“Either things in China are now very serious (and Jean-Claude Juncker has been hired as chief propaganda officer), or the BOC hired Erin Callan as CFO. Either way, for now at least, the Bank of China “is fine”…”
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Joined Nov 11, 2007
31,929 Blog Posts
Gapping Up and Down This Morning
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Comments »In Play and On the Wires
HEADS UP: ALL ASSET CLASSES ARE SELLING OFF GLOBALLY
Report Shows Banks Fail to Comply With Mortgage Settlement
“Four large U.S. banks have failed to comply with key elements of a landmark $25 billion mortgage settlement, an independent monitor said Wednesday.
The report shows that lenders continue to bungle their dealings with struggling homeowners seven years after the bursting of a national housing bubble.
Bank of America Corp., BAC -0.61%J.P. Morgan Chase JPM -1.05% & Co.,Citigroup Inc. C -0.97% and Wells Fargo WFC -0.44% & Co. each failed to meet at least one of 29 standards for providing timely and accurate relief to homeowners at risk of foreclosure, Joseph A. Smith Jr., the independent monitor responsible for overseeing the settlement, said.
The bank lapses show that some homeowners still face challenges despite an improving housing market and a legal settlement designed to provide more transparency and accountability from lenders.
“Delays in the foreclosure process result in homeowners falling further behind,” said Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, during a Wednesday news conference. “This is unacceptable.”
Mr. Donovan warned that banks that fail to correct continued missteps will face “serious consequences,” including “hauling them back into court.” ….”
Comments »$SD Hits the Bid on CEO, Company Pays $90 Million Golden Parachute
“SandRidge Energy Inc. SD +2.17% on Wednesday ousted Chief Executive Tom Ward after dissident investors pushed for his removal. But the founder’s fall is being cushioned by about $90 million, one of the larger severance packages seen in the energy industry.
Mr. Ward’s departure wasn’t a surprise. SandRidge came under fire last year from activist investors for Mr. Ward’s high pay, a weak stock performance and its dealings with businesses controlled by Mr. Ward and his family. A spokesman for Mr. Ward said he wasn’t available to comment.
In March, the Oklahoma City company settled a proxy fight with a big activist shareholder, agreeing to either fire Mr. Ward or give control of its board to the activist, hedge fund TPG-Axon Capital LP. SandRidge appointed four directors nominated by the investor at that time.
SandRidge promoted President and Chief Financial Officer James Bennett to CEO. Mr. Bennett, who will remain president, worked in private equity before joining SandRidge in 2011….”
Comments »$MU Turns the Corner Hopefully Leaving Seven Qs of Losses Behind
“Micron Technology Inc. (MU) reported third quarter fiscal 2013 earnings per share of 4 cents beating the Zacks Consensus Estimate of 3 cents per share. After posting losses in the past seven quarters, this quarter’s beat seems to be a sigh of relief for Micron. The beat can be attributed to favorable memory market condition that led to higher shipments and improved average selling price (ASP). Nevertheless, lackluster PC demand and macro uncertainty remained headwinds.
Revenues
Micron reported revenues of $2.32 billion, up 6.7% year over year and 11.5% sequentially. The quarter’s revenues came above the Zacks Consensus Estimate of $2.26 billion. The improvement was mainly due to higher DRAM and NAND shipments.
DRAM revenues grew 23.0% from the prior quarter aided by 6.0% hike in sales volume and 16.0% surge in ASP. NAND sales grew 7.0% sequentially due to an 8.0% increase in ASP. NOR flash sales remained flat sequentially.
Higher DRAM ASP was the effect of balancing supply with slowing PC demand. NAND fundamentals improved due to continuous growth in SSD sales.
Operating Results…”
Comments »$RHT Reports Stellar Q and Edges Guidance Higher
“Red Hat (RHT) late Wednesday released results that edged analyst expectations, and its shares rose late after a rough day for the stock market.
But the provider of open-source Linux products’ year-over-year revenue growth of 15% tied for its smallest percentage increase since August 2009. Red Hat is diversifying into more product areas as the rate at which companies convert to Linux from the Unix computer operating platform slows.
And the company’s outlook for the current quarter was a tad short of Wall Street views, as the company pointed to slow spending by U.S. government customers.
Still, the company’s shares were up 2.5% in after-hours trading, after it released results. This came on a day when the stock market tanked after Federal Reserve Chairman Ben Bernanke said the central bank expects to slow the pace of its bond purchases later this year as the economy recovers. The tech-heavy Nasdaq composite index fell 1.1% Wednesday, and Red Hat fell nearly 1% in the regular session.
For its fiscal Q1 ended May 31, Red Hat reported earnings per share minus items of 32 cents, up 6.7% from 30 cents in the year-earlier period. Revenue rose to $363 million. Analysts polled by Thomson Reuters had expected EPS of 31 cents on sales of $359.8 million.
For the current quarter, Red Hat expects EPS ex items of 32 cents or 33 cents on revenue of $370 million to $373 million. Analysts have been modeling 33 cents, up 18%, and $373.1 million, up 16%.
“We are pleased with the double-digit growth that we delivered across each of our key financial metrics,” Red Hat CEO Jim Whitehurst said in a conference call with analysts. “We are leveraging our open innovation development model and subscription business model to help define the next generation of the data center.”
While U.S. government spending slowed last quarter, “we are also seeing encouraging signs that our federal business will improve in the current quarter,” Charlie Peters, Red Hat’s chief financial officer, said on the call….”
Comments »France Will Charge $GOOG a Privacy Fine If They Reject Transparency on Prism
“PARIS (AP) — France is giving Google three months to be more upfront about the data it collects from users — or be fined. Other European countries aren’t far behind.
Now it’s up to Google to decide whether the relatively small fines are enough of an incentive to rethink its privacy rules — the Internet giant risks a €300,000 euro ($402,180) penalty in France.
Europe’s a big market, but one where Google has no serious competition.
However, the company does have a reputation problem when it comes to protecting user privacy. Thursday’s legal action puts new pressure on Google, which is smarting from criticism over providing customer data to the U.S. government as part of its fight against foreign terrorists.
The French agency that regulates information technology says that five other European countries are taking similar steps in a staggered offensive against Google’s privacy policy between now and the end of July. It says Google largely ignored earlier recommendations from European regulators.
The French National Commission on Computing and Freedom, known as CNIL, says Spain joined France in the first wave of legal action Thursday, and that Britain, Germany, Italy and the Netherlands will join in the coming weeks.
The legal action accelerates a long-running European fight against Google over privacy, which is more rigorously protected in many European countries than in Google’s homeland, the United States.
A spokesman for Google said Thursday that it believes its privacy practices respect European laws.
“We have engaged fully with the authorities involved throughout this process, and we’ll continue to do so going forward,” said Al Verney.
Paris’ formal warning gives the company three months to make changes to its privacy practices. They include specifying to users what it is using personal data for, and how long it’s held.
Regulators also want Google to let users opt out of having their data centralized — for example, when data from online searches, Gmail and YouTube are crunched into a single location.
If not, Google risks a fine of up to 300,000 euros by France, which could eventually mean millions of euros in penalties across all six countries. By comparison, Google’s revenues were $14 billion in the first quarter of this year, much of that from advertising — which is boosted by the Internet giant’s ability to target users based on what they read, watch and buy online….”
Comments »Emerging Markets and Their Currencies Get Smashed Hampering Borrowing Costs
“Emerging-market stocks tumbled the most in 20 months, currencies weakened and government borrowing costs rose after China’s cash crunch worsened and the Federal Reserve said it may reduce monetary stimulus this year.
The MSCI Emerging Markets Index slid 3.2 percent to 916.20 as of 12:11 p.m. in London, the most since Oct. 3, 2011. Turkey’s benchmark stock index lost 4.4 percent, the most among major emerging markets, as the lira and India’s rupee hit record lows. BYD Co. (1211) slumped 9.3 percent in Hong Kong, while KGHM Polska Miedz SA fell 8.5 percent in Warsaw. Yields on South Africa’s benchmark 10.5 percent bonds due December 2026 jumped 0.42 percentage point to 8.33 percent.
Fed Chairman Ben S. Bernanke said yesterday the central bank may start reducing bond purchases and end the program in 2014 should risks to the U.S. economy abate. China’s benchmark money-market rate climbed to a record and a private report showed manufacturing shrank at a faster pace this month. Funds investing in developing-nation assets saw outflows of more than $19 billion in the three weeks to June 12, the most since 2011, according to EPFR Global.
“After 10 years of solid inflows into emerging-market debt, we should prepare ourselves for a period of outflows,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Management in The Hague, said by e-mail. “This should push currencies down more, lead to higher interest rates in emerging markets and make it necessary for investors to adjust their EM growth expectations downwards.”
Cheap Money….”
Comments »The BoE Orders Five U.K. Banks to Raise $21 Billion
“Five U.K. banks must find 13.4 billion pounds ($21 billion) to plug a 27.1 billion-pound capital shortfall by the end of the year, the Bank of England said.
The five lenders, including Barclays Plc (BARC), Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS), have already submitted plans to raise half the total, the London-based BOE said in a statement today. Lloyds must plan to raise an extra 7 billion pounds, while RBS and Barclays need 3.2 billion pounds and 1.7 billion pounds of additional capital.
“The challenge for the banks is that they have got many projects going on in the capital space,” Kevin Burrowes, a partner at PricewaterhouseCoopers, said in an e-mailed statement. “Many of those projects compete and some are duplicative. Banks need to align their projects and look at their business as a whole rather than in parts to get to the right capital position.”
The strength of Britain’s banking system is under scrutiny as the government considers selling its stake in Lloyds, which is 39 percent-owned by the state, and splitting up RBS. Chancellor of the Exchequer George Osborne said in a speech in London yesterday that the U.K. government would proceed only “if we get value for the taxpayer.”
Risk Weighted…”
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China’s Manufacturing Accelerates to the Downside Threatening European Recovery
“China’s manufacturing is shrinking at a faster pace this month, a trend that threatens to stem an economic recovery in the euro area from the currency bloc’s longest-ever recession.
A preliminary reading of 48.3 for the Chinese Purchasing Managers’ Index (EC11FLAS)released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. In Europe, a composite index based on a survey of purchasing managers in the services and manufacturing industries rose to 48.9 from 47.7 in May, Markit Economics said. While that’s the highest in 15 months, a measure below 50 still indicates contraction.
China’s manufacturing weakness, along with a cash crunch in the nation’s money market, will test how far Premier Li Keqiang is willing to go in sacrificing short-term expansion for more-sustainable long-term growth. After record credit in the first four months of the year failed to stoke growth, China’s State Council, led by Li, said yesterday that the financial system needs to do a better job of supporting the economy.
The China PMI Index “is a reminder that a strong euro-zone export recovery is unlikely” to materialize soon, said Martin Van Vliet, senior euro-area economist at ING Bank NV in Amsterdam. “Any further recovery later in the year is likely to be very slow and bumpy.”
Euro Stagnation…”
Comments »The Aussie Dollar Hits 3 Year Lows, Bond Yields Rise
“Australia’s dollar slid to the lowest in almost three years after a gauge of Chinese manufacturing contracted and the Federal Reserve signaled an exit from monetary easing. New Zealand’s bond yields surged the most since the collapse of Lehman Brothers Holdings Inc.
The Aussie slid for a fifth day, following the biggest decline since November 2011 yesterday, after Fed Chairman Ben S. Bernanke signaled the central bank could reduce monetary stimulus that tends to weaken the greenback. New Zealand’s dollar dropped for a fifth day after data showed the nation’s economic growth slowed more than economists forecast.
“The link between the China growth story and the Aussie dollar remains crucial,” said Michael Judge, a Sydney-based dealer at OZForex Pty Ltd., an online foreign-exchange company. “We all know the only way interest rates are heading in this country at the moment is south, and obviously weakening China growth doesn’t help that prognosis.”
The Australian dollar fell 0.7 percent to 92.29 U.S. cents as of 4:55 p.m. in Sydney from yesterday, when it tumbled 2 percent. It earlier touched 92.25, the lowest since Sept. 10, 2010. The New Zealand dollar weakened 0.8 percent to 78.33 U.S. cents after sliding 1.1 percent yesterday.
The yield on Australia’s benchmark 10-year government bond rose as much as 23 basis points to 3.65 percent, the highest since March 15. The extra yield it offers over 10-year U.S. debt yesterday narrowed to 107 basis points, or 1.07 percentage point, the least since November 2008. Commonwealth Bank of Australia (CBA) predicts the gap could shrink to the lowest since 2001.
China Slowdown…”
Comments »Initial Claims: Prior 334k, Market Expects 340k, Actual 354k
The Greenback Soars Creating a Carry Trade Pitfall
“The dollar surged against counterparts worldwide ranging from Australia’s currency to Turkey’s lira as the Federal Reserve’s signal it is getting closer to reducing monetary stimulus pushed volatility to the highest in a year and spurred losses in carry trades.
The U.S. currency strengthened versus all of its 16-most-traded peers and Deutsche Bank AG’s G10 FX Carry Basket index fell to the lowest level since October as Fed Chairman Ben S. Bernanke yesterday outlined the case for reduced monetary stimulus this year if the U.S. economy keeps improving. India leads carry losses among the 31 most-traded currencies versus the dollar this month with a 4.8 percent decline while its central bank likely intervened to protect the rupee.
“QE3 is now likely to end in the middle of next year so we’ve had an initial rise in the dollar,” saidGavin Friend, a currency strategist at National Australia Bank Ltd. in London, referring to quantitative easing, or QE. “People are reading this as the end the cheap money that’s gone intoemerging markets from the U.S. and Europe. If today’s U.S. data is reasonable, the dollar will continue to rally against currencies like the Aussie in particular.”
The dollar rose 0.6 percent to $1.3211 per euro at 8:01 a.m. in New York, extending the biggest two-day gain since July 6, 2012. The U.S. currency advanced 1.5 percent to 97.86 per yen. TheJapan’s currency fell 0.9 percent to 129.39 per euro.
Dollar Measure….”
Comments »Au and Ag Get in the Smelter After Coming Out of the Vice
“Bernanke said yesterday the central bank, which buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year and end the program in 2014 should the economy continue to improve. The dollar rose to the highest in more than a week against six major currencies and the 10-year yield on Treasuries reached a 22-month high. Commodities dropped.
Bullion slid 22 percent this year, heading for the biggest annual drop since 1981, as some investors lose faith in it as a store of value and as speculation grew that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year. Investors sold 520.7 metric tons valued at $21.6 billion from gold-backed exchange-traded products this year. The price slump hurt billionaire hedge fund manager John Paulson and producer Newcrest Mining Ltd. (NCM)
“The markets are definitely not prepared to wait until the tapering actually begins,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “The combination of Fed tapering, a spike in nominal yields and a stronger dollar has put gold under some considerable pressure.”
Gold Price
Gold for immediate delivery dropped as much as 4.8 percent to $1,286.20 an ounce, the lowest since Sept. 28, 2010, and traded at $1,300 by 11:57 a.m. in London. Bullion for August delivery sank as much as 6.5 percent to $1,285 on the Comex in New York and was last at $1,298.80. Futures trading volume was triple the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
The metal may fall another $50 in the next few days and will probably drop to about $1,100 in a year, according to Ric Deverell, head of commodities research at Credit Suisse Group AG. Nouriel Roubini, professor of economics and international business at New York University, has forecast a decline toward $1,000 by 2015.
The Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities dropped 3.6 percent since the start of January, the MSCI All-Country World Index of equities rose 5.4 percent and the U.S. Dollar Index added 2.8 percent. A Bank of America Corp. index shows Treasuries lost 1.9 percent.
Money Printing…”
Comments »Global Markets Get Smashed With the Homo Hammer, U.S. Futures Follow Suit
Charles Morris Who Accurately Predicted the Debt Crash Sees an Economic Boom Not Seen Since the 50s & 60s
“The man who predicted the crash of 2008 thinks energy and heavy manufacturing have the potential to fuel an economic boom not seen since the 1950s and 1960s. Photo courtesy of Jim R. Bounds/Bloomberg via Getty Images.
Paul Solman: In 2005, Charles Morris became convinced that a debt crash was inevitable. In 2006, he began his 10th book to make and explain his prediction. In 2007, he delivered the manuscript, and at the beginning of 2008, Public Affairs Books published “Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash,” which received almost no notice at all until The Economist magazine wrote about it in March. Six months after that, the deluge.
What’s remarkable is how well Morris’ analysis of the crash, written beforethe crash, holds up half a decade after it. So when I saw that he was calling his newest book “Comeback,” I felt obliged to take a look.
I’ll let him take it from here.
Charles Morris: It’s the best-kept secret in the economics media: The United States is on the brink of a period of solid, long-term growth rivaling that of the 1950s and 1960s. It is not a finance-driven, self-destructive boom, like the 2000s’ housing bubble. No, the new economy will be durably grounded in energy and heavy manufacturing, even though it will take several years to come to full fruition.
Evidence? Dow Chemical has commenced a $4 billion development in new plastics manufacturing in Texas, for example, that will start coming on stream in 2015 and be fully operational only in 2017, but it will be productive for a very long time. This will be a growth cycle with staying power.
Why haven’t you heard about the boom? Official economic forecasters, like the International Monetary Fund and the Congressional Budget Office, simply have not factored America’s emerging new economy into their forecasts. Instead, they still see us limping along at an average of 2 to 2.5 percent real (after inflation) growth to the farthest horizon — a hobbled, aging power, borne down by debts and deficits, shorn of its old bounce-back vigor, tottering along just fast enough to stave off out-and-out stagnation.
There is no question that the financial crash has left deep economic scars. But the fundamentals will turn in America’s favor and when they do, annual GDP growth should kick back up to at least the 3.3 percent average real growth rate that has prevailed since 1950. That’s far from a startling forecast for a recovery, but even at that level, the budget problems that have so paralyzed official Washington will shrink rapidly in the rear-view mirror as tax receipts grow, making debts and deficits shrink. The seemingly crushing post WWII debt — 120 percent of GDP — quickly dropped from the radar screens with growth in the 3-4 percent range in the 1950s. So what are the positive portents?
The Energy Boom Is Already Here…”
Comments »FOMC Conference Tanks Equities and Sends Yields Higher
Essentially, Bernanke tanked the markets when he said if the data comes in line with current the current pace of an economy that is expanding moderately, that the Fed would consider tapering later this year. If it continues to get better over the next several quarters then the fed could end QE mid next year.
Generally what ever happens on Fed speak day is the opposite of what happens over the next few. Although, this time may be different…
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