Monday, August 31, 2009

Nomura Gets 6 Years Free Rent For London HQ - Canadian Pensioners Probably Not Happy......

The landlord is Oxford Properties ( the property arm of the Ontario pension fund in combination with UBS )....The 365,000 active and retired members of one of the biggest Canadian pension funds are probably not happy....... The unfavourable CAD/GBP Chart isn´t making things better..... And with stories like this it is only going to get worse...... For more "good" news on the pension front i recommend the blog Pension Pulse.....Unfortunately the situation in Germany isn´t any better.....I have listened to the latest conference call from Thyssen Krupp ( one of the largest steel producers and close to a junk rating ) & the CFO ( former CFO from überlevereged CONTI..... ) said the ( analogous ) following ( and he was not kidding! )..... "Good that our pension plan is still underfunded by over € 6 billions..... If we would have funded it in the past few years the deficit would be much bigger".... Probably the best spin attempt i´ve heard so far... CHUZPAH!

Der Vermieter ist in Kombination mit der UBS der Immobilienarm des Pensionsfonds von Ontario.....Keine guten Nachrichten für 365,000 Mitglieder einer der größten kanadischen Pensionskasse...... Wenn man jetzt auch noch die nicht gerade vorteilhafte Währungsentwicklung hinzunimmnt ( siehe CAD/GBP Chart ) dürfte der Ärger nicht geringer werden..... Und dank Nachrichten wie diesen ist eine Besserung nicht in Sicht...... Wer mehr "gute" Nachrichten zum Thema Pensionskassen hören möchte dem empfehle ich Pension Pulse oder die letzte Telefonkonferenz von Thyssen Krupp ( demnächst höchstwahrscheinlich mit einem Junkrating )..... Sinngemäßes Zitat CFO ( kommt von Conti.....) " Gut das wir zur Zeit mit über 6 Mrd unterfinanziert sind ...." Nach dem Motto je größer das Defizit desto weniger können wir mit unseren Einlagen verlieren..... So verkauft man grotesk schlechte Nachrichten noch als Erfolg.....PS: Überflüssig zu erwähnen das solch geringe Summen in der Präsentation die fleißig den Aufbau der flüssigen Mittel abfeiert vollkommen fehlt....CHUZPE!

Let´s at least hope they have viewed this deal from the start as "opportunistic"........

Bleibt zu hoffen das der Deal von Anfang an als "Opportunistisch" angesehen worden ist........

> From the 2007 press release when the deal was anounced......

> Aus der Pressemitteilung vom Sommer 2007

"The Watermark Place development is another important step in the expansion of Oxford's global investment platform,demonstrating the skills, capabilities, and reach of Oxford and its investment professionals. We are excited about our relationship with UBS - a world-class investment manager and a great like-minded partner." Andrew Trickett, Vice President of Corporate Development & Investment, added "this development represents a unique investment opportunity for Oxford and an outstanding addition to London's office market.
LONDON, Aug 31 (Reuters) -

Japanese investment bank Nomura has secured a rental deal on its new London headquarters allowing free rent for almost six years, the Financial Times reported, citing the terms of a deal to be announced on Tuesday.

The FT said the bank will confirm plans to move its UK business, including the staff taken on as part of the Lehman Brothers acquisition, into a new office development on the Thames.

Up to 4,000 banking staff will move into the 12-storey Watermark Place next year, many relocating from the former Lehman Brothers building in Canary Wharf.

The landlord, Oxford Properties, is the property arm of an Ontario pension fund and UBS

UPDATE via German FT Mietfrei im Londoner Hybrisbau
The term of the leasing contract is 20 years and the price is 40 british pound per square meter ( peak boomtimes 70 british pounds )

Der über 20 Jahre laufende Mietvertrag sieht nämlich vor, dass die Japaner in den ersten sechs Jahren kostenlos (!) in dem Glaspalast an der Themse residieren dürfen. Für die verbleibende Zeit verlangen die Eigentümer - ein Konsortium aus der Schweizer UBS und einem kanadischen Pensionsfonds - 40 Pfund je Monat und Quadratmeter. Zu Boomzeiten waren 70 Pfund üblich.

> With news like this no wonder Canary Warf needs a bailout......

> Dank solcher Nachrichten ist es wenig verwunderlich das Canary Warf in extremer Schieflage ist......

China invests in Canary Wharf with £880m bail-out of Songbird Telegraph

China is set to become the joint-largest shareholder in the owner of Canary Wharf after joining an £880m bail-out of Songbird Estates with its first major investment in UK property.

UK CRE Now Off 45 Percent From The Peak.......

According to IFD, UK commercial properties values have been declining fast with peak to current declines of around 45%, with major declines noted in all major segments - retail, offices and industrials

At the same time the amount of available floor space for occupation increased at the fastest pace since 1999 in all regions with the exception of London (Chart 2) and thevalues of inducements rose at its fastest pace since the survey’s history in 1999. Collectively this implies that an upward correction in prices in the foreseeable future is unlikely.

BNP Paribas chart of available floor space in the UK

> I still would almost die to see a similar stat for Dubai ( see The Upcoming Skyscraper Tsunami..... )

> Ich würde immer noch liebend gerne eine ähnliche Statistik für den Markt in Dubai sehen ( siehe The Upcoming Skyscraper Tsunami..... )

> Only 6 years of free rent.......Cleary a sign that the bottom is near....... ;-)

> Lediglich 6 Jahre Mietfrei in einer Top Lage Londons......Klares Anzeichen das der Boden wie tagtäglich propagiert inzwischen erreicht ist.... ;-)

Update:

Stuy Town, Which Is On Verge Of Default, Costs Florida's Pension Fund Entire $250 Million Investment

For Commercial Real Estate, Hard Times Have Just Begun

Corporate Pension Fund shortfalls weigh on recovery

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Friday, August 28, 2009

Depression-Era Bear Market Rallies Dow 1929-1932 vs 2009

A fascinating market........ With bullish sentiment among newsletter writers at its highest levels since January 2008. & Merrill Lynch Global Fund Manager Survey with highest equity allocation since October 2007 & long time bears capitulating ( see here & here ), short sellers "fleeing" , highest insider selling since 2004 with a sell/buy ratio of 61.8 , "Panic Buying" :-)!!! & zombie stocks making up to 30-40% ( swine flu ? ;-) & "Robotrading" well over 50% of the daily trading volume & rampant "creative accounting" ( see here, here, here & here) i´m more bearish than ever and i´m having 2007 flashback´s ;-) on a daily basis .....But as long everything is "better than expected" , the "less bad is good mantra" is dominating , the "Herd Mentality" is on steroids & leveraged loans are once again flying high i will repeat what i´ve said earlier .....
Be careful if you´re still long this market...... The risk/reward ratio isn´t quite "favourable" right now..... If you´re considering to short this market i agree with Jesse ( even if it is very tempting) .....
Bin jeden Tag auf neue fasziniert was an den Märkten bzw. im Kasino so abgeht...... Momentan haben wir eine geradezu euphorische Investorengemeinde ( siehe bullish sentiment among newsletter writers is at its highest levels since January 2008. sowie Merrill Lynch Global Fund Manager Survey mit höchster Aktienquote seit Oktober 2007 ), Bären die einer nach dem anderen kapitulieren ( siehe hier & hier ), "flüchtende" Short Seller,höchste Insiderverkäufe seit 2004 mit einem unfassbaren sell/buy ratio von 61.8 , "Kaufpanik" :-)!!!!, hyperinflationäre "kreative Bilanzierung" ( siehe hier , hier, hier & hier), jede Meldung egal wie "grottig" "besser als erwartet" ist bzw. das "The Less Bad Is Good Mantra" ausreicht aus um die Kurse zu beflügeln und selbst waghalsigsten Finanzierungen die noch vor 2 Monaten nicht mal im Traum durchgegangen wären sind heutzutage anscheinend wenig problematisch..... Mich erinnert das alles an den Sommer 2007 ...... ;-) Das momentan mit den Zombie Aktien von AIG, Citi, Fannie & Freddie momentan bis zu 30-40% und "Robotrading" deutlich über 50% des Handelsvolumens in den USA ausmachen und die "Herdenmentalität" extreme Auswüchse angenommen hat deutet für mich entweder darauf hin das die Schweinegrippe doch ein größeres Problem darstellt oder das der Tipping Point nicht mehr allzu lange weg sein kann.... Ich wiederhole meine frühere Aussage
Denke man sollte sehr vorsichtig sein wenn man noch immer long ist...... Für meinen Geschmack ist das Chance/Risikoverhältnis wenig vorteilhaft und wie ich finde stand es sogar selten schlechter als dies momentan der Fall ist ..... Für alle die mit dem Gedanken spielen short zu gehen empfehle ich den regelmäßigen Besuch der Seite von Jesse.....

Chart Of The Day

For some perspective on the current stock market rally and how it compares the 1929-1932 bear market (which also included bank failures, bankruptcies, severe stock market declines, etc.), today's chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots). For example, the bear market rally that began in November 1929 lasted 155 calendar days and resulted in a gain of 48%. As today's chart illustrates, the duration of the current Dow rally (hollow blue dot labeled you are here) is longer than any that occurred during the 1929-1932 bear market. As for magnitude, only the November 1929 bear market rally resulted in a better performance than what has occurred during the current rally to date.
News from 1930 Daily summary based upon my reading of the Wall Street Journal from the corresponding day in 1930

There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.”

Fed. Reserve seen continuing easy credit policy pursued since start of year. Some concern that increased reserve credit “will flow into speculative channels,” but this doesn't seem to have happened much yet.

Sounds familar.....? ;-)

Kommt Euch das irgendwie bekannt vor...... ? ;-)

UPDATE:

US Equity Markets Look Dangerously Wobbly As Insiders Sell In Record Numbers

Kass Calls The Top

Four Stages of Secular Bear Markets

Barton Biggs: Markets Lagging Reality, S&P Going To 1,200

S&P 500 May Surge 40% in Duplication of Japan: Chart of the Day ( No kidding !)

Birinyi said on May 20 that the S&P 500 would climb to a record 1,700 in the next two or three years

Party Time! Wall Street Back to Its Old Highly Levered Ways

The 1929 DJIA and the 2000 Nasdaq

The "Real" Mega-Bears

European countries announce that they voluntarily increase the IMF´s funding

Hedge Funds Betting on a Deflationary Market Collapse

Mutual Fund Cash Levels Adjusted For Inflation

Where Is The Pent-Up Demand

Food stamp list soars past 35 million: USDA

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Monday, August 24, 2009

Central Banks Net Buyers Of Gold.......

Looks like my critisism ( see Gold & The Wisdom Of Central Bankers ) was too widespread.... A better title would have been "Gold & The Wisdom Of Western Central Bankers"..... ;-)

Sieht so aus als meine Kritik ( siehe Gold & The Wisdom Of Central Bankers ) etwas zu breitgefächert war. Hätte wohl richtiger "Gold & The Wisdom Of Western Central Bankers" heißen müssen..... ;-)


Gold demand declines in Q2, still high Rolfe Winkler
The central bank sector had a dampening impact on supply - net purchases of 14 tonnes were recorded in Q2’09 compared to net sales of 69 tonnes in Q2’08, the figures indicating the first net purchase by central banks for a considerable length of time.
> Check out the rest of the link . As usual great stuff from Winkler

> Empfehle den kompletten Link von Winkler zu lesen. Wie immer großartig......


China's gold buy raises eyebrows for all the right reasons MW May 1, 2009

The precious-metals market took notice for all the right -- but not-so-obvious -- reasons when China announced last week that it ramped up its gold reserves by 76% in the last six years.

Last week, China announced that the amount of gold in its reserves has climbed to 1,054 tons from 600 tons in 2003

It also asked the International Monetary Fund to sell its entire 3,217 tons reserve

China's gold reserves are worth almost $31 billion -- about 1.6% of its total foreign- exchange reserve holdings, and gold as a percent of the country's total reserves has actually declined since 2003, according to Sam Subramanian, editor of AlphaProfit Sector Investors' Newsletter.

To put that into better perspective, if China was to purchase the IMF's reserves of 3,217 tons at a price of $1,000 per ounce, the price would be $103 billion, according to Kosares.

Disclosure: "Goldbug" ;-)

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Bernanke Sees A Recovery - How Would He Know? Hussman

Just in time for the reappointment of Bernanke.......I´ve put some updates to the original Hussman piece..... "Yes, We Can´t".....

Paßt hervorragend zur Wiederernennung von Bernanke.....Habe ein paar Updates zum ursprünglichen Hussman Artikel hinzugefügt...."Yes, We Can´t...."



Bernanke Sees A Recovery - How Would He Know? Hussman

“Our forecast is for moderate but positive growth going into next year. We think that by the spring, early next year, that as these credit problems resolve and, as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in other areas outside of housing, will take control and will help the economy recover to a more reasonable growth pace.”
Ben Bernanke, Federal Reserve Chairman
On Friday, investors took great cheer in an optimistic statement by Ben Bernanke suggesting good prospects for economic growth ahead.

We might be inclined to place a sliver of credibility in Chairman Bernanke's assessment – if not for the fact that the quote above wasn't from last week at all, but rather, hails back to November 8, 2007, just before the recent recession began.
> I have also found this ( see What? Did Bernanke Really Say This ? ) from Nov 2007..... UPDATE: OECD June 2007 Outlook via Mish...... Suddenly Bernanke is looking less "dumb"......

> Habe im "Blogarchiv" noch dieses Sahnestück ( siehe What? Did Bernanke Really Say This ? ) von Bernanke gefunden..... UPDATE: Verhlichen mit dem OECD June 2007 Outlook könnte man sogar behaupten das Bernanke unter den Einäugigen König ist......

You might recall that the S&P 500 was pushing 1500 at the time. The implosion of the global credit markets was still just a slight rumble

Solving economic problems, to our Fed Chairman, is as easy as throwing money out of helicopters. Not surprisingly, throwing money out of helicopters has been the basic core of his strategy during this crisis.

This does not involve complex thought about debt restructuring, moral hazard, incentives, equitable distribution of resources, or other factors.

All it requires is the three second tape playing in Bernanke's head - "We let the banks fail in the Great Depression, and look what happened." And then the tape repeats.

Never mind that the cause of the upheaval was not the failure of banks per se, but the disorganized Lehman-style failure of banks. The tape isn't long enough to encompass such nuances.

Ben Bernanke (like Tim Geithner and his predecessor Hank Paulson), shows no hesitation in diverting the real resources of the American public to defend and compensate the bondholders of mismanaged financial companies who made reckless loans and who should have (and equally important, could have) been expected to write down principal or swap debt for equity as an alternative to receivership.

This is not decisiveness. It is timidity and poor stewardship. Worse, the underlying problems are not healed - only band-aided temporarily by a flood of public money.

Unfortunately, the resources used in the recent bailout were not just free money tossed out of a helicopter. Only a partial-equilibrium economist thinks that way.

No, this was an allocation of trillions of dollars of real resources that could be spent improving access of poor families to health care, finding cures for life-changing diseases, providing better education, and reversing the crowding-out of productive private investment.

A public servant willing to act this carelessly with the resources entrusted to him, and so strongly in defense of fellow bankers, frankly does not deserve the job. Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end. We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership.

> Another Bernanke quote via Rosenberg

Then again, he told us in June 2008 that “although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.”

Nice call. Those supporting Mr. B's reappointment should take this forecast into consideration. It's not quite like Chamberlain's “peace in our time”, but it's not that far off either.

> I have never heard the usually calm Farrel ranting...... I like it......

> Habe den ansonsten besonnene Farrel bisher nicht mal im Ansatz so "explodieren hören"......

Dismantle Bernanke's 'Happy Conspiracy' ... now! Paul B. Farrell

(MarketWatch) -- At last week's annual Jackson Hole meeting of Fed execs, Boss Ben Bernanke's braggadocio about saving the world from another Great Depression had the feel of an egomaniacal dictator trying to cement his legacy in history.

Any good behaviorist would tell you Bernanke's got some dangerous biases isolating him from reality (remember two years ago when he was denying the meltdown). His brash claims and radical, secretive policies present a grave danger to American capitalism and democracy.

The Case Against Ben Bernanke Stephen Roach via Kedrosky

He argues three points about the pre-Lehman incarnation of Bernanke:

He was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles.

He was the intellectual champion of the “global saving glut” defence that exonerated the US from its bubble-prone tendencies and pinned the blame on surplus savers in Asia.

He is cut from the same market libertarian cloth that got the Fed into this mess.

Finally, and this is a broader point, Roach argues that it is too soon to grant Bernankeas having saved the day: “It would be the height of folly to reward Mr Bernanke for the recovery that never stuck. “

6 Bad Calls By Ben Bernanke Clusterstock Slideshow

Dean Baker via Tim

"Reappointing Ben Bernanke because of how he has dealt with the crisis is like giving another command to the captain of the Titanic, based on how effectively he got people into the life boats".

Rolfe Winkler

That said, I think Fed policy under Bernanke has been terrible. The Greenspan interventions he supported inflated the largest credit bubble in 80 years; the de-leveraging that needs to happen to correct the damage has been delayed indefinitely by Bernanke’s own interventions.

His supporters say he averted a second Great Depression. I disagree. He’s merely delayed it.

The liabilities of the financial and consumer sectors haven’t gone away, they’ve merely been absorbed by the public balance sheet. This is as much Hank Paulson’s and Tim Geithner’s fault as it is Bernanke’s. I’m not thrilled with their leadership either.

> I agree....

> Hätte es besser nicht sagen können......

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Friday, August 21, 2009

Prime Time Humor.....

Thanks to Gary Varvel!



















Souring Prime Loans Compound Mortgage Woes WSJ

[mortgage chart]

MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2 Calculated Risk

The Market Ticker
Delinquency cure rates refer to the percentage of delinquent loans returning to a current payment status each month. Cure rates have declined from an average of 45% during 2000-2006 to the currently level of 6.6%. It is important not only to observe total roll rates, but delinquency cure rates as well, according to Managing Director Roelof Slump.

In addition to prime cure rates dropping to 6.6%, Alt-A cure rates have dropped to 4.3%, from an average of 30.2%, and subprime is down to 5.3% from an average of 19.4%. 'Whereas prime had previously been distinct for its relatively high level of delinquency recoveries, by this measure prime is no longer significantly outperforming other sectors,' said Slump.

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Wednesday, August 19, 2009

When Monetizing 12% Percent Of GDP Isn´t Enough.......

Not quite an "Exit Strategy"....... This Cartoon on "Green Shoots" is spot on..... :-) As long as the pound & gilts are not crashing this will continue.....I´m pretty sure Bernanke is watching the market reaction very closely UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain .... Especially with the Fed running low on ammo..... Read A 300-year-old example of quantitative easing.... John Law, Alan Greenspan, Ben Bernanke... via The Mess That Greenspan Made as a reminder what can happen.......

Das ist wohl das Gegenteil der dank der tagtäglichen "Green Shoots Visionen" diskutierten Exitstrategie der Notenbanken......Die Lage muß wirklich KLASSE sein......Dieser Cartoon trifft den Nagel auf den Kopf...... Aber solange das Pfund & Gilts nicht crashen wird dieses in der Vergangenheit mehrmals massiv fehlgeschlagenes "Experiment" ( siehe A 300-year-old example of quantitative easing...... John Law, Alan Greenspan, Ben Bernanke... ) weitergehen...... Bernanke dürfte die Marktreaktion sehr genau verfolgen UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain ..... Das gilt umso mehr als die Programme der Fed auf "Reserve" ( siehe Running low on ammo via R.Winkler ) laufen......

The governor’s insatiable appetite for QE FT Alphaville
The Governor invited the Committee to vote on the proposition that:

Bank Rate should be maintained at 0.5%;

The Bank of England should finance a further £50 billion of asset purchases by the creation of central bank reserves, implying a total quantity of £175 billion of such asset purchases. The Bank should seek to complete the additional purchases within the next three months.

Six members of the Committee (Charles Bean, Paul Tucker, Kate Barker, Spencer Dale, Paul Fisher and Andrew Sentance) voted in favour of the proposition. Three members of the Committee (the Governor, Tim Besley and David Miles) voted against, preferring to increase the size of the asset purchase programme by £75 billion to a total of £200 billion.

Yep, Mervyn King, together with Besley and Miles wanted the rate of monetary stimulus increasing, not just extending at the current rate of £50bn-a-quarter. That was good for half a cent off sterling versus the dollar and a third of a cent v the euro on Wednesday morning. Gilts, of course, spiked higher.

Somebody stop me Alice Cook from the great blog UK Bubble

The extraordinary thing about UK monetary policy today is how close it is shadowing fiscal policy. This year, the Bank of England printing presses will produce roughly the same amount of new money as this year's fiscal deficit. Or to put it more bluntly, the private sector have, on a net basis, stopped lending money to the government.


The Casey Report

> The estimated issuance is based on this "optimitic" forecast.... Especially compared to the IMF, OECD, Bloomberg etc..... No surprise to see the BOE also out of touch....... Good to know that at least this leads to a "review" of the AAA rating.... Hallelujah! :-) After watching this & this chart it should be clear to anybody not working at an rating agency that an AAA is more or less history.....

> Die o.g. Emission der Gilts basierd auf der unten aufgeführten "wenig konservativen" BSP Prognose...... Vergleicht diese mal mit denen von IMF, OECD, Bloomberg..... Überflüssig zu erwähnen das die BOE ebenfalls jenseits aller Realität prognostiziert..... Immerhin wird "gedroht" das AAA Rating einer ernsthaften Prüfung zu unterziehen..... Was wären wir nur ohne die Ratingagenturen....... Spätestens nachdem man sich diesen & diesen Chart vor Augen führt dürfte jedem der nicht gerade für eine Ratingagentur arbeitet klar sein das ein AAA wohl auf Jahre hinaus nicht mehr als ein feuchter Traum von Brown & Co sein wird.....

FT Alphaville

The Chancellor has forecast that the economy will contract by 3.5% in 2009, followed by GDP growth of 1.25% in 2010 and 3.5% in 2011. He sees long-term trend growth at 2.75%

UK GDP forecasts - RBC (amended)

> While i´m still in the deflation camp for some time to come but i´m pretty sure down the road the central banks will once more cause massive inflation ( read Inflation: What the heck is it? from Mish). If you want to know the details why i think this will happen i would like to refer to the podcast with Chris Martenson. Couldn´t have said it better.....H/T Pension Pulse.... One of many reason why i´m a "Goldbug" ( regardless of the timing - H/T Zero Hedge). The best "insurance"( relatively speaking ) you can buy to protect yourself from the "wisdom" of King, Bernanke & Co.. :-)

> Obwohl ich die nächsten Jahre noch dem Deflationscamp zuzuordnen bin steht zu befürchten das die Notenbänker Ihr Ziel einer stark "erhöhten" Inflation nicht verfehlen wird. Wichtig zu wissen das ich mit der Definition von Mish ( siehe Inflation: What the heck is it?.) übereinstimme die mit den Veränderungen der Konsumentenpreisen nur sehr indirekt etwas zu tun haben. Für alle die die Logik hinter dieser Einschätzung erfahren möchten die verweise ich gerne auf den erstklassigen Podcast mit Chris Martenson. Kann es beser nicht formulieren..... Dank an Pension Pulse..... Einer von vielen Gründen warum ich ein Freund des Goldes bin ( und das unabhängig vom timing / Dank an Zero Hedge ) Auf Dauer gesehen die zumindest relativ beste Absicherung gegen die "Weisheit" von Bernanke, King & Co .....

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Monday, August 17, 2009

"Generally Accepted Accounting Principles Are Not Generally Accepted In China ......"

Not even close to compete with the accounting stunts we see on a daily basis from Wall Street Finest ( see "Reported Earnings vs Operating Earnings" ) ..... ;-)

Verglichen mit den Buchführungsverrenkungen der börsennotierten Großkonzerne & Analysten ( siehe "Reported Earnings vs Operating Earnings" noch harmlos..... ;-)

Another View: Tunneling to True Profit in China Dealbook
Mark Dixon, a founder of the mergers and acquisitions adviser the1.com, which is active in mainland China, unwittingly unearthed some Chinese accounting tricks while valuing a local company

> Not a listed company / keine börsennotierte Firma

What with the world still reeling from the domino effect that Lehman Brothers’ balance sheet had on financial markets, the exposure of accounting frauds like the one at the Madoff fund and the final throes of the expenses scandal in the British Parliament, a trip to China promised to be a breath of fresh air in this atmosphere of fishy finances.

Hired by a client to help with an acquisition in China, I was given the job of deciding how much the buyer should pay for the business. That meant first calculating an accurate profit for the target company, its so-called normalized profit.

In the West, the process involves making a few small adjustments caused by things like no longer having to pay salaries to sellers if they aren’t going to stay at the company and other nonrecurring items. But it shouldn’t mean having to recalculate the entire income statement.

Generally Accepted Accounting Principles are not generally accepted in China. This is partly because the Chinese have their own accounting rules and partly because rules are for breaking
And it’s not just that some company owners are trying to confuse the tax authorities. It’s that, when they do so, they end up also confusing themselves.

The gymnastics they do with revenues and costs are so impressive that the Beijing Olympics should have added an event especially for accountants.

Markets with developed gray economies, like Italy, are well known for the practice of keeping one set of accounts for the government and another for the owners so they know what’s really going on. Chinese companies often dispense with the second set, hence the confusion. That’s probably true of other “developing gray economies.” .....

> At least they try to understate the true earnings power..... The opposite is true for almost every listed company out there ( except when it comes to their taxable profit )..... Go and read the entire piece..... Nice insight on Chinese mentality....

> Immerhin versuchen die chinesischen Eigner die wahre Ertragsktaft zu verschleiern..... Das kann man von den börsennotierten Firmen weltweit nicht gerade behaupten ( wenn man mal vom letztendlich zu versteuernden Gewinn absieht )..... Empfehle den Rest der Story zu lesen..... Offeriert einen netten Einblick wie der typische chinesische Firmeneigner tickt.........

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WM 2009 Berlin - World Record 100m - Usain Bolt - 9.58 HQ

Let´s hope he made it without doping.....

Bleibt zu hoffen das diese Leistung auf legalem Wege erzielt worden ist.......



Lightning Bolt Economist
The men's 100 metres record is smashed by the biggest margin in modern times
IT WAS another big occasion and yet another world record for a Jamaican sprinter, Usain Bolt, on Sunday August 16th. At the athletics World Championships he broke the 100 metres sprint record again, taking his own time down to 9.58 seconds from 9.69 seconds, set a year ago at the Beijing Olympics. This is the most the record has fallen since electronic timing was first used in 1968. In the century or so since official records began a little more than a second has been shaved off the quickest time for the sprint, an improvement of 9%.




100-Meter-Weltrekorde
ZEIT NAME JAHR ORT
10,60Donald Lippincott/USA1912Stockholm
10,20Jesse Owens/USA1936Chicago
10,00Armin Hary/Deutschland1960Zürich
9,95James Hines/USA1968Sacramento
9,92Carl Lewis/USA1988Seoul
9,86Carl Lewis/USA1991Tokio
9,84Donovan Bailey/Kanada1996Atlanta
9,79Maurice Greene/USA1999Athen
9,77Asafa Powell/Jamaika2005Athen
9,74Asafa Powell/Jamaika2007Rieti
9,72Usain Bolt/Jamaika2008New York
9,69Usain Bolt/Jamaika2008Peking
9,58Usain Bolt/Jamaika2009Berlin


H/T Paul Kedrosky
"By the way, Bolt’s start in the final, while good, wasn’t his best at this year’s meet. Consider the following chart, which shows reaction times out of the blocks in the 100m final. Of the 8 sprinters, Bolt was third-slowest, making the outcome even more remarkable."



UPDATE:

Usain Bolt Lights Up Berlin for WR in 200m -- 19.19s(!)

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Sunday, August 16, 2009

Bad, Bad Assets.....

Some kind of follow up to Joke Of The Day "Well Capitalized......”

Wenn man so will eine Fortsetzung von Joke Of The Day "Well Capitalized......”

Dank an Randy Glasbergen

Bad, Bad Assets Floyd Norris
The F.D.I.C. announced the seizure of Colonial Bank and the transfer of the deposits to BB&T, a regional bank based in North Carolina. (As an aside, I’ll note that Colonial only wanted to expand into fast-growing areas, and never chose to enter North Carolina. Tortoise and Hare?)

You can learn all you really need to know about the assets Colonial amassed from the breakdown of what will happen to them, although details are sparse.

1. The F.D.I.C. gets $3 billion in assets that BB&T did not want at all.
2. BB&T gets $7 billion of assets.
3. BB&T gets another $15 billion of assets to manage, but the F.D.I.C. will share losses on them, in ways that are not yet disclosed.

That means that of the $25 billion in assets Colonial had, only 28 percent of them were deemed by BB&T to be worth taking on without any protection. And 12 percent were deemed not worthy of being taken under any terms.
WSJ: Loss Rates for FDIC higher than during S&L Crisis via Calculated Risk
At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency's deposit-insurance fund is expected by the FDIC to be about 50% of their assets.
As of Friday August 14, 2009, FDIC is Bankrupt via Mish

Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC. Note that this graph is based on the old insurance limit with a maximum coverage of $100.000/account. This limit has been changed to cover up to $250.000/account until January 1st 2014. Estimates say that the change increases the deposits covered under FDIC insurance to approximately $6 trillion in total.

The current reserve ratio of 0.014%1 strongly indicates how bad this crisis has affected U.S financial institutions. However, this is not the entire story. If we take a closer look at non-current loans and charge-offs from banks one realizes that the FDIC still has a lot of work to be done. Combined non-current loans and charge-offs amounted to nearly $100 billion in Q109 compared to $15 billion/quarter pre-crisis. Moreover, according to analysts at the Royal Bank of Canada the U.S still has banking failures in the thousands to face before the crisis is over. In turn that should result in the FDIC requesting the pre-approved funding signed by the Congress in May 2009, including $100 billion from the U.S Treasury Department.


Larger Version / Vergrößerte Version

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Thursday, August 13, 2009

"Reported Earnings vs Operating Earnings"

I´ll repeat what i have said in my post But Still Better Than Expected....
Thank god that real earnings don´t matter...until they matter..Some still call the market "cheap"...... No problem with the right pro forma ( What are pro forma earnings? ) model/formular.... Havn´t heard the word GAAP for a long time..;-)
Ich wiederhole einfach das was ich in meinem Posting But Still Better Than Expected........ gesagt habe.....
Gottseidank wird ja den realen Gewinnen momentan keinerlei Bedeutung beigemessen und das alle Schätzungen auf den berühmt berüchtigten EBITDA bzw Proformabasis ( ex dieses, ex jenes, usw.) basieren......Ansonsten wäre das KGV ( wenn es denn überhaupt vorhanden wäre ) auch zu schockierend... Gut zu wissen das einige der Experten den Markt immer noch als "billig" betiteln..... Wenn man die richtige "Proformakalkulation" (siehe What are pro formaearnings? ) zugrunde legt sicher kein Problem.... Ich jedenfalls wundere mich schon lange nicht mehr das ich den Gewinnausweis nach der einheitlichen Bilanzierungsvorschrift GAAP nur nach lagem suchen im Kleingedruckten der Quartalsberichte finden kann..... Vor alternativen Analysten und Unternehmenskreationen wie EBITDA ( oftmal noch versüßt durch andere "außerordentliche" Belastungen ) usw. kann man sich in der tagtäglichen Berichterstattung hingegen kaum retten.....;-)
Alternative yardsticks for US earnings tell different stories By Paul Marson via FT

Every quarter, US companies publish their results under the defined US GAAP accounting rules. These results are labelled "reported earnings".

However, the most commonly looked at form of earnings are adjusted "operating earnings" on which companies prefer to focus as they onsider these better capture the underlying trend in activity

Adjusted operating earnings exclude non-recurring expenses such as restructuring charges, asset sales gains, major litigation charges, goodwill right downs and other write-offs.
While reported earnings are based on strict accounting rules, adjusted operating earnings are at the discretion of companies because there is no defined set of exclusions
Neither measure is perfect but with adjusted operating earnings, exclusions are currently so large that information about the true state of companies (and therefore the market as a whole) is being excluded.

These exclusions have reached the level where the gap between adjusted operating earnings and reported earnings is so wide that they deliver different messages on the state of US corporates.

Today reported earnings per share for the S&P 500 companies gathered by Standard & Poor's is $7.2 per share, down 91 per cent from the 2007 peak.

On an adjusted operating basis, earnings are $61.2, down 34 per cent from the 2007 peak.

This $54 gap is a record.

How has this come about? Much of the difference between adjusted operating earnings and reported earnings is caused by massive writedowns in the financial sector. However, outside the financial sectors write-offs are also at record highs as corporates are eager to toss out impaired assets during periods of stress.

Furthermore, when looking at adjusted operating earnings, it seems that most US corporates managed to beat their analyst estimates thanks to production and job cuts.

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Wednesday, August 12, 2009

Joke Of The Day "Well Capitalized......”

Stories like this explain my "GOLD addiction"........This Cartoon from Jesse ( see "The Emporer Has No Clothes, But Who Dares To Say It" ) nails it.....

U.a. dank solcher Geschichten bin ich ein großer Anhänger von GOLD...... Dieser Cartoon von Jesse ( siehe "The Emporer Has No Clothes, But Who Dares To Say It" ) ist spot on......


Next Bubble to Burst Is Banks’ Big Loan Values: Jonathan Weil
Aug. 13 (Bloomberg) -- It’s amazing what a little sunshine can accomplish.

Check out the footnotes to Regions Financial Corp.’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. ( see Regions Form 10-K via Zero Hedge)

The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.

So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well capitalized.”

> I must admit that i´m somewhat surprised to see that John Paulson purchased 35 million shares of Regions Financial Corp. He is one of the best Hedge Fund mangers out there...

> Ich muß gestehen das ich doch sehr "überrascht" bin das ausgerechnet einer der besten Hedgefondmanger überhaupt sich ausgerechnet in diese Aktie eingekauft hat ( siehe John Paulson purchased 35 million shares of Regions Financial Corp )

While disclosures of this sort aren’t new, their frequency is. This summer’s round of interim financial reports marked the first time U.S. companies had to publish the fair market values of all their financial instruments on a quarterly basis. Before, such disclosures had been required only annually under the Financial Accounting Standards Board’s rules.

The timing of the revelations is uncanny. Last month, in a move that has the banking lobby fuming, the FASB said it would proceed with a plan to expand the use of fair-value accounting for financial instruments. In short, all financial assets and most financial liabilities would have to be recorded at market values on the balance sheet each quarter, although not all fluctuations in their values would count in net income. A formal proposal could be released by year’s end.

Recognizing Loan Losses

The biggest change would be to the treatment of loans. The FASB’s current rules let lenders carry most of the loans on their books at historical cost, by labeling them as held-to- maturity or held-for-investment. Generally, this means loan losses get recognized only when management deems them probable, which may be long after they are foreseeable. Using fair-value accounting would speed up the recognition of loan losses, resulting in lower earnings and reduced book values.

While Regions may be an extreme example of inflated loan values, it’s not unique. Bank of America Corp. said its loans as of June 30 were worth $64.4 billion less than its balance sheet said. The difference represented 58 percent of the company’s Tier 1 common equity, a measure of capital used by regulators that excludes preferred stock and many intangible assets, such as goodwill accumulated through acquisitions of other companies.

Wells Fargo & Co. said the fair value of its loans was $34.3 billion less than their book value as of June 30. The bank’s Tier 1 common equity, by comparison, was $47.1 billion.

Widening Gaps

The disparities in those banks’ loan values grew as the year progressed. Bank of America said the fair-value gap in its loans was $44.6 billion as of Dec. 31. Wells Fargo’s was just $14.2 billion at the end of 2008, less than half what it was six months later. At Regions, it had been $13.2 billion.

Other lenders with large divergences in their loan values included SunTrust Banks Inc. It showed a $13.6 billion gap as of June 30, which exceeded its $11.1 billion of Tier 1 common equity. KeyCorp said its loans were worth $8.6 billion less than their book value; its Tier 1 common was just $7.1 billion.

When a loan’s market value falls, it might be that the lender would charge higher borrowing costs for the same loan today. It also could be that outsiders perceive a greater chance of default than management is assuming. Perhaps the underlying collateral has collapsed in value, even if the borrower hasn’t missed a payment.

The trend in banks’ loan values is not uniform. Twelve of the 24 companies in the KBW Bank Index, including Citigroup Inc., said their loans’ fair values were within 1 percent of their carrying amounts, more or less. Citigroup said the fair value of its loans was $601.3 billion, just $1.3 billion less than their book value. The gap had been $18.2 billion at the end of 2008.

> Unfortunately the same cannot be said about Citi’s dirty pool of assets .....

> Dummerweise gilt das bei City nicht wenn man sich die anderen Papiere ansieht ( siehe Citi’s dirty pool of assets .....

Arbitrary Accounting

If nothing else, today’s fair-value gaps highlight the arbitrariness of book values and regulatory capital. Banks already have the option to carry loans at fair value under the accounting rules. For the vast majority of loans, most banks elect not to, on the grounds that they intend to keep them until maturity and hope the cash rolls in.

Consequently, the difference between being well capitalized and woefully undercapitalized may come down to nothing more than some highly paid chief executive’s state of mind.

Fair-value estimates in the short-term can be a poor indicator of an asset’s eventual worth, especially when markets aren’t functioning smoothly.

The problem with relying on management’s intentions is that they may be even less reliable.

At least now we’re getting some real numbers, even if you have to dig through the footnotes to get them.

> REGIONS FINANCIAL CORPORATION / Shareholder Information

UPDATE:

Elizabeth Warren "We Have A Real Problem Coming" via Zero Hedge

William Black goes in depth on the biggest theft in world history


Fun commercial real estate figures and charts Agnes Crane/Reuters

Toxic Loans Topping 5% May Push 150 Banks to Point of No Return Bloomberg

Bad, Bad Assets Floyd Norris / NYT

America’s Japanese banks Rolfe Winkler

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Tuesday, August 11, 2009

Putting The Rally Into Perspective......A Record Bounce?

This is a follow up on my earlier posts But Still Better Than Expected........ & More On "The Less Bad Is Good" Mantra....... & Chart Of the Day "Today´s Rally vs Rally 1929/1930"

Wenn man so möchte ist dieses Posting ein Nachschlag zu meinen früheren Beiträgen But Still Better Than Expected........ & More On "The Less Bad Is Good" Mantra....... & Chart Of the Day "Today´s Rally vs Rally 1929/1930"


A RECORD BOUNCE? David Rosenberg

The S&P 500 has rebounded 49% from those March 9 lows. Imagine how abnormal a 49% rally over a five-month span is — it’s unprecedented back to the 1930s. In the last cycle, it didn’t happen until February 2004 — 18 months into that bull phase where again there was tremendous policy stimulus and an oversold low to climb out of.

In addition, household credit was expanding rapidly. Even coming into what was a secular bull market in 1982, it took a good seven months to rally 49%, and that was with the benefit of a V-shaped economic recovery.

Going back to 1950, it has taken an average of around 18 months for the market to rebound 49% from a recession trough, not five months as has been the case thus far.

Let’s examine what the macro landscape usually looks like at that magical +49% point in the equity market rally:

• Real GDP had expanded on average by 4.5%
• Employment rebounded an average of 850k
• The ISM manufacturing index had firmed to an average of 56.2 (the lowest print by this juncture was 53.9)
• Corporate profits had recovered 12%
• Bank lending rose an average of 5%

In other words, the market is way ahead of itself, because, as of the latest data points during this 49% rally:

• Real GDP is trying to make a cycle low
• Employment is trying to make a cycle low
• The ISM is off the low but still sub-50, at 48.9
• Corporate profits are still trying to make a cycle low
• Bank lending is still trying to make a cycle low

We have never before witnessed a stock market rally of this magnitude over such a short time frame and absent anything more than tentative signs of economic improvement.

The only rally of this magnitude was the wild bear market rally ride in 1930, which was followed by a resumption of the decline that finally bottomed 82% lower in 1932.

A VERY SPECULATIVE STOCK MARKET
This is the most speculative momentum-driven equity market since the early 1930s. Make no mistake, the economy is getting better but most of the diffusion indices are still below the 50 cutoff and many of the economic indicators are still in negative growth terrain

But what we have on our hands is a jobless, revenue-less, income-less, profitless and consumer-less recovery. It’s a one of a kind.

The equity market tends to bottom 3-6 months before the recession ends; normally it is four months. The S&P 500 bottomed in March, and we are now four months into this rally and while the media have declared the recession to have ended, none of the four classic ingredients that go into making that call have yet to bottom.

Hence, Mr. Market may well be way ahead of himself on this one. No doubt that the market was priced for extremely bad news at those March lows, but let’s face it, the news turned out to be pretty bad, especially for those 2.2 million people who lost their jobs since that time. That’s more than the entire March 2001-June 2003 down-cycle — in just five months.

> Just today three major German financial newspapers ( FT Germany, Handelsblatt und Welt ) had all bullish stories why stocks have room to climb higher.....At least they didn´t have their stories on the cover.... This would have triggered a perfect signal to short the market....;-) The FAZ seems to be regular readers of Zero Hedge and is therefore less "euphoric"......You really have to be brave to be long this market....... The risk/reward isn´t quite "balanced" right now......

> Im Vergleich ( DAX 5400 ) dazu die heutigen Artikel der FT ( siehe Acht Gründe, warum es weiter aufwärts gehen könnte. ) , der Welt ( siehe Die Börse beweist, dass die Krise bald vorbei ist) & des Handelsblattes ( siehe Charttechnik verspricht steigende Kurse ) Immerhin haben es die Beiträge nicht auf die Titelseiten geschafft...... Ansonsten wäre heute sicher der ideale Tag um short gehen..... :-) Lediglich die FAZ ( siehe Ohne Umsatzzuwachs keine Gewinnsteigerungen ) ist nicht ganz so euphorisch. Sieht so aus als wenn einige in der FAZ Zero Hedge Fans sind....... Ich bin mehr denn je der Meinung das wirklich nur ganz Wagemutige long sein sollten....Das Chance/Risikoprofil ist "ÜBELST"........

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Wednesday, August 05, 2009

Chart Of the Day "Today´s Rally vs Rally 1929/1930"

For a daily dose of excellent "ANTI SPIN" i highly recommend to subsribe to the free daily update from David Rosenberg.

Wer die momentan wohl beste tagtägliche Analyse frei Haus geliefert haben möchte der sollte sich hier registrieren lassen. David Rosenberg unterscheided sich nicht erst seit seinem Wechsel von Merrill Lynch zu Gluskin Sheff wohltuend von den üblichen Verdächtigen....

H/T Clusterstock

1929 comparison

This is from another Rosenberg piece via Mish
Rosenberg also points out that the 46% rally in 101 days is unmatched dating back to 1933. I suppose the rally could continue given the 1933 rally lasted 249 days taking the stock market up 172%. However, I would not recommend playing for it.
> Be careful if you´re still long this market...... The risk/reward ratio isn´t quite "favourable" right now..... If you´re considering to short this market i agree with Jesse ( even if it is very tempting) .....

> Denke man sollte sehr vorsichtig sein wenn man noch immer long ist...... Für meinen Geschmack ist das Chance/Risikoverhältnis wenig vorteilhaft und wie ich finde stand es sogar selten schlechter als dies momentan der Fall ist ..... Für alle die mit dem Gedanken spielen short zu gehen empfehle ich den regelmäßigen Besuch der Seite von Jesse.....


UPDATE:

More realistic stuff from Rosenberg What Growth is the S&P 500 Pricing In? via Mish including the not so unrealistic chart 3 Stages Of A Bear Market .

Passend zum unten genannten Clip der nachfolgende Link von RosenbergWhat Growth is the S&P 500 Pricing In? via Mish der einen wie ich finde nicht unwahrscheinlichen Marktverlauf ( siehe 3 Stages Of A Bear Market ) beschreibt....






Mish sums it up....
Rosenberg suggests there will be no recovery without the consumer. I suggest there will be no recovery in consumer spending, discounting of course "free money" programs like "cash for clunkers".

Of course this all depends on the definition of "recovery". At best, I think we have a "Recoveryless Recovery" before the economy slips back into a double or triple dip recession. Regardless, the stock market is priced for perfection while the odds of perfection are close to zero.
I agree.... Especially when you add charts like Zero 10 Year US Job Creation to the mix.....

Hätte es besser nicht formulieren können.....Gilt besonders dann wennn man sich folgenden Chart ( siehe Zero 10 Year US Job Creation ) vor Augen führt....

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Brilliant Satire Via The Onion....... "U.S. Government Stages Fake Coup To Wipe Out National Debt"

I also recommend to read the following excellent piece Nation Ready To Be Lied To About Economy Again via The Onion. I´m not so sure that this "wish" hasn´t already become reality...... ;-)

Genauso brilliant der nachfolgende Clip ist Nation Ready To Be Lied To About Economy Again ebenfalls vom US Satiremagazin "The Onion". Obwohl ich mir nicht sicher bin ob der geäußerte Wunsch nicht längst in die Realität umgesetzt worden ist..... ;-)

H/T The Mess That Greenspan Made


U.S. Government Stages Fake Coup To Wipe Out National Debt

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Sunday, August 02, 2009

Full Metal Durable Goods / Budget.......

Thank god they are all worried/serious about the deficit...... Colbert from April sums it up......

Gottseidank sorgen sich ja bekanntlich in den USA alle um das Defizit. Schön zu sehen das bei den Militärausgaben weiter Vollgas gegeben wird...... Colbert vom April trifft mal wieder ins Schwarze.....

The Colbert ReportMon - Thurs 11:30pm / 10:30c
ThreatDown - Robert Gates, Dog Seders & Obama
http://www.colbertnation.com/
Colbert Report Full EpisodesPolitical HumorTasers


Floyd Norris NYT

The accompanying charts show the trend in durable goods spending, for military purposes and for other shipments of durable goods, from 2000 through this June.

In June, seasonally adjusted shipments for civilian purposes were 19 percent below the average monthly figure for 2000. Shipments of military items were running 123 percent above the 2000 average.

Military vs. Non-Military Durable Goods / Larger Version / Größere Version

The United States remains primarily a civilian economy. The military now takes about 8 percent of all durable goods, up from 3 percent in 2000.

> Calming.....Here is another chart without any further comment......

> Wie beruhigend......Hier ein weiterer Chart der jeden Kommentar überflüssig macht........


YES WE CAN´T...... ;-)

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