MasterFeeds: September 2011

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September 26, 2011

Tax wars: A fight worth billions

Very interesting article on the use of foreign tax shelters by american companies.

Tax wars: A fight worth billions

Financial Times, 10:30pm Sunday September 25th, 2011
By Vanessa Houlder, Megan Murphy, Financial Times, and Jeff Gerth, ProPublica
US banks' deals with Barclays come under scrutiny, write Vanessa Houlder, and Megan Murphy of the FT and Jeff Gerth of ProPublica

Read the full article at:

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September 24, 2011

Grübel resigns as chief executive of UBS

After much deliberation, I am sure he just had enough!!

Grübel resigns as chief executive of UBS
Financial Times, 12:43pm Saturday September 24th, 2011

By Haig Simonian in Zurich
Oswald Grübel resigns as chief executive of UBS in the aftermath of $2.3bn rogue trading loss at the Swiss bank

Read the full article at:

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September 23, 2011

Investors are back in a 2008 mindset -

Investors are back in a 2008 mindset -

A bond bull only has to look at Japan and Switzerland for inspiration when it comes to US Treasuries and pay attention to what the Fed is saying. Both countries in effect have zero overnight rate policies, and their respective 10-year bond yields are below 1 per cent.

In the US, the yield on 10-year notes has fallen to 1.71 per cent, and barring an economic rebound, the Fed says its near zero overnight rate policy will stand for the next two years.

see the whole article here: Investors are back in a 2008 mindset -

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Chief Sells $25 Million in Shares of Jefferies -

Jefferies' Chief Sells $25 Million in Shares

September 22, 2011, 9:30 pm

The chief executive of a Wall Street investment bank sold a large stake in his company to pay off a personal debt on Thursday, a move that frightened its shareholders during an already scary day in the markets.

Richard B. Handler, the head of the Jefferies Group — and the highest-paid chief executive of a major Wall Street bank last year — sold two million shares, or $25.2 million worth of stock, to the bank’s largest shareholder, according to a securities filing.

The news sent shares of Jefferies tumbling more than 11 percent, before they recovered. Shares closed at $12.37, falling 3.7 percent, roughly in line with the broader market.

Mr. Handler sent a short memo to his employees explaining his reason for the sale. The transaction was tied to “significant tax payments” that he owed because of recently vested Jefferies stock. He said he had previously taken on debt to pay the tax bill because, as chief executive, he had been blocked from selling shares.

“While I am not happy about reducing my interest in our firm,” Mr. Handler said, “being out of debt is the prudent thing for me and my family in a turbulent world.”

Mr. Handler sold his stock in a turbulent market. The Dow Jones industrial average dropped more than 500 points Thursday before closing down 391 points, or 3.5 percent.

It was also an unpropitious time to sell Jefferies stock. All financial services shares have been hard hit this year, but Jefferies has fallen more than most. Its stock has fallen more than 50 percent year to date, while the Standard & Poor’s 500 stock-market index is down about 10 percent. Its shares fell sharply on Wednesday as analysts called the bank’s third-quarter results disappointing and cut its earnings estimates.

Goldman, in a research report, said it saw “continued downside” in the stock. The firm has a sell rating on the company.

Thomas Tarrant, a spokesman for Jefferies, declined to comment.

Chief executives rarely sell large chunks of stock, especially in down markets, because shareholders often consider it a vote of nonconfidence. In recent years, some executives have sold down their positions to assist in tax planning. Last year, Steven A. Ballmer, the chief executive of Microsoft, announced the sale of a portion of his holdings in part for tax reasons.

Still, Mr. Handler’s sale had Wall Street trading floors abuzz on Thursday. Mr. Handler, 50, is one of the highest paid chief executives not only in finance, but in the country. In 2010, he was granted total compensation valued at $47.3 million, which included a bonus for 2009 and stock awards for coming years. In contrast, Lloyd C. Blankfein, Goldman Sachs’s chief executive, made $13.2 million in 2010.

The sale also surprised the staff at Jefferies, which, like many Wall Street banks, is known for a staunch stock-ownership culture where sales of the company’s shares are frowned upon inside the bank.

Mr. Handler, who has been the chief executive for the last decade, is the largest individual shareholder in Jefferies and has not sold any of his stock since 2006. After his sale of two million shares, he still owns about 12 million shares, or 6 percent of the shares outstanding. Those shares are worth $148 million based on Thursday’s closing price.

Adding to the intrigue was the news that Mr. Handler had sold his shares to the Leucadia National Corporation, the bank’s largest shareholder. Leucadia, a low-profile conglomerate, owns about 26 percent of the company. Leucadia acquired Mr. Handler’s 2 million shares at $12.58 a share, approximately the market price.

“I think they made a great buy and am gratified by their belief in and support of Jefferies,” Mr. Handler said in his memo.

Jefferies, which is based in New York and specializes in trading debt and stocks, has expanded aggressively in recent years, in part taking advantage of some of the dislocation from the financial crisis. Mr. Handler, a charismatic leader, is a former trader at the investment bank Drexel Burnham Lambert, which collapsed in 1990 in the turmoil of the junk-bond market.

“I am sharing this personally with all of you so you are aware of the exact details so rumors or noise do not distort the facts,” Mr. Handler said.

Chief Sells $25 Million in Shares of Jefferies -

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September 14, 2011

China developers ‘short of cash’: analyst - MarketWatch

Sept. 14, 2011, 1:47 a.m. EDT

China developers ‘short of cash’: analyst

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — China’s real-estate market may face an escalating credit crisis, with industry data for August providing clues that big developers are running short of cash, according to Credit Suisse analysts.

The unfolding situation heralds a perfect storm for China’s home-building industry, and China’s deteriorating credit backdrop should be viewed by investors with alarm, the Credit Suisse analysts said.

Whose banks are better...China's or U.S.'s?

MarketWatch columnist David Weidner makes a stop on Mean Street to make the case that the U.S. banking industry should be a lot more like China's.

“I advocate selling all [Chinese] property-developer stocks because a credit crunch is coming,” said Credit Suisse analyst Jinsong Du, speaking with MarketWatch about the research.

Du said worries he’s had for a while about the housing market were confirmed by the “big disconnect” in data released by China’s National Bureau of Statistics on Friday.

Among figures out late last week, investment in residential projects rose to 432.9 billion yuan ($67.75 billion) in August, up 37% on year, or 4% higher from the prior month.

Meanwhile, completed residential projects in August totaled 37,250,000 square meters, a rise of 1% from a year earlier, but down 6% from the prior month.

Credit Suisse analysts said the Statistics Bureau’s figures back its earlier research which flagged that China’s real estate developers were beginning to face major headwinds.

The report, published in May, forecast that payment disputes between developers and their contracted construction companies would become more widespread, eventually resulting in construction delays and pushed back delivery dates.

“It’s finally shown up in the numbers,” said Du.

In spite of curbing the acquisition of new land and pressing for builders to slow their work, developers appear to have exhausted options to preserve cash, Credit Suisse said in its report dated Sept. 6.

Net gearing rose slightly in the first half, even as firms scrambled to improve their balance sheets, with the result “financials [are] much worse than they appear,” said the Credit Suisse analysts.

Credit Suisse forecasts property prices will decline in the second half, as sentiment surveys show enthusiasm towards property ownership beginning to wane.

Copyright © 2011 MarketWatch, Inc. All rights reserved.
China developers ‘short of cash’: analyst - MarketWatch

U.S. Census Data Shows Rising Poverty - Bloomberg

U.S. Census Data Shows Rising Poverty

The U.S. poverty rate rose to the highest level in almost two decades and household income fell in 2010, underscoring the lingering impact of the worst economic slump in seven decades.

Data released by the Census Bureau today showed the proportion of people living in poverty climbed to 15.1 percent last year from 14.3 percent in 2009, and median household income declined 2.3 percent. The number of Americans living in poverty was the highest in the 52 years since the U.S. Census Bureau began gathering that statistic. Those figures may have worsened in recent months as the economy weakened.

“Families are struggling to put food on the table, and they don’t have the purchasing power to help the economy recover,” said Isabel Sawhill, a senior fellow at the Brookings Institution in Washington.

Stagnating incomes and rising poverty will be at the heart of the 2012 presidential campaign that’s focusing on joblessness and will give added urgency to debates in Washington and statehouses across the U.S. over budget cuts to programs designed to protect families from hardship.

The ranks of people in poverty increased to 46.2 million from 43.6 million. The last time the poverty rate reached 15.1 percent was in 1993. It climbed to 15.2 percent in 1983. Median household income in 2010 was $49,445, down from $50,599 the year before.

Health Coverage

The number of those lacking health insurance increased to 49.9 million from 49 million, or about 16.3 percent of the population, a change the bureau said wasn’t statistically significant.

The income figures declined even as the U.S. economy expanded 3 percent in 2010. Growth has slowed this year to an annual rate of less than 1 percent, sparking concern that the financial struggles of families will continue to worsen and hamper the recovery.

U.S. households have little to cheer about as job creation stagnated last month and hourly wages retreated. The unemployment rate has hovered at or above 9 percent for more than two years. Consumer confidence fell to the second-lowest level this year for the week that ended Sept. 4.

“We would have hoped to have begun to climb out by now in terms of income and poverty rates, and that doesn’t seem to be happening,” said Sawhill, who was associate director of the White House budget office under President Bill Clinton.

Third Straight Increase

It was the third consecutive annual increase in the poverty rate, a trend that won’t reverse itself without “concerted action” on the part of policy makers, said Melissa Boteach, who leads a campaign to reduce poverty at the Center for American Progress, a Washington-based research group with ties to the Obama administration.

“The numbers should be a wake-up call to our elected officials that we need to act immediately to invest in job creation and protect vulnerable families,” she said.

Since the low point in the labor market downturn in February 2010, nonfarm payrolls have increased by 1.9 million, showing that without stronger growth, it will take years to recoup about 8.7 million jobs lost as a result of the recession that began in December 2007 and ended in June 2009.

The jobless rate rose to 9.6 percent in 2010 from 9.3 percent in 2009. Long-term unemployment, the percent of those without a job for 27 weeks or longer, increased to 43 percent from 31 percent, according to the Washington-based Economic Policy Institute.

Impact on Families

The figures “tell us how the changing economic conditions have really impacted the American family.” said Robert Groves, director of the U.S. Census Bureau, on a conference call with reporters.

President Barack Obama has proposed a $447 billion jobs bill. Yesterday he urged Congress to act on the proposal, which includes a cut in payroll taxes, spending to improve the nation’s infrastructure and aid to states to keep teachers and emergency workers employed.

The 2010 figures are part of an annual report on income, poverty and health insurance released by the Census Bureau. The data are based on a survey of about 100,000 addresses that’s used as the primary source of figures about the nation’s labor force.

Struggling to Make Ends Meet

The data show that in 2010, a year when corporate profits were soaring and the economy was pulling out of recession, middle-class Americans continued to see their fortunes decline. The earnings of women who worked full time were about 77 percent of those of men, about the same gap as in 2009.

“Even in good economic times, the number of Americans who were struggling to make ends meet and had declining income was going in the wrong direction,” said Boteach. “People are right to have some frustration that the economic gains of the last decade, when they were happening, weren’t shared.”

Since 2007, the year before the recession, median household income has fallen 6.4 percent, the census bureau said.

The growing poverty rate is likely to become an element of budget fights in Washington as a special committee of lawmakers looks to trim $1.5 trillion from the U.S. deficit during the next decade, and it may give momentum to calls from Democrats to raise taxes on the wealthiest Americans.

“Some in Congress have proposed cutting programs like food stamps and Medicaid, which were effective in keeping millions of people insured and above the poverty line at a time of widespread job loss,” said Arloc Sherman, a senior researcher at the Center on Budget and Policy Priorities in Washington.

Worsening Problem

“The data suggest that thoughtless budget-cutting could make problems of rising poverty and uninsurance significantly worse,” he said.

read the rest here: U.S. Census Data Shows Rising Poverty - Bloomberg:

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September 12, 2011

JPMorgan chief says bank rules ‘anti-US’

JPMorgan chief says bank rules 'anti-US'

Financial Times, 1:01am Monday September 12th, 2011
By Tom Braithwaite in New York and Patrick Jenkins in London
Jamie Dimon says moves to impose an additional charge on the largest global banks went too far and that Washington should consider an exit from Basel

Read the full article at:

September 9, 2011

"Gucci Scaramucci" Now Schmoozes

"Gucci Scaramucci" Now Schmoozes - Bloomberg

How much gold is traded every day?

How much gold is traded every day?

Excellent stats on the daily gold market in London

The MasterMetals Blog

Switzerland's central bank EIU ViewsWire

Switzerland's central bank has dramatically intervened in an attempt to stem the appreciation of the Swiss franc, imposing a ceiling of Swfr1.20:€1. The move, which prompted a sharp fall in the franc on September 6th, is broadly in line with recent Economist Intelligence Unit analyses suggesting that more unconventional measures would be needed to offset upward pressure on the currency. However, there is a substantial chance that rising global risk aversion will sustain the franc's safe-haven appeal, making it harder to prevent appreciation. The new policy also exposes the Swiss National Bank (SNB) to potentially heavy losses on its foreign-exchange holdings.

SNB acts

The SNB, Switzerland's central bank, stunned markets on September 6th by announcing that it would enforce a minimum franc/euro exchange rate of Swfr1.20:€1, and that it was prepared to buy "unlimited quantities" of foreign currency in order to do so. The new policy comes in response to what the SNB described as the "massive overvaluation" of the franc, and follows the failure of previous measures to counter the franc's rise.

In 2010 the SNB intervened heavily in the currency markets, selling francs and buying foreign currency. But the franc still rose by about 19% against the euro for the year. In the second half of 2010, the franc appreciated substantially against the US dollar as well. This year the upward pressure has continued as the debt crisis in the euro zone and an increase in global risk aversion boosted safe-haven flows into the franc. In recent weeks the Swiss currency hit record highs against both the euro and the US dollar. On August 10th the franc neared parity against the euro, reaching Swfr1.03:€1. This was despite an early-August cut in interest rates, accompanied by the announcement that the SNB intended to keep rates as close to zero as possible. Measures to increase Swiss-franc liquidity in the domestic money market have also been ineffective in preventing currency appreciation.

The strength of the franc has created problems for Swiss exporters. It is also tantamount to monetary tightening, threatening domestic growth and contributing to fears of deflation. As a result of these factors, the SNB has been under increasing political pressure to take stronger action to weaken the franc. This has culminated in its extraordinary imposition of an exchange rate ceiling vis-à-vis the euro, which could be considered a step towards a currency peg.

Costs and benefits

Will the new measure work? And at what cost to the economy and/or the SNB? These are difficult questions to answer in more than speculative terms. The Swiss franc immediately fell sharply against the euro, from Swfr1.1:€1 to Swfr1.2:€1, on news of the SNB's move. However, currency intervention often results in no more than temporary exchange-rate movements, reflecting the very large global market forces that such measures attempt, like King Canute, to defy. The fact that the SNB acted unilaterally rather than in concert with other central banks could render its policy less effective. In the SNB's favour is the fact that preventing currency appreciation is arguably less difficult than defending a currency that is under downward pressure. The central bank can theoretically print unlimited amounts of money to buy foreign currency; and it does not have to worry about running out of foreign-exchange reserves, as these increase, rather than fall, the more policymakers intervene. (Indeed, one side-effect of the SNB's unsuccessful efforts thus far to curb franc appreciation has been the huge rise in such reserves, from around US$45bn in 2008 to US$233bn in June 2011, according to IMF data.)

The biggest concern over the policy's effectiveness is simply the fact that investors' preference for safe-haven assets such as the Swiss franc looks likely to persist. The global economy is weakening, and the debt crisis in the euro zone remains severe. Moreover, the scale of intervention that will be needed, day after day, is formidable.

There is also the risk that the SNB's purchases of foreign currency could hurt its finances. The central bank's intervention in 2010 saddled it with losses of some Swfr21bn (US$24bn at the current exchange rate), as the value of foreign holdings was undermined by the subsequent strengthening of the franc. Should the SNB's new policy succeed in holding down the value of the franc for a sustained period, this ought not to be a problem. Still, a repeat of the losses suffered last year would be politically unacceptable. This also suggests that the difficulties facing the export and tourism sectors as a result of currency appreciation have become so acute that political pressure to weaken the franc is overriding other concerns for now.

SNB intervention also has potential implications for liquidity, inflation and bond markets in the euro zone. Printing money to buy euros and dollars implies an expansion in the money supply, which—as with quantitative easing in the US—could risk increasing inflationary pressures in the future if liquidity is not promptly drained at the appropriate time. However, such risks are mitigated for the time being by the fact that Swiss inflation is very low. Consumer prices rose just 0.2% year on year in August, the slowest pace so far this year. Last but not least, some commentators have suggested that the SNB's purchases of euros could lead the bank to increase its holdings of government bonds from euro members. This could increase Swiss exposure to euro area risk or, assuming the SNB bought high-quality bonds such as those from Germany, indirectly add to market pressures on the weaker "periphery" countries.

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September 7, 2011

In Euro Zone, Banking Fear Feeds on Itself -

  Some snippets from the article:

- American money market funds, long a reliable financing source for capital starved European banks, have sharply cut back on their exposure — starting in Spain and Italy but now also France — making it harder for European banks to loan dollars.

- The 10 biggest money market funds in the United States cut their exposure to European banks by a further 9 percent in July, or $30 billion, after a reduction of 20 percent in June, the Institute of International Finance said in a report issued Monday.

- Nevertheless, American institutions remain vulnerable to problems their French counterparts might encounter. At the end of the second quarter, JPMorgan Chase reported total cross-border exposure of $49 billion to France, while Citigroup had $44 billion and Bank of America had $20 billion.

Meanwhile, problems in Spain were highlighted on Tuesday when one of Spain's largest savings banks, Caja de Ahorros del Mediterráneo, reported a startling increase in bad loans to 19 percent of overall lending from 9 percent at the end of last year.

Still, the huge stockpile of euros that banks have stashed away at the European Central Bank  at rock-bottom interest rates —  last night it hit a recent high of 166 billion euros  — suggests that no bank is close to a Lehman-like failure.
See the whole article here: 

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September 6, 2011

Franc plunges as Swiss set euro-franc floor - Market Extra - MarketWatch

Market Extra

Sept. 6, 2011, 6:09 a.m. EDT

Franc plunges as Swiss set euro-franc floor

SNB vows to buy ‘unlimited quantities’ of euros to defend rate

By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — The Swiss franc plunged dramatically versus the euro and other major rivals Tuesday after the Swiss National Bank took the extraordinary step of setting a floor for the euro/Swiss franc exchange rate at 1.20 francs and vowed to buy “unlimited quantities” of euros to defend it.

In a breakneck swing, the euro (ICAPC:EURCHF) traded at 1.2033 francs, up from around 1.12 francs ahead of the announcement, a rise of 8.9%, as traders stampeded out of short euro/Swiss franc bets. Other currencies also rose versus the franc, with the U.S. dollar (ICAPC:USDCHF) jumping 8% to trade at 84.85 centimes. There are 100 centimes in a franc.

Swiss equities, which have been hurt by fears a strong franc undercutting Swiss exports, also jumped. The Swiss Market Index (SWX:CH:SMI) rallied 4.7% to 5,387.30, with offshore drilling firm Transocean Ltd. (NYSE:RIG) (SWL:CH:RIGN) up 8.9% and staffing firm Adecco SA (SWL:CH:ADEN) up 6%.

EURCHF 1.2024, +0.0937, +8.4513%

“With immediate effect, [the SNB] will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” the SNB said.

But analysts said the SNB’s toughest battle lies ahead, particularly if ongoing tensions in the euro zone continue to stoke investor appetite for safe havens.

“This is an endurance contest whereby the SNB needs to fight hard against a market that could soon test its resolve,” said Paul Mackel, currency strategist at HSBC in Hong Kong. “Putting EUR-CHF at 1.20 today is the easy part. Keeping it there or significantly above will be difficult if the world still looks like a gloomy place.”

The SNB had previously moved to boost franc liquidity and taken other steps in an effort to arrest the rise of the franc amid fears over the toll of a strong currency on the nation’s economy. Tuesday’s salvo was its strongest statement yet.

read the rest here: Franc plunges as Swiss set euro-franc floor - Market Extra - MarketWatch

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