiting the power of bureaucrats…..
CPI Falls Less Than Expected in Europe
By Gabi Thesing
Aug. 31 (Bloomberg) — European consumer prices dropped less than economists forecast in August as the economy recovered from the deepest slump in six decades.
Prices in the 16-member euro region fell 0.2 percent from the year-earlier month after declining a record 0.7 percent in July, the European Union statistics office in Luxembourg said today. Economists predicted a 0.3 percent decrease, according to the median of 36 estimates in a Bloomberg News survey.
Inflation may accelerate as the global economy emerges from the worst recession since World War II, stoking demand and driving up the cost of crude oil and other commodities. The European Central Bank has warned that the recovery may face obstacles as rising unemployment curbs consumer spending and helps keep a lid on prices.
“It’s certainly a shorter period of negative inflation rates than most people thought and could be over next month,” said Nick Kounis, chief European economist at Fortis Bank NV in Amsterdam. “This latest piece of data puts the final nail in the coffin of the idea that the ECB will do more. At the same time, they don’t really have to worry about inflation pressures until 2011 or 2012.”
Consumer prices in Italy, the euro region’s third-largest economy, unexpectedly increased 0.2 percent in August from a year earlier, the Italian Statistics Institute in Rome said today. Economists forecast a 0.1 percent drop, according to the median forecast of 15 projections in a Bloomberg survey. Italian retail sales unexpectedly fell 0.4 percent in June from May, according to a separate report….
By Cherian Thomas
Aug. 31 (Bloomberg) — India’s economic growth accelerated for the first time since 2007, indicating the global recession’s impact on Asia’s third-largest economy is waning.
Gross domestic product expanded 6.1 percent last quarter from a year earlier after a 5.8 percent rise in the previous quarter, the Central Statistical Organisation said in New Delhi today. Economists forecast a 6.2 percent gain.
India joins China, Japan and Indonesia in rebounding as Asian economies benefits from more than $950 billion of stimulus spending and lower borrowing costs. India’s recovery may stall as drought threatens to reduce harvests and spur food inflation, making it harder for the central bank to judge when to raise interest rates.
“The weak monsoon has complicated the situation for the central bank,” said Saugata Bhattacharya, an economist at Axis Bank Ltd. in Mumbai. “Poor rains will hurt growth and stoke inflationary pressures as well.”
India’s benchmark Sensitive stock index maintained its declines today, dropping 1 percent to 15755.33 in Mumbai at 11:12 a.m. local time. The yield on the key 7-year government bond held at a nine-month high of 7.43 percent, while the rupee was little changed at 48.86 per dollar.
Before the rains turned scanty, the Reserve Bank of India on July 28 forecast the economy would grow 6 percent “with an upward bias” in the year to March 31, the weakest pace since 2003. It also raised its inflation forecast to 5 percent from 4 percent by the end of the financial year. The key wholesale price inflation index fell 0.95 percent in the week to Aug. 15.
‘Recovery Impulses’….
Still Not Enough Liquidity From The Federal Governemnt
By DAMIAN PALETTA
WASHINGTON — The biggest spur to deal-making among banks isn’t private-equity cash or foreign investors. It is the federal government.
To encourage banks to pick through the wreckage of their collapsed competitors, the Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. The initiative amounts to a subsidy for dozens of hand-picked banks.
![[The headquarters of the U.S. Federal Deposit Insurance Corp. The agency faces an exposure six times the amount remaining in its fund that guarantees consumers' deposits.]](http://ibankcoin.com/cronkite/wp-content/imagescaler/46bf9db83b88692f25b2724f54535d1f.jpg)
Bloomberg News
The headquarters of the U.S. Federal Deposit Insurance Corp. The agency faces an exposure six times the amount remaining in its fund that guarantees consumers’ deposits.
Through more than 50 deals known as “loss shares,” the FDIC has agreed to absorb losses on the detritus of the financial crisis — from loans on two log cabins in the woods of northwestern Illinois to hundreds of millions of dollars in busted condominium loans in Florida. The agency’s total exposure is about six times the amount remaining in its fund that guarantees consumers’ deposits, exposing taxpayers to a big, new risk.
As financial markets heal and the economy appears to be pulling out of recession, the federal government is shifting from crisis to cleanup mode. But as the loss-share deals show, its potential financial burden isn’t receding. So far, the FDIC has paid out $300 million to a handful of banks under the loss-share agreements.
The practice is largely a response to the number of bank failures of the past 18 months, which has stretched the FDIC’s financial and logistical resources. The FDIC had just $10.4 billion in its deposit-insurance fund at the end of June, down from more than $50 billion last year. The agency said Thursday it had 416 banks on its “problem” list at the end of the second quarter, which means the list of banks at a higher risk of insolvency has been growing.
Many of the government programs aimed at attacking the financial crisis have carried high price tags, including the Treasury Department’s $700 billion Troubled Asset Relief Program, which includes major government investments in American International Group Inc., Citigroup Inc., Bank of America Corp., and the U.S. auto industry. But federal money isn’t just going one way. Some of the emergency programs put in place last year, including TARP, have brought in billions of dollars for the government…..
Warren Buffet Expected to Raise Steak in BYD
By Joanne Chiu
HONG KONG (Reuters) – U.S. billionaire Warren Buffett intends to raise his stake in Chinese electric car and battery maker BYD Co Ltd (1211.HK), BYD’s chairman said on Monday, sending shares in his company up 8 percent.
MidAmerican Energy Holdings, a unit of Buffett’s Berkshire Hathaway (BRKa.N), bought 10 percent of BYD for $230 million or about HK$8 a share last September, sparking a massive rally in the stock.
“MidAmerican has always intended to raise its stake in BYD because it believes BYD has good prospects in the development of renewable energy, but we are still considering (whether to sell more),” BYD Chairman Wang Chuanfu told reporters on Monday.
BYD, Hong Kong’s largest listed auto stock, also said it expects to sell its e6 electric car in the United States in 2010, a year ahead of schedule…….
Baker Hughes To Buy BJ Services
New York, August 31 – Baker Hughes said it will buy smaller competitor BJ Services for $5.5bn in stock and cash to expand its international business and take advantage of BJ’s pressure pumping expertise.
The deal values BJ at a 16 per cent premium over its closing price on Friday, the companies said.
Lower oil and gas prices have hammered the industry, with both companies, as well as industry leaders Schlumberger and Halliburton, recently reporting sharply weaker second-quarter profit.
BJ Services stockholders will receive 0.40035 shares of Baker Hughes and $2.69 in cash for each share of BJ Services, which totals $17.94 a share based on Friday’s closing price. BJ Services shares were trading at $17.20, up 11 per cent, in thin pre-market trading. Baker Hughes shares were down 3 per cent.
Baker Hughes and BJ Services’ combined market capitalisation will be about $16.3bn, putting it ahead of National Oilwell Varco in the oil services field, but well behind Schlumberger, worth $68.8bn, and Halliburton, at $21.8bn.
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