Tuesday, 20 November 2012
UPDATE 1-Iron ore at 2-week low as China demand slips, swaps down - RTRS
REF : Thomsons Reuters
"20-Nov-2012 09:11
Miners offering 600,000 T at spot tenders on Tuesday
China Nov 1-10 daily steel output up 1.6 pct
(Updates rebar price)
By Manolo Serapio Jr
SINGAPORE, Nov 20 (Reuters) - Iron ore swaps dropped on Tuesday after spot prices hit two-week lows with demand from top buyer China losing steam after weeks of restocking, prompting miners to unload more cargoes onto the spot market before prices fall further.
Top miners Vale VALE5.SA, Rio Tinto RIO.AX RIO.L and BHP Billiton BHP.AX BLT.L are together offering around 600,000 tonnes of iron ore at spot tenders closing today, traders said, far more than usual volumes.
The December swap contract SGXIOSZ2 cleared by the Singapore Exchange edged down to $115.50 per tonne in early deals after falling more than a dollar to $115.72 on Monday, brokers said, reflecting market expectations spot prices will slip further.
Iron ore with 62 percent iron content IODBZ00-PLT fell 1.2 percent to $122.25 a tonne on Monday, its lowest since Nov. 6, according to data provider Platts.
Chinese steel mills had stocked up on iron ore over the past four weeks on hopes of positive policy signals from China's 18th party congress. The meeting, however, ended last week without any indications of economic stimulus, said a physical iron ore trader in Singapore.
"And all this time, steel consumption has remained fundamentally weak, so now that mills are well stocked with iron ore, there's no incentive to procure more spot cargoes," the trader said.
"I believe sentiment will start to weaken from this point onwards," he said, adding he expects the benchmark iron ore price to drop to $115 in the near term.
MEASURED RESTOCKING
Before prices fall further, miners are unloading cargoes in the spot market at separate tenders on Tuesday, which traders expect to be sold at less than previous deals.
Vale is offering 155,000 tonnes of 60.74-percent grade iron ore and another 90,000 tonnes of 63.63-percent grade material, traders said.
BHP Billiton is selling 100,000 tonnes of 63-percent Newman iron ore fines and 110,000 tonnes of 58-percent Yandi fines, while Rio Tinto's tender for 165,000 tonnes of 61-percent Pilbara fines is also closing today, traders said.
"I guess no one wants to miss the boat so everyone will try and sell a lot today," said Jamie Pearce, head of iron ore broking at SSY Futures.
Iron ore has rebounded from three-year lows below $87 in early September, but price gains have since been capped at just above $120, with any recovery in Chinese steel demand remaining fragile.
Shanghai rebar futures SRBcv1 closed up 0.2 percent at 3,552 yuan ($570) a tonne, after briefly hitting a fresh seven-week low of 3,539 yuan. It fell nearly 3 percent on Monday.
But after heavy destocking in recent months that had cut steel inventories at both traders and mills to 2-1/2-year lows, there is a potential for a restocking cycle in China's steel sector, Commonwealth Bank of Australia said in a note.
"Any restocking in the steel sector is likely to be measured, though, thanks to Chinese banks rationing credit in the steel and iron ore sector," the bank said.
China's average daily crude steel output rose 1.6 percent to 1.957 million tonnes for the first 10 days of November from the preceding period, industry data showed on Tuesday, as large mills lifted output on a recent rally in steel prices from September lows. (Full Story)
Shanghai rebar futures and iron ore indexes at 0704 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3552 +8.00 +0.23
PLATTS 62 PCT INDEX 122.25 -1.50 -1.21
THE STEEL INDEX 62 PCT INDEX 122.8 +0.00 +0.00
METAL BULLETIN INDEX 121.8 -1.15 -0.94
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day"
($1 = 6.2345 Chinese yuan)
(Editing by Miral Fahmy)
((manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.reuters.com@reuters.net))
Thursday, 15 November 2012
Eurozone falls back into recession
Breaking News
FT on Line :
BREAKING NEWS
"The eurozone fell back into recession in the third quarter after the combined economy of the 17-member bloc contracted for the second consecutive month, dragged down by the Netherlands and peripheral nations.
Eurostat, the EU’s statistics office said the region’s economy contracted by 0.1 per cent in June to September, compared with the previous three months. This follows from a 0.2 per cnet decline in the second quarter.
The wider EU avoided recession after recording growth of 0.1 per cent in the third quarter, largely thanks to an Olympics-related boost in the UK.
Germany and France expanded in the third quarter, but the outlook remained bleak as the crisis engulfing the eurozone takes its toll on the region’s largest economies "
FT on Line :
BREAKING NEWS
"The eurozone fell back into recession in the third quarter after the combined economy of the 17-member bloc contracted for the second consecutive month, dragged down by the Netherlands and peripheral nations.
Eurostat, the EU’s statistics office said the region’s economy contracted by 0.1 per cent in June to September, compared with the previous three months. This follows from a 0.2 per cnet decline in the second quarter.
The wider EU avoided recession after recording growth of 0.1 per cent in the third quarter, largely thanks to an Olympics-related boost in the UK.
Germany and France expanded in the third quarter, but the outlook remained bleak as the crisis engulfing the eurozone takes its toll on the region’s largest economies "
Tencent in rare profit miss, new forays shrink margins 0700.HK NPNJn.J - RTRS
14-Nov-2012 13:53
Ref: Thomsons Reuters !!
"Q3 net profit up 32 pct on strength in online games
But falls short of market estimates as costs soar
Tencent shares up 72 pct this year as new forays welcomed
(Adds analyst quote)
By Melanie Lee
SHANGHAI, Nov 14 (Reuters) - Tencent Holdings 0700.HK, China's biggest online gaming and social networking company, surprised with a rare earnings miss, as efforts to expand into new businesses hit margins and the number of fee-paying users for its Internet services fell.
Searching for fresh revenue streams, Tencent has steadily expanded into e-commerce and online video but the highly competitive and cost-heavy nature of both these industries has meant that Tencent has had to spend in order to boost sales growth.
"The bottom line was a bit of a miss compared to our numbers and the Street and it's largely due to Tencent's margins," said Hong Kong-based Nomura analyst Jin Yoon.
"Margins will have to continue to go down if this company continues to invest in these negative margin businesses," Yoon said.
Net profit for the third quarter climbed 32 percent to 3.2 billion yuan ($514 million) from a year earlier, helped by strength in its core online gaming business.
But it fell short of an average estimate of 3.5 billion yuan in a Reuters poll of nine analysts as cost of sales soared 80 percent. Tencent's e-commerce business had the lowest margins, as costs were equivalent to 96 percent of that segment's sales, followed by online advertising, where costs were equivalent to 50 percent of that segment's revenue.
Its e-commerce revenue rose 32 percent from the previous quarter to 1.1 billion yuan.
Tencent, which is more than 30 percent owned by South African media group Naspers Ltd NPNJn.J, is a relatively new player in China's e-commerce industry which was worth $45 billion in the second quarter. In the second quarter, Tencent had 4.5 percent of the market, behind 360buy and Alibaba Group's ALIAB.UL Taobao platforms. (Full Story)
The forays into new businesses have, however, found favour with investors this year, driving its shares 72 percent higher, compared with a 16 percent climb for the Hang Seng Index .HSI.
MOBILE PAIN
Tencent said the number of fee-paying subscribers for value-added Internet services fell 4.8 percent in the quarter after it initiated a drive to improve its subscriber base by cutting out user accounts where fee-collection was unlikely.
The company also said the consumer shift to mobile devices was bringing some pain and might pose a risk to its traditional business model -- where users buy virtual currency and virtual items to personalise their accounts. Tencent's value-added Internet service business contributes more than 72 percent to its total revenue.
Tencent also noted that a slower Chinese economy may have hurt its online advertising business, which online video is a part of.
Online gaming continued to drive much of quarterly profit growth, with Tencent's new game "League of Legends" gaining traction in the market to join stalwarts "Cross Fire" and "Dungeon & Fighter" as China's most-searched-for games.
Overall third-quarter revenue jumped 54 percent from a year earlier to 11.6 billion yuan, matching analysts' estimates, with online gaming revenue climbing 44 percent to 6 billion yuan.
Tencent said that Weixin or WeChat, its highly popular mobile chatting app that has been a particular focus for investors, had taken good steps forward and had more than 200 million users as of end-September.
"Several of our investment initiatives, such as open platform, Weixin and online video, made progress in driving user engagement or monetisation," Tencent's Chief Executive Pony Ma said in a statement.
"Our focus remains on building our user base and enhancing our user experience, particularly during this period of rapid mobile Internet growth," Ma said.
Shares of Tencent ended 0.9 percent lower on Wednesday before its results were announced, versus a 1 percent rise for the Hang Seng. "
($1 = 6.2265 Chinese yuan)
Steven
Ref: Thomsons Reuters !!
"Q3 net profit up 32 pct on strength in online games
But falls short of market estimates as costs soar
Tencent shares up 72 pct this year as new forays welcomed
(Adds analyst quote)
By Melanie Lee
SHANGHAI, Nov 14 (Reuters) - Tencent Holdings 0700.HK, China's biggest online gaming and social networking company, surprised with a rare earnings miss, as efforts to expand into new businesses hit margins and the number of fee-paying users for its Internet services fell.
Searching for fresh revenue streams, Tencent has steadily expanded into e-commerce and online video but the highly competitive and cost-heavy nature of both these industries has meant that Tencent has had to spend in order to boost sales growth.
"The bottom line was a bit of a miss compared to our numbers and the Street and it's largely due to Tencent's margins," said Hong Kong-based Nomura analyst Jin Yoon.
"Margins will have to continue to go down if this company continues to invest in these negative margin businesses," Yoon said.
Net profit for the third quarter climbed 32 percent to 3.2 billion yuan ($514 million) from a year earlier, helped by strength in its core online gaming business.
But it fell short of an average estimate of 3.5 billion yuan in a Reuters poll of nine analysts as cost of sales soared 80 percent. Tencent's e-commerce business had the lowest margins, as costs were equivalent to 96 percent of that segment's sales, followed by online advertising, where costs were equivalent to 50 percent of that segment's revenue.
Its e-commerce revenue rose 32 percent from the previous quarter to 1.1 billion yuan.
Tencent, which is more than 30 percent owned by South African media group Naspers Ltd NPNJn.J, is a relatively new player in China's e-commerce industry which was worth $45 billion in the second quarter. In the second quarter, Tencent had 4.5 percent of the market, behind 360buy and Alibaba Group's ALIAB.UL Taobao platforms. (Full Story)
The forays into new businesses have, however, found favour with investors this year, driving its shares 72 percent higher, compared with a 16 percent climb for the Hang Seng Index .HSI.
MOBILE PAIN
Tencent said the number of fee-paying subscribers for value-added Internet services fell 4.8 percent in the quarter after it initiated a drive to improve its subscriber base by cutting out user accounts where fee-collection was unlikely.
The company also said the consumer shift to mobile devices was bringing some pain and might pose a risk to its traditional business model -- where users buy virtual currency and virtual items to personalise their accounts. Tencent's value-added Internet service business contributes more than 72 percent to its total revenue.
Tencent also noted that a slower Chinese economy may have hurt its online advertising business, which online video is a part of.
Online gaming continued to drive much of quarterly profit growth, with Tencent's new game "League of Legends" gaining traction in the market to join stalwarts "Cross Fire" and "Dungeon & Fighter" as China's most-searched-for games.
Overall third-quarter revenue jumped 54 percent from a year earlier to 11.6 billion yuan, matching analysts' estimates, with online gaming revenue climbing 44 percent to 6 billion yuan.
Tencent said that Weixin or WeChat, its highly popular mobile chatting app that has been a particular focus for investors, had taken good steps forward and had more than 200 million users as of end-September.
"Several of our investment initiatives, such as open platform, Weixin and online video, made progress in driving user engagement or monetisation," Tencent's Chief Executive Pony Ma said in a statement.
"Our focus remains on building our user base and enhancing our user experience, particularly during this period of rapid mobile Internet growth," Ma said.
Shares of Tencent ended 0.9 percent lower on Wednesday before its results were announced, versus a 1 percent rise for the Hang Seng. "
($1 = 6.2265 Chinese yuan)
Steven
Wednesday, 14 November 2012
WHY DOES RICHEMONT STAY SO STRONG?
An interesting perspective from HSBC :
Enjoy a great piece of Analysis :
"It was the Diwali holiday yesterday and I left you all with a quiz on Monday so I will start there.
The quiz was: In many countries, gift giving often means money in a brown
envelop. Why is it that in China people give expensive watches instead? The
answer was actually told to me by a watch retailer who shall remain nameless.
In Singapore, the largest currency denomination is $10,000 but you can
actually find the $1,000 (~US$820) quite easily. In HK, the largest
denomination is HK$1,000 (~$128). In China, the largest denomination is
RMB100 (~US$16) so if you want to put a reasonable amount in a brown
envelop, it has to be a pretty big one. Simple practical reason explaining
why about 1 in 3 watches are bought for gift giving purposes. I will make a
case for China related to gift giving. Most China bulls have been smacked
into submission including my own China strategist Steven Sun (though my
Asian strategist Herald van der Linde is overweight on China). I was in a
discussion with Nouriel Roubini during the Salt conference in Singapore and
he was adamant that China will hard-land within the next 2 years. Why then
am I more sanguine on China despite my caution on other equity markets? I
think that the consensus opinion has missed out on just how important gift
giving is in China. There is even a term for it: 关系。The leadership
transition currently underway in China does not just involve the top
leadership. It also involves all the provincial and state governments. In
China, there is an idiom that says that a new Emperor brings a new court of
Ministers (一潮君子，一潮臣). It's no wonder then that gift giving has
slowed massively (if not stopped entirely) as no one is sure if the person
at the other side of the table will be there in a couple of months. As the
situation settles and as the new powers ascend, there will be a pent up
demand of people trying to ingratiate themselves with the new
powers-that-be. This will in fact result in a spike in conspicuous
consumption which will then filter through the system through the multiplier
effect (the Rolex salesperson will get his commission again with which he
can now buy something else and so on). My guess is that sales of luxury
products will be much higher than expected in Q1 next year and this will
once again cause analysts to once again extrapolate too much on the upside.
Am happy to be bullish on China here. "
Take it easy
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Enjoy a great piece of Analysis :
"It was the Diwali holiday yesterday and I left you all with a quiz on Monday so I will start there.
The quiz was: In many countries, gift giving often means money in a brown
envelop. Why is it that in China people give expensive watches instead? The
answer was actually told to me by a watch retailer who shall remain nameless.
In Singapore, the largest currency denomination is $10,000 but you can
actually find the $1,000 (~US$820) quite easily. In HK, the largest
denomination is HK$1,000 (~$128). In China, the largest denomination is
RMB100 (~US$16) so if you want to put a reasonable amount in a brown
envelop, it has to be a pretty big one. Simple practical reason explaining
why about 1 in 3 watches are bought for gift giving purposes. I will make a
case for China related to gift giving. Most China bulls have been smacked
into submission including my own China strategist Steven Sun (though my
Asian strategist Herald van der Linde is overweight on China). I was in a
discussion with Nouriel Roubini during the Salt conference in Singapore and
he was adamant that China will hard-land within the next 2 years. Why then
am I more sanguine on China despite my caution on other equity markets? I
think that the consensus opinion has missed out on just how important gift
giving is in China. There is even a term for it: 关系。The leadership
transition currently underway in China does not just involve the top
leadership. It also involves all the provincial and state governments. In
China, there is an idiom that says that a new Emperor brings a new court of
Ministers (一潮君子，一潮臣). It's no wonder then that gift giving has
slowed massively (if not stopped entirely) as no one is sure if the person
at the other side of the table will be there in a couple of months. As the
situation settles and as the new powers ascend, there will be a pent up
demand of people trying to ingratiate themselves with the new
powers-that-be. This will in fact result in a spike in conspicuous
consumption which will then filter through the system through the multiplier
effect (the Rolex salesperson will get his commission again with which he
can now buy something else and so on). My guess is that sales of luxury
products will be much higher than expected in Q1 next year and this will
once again cause analysts to once again extrapolate too much on the upside.
Am happy to be bullish on China here. "
Take it easy
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Monday, 5 November 2012
The Downgrade of the Sovereign
A good Article from Alastair Sellick from PSG Asset Management.
Enjoy reading !!
"After the close of the local bond market on Friday the 12th October, bond market participants received the unwelcome news that S&P had cut South Africa’s foreign currency credit rating to “BBB“ from “BBB+” and the local currency credit rating to “A-“ from “A”. Importantly, the ratings outlook was maintained at negative. This was the most concerning aspect of the downgrade, as a negative outlook means that there is a material chance that the credit rating could be subject to further downgrades later.
The move by S&P wasn’t unexpected - on Thursday the 27th September, Moody’s had downgraded South Africa’s foreign currency credit rating to “Baa1” from “A3”, the equivalent of S&P’s “BBB+”. At the time, this brought Moody’s in line with S&P and Fitch. However, S&P’s timing certainly was a surprise. The common wisdom of the market had been that they would give the sovereign the benefit of the doubt and wait until the Medium Term Budget Policy Statement had been delivered by Finance Minister Pravin Gordhan. That the ongoing developments had, in their view, deteriorated so rapidly, is quite telling, and serves to underscore the severity of the implications of the maintained negative outlook.
S&P list the following factors that could lead to further ratings downgrades:
If the South African business and investment climate weakens more than they expect
If the diverging factions within the ANC impede the formulation of a policy framework that is conducive to growth and job creation
If the Mangaung congress sets a policy framework that deviates from the path of fiscal consolidation
Factors that could lead to a downgrade of more than one notch include:
If the government’s fiscal flexibility decreases potentially due to public sector wages or debt service costs increasing more than currently expected.
In order for the rating to be affirmed at current levels, and a revision of the outlook to stable, S&P require that:
The expected increase in public sector debt must be offset by an improvement in investment and economic growth prospects, and
Fiscal consolidation must continue
Ordinarily, it is counter-productive for the downgraded entity to respond to a ratings agency. It is far more telling to react to the reasons that have been cited for the rating action. However, National Treasury’s response to S&P is measured and it emphasizes the positive long term consequences of the infrastructure spending programme. The financial markets certainly took the ratings actions in their stride – bond yields sold off around 15 bp and have since recovered. The Rand had weakened significantly around the strike actions which happened the week or two before, so is broadly stronger than it was at the time of S&P’s announcement.
These ratings downgrades were not a fait accompli. They represent the consequences of allowing an inefficient labour market to impact on the productive capacity of the South African economy over a long period of time. It is no surprise that South Africa features so poorly in the labour categories of the Global Competitiveness Report of the World Economic Forum. As an increasingly emboldened and more powerful member of the tripartite alliance, labour has been flexing its muscles – the annual strike season refers. When strikers are so emboldened that the rule of labour law is no longer respected, the consequences can be disastrous. Labour would be well advised to take note that much of the gain, in terms of being able to increase social spending and develop the country’s infrastructure has depended on positive foreign investor perceptions about South Africa.
Fitch has given the Finance Minister the benefit of the doubt, and has indicated that a pronouncement on the South African sovereign rating will occur early in 2013. However, the manner in which the wildcat strikes expanded, as well as the lost output in various mines and support industries suggests that there could be a reduction in the country’s Q3 / Q4 growth rate, and this has implications for the fiscus. We thus continue with the Sword of Damocles hanging over the bond market.
In the current global environment, there is such a heightened focus on government deficits, austerity and fiscal consolidation. It is important that governments keep their house in order, and fly below the radar. While South Africa initially did so well at the start of the financial crisis, primarily through the sound policies of the South African Reserve Bank and the rigorous regulation of our banks, we have lost the advantage we once had. South Africa has also benefitted from the dual windfalls of global quantitative easing, which has sent large amounts of cheap foreign capital out hunting for yield in the well run, investment grade bond markets, and our inclusion in the Citi World Global Bond Index (the WGBI) on the 1st October 2012. We should be doing our utmost to show the world that South Africa is a capital friendly investment destination, and in the context of the global financial crisis, we should be putting our best face forward. We should be marketing our country as the ideal destination for capital that can be deployed towards the economic development of the African Continent. We need to now convert the hot-money of global bond inflows into long term Foreign Direct Investment (FDI) otherwise we will pay the price if that capital leaves at the speed with which it arrived.
Ratings agencies and the bond markets play an important role in regulating the behaviour of governments. If governments play by the rules and adopt sensible, responsible policies, they will be rewarded by good credit ratings and access to foreign capital. If not, it is the duty of the ratings agencies to point this out to bond investors. In turn, it is the obligation of bond investors to price adequately for the investment risk they are taking. Now that foreign investors hold close to 40% of our nominal local government debt, we are even more vulnerable to the marginal ratings change by ratings agencies.
There is no doubt that the required risk premium for investing in South African government bonds has risen, even though our bond yields have fallen. The question is: will the government be able to deliver on the required improvement in investment, economic growth and social prospects that are now demanded of this country?"
"The PSG Angle is an electronic newsletter of PSG Asset Management"
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Enjoy reading !!
"After the close of the local bond market on Friday the 12th October, bond market participants received the unwelcome news that S&P had cut South Africa’s foreign currency credit rating to “BBB“ from “BBB+” and the local currency credit rating to “A-“ from “A”. Importantly, the ratings outlook was maintained at negative. This was the most concerning aspect of the downgrade, as a negative outlook means that there is a material chance that the credit rating could be subject to further downgrades later.
The move by S&P wasn’t unexpected - on Thursday the 27th September, Moody’s had downgraded South Africa’s foreign currency credit rating to “Baa1” from “A3”, the equivalent of S&P’s “BBB+”. At the time, this brought Moody’s in line with S&P and Fitch. However, S&P’s timing certainly was a surprise. The common wisdom of the market had been that they would give the sovereign the benefit of the doubt and wait until the Medium Term Budget Policy Statement had been delivered by Finance Minister Pravin Gordhan. That the ongoing developments had, in their view, deteriorated so rapidly, is quite telling, and serves to underscore the severity of the implications of the maintained negative outlook.
S&P list the following factors that could lead to further ratings downgrades:
If the South African business and investment climate weakens more than they expect
If the diverging factions within the ANC impede the formulation of a policy framework that is conducive to growth and job creation
If the Mangaung congress sets a policy framework that deviates from the path of fiscal consolidation
Factors that could lead to a downgrade of more than one notch include:
If the government’s fiscal flexibility decreases potentially due to public sector wages or debt service costs increasing more than currently expected.
In order for the rating to be affirmed at current levels, and a revision of the outlook to stable, S&P require that:
The expected increase in public sector debt must be offset by an improvement in investment and economic growth prospects, and
Fiscal consolidation must continue
Ordinarily, it is counter-productive for the downgraded entity to respond to a ratings agency. It is far more telling to react to the reasons that have been cited for the rating action. However, National Treasury’s response to S&P is measured and it emphasizes the positive long term consequences of the infrastructure spending programme. The financial markets certainly took the ratings actions in their stride – bond yields sold off around 15 bp and have since recovered. The Rand had weakened significantly around the strike actions which happened the week or two before, so is broadly stronger than it was at the time of S&P’s announcement.
These ratings downgrades were not a fait accompli. They represent the consequences of allowing an inefficient labour market to impact on the productive capacity of the South African economy over a long period of time. It is no surprise that South Africa features so poorly in the labour categories of the Global Competitiveness Report of the World Economic Forum. As an increasingly emboldened and more powerful member of the tripartite alliance, labour has been flexing its muscles – the annual strike season refers. When strikers are so emboldened that the rule of labour law is no longer respected, the consequences can be disastrous. Labour would be well advised to take note that much of the gain, in terms of being able to increase social spending and develop the country’s infrastructure has depended on positive foreign investor perceptions about South Africa.
Fitch has given the Finance Minister the benefit of the doubt, and has indicated that a pronouncement on the South African sovereign rating will occur early in 2013. However, the manner in which the wildcat strikes expanded, as well as the lost output in various mines and support industries suggests that there could be a reduction in the country’s Q3 / Q4 growth rate, and this has implications for the fiscus. We thus continue with the Sword of Damocles hanging over the bond market.
In the current global environment, there is such a heightened focus on government deficits, austerity and fiscal consolidation. It is important that governments keep their house in order, and fly below the radar. While South Africa initially did so well at the start of the financial crisis, primarily through the sound policies of the South African Reserve Bank and the rigorous regulation of our banks, we have lost the advantage we once had. South Africa has also benefitted from the dual windfalls of global quantitative easing, which has sent large amounts of cheap foreign capital out hunting for yield in the well run, investment grade bond markets, and our inclusion in the Citi World Global Bond Index (the WGBI) on the 1st October 2012. We should be doing our utmost to show the world that South Africa is a capital friendly investment destination, and in the context of the global financial crisis, we should be putting our best face forward. We should be marketing our country as the ideal destination for capital that can be deployed towards the economic development of the African Continent. We need to now convert the hot-money of global bond inflows into long term Foreign Direct Investment (FDI) otherwise we will pay the price if that capital leaves at the speed with which it arrived.
Ratings agencies and the bond markets play an important role in regulating the behaviour of governments. If governments play by the rules and adopt sensible, responsible policies, they will be rewarded by good credit ratings and access to foreign capital. If not, it is the duty of the ratings agencies to point this out to bond investors. In turn, it is the obligation of bond investors to price adequately for the investment risk they are taking. Now that foreign investors hold close to 40% of our nominal local government debt, we are even more vulnerable to the marginal ratings change by ratings agencies.
There is no doubt that the required risk premium for investing in South African government bonds has risen, even though our bond yields have fallen. The question is: will the government be able to deliver on the required improvement in investment, economic growth and social prospects that are now demanded of this country?"
"The PSG Angle is an electronic newsletter of PSG Asset Management"
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Tuesday, 30 October 2012
Nissan warns of slowing China expansion
Breaking News
FT.com
"Nissan warns of slowing China expansion
Carlos Ghosn, chief executive of Nissan, has warned that a protracted breakdown in relations between Japan and China could slow his company’s aggressive expansion into the Chinese car market, which Nissan has come to rely on for one-quarter of its sales.
In an interview with the Financial Times, Mr Ghosn said Nissan’s current investment plans, such as a factory in Dalian that is to be built in 2014, would go ahead despite a consumer backlash in China against Japanese car brands that has led to a sharp fall-off in demand.
But he cautioned that additional commitments would “be subject to a lot of scrutiny and analysis, and a little bit of time.”
Friday, 26 October 2012
Asian Stocks Fall After Apple Earnings as Metals, Yen Advance
Oct. 26 (Bloomberg) --
"Asian stocks fell, with the regional benchmark index erasing its gain for the month, and U.S. futures slid as China Unicom (Hong Kong) Ltd. and Apple Inc. joined companies posting results that missed analysts’ estimates. Metals rose and Japan’s yen climbed.
The MSCI Asia Pacific Index lost 0.9 percent as of 1:01 p.m. in Tokyo as Standard & Poor’s 500 Index futures fell 0.8 percent. Zinc contracts in London gained 0.3 percent to $1,840.5 a metric ton as nickel rose 0.2 percent. The yen climbed 0.2 percent against the dollar and China’s yuan touched the upper limit of its allowed trading band for a second day.
Apple, the world’s largest company by market value, announced yesterday forecasts on earnings that fell short of projections for the crucial holiday quarter. China Unicom, the country’s No. 2 mobile-phone carrier, was among 60 percent of companies on the Asia-Pacific gauge whose earnings have missed estimates. U.S. data today may show the world’s largest economy expanded 1.8 percent in the third quarter, for the first back- to-back readings below 2 percent since 2009.
“Economic data has been positive, but earnings as a whole has been disappointing,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “We’ve seen the worst in terms of economic growth downgrades, and the general economy is starting to improve from a low level. But we are still in the process of seeing the impact on earnings of that lower growth.”
Canon Inc., the world’s largest camera maker, slid 2.5 percent in Tokyo after it lowered its full-year profit and sales forecasts on slowing demand. Fanuc Corp., the largest maker of controls that run machine tools, fell the most in six months after reporting first-half profit that missed estimates.
Samsung, TSMC
A gauge of technology stocks fell 0.5 percent on the MSCI Asia Pacific Index, led by a 1.8 percent decline in Samsung Electronics Co. in Seoul. The company, both a rival and supplier to Apple, reported today third-quarter profit that beat analysts’ estimates. Samsung has the heaviest weighting among the 1,006 members of the Asia-Pacific index.
Taiwan Semiconductor Manufacturing Co. rose 2.8 percent, pacing gains on the regional benchmark after forecasting profit margins that also beat expectations.
Apple expected profit in the current period will be about $11.75 a share on sales of about $52 billion, the company said yesterday in a statement. That compares with $15.49 a share on sales of $55.1 billion according to the average of analysts’ estimates compiled by Bloomberg. Last quarter’s profit rose to $8.67 a share, shy of the $8.75 a share projected by analysts.
Nikkei 225
Japan’s Nikkei 225 Stock Average dropped 1.1 percent, extending declines after the government announced a further $9.4 billion stimulus package.
"Japan needs bigger stimulus as the economy is slowing faster than expected, but it will be hard to have larger spending due to political gridlock and worsening fiscal conditions,” said Yoshimasa Maruyama , chief economist at Itochu Corp. in Tokyo. “Political pressure will build on the BOJ.”
South Korea’s Kospi Index dropped 1.6 percent. Hong Kong’s Hang Seng Index declined 0.8 percent after yesterday capping the longest streak of gains since 2006. Markets in Indonesia, Malaysia, Singapore and the Philippines are closed for a holiday.
Industrial metals rallied following five days of losses in the London Metal Exchange Metals Index. Copper, aluminum and tin futures rose at least 0.3 percent.
Korea GDP
South Korea’s gross domestic product expanded 1.6 percent in the three months to September, the slowest pace since 2009, according to Bank of Korea data today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News.
Japan’s consumer prices, excluding fresh food, fell 0.1 percent in September, the fifth month of decline, the statistics bureau reported today. The median of 27 estimates in a Bloomberg News survey was for a 0.2 percent drop.
The yen strengthened after touching a four-month low earlier, amid speculation the central bank will expand monetary easing next week. The currency was headed for a second weekly drop as a survey of economists showed the Bank of Japan will probably undertake additional measures when it meets Oct. 30.
Upper Limit
China’s yuan climbed to a 19-year high, with the advance exceeding the People’s Bank of China’s reference rate by the maximum allowed 1 percent. The daily fixing was raised 0.06 percent today to 6.3010 per dollar.
Benchmark U.S. 10-year notes yielded 1.81 percent, less than 1 basis point from yesterday’s close, before the U.S. GDP report later today. Treasuries were headed for a second weekly loss before the government report economists said will show consumer spending drove a pickup in growth.
The Thomson Reuters/University of Michigan final index of sentiment is also due today. The gauge jumped to 83 in October, the highest level since September 2007, according to a Bloomberg survey.
To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks fell, with the regional benchmark index erasing its gain for the month, and U.S. futures slid as China Unicom (Hong Kong) Ltd. and Apple Inc. joined companies posting results that missed analysts’ estimates. Metals rose and Japan’s yen climbed.
The MSCI Asia Pacific Index lost 0.9 percent as of 1:01 p.m. in Tokyo as Standard & Poor’s 500 Index futures fell 0.8 percent. Zinc contracts in London gained 0.3 percent to $1,840.5 a metric ton as nickel rose 0.2 percent. The yen climbed 0.2 percent against the dollar and China’s yuan touched the upper limit of its allowed trading band for a second day.
Apple, the world’s largest company by market value, announced yesterday forecasts on earnings that fell short of projections for the crucial holiday quarter. China Unicom, the country’s No. 2 mobile-phone carrier, was among 60 percent of companies on the Asia-Pacific gauge whose earnings have missed estimates. U.S. data today may show the world’s largest economy expanded 1.8 percent in the third quarter, for the first back- to-back readings below 2 percent since 2009.
“Economic data has been positive, but earnings as a whole has been disappointing,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “We’ve seen the worst in terms of economic growth downgrades, and the general economy is starting to improve from a low level. But we are still in the process of seeing the impact on earnings of that lower growth.”
Canon Inc., the world’s largest camera maker, slid 2.5 percent in Tokyo after it lowered its full-year profit and sales forecasts on slowing demand. Fanuc Corp., the largest maker of controls that run machine tools, fell the most in six months after reporting first-half profit that missed estimates.
Samsung, TSMC
A gauge of technology stocks fell 0.5 percent on the MSCI Asia Pacific Index, led by a 1.8 percent decline in Samsung Electronics Co. in Seoul. The company, both a rival and supplier to Apple, reported today third-quarter profit that beat analysts’ estimates. Samsung has the heaviest weighting among the 1,006 members of the Asia-Pacific index.
Taiwan Semiconductor Manufacturing Co. rose 2.8 percent, pacing gains on the regional benchmark after forecasting profit margins that also beat expectations.
Apple expected profit in the current period will be about $11.75 a share on sales of about $52 billion, the company said yesterday in a statement. That compares with $15.49 a share on sales of $55.1 billion according to the average of analysts’ estimates compiled by Bloomberg. Last quarter’s profit rose to $8.67 a share, shy of the $8.75 a share projected by analysts.
Nikkei 225
Japan’s Nikkei 225 Stock Average dropped 1.1 percent, extending declines after the government announced a further $9.4 billion stimulus package.
"Japan needs bigger stimulus as the economy is slowing faster than expected, but it will be hard to have larger spending due to political gridlock and worsening fiscal conditions,” said Yoshimasa Maruyama , chief economist at Itochu Corp. in Tokyo. “Political pressure will build on the BOJ.”
South Korea’s Kospi Index dropped 1.6 percent. Hong Kong’s Hang Seng Index declined 0.8 percent after yesterday capping the longest streak of gains since 2006. Markets in Indonesia, Malaysia, Singapore and the Philippines are closed for a holiday.
Industrial metals rallied following five days of losses in the London Metal Exchange Metals Index. Copper, aluminum and tin futures rose at least 0.3 percent.
Korea GDP
South Korea’s gross domestic product expanded 1.6 percent in the three months to September, the slowest pace since 2009, according to Bank of Korea data today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News.
Japan’s consumer prices, excluding fresh food, fell 0.1 percent in September, the fifth month of decline, the statistics bureau reported today. The median of 27 estimates in a Bloomberg News survey was for a 0.2 percent drop.
The yen strengthened after touching a four-month low earlier, amid speculation the central bank will expand monetary easing next week. The currency was headed for a second weekly drop as a survey of economists showed the Bank of Japan will probably undertake additional measures when it meets Oct. 30.
Upper Limit
China’s yuan climbed to a 19-year high, with the advance exceeding the People’s Bank of China’s reference rate by the maximum allowed 1 percent. The daily fixing was raised 0.06 percent today to 6.3010 per dollar.
Benchmark U.S. 10-year notes yielded 1.81 percent, less than 1 basis point from yesterday’s close, before the U.S. GDP report later today. Treasuries were headed for a second weekly loss before the government report economists said will show consumer spending drove a pickup in growth.
The Thomson Reuters/University of Michigan final index of sentiment is also due today. The gauge jumped to 83 in October, the highest level since September 2007, according to a Bloomberg survey.
To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Thursday, 25 October 2012
Britain moves out of recession
Britain’s double-dip recession has ended after the economy grew 1 per cent between the second and third quarters, much more robustly than economists had expected.
The strong rise in gross domestic product will come as a relief to the coalition government, whose austerity programme has come in for fierce criticism as the economy has faltered.
The strong rise in gross domestic product will come as a relief to the coalition government, whose austerity programme has come in for fierce criticism as the economy has faltered.
Tuesday, 23 October 2012
Facebook fillip from mobile growth
FT.com
"Facebook reported better than expected revenues in the third quarter, mainly driven by its aggressive push into mobile advertising.
The social networking company is starting to show success from its aggressive push into mobile advertising in recent months, reporting better than expected revenues for the third quarter.
The company generated $1.26bn in revenues, more than the $1.22bn analysts had anticipated. Earnings per share were 12 cents, on par with analysts’ expectations."
"Facebook reported better than expected revenues in the third quarter, mainly driven by its aggressive push into mobile advertising.
The social networking company is starting to show success from its aggressive push into mobile advertising in recent months, reporting better than expected revenues for the third quarter.
The company generated $1.26bn in revenues, more than the $1.22bn analysts had anticipated. Earnings per share were 12 cents, on par with analysts’ expectations."
IMPORTANT VAT 201 SUBMISSION DATE NOTIFICATION - FURTHER STATEMENT
IMPORTANT VAT 201 SUBMISSION DATE NOTIFICATION - FURTHER STATEMENT
Just received 5 Mins ago
Further statements have been issued by SARS indicating that the move of the required submission date for VAT201 returns to the 25th of the month is a "significant unintended change in tax law".
As a result, SARS is not requiring VAT vendors who use eFiling to submit VAT returns on the 25th of the month. The benefit of no interest, penalties, or prosecution will remain effective if the return and payment are submitted via eFiling (or EFT) on or before the last business day of the month.
A perception has been created that to enjoy the benefit of no interest, penalties or criminal prosecution the due date for filing a VAT return electronically (i.e. via eFiling) is now the 25th of the month, though payment could still be made until the last business day of the month. This was the result of an amendment to proviso (iii) to section 28(1) of the Value-Added Tax Act came into effect on 1 October 2012 when the Tax Administration Act became operational. To clarify this matter, a further amendment to the proviso will be included in the current draft Tax Administration Amendment Bill.
This will ensure that the due date for both filing and payment remains the last business day of the month if the return is filed via eFiling and payment is made either via eFiling or EFT on or before that day and the payment reflects in the SARS account on or before that day.
To conclude, SARS is not requiring eFiling users to submit VAT returns on the 25th of the month. This means that the benefit of no interest, penalties or prosecution will remain effective if the return and payment is submitted via eFiling (or EFT) on or before the last business day of the month.
eFiling users should note that interest and penalties are chargeable with effect from the 25th of the month where such a return is filed or payment is made after the last business day of the month.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Just received 5 Mins ago
Further statements have been issued by SARS indicating that the move of the required submission date for VAT201 returns to the 25th of the month is a "significant unintended change in tax law".
As a result, SARS is not requiring VAT vendors who use eFiling to submit VAT returns on the 25th of the month. The benefit of no interest, penalties, or prosecution will remain effective if the return and payment are submitted via eFiling (or EFT) on or before the last business day of the month.
A perception has been created that to enjoy the benefit of no interest, penalties or criminal prosecution the due date for filing a VAT return electronically (i.e. via eFiling) is now the 25th of the month, though payment could still be made until the last business day of the month. This was the result of an amendment to proviso (iii) to section 28(1) of the Value-Added Tax Act came into effect on 1 October 2012 when the Tax Administration Act became operational. To clarify this matter, a further amendment to the proviso will be included in the current draft Tax Administration Amendment Bill.
This will ensure that the due date for both filing and payment remains the last business day of the month if the return is filed via eFiling and payment is made either via eFiling or EFT on or before that day and the payment reflects in the SARS account on or before that day.
To conclude, SARS is not requiring eFiling users to submit VAT returns on the 25th of the month. This means that the benefit of no interest, penalties or prosecution will remain effective if the return and payment is submitted via eFiling (or EFT) on or before the last business day of the month.
eFiling users should note that interest and penalties are chargeable with effect from the 25th of the month where such a return is filed or payment is made after the last business day of the month.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
VAT e-filing shock
Take note of the changes to VAT submissions from 1 October 2012 :
"VAT vendors may be caught off guard by a confirmation from SARS that all VAT vendors using e-filing will now have to submit their returns by the 25th of the month that follows after their tax period, and no longer have leeway until the last business day of the month. Payments may still be made via e-filing up to the last business day of the month.
This follows the non-binding opinion, issued on 16 October 2012 by SARS’ Cape Town legal department. The amendment to section 28 of the VAT Act came into operation through amendments included in the Tax Administration Act (TAACT) which came into effect on 1 October 2012.
The specific amendment read as follows:
‘‘(iii) a vendor registered with the Commissioner to submit returns [and payments] electronically [(other than by means of a debit order), must furnish the return] is deemed to have made payment within the period contemplated in subsection (1) [and make] if the vendor makes full payment of the amount of tax within the period ending on the last business day of the month during which that twenty-fifth day falls; ([ ] means deletion and underlining means inclusions)
The deletion of the words “must furnish a return” seems to have the effect that returns submitted via e-filing must now be submitted by the 25th of the month."
It is uncertain at this stage whether this amendment was intentional or just a general oversight by the legislature. Adding to the confusion is that the SARS short guide to the TAACT does not mention this significant amendment. Even SARS’ website, under benefits of e-filing, still states “e-filers are also given more time to make their submissions and payments”.
Taxpayers would, at the very least, have expected SARS to notify them, either by e-filing or a general notice on SARS’ website, , about the change. As a result of this amendment, vendors now have less time to obtain the relevant financial information to complete and submit their VAT returns. This could lead to an increase in
human error and the unfortunate possibility of penalties and interest being levied by SARS.
Taxpayers put processes in place immediately to ensure that they submit their VAT returns, which are due from 1 October 2012, by the due date now being 25 October.
Take note of the changes and don't get caught off guard.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
"VAT vendors may be caught off guard by a confirmation from SARS that all VAT vendors using e-filing will now have to submit their returns by the 25th of the month that follows after their tax period, and no longer have leeway until the last business day of the month. Payments may still be made via e-filing up to the last business day of the month.
This follows the non-binding opinion, issued on 16 October 2012 by SARS’ Cape Town legal department. The amendment to section 28 of the VAT Act came into operation through amendments included in the Tax Administration Act (TAACT) which came into effect on 1 October 2012.
The specific amendment read as follows:
‘‘(iii) a vendor registered with the Commissioner to submit returns [and payments] electronically [(other than by means of a debit order), must furnish the return] is deemed to have made payment within the period contemplated in subsection (1) [and make] if the vendor makes full payment of the amount of tax within the period ending on the last business day of the month during which that twenty-fifth day falls; ([ ] means deletion and underlining means inclusions)
The deletion of the words “must furnish a return” seems to have the effect that returns submitted via e-filing must now be submitted by the 25th of the month."
It is uncertain at this stage whether this amendment was intentional or just a general oversight by the legislature. Adding to the confusion is that the SARS short guide to the TAACT does not mention this significant amendment. Even SARS’ website, under benefits of e-filing, still states “e-filers are also given more time to make their submissions and payments”.
Taxpayers would, at the very least, have expected SARS to notify them, either by e-filing or a general notice on SARS’ website, , about the change. As a result of this amendment, vendors now have less time to obtain the relevant financial information to complete and submit their VAT returns. This could lead to an increase in
human error and the unfortunate possibility of penalties and interest being levied by SARS.
Taxpayers put processes in place immediately to ensure that they submit their VAT returns, which are due from 1 October 2012, by the due date now being 25 October.
Take note of the changes and don't get caught off guard.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Monday, 22 October 2012
Cycling's governing body gives Lance Armstrong life ban
Breaking News
FT.com !!
Lance takes the fall for the Cycling sport !!
I feel he did so much for this sport.
"Cycling's governing body gives Lance Armstrong life ban
Cycling’s governing body has banned Lance Armstrong from the sport for life and stripped him of his seven Tour de France titles, saying the American had “no place in cycling”.
Union Cycliste Internationale announced at a press conference in Geneva that it was endorsing the report of the US Anti-Dopiong Agency, which implicated Mr Armstrong in an organised doping ring that encouraged the use of banned substances over several years.
Pat McQuaid, president of the UCI, said this was “a landmark day for cycling”, but insisted that the sport had a future.
He talked about “the painful process of confronting its past”, adding the governing body, which is under pressure to explain why it failed to prevent doping scandal, had nothing to hide. It would hold a special meeting to discuss the USADA report and look at measures to prevent a repeat of the scandal."
FT.com !!
Lance takes the fall for the Cycling sport !!
I feel he did so much for this sport.
"Cycling's governing body gives Lance Armstrong life ban
Cycling’s governing body has banned Lance Armstrong from the sport for life and stripped him of his seven Tour de France titles, saying the American had “no place in cycling”.
Union Cycliste Internationale announced at a press conference in Geneva that it was endorsing the report of the US Anti-Dopiong Agency, which implicated Mr Armstrong in an organised doping ring that encouraged the use of banned substances over several years.
Pat McQuaid, president of the UCI, said this was “a landmark day for cycling”, but insisted that the sport had a future.
He talked about “the painful process of confronting its past”, adding the governing body, which is under pressure to explain why it failed to prevent doping scandal, had nothing to hide. It would hold a special meeting to discuss the USADA report and look at measures to prevent a repeat of the scandal."
Friday, 19 October 2012
China Growth Suggests Economy on the Mend
REF : Bloomberg Business Week !!
"Has China’s economy bottomed out?
Economists and analysts are posing that question following the Oct. 18 announcement that gross domestic product grew 7.4 percent in the third quarter, from a year earlier, down from 7.6 percent growth in the previous three months. China’s economic growth has started to stabilize, Premier Wen Jiabao said in a recent meeting with heads of Chinese companies, industrial leaders, and local government officials, the Xinhua News Agency reported on Oct. 17. The economy will continue to show “positive changes,” Wen said. He has set a target of 7.5 percent growth for the year.
With continued weakness in Europe and North America, “what we see is a good performance. It augurs well for continued soft landing,” John Quelch, professor of international management and dean of China Europe International Business School in Shanghai, said in a telephone interview after China’s statistics bureau released the latest growth figure.
Contributing to the optimistic sentiment: a slew of positive indicators throughout the economy, suggesting a corner may have been turned, following seven quarters of slowing growth. Industrial production, for example, grew 9.4 percent; fixed asset investment in cities grew 20.5 percent; and retails sales were up 14.2 percent—all ahead of estimates. Exports and money supply also grew faster than expected. “In our view the September data suggest that a bottoming out may be in sight,” Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong, wrote in an Oct. 18 note.
Add Ting Lu and Larry Hu, China economists at Bank of America Merrill Lynch (BAC) in Hong Kong, in an Oct. 18 note: “We are seeing an increasing amount of evidences for green shoots. This evidence comes from a wide range of sectors including transportation, commodity, exports, property market, credit and money data, tourism in Golden Week [China’s week-long October holiday] and restocking by manufacturing companies.”
The good news has lessened pressure on Beijing to take further loosening measures, even as it prepares for a once-in-a-decade leadership transition, beginning at a Party Congress opening on Nov. 8. China’s central bank has left interest rates alone since July, following two cuts to the benchmark rate in one month. That followed three cuts in bank reserve ratio requirements, starting last November.
“As we saw in 2008 in the U.S., one never wants an economic crisis to accompany a leadership transition,” says Quelch, who predicts China is unlikely to take further accommodative steps before the end of the year. “The Chinese economy has been well managed; there won’t be any urgent or significant challenges that new leadership will have to face within the first 90 days.”
But even as these latest numbers have raised hopes, there are still worrying signs in the Chinese economy, particularly in such industries as steel, cement, and autos, now facing overcapacity following several years of hyper-charged investment growth. “Investment outside of real estate and infrastructure—mainstream corporate investment—appears to be losing speed, weighed down by spare capacity and weak profits,” says RBS’s Kuijs.
Still, Kuijs is predicting that China will grow 7.5 percent this year, meeting the official target, and tick up to 7.8 percent in 2013. “This assumes subdued growth globally but no major turmoil and, in China, a continued pro-growth macro stance but no major, game-changing stimulus,” says Kuijs. “The biggest risk to our outlook is still a larger global downturn combined with financial turmoil.”"
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Has China’s economy bottomed out?
Economists and analysts are posing that question following the Oct. 18 announcement that gross domestic product grew 7.4 percent in the third quarter, from a year earlier, down from 7.6 percent growth in the previous three months. China’s economic growth has started to stabilize, Premier Wen Jiabao said in a recent meeting with heads of Chinese companies, industrial leaders, and local government officials, the Xinhua News Agency reported on Oct. 17. The economy will continue to show “positive changes,” Wen said. He has set a target of 7.5 percent growth for the year.
With continued weakness in Europe and North America, “what we see is a good performance. It augurs well for continued soft landing,” John Quelch, professor of international management and dean of China Europe International Business School in Shanghai, said in a telephone interview after China’s statistics bureau released the latest growth figure.
Contributing to the optimistic sentiment: a slew of positive indicators throughout the economy, suggesting a corner may have been turned, following seven quarters of slowing growth. Industrial production, for example, grew 9.4 percent; fixed asset investment in cities grew 20.5 percent; and retails sales were up 14.2 percent—all ahead of estimates. Exports and money supply also grew faster than expected. “In our view the September data suggest that a bottoming out may be in sight,” Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong, wrote in an Oct. 18 note.
Add Ting Lu and Larry Hu, China economists at Bank of America Merrill Lynch (BAC) in Hong Kong, in an Oct. 18 note: “We are seeing an increasing amount of evidences for green shoots. This evidence comes from a wide range of sectors including transportation, commodity, exports, property market, credit and money data, tourism in Golden Week [China’s week-long October holiday] and restocking by manufacturing companies.”
The good news has lessened pressure on Beijing to take further loosening measures, even as it prepares for a once-in-a-decade leadership transition, beginning at a Party Congress opening on Nov. 8. China’s central bank has left interest rates alone since July, following two cuts to the benchmark rate in one month. That followed three cuts in bank reserve ratio requirements, starting last November.
“As we saw in 2008 in the U.S., one never wants an economic crisis to accompany a leadership transition,” says Quelch, who predicts China is unlikely to take further accommodative steps before the end of the year. “The Chinese economy has been well managed; there won’t be any urgent or significant challenges that new leadership will have to face within the first 90 days.”
But even as these latest numbers have raised hopes, there are still worrying signs in the Chinese economy, particularly in such industries as steel, cement, and autos, now facing overcapacity following several years of hyper-charged investment growth. “Investment outside of real estate and infrastructure—mainstream corporate investment—appears to be losing speed, weighed down by spare capacity and weak profits,” says RBS’s Kuijs.
Still, Kuijs is predicting that China will grow 7.5 percent this year, meeting the official target, and tick up to 7.8 percent in 2013. “This assumes subdued growth globally but no major turmoil and, in China, a continued pro-growth macro stance but no major, game-changing stimulus,” says Kuijs. “The biggest risk to our outlook is still a larger global downturn combined with financial turmoil.”"
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Goldman Ex-Employee Says Firm Pushed Europe Bank Options
Oct. 18 (Bloomberg) --
The Saga carries on !!
"Greg Smith, the former Goldman Sachs Group Inc. salesman who publicly accused the firm of ripping off its clients, was denied a raise and a promotion in the weeks before he resigned in March, documents provided by Goldman show.
Smith, 33, told one of his managers in a December 2011 meeting that he expected to earn more than $1 million a year, about double what he was making at the time as an executive director in London, according to a summary of Goldman Sachs’s investigation into Smith’s claims. He also said in the meeting that he wasn’t advancing up the corporate ladder fast enough and expected to win the promotion to managing director he had repeatedly stated as a goal in self-evaluations.
His bosses were incredulous. New York-based Goldman Sachs, the fifth-largest U.S. bank, was about to book its second-lowest profit in a decade and that year had eliminated almost a tenth of its workforce -- 3,400 jobs. The equity-derivatives desk Smith worked for in London had been told that compensation would be down “significantly,” according to the firm’s summary.
“Greg Smith off the charts unrealistic, thinks he shld [sic] trade at multiples,” one of Smith’s managers wrote in a January 2012 internal e-mail after informing him that his raise request and demand for promotion had been turned down.
‘Moral Fiber’
Two months later, Smith made one of the most public exits in Wall Street history, announcing his resignation in a scathing op-ed in the New York Times entitled “Why I Am Leaving Goldman Sachs.” He called the environment at the firm “toxic and destructive,” said senior staff referred to clients by the derogatory term “muppets” and blamed Chairman and Chief Executive Officer Lloyd Blankfein and President Gary Cohn for “a decline in the firm’s moral fiber.”
Smith has since documented his views and experiences in a 276-page book, “Why I Left Goldman Sachs.” Published by Grand Central, it’ll be available for purchase Oct. 22.
Seeking better compensation is “the American way,” according to John Farrell, JPMorgan Chase & Co.’s former human- resources chief. “I don’t think there’s anything wrong with trying to earn more and be promoted.” He added that any writing by former employees about their old workplaces should be taken “with a grain of salt.”
Blankfein Mission
The sudden and public nature of the departure caught Goldman Sachs off-guard. Smith was one of 13,000 vice presidents. Blankfein and Cohn had no idea who Smith was or why he decided to go public with his resignation, according to two people familiar with their thinking at the time.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the Times on March 14.
That day, Blankfein, 58, set in motion a soul-searching mission that would become a months-long investigation into Smith’s allegations. According to two people close to the CEO, he indicated he and the board wanted to know why Goldman Sachs’s radar failed to detect Smith’s dissatisfaction.
Among Wall Street firms, Goldman Sachs was dragged most publicly through Congressional inquiries over its role in the financial crisis, and it paid $550 million in a settlement with regulators. Now Goldman Sachs would have to defend its conduct again.
Jake Siewert, a Goldman Sachs spokesman, says all of the firm’s attempts to talk to Smith after his resignation were rebuffed. Jimmy Franco, director of publicity at Grand Central, said in an e-mail that Smith would not be making statements at this time.
Forensic Specialists
The firm hired forensic specialists to troll through e- mails and taped conversations, according to four people with direct knowledge of the probe. It also conducted interviews with 125 employees who had contact with Smith, going as far back as his summer internship in 2000.
The results of that investigation were shared with Goldman Sachs’s board and regulators including the Washington-based Financial Industry Regulatory Authority and the U.K.’s Financial Services Authority, according to one of the people familiar with the probe.
A nine-page summary was provided to Bloomberg News. While it includes excerpts from Smith’s self-evaluations and quotes directly from internal e-mails, much is excluded. The summary does not, for example, show the context in which some of Smith’s remarks were made, leaving open the possibility of misinterpretation.
Still, the documents paint a picture of Smith that is at odds with the image he fashioned for himself in the op-ed: an altruistic kid from Johannesburg, out of place in the rapacious, wealth-obsessed world of American high finance.
Stanford Grad
Smith wrote in the Times that Goldman Sachs “has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”
Goldman Sachs’s document shows Smith as a striver, eager to make more money and frustrated when he didn’t advance. In his 2010 self-evaluation he made clear he wanted to stay at Goldman Sachs, saying, “it is my goal to get promoted to managing director.”
“It creates some doubt, some question about his credibility and whether in fact he had an axe to grind,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics.
Smith, a graduate of Stanford University in Palo Alto, California, joined Goldman Sachs full-time in 2001 as an analyst in the equities division in New York. He was promoted to associate in 2003 and then vice president in 2006. He transferred to London in 2011 to take a position supporting the desk that sells U.S. equity derivatives to European clients.
Falling Behind
By 2012, Smith had fallen behind his peers. According to Goldman Sachs, he was the lowest-paid among the VPs who started in the same training class. A third of his classmates had become managing directors.
In the op-ed, Smith said he’d advised some of the world’s largest money managers and that his “clients have a total asset base of more than a trillion dollars.” According to Goldman Sachs’s investigation, that description is a stretch.
While Smith did work for some of the firm’s biggest clients, including AQR Capital Management LLC, Government of Singapore Investment Corp., T. Rowe Price Group Inc., Vanguard Group Inc. and the asset-management units of Morgan Stanley and Deutsche Bank AG, he had no direct responsibility for those accounts and didn’t perform an advisory role.
Promotion Denied
At the same time, Smith had, in Goldman Sachs’s assessment, an overgenerous view of his own performance. The documents say he placed in the bottom half of the firm in regular evaluations from 2007, while giving himself scores that were “significantly above” those he received from others.
When his request for a promotion to managing director was denied in January, Smith asked to be moved to a different sales desk. The investigation report says he wanted to generate revenue and cover clients, a step up from the support role he was providing as a marketer and one with a better shot at a bigger paycheck.
Goldman Sachs put a different managing director in charge of Smith as it considered giving him a sales job. The report says he “found the transition difficult” and considered the female MD who ran the desk a peer and not his boss.
‘Vague Concerns’
In February, Smith told a colleague he was concerned that the move he wanted to a different sales desk might not happen, according to Goldman Sachs’s account. A month later, he was gone.
The investigation exonerated Smith’s managers, saying they had not missed warning signs. When he had formal opportunities to raise concerns or criticize individuals, such as performance reviews, he gave his colleagues top marks.
According to Goldman Sachs, Smith never let on that he was disenchanted or resentful until March 12, two days before he resigned. At a regular meeting with a Goldman partner he “expressed vague concerns” about the firm’s direction and complained that its focus was on making money, not serving clients.
Goldman Sachs executives now say they believe Smith had submitted his op-ed by the time that meeting was held.
Taken together, the materials provided by Goldman Sachs challenge the storyline Smith has presented in his op-ed and excerpts from his forthcoming book. Only Smith knows if his public denunciation of the firm was motivated by loathing for what it had become, or instead resentment upon realizing that his career was stuck and a promotion unlikely.
What Smith didn’t know: His future at Goldman Sachs might have been short-lived anyway. The investigation report says Smith’s managers “discussed the possibility of Greg’s departure from the firm.”
To contact the reporters on this story: Erik Schatzker in New York at eschatzker@bloomberg.net ; Stephanie Ruhle in New York at sruhle2@bloomberg.net .
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
The Saga carries on !!
"Greg Smith, the former Goldman Sachs Group Inc. salesman who publicly accused the firm of ripping off its clients, was denied a raise and a promotion in the weeks before he resigned in March, documents provided by Goldman show.
Smith, 33, told one of his managers in a December 2011 meeting that he expected to earn more than $1 million a year, about double what he was making at the time as an executive director in London, according to a summary of Goldman Sachs’s investigation into Smith’s claims. He also said in the meeting that he wasn’t advancing up the corporate ladder fast enough and expected to win the promotion to managing director he had repeatedly stated as a goal in self-evaluations.
His bosses were incredulous. New York-based Goldman Sachs, the fifth-largest U.S. bank, was about to book its second-lowest profit in a decade and that year had eliminated almost a tenth of its workforce -- 3,400 jobs. The equity-derivatives desk Smith worked for in London had been told that compensation would be down “significantly,” according to the firm’s summary.
“Greg Smith off the charts unrealistic, thinks he shld [sic] trade at multiples,” one of Smith’s managers wrote in a January 2012 internal e-mail after informing him that his raise request and demand for promotion had been turned down.
‘Moral Fiber’
Two months later, Smith made one of the most public exits in Wall Street history, announcing his resignation in a scathing op-ed in the New York Times entitled “Why I Am Leaving Goldman Sachs.” He called the environment at the firm “toxic and destructive,” said senior staff referred to clients by the derogatory term “muppets” and blamed Chairman and Chief Executive Officer Lloyd Blankfein and President Gary Cohn for “a decline in the firm’s moral fiber.”
Smith has since documented his views and experiences in a 276-page book, “Why I Left Goldman Sachs.” Published by Grand Central, it’ll be available for purchase Oct. 22.
Seeking better compensation is “the American way,” according to John Farrell, JPMorgan Chase & Co.’s former human- resources chief. “I don’t think there’s anything wrong with trying to earn more and be promoted.” He added that any writing by former employees about their old workplaces should be taken “with a grain of salt.”
Blankfein Mission
The sudden and public nature of the departure caught Goldman Sachs off-guard. Smith was one of 13,000 vice presidents. Blankfein and Cohn had no idea who Smith was or why he decided to go public with his resignation, according to two people familiar with their thinking at the time.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the Times on March 14.
That day, Blankfein, 58, set in motion a soul-searching mission that would become a months-long investigation into Smith’s allegations. According to two people close to the CEO, he indicated he and the board wanted to know why Goldman Sachs’s radar failed to detect Smith’s dissatisfaction.
Among Wall Street firms, Goldman Sachs was dragged most publicly through Congressional inquiries over its role in the financial crisis, and it paid $550 million in a settlement with regulators. Now Goldman Sachs would have to defend its conduct again.
Jake Siewert, a Goldman Sachs spokesman, says all of the firm’s attempts to talk to Smith after his resignation were rebuffed. Jimmy Franco, director of publicity at Grand Central, said in an e-mail that Smith would not be making statements at this time.
Forensic Specialists
The firm hired forensic specialists to troll through e- mails and taped conversations, according to four people with direct knowledge of the probe. It also conducted interviews with 125 employees who had contact with Smith, going as far back as his summer internship in 2000.
The results of that investigation were shared with Goldman Sachs’s board and regulators including the Washington-based Financial Industry Regulatory Authority and the U.K.’s Financial Services Authority, according to one of the people familiar with the probe.
A nine-page summary was provided to Bloomberg News. While it includes excerpts from Smith’s self-evaluations and quotes directly from internal e-mails, much is excluded. The summary does not, for example, show the context in which some of Smith’s remarks were made, leaving open the possibility of misinterpretation.
Still, the documents paint a picture of Smith that is at odds with the image he fashioned for himself in the op-ed: an altruistic kid from Johannesburg, out of place in the rapacious, wealth-obsessed world of American high finance.
Stanford Grad
Smith wrote in the Times that Goldman Sachs “has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”
Goldman Sachs’s document shows Smith as a striver, eager to make more money and frustrated when he didn’t advance. In his 2010 self-evaluation he made clear he wanted to stay at Goldman Sachs, saying, “it is my goal to get promoted to managing director.”
“It creates some doubt, some question about his credibility and whether in fact he had an axe to grind,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics.
Smith, a graduate of Stanford University in Palo Alto, California, joined Goldman Sachs full-time in 2001 as an analyst in the equities division in New York. He was promoted to associate in 2003 and then vice president in 2006. He transferred to London in 2011 to take a position supporting the desk that sells U.S. equity derivatives to European clients.
Falling Behind
By 2012, Smith had fallen behind his peers. According to Goldman Sachs, he was the lowest-paid among the VPs who started in the same training class. A third of his classmates had become managing directors.
In the op-ed, Smith said he’d advised some of the world’s largest money managers and that his “clients have a total asset base of more than a trillion dollars.” According to Goldman Sachs’s investigation, that description is a stretch.
While Smith did work for some of the firm’s biggest clients, including AQR Capital Management LLC, Government of Singapore Investment Corp., T. Rowe Price Group Inc., Vanguard Group Inc. and the asset-management units of Morgan Stanley and Deutsche Bank AG, he had no direct responsibility for those accounts and didn’t perform an advisory role.
Promotion Denied
At the same time, Smith had, in Goldman Sachs’s assessment, an overgenerous view of his own performance. The documents say he placed in the bottom half of the firm in regular evaluations from 2007, while giving himself scores that were “significantly above” those he received from others.
When his request for a promotion to managing director was denied in January, Smith asked to be moved to a different sales desk. The investigation report says he wanted to generate revenue and cover clients, a step up from the support role he was providing as a marketer and one with a better shot at a bigger paycheck.
Goldman Sachs put a different managing director in charge of Smith as it considered giving him a sales job. The report says he “found the transition difficult” and considered the female MD who ran the desk a peer and not his boss.
‘Vague Concerns’
In February, Smith told a colleague he was concerned that the move he wanted to a different sales desk might not happen, according to Goldman Sachs’s account. A month later, he was gone.
The investigation exonerated Smith’s managers, saying they had not missed warning signs. When he had formal opportunities to raise concerns or criticize individuals, such as performance reviews, he gave his colleagues top marks.
According to Goldman Sachs, Smith never let on that he was disenchanted or resentful until March 12, two days before he resigned. At a regular meeting with a Goldman partner he “expressed vague concerns” about the firm’s direction and complained that its focus was on making money, not serving clients.
Goldman Sachs executives now say they believe Smith had submitted his op-ed by the time that meeting was held.
Taken together, the materials provided by Goldman Sachs challenge the storyline Smith has presented in his op-ed and excerpts from his forthcoming book. Only Smith knows if his public denunciation of the firm was motivated by loathing for what it had become, or instead resentment upon realizing that his career was stuck and a promotion unlikely.
What Smith didn’t know: His future at Goldman Sachs might have been short-lived anyway. The investigation report says Smith’s managers “discussed the possibility of Greg’s departure from the firm.”
To contact the reporters on this story: Erik Schatzker in New York at eschatzker@bloomberg.net ; Stephanie Ruhle in New York at sruhle2@bloomberg.net .
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Monday, 15 October 2012
Have you put your portfolio on hold?
Great Article from BLACK ROCK !!
RETHINK THE COST OF CASH
Cash is an essential part of every portfolio. But holding cash and putting your portfolio "on hold" is not a long-term investment strategy, since cash holdings historically have produced negative returns after considering the effects of taxes and inflation.
Cash Averages a Negative Return After Taxes and Inflation1
"So what do I do with my money?"
Cash is an essential part of everyone’s finances and plays an important role in saving and investing. In terms of investment risk, cash is also probably the most conservative option. But safety and comfort come at a price—the probability you will not meet your long-term investment goals. While today’s market conditions understandably produce anxiety, investors with large amounts of cash should take a step back, assess their goals, and work with their financial advisors to make their money work harder for them. Ask your financial advisor about how to build a balanced, diverse portfolio designed for growth even as markets stagnate.
Watch this video, it is so True but get advise before taking any steps !!
http://www.youtube.com/watch?feature=player_embedded&v=KBJ3Ne-BXf8
Steven
Go to the Black Rock Website !!
Interesting ideas :
http://t.co/jO0kDE77
RETHINK THE COST OF CASH
Cash is an essential part of every portfolio. But holding cash and putting your portfolio "on hold" is not a long-term investment strategy, since cash holdings historically have produced negative returns after considering the effects of taxes and inflation.
Cash Averages a Negative Return After Taxes and Inflation1
"So what do I do with my money?"
Cash is an essential part of everyone’s finances and plays an important role in saving and investing. In terms of investment risk, cash is also probably the most conservative option. But safety and comfort come at a price—the probability you will not meet your long-term investment goals. While today’s market conditions understandably produce anxiety, investors with large amounts of cash should take a step back, assess their goals, and work with their financial advisors to make their money work harder for them. Ask your financial advisor about how to build a balanced, diverse portfolio designed for growth even as markets stagnate.
Watch this video, it is so True but get advise before taking any steps !!
http://www.youtube.com/watch?feature=player_embedded&v=KBJ3Ne-BXf8
Steven
Go to the Black Rock Website !!
Interesting ideas :
http://t.co/jO0kDE77
Thursday, 11 October 2012
Goldman Sachs’s Cohn Sees Pain When Fed Ends Quantitative Easing
Oct. 11 (Bloomberg) --
"The Federal Reserve will struggle to end its quantitative easing program, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer.
“I understand what they’re trying to do and I will tell you this, this is going to be difficult to stop or to exit,” Cohn told Bloomberg Television today in Tokyo. “At the end of this -- there will be an end to quantitative easing -- we will have to go through the pains of stopping quantitative easing.”
The Fed last month announced its third round of large-scale asset purchases since 2008, with no limit this time on the ultimate amount it would buy or the duration of the program. Fed Chairman Ben S. Bernanke says stimulus will be expanded until the Fed sees “sustained improvement” in the labor market and that the strategy works in part by boosting the prices of assets such as equities.
“We know the Fed wants to create job growth,” Cohn said. “We know that the Fed wants to create asset appreciation.”
Fed Vice Chairman Janet Yellen said in Tokyo yesterday that policy makers have a plan to normalize monetary policy when the time comes. After it begins to raise its benchmark interest rate from near zero, the U.S. central bank has indicated it wants to sell many of the assets on its balance sheet in a “very gradual and predictable way,” she said.
Normalizing Policy
“We know that this will be a challenging feat to normalize monetary policy,” she said, noting bank balance sheets may be vulnerable to any sharp increase in rates.
The Fed isn’t alone in easing monetary policy, with the European Central Bank and Bank of Japan both adding to stimulus in the past three months. The ECB cut its benchmark interest rate to a record low of 0.75 percent and pledged to buy the bonds of governments that agree to austerity conditions. The Bank of Japan last month boosted its asset-purchase fund by 10 trillion yen and abandoned a floor rate for bond purchases.
“They are all kind of doing the same thing so it has less impact than if other players were on the sideline,” said Cohn.
While he praised ECB President Mario Draghi for doing a “spectacular job” and removing “a lot of risk off the table,” Cohn said the ECB can’t “deal with the real long-term problem of Europe, which is economic growth.” Draghi worked at Goldman Sachs from 2002 to 2005.
Cohn echoed his June view that Europe needs a “moment” like Lehman Brothers Holdings Inc.’s 2008 bankruptcy to solve its debt stress.
“I’m not sure what the moment will be, but I do believe there’s going to be a moment when everyone takes a deep breath and says ‘we’ve got to fix this situation,’” Cohn said.
With the annual meetings of the International Monetary Fund under way in Tokyo, Cohn said the world economy is in a tough place and lacks leadership. Goldman Sachs’ business model is correlated to economic growth, he said. "
To contact the reporters on this story: Sara Eisen in Tokyo at seisen2@bloomberg.net ; Simon Kennedy in Tokyo at skennedy4@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"The Federal Reserve will struggle to end its quantitative easing program, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer.
“I understand what they’re trying to do and I will tell you this, this is going to be difficult to stop or to exit,” Cohn told Bloomberg Television today in Tokyo. “At the end of this -- there will be an end to quantitative easing -- we will have to go through the pains of stopping quantitative easing.”
The Fed last month announced its third round of large-scale asset purchases since 2008, with no limit this time on the ultimate amount it would buy or the duration of the program. Fed Chairman Ben S. Bernanke says stimulus will be expanded until the Fed sees “sustained improvement” in the labor market and that the strategy works in part by boosting the prices of assets such as equities.
“We know the Fed wants to create job growth,” Cohn said. “We know that the Fed wants to create asset appreciation.”
Fed Vice Chairman Janet Yellen said in Tokyo yesterday that policy makers have a plan to normalize monetary policy when the time comes. After it begins to raise its benchmark interest rate from near zero, the U.S. central bank has indicated it wants to sell many of the assets on its balance sheet in a “very gradual and predictable way,” she said.
Normalizing Policy
“We know that this will be a challenging feat to normalize monetary policy,” she said, noting bank balance sheets may be vulnerable to any sharp increase in rates.
The Fed isn’t alone in easing monetary policy, with the European Central Bank and Bank of Japan both adding to stimulus in the past three months. The ECB cut its benchmark interest rate to a record low of 0.75 percent and pledged to buy the bonds of governments that agree to austerity conditions. The Bank of Japan last month boosted its asset-purchase fund by 10 trillion yen and abandoned a floor rate for bond purchases.
“They are all kind of doing the same thing so it has less impact than if other players were on the sideline,” said Cohn.
While he praised ECB President Mario Draghi for doing a “spectacular job” and removing “a lot of risk off the table,” Cohn said the ECB can’t “deal with the real long-term problem of Europe, which is economic growth.” Draghi worked at Goldman Sachs from 2002 to 2005.
Cohn echoed his June view that Europe needs a “moment” like Lehman Brothers Holdings Inc.’s 2008 bankruptcy to solve its debt stress.
“I’m not sure what the moment will be, but I do believe there’s going to be a moment when everyone takes a deep breath and says ‘we’ve got to fix this situation,’” Cohn said.
With the annual meetings of the International Monetary Fund under way in Tokyo, Cohn said the world economy is in a tough place and lacks leadership. Goldman Sachs’ business model is correlated to economic growth, he said. "
To contact the reporters on this story: Sara Eisen in Tokyo at seisen2@bloomberg.net ; Simon Kennedy in Tokyo at skennedy4@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Wednesday, 10 October 2012
Asian Summary 10 October 2012
"Asian stocks decline overnight (MSCI Asia Pacific falling 0.8%) after Chinese growth and Europe's debt crisis hurt profits. Alcoa Inc said Chinese growth will cut global demand for Aluminium, while Japanese car sales in China slumped on a territorial dispute. A report later today may show that French and Italian industrial production fell in August. The Dow closed down 0.13% and the S&P off 0.21% after SA futures close."
Asian Stocks Drop With Oil on China, Europe Concern; Won Weakens
Oct. 10 (Bloomberg) --
"Asian stocks fell for a third day, credit risk in the region rose to a one-week high and oil declined as slowing Chinese growth and Europe’s debt crisis hurt corporate profits. The won retreated from an 11-month high.
The MSCI Asia Pacific Index slipped 0.8 percent at 12:11 p.m. in Tokyo, led by Japanese shares. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. Bond risk in the Asia-Pacific region rose to the highest level in at least a week. South Korea’s won weakened 0.4 percent to 1,114.80 per dollar. Commodities as measured by the S&P GSCI Index decreased 0.3 percent as oil fell 0.5 percent. Markets in Taiwan are closed.
Alcoa Inc. said slowing Chinese growth will cut global demand for aluminum, while Japanese car sales in China plunged on a territorial dispute. Data today may show French and Italian industrial production fell in August as Europe’s debt crisis hampers growth. Spain’s Prime Minister Mariano Rajoy is struggling to contain the country’s deficit as he meets with French President Francois Hollande in Paris today.
“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run. So, it won’t be surprising if they go through some correction.”
More than three stocks fell for every one that climbed on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and the broader Topix Index slumped at least 1.4 percent. Toyota Motor Corp. sank 1.8 percent after reporting the biggest drop in China sales since at least 2008. Data today may show Chinese passenger-vehicle sales rose at the slowest pace in eight months.
Alcoa, S&P
The Shanghai Composite Index dropped 0.3 percent, led by materials producers, and Hong Kong’s Hang Seng Index slipped 0.5 percent. Aluminum Corp. of China Ltd., the nation’s biggest producer, declined at least 0.6 percent in Hong Kong and Shanghai. Alcoa, the first company in the Dow Jones Industrial Average to report results, posted earnings and sales that beat analysts’ estimates.
Third-quarter profits and sales for the S&P 500 probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Five years after the S&P 500 began its decline from a record, per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan added 3.5 basis points to 134, Credit Agricole SA prices show. The gauge is set for its highest close since Oct. 2, according to data provider CMA.
Yuan, Won
China’s yuan weakened for a third day, the longest run of declines since August, on heightened concern the economy is losing momentum. The country’s money-market rate dropped for a second day on speculation cash supply will increase as the central bank adds funds to the financial system. The People’s Bank of China injected a total of 265 billion yuan ($42 billion) via reverse repos yesterday, the second-biggest amount for a single day since Bloomberg started compiling the data in 2004.
The won, which touched 1,109.57 on Oct. 8, the strongest level since Nov. 1, 2011, retreated as 13 out of 16 economists in a Bloomberg survey forecast interest rates will be cut at a central bank policy meeting tomorrow.
The peso fell 0.2 percent as data today showed Philippine exports declined in August for the first time in five months. Malaysia’s ringgit weakened 0.2 percent before a report tomorrow that economists predict will show industrial output fell for the first time in a year.
Euro Weakens
The euro weakened against most of its major counterparts, losing 0.3 percent against the dollar and yen. German Chancellor Angela Merkel urged Greece yesterday to maintain austerity while reiterating her desire to keep the country in the euro. Spain’s economy minister Luis de Guindos said the nation will decide on the “sensitive” issue of a full bailout, taking into account the impact for the whole euro area.
The euro was at $1.2845, after earlier touching $1.2836 the lowest since Oct. 1. The common currency declined to 100.44 yen, also the least since Oct. 1, before trading at 100.53. The Dollar Index, a gauge against six major peers, rose 0.2 percent.
Crude in New York declined to $91.91 a barrel after climbing to the highest close in a week yesterday on increased tension in the Middle East. Brent oil slipped 0.5 percent to $113.98 a barrel. The spread between the two contracts reached $22.49 on Oct. 8, the widest since October 2011.
London-traded Brent prices are “still high” and Saudi Arabia will work toward “moderating” them, Oil Minister Ali al-Naimi said yesterday. U.S. crude inventories probably rose by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Department report tomorrow.
Aluminum for three-month delivery on the London Metal Exchange decreased 0.5 percent to $2,043 a metric ton. Alcoa, the largest U.S. aluminum producer, said global demand for the metal will climb by 6 percent this year, paring a July projection of 7 percent.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks fell for a third day, credit risk in the region rose to a one-week high and oil declined as slowing Chinese growth and Europe’s debt crisis hurt corporate profits. The won retreated from an 11-month high.
The MSCI Asia Pacific Index slipped 0.8 percent at 12:11 p.m. in Tokyo, led by Japanese shares. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. Bond risk in the Asia-Pacific region rose to the highest level in at least a week. South Korea’s won weakened 0.4 percent to 1,114.80 per dollar. Commodities as measured by the S&P GSCI Index decreased 0.3 percent as oil fell 0.5 percent. Markets in Taiwan are closed.
Alcoa Inc. said slowing Chinese growth will cut global demand for aluminum, while Japanese car sales in China plunged on a territorial dispute. Data today may show French and Italian industrial production fell in August as Europe’s debt crisis hampers growth. Spain’s Prime Minister Mariano Rajoy is struggling to contain the country’s deficit as he meets with French President Francois Hollande in Paris today.
“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run. So, it won’t be surprising if they go through some correction.”
More than three stocks fell for every one that climbed on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and the broader Topix Index slumped at least 1.4 percent. Toyota Motor Corp. sank 1.8 percent after reporting the biggest drop in China sales since at least 2008. Data today may show Chinese passenger-vehicle sales rose at the slowest pace in eight months.
Alcoa, S&P
The Shanghai Composite Index dropped 0.3 percent, led by materials producers, and Hong Kong’s Hang Seng Index slipped 0.5 percent. Aluminum Corp. of China Ltd., the nation’s biggest producer, declined at least 0.6 percent in Hong Kong and Shanghai. Alcoa, the first company in the Dow Jones Industrial Average to report results, posted earnings and sales that beat analysts’ estimates.
Third-quarter profits and sales for the S&P 500 probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Five years after the S&P 500 began its decline from a record, per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan added 3.5 basis points to 134, Credit Agricole SA prices show. The gauge is set for its highest close since Oct. 2, according to data provider CMA.
Yuan, Won
China’s yuan weakened for a third day, the longest run of declines since August, on heightened concern the economy is losing momentum. The country’s money-market rate dropped for a second day on speculation cash supply will increase as the central bank adds funds to the financial system. The People’s Bank of China injected a total of 265 billion yuan ($42 billion) via reverse repos yesterday, the second-biggest amount for a single day since Bloomberg started compiling the data in 2004.
The won, which touched 1,109.57 on Oct. 8, the strongest level since Nov. 1, 2011, retreated as 13 out of 16 economists in a Bloomberg survey forecast interest rates will be cut at a central bank policy meeting tomorrow.
The peso fell 0.2 percent as data today showed Philippine exports declined in August for the first time in five months. Malaysia’s ringgit weakened 0.2 percent before a report tomorrow that economists predict will show industrial output fell for the first time in a year.
Euro Weakens
The euro weakened against most of its major counterparts, losing 0.3 percent against the dollar and yen. German Chancellor Angela Merkel urged Greece yesterday to maintain austerity while reiterating her desire to keep the country in the euro. Spain’s economy minister Luis de Guindos said the nation will decide on the “sensitive” issue of a full bailout, taking into account the impact for the whole euro area.
The euro was at $1.2845, after earlier touching $1.2836 the lowest since Oct. 1. The common currency declined to 100.44 yen, also the least since Oct. 1, before trading at 100.53. The Dollar Index, a gauge against six major peers, rose 0.2 percent.
Crude in New York declined to $91.91 a barrel after climbing to the highest close in a week yesterday on increased tension in the Middle East. Brent oil slipped 0.5 percent to $113.98 a barrel. The spread between the two contracts reached $22.49 on Oct. 8, the widest since October 2011.
London-traded Brent prices are “still high” and Saudi Arabia will work toward “moderating” them, Oil Minister Ali al-Naimi said yesterday. U.S. crude inventories probably rose by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Department report tomorrow.
Aluminum for three-month delivery on the London Metal Exchange decreased 0.5 percent to $2,043 a metric ton. Alcoa, the largest U.S. aluminum producer, said global demand for the metal will climb by 6 percent this year, paring a July projection of 7 percent.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Tuesday, 9 October 2012
UIF earnings ceiling increase
Increase in UIF ceiling 2012 from 1 October 2012.
The maximum earnings ceiling used for the calculation of UIF contributions has been increased from
R149 736 to R178 464 per annum with effect from 1st October 2012.
This makes the new earnings ceiling for the calculation of UIF as follows:
Period Ceiling :
From 1 October 2012 : Year R178 464
(Before 1/10/2012 : R149 736)
From 1 October 2012 : Monthly R14 872
(Before 1/10/2012 : R12 478)
From 1 October 2012 : Fortnight R6 864
(Before 1/10/2012 : R6 239)
Week R3 432
(Before 1/10/2012 : R3 120)
This translates to max UIF to be deducted monthly as follows:
1% of the income for UIF is paid by the employee & 1% is paid by the employer.
This is based on your Monthly, fortnightly, weekly salary from the first R1 up to the Capp.
The Max monthly salary of R14 872 Max UIF is deducted on this amount if the salary is higher it is capped at this amount for UIF.
Example: On Max - Monthly Salary of R14 872
Employee : R148.72 (OLD : R124.78)(MAX : R12 478)
Employer : R148.72 (OLD : R124.78)(MAX : R12 478)
Total monthly : R297.44 (OLD : R249.56)(MAX : R12 478)
Do yourself a favour - do what you have to right now to make sure this change is implimented in your October payroll.
This is just the sort of relatively "small change" problem for small business owners to clean up down the line if you don't do it right when you're supposed to. If you need any help or any queries regarding this issue give me a call/e-mail
The maximum earnings ceiling used for the calculation of UIF contributions has been increased from
R149 736 to R178 464 per annum with effect from 1st October 2012.
This makes the new earnings ceiling for the calculation of UIF as follows:
Period Ceiling :
From 1 October 2012 : Year R178 464
(Before 1/10/2012 : R149 736)
From 1 October 2012 : Monthly R14 872
(Before 1/10/2012 : R12 478)
From 1 October 2012 : Fortnight R6 864
(Before 1/10/2012 : R6 239)
Week R3 432
(Before 1/10/2012 : R3 120)
This translates to max UIF to be deducted monthly as follows:
1% of the income for UIF is paid by the employee & 1% is paid by the employer.
This is based on your Monthly, fortnightly, weekly salary from the first R1 up to the Capp.
The Max monthly salary of R14 872 Max UIF is deducted on this amount if the salary is higher it is capped at this amount for UIF.
Example: On Max - Monthly Salary of R14 872
Employee : R148.72 (OLD : R124.78)(MAX : R12 478)
Employer : R148.72 (OLD : R124.78)(MAX : R12 478)
Total monthly : R297.44 (OLD : R249.56)(MAX : R12 478)
Do yourself a favour - do what you have to right now to make sure this change is implimented in your October payroll.
This is just the sort of relatively "small change" problem for small business owners to clean up down the line if you don't do it right when you're supposed to. If you need any help or any queries regarding this issue give me a call/e-mail
Tuesday, 2 October 2012
Pimco Investment Outlook for October 2012
REF : PIMCO Investment Outlook
A good read I came across from my brokers enjoy :
October 2012
"Damages
William H. Gross
The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.
I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”
My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.
For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.
The ring of fire
In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?
Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.
I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.
And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.
As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
Investment conclusions
So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.
William H. Gross
Managing Director "
A good read I came across from my brokers enjoy :
October 2012
"Damages
William H. Gross
The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.
I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”
My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.
For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.
The ring of fire
In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?
Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.
I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.
And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.
As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
Investment conclusions
So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.
William H. Gross
Managing Director "
Monday, 1 October 2012
Xstrata Recommends Glencore Bid After Winning Assurance on Board
Oct. 1 (Bloomberg) --
"Xstrata Plc’s board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.
“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata Chairman John Bond said in a statement today. This will “enable shareholders to vote in line with their convictions” without influencing their voting on the Glencore combination, he said.
Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its Chief Executive Officer Mick Davis.
Sweetened Bid
The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.” As little as 16.5 percent of investors can prevent the merger because Glencore can’t vote its 34 percent stake.
The combination of the two commodity giants, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc mines, creating the fourth-largest mining company.
A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.
To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Xstrata Plc’s board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.
“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata Chairman John Bond said in a statement today. This will “enable shareholders to vote in line with their convictions” without influencing their voting on the Glencore combination, he said.
Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its Chief Executive Officer Mick Davis.
Sweetened Bid
The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.” As little as 16.5 percent of investors can prevent the merger because Glencore can’t vote its 34 percent stake.
The combination of the two commodity giants, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc mines, creating the fourth-largest mining company.
A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.
To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Sunday, 30 September 2012
Glencore Xstrata Deal !!
Got a e-mail from FT on Line to say the deal in principal has been apporved, Tomorrow it should be announced !!
Tomorrow will be an interesting day !!
Tomorrow will be an interesting day !!
Thursday, 27 September 2012
Asian Stocks Advance With Aussie on Prospect for More Stimulus
Sept. 27 (Bloomberg) --
"Asian stocks rebounded from the biggest slide in two months and the Australian dollar rose as China’s industrial profits fell for a fifth month, increasing speculation the government will do more to support economic growth. Emerging-market currencies strengthened.
The MSCI Asia Pacific Index climbed 0.4 percent at 1:45 p.m. in Tokyo, as the Shanghai Composite Index added 0.3 percent. Futures on the Standard & Poor’s 500 Index advanced 0.4 percent while contracts on the FTSE 100 Index added 0.2 percent. The so-called Aussie, Malaysia’s ringgit and the Philippine peso rose at least 0.3 percent against the dollar.
A government report showed Chinese industrial companies’ profits dropped in August and a Bank of Korea index of manufacturers confidence for October was at 72 from 75 the previous month, after reaching 70 in August, the lowest level since May 2009. China’s central bank added a net 365 billion yuan ($58 billion) to the financial system this week, the highest in Bloomberg data going back to 2008, as cash demand rises before a weeklong holiday next week.
“The positive would be a big China stimulus package that could send markets higher,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “The signals are that they are not really itching to do that.”
China Overseas
About five stocks gained for every four that fell on the MSCI Asia Pacific Index, which climbed 3.7 percent this quarter through yesterday as central banks in Europe, the U.S., Japan and China took action to boost their economies. The gauge slumped 1.4 percent yesterday, the most since July 23.
China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, rose 0.5 percent. Komatsu Ltd., a maker of construction equipment that gets about 15 percent of its sales in China, gained 0.3 percent.
Baoshan Iron & Steel Co., the nation’s largest publicly traded steelmaker, fell 0.2 percent as the company suspended production at a Chinese plant after demand dropped for slabs used to make ships and bridges. China is unlikely to introduce any large stimulus plans on infrastructure investment in the near term because economic development is already “unbalanced,” a company executive said at a conference today.
Aussie, Kiwi
The Australian dollar was at $1.0398, rebounding from a two-week low, while the country’s bonds pared gains. New Zealand’s dollar added 0.2 percent after data showed the business outlook improved this month. The euro was 0.3 percent from a two-week low against the dollar and was last at $1.2876.
Asian currencies rose toward a four-month high, led by the Philippine peso and Malaysia’s ringgit, on optimism regional economies have scope to combat slowdowns by boosting state spending. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was at 116.80. The gauge reached 117.06 on Sept. 21, the highest level since May 2.
“The Philippines and Malaysia would have the fiscal space to deal with the slowdown from the external side,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc. “I don’t see a massive gain in Asian currencies. Globally, markets are still looking at the developments in Europe.”
A final reading of the consumer confidence index in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News before the data due today, while a U.S. report may show orders for durable goods orders fell.
Euro Prospect
The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said. An accord that paved the way to cut Ireland’s legacy bank debt won’t unravel, said Irish deputy prime minister Eamon Gilmore. Germany, the Netherlands and Finland indicated a retreat from the agreement to allow the euro-area bailout fund to recapitalize banks.
U.S. stocks fell for a fifth day yesterday in the longest slump since July as protests against European austerity measures fueled concern the region’s fiscal crisis may escalate. Spanish protesters yesterday marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse budget cuts, while police in Athens dispersed protestors with tear gas.
The S&P 500 has erased all its gains since the Federal Reserve said Sept. 13 that it will undertake a third round of quantitative easing and probably hold the federal funds rate near zero until at least the middle of 2015.
Worldwide corporate issuance of $949 billion since June 30 brings the total for the year to $2.9 trillion, the second- fastest pace on record, according to data compiled by Bloomberg, as unprecedented investor demand allows issuers to refinance debt with borrowing costs at all-time-lows. "
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ;
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks rebounded from the biggest slide in two months and the Australian dollar rose as China’s industrial profits fell for a fifth month, increasing speculation the government will do more to support economic growth. Emerging-market currencies strengthened.
The MSCI Asia Pacific Index climbed 0.4 percent at 1:45 p.m. in Tokyo, as the Shanghai Composite Index added 0.3 percent. Futures on the Standard & Poor’s 500 Index advanced 0.4 percent while contracts on the FTSE 100 Index added 0.2 percent. The so-called Aussie, Malaysia’s ringgit and the Philippine peso rose at least 0.3 percent against the dollar.
A government report showed Chinese industrial companies’ profits dropped in August and a Bank of Korea index of manufacturers confidence for October was at 72 from 75 the previous month, after reaching 70 in August, the lowest level since May 2009. China’s central bank added a net 365 billion yuan ($58 billion) to the financial system this week, the highest in Bloomberg data going back to 2008, as cash demand rises before a weeklong holiday next week.
“The positive would be a big China stimulus package that could send markets higher,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “The signals are that they are not really itching to do that.”
China Overseas
About five stocks gained for every four that fell on the MSCI Asia Pacific Index, which climbed 3.7 percent this quarter through yesterday as central banks in Europe, the U.S., Japan and China took action to boost their economies. The gauge slumped 1.4 percent yesterday, the most since July 23.
China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, rose 0.5 percent. Komatsu Ltd., a maker of construction equipment that gets about 15 percent of its sales in China, gained 0.3 percent.
Baoshan Iron & Steel Co., the nation’s largest publicly traded steelmaker, fell 0.2 percent as the company suspended production at a Chinese plant after demand dropped for slabs used to make ships and bridges. China is unlikely to introduce any large stimulus plans on infrastructure investment in the near term because economic development is already “unbalanced,” a company executive said at a conference today.
Aussie, Kiwi
The Australian dollar was at $1.0398, rebounding from a two-week low, while the country’s bonds pared gains. New Zealand’s dollar added 0.2 percent after data showed the business outlook improved this month. The euro was 0.3 percent from a two-week low against the dollar and was last at $1.2876.
Asian currencies rose toward a four-month high, led by the Philippine peso and Malaysia’s ringgit, on optimism regional economies have scope to combat slowdowns by boosting state spending. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was at 116.80. The gauge reached 117.06 on Sept. 21, the highest level since May 2.
“The Philippines and Malaysia would have the fiscal space to deal with the slowdown from the external side,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc. “I don’t see a massive gain in Asian currencies. Globally, markets are still looking at the developments in Europe.”
A final reading of the consumer confidence index in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News before the data due today, while a U.S. report may show orders for durable goods orders fell.
Euro Prospect
The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said. An accord that paved the way to cut Ireland’s legacy bank debt won’t unravel, said Irish deputy prime minister Eamon Gilmore. Germany, the Netherlands and Finland indicated a retreat from the agreement to allow the euro-area bailout fund to recapitalize banks.
U.S. stocks fell for a fifth day yesterday in the longest slump since July as protests against European austerity measures fueled concern the region’s fiscal crisis may escalate. Spanish protesters yesterday marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse budget cuts, while police in Athens dispersed protestors with tear gas.
The S&P 500 has erased all its gains since the Federal Reserve said Sept. 13 that it will undertake a third round of quantitative easing and probably hold the federal funds rate near zero until at least the middle of 2015.
Worldwide corporate issuance of $949 billion since June 30 brings the total for the year to $2.9 trillion, the second- fastest pace on record, according to data compiled by Bloomberg, as unprecedented investor demand allows issuers to refinance debt with borrowing costs at all-time-lows. "
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ;
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Tuesday, 25 September 2012
Not all growth is equal
Another great article from PSG :
"In our strive toward continual improvement, we unashamedly look for guidance and wisdom from some of the world’s leading investors and historians which can then be applied and adapted to our methodology of investing. In many cases one needs to look no further than the Sage of Omaha.
In his 2007 letter to shareholders, Mr. Buffett fondly writes about See’s Candy, a business that has managed to deliver excellent growth while requiring very little in the form of additional capital.
See’s Candy was acquired for $25m in 1972 and at the time had invested capital of $8m, generating $5m in pre-tax earnings, a 60% pre-tax return on capital.
Fast forward to 2007 and See’s made pre-tax profits of $82m while the capital required to run the business amounted to $40m. On a cumulative basis the business earned a total of $1.35bn in pre-tax profits over the years, while only requiring $32m in the form of additional capital. All of the $1.35bn earned, except for the $32m, was “up-streamed” to See’s owner, Berkshire Hathaway to be used at their discretion, mostly to buy and grow other attractive businesses.
In Buffett’s own words, “Just as Adam and Eve kick-started an activity that led to six billion humans, See’s has given birth to multiple new streams of cash for us. (The biblical command to “be fruitful and multiply” is one we take seriously at Berkshire.)” – Berkshire Shareholder Letter 2007
As an investor, the See’s example appears to be the holy grail of investing; only paying an additional $32m to receive $1.3bn in dividends!
Behind See’s success were its strong brand positioning, which afforded the company extraordinary pricing power, the fact that the product was sold for cash, eliminating debtors, and its short production and distribution cycle, which minimized cash tied up in stock.
However, as growing companies generally have significant working capital and fixed infrastructure investment requirements, according to Buffett the typical company (as shown in table 1) would spend $400m in additional capital to grow earnings from $5m to $82m. While each additional dollar of invested capital generated $42 pre-tax earnings for See’s, company B only made an additional $3.4 for each dollar invested.
Company B’s 20% return on invested capital in 2007 is certainly not to be sneezed at, but the example clearly demonstrates the value inherent in growth for a capital light business.
While there aren’t many See’s available in today’s market, the investment team at PSG Asset Management is on the continual lookout for and proud owner of companies with strong sustainable competitive advantages, that are able to show capital light growth. In most cases these companies have exceptional management teams that are aligned to shareholders and not shy to part with excess cash resources should available investment opportunities either not strengthen their existing moat or satisfy shareholders’ stringent return requirements, as after all, not all growth is equal. "
REF : Philipp Wörz
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
"In our strive toward continual improvement, we unashamedly look for guidance and wisdom from some of the world’s leading investors and historians which can then be applied and adapted to our methodology of investing. In many cases one needs to look no further than the Sage of Omaha.
In his 2007 letter to shareholders, Mr. Buffett fondly writes about See’s Candy, a business that has managed to deliver excellent growth while requiring very little in the form of additional capital.
See’s Candy was acquired for $25m in 1972 and at the time had invested capital of $8m, generating $5m in pre-tax earnings, a 60% pre-tax return on capital.
Fast forward to 2007 and See’s made pre-tax profits of $82m while the capital required to run the business amounted to $40m. On a cumulative basis the business earned a total of $1.35bn in pre-tax profits over the years, while only requiring $32m in the form of additional capital. All of the $1.35bn earned, except for the $32m, was “up-streamed” to See’s owner, Berkshire Hathaway to be used at their discretion, mostly to buy and grow other attractive businesses.
In Buffett’s own words, “Just as Adam and Eve kick-started an activity that led to six billion humans, See’s has given birth to multiple new streams of cash for us. (The biblical command to “be fruitful and multiply” is one we take seriously at Berkshire.)” – Berkshire Shareholder Letter 2007
As an investor, the See’s example appears to be the holy grail of investing; only paying an additional $32m to receive $1.3bn in dividends!
Behind See’s success were its strong brand positioning, which afforded the company extraordinary pricing power, the fact that the product was sold for cash, eliminating debtors, and its short production and distribution cycle, which minimized cash tied up in stock.
However, as growing companies generally have significant working capital and fixed infrastructure investment requirements, according to Buffett the typical company (as shown in table 1) would spend $400m in additional capital to grow earnings from $5m to $82m. While each additional dollar of invested capital generated $42 pre-tax earnings for See’s, company B only made an additional $3.4 for each dollar invested.
Company B’s 20% return on invested capital in 2007 is certainly not to be sneezed at, but the example clearly demonstrates the value inherent in growth for a capital light business.
While there aren’t many See’s available in today’s market, the investment team at PSG Asset Management is on the continual lookout for and proud owner of companies with strong sustainable competitive advantages, that are able to show capital light growth. In most cases these companies have exceptional management teams that are aligned to shareholders and not shy to part with excess cash resources should available investment opportunities either not strengthen their existing moat or satisfy shareholders’ stringent return requirements, as after all, not all growth is equal. "
REF : Philipp Wörz
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
Friday, 21 September 2012
Apple Poised to Sell 10 Million IPhones in Record Debut
Sept. 21 (Bloomberg) --
Apple Inc. is poised for a record iPhone 5 debut and may not be able to keep up with demand as customers lined up in Sydney, Tokyo and New York to pick up the latest model of its top-selling product.
Global sales started at the Apple Store in Sydney’s George Street at 8 a.m., as about 500 people waited to buy the device. Besides Australia, the phone will debut in Japan, Hong Kong, Singapore, France, Germany, the U.K., Canada and the U.S. today. With a new wireless contract, the device costs $199, $299 and $399 in the U.S., depending on the amount of memory.
Pedro Mendez, a 21-year-old student from Elmhurst, New York, got in line at Apple’s flagship store on Fifth Avenue in New York on Sept. 18 to make sure he’d get the new phone.
“It’s something you have to do,” said Mendez, who plans to sell his iPhone 4S to a friend. “You stand in line, you see everyone the next day at school and talk about it.”
The crowds reinforce estimates from analysts that the iPhone 5 will be the largest consumer-electronics debut in history. Apple may sell as many as 10 million iPhones during the weekend sales rush, according to Gene Munster, an analyst at Piper Jaffray Cos. Because Apple generates about two-thirds of its profit from the iPhone, a successful introduction is critical to fuel growth that has led investors to catapult Cupertino, California-based Apple to the world’s most valuable company.
‘Cool Kids’
“We’ve never seen anything like this before,” said Andrew McAfee, principal research scientist at Massachusetts Institute of Technology’s Center for Digital Business. “It used to be that with tech products the nerds got them, obsessed about them, and talked about them, and the cool kids wanted no part of that conversation. That’s just not true anymore.”
Apple may have trouble keeping up with initial demand because of supply shortages of components such as in-cell screen displays, according to Barclays Plc. Already, the company had to push out some deliveries to October after early online purchases topped 2 million in 24 hours, double the record set last year with the iPhone 4S.
Apple is introducing the iPhone across the world faster than any of the device’s five previous debuts. The iPhone will go on sale in 22 more countries on Sept. 28, Apple said, and it will be in more than 100 countries by the end of the year.
Steve Wozniak, who co-founded Apple with Steve Jobs, was among those waiting at an Apple Store before the opening. He wrote on Twitter that he was in line in Australia to pick up the new iPhone.
Sydney, Tokyo
In Sydney, the first 11 places in line were taken up by companies using the sale to promote their own business. Some of them were there since Sept. 18, and were paid as much as A$200 ($209) a day to stand and advertise for business. Apple employees in blue T-shirts applauded as the first shoppers got into the store while police tried to manage the crowd outside.
At the Apple Store in Tokyo’s shopping district Ginza, about 750 people had lined up by 8 a.m.
“I’ve been taking time-offs since Saturday and waiting,” said Mitsuya Hirose, 37, who was the first in line. “When I bought the iPad, I was the third person in line, so I am happy now,” said Hirose, who bought his first iPhone three years ago.
In Hong Kong, hundreds of people jammed the entrance of the Apple Store in Hong Kong’s IFC mall, chanting and cheering as customers waited to be let in. Police and security guards were standing by as the store opened at 8 a.m., two hours earlier than usual. Only those customers who registered online to reserve a handset were allowed in.
Stolen Phones
Among them was Michael Chan, a 29-year-old airline industry worker, who called in sick at work to be able to buy two 64 GB black-colored iPhones. Chan said he had bought all previous versions of the iPhone, since they were introduced in 2007.
At three outlets in western Japan’s Osaka, 191 iPhone 5s were stolen earlier today, Kyodo News reported, citing police at the prefecture. A resident near one of the outlets saw three men break into the store and then leave in a car, the news agency said. Thefts were also reported from Kobe City, Kyodo said, citing local police.
The new iPhone has a bigger screen, lightweight body design and faster microprocessor, and is compatible with speedier wireless networks. Software upgrades include new mapping and turn-by-turn navigation features.
Technology gadget reviewers mostly praised the new device, especially for its swifter wireless speeds that improve Web browsing and other data-hungry tasks. One criticism was the new mapping features, which don’t include details on how to navigate public transportation.
Android Competition
On Sept. 19, two days before the introduction, about 17 people were lined up at Apple’s Fifth Avenue store in New York.
The lines around the world show how customers remain loyal to Apple once they buy one of its products, said Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which owns Apple shares.
“The longer people are in the Apple ecosystem, the harder it is for them to switch away,” he said.
Apple shares fell less than 1 percent to $698.70 at the close in New York. The stock has risen 73 percent this year.
Apple is vying with rivals including Samsung Electronics Co., HTC Corp. and Google Inc.’s Motorola Mobility for dominance in a global smartphone market that reached $219.1 billion last year, according to data compiled by Bloomberg Industries. Those manufacturers primarily use Google’s Android operating system, which is the world’s most popular mobile software. Microsoft Corp., which has been working closely with Nokia Oyj, also is introducing a new mobile version of Windows later this year.
IPhone’s Popularity
The benefits of a successful iPhone debut extend beyond Apple. Suppliers including Qualcomm Inc., Broadcom Corp., LG Display and Hon Hai Precision Industry Co., the owner of Foxconn Technology Co., also will see a gain, according to Barclays.
To take advantage of the iPhone’s popularity, some of the first to get in line were there for the publicity.
In what may be the biggest consumer electronics debut in history, more than 200 people are expected to hold places in line for strangers at stores around New York and the San Francisco bay area for the iPhone 5, Bloomberg.com reported on its Tech Blog. These arrangements were made on the website TaskRabbit Inc., where a user can find workers to do odd jobs such as assembling Ikea furniture or waiting in long lines.
Joseph Cruz, 19, said Gazelle.com offered to pay for his iPhone, along with four others in line in New York, if he agreed to wear the company’s T-shirts and wrist bands.
“I’ve just got to wear this stuff for the whole week and they’ll pay for my iPhone,” he said. “I was going to stand out here regardless.”
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net ; Ryan Faughnder in New York at rfaughnder@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Apple Inc. is poised for a record iPhone 5 debut and may not be able to keep up with demand as customers lined up in Sydney, Tokyo and New York to pick up the latest model of its top-selling product.
Global sales started at the Apple Store in Sydney’s George Street at 8 a.m., as about 500 people waited to buy the device. Besides Australia, the phone will debut in Japan, Hong Kong, Singapore, France, Germany, the U.K., Canada and the U.S. today. With a new wireless contract, the device costs $199, $299 and $399 in the U.S., depending on the amount of memory.
Pedro Mendez, a 21-year-old student from Elmhurst, New York, got in line at Apple’s flagship store on Fifth Avenue in New York on Sept. 18 to make sure he’d get the new phone.
“It’s something you have to do,” said Mendez, who plans to sell his iPhone 4S to a friend. “You stand in line, you see everyone the next day at school and talk about it.”
The crowds reinforce estimates from analysts that the iPhone 5 will be the largest consumer-electronics debut in history. Apple may sell as many as 10 million iPhones during the weekend sales rush, according to Gene Munster, an analyst at Piper Jaffray Cos. Because Apple generates about two-thirds of its profit from the iPhone, a successful introduction is critical to fuel growth that has led investors to catapult Cupertino, California-based Apple to the world’s most valuable company.
‘Cool Kids’
“We’ve never seen anything like this before,” said Andrew McAfee, principal research scientist at Massachusetts Institute of Technology’s Center for Digital Business. “It used to be that with tech products the nerds got them, obsessed about them, and talked about them, and the cool kids wanted no part of that conversation. That’s just not true anymore.”
Apple may have trouble keeping up with initial demand because of supply shortages of components such as in-cell screen displays, according to Barclays Plc. Already, the company had to push out some deliveries to October after early online purchases topped 2 million in 24 hours, double the record set last year with the iPhone 4S.
Apple is introducing the iPhone across the world faster than any of the device’s five previous debuts. The iPhone will go on sale in 22 more countries on Sept. 28, Apple said, and it will be in more than 100 countries by the end of the year.
Steve Wozniak, who co-founded Apple with Steve Jobs, was among those waiting at an Apple Store before the opening. He wrote on Twitter that he was in line in Australia to pick up the new iPhone.
Sydney, Tokyo
In Sydney, the first 11 places in line were taken up by companies using the sale to promote their own business. Some of them were there since Sept. 18, and were paid as much as A$200 ($209) a day to stand and advertise for business. Apple employees in blue T-shirts applauded as the first shoppers got into the store while police tried to manage the crowd outside.
At the Apple Store in Tokyo’s shopping district Ginza, about 750 people had lined up by 8 a.m.
“I’ve been taking time-offs since Saturday and waiting,” said Mitsuya Hirose, 37, who was the first in line. “When I bought the iPad, I was the third person in line, so I am happy now,” said Hirose, who bought his first iPhone three years ago.
In Hong Kong, hundreds of people jammed the entrance of the Apple Store in Hong Kong’s IFC mall, chanting and cheering as customers waited to be let in. Police and security guards were standing by as the store opened at 8 a.m., two hours earlier than usual. Only those customers who registered online to reserve a handset were allowed in.
Stolen Phones
Among them was Michael Chan, a 29-year-old airline industry worker, who called in sick at work to be able to buy two 64 GB black-colored iPhones. Chan said he had bought all previous versions of the iPhone, since they were introduced in 2007.
At three outlets in western Japan’s Osaka, 191 iPhone 5s were stolen earlier today, Kyodo News reported, citing police at the prefecture. A resident near one of the outlets saw three men break into the store and then leave in a car, the news agency said. Thefts were also reported from Kobe City, Kyodo said, citing local police.
The new iPhone has a bigger screen, lightweight body design and faster microprocessor, and is compatible with speedier wireless networks. Software upgrades include new mapping and turn-by-turn navigation features.
Technology gadget reviewers mostly praised the new device, especially for its swifter wireless speeds that improve Web browsing and other data-hungry tasks. One criticism was the new mapping features, which don’t include details on how to navigate public transportation.
Android Competition
On Sept. 19, two days before the introduction, about 17 people were lined up at Apple’s Fifth Avenue store in New York.
The lines around the world show how customers remain loyal to Apple once they buy one of its products, said Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which owns Apple shares.
“The longer people are in the Apple ecosystem, the harder it is for them to switch away,” he said.
Apple shares fell less than 1 percent to $698.70 at the close in New York. The stock has risen 73 percent this year.
Apple is vying with rivals including Samsung Electronics Co., HTC Corp. and Google Inc.’s Motorola Mobility for dominance in a global smartphone market that reached $219.1 billion last year, according to data compiled by Bloomberg Industries. Those manufacturers primarily use Google’s Android operating system, which is the world’s most popular mobile software. Microsoft Corp., which has been working closely with Nokia Oyj, also is introducing a new mobile version of Windows later this year.
IPhone’s Popularity
The benefits of a successful iPhone debut extend beyond Apple. Suppliers including Qualcomm Inc., Broadcom Corp., LG Display and Hon Hai Precision Industry Co., the owner of Foxconn Technology Co., also will see a gain, according to Barclays.
To take advantage of the iPhone’s popularity, some of the first to get in line were there for the publicity.
In what may be the biggest consumer electronics debut in history, more than 200 people are expected to hold places in line for strangers at stores around New York and the San Francisco bay area for the iPhone 5, Bloomberg.com reported on its Tech Blog. These arrangements were made on the website TaskRabbit Inc., where a user can find workers to do odd jobs such as assembling Ikea furniture or waiting in long lines.
Joseph Cruz, 19, said Gazelle.com offered to pay for his iPhone, along with four others in line in New York, if he agreed to wear the company’s T-shirts and wrist bands.
“I’ve just got to wear this stuff for the whole week and they’ll pay for my iPhone,” he said. “I was going to stand out here regardless.”
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net ; Ryan Faughnder in New York at rfaughnder@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
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