A great article form the The Association of Investor awareness.
Read it but take it all into perspective don't run for the hills or panic. Just look at it in perspective !!
"The stock market rally that began in late December continued through the first three weeks of February. Since our last issue, the Dow and the Nasdaq gained 1.8% and 5.1% respectively.
Measured from December 20, the numbers were an even sweeter 7.1% and 13.2%. From the market’s recent low on October 3, 2011, the two indices are up a heart-warming 21.7% and 26.2% respectively. The added gains pushed stocks into official bull market territory. Of course, there is no guarantee that the happy condition will continue.
Bull Markets Always Climb “A Wall Of Worry”
Despite the strong upturn, many investors remain unconvinced that the bull has actually returned. They point to the many serious problems that could send prices back down. The list includes a barely warm economic recovery, the debt crisis in Europe, soaring energy prices, and a possible war with Iran.
Any one of the threats could give the market back to the bear. But, all major upturns begin while scary problems remain. Investors move back into stocks anyway if they think the problems are getting smaller.
But “The Wall” May Be Lower Than It Looks
For example, the debt crisis in Europe may have been defused by the February 18 agreement to bail out Greece for the second time. The Greek people won’t like wearing hair shirts for several years to bring the country’s deficit down, but that’s better than a meltdown.
A possible war with Iran is a bigger concern. But here too there are signs that a tragedy may be averted. Every country that’s involved, including Iran, seems determined to find a way to negotiate a solution to the nuclear issue. If the peace effort is successful, gasoline prices should come back down by themselves.
As to the lukewarm economic recovery, stronger growth is expected during the second half of the year. In any event, the growth we have now is an adrenalin shot compared to the Great Recession. Most American companies that survived the downturn have become very efficient and will be able to find good profits even in a soft recovery.
As it turns out, the recovery is not soft for many industries. For example, U.S. manufacturers are growing at about twice the speed of the broader economy. Ditto for exporters that are also benefitting from stronger than expected growth in China and other developing countries. Agriculture is also very profitable. In addition, many analysts think housing is finally starting to turn around.
A Correction Seems Overdue
Nevertheless, no big stock market move goes very far without a reversal. Since we had an unusually big upturn over the past few months, stocks seem likely to fall back before they make another big jump.
With a correction on the way, many investors may wish to take some profits off the table. At minimum, we think you should protect your gains with stop-loss orders. Even if you are investing for the long term, as we recommend, there is no reason to suffer near term losses. You will do better if you step aside during a correction and buy back in at lower prices after the scare runs its course. You don’t need to call either the top or the bottom to make this strategy work for you.
It can also be a good idea to sell any weak stocks that were pushed up by the rally. Sometimes the best strategy with mistakes is to cut them short at the best terms you can find, and put the money into stronger stocks."
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
Wednesday, 29 February 2012
The SA NATIONAL BUDGET DOES NOT MATTER
A good article from Felicity Duncan from Money Web stable :
"OK, I’ll be perfectly honest, the national budget really does matter. Every year, the finance minister stands before parliament and tells some South Africans what their annual tax bill will be, tells others how much more they’ll be spending on smokes and booze, and tells the rest what kind of increases they can expect in their social grants (with some overlap among these categories). These are all important things, with implications for people’s everyday lives.
The national budget also signals what the priorities of the upper echelons of government are. This year, for example, it was clear that ANC top leadership has prioritised infrastructure investment and job creation, with plans to spend money on projects ranging from upgrading the country’s ports to employing the unemployed to eliminate alien vegetation from its waterways (seriously, look it up).
However, there is an important sense in which the national budget doesn’t matter, a sense which is captured by this quote from Pravin Gordhan’s budget speech : “We are aware of several weaknesses in the state’s infrastructure capacity. In the past, spending has lagged behind plans. Our estimate is that in 2010/11, R178bn was spent out of a planned R260bn, or just 68%. In addition to long delays, we have often experienced significant cost over-runs in infrastructure projects.”
The national budget and the associated medium-term expenditure framework (which is basically government’s spending plan for the next four years) are a blueprint for what the government’s top bosses hope to achieve. However, they are often not much more than that, because the implementation of these plans rests in the hands of other elements of the state, and as South Africa’s infrastructure track record indicates, there’s often a large gap between what the national government wants to do, and what the various arms of the government actually can do. A lot of what appears in the national budget is provisional, and subject to the whims of the employees and associates of the state.
Consider, for example, Gordhan’s projections with respect to the budget deficit. Revenue collection this year was stronger than anticipated, and the minister announced that the deficit would be equal to 4.6% of GDP in 2011/12 (down from a previous estimate of 4.8%), and would fall to 3% in 2012/13. This is great news, especially in light of recent worries about South Africa’s credit ratings.
These projections, however, are based on the optimistic assumption that government will be able to keep increases in its sizeable wage bill (currently equal to about one third of the R1tn national budget) below 7%. This seems very unlikely; after all, spending on wages rose by 11.9% last year, despite the fact that the previous budget projected a rise of just 7.8%. Strike-happy public sector workers demanding above-inflation wage increases could easily derail Gordhan’s plans for fiscal prudence.
Or consider the government’s job creation schemes. For a few years now, Gordhan has been talking about a youth employment subsidy, and I was hoping that this year some flesh would be added to those bones. However, all he had to say about that was “[it] is under discussion at Nedlac, where the labour constituency has expressed reservations. In our view these concerns can be addressed in the design and implementation of the incentive. We would all like to see greater urgency in resolving this matter.”
In other words, COSATU is gumming up the works on the youth employment subsidy, and there’s not much Gordhan or anyone else can do about it. Again, the best-laid plans of the country’s top leadership can be thwarted by the actions of those it relies on; the budget is a guide, not a guarantee.
Since it came to power, the ANC has consistently produced sensible budgets. However, as time goes by, it’s becoming easier to see, in those budgets, the fracture lines in South African politics and the weaknesses of the state.
The government’s key weakness is its lack of capacity, as illustrated by the takeover of elements of the provincial governments of Limpopo, Gauteng, and the Free State, and a chronic inability to spend the money it allocates for infrastructure, job creation, and investment projects. The top leadership of the ANC is generally good, but the rest of the state is desperately short of the technocrats it needs to implement that leadership’s plans. This must be urgently addressed.
As for the fracture lines, the key tension is between those who want a more business-friendly South Africa that encourages economic growth, and those who want to see the state take a more active role in fighting poverty and creating jobs. Gordhan’s latest budget walks a tight line between those two poles, but we’ll have to watch the implementation of the budget to see which side is winning. "
REF : –Felicity Duncan (felicity@moneyweb.co.za)
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
"OK, I’ll be perfectly honest, the national budget really does matter. Every year, the finance minister stands before parliament and tells some South Africans what their annual tax bill will be, tells others how much more they’ll be spending on smokes and booze, and tells the rest what kind of increases they can expect in their social grants (with some overlap among these categories). These are all important things, with implications for people’s everyday lives.
The national budget also signals what the priorities of the upper echelons of government are. This year, for example, it was clear that ANC top leadership has prioritised infrastructure investment and job creation, with plans to spend money on projects ranging from upgrading the country’s ports to employing the unemployed to eliminate alien vegetation from its waterways (seriously, look it up).
However, there is an important sense in which the national budget doesn’t matter, a sense which is captured by this quote from Pravin Gordhan’s budget speech : “We are aware of several weaknesses in the state’s infrastructure capacity. In the past, spending has lagged behind plans. Our estimate is that in 2010/11, R178bn was spent out of a planned R260bn, or just 68%. In addition to long delays, we have often experienced significant cost over-runs in infrastructure projects.”
The national budget and the associated medium-term expenditure framework (which is basically government’s spending plan for the next four years) are a blueprint for what the government’s top bosses hope to achieve. However, they are often not much more than that, because the implementation of these plans rests in the hands of other elements of the state, and as South Africa’s infrastructure track record indicates, there’s often a large gap between what the national government wants to do, and what the various arms of the government actually can do. A lot of what appears in the national budget is provisional, and subject to the whims of the employees and associates of the state.
Consider, for example, Gordhan’s projections with respect to the budget deficit. Revenue collection this year was stronger than anticipated, and the minister announced that the deficit would be equal to 4.6% of GDP in 2011/12 (down from a previous estimate of 4.8%), and would fall to 3% in 2012/13. This is great news, especially in light of recent worries about South Africa’s credit ratings.
These projections, however, are based on the optimistic assumption that government will be able to keep increases in its sizeable wage bill (currently equal to about one third of the R1tn national budget) below 7%. This seems very unlikely; after all, spending on wages rose by 11.9% last year, despite the fact that the previous budget projected a rise of just 7.8%. Strike-happy public sector workers demanding above-inflation wage increases could easily derail Gordhan’s plans for fiscal prudence.
Or consider the government’s job creation schemes. For a few years now, Gordhan has been talking about a youth employment subsidy, and I was hoping that this year some flesh would be added to those bones. However, all he had to say about that was “[it] is under discussion at Nedlac, where the labour constituency has expressed reservations. In our view these concerns can be addressed in the design and implementation of the incentive. We would all like to see greater urgency in resolving this matter.”
In other words, COSATU is gumming up the works on the youth employment subsidy, and there’s not much Gordhan or anyone else can do about it. Again, the best-laid plans of the country’s top leadership can be thwarted by the actions of those it relies on; the budget is a guide, not a guarantee.
Since it came to power, the ANC has consistently produced sensible budgets. However, as time goes by, it’s becoming easier to see, in those budgets, the fracture lines in South African politics and the weaknesses of the state.
The government’s key weakness is its lack of capacity, as illustrated by the takeover of elements of the provincial governments of Limpopo, Gauteng, and the Free State, and a chronic inability to spend the money it allocates for infrastructure, job creation, and investment projects. The top leadership of the ANC is generally good, but the rest of the state is desperately short of the technocrats it needs to implement that leadership’s plans. This must be urgently addressed.
As for the fracture lines, the key tension is between those who want a more business-friendly South Africa that encourages economic growth, and those who want to see the state take a more active role in fighting poverty and creating jobs. Gordhan’s latest budget walks a tight line between those two poles, but we’ll have to watch the implementation of the budget to see which side is winning. "
REF : –Felicity Duncan (felicity@moneyweb.co.za)
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
Tuesday, 21 February 2012
Euro Finance Ministers Reach Agreement on Greek Bailout
Euro-area finance ministers reach agreement on a second bailout package for Greece,
Finance ministers have haggled over the terms of new loans, & possible contribution by central banks, and leaned on investors to accept bigger write-offs in a bond exchange that is vital to staving off a Greek bankruptcy next month.
The euro jumped on news of a deal being reached.
It rose almost a cent to $1.3287 at 4:15 a.m.
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Finance ministers have haggled over the terms of new loans, & possible contribution by central banks, and leaned on investors to accept bigger write-offs in a bond exchange that is vital to staving off a Greek bankruptcy next month.
The euro jumped on news of a deal being reached.
It rose almost a cent to $1.3287 at 4:15 a.m.
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Monday, 20 February 2012
Greece Moves Toward Second Bailout as Default Risk Spooks Europe
The epic carries on.
"Feb. 20 (Bloomberg) --
European governments moved toward a second rescue of Greece, calculating that the 130 billion-euro ($172 billion) cost of a fresh bailout is a price worth paying to prevent a default that could shatter the euro area.
Finance ministers will weigh the terms of new loans to Greece and a possible contribution by central banks at a meeting today in Brussels.
They also aim to start a bond exchange with private investors meant to stave off a Greek bankruptcy next month.
Bondholders’ response to the swap, Greece’s ability to prolong two years of austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti- bailout mindset loom as risks to the latest salvage operation.
“We still have a bit of work to do,” German Finance Minister Wolfgang Schaeuble told reporters today as he arrived for the meeting of euro-area finance chiefs. “We’ve set out to wrap up the decision on a new aid program for Greece. I’m confident.”
No time was set for a press conference after the meeting, under way since 3:30 p.m.
Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil in Greece, representing 2.4 percent of the continental economy, will spill across borders.
The euro gained as much as 1 percent to $1.3277 today, bringing its climb against the dollar this year to more than 2 percent. European stocks rose, with the Stoxx Europe 600 Index advancing 0.9 percent to a six-month high.
Summit-Level Pledge
Tonight’s meeting is two years and nine days after Greece’s fiscal woes burst upon the 17-nation euro zone, prompting a summit-level pledge of “determined and coordinated action, if needed” to safeguard the currency.
Since then, creditor countries and Greece have sought leverage over each other. Rich countries led by Germany have tied aid to ever-stricter conditions, while Greece counts on Europe’s fear that letting it go bust would destabilize, and possibly wreck, the 13-year-old monetary union.
“It is the intention of nobody to have Greece outside the euro area,” Luxembourg Prime Minister Jean-Claude Juncker said as he arrived to chair the meeting.
The size of the public aid is “still open.”
Finance ministers will try to make Greece’s aid numbers add up, possibly offering lower interest rates or longer loan maturities to bring Greek debt down to a target of 120 percent of gross domestic product in 2020, two officials said last week.
IMF Estimates
Unchanged terms would leave the debt at 129 percent of GDP by 2020, too high to be “sustainable,” according to European and International Monetary Fund estimates that were shown to the ministers on a Feb. 15 conference call, two officials said.
“We are here today ready to conclude this long process,” Greek Finance Minister Evangelos Venizelos said. “I am optimistic, but in any case we need a clear political approval.”
Up for debate at the meeting, attended by European Central Bank President Mario Draghi, is the role of the politically independent ECB and its national branches in the bailout that follows 110 billion euros awarded in May 2010.
Central-bank contributions and bigger-than-planned writeoffs by private bondholders would be two ways of drumming up the extra funds, Austrian Finance Minister Maria Fekter said.
“Governments can’t make more tax money available -- that would overburden the states,” Fekter told reporters. “We in Austria would have problems getting it through parliament.”
Previous Practice
Fekter said she is also on guard against the IMF springing a surprise tonight by cutting its share of the Greek loans from its previous practice of delivering one third of the total.
Christine Lagarde, who was French finance minister when the crisis began and took over the IMF last year, declined to say how much the Washington-based fund will steer toward the new package.
“Greece has manifestly made very significant strides and now the work has to go on,” Lagarde said on her way in. “The IMF is here to be part of the work.”
European governments need to weld together the program tonight to give enough time for the bond exchange -- designed ultimately to write off about 100 billion euros of Greek debt -- to go ahead by a mid-March deadline.
The target is for the swap offer to run from Feb. 22 to March 9, so the exchange takes place in time for Greece to escape the full 14.5 billion euro cost of a March 20 bond redemption, German lawmakers were told last week by government officials.
State Assets
Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries are also insisting on more control over how Greece spends the money.
Germany’s Schaeuble said Greece accepts the idea of paying the international funds into a special account, which would give priority to keeping Greece solvent before releasing money for the country’s budget.
Greece upheld part of its side of the bargain yesterday by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens.
The Greek economy shrank 7 percent in the fourth quarter from a year earlier as unemployment surged past 20 percent in November. The country’s output is forecast to shrink for the fifth straight year.
“It’s like a puzzle: all the pieces are on the table, we have to put them together,” French Finance Minister Francois Baroin said. “That’s what we’re going to do this afternoon.”
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Rainer Buergin in Brussels at rbuergin1@bloomberg.net .
===
Sent from Bloomberg for Blackberry. Download it from the Blackberry App World!
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
"Feb. 20 (Bloomberg) --
European governments moved toward a second rescue of Greece, calculating that the 130 billion-euro ($172 billion) cost of a fresh bailout is a price worth paying to prevent a default that could shatter the euro area.
Finance ministers will weigh the terms of new loans to Greece and a possible contribution by central banks at a meeting today in Brussels.
They also aim to start a bond exchange with private investors meant to stave off a Greek bankruptcy next month.
Bondholders’ response to the swap, Greece’s ability to prolong two years of austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti- bailout mindset loom as risks to the latest salvage operation.
“We still have a bit of work to do,” German Finance Minister Wolfgang Schaeuble told reporters today as he arrived for the meeting of euro-area finance chiefs. “We’ve set out to wrap up the decision on a new aid program for Greece. I’m confident.”
No time was set for a press conference after the meeting, under way since 3:30 p.m.
Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil in Greece, representing 2.4 percent of the continental economy, will spill across borders.
The euro gained as much as 1 percent to $1.3277 today, bringing its climb against the dollar this year to more than 2 percent. European stocks rose, with the Stoxx Europe 600 Index advancing 0.9 percent to a six-month high.
Summit-Level Pledge
Tonight’s meeting is two years and nine days after Greece’s fiscal woes burst upon the 17-nation euro zone, prompting a summit-level pledge of “determined and coordinated action, if needed” to safeguard the currency.
Since then, creditor countries and Greece have sought leverage over each other. Rich countries led by Germany have tied aid to ever-stricter conditions, while Greece counts on Europe’s fear that letting it go bust would destabilize, and possibly wreck, the 13-year-old monetary union.
“It is the intention of nobody to have Greece outside the euro area,” Luxembourg Prime Minister Jean-Claude Juncker said as he arrived to chair the meeting.
The size of the public aid is “still open.”
Finance ministers will try to make Greece’s aid numbers add up, possibly offering lower interest rates or longer loan maturities to bring Greek debt down to a target of 120 percent of gross domestic product in 2020, two officials said last week.
IMF Estimates
Unchanged terms would leave the debt at 129 percent of GDP by 2020, too high to be “sustainable,” according to European and International Monetary Fund estimates that were shown to the ministers on a Feb. 15 conference call, two officials said.
“We are here today ready to conclude this long process,” Greek Finance Minister Evangelos Venizelos said. “I am optimistic, but in any case we need a clear political approval.”
Up for debate at the meeting, attended by European Central Bank President Mario Draghi, is the role of the politically independent ECB and its national branches in the bailout that follows 110 billion euros awarded in May 2010.
Central-bank contributions and bigger-than-planned writeoffs by private bondholders would be two ways of drumming up the extra funds, Austrian Finance Minister Maria Fekter said.
“Governments can’t make more tax money available -- that would overburden the states,” Fekter told reporters. “We in Austria would have problems getting it through parliament.”
Previous Practice
Fekter said she is also on guard against the IMF springing a surprise tonight by cutting its share of the Greek loans from its previous practice of delivering one third of the total.
Christine Lagarde, who was French finance minister when the crisis began and took over the IMF last year, declined to say how much the Washington-based fund will steer toward the new package.
“Greece has manifestly made very significant strides and now the work has to go on,” Lagarde said on her way in. “The IMF is here to be part of the work.”
European governments need to weld together the program tonight to give enough time for the bond exchange -- designed ultimately to write off about 100 billion euros of Greek debt -- to go ahead by a mid-March deadline.
The target is for the swap offer to run from Feb. 22 to March 9, so the exchange takes place in time for Greece to escape the full 14.5 billion euro cost of a March 20 bond redemption, German lawmakers were told last week by government officials.
State Assets
Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries are also insisting on more control over how Greece spends the money.
Germany’s Schaeuble said Greece accepts the idea of paying the international funds into a special account, which would give priority to keeping Greece solvent before releasing money for the country’s budget.
Greece upheld part of its side of the bargain yesterday by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens.
The Greek economy shrank 7 percent in the fourth quarter from a year earlier as unemployment surged past 20 percent in November. The country’s output is forecast to shrink for the fifth straight year.
“It’s like a puzzle: all the pieces are on the table, we have to put them together,” French Finance Minister Francois Baroin said. “That’s what we’re going to do this afternoon.”
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Rainer Buergin in Brussels at rbuergin1@bloomberg.net .
===
Sent from Bloomberg for Blackberry. Download it from the Blackberry App World!
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
The cost of economic growth
I realy enjoyed this article from Neels van Schaik from PSG gives a good perspective to what is happening and how things have changed.
Enjoy your week
Steven
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
To subscribe or read more, please go to to http://www.psgam.co.za/
"Whether you are a passive shareholder in a listed company or actively engaged in running your own business, there is one concept that focuses the mind of any capital provider, that being growth!
Expectations of growth determine which projects or new ventures will be allocated capital and which will be starved of capital. Measured in aggregate, economists and investors get very excited from quarter to quarter about economic growth, or the lack thereof and what adjustments need to be made to a business or economy to keep fuelling growth.
One of the problems facing certain countries at present, and this is effectively a global dilemma, is that to accommodate growing populations and the workforce that accompanies a larger human base, economic growth has to be strong and consistently so, often for unrealistically extended periods of time. What has become quite clear is that rising numbers of people are also more present when economic growth allows for it; this does however carry a deep cost – what I describe as the dark social or environmental cost of economic growth.
Having recently visited China and coincidently having just read the book by well known author and scientist, Jared Diamond called Collapse: How societies choose to fail or survive, I have increasingly been struck by the destructive forces of the human race, most notably towards our host, earth. A deep debate on the social and environmental costs of economic growth transcends typical economic discussions such as global warming and whose to blame, or whether capitalism or democratic socialism allow for better economic management or even whether capitalism in its current form is sustainable. It is instead an intense focus on whether our present day system of individual self interest and survival takes us down a path of self-destruction that is for all intense and purposes irreversible. In my opinion, my January trip to China brought home to me, a very clear perspective of the destructive nature of human population growth and our quest for economic growth at the expense of our environment.
Economic disequilibria as a result of over-population and man’s demand for resources is well documented, an interesting present day example is the Middle East. As we all know, the Middle East has been blessed with the world’s biggest oil reserves, but has some of the world’s poorest natural freshwater resources. For many centuries most of Saudi Arabia’s water came from relatively shallow underground aquifers that could sustain a relatively small subsistence population.
The drilling technology from the 1970’s stemming from the oil industry enabled Saudi Arabia to tap non-renewable ancient fossil aquifers; these are estimated to be 30,000 years old and immense in volume, estimated to be one-sixth as large as the Ogallala aquifer in America’s Midwest. As Steven Solomon puts it in his book, “Water”, with these discoveries the Saudi’s viewing their resource as infinite, used up their water resource as fast as the West was using its oil. (1)
At one point Saudi Arabia became self-sufficient in desert wheat through subsidies of roughly $900 per ton in the 1970’s, and from the 1980’s became one of the leading grain exporters – the production costs, according to Solomon were, however, five times greater than the grain price on international markets.
Today Saudi Arabia still produces roughly enough durum and wheat for domestic consumption, but now that most of their natural water resources are depleted, they have abandoned wheat growing, and will probably be relying solely on wheat imports by 2016. In this example, there is little doubt that the historical abusive usage of water has meant that irreversible damage has been inflicted to the area, and one would think that it represents failed policy and a failed example that modern economies should try to avoid.
Unfortunately, it looks as if the Chinese do not seem too focused at present on long-term environmental impacts of economic growth either. Clearly, their immediate concerns relate more to appeasing the hordes to stave off social and economic unrest which will inevitably flair if the economic juggernaut does not maintain momentum. What follows are my thoughts and observations as I travelled:
The train trip from Beijing to Shanghai covered a distance of 1400km, it was best described as an unpleasant eye opener, we covered large parts of the trip in smog . Maybe the time has come for investors to shift their obsession from commodities to medical companies.
China’s rate of urbanization clearly results in positive and negative consequences - not dissimilar to the experience in many other countries. From a ‘positive’ perspective, BHP Billiton’s half year presentation last week emphasised yet again to what extent resource companies are gearing their capital expenditure towards emerging markets, China, the most prominent. The more daunting aspect to urbanization is of course that it creates expectations, such as earning a better wage, improving living conditions and education needs. In so doing, the virtuous economic, social and environmental pressure cycle unfolds!
Whist China has been adept in managing the pace of urbanization thus far, one senses below the surface brews underlying social and economic pressures. Income inequality has already soared, statistics showing that the top 10% of the population earn at least twenty times more than the bottom 10%. Although the argument can be made that this is no different to countries such as Brazil, we believe that what differentiates China is the population size. Brazil has seven times fewer people than China! The demands and requirements of these new urbanites will have a tangible impact on the prices of many raw materials across the globe and clearly this will imply a serious environmental impact!
As populations become more affluent diets change towards higher protein intake. Per capita consumption of various protein sources like meat and eggs have already quadrupled between 1978 and 2001. These sources of protein are not necessarily efficient as it requires 5 to 10 kilograms of plants to produce half a kilogram of meat.
We have all heard the statistics about China’s water pollution, but a quick revisit would suffice. According to the World Bank, China has only a per-capita share of water of 2700 cubic meters per annum (2005 statistics). This is one quarter of the world’s average, yet they have a fifth of the world’s population. What exacerbates China’s water problem is the uneven distribution of water sources between North and South China. North China has only one fifth the per capita supply of South China.
China is now relying on 10,000 year old aquifers to supply water, with the likely outcome not dissimilar to Saudi Arabia. To address this problem, they are looking to develop a significant dependence on desalination given the current worsening state of their water quality. Desalination thus far has not proven to be an environmentally friendly solution and despite the technology having improved considerably, desalination capacity so far is only 0.3% of total global water usage.
Climate change has led to significant changes in China’s weather patterns. Deforestation and the degradation of grasslands and wetlands especially in Northern China is a key driver behind the frequency of droughts and soil erosion, according to Jared Diamond. The grassland degradation has increased the frequency of dust storms in Eastern China, and has also increased the frequency and severity of floods on the Yellow and Yangtze River. For example, roughly four fifths of the wetlands in the Sanjian Plain in the Northeast China, covering an area of 110,000 square kilometres (bigger than the Republic of Korea) has erroneously been converted to farmland, and although the Asian Development Bank is funding the restoration of this wetland area it will take years if not decades for any positive impact to be seen. As this is an important grain producing area, the question remains where and how the grain production from this area will be replaced.
Although most of us tend to focus on the impact China is having on its own environment, it is worth pointing out that it has gradually externalised its social and environmental pressures to other countries that have thus far been benefitting significantly from supplying products to China. These producer nations, in many instances so obsessed with economic growth, have paid little or no attention to the impact that this has had on their own environments. Ironic is that whilst China exports its environmental impact, in isolated pockets, it has to some extent been able to reverse its own resource depletion! Take for example a reversal in deforestation at home over recent years, with natural forest cover having increased by 12% in total over the last 20 years to 2010 (“old-growth” forest cover is still marginally lower than 1990).
This Angle in no way attempts to blame China, Western economies underwent economic industrialization decades ago and environmental concerns certainly took a back seat then too and not much has actually changed. What is, however, startling this time round is that the numbers are so much larger and thus the consequences too!
Jared Diamond highlights five key factors, environmental damage, climate change, hostile neighbours, loss of trading partners, and the society's own responses to its environmental problems that has lead to the destruction of earlier societies and civilizations, and cautions that many of these issues are present today on a global scale.
In the words of Aldo Leopold: “One of the oldest tasks in history is to live on a piece of land without destroying it "
Enjoy your week
Steven
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
To subscribe or read more, please go to to http://www.psgam.co.za/
"Whether you are a passive shareholder in a listed company or actively engaged in running your own business, there is one concept that focuses the mind of any capital provider, that being growth!
Expectations of growth determine which projects or new ventures will be allocated capital and which will be starved of capital. Measured in aggregate, economists and investors get very excited from quarter to quarter about economic growth, or the lack thereof and what adjustments need to be made to a business or economy to keep fuelling growth.
One of the problems facing certain countries at present, and this is effectively a global dilemma, is that to accommodate growing populations and the workforce that accompanies a larger human base, economic growth has to be strong and consistently so, often for unrealistically extended periods of time. What has become quite clear is that rising numbers of people are also more present when economic growth allows for it; this does however carry a deep cost – what I describe as the dark social or environmental cost of economic growth.
Having recently visited China and coincidently having just read the book by well known author and scientist, Jared Diamond called Collapse: How societies choose to fail or survive, I have increasingly been struck by the destructive forces of the human race, most notably towards our host, earth. A deep debate on the social and environmental costs of economic growth transcends typical economic discussions such as global warming and whose to blame, or whether capitalism or democratic socialism allow for better economic management or even whether capitalism in its current form is sustainable. It is instead an intense focus on whether our present day system of individual self interest and survival takes us down a path of self-destruction that is for all intense and purposes irreversible. In my opinion, my January trip to China brought home to me, a very clear perspective of the destructive nature of human population growth and our quest for economic growth at the expense of our environment.
Economic disequilibria as a result of over-population and man’s demand for resources is well documented, an interesting present day example is the Middle East. As we all know, the Middle East has been blessed with the world’s biggest oil reserves, but has some of the world’s poorest natural freshwater resources. For many centuries most of Saudi Arabia’s water came from relatively shallow underground aquifers that could sustain a relatively small subsistence population.
The drilling technology from the 1970’s stemming from the oil industry enabled Saudi Arabia to tap non-renewable ancient fossil aquifers; these are estimated to be 30,000 years old and immense in volume, estimated to be one-sixth as large as the Ogallala aquifer in America’s Midwest. As Steven Solomon puts it in his book, “Water”, with these discoveries the Saudi’s viewing their resource as infinite, used up their water resource as fast as the West was using its oil. (1)
At one point Saudi Arabia became self-sufficient in desert wheat through subsidies of roughly $900 per ton in the 1970’s, and from the 1980’s became one of the leading grain exporters – the production costs, according to Solomon were, however, five times greater than the grain price on international markets.
Today Saudi Arabia still produces roughly enough durum and wheat for domestic consumption, but now that most of their natural water resources are depleted, they have abandoned wheat growing, and will probably be relying solely on wheat imports by 2016. In this example, there is little doubt that the historical abusive usage of water has meant that irreversible damage has been inflicted to the area, and one would think that it represents failed policy and a failed example that modern economies should try to avoid.
Unfortunately, it looks as if the Chinese do not seem too focused at present on long-term environmental impacts of economic growth either. Clearly, their immediate concerns relate more to appeasing the hordes to stave off social and economic unrest which will inevitably flair if the economic juggernaut does not maintain momentum. What follows are my thoughts and observations as I travelled:
The train trip from Beijing to Shanghai covered a distance of 1400km, it was best described as an unpleasant eye opener, we covered large parts of the trip in smog . Maybe the time has come for investors to shift their obsession from commodities to medical companies.
China’s rate of urbanization clearly results in positive and negative consequences - not dissimilar to the experience in many other countries. From a ‘positive’ perspective, BHP Billiton’s half year presentation last week emphasised yet again to what extent resource companies are gearing their capital expenditure towards emerging markets, China, the most prominent. The more daunting aspect to urbanization is of course that it creates expectations, such as earning a better wage, improving living conditions and education needs. In so doing, the virtuous economic, social and environmental pressure cycle unfolds!
Whist China has been adept in managing the pace of urbanization thus far, one senses below the surface brews underlying social and economic pressures. Income inequality has already soared, statistics showing that the top 10% of the population earn at least twenty times more than the bottom 10%. Although the argument can be made that this is no different to countries such as Brazil, we believe that what differentiates China is the population size. Brazil has seven times fewer people than China! The demands and requirements of these new urbanites will have a tangible impact on the prices of many raw materials across the globe and clearly this will imply a serious environmental impact!
As populations become more affluent diets change towards higher protein intake. Per capita consumption of various protein sources like meat and eggs have already quadrupled between 1978 and 2001. These sources of protein are not necessarily efficient as it requires 5 to 10 kilograms of plants to produce half a kilogram of meat.
We have all heard the statistics about China’s water pollution, but a quick revisit would suffice. According to the World Bank, China has only a per-capita share of water of 2700 cubic meters per annum (2005 statistics). This is one quarter of the world’s average, yet they have a fifth of the world’s population. What exacerbates China’s water problem is the uneven distribution of water sources between North and South China. North China has only one fifth the per capita supply of South China.
China is now relying on 10,000 year old aquifers to supply water, with the likely outcome not dissimilar to Saudi Arabia. To address this problem, they are looking to develop a significant dependence on desalination given the current worsening state of their water quality. Desalination thus far has not proven to be an environmentally friendly solution and despite the technology having improved considerably, desalination capacity so far is only 0.3% of total global water usage.
Climate change has led to significant changes in China’s weather patterns. Deforestation and the degradation of grasslands and wetlands especially in Northern China is a key driver behind the frequency of droughts and soil erosion, according to Jared Diamond. The grassland degradation has increased the frequency of dust storms in Eastern China, and has also increased the frequency and severity of floods on the Yellow and Yangtze River. For example, roughly four fifths of the wetlands in the Sanjian Plain in the Northeast China, covering an area of 110,000 square kilometres (bigger than the Republic of Korea) has erroneously been converted to farmland, and although the Asian Development Bank is funding the restoration of this wetland area it will take years if not decades for any positive impact to be seen. As this is an important grain producing area, the question remains where and how the grain production from this area will be replaced.
Although most of us tend to focus on the impact China is having on its own environment, it is worth pointing out that it has gradually externalised its social and environmental pressures to other countries that have thus far been benefitting significantly from supplying products to China. These producer nations, in many instances so obsessed with economic growth, have paid little or no attention to the impact that this has had on their own environments. Ironic is that whilst China exports its environmental impact, in isolated pockets, it has to some extent been able to reverse its own resource depletion! Take for example a reversal in deforestation at home over recent years, with natural forest cover having increased by 12% in total over the last 20 years to 2010 (“old-growth” forest cover is still marginally lower than 1990).
This Angle in no way attempts to blame China, Western economies underwent economic industrialization decades ago and environmental concerns certainly took a back seat then too and not much has actually changed. What is, however, startling this time round is that the numbers are so much larger and thus the consequences too!
Jared Diamond highlights five key factors, environmental damage, climate change, hostile neighbours, loss of trading partners, and the society's own responses to its environmental problems that has lead to the destruction of earlier societies and civilizations, and cautions that many of these issues are present today on a global scale.
In the words of Aldo Leopold: “One of the oldest tasks in history is to live on a piece of land without destroying it "
EU Ministers Circle In on Greek Rescue as Crisis Disputes Linger
The crisis still lingers !!
Feb. 20 (Bloomberg) --
"European officials attempting to fend off the euro area’s first sovereign default will try to settle remaining disputes today as they close in on a 130 billion-euro ($170 billion) Greek bailout.
Finance ministers meet in Brussels at 3:30 p.m., joining Greece’s prime minister, Lucas Papademos, who arrived on the eve of the gathering. Their talks on his country’s second bailout in two years will aim to reconcile demands made on Greek leaders, a debt swap among private creditors, the role of the European Central Bank and concerns the measures won’t bear fruit.
European leaders including German Chancellor Angela Merkel want to wrest the common currency out of its crisis amid signs of improvement in the global economy. Focus has returned to Greece as the threat of economic collapse and exit from the euro has stoked officials’ concern such a scenario may provoke chaos.
“I don’t think there will be a majority to go down any other avenue” than a Greek bailout, Austrian Finance Minister Maria Fekter told state broadcaster ORF yesterday. Asked whether ministers will reach agreement, she said: “it looks like it.”
Should ministers fail to back the bailout package at their Brussels meeting, the issue could be pushed off to the next European Union summit on March 1. A disrupted schedule would threaten to spark unease among investors and reverse a decline in bond yields in indebted nations such as Italy and Spain.
Scope ‘to Disappoint’
Italian bonds rose for a sixth week last week, the longest run of gains since August 2006. The euro has climbed 1.6 percent against the U.S. dollar since the beginning of the year. In contrast, the yield on Greece’s 2022 bond climbed 60 basis points to 33.98 percent on Feb. 17.
“Deadlines are shifted and there is scope for events to disappoint,” Neil MacKinnon, a global macro strategist at VTB Capital in London and a former U.K. Treasury official, wrote in a note to clients yesterday.
Merkel, Papademos and Italian premier Mario Monti on Feb. 17 expressed confidence that ministers will resolve open questions, and Papademos flew to Brussels yesterday to facilitate discussions. International Monetary Fund Managing Director Christine Lagarde will also participate in the finance ministers’ talks, according to fund spokesman Gerry Rice.
Critical Talks
Papademos’s presence was deemed necessary because critical talks are under way with European agencies, the IMF and member states, requiring immediate coordination between Papademos and Finance Minister Evangelos Venizelos, according to a Greek finance ministry official. A final meeting with Greek government officials such as Papademos and Venizelos and the International Institute of Finance could also be required, the official said.
As the clock ticks toward March 20, when Greece is due to pay off 14.5 billion euros of maturing debt, euro region officials are scrambling to align competing schedules with a private-sector bond swap designed to slice about 100 billion euros off Greece’s debt.
Officials are targeting a window of Feb. 22 to March 9 to complete the swap transaction, German lawmakers were told during a briefing by government officials. The swap would then begin by March 8 at the latest and be completed by March 11, according to state-run Athens News Agency. Still, the exchange can only proceed once governments authorize funds to be used in cash or collateral as an incentive to investors.
ECB Role
Compounding the issue is the role of the ECB and the Greek bonds it has accumulated over the course of the crisis. The Frankfurt-based central bank is holding talks on exempting Greek bonds in national central banks’ investment portfolios from a debt restructuring, two euro-area officials said on Feb. 18.
The ECB is swapping its Greek bonds for new ones to ensure that it won’t be forced to take losses in any debt restructuring, three euro-area officials said on Feb. 16. The move may be completed today, the officials said.
Greece is drawing up legislation that could be used to impose losses on investors who don’t support the debt swap, according to two euro-region officials familiar with the situation. Finance ministers are prepared to back the use of so- called collective-action clauses if the voluntary swap doesn’t draw enough participation, one of the officials said.
Meanwhile, questions have swirled on whether austerity and outside financing measures being undertaken will manage to stave off a Greek collapse. The Greek economy shrank 7 percent in the fourth quarter from a year earlier as unemployment surged past 20 percent in November. The country’s output is forecast to shrink for the fifth straight year.
Debt Goals
Euro-area ministers heard on a Feb. 15 conference call that without further measures, Greece will miss debt-reduction goals. Outstanding debt would fall to 129 percent of gross domestic product in 2020, missing a targeted 120 percent, according to three people familiar with the talks.
German Finance Minister Wolfgang Schaeuble signaled flexibility on the target, saying in Stuttgart on Feb. 17 that “the 120 percent may be 122 percent or 123 percent, it mustn’t be 130 percent.”
Before he flew to Brussels, Papademos signaled his government had identified the cuts necessary to lower spending by 325 million euros, offering more guarantees that Greece will fulfill its side of the bargain.
“A euro exit by one member could fundamentally change the nature of the euro as an irreversible currency and spark an unprecedented run on banks and sovereigns,” Joachim Fels, chief economist at Morgan Stanley, wrote in a note to clients yesterday.
To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net
===
Sent from Bloomberg
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Feb. 20 (Bloomberg) --
"European officials attempting to fend off the euro area’s first sovereign default will try to settle remaining disputes today as they close in on a 130 billion-euro ($170 billion) Greek bailout.
Finance ministers meet in Brussels at 3:30 p.m., joining Greece’s prime minister, Lucas Papademos, who arrived on the eve of the gathering. Their talks on his country’s second bailout in two years will aim to reconcile demands made on Greek leaders, a debt swap among private creditors, the role of the European Central Bank and concerns the measures won’t bear fruit.
European leaders including German Chancellor Angela Merkel want to wrest the common currency out of its crisis amid signs of improvement in the global economy. Focus has returned to Greece as the threat of economic collapse and exit from the euro has stoked officials’ concern such a scenario may provoke chaos.
“I don’t think there will be a majority to go down any other avenue” than a Greek bailout, Austrian Finance Minister Maria Fekter told state broadcaster ORF yesterday. Asked whether ministers will reach agreement, she said: “it looks like it.”
Should ministers fail to back the bailout package at their Brussels meeting, the issue could be pushed off to the next European Union summit on March 1. A disrupted schedule would threaten to spark unease among investors and reverse a decline in bond yields in indebted nations such as Italy and Spain.
Scope ‘to Disappoint’
Italian bonds rose for a sixth week last week, the longest run of gains since August 2006. The euro has climbed 1.6 percent against the U.S. dollar since the beginning of the year. In contrast, the yield on Greece’s 2022 bond climbed 60 basis points to 33.98 percent on Feb. 17.
“Deadlines are shifted and there is scope for events to disappoint,” Neil MacKinnon, a global macro strategist at VTB Capital in London and a former U.K. Treasury official, wrote in a note to clients yesterday.
Merkel, Papademos and Italian premier Mario Monti on Feb. 17 expressed confidence that ministers will resolve open questions, and Papademos flew to Brussels yesterday to facilitate discussions. International Monetary Fund Managing Director Christine Lagarde will also participate in the finance ministers’ talks, according to fund spokesman Gerry Rice.
Critical Talks
Papademos’s presence was deemed necessary because critical talks are under way with European agencies, the IMF and member states, requiring immediate coordination between Papademos and Finance Minister Evangelos Venizelos, according to a Greek finance ministry official. A final meeting with Greek government officials such as Papademos and Venizelos and the International Institute of Finance could also be required, the official said.
As the clock ticks toward March 20, when Greece is due to pay off 14.5 billion euros of maturing debt, euro region officials are scrambling to align competing schedules with a private-sector bond swap designed to slice about 100 billion euros off Greece’s debt.
Officials are targeting a window of Feb. 22 to March 9 to complete the swap transaction, German lawmakers were told during a briefing by government officials. The swap would then begin by March 8 at the latest and be completed by March 11, according to state-run Athens News Agency. Still, the exchange can only proceed once governments authorize funds to be used in cash or collateral as an incentive to investors.
ECB Role
Compounding the issue is the role of the ECB and the Greek bonds it has accumulated over the course of the crisis. The Frankfurt-based central bank is holding talks on exempting Greek bonds in national central banks’ investment portfolios from a debt restructuring, two euro-area officials said on Feb. 18.
The ECB is swapping its Greek bonds for new ones to ensure that it won’t be forced to take losses in any debt restructuring, three euro-area officials said on Feb. 16. The move may be completed today, the officials said.
Greece is drawing up legislation that could be used to impose losses on investors who don’t support the debt swap, according to two euro-region officials familiar with the situation. Finance ministers are prepared to back the use of so- called collective-action clauses if the voluntary swap doesn’t draw enough participation, one of the officials said.
Meanwhile, questions have swirled on whether austerity and outside financing measures being undertaken will manage to stave off a Greek collapse. The Greek economy shrank 7 percent in the fourth quarter from a year earlier as unemployment surged past 20 percent in November. The country’s output is forecast to shrink for the fifth straight year.
Debt Goals
Euro-area ministers heard on a Feb. 15 conference call that without further measures, Greece will miss debt-reduction goals. Outstanding debt would fall to 129 percent of gross domestic product in 2020, missing a targeted 120 percent, according to three people familiar with the talks.
German Finance Minister Wolfgang Schaeuble signaled flexibility on the target, saying in Stuttgart on Feb. 17 that “the 120 percent may be 122 percent or 123 percent, it mustn’t be 130 percent.”
Before he flew to Brussels, Papademos signaled his government had identified the cuts necessary to lower spending by 325 million euros, offering more guarantees that Greece will fulfill its side of the bargain.
“A euro exit by one member could fundamentally change the nature of the euro as an irreversible currency and spark an unprecedented run on banks and sovereigns,” Joachim Fels, chief economist at Morgan Stanley, wrote in a note to clients yesterday.
To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net
===
Sent from Bloomberg
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Saturday, 18 February 2012
China Cuts Bank Reserve Requirements With Export Outlook ‘Grim’
Breaking News !!
"Feb. 18 (Bloomberg) -- China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.
Reserve requirements will fall by 50 basis points effective Feb. 24 the People’s Bank of China said on its website this evening. Before today’s move, the ratio for the nation’s largest lenders stood at 21 percent.
Premier Wen Jiabao aims to steer the world’s second-biggest economy through a property market slowdown and the weakest export growth since 2009, with the commerce ministry last week calling the trade outlook “grim.” The International Monetary Fund said this month that China’s expansion may be cut almost in half if Europe’s debt crisis worsens.
“Growth remains the top concern for policy makers,” Zhu Haibin, a Hong Kong-based economist for JPMorgan Chase & Co., said before today’s release. “Monetary policy will be biased toward easing this year.”
A 50 basis-point cut in reserve ratios adds 400 billion yuan ($63 billion) to the financial system, Australia & New Zealand Banking Group Ltd. estimates. The previous reduction, which took effect in December, was the first since the global financial crisis.
Export Slide
China’s exports and imports fell for the first time in two years last month and new lending was the lowest for a January in five years.
Before today's announcement, Ken Peng, a Beijing-based economist at BNP Paribas SA, said the government needs to be “careful not to overshoot monetary loosening, as it did in the financial crisis.” Lingering effects of record lending in 2009 and 2010 include the risk for banks that local government financing vehicles will default, saddling lenders with bad loans.
The government also aims to avoid fueling consumer and property prices. Inflation unexpectedly rebounded to 4.5 percent in January, accelerating for the first time in six months, as a week-long Chinese New Year holiday boosted spending and prices.
The central bank said Feb. 15 that it will improve the use of differentiated reserve ratios, where individual lenders hold different percentages of deposits as reserves according to their capital adequacy levels and lending growth.
Money-Supply Target
The bank also said that M2, the broadest measure of money supply, will probably grow 14 percent this year, a target that JPMorgan Chase’s Zhu said would imply three to four cuts in reserve ratios this year.
China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace since the first half of 2009. Home prices have declined in cities from Beijing to Wenzhou as the government cracks down on speculation and implements a program to build low-cost housing. Wen has said China won’t waver on its real-estate curbs, which aim to bring home prices to a “reasonable level”.
Jim O’Neill, the economist who coined the term BRIC for developing nations Brazil, Russia, India and China, said Jan. 17 that Chinese officials had moved to avoid the “wild housing bubbles” that many Western nations had experienced. O’Neill, chairman of Goldman Sachs Asset Management, said he doesn’t see a “hard landing” for China.
Besides today’s move, the central bank is allowing the nation’s five biggest lenders, including Industrial & Commercial Bank of China, to increase first-quarter lending by a maximum of about 5 percent from a year earlier, two people at state lenders said previously.
Separately, the banking regulator has been weighing a plan to relax capital requirements, four people with knowledge of the matter said in January.
REF : Paul Panckhurst at ppanckhurst@bloomberg.net "
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Sent from my BlackBerry® wireless device
"Feb. 18 (Bloomberg) -- China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.
Reserve requirements will fall by 50 basis points effective Feb. 24 the People’s Bank of China said on its website this evening. Before today’s move, the ratio for the nation’s largest lenders stood at 21 percent.
Premier Wen Jiabao aims to steer the world’s second-biggest economy through a property market slowdown and the weakest export growth since 2009, with the commerce ministry last week calling the trade outlook “grim.” The International Monetary Fund said this month that China’s expansion may be cut almost in half if Europe’s debt crisis worsens.
“Growth remains the top concern for policy makers,” Zhu Haibin, a Hong Kong-based economist for JPMorgan Chase & Co., said before today’s release. “Monetary policy will be biased toward easing this year.”
A 50 basis-point cut in reserve ratios adds 400 billion yuan ($63 billion) to the financial system, Australia & New Zealand Banking Group Ltd. estimates. The previous reduction, which took effect in December, was the first since the global financial crisis.
Export Slide
China’s exports and imports fell for the first time in two years last month and new lending was the lowest for a January in five years.
Before today's announcement, Ken Peng, a Beijing-based economist at BNP Paribas SA, said the government needs to be “careful not to overshoot monetary loosening, as it did in the financial crisis.” Lingering effects of record lending in 2009 and 2010 include the risk for banks that local government financing vehicles will default, saddling lenders with bad loans.
The government also aims to avoid fueling consumer and property prices. Inflation unexpectedly rebounded to 4.5 percent in January, accelerating for the first time in six months, as a week-long Chinese New Year holiday boosted spending and prices.
The central bank said Feb. 15 that it will improve the use of differentiated reserve ratios, where individual lenders hold different percentages of deposits as reserves according to their capital adequacy levels and lending growth.
Money-Supply Target
The bank also said that M2, the broadest measure of money supply, will probably grow 14 percent this year, a target that JPMorgan Chase’s Zhu said would imply three to four cuts in reserve ratios this year.
China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace since the first half of 2009. Home prices have declined in cities from Beijing to Wenzhou as the government cracks down on speculation and implements a program to build low-cost housing. Wen has said China won’t waver on its real-estate curbs, which aim to bring home prices to a “reasonable level”.
Jim O’Neill, the economist who coined the term BRIC for developing nations Brazil, Russia, India and China, said Jan. 17 that Chinese officials had moved to avoid the “wild housing bubbles” that many Western nations had experienced. O’Neill, chairman of Goldman Sachs Asset Management, said he doesn’t see a “hard landing” for China.
Besides today’s move, the central bank is allowing the nation’s five biggest lenders, including Industrial & Commercial Bank of China, to increase first-quarter lending by a maximum of about 5 percent from a year earlier, two people at state lenders said previously.
Separately, the banking regulator has been weighing a plan to relax capital requirements, four people with knowledge of the matter said in January.
REF : Paul Panckhurst at ppanckhurst@bloomberg.net "
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Sent from my BlackBerry® wireless device
Friday, 17 February 2012
UPS in €5bn approach for TNT Express
US logistics company UPS has approached TNT Express about a possible takeover, reigniting on-off talks about a bid for the Dutch delivery company which faces pressure from shareholders after a drop in its share price.
After many years of speculation about a tie-up between the two, the potential offer from UPS may value the Dutch delivery company around €9 a share or close to €5bn, two people familiar with the talks said.
After many years of speculation about a tie-up between the two, the potential offer from UPS may value the Dutch delivery company around €9 a share or close to €5bn, two people familiar with the talks said.
BEAKING FROM FT ON LINE : NYSE Euronext and CME kick off race for LME
US exchange groups submit bids for the London Metal Exchange, valuing it at up to £1bn and jump-starting a contest for the commodities business
Thursday, 16 February 2012
PROVISIONAL TAX SUBMISSIONS to SARS for Year Ended February 2012- DUE 29 February 2012
Please note that all provisional tax payers (Individuals, Trusts, Companies, Close Corporations) must submitt their Provisional Tax Submissions to SARS by 29 February 2012.
Please note the calculation requirment changes to avoid any penalties for incorrect submissions to SARS.
If you have any queries or require them to be completed at a very competitive fee.
Contact me !!
Have a great day !!
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
Please note the calculation requirment changes to avoid any penalties for incorrect submissions to SARS.
If you have any queries or require them to be completed at a very competitive fee.
Contact me !!
Have a great day !!
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
South African Pvt Entities with a 28 Feb 2011 Year End - Tax Submission Deadline with SARS
Just to remind all Companies, Trust, Close Corporations.
All Entities with a year end of 28 February 2011 note !!
IT14 Tax submissions due to SARS by 29 February 2012 !!
No extention on deadline.
SARS have become strict & the penalities levied for not submitting on time can be harsh depending on your history of submissions by the deadlines.
If you have any queries & need help in meeting this timeline contact me.
Have a great day
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
All Entities with a year end of 28 February 2011 note !!
IT14 Tax submissions due to SARS by 29 February 2012 !!
No extention on deadline.
SARS have become strict & the penalities levied for not submitting on time can be harsh depending on your history of submissions by the deadlines.
If you have any queries & need help in meeting this timeline contact me.
Have a great day
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
Wednesday, 15 February 2012
Asia Stocks, Metals Gain as China Pledges Europe Help; Yen Drops
Will the "Son many would not mention for years" save the day !!
Enjoy this article from Bloomberg on line
"Feb. 15 (Bloomberg) -- Asia stocks rose the most in a month, the yen fell to a three-month low and metals rallied after China pledged to help resolve Europe’s debt crisis.
The MSCI Asia Pacific Index advanced 1.4 percent as of 12:43 p.m. in Tokyo, led by technology shares. Standard & Poor’s 500 Index futures added 0.6 percent. The Nikkei 225 Stock Average jumped 2.1 percent, while the yen weakened against all of its major peers. The euro climbed 0.2 percent to $1.3159. Zinc, tin, lead and copper rose at least 0.7 percent and oil increased 0.5 percent. Ten-year Treasury yields rose two basis points to 1.96 percent.
China is ready to be more involved in resolving the crisis through the European Financial Stability Facility and European Stability Mechanism, said People’s Bank of China Governor Zhou Xiaochuan in a speech, echoing comments made yesterday by Premier Wen Jiabao. The leaders of Greece’s two biggest political parties will provide written commitments to budget cuts, a government official in Athens said.
“China could make Europe’s problems go away,” said Peter Jolly, head of market research at National Australia Bank Ltd. in Sydney. “They have the funds. To the extent that China will participate in the European solution, it takes away some of the flight to quality in Treasuries.”
The Nikkei 225 is poised to close at the highest level since August. The Bank of Japan unexpectedly added 10 trillion yen ($128 billion) to an asset-purchase program yesterday and set a 1 percent goal for inflation to boost the economy.
European finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch a 130 billion euros ($170 billion) aid package.
Elpida Plunges
Elpida Memory Inc. plunged as much as 21 percent, touching its lowest price since it listed in 2004. The Japanese chipmaker said yesterday there is “uncertainty” about its future as it hasn’t reached a deal with the trade ministry, the Development Bank of Japan and its main lenders, reversing a Feb. 2 statement that it expects to secure financing.
Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, rose 4.8 percent. Hynix Semiconductor Inc., a maker of semiconductors such as dynamic random access memory, gained 5.6 percent. Taiwan Semiconductor Manufacturing International Co., the world’s largest contract manufacturer of chips, rose 1 percent in Taipei.
“Investors appear to be betting that the possible failure of Elpida will mean less competition in the industry,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion.
Westfield Jumps
Three stocks rose for each that declined in the MSCI Asia Pacific Index. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 2.1 percent and South Korea’s Kospi Index climbed 0.9 percent.
Westfield Group advanced 5.4 percent in Australia. The manager of shopping centers said it formed a $4.8 billion joint venture with the Canada Pension Plan Investment Board and plans to buy back as much as 10 percent of its stock.
Data later today may show Europe’s economy shrank in the fourth quarter for the first time in 2 1/2 years as the region’s debt crisis undermined confidence. Gross domestic product in the 17-nation euro area fell 0.4 percent from the previous three months, according to the median forecast of 42 economists in a Bloomberg News survey.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net . "
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Enjoy this article from Bloomberg on line
"Feb. 15 (Bloomberg) -- Asia stocks rose the most in a month, the yen fell to a three-month low and metals rallied after China pledged to help resolve Europe’s debt crisis.
The MSCI Asia Pacific Index advanced 1.4 percent as of 12:43 p.m. in Tokyo, led by technology shares. Standard & Poor’s 500 Index futures added 0.6 percent. The Nikkei 225 Stock Average jumped 2.1 percent, while the yen weakened against all of its major peers. The euro climbed 0.2 percent to $1.3159. Zinc, tin, lead and copper rose at least 0.7 percent and oil increased 0.5 percent. Ten-year Treasury yields rose two basis points to 1.96 percent.
China is ready to be more involved in resolving the crisis through the European Financial Stability Facility and European Stability Mechanism, said People’s Bank of China Governor Zhou Xiaochuan in a speech, echoing comments made yesterday by Premier Wen Jiabao. The leaders of Greece’s two biggest political parties will provide written commitments to budget cuts, a government official in Athens said.
“China could make Europe’s problems go away,” said Peter Jolly, head of market research at National Australia Bank Ltd. in Sydney. “They have the funds. To the extent that China will participate in the European solution, it takes away some of the flight to quality in Treasuries.”
The Nikkei 225 is poised to close at the highest level since August. The Bank of Japan unexpectedly added 10 trillion yen ($128 billion) to an asset-purchase program yesterday and set a 1 percent goal for inflation to boost the economy.
European finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch a 130 billion euros ($170 billion) aid package.
Elpida Plunges
Elpida Memory Inc. plunged as much as 21 percent, touching its lowest price since it listed in 2004. The Japanese chipmaker said yesterday there is “uncertainty” about its future as it hasn’t reached a deal with the trade ministry, the Development Bank of Japan and its main lenders, reversing a Feb. 2 statement that it expects to secure financing.
Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, rose 4.8 percent. Hynix Semiconductor Inc., a maker of semiconductors such as dynamic random access memory, gained 5.6 percent. Taiwan Semiconductor Manufacturing International Co., the world’s largest contract manufacturer of chips, rose 1 percent in Taipei.
“Investors appear to be betting that the possible failure of Elpida will mean less competition in the industry,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion.
Westfield Jumps
Three stocks rose for each that declined in the MSCI Asia Pacific Index. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 2.1 percent and South Korea’s Kospi Index climbed 0.9 percent.
Westfield Group advanced 5.4 percent in Australia. The manager of shopping centers said it formed a $4.8 billion joint venture with the Canada Pension Plan Investment Board and plans to buy back as much as 10 percent of its stock.
Data later today may show Europe’s economy shrank in the fourth quarter for the first time in 2 1/2 years as the region’s debt crisis undermined confidence. Gross domestic product in the 17-nation euro area fell 0.4 percent from the previous three months, according to the median forecast of 42 economists in a Bloomberg News survey.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net . "
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Tuesday, 14 February 2012
Breaking News - Eurozone ministers meeting called off
FT on Line :
Finance ministers of the eurozone will not be meeting face to face to discuss Greece on Wednesday, but will hold a conference call instead, Luxembourg Prime Minister Jean-Claude Juncker said.
Finance ministers of the eurozone will not be meeting face to face to discuss Greece on Wednesday, but will hold a conference call instead, Luxembourg Prime Minister Jean-Claude Juncker said.
Dollar bears in for shock if US cuts energy imports
FT on Line
"Dollar bears in for shock if US cuts energy imports
The future of the dollar is more likely to be determined in the shale gas and oil fields of Dakota and Texas than in the sovereign wealth funds of Asia and the Middle East. This is because striking new technological developments are set to transform America’s energy supplies, significantly improving the US balance of payments and the long-term outlook for the greenback, argues Mansoor Mohi-Uddin."
Go to FT.com for full story.
Regards
Steven
"Dollar bears in for shock if US cuts energy imports
The future of the dollar is more likely to be determined in the shale gas and oil fields of Dakota and Texas than in the sovereign wealth funds of Asia and the Middle East. This is because striking new technological developments are set to transform America’s energy supplies, significantly improving the US balance of payments and the long-term outlook for the greenback, argues Mansoor Mohi-Uddin."
Go to FT.com for full story.
Regards
Steven
Europe Now Better Prepared Should Greece Default, Schaeuble Says
Hope this time will be the last.
Don't believe it will be !!
See below from Bloomberg on line
"Feb. 14 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago, jacking up pressure on Greece to hold to its pledges and find the savings needed to win a second bailout.
Euro-area finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among the conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse.
“We want to do everything to help Greece master this crisis,” Schaeuble said in an interview with ZDF television late yesterday. “What we’re experiencing at the moment is much less bad than what may happen to Greece if the attempts to keep Greece in the euro zone failed.” Yet if everything fails, “we’re better prepared than two years ago,” he said.
Germany, the largest contributor to euro-area bailouts, is losing patience with Greece as Europe’s most indebted country threatens to drag the region’s economy into recession more than two years after the sovereign debt crisis first emerged.
While political leaders in Berlin and Brussels welcomed passage of austerity measures in the Greek parliament on Feb. 12, they said that extra steps still need to be agreed upon, and pledges fulfilled. Chancellor Angela Merkel signaled that no more money will be made available beyond the 130 billion euros, saying “there can’t and won’t be any changes to the program.”
Greek leaders have been told they must provide written assurances of their support for measures and policies in return for new financing, the government in Athens said.
‘Day X’
“We can and want to help only if there is a quid pro quo on the Greek side,” German Economy Minister Philipp Roesler said Feb. 12 in an interview with ARD public television. If not, the “day X” of a Greek default “has lost much of its horror.”
Greek products are too expensive, with a minimum wage that exceeds the euro-region average, Schaeuble said. It “has long lived beyond its means and must urgently develop a competitive economy,” he said.
Greek bureaucracy is strangling the bailout aid before it can be put to proper use, Volker Kauder, the parliamentary floor leader of Merkel’s Christian Democrats, said in an interview on Deutschlandradio today.
Greece is being subject to an “overdose of austerity” with the result that “we will likely see more many more tense moments in Greece, with a very serious risk that Greece will eventually have to leave the euro,” Holger Schmieding and Christian Schulz of Berenberg Bank in London said in a note.
German and other policymakers have made clear that “support for Greece could be cut off at any time if the country fails to implement the harsh program,” the economists said. "
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Don't believe it will be !!
See below from Bloomberg on line
"Feb. 14 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago, jacking up pressure on Greece to hold to its pledges and find the savings needed to win a second bailout.
Euro-area finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among the conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse.
“We want to do everything to help Greece master this crisis,” Schaeuble said in an interview with ZDF television late yesterday. “What we’re experiencing at the moment is much less bad than what may happen to Greece if the attempts to keep Greece in the euro zone failed.” Yet if everything fails, “we’re better prepared than two years ago,” he said.
Germany, the largest contributor to euro-area bailouts, is losing patience with Greece as Europe’s most indebted country threatens to drag the region’s economy into recession more than two years after the sovereign debt crisis first emerged.
While political leaders in Berlin and Brussels welcomed passage of austerity measures in the Greek parliament on Feb. 12, they said that extra steps still need to be agreed upon, and pledges fulfilled. Chancellor Angela Merkel signaled that no more money will be made available beyond the 130 billion euros, saying “there can’t and won’t be any changes to the program.”
Greek leaders have been told they must provide written assurances of their support for measures and policies in return for new financing, the government in Athens said.
‘Day X’
“We can and want to help only if there is a quid pro quo on the Greek side,” German Economy Minister Philipp Roesler said Feb. 12 in an interview with ARD public television. If not, the “day X” of a Greek default “has lost much of its horror.”
Greek products are too expensive, with a minimum wage that exceeds the euro-region average, Schaeuble said. It “has long lived beyond its means and must urgently develop a competitive economy,” he said.
Greek bureaucracy is strangling the bailout aid before it can be put to proper use, Volker Kauder, the parliamentary floor leader of Merkel’s Christian Democrats, said in an interview on Deutschlandradio today.
Greece is being subject to an “overdose of austerity” with the result that “we will likely see more many more tense moments in Greece, with a very serious risk that Greece will eventually have to leave the euro,” Holger Schmieding and Christian Schulz of Berenberg Bank in London said in a note.
German and other policymakers have made clear that “support for Greece could be cut off at any time if the country fails to implement the harsh program,” the economists said. "
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Foreign outcry over ‘Volcker rule’ plans
Financial Times - FT Trading Room
Foreign outcry over ‘Volcker rule’ plans
Enjoy what unfolds
"US regulators are facing complaints about the rule aimed at banning proprietary trading at banks, increasing the chances the measure may be watered down"
See link below for Full story
http://www.ft.com/cms/s/0/c6c8ac30-5664-11e1-b548-00144feabdc0.html#ixzz1mMM5hmPA
Foreign outcry over ‘Volcker rule’ plans
Enjoy what unfolds
"US regulators are facing complaints about the rule aimed at banning proprietary trading at banks, increasing the chances the measure may be watered down"
See link below for Full story
http://www.ft.com/cms/s/0/c6c8ac30-5664-11e1-b548-00144feabdc0.html#ixzz1mMM5hmPA
Goldman Sachs Seeks Exemption for Bank Stakes in ‘Credit Funds’
A interesting Article for my foreign followers from Bloomberg Wires:
Take note big brother wants more action.
"Feb. 14 (Bloomberg) -- Goldman Sachs Group Inc., which says it owns the world’s largest family of so-called mezzanine loan funds, is asking regulators to loosen proposed limits on bank investments in such pools.
Four Goldman Sachs employees and three lawyers from Sullivan & Cromwell LLP met on Feb. 2 with Federal Reserve Board staff to discuss Volcker rule limits on banks’ fund investments, according to a summary published yesterday by the central bank. The Volcker rule limits depository institutions from supplying more than 3 percent of the capital in a hedge fund, private- equity fund or other “covered fund.”
Goldman Sachs “expressed their view that the proposed rule does not permit a banking entity to acquire over 3 percent of the ownership interests in a ‘credit fund’ that is principally engaged in making or acquiring extensions of credit,” according to the Fed summary. “GS explained that investors in credit funds require at least 5 percent ‘skin in the game’ from sponsors.”
Goldman Sachs, which was the most profitable securities firm in Wall Street history before converting to a bank in 2008, typically has supplied about 30 percent of the money to the hedge funds, private-equity funds and credit funds the firm manages for clients. Andrea Raphael, a spokeswoman for New York- based Goldman Sachs, declined to comment.
GS Mezzanine Partners, which raised $13 billion for its fifth fund in 2007, has been extending mezzanine credit to buyout firms and corporations since 1996, according to Goldman Sachs’s website. Mezzanine debt, often used in leveraged buyouts, typically us repaid after bank loans in a bankruptcy and has higher yields than broadly marketed public bonds.
‘Leveraged Capital’
“This is the largest mezzanine fund family in the world, with more than $28 billion of leveraged capital raised since 1996,” the company says on the website.
In 2008, Goldman Sachs said it raised $10.5 billion in equity and leverage commitments for its first GS Loan Partners fund, including more than $1 billion from the firm and Goldman Sachs employees. The company also makes and buys loans through Goldman Sachs Credit Partners LP.
The line between hedge funds and credit funds isn’t always clear as some hedge funds make and buy loans as part of a credit strategy. Lloyd C. Blankfein, 57, Goldman Sachs’s chairman and chief executive officer, told investors at a November 2007 conference that the firm recently had raised “Liberty Harbor, a $2.7 billion credit hedge fund, and GS Liquidity Partners, a $1.8 billion fund raised to take advantage of distress opportunities in the credit markets.”
Extending Credit
Ben Adler, Eric Edwards, Michael Koester and David Thomas - - Goldman Sachs representatives at the meeting with Fed staff -- recommended that the Volcker rule should allow banks to own more than 3 percent of a credit fund as long as the fund is “predominantly engaged” in extending credit, originating or acquiring loans and doesn’t employ “excess” leverage, according to the meeting summary.
The exception also should require that the funds’ strategy is to hold loans for at least three years, that they only use derivatives to hedge interest rate and currency risk, and that the funds’ obligations aren’t guaranteed or supported by the sponsoring banking entity, according to the summary.
Whitney Chaterjee, Rodgin Cohen and Michael Wiseman attended the Feb. 2 meeting from Sullivan & Cromwell, according to the Fed summary. The central bank representatives at the meeting were Sean Campbell, Anna Harrington and Christopher Paridon, according to the summary.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Take note big brother wants more action.
"Feb. 14 (Bloomberg) -- Goldman Sachs Group Inc., which says it owns the world’s largest family of so-called mezzanine loan funds, is asking regulators to loosen proposed limits on bank investments in such pools.
Four Goldman Sachs employees and three lawyers from Sullivan & Cromwell LLP met on Feb. 2 with Federal Reserve Board staff to discuss Volcker rule limits on banks’ fund investments, according to a summary published yesterday by the central bank. The Volcker rule limits depository institutions from supplying more than 3 percent of the capital in a hedge fund, private- equity fund or other “covered fund.”
Goldman Sachs “expressed their view that the proposed rule does not permit a banking entity to acquire over 3 percent of the ownership interests in a ‘credit fund’ that is principally engaged in making or acquiring extensions of credit,” according to the Fed summary. “GS explained that investors in credit funds require at least 5 percent ‘skin in the game’ from sponsors.”
Goldman Sachs, which was the most profitable securities firm in Wall Street history before converting to a bank in 2008, typically has supplied about 30 percent of the money to the hedge funds, private-equity funds and credit funds the firm manages for clients. Andrea Raphael, a spokeswoman for New York- based Goldman Sachs, declined to comment.
GS Mezzanine Partners, which raised $13 billion for its fifth fund in 2007, has been extending mezzanine credit to buyout firms and corporations since 1996, according to Goldman Sachs’s website. Mezzanine debt, often used in leveraged buyouts, typically us repaid after bank loans in a bankruptcy and has higher yields than broadly marketed public bonds.
‘Leveraged Capital’
“This is the largest mezzanine fund family in the world, with more than $28 billion of leveraged capital raised since 1996,” the company says on the website.
In 2008, Goldman Sachs said it raised $10.5 billion in equity and leverage commitments for its first GS Loan Partners fund, including more than $1 billion from the firm and Goldman Sachs employees. The company also makes and buys loans through Goldman Sachs Credit Partners LP.
The line between hedge funds and credit funds isn’t always clear as some hedge funds make and buy loans as part of a credit strategy. Lloyd C. Blankfein, 57, Goldman Sachs’s chairman and chief executive officer, told investors at a November 2007 conference that the firm recently had raised “Liberty Harbor, a $2.7 billion credit hedge fund, and GS Liquidity Partners, a $1.8 billion fund raised to take advantage of distress opportunities in the credit markets.”
Extending Credit
Ben Adler, Eric Edwards, Michael Koester and David Thomas - - Goldman Sachs representatives at the meeting with Fed staff -- recommended that the Volcker rule should allow banks to own more than 3 percent of a credit fund as long as the fund is “predominantly engaged” in extending credit, originating or acquiring loans and doesn’t employ “excess” leverage, according to the meeting summary.
The exception also should require that the funds’ strategy is to hold loans for at least three years, that they only use derivatives to hedge interest rate and currency risk, and that the funds’ obligations aren’t guaranteed or supported by the sponsoring banking entity, according to the summary.
Whitney Chaterjee, Rodgin Cohen and Michael Wiseman attended the Feb. 2 meeting from Sullivan & Cromwell, according to the Fed summary. The central bank representatives at the meeting were Sean Campbell, Anna Harrington and Christopher Paridon, according to the summary.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Monday, 13 February 2012
Some perspectives from the battle zone.
PSG giving there views of what the goings on are at the moment.
"We have spent much of the last two weeks on a roadshow to clients on how we see investment markets and how our process has been configured to produce reasonable and consistent returns whatever the future holds. I thought it would be worthwhile sharing some of the main issues discussed.
An uncertain world requires a rigorous process.
We keep reminding investors that the future is always uncertain. And, while the world currently faces some very real and pressing issues, it is important to focus your investment process on trying to protect your clients from losing capital whilst at the same time taking advantage of the opportunities that an uncertain world pitches.
We like to keep our investment process rigorous but simple. This involves having a value-based approach which sees us buying companies for less than we think they are worth. And while we acknowledge that we can’t value companies with precision, a contrarian mindset is useful; buying when the market is fearful and selling off raises the margin of safety. Fear is generally pervasive and the instinct to flee or sell indiscriminately is where the best opportunities are created. It is clear to us the recent concerns around the collapse of Europe were a good example of pervasive fear.
Contrarian ideas.
Some of the better global ideas that we have at the moment originate in areas where markets are fearful or where the outlook is perceived to be uncertain. Within global equities we highlight the following opportunities:
Old tech
US healthcare
Financials
European cyclicals
Materials
We select stocks on a bottom-up basis. Our stock selection screens have identified numerous opportunities within the above sectors. Our portfolios include stocks from each of these areas and in each case we only own the stocks because we have been able to discharge our margin of safety requirement.
SA is fertile ground for Compounders.
We segment our portfolios into 2 types of stocks: compounders and mean-reverters. Compounders are companies that are able to progressively generate increasing cash flow every year. They tend to have less competition and as a result are highly profitable. Their ability to reinvest in opportunities to grow their business results in what we refer to as the lucrative equation.
It is our view that South Africa has been fertile ground for compounders. Competition has generally been benign, primarily due to historic and geographic isolation, and many industries see monopolies and oligopolies dominating. And, returns to shareholders in quality companies in these sectors have been very good.
We highlight the domestic clothing retailers as an example of an industry that has enjoyed the benefits of being able to aggressively grow their footprint without excessive competition. And, the SA private hospital groups are an example of an industry with massive barriers to entry for competitors and very strong pricing power; returns on assets are very high when compared to global peers. In both cases, shareholders have seen spectacular returns over the past decade.
When we derive a fair value for compounders we attempt to determine a value for future growth. For companies with sustainable competitive advantages in a high growth industry this value of future growth can comprise a material part of our intrinsic value.
On this basis we consider many of the SA compounders that we have owned in the past to be too expensive at this point. We think it is well possible that you could incur future capital losses if you bought many of the higher quality companies on the JSE at current valuation levels.
We see significantly better opportunity to acquire selected global compounders in the US and Europe. Not only are valuations much more favourable, but we are looking at some of the world’s leading companies in terms of quality of management and past track record.
Mean-reverters.
The second type of stocks that we own, mean-reverters, are generally lower quality businesses with limited competitive advantage or pricing power. We are happy to own mean-reverters when the margin of safety is large, for example when we are buying a rand’s worth of assets for fifty cents.
The uncertain macro-environment has resulted in defensive higher quality compounders trading at a significant premium to the mean-reverters. We have increasingly tilted our portfolios towards mean-reverters in some of the sectors highlighted above. For example, within the materials sector we have been buyers of Anglo American which trades at an attractive discount to what we estimate to be the value of its assets.
Two opposing forces at play in global financial markets.
Investors need to be aware of the two massive opposing forces at play in global financial markets. On the one hand, the consequence of excessive debt levels in the West is a painful process of de-leveraging. The worst pain is being felt in peripheral Eurozone countries where monetary union impedes some of the remedies for bloated sovereign debt: currency devaluation and default. But, global central banks have demonstrated a willingness to intervene in order to prevent a disorderly spillover to financial markets.
Central bank balance sheets have ballooned and much needed liquidity has been provided to the banking system when required. Given the very unattractive rates available in fixed interest markets, in the absence of further deterioration in the global economic outlook, it is possible to foresee a flow of money out of bonds into more risky and higher yielding assets like equities.
How we are positioning our portfolios.
We have been finding fewer opportunities on the JSE and have sold most of our larger cap JSE compounders in favour of: global compounders, small and mid cap compounders and mean reverters.
We are generally cautious of bonds, particularly global bonds.
We sit with higher than normal cash balances that we are happy to put to work as and when opportunities arise. "
REF : PSG - Shaun le Roux
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
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
"We have spent much of the last two weeks on a roadshow to clients on how we see investment markets and how our process has been configured to produce reasonable and consistent returns whatever the future holds. I thought it would be worthwhile sharing some of the main issues discussed.
An uncertain world requires a rigorous process.
We keep reminding investors that the future is always uncertain. And, while the world currently faces some very real and pressing issues, it is important to focus your investment process on trying to protect your clients from losing capital whilst at the same time taking advantage of the opportunities that an uncertain world pitches.
We like to keep our investment process rigorous but simple. This involves having a value-based approach which sees us buying companies for less than we think they are worth. And while we acknowledge that we can’t value companies with precision, a contrarian mindset is useful; buying when the market is fearful and selling off raises the margin of safety. Fear is generally pervasive and the instinct to flee or sell indiscriminately is where the best opportunities are created. It is clear to us the recent concerns around the collapse of Europe were a good example of pervasive fear.
Contrarian ideas.
Some of the better global ideas that we have at the moment originate in areas where markets are fearful or where the outlook is perceived to be uncertain. Within global equities we highlight the following opportunities:
Old tech
US healthcare
Financials
European cyclicals
Materials
We select stocks on a bottom-up basis. Our stock selection screens have identified numerous opportunities within the above sectors. Our portfolios include stocks from each of these areas and in each case we only own the stocks because we have been able to discharge our margin of safety requirement.
SA is fertile ground for Compounders.
We segment our portfolios into 2 types of stocks: compounders and mean-reverters. Compounders are companies that are able to progressively generate increasing cash flow every year. They tend to have less competition and as a result are highly profitable. Their ability to reinvest in opportunities to grow their business results in what we refer to as the lucrative equation.
It is our view that South Africa has been fertile ground for compounders. Competition has generally been benign, primarily due to historic and geographic isolation, and many industries see monopolies and oligopolies dominating. And, returns to shareholders in quality companies in these sectors have been very good.
We highlight the domestic clothing retailers as an example of an industry that has enjoyed the benefits of being able to aggressively grow their footprint without excessive competition. And, the SA private hospital groups are an example of an industry with massive barriers to entry for competitors and very strong pricing power; returns on assets are very high when compared to global peers. In both cases, shareholders have seen spectacular returns over the past decade.
When we derive a fair value for compounders we attempt to determine a value for future growth. For companies with sustainable competitive advantages in a high growth industry this value of future growth can comprise a material part of our intrinsic value.
On this basis we consider many of the SA compounders that we have owned in the past to be too expensive at this point. We think it is well possible that you could incur future capital losses if you bought many of the higher quality companies on the JSE at current valuation levels.
We see significantly better opportunity to acquire selected global compounders in the US and Europe. Not only are valuations much more favourable, but we are looking at some of the world’s leading companies in terms of quality of management and past track record.
Mean-reverters.
The second type of stocks that we own, mean-reverters, are generally lower quality businesses with limited competitive advantage or pricing power. We are happy to own mean-reverters when the margin of safety is large, for example when we are buying a rand’s worth of assets for fifty cents.
The uncertain macro-environment has resulted in defensive higher quality compounders trading at a significant premium to the mean-reverters. We have increasingly tilted our portfolios towards mean-reverters in some of the sectors highlighted above. For example, within the materials sector we have been buyers of Anglo American which trades at an attractive discount to what we estimate to be the value of its assets.
Two opposing forces at play in global financial markets.
Investors need to be aware of the two massive opposing forces at play in global financial markets. On the one hand, the consequence of excessive debt levels in the West is a painful process of de-leveraging. The worst pain is being felt in peripheral Eurozone countries where monetary union impedes some of the remedies for bloated sovereign debt: currency devaluation and default. But, global central banks have demonstrated a willingness to intervene in order to prevent a disorderly spillover to financial markets.
Central bank balance sheets have ballooned and much needed liquidity has been provided to the banking system when required. Given the very unattractive rates available in fixed interest markets, in the absence of further deterioration in the global economic outlook, it is possible to foresee a flow of money out of bonds into more risky and higher yielding assets like equities.
How we are positioning our portfolios.
We have been finding fewer opportunities on the JSE and have sold most of our larger cap JSE compounders in favour of: global compounders, small and mid cap compounders and mean reverters.
We are generally cautious of bonds, particularly global bonds.
We sit with higher than normal cash balances that we are happy to put to work as and when opportunities arise. "
REF : PSG - Shaun le Roux
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
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
Sunday, 12 February 2012
Wolfgang Münchau: Why Greece and Portugal ought to go bankrupt -
Financial Times on line -
"Some say it would be better to force Greece out of the eurozone right now, and use the funds to save Portugal. I disagree. I personally believe it would be best to recognise the desolate state of both countries, let both default inside the monetary union, and then use a sufficiently increased rescue fund to help them to rebuild themselves, and to ringfence the rest at the same time"
Link :
http://www.ft.com/cms/s/0/57485f60-540a-11e1-8d12-00144feabdc0.html#ixzz1mBzX9C8V
"Some say it would be better to force Greece out of the eurozone right now, and use the funds to save Portugal. I disagree. I personally believe it would be best to recognise the desolate state of both countries, let both default inside the monetary union, and then use a sufficiently increased rescue fund to help them to rebuild themselves, and to ringfence the rest at the same time"
Link :
http://www.ft.com/cms/s/0/57485f60-540a-11e1-8d12-00144feabdc0.html#ixzz1mBzX9C8V
Nigeria power rates to rise up to 88%
REF Financial Times :
"Electricity tariffs in Nigeria will increase by up to 88 per cent under reforms designed to revive the power sector and attract outside investors. But the move is likely to cause controversy, coming just a month after the removal of fuel subsidies, which caused petrol prices to more than double. "
"Electricity tariffs in Nigeria will increase by up to 88 per cent under reforms designed to revive the power sector and attract outside investors. But the move is likely to cause controversy, coming just a month after the removal of fuel subsidies, which caused petrol prices to more than double. "
China tells banks to roll over loans !!
REF : Financial Times
"China has instructed its banks to embark on a mammoth rollover of loans to local governments, delaying the country’s reckoning with debts that have clouded its economic prospects"
See link :
. http://www.ft.com/cms/s/0/dc7035dc-553b-11e1-b66d-00144feabdc0.html#ixzz1mBnrfsRl
"China has instructed its banks to embark on a mammoth rollover of loans to local governments, delaying the country’s reckoning with debts that have clouded its economic prospects"
See link :
. http://www.ft.com/cms/s/0/dc7035dc-553b-11e1-b66d-00144feabdc0.html#ixzz1mBnrfsRl
Thursday, 9 February 2012
Breaking News - Bank of England raises stimulus by £50bn
The Bank of England’s Monetary Policy Committee voted to keep interest rates at their current record lows on Thursday and authorised further gilts purchases totalling £50bn, in line with economists’ expectations.
The move brings the size of the total gilts purchasing programme, known as Quantitative Easing, to £325bn and suggests that, despite recent signs that the UK economy is picking up after a trough in the middle of last autumn, the Bank’s policymakers do not feel confident there is enough momentum for demand to build on its own.
The move brings the size of the total gilts purchasing programme, known as Quantitative Easing, to £325bn and suggests that, despite recent signs that the UK economy is picking up after a trough in the middle of last autumn, the Bank’s policymakers do not feel confident there is enough momentum for demand to build on its own.
South Africa unloved at its own mining party
Interesting read on Reuters !!
Is the writing on the wall !!
"CAPE TOWN, Feb 9 (Reuters) - The industry executives who pile into Cape Town every year for the annual African mining conference love the sun, wine and stunning mountain backdrop the venue provides.
But South Africa's once towering mining industry is no draw and investors flocking to the "Indaba", as it is called, have their sights set on alluring prizes elsewhere on the continent.
Gold and diamonds built Africa's largest economy, which also boasts 80 percent of the world's platinum reserves, but outside investors remain wary of sinking money into an industry that appears in a state of terminal decline.
Soaring labour and power costs which are not matched by productivity gains, not to mention the world's deepest shafts for those mining gold, are all making South Africa a treacherous place for miners who are finding less headaches elsewhere.
Political risk and policy uncertainty have also dampened the enthusiasm of an industry that must invest millions and even billions to build mines before it can recoup any profit.
“You look at any of the major mining companies and they are very happy to spend billions of dollars to develop mines and related infrastructure in countries like Mongolia, Indonesia and Guinea, and are willing to spend billions of dollars on acquisitions, and a multi-year investment programme in Mozambique," said Adam Brett, a London-based investment banker with JPMorgan who focuses on mining.
"And just next door is South Africa. There are resources in South Africa, there are opportunities but frankly it is perceived to be easier to go to Asia, South America or indeed other parts of Africa,” he said.
South Africa reassured investors on one front this week by delivering a hammer blow to a nationalisation drive by radical elements within the ruling African National Congress (ANC).
A study expected to become official ANC policy said nationalisation would be an "unmitigated disaster." But it also proposed a "resource rent" that would effectively be a super tax of 50 percent on earnings.
"It is fairly clear nationalisation is not a way forward, and clearing that out of the system is a very good thing but it has raised various other areas of uncertainty... and any policy uncertainty for a business investor is not a good thing," said Ian Farmer, chief executive of Lonmin LMI.L, the world's third largest primary platinum producer.
MOVING OUT
Platinum miners have little choice outside of South Africa because that is where the stuff is found but others have far more choice.
At one of the lavish dinners put on for delegates, a senior mining executive said he feared South Africa was following the statist path taken by other African countries after they gained their independence from colonial rule.
But he praised other African mining states like Burkina Faso and Ivory Coast for opening their doors to mining investment.
Still, there are concerns in frontier Africa as a wave of resource nationalism surges across the region.
Nick Holland, chief executive of South African-based Gold Fields GFIJ.J, the world's fourth biggest bullion producer, told Reuters that "resource nationalism is my number once concern at the moment".
Holland said in December that looming tax changes in Ghana have put a question mark over $1 billion in Gold Fields' planned investments in the country and he told Reuters that his company remained in talks with the government about the issue.
South Africa does remain a mining gateway to the rest of Africa, for both investment and manpower, with the continent drawing on the country's executives and engineers to get projects off the ground and running.
Where there is a mine in Africa you are bound to hear Afrikaans, the Dutch-based language of South Africa's earliest white settlers.
The chief executives driving the looming $90 billion tie-up between commodities giant Glencore GLEN.L and miner Xstrata XTA.L, Ivan Glasenberg and Mick Davis, are both South African born."
Is the writing on the wall !!
"CAPE TOWN, Feb 9 (Reuters) - The industry executives who pile into Cape Town every year for the annual African mining conference love the sun, wine and stunning mountain backdrop the venue provides.
But South Africa's once towering mining industry is no draw and investors flocking to the "Indaba", as it is called, have their sights set on alluring prizes elsewhere on the continent.
Gold and diamonds built Africa's largest economy, which also boasts 80 percent of the world's platinum reserves, but outside investors remain wary of sinking money into an industry that appears in a state of terminal decline.
Soaring labour and power costs which are not matched by productivity gains, not to mention the world's deepest shafts for those mining gold, are all making South Africa a treacherous place for miners who are finding less headaches elsewhere.
Political risk and policy uncertainty have also dampened the enthusiasm of an industry that must invest millions and even billions to build mines before it can recoup any profit.
“You look at any of the major mining companies and they are very happy to spend billions of dollars to develop mines and related infrastructure in countries like Mongolia, Indonesia and Guinea, and are willing to spend billions of dollars on acquisitions, and a multi-year investment programme in Mozambique," said Adam Brett, a London-based investment banker with JPMorgan who focuses on mining.
"And just next door is South Africa. There are resources in South Africa, there are opportunities but frankly it is perceived to be easier to go to Asia, South America or indeed other parts of Africa,” he said.
South Africa reassured investors on one front this week by delivering a hammer blow to a nationalisation drive by radical elements within the ruling African National Congress (ANC).
A study expected to become official ANC policy said nationalisation would be an "unmitigated disaster." But it also proposed a "resource rent" that would effectively be a super tax of 50 percent on earnings.
"It is fairly clear nationalisation is not a way forward, and clearing that out of the system is a very good thing but it has raised various other areas of uncertainty... and any policy uncertainty for a business investor is not a good thing," said Ian Farmer, chief executive of Lonmin LMI.L, the world's third largest primary platinum producer.
MOVING OUT
Platinum miners have little choice outside of South Africa because that is where the stuff is found but others have far more choice.
At one of the lavish dinners put on for delegates, a senior mining executive said he feared South Africa was following the statist path taken by other African countries after they gained their independence from colonial rule.
But he praised other African mining states like Burkina Faso and Ivory Coast for opening their doors to mining investment.
Still, there are concerns in frontier Africa as a wave of resource nationalism surges across the region.
Nick Holland, chief executive of South African-based Gold Fields GFIJ.J, the world's fourth biggest bullion producer, told Reuters that "resource nationalism is my number once concern at the moment".
Holland said in December that looming tax changes in Ghana have put a question mark over $1 billion in Gold Fields' planned investments in the country and he told Reuters that his company remained in talks with the government about the issue.
South Africa does remain a mining gateway to the rest of Africa, for both investment and manpower, with the continent drawing on the country's executives and engineers to get projects off the ground and running.
Where there is a mine in Africa you are bound to hear Afrikaans, the Dutch-based language of South Africa's earliest white settlers.
The chief executives driving the looming $90 billion tie-up between commodities giant Glencore GLEN.L and miner Xstrata XTA.L, Ivan Glasenberg and Mick Davis, are both South African born."
UPDATE 1-Emerging mkt rally to continue in 2012: Citi
A good Article from Reuters.
We in for a bumpy and interesting 2012 on the Markets
"Feb 9 (Reuters) - Global emerging market equities will continue to rally through 2012 boosted by ample liquidity conditions, according to Citigroup, which said it will be among buyers in the event of a pullback.
Most of the 2012 gains will likely come early in the year on lower inflation and falling interest rates in emerging markets, Citigroup wrote in its global emerging markets strategy report.
The 11.2 percent rise in MSCI Global Emerging Markets index in January was the best first month of the year since 2001 and the first January gain of any kind since 2006, analyst Geoffrey Dennis said.
The MSCI Emerging Market Index .MSCIEF has seen a year-to-date rise of 16 percent, according to Reuters data.
Citigroup's sentiment indicator has risen from "panic" to just above "neutral."
"This suggests sentiment is much better, but not yet euphoric. This is good news for the rally," analyst Dennis said.
Citigroup upgraded Brazil to "overweight" from a "strong neutral" citing room for another 100 basis points of rate cuts.
The prevalence of high-beta outperformance is clear, the brokerage said and downgraded a lower-beta, or less volatile, South Africa to "neutral." "
Regards
Steven
We in for a bumpy and interesting 2012 on the Markets
"Feb 9 (Reuters) - Global emerging market equities will continue to rally through 2012 boosted by ample liquidity conditions, according to Citigroup, which said it will be among buyers in the event of a pullback.
Most of the 2012 gains will likely come early in the year on lower inflation and falling interest rates in emerging markets, Citigroup wrote in its global emerging markets strategy report.
The 11.2 percent rise in MSCI Global Emerging Markets index in January was the best first month of the year since 2001 and the first January gain of any kind since 2006, analyst Geoffrey Dennis said.
The MSCI Emerging Market Index .MSCIEF has seen a year-to-date rise of 16 percent, according to Reuters data.
Citigroup's sentiment indicator has risen from "panic" to just above "neutral."
"This suggests sentiment is much better, but not yet euphoric. This is good news for the rally," analyst Dennis said.
Citigroup upgraded Brazil to "overweight" from a "strong neutral" citing room for another 100 basis points of rate cuts.
The prevalence of high-beta outperformance is clear, the brokerage said and downgraded a lower-beta, or less volatile, South Africa to "neutral." "
Regards
Steven
Wednesday, 8 February 2012
Greeks seek elusive bailout deal as EU tempers fray
A Good read from Reuters :
"ATHENS, Feb 8 (Reuters) - Greek parties will try yet again on Wednesday to strike a reform deal in return for a new international rescue to avoid a chaotic default, after a string of delays which have prompted some EU leaders to warn that the euro zone can live without Athens.
As one deadline after another has come and gone, leaders of the three parties in the coalition of Prime Minister Lucas Papademos postponed what was supposed to have been a crunch meeting on Tuesday until the following day.
Papademos - a technocat parachuted in last November to secure the new 130 billion euro ($172 billion) rescue from the IMF and EU - is trying to persuade the party leaders to accept austerity and reform measures which are likely to prove highly unpopular with an angry and despondent Greek electorate.
Facing a parliamentary election possibly as early as April, coalition leaders showed little sense of urgency, despite demands from euro zone leaders to make up their minds fast because Greece faces bankruptcy next month unless it gets the rescue funding to meet big debt repayments falling due.
"We can't say a plain yes or no unless we have assurances from the relevant authorities of the state that these actions are constitutional and will lead the country out of the crisis," said George Karatzaferis, who leads the far-right LAOS party.
"There is time. When it comes to future of the country, we will find the time," he told reporters.
MISSING PAPERWORK
One party official blamed Tuesday's delay on missing
paperwork, the same reason given when the meeting was postponed from Monday to Tuesday.
The heads of the conservative New Democracy, PASOK socialists and LAOS had yet to receive the draft agreement with the EU and IMF only half an hour before they were supposed to meet Papademos on Tuesday, he said.
Party leaders have hesitated to accept the tough terms of the deal, which are certain to mean a big drop in living standards for many Greeks.
Adding to the pressure, unions staged a 24-hour strike on Tuesday, and protesters tussled with police outside parliament, chanting: "No to mediaeval labour conditions!"
Deadlines are losing significance as one after another passes. Last weekend, Finance Minister Evangelos Venizelos said a deal had to be done by Sunday. Then the parties sailed past a Monday deadline to give their response to the EU, promising that Tuesday would be the day for decisions.
Such apparent dithering is a challenge to the authority of German Chancellor Angela Merkel, whose government is a major funder of Greek bailouts. She said on Monday that "time is of the essence" and expressed bewilderment about what the repeated delays could achieve.
UNFORESEEABLE CONSEQUENCES
However, Greek resentment is increasingly directed at Germany, and striking protesters burned a German and Nazi flag in central Athens on Tuesday.
Merkel tried to calm the atmosphere, saying that forcing Greece to abandon the euro would have "unforeseeable consequences".
"I will have no part in forcing Greece out of the euro," she said in response to a question from a Greek student at a meeting with young people in a Berlin museum.
Euro zone countries cannot be forced out of the currency bloc by their peers. But some policymakers in the bloc are starting to say in public what they have been saying in private: that if Athens doesn't accept the terms, they might not do much to prevent Greece falling out of its own accord.
Dutch Prime Minister Mark Rutte said the euro zone could live without Greece if it didn't keep its side of the bargain.
"We are currently so strong in the rest of the euro zone, in the countries who have the euro, that we can handle an exit of Greece - a Greece which runs into serious trouble," Rutte told Dutch public broadcaster NOS.
"They really have to implement all the measures they have promised to take. If that doesn't happen we can't help them," he added. European Commissioner Neelie Kroes made similar remarks.
Such comments awaken deep fears among Greeks that they will be cast adrift from the euro zone and left with a new national drachma currency which would probably dive in value.
Euro zone officials say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before Feb. 15.
This is to allow time for complex legal procedures involved in a bond swap deal - under which the value of private investors' holdings of Greek debt will be cut radically - so Athens can get rescue funds before March 20 when it has to meet the heavy debt repayments or suffer a chaotic default.
After days of negotiations, officials said sticking points on cutting the minimum wage and scrapping holiday bonuses appeared to have been largely resolved but problems with the level of cuts on top-up, supplementary pensions still remained. ($1 = 0.7646 euros) "
REF :
(Additional reporting by Ingrid Melander, Yannis Behrakis, Karolina Tagaris and Harry Papachristou in Athens, Gareth Jones, Stephen Brown and Andreas Rinke in Berlin and Sara Webb in Amsterdam; Writing by David Stamp and Deepa Babington; Editing by Michael Roddy)
((deepa.babington@thomsonreuters.com)(+30 210 33 76 496)(Reuters Messaging:
deepa.babington.thomsonreuters.com@reuters.net))
"ATHENS, Feb 8 (Reuters) - Greek parties will try yet again on Wednesday to strike a reform deal in return for a new international rescue to avoid a chaotic default, after a string of delays which have prompted some EU leaders to warn that the euro zone can live without Athens.
As one deadline after another has come and gone, leaders of the three parties in the coalition of Prime Minister Lucas Papademos postponed what was supposed to have been a crunch meeting on Tuesday until the following day.
Papademos - a technocat parachuted in last November to secure the new 130 billion euro ($172 billion) rescue from the IMF and EU - is trying to persuade the party leaders to accept austerity and reform measures which are likely to prove highly unpopular with an angry and despondent Greek electorate.
Facing a parliamentary election possibly as early as April, coalition leaders showed little sense of urgency, despite demands from euro zone leaders to make up their minds fast because Greece faces bankruptcy next month unless it gets the rescue funding to meet big debt repayments falling due.
"We can't say a plain yes or no unless we have assurances from the relevant authorities of the state that these actions are constitutional and will lead the country out of the crisis," said George Karatzaferis, who leads the far-right LAOS party.
"There is time. When it comes to future of the country, we will find the time," he told reporters.
MISSING PAPERWORK
One party official blamed Tuesday's delay on missing
paperwork, the same reason given when the meeting was postponed from Monday to Tuesday.
The heads of the conservative New Democracy, PASOK socialists and LAOS had yet to receive the draft agreement with the EU and IMF only half an hour before they were supposed to meet Papademos on Tuesday, he said.
Party leaders have hesitated to accept the tough terms of the deal, which are certain to mean a big drop in living standards for many Greeks.
Adding to the pressure, unions staged a 24-hour strike on Tuesday, and protesters tussled with police outside parliament, chanting: "No to mediaeval labour conditions!"
Deadlines are losing significance as one after another passes. Last weekend, Finance Minister Evangelos Venizelos said a deal had to be done by Sunday. Then the parties sailed past a Monday deadline to give their response to the EU, promising that Tuesday would be the day for decisions.
Such apparent dithering is a challenge to the authority of German Chancellor Angela Merkel, whose government is a major funder of Greek bailouts. She said on Monday that "time is of the essence" and expressed bewilderment about what the repeated delays could achieve.
UNFORESEEABLE CONSEQUENCES
However, Greek resentment is increasingly directed at Germany, and striking protesters burned a German and Nazi flag in central Athens on Tuesday.
Merkel tried to calm the atmosphere, saying that forcing Greece to abandon the euro would have "unforeseeable consequences".
"I will have no part in forcing Greece out of the euro," she said in response to a question from a Greek student at a meeting with young people in a Berlin museum.
Euro zone countries cannot be forced out of the currency bloc by their peers. But some policymakers in the bloc are starting to say in public what they have been saying in private: that if Athens doesn't accept the terms, they might not do much to prevent Greece falling out of its own accord.
Dutch Prime Minister Mark Rutte said the euro zone could live without Greece if it didn't keep its side of the bargain.
"We are currently so strong in the rest of the euro zone, in the countries who have the euro, that we can handle an exit of Greece - a Greece which runs into serious trouble," Rutte told Dutch public broadcaster NOS.
"They really have to implement all the measures they have promised to take. If that doesn't happen we can't help them," he added. European Commissioner Neelie Kroes made similar remarks.
Such comments awaken deep fears among Greeks that they will be cast adrift from the euro zone and left with a new national drachma currency which would probably dive in value.
Euro zone officials say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before Feb. 15.
This is to allow time for complex legal procedures involved in a bond swap deal - under which the value of private investors' holdings of Greek debt will be cut radically - so Athens can get rescue funds before March 20 when it has to meet the heavy debt repayments or suffer a chaotic default.
After days of negotiations, officials said sticking points on cutting the minimum wage and scrapping holiday bonuses appeared to have been largely resolved but problems with the level of cuts on top-up, supplementary pensions still remained. ($1 = 0.7646 euros) "
REF :
(Additional reporting by Ingrid Melander, Yannis Behrakis, Karolina Tagaris and Harry Papachristou in Athens, Gareth Jones, Stephen Brown and Andreas Rinke in Berlin and Sara Webb in Amsterdam; Writing by David Stamp and Deepa Babington; Editing by Michael Roddy)
((deepa.babington@thomsonreuters.com)(+30 210 33 76 496)(Reuters Messaging:
deepa.babington.thomsonreuters.com@reuters.net))
Tuesday, 7 February 2012
UBS Posts 76% Drop in Quarterly Profit, Investment Bank Loss
REF Bloomberg !!
"Feb. 7 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, said fourth-quarter profit dropped 76 percent after its investment bank reported a second consecutive quarterly loss.
Net income fell to 393 million Swiss francs ($427 million) from 1.66 billion francs in the year-earlier period, the Zurich- based bank said in a statement today. Earnings missed the 721 million-franc average estimate of eight analysts surveyed by Bloomberg over the past four weeks.
Chief Executive Officer Sergio Ermotti, who took over from Oswald Gruebel following the discovery of a $2.3 billion loss from unauthorized trading in September, is shrinking the investment bank as stricter capital requirements and the European sovereign debt crisis curb profitability. The bank said concerns about the crisis and the global economic outlook are “likely” to affect revenues this quarter as well.
“They basically gave a profit warning for the first quarter,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, who has a “reduce” rating on UBS. “I don’t see how the bank can come out of the strategic dilemma of not having enough revenues to sustain staff at the investment bank. Cutting risk-weighted assets won’t help there.”
Cash Dividend
UBS fell as much as 2.7 percent, and was 15 centimes, or 1.1 percent, lower at 13.06 francs by 9:20 a.m. in Zurich, trimming its gain this year to 17 percent. That compares with an 18 percent increase in the 43-company Bloomberg Europe Banks and Financial Services Index and a 13 percent gain at Credit Suisse Group AG.
UBS reiterated plans for a dividend of 10 centimes a share for 2011, its first cash payout since 2006.
Pretax profit at the wealth management unit rose 2 percent to 471 million francs from a year earlier, while wealth management Americas swung to a profit of 114 million francs from a loss of 32 million francs. The two units reported net new money of 5 billion francs for the quarter. Earnings at the retail and corporate unit gained 6.5 percent to 412 million francs, while asset management saw a 20 percent decline in profit to 118 million francs. The investment bank posted a pretax loss of 256 million francs.
“Traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the investment bank,” Ermotti and Chairman Kaspar Villiger said in a letter to shareholders today.
Deutsche Bank
UBS wasn’t alone in reporting a worsening performance in investment banking as the debt crisis curbed trading. Deutsche Bank AG, Germany’s biggest bank, last week said fourth-quarter profit dropped 76 percent as its investment bank posted a 422 million-euro ($554 million) pretax loss. Credit Suisse, which reports earnings on Feb. 9, may say profit fell 53 percent to 396 million francs in the quarter, according to the mean estimate of nine analysts surveyed by Bloomberg, who also forecast a loss at the securities unit.
UBS intends to reduce risk-weighted assets at the investment bank, run by 44-year-old Carsten Kengeter, by 145 billion francs from 300 billion francs by 2016, under Basel III rules. The company reduced risk-weighted assets by about 20 billion francs in the fourth quarter, while the investment bank cut assets by about 26 billion francs, it said.
Management Change
The bank lowered its profitability target in November to a return on equity of between 12 percent and 17 percent starting in 2013, compared with the goal set in 2009 of 15 percent to 20 percent. UBS’s return on equity in 2011 was 8.6 percent.
The shift in strategy coincides with another round of management upheaval at UBS, which was ravaged by more than $57 billion of credit-related losses during the financial crisis of 2008. Ermotti, 51, who joined UBS in April, became CEO after the departure of Gruebel, 68. Villiger, 71, is leaving in 2012, a year earlier than planned, to make way for former Bundesbank President Axel Weber, 54, in the chairman role.
Since Ermotti took over, UBS’s co-heads of the equities unit, Francois Gouws and Yassine Bouhara, left, as did Chief Risk Officer Maureen Miskovic, who was at the bank for less than a year.
Kweku Adoboli, the former UBS employee accused of causing the trading loss, pleaded not guilty to fraud and false accounting last week and was denied bail while he awaits a trial in early September. The U.K. and Swiss finance regulators also said last week that they have begun formal enforcement actions against UBS over the risk-management processes at its investment bank.
UBS cut the 2011 bonus pool, including pay that is being deferred into future years, by 40 percent to 2.57 billion francs from 4.25 billion francs for 2010, the bank said. About 707 million francs of the pool is earmarked to be deferred into future years. Variable compensation at the investment bank is being cut 60 percent, Chief Financial Officer Tom Naratil said.
Ermotti said UBS would reduce costs further if market conditions don’t improve.
“We must focus on strategic changes which go to the heart of our organizational design and structure,” Ermotti said at a press conference in Zurich. “Consistently improving efficiency has to become part of our corporate DNA. And we are working on the next phase, which will reshape our cost base in the years to come.”
"
To contact the reporter on this story: Elena Logutenkova in Zurich at Bloomberg.com elogutenkova@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
"Feb. 7 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, said fourth-quarter profit dropped 76 percent after its investment bank reported a second consecutive quarterly loss.
Net income fell to 393 million Swiss francs ($427 million) from 1.66 billion francs in the year-earlier period, the Zurich- based bank said in a statement today. Earnings missed the 721 million-franc average estimate of eight analysts surveyed by Bloomberg over the past four weeks.
Chief Executive Officer Sergio Ermotti, who took over from Oswald Gruebel following the discovery of a $2.3 billion loss from unauthorized trading in September, is shrinking the investment bank as stricter capital requirements and the European sovereign debt crisis curb profitability. The bank said concerns about the crisis and the global economic outlook are “likely” to affect revenues this quarter as well.
“They basically gave a profit warning for the first quarter,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, who has a “reduce” rating on UBS. “I don’t see how the bank can come out of the strategic dilemma of not having enough revenues to sustain staff at the investment bank. Cutting risk-weighted assets won’t help there.”
Cash Dividend
UBS fell as much as 2.7 percent, and was 15 centimes, or 1.1 percent, lower at 13.06 francs by 9:20 a.m. in Zurich, trimming its gain this year to 17 percent. That compares with an 18 percent increase in the 43-company Bloomberg Europe Banks and Financial Services Index and a 13 percent gain at Credit Suisse Group AG.
UBS reiterated plans for a dividend of 10 centimes a share for 2011, its first cash payout since 2006.
Pretax profit at the wealth management unit rose 2 percent to 471 million francs from a year earlier, while wealth management Americas swung to a profit of 114 million francs from a loss of 32 million francs. The two units reported net new money of 5 billion francs for the quarter. Earnings at the retail and corporate unit gained 6.5 percent to 412 million francs, while asset management saw a 20 percent decline in profit to 118 million francs. The investment bank posted a pretax loss of 256 million francs.
“Traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the investment bank,” Ermotti and Chairman Kaspar Villiger said in a letter to shareholders today.
Deutsche Bank
UBS wasn’t alone in reporting a worsening performance in investment banking as the debt crisis curbed trading. Deutsche Bank AG, Germany’s biggest bank, last week said fourth-quarter profit dropped 76 percent as its investment bank posted a 422 million-euro ($554 million) pretax loss. Credit Suisse, which reports earnings on Feb. 9, may say profit fell 53 percent to 396 million francs in the quarter, according to the mean estimate of nine analysts surveyed by Bloomberg, who also forecast a loss at the securities unit.
UBS intends to reduce risk-weighted assets at the investment bank, run by 44-year-old Carsten Kengeter, by 145 billion francs from 300 billion francs by 2016, under Basel III rules. The company reduced risk-weighted assets by about 20 billion francs in the fourth quarter, while the investment bank cut assets by about 26 billion francs, it said.
Management Change
The bank lowered its profitability target in November to a return on equity of between 12 percent and 17 percent starting in 2013, compared with the goal set in 2009 of 15 percent to 20 percent. UBS’s return on equity in 2011 was 8.6 percent.
The shift in strategy coincides with another round of management upheaval at UBS, which was ravaged by more than $57 billion of credit-related losses during the financial crisis of 2008. Ermotti, 51, who joined UBS in April, became CEO after the departure of Gruebel, 68. Villiger, 71, is leaving in 2012, a year earlier than planned, to make way for former Bundesbank President Axel Weber, 54, in the chairman role.
Since Ermotti took over, UBS’s co-heads of the equities unit, Francois Gouws and Yassine Bouhara, left, as did Chief Risk Officer Maureen Miskovic, who was at the bank for less than a year.
Kweku Adoboli, the former UBS employee accused of causing the trading loss, pleaded not guilty to fraud and false accounting last week and was denied bail while he awaits a trial in early September. The U.K. and Swiss finance regulators also said last week that they have begun formal enforcement actions against UBS over the risk-management processes at its investment bank.
UBS cut the 2011 bonus pool, including pay that is being deferred into future years, by 40 percent to 2.57 billion francs from 4.25 billion francs for 2010, the bank said. About 707 million francs of the pool is earmarked to be deferred into future years. Variable compensation at the investment bank is being cut 60 percent, Chief Financial Officer Tom Naratil said.
Ermotti said UBS would reduce costs further if market conditions don’t improve.
“We must focus on strategic changes which go to the heart of our organizational design and structure,” Ermotti said at a press conference in Zurich. “Consistently improving efficiency has to become part of our corporate DNA. And we are working on the next phase, which will reshape our cost base in the years to come.”
"
To contact the reporter on this story: Elena Logutenkova in Zurich at Bloomberg.com elogutenkova@bloomberg.net
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Glencore-Xstrata deal meets opposition
Let the games begin !!
An Article already from REF Business Report via Reuters!!
"Two top 10 shareholders in miner Xstrata said on Tuesday they would vote against a takeover by commodities trader Glencore, threatening the industry's biggest deal to create a powerhouse spanning mining, agriculture and trading.
Standard Life Investments, the fourth largest investor in Xstrata, and Schroders head of UK equities said the deal to buy the remaining 66 percent of Xstrata for $41 billion undervalued their shares.
The two own 3.6 percent of Xstrata, according to Thomson Reuters data. Their statements may persuade others to follow suit and block Glencore's ambition to create a company to rival mining heavyweights such as BHP Billiton and Rio Tinto .
“I'm in complete agreement with Standard Life and we intend to do exactly the same. This is a fabulous deal for Glencore, it's probably a great deal for the Xstrata management, but it's a poor deal for Xstrata's majority shareholders,” Shroders' Richard Buxton told Reuters.
The new group, with mining assets from New Caledonia to the Democratic Republic of Congo, is expected to use its clout to look at other deals, including potentially a takeover of Anglo American, analysts say.
“M&A is a space that you'd expect the combined group to be in,” Xstrata chief executive Mick Davis, who will be CEO of the enlarged Glencore, told Reuters.
“We have a combined entity which has much greater flexibility to be opportunistic and capture the right opportunities when they are there.”
Glencore will issue 2.8 new shares for each Xstrata share in a deal it said was a “merger of equals”.
The ratio is a 15.2 percent premium to Xstrata shareholders compared with its share price last Wednesday before word leaked out about the merger talks, a joint statement said.
Xstrata chairman John Bond and Chief Financial Officer Trevor Reid will retain their posts, and Glencore CEO Ivan Glasenberg, a billionaire who owns 15.8 percent of Glencore, will be president and deputy CEO of the new company.
Xstrata shareholders other than Glencore, which already has a 34 percent stake in the mining group, will hold 45 percent of the new company, to be named Glencore Xstrata International.
SURGE IN DEMAND
Bringing together Xstrata, the world's fourth-biggest diversified miner, and Glencore will create a group looking to ride an extended surge in demand in coming years for commodities from China and other emerging nations.
Competition authorities are expected to have a hard look at the new company, which will have a big sway over key markets like thermal coal, copper, zinc and others.
“Many governments may take the opportunity to review Glenstrata's influence on their food and industrial and energy imports and exports so ... it might be forced to relinquish some of its other roles,” said Neil Dwane, chief investment officer of RCM, a unit of Allianz Global Investors, an Xstrata shareholder.
The combined group expects synergies of at least $500 million and to be earnings accretive to Xstrata shareholders in its first full financial year.
“This is a natural merger which will realise immediate and ongoing value from marketing the combined group's products to maximise arbitrage opportunities, blending, swapping and storing to meet customer needs more exactly,” Glasenberg said.
As the world's biggest exporter of coal for power plants and a top copper producer, the combined firm aims to have the bulk to compete with mining sector leaders BHP Billiton, Vale and Rio Tinto.
It would have had revenues of $209 billion and adjusted core profit of $16.2 billion they had been together during 2011.
The deal is the largest in the mining sector since Rio Tinto's takeover of Alcan in 2007.
Xstrata shares fell 2.3 percent while Glencore rose 1.8 percent in early trading on Tuesday compared to a 1 percent fall in the sector. - Reuters "
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An Article already from REF Business Report via Reuters!!
"Two top 10 shareholders in miner Xstrata said on Tuesday they would vote against a takeover by commodities trader Glencore, threatening the industry's biggest deal to create a powerhouse spanning mining, agriculture and trading.
Standard Life Investments, the fourth largest investor in Xstrata, and Schroders head of UK equities said the deal to buy the remaining 66 percent of Xstrata for $41 billion undervalued their shares.
The two own 3.6 percent of Xstrata, according to Thomson Reuters data. Their statements may persuade others to follow suit and block Glencore's ambition to create a company to rival mining heavyweights such as BHP Billiton and Rio Tinto .
“I'm in complete agreement with Standard Life and we intend to do exactly the same. This is a fabulous deal for Glencore, it's probably a great deal for the Xstrata management, but it's a poor deal for Xstrata's majority shareholders,” Shroders' Richard Buxton told Reuters.
The new group, with mining assets from New Caledonia to the Democratic Republic of Congo, is expected to use its clout to look at other deals, including potentially a takeover of Anglo American, analysts say.
“M&A is a space that you'd expect the combined group to be in,” Xstrata chief executive Mick Davis, who will be CEO of the enlarged Glencore, told Reuters.
“We have a combined entity which has much greater flexibility to be opportunistic and capture the right opportunities when they are there.”
Glencore will issue 2.8 new shares for each Xstrata share in a deal it said was a “merger of equals”.
The ratio is a 15.2 percent premium to Xstrata shareholders compared with its share price last Wednesday before word leaked out about the merger talks, a joint statement said.
Xstrata chairman John Bond and Chief Financial Officer Trevor Reid will retain their posts, and Glencore CEO Ivan Glasenberg, a billionaire who owns 15.8 percent of Glencore, will be president and deputy CEO of the new company.
Xstrata shareholders other than Glencore, which already has a 34 percent stake in the mining group, will hold 45 percent of the new company, to be named Glencore Xstrata International.
SURGE IN DEMAND
Bringing together Xstrata, the world's fourth-biggest diversified miner, and Glencore will create a group looking to ride an extended surge in demand in coming years for commodities from China and other emerging nations.
Competition authorities are expected to have a hard look at the new company, which will have a big sway over key markets like thermal coal, copper, zinc and others.
“Many governments may take the opportunity to review Glenstrata's influence on their food and industrial and energy imports and exports so ... it might be forced to relinquish some of its other roles,” said Neil Dwane, chief investment officer of RCM, a unit of Allianz Global Investors, an Xstrata shareholder.
The combined group expects synergies of at least $500 million and to be earnings accretive to Xstrata shareholders in its first full financial year.
“This is a natural merger which will realise immediate and ongoing value from marketing the combined group's products to maximise arbitrage opportunities, blending, swapping and storing to meet customer needs more exactly,” Glasenberg said.
As the world's biggest exporter of coal for power plants and a top copper producer, the combined firm aims to have the bulk to compete with mining sector leaders BHP Billiton, Vale and Rio Tinto.
It would have had revenues of $209 billion and adjusted core profit of $16.2 billion they had been together during 2011.
The deal is the largest in the mining sector since Rio Tinto's takeover of Alcan in 2007.
Xstrata shares fell 2.3 percent while Glencore rose 1.8 percent in early trading on Tuesday compared to a 1 percent fall in the sector. - Reuters "
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Breaking News - Glencore & Xstra agree on $90bn deal
A great Article from FT.com regarding the merger of these two power houses.
Both companies with South African Heritage.
Enjoy the read.
"Glencore and Xstrata on Tuesday announced an all-share merger that would create a $90bn giant combining the world’s largest commodities trading house with one of the biggest miners of thermal coal, copper, nickel and zinc.
Under the agreement announced in a joint statement, investors in the miner would receive 2.8 Glencore shares for every Xstrata share they hold. That ratio puts a greater relative value on Xstrata shares than most investors had expected, representing a 15.2 per cent premium over the closing share price on February 1.
"We have a fantastic opportunity to create a new powerhouse in the global commodities industry,” said Ivan Glasenberg, chief executive at Glencore.
Mr Glasenberg and Mick Davis, his counterpart at Xstrata, agreed the make-up of the combined company’s board and senior management. Sir John Bond, Xstrata’s chairman, will stay on as chairman of the enlarged group. Mr Davis will become chief executive and Mr Glasenberg deputy chief executive.
Mr Davis said in a statement that the merger offered “a unique opportunity to create a new business model” to respond to a changing environment. “It is the logical next step for two complementary businesses,” he added.
Glencore’s shareholders will control 55 per cent of the new company, to be called Glencore Xstrata International, with Xstrata’s shareholders controlling the rest. Glencore shares rose 1.3 per cent to 466.6pp, while Xstrata was down 2 per cent at £12.35 in early trading in London, making it one of the biggest fallers on the FTSE 100.
The merger plan – codenamed “Everest” in a nod to a joint Himalayan expedition by the two companies’ chairmen a few years ago – marks the culmination of five years of attempts to combine the two companies by Mr Glasenberg.
The deal comes less than a year after the trading house floated its shares, raising $10bn and turning its top executives into billionaires overnight.
The merger would shake up the mining sector in a similar fashion to the multibillion-dollar combination of BHP and Billiton in 2001 that triggered a decade of consolidation in the industry. The combined company would rank as the world’s fourth largest mining group by market capitalisation, behind BHP Billiton, Vale of Brazil and Rio Tinto. Industry observers said the merger would in the medium term give the new company the financial firepower to bid for rivals, including Anglo American, Fortescue, ENRC and others.
The deal, which both companies have described as a “merger of equals”, is set to be implemented via a so-called “scheme of arrangement”, which requires 75 per cent of shareholders to agree. This differs from a straightforward offer to shareholders, which would only require 50 per cent agreement.
Three quarters of Xstrata’s shareholders would have to approve the deal – with Glencore’s 34 per cent holding unable to vote – meaning that only 16.4 per cent of Xstrata’s shareholders need to vote against the deal to block it. Nonetheless, people involved in the discussions are confident of broad-based acceptance from shareholders, noting that many of the large institutional shareholders in Xstrata also own Glencore shares.
Xstrata and Glencore disclosed their annual results together with the merger details. The mining group said that net profits, excluding exceptional items, rose 12 per cent to $5.78bn, in line with the consensus estimate, on the back of higher metal prices.
Glencore published an estimate of its financial results, which the trading house will restate on March 5. It said its net profit in 2011 rose to $4.06bn, up 7 per cent from last year, on the back of stronger metal prices and higher production, but weighed down by falling profits in trading, particularly in agricultural commodities.
The companies said that they hoped to close the transaction in the second half of the year. Glencore has agree to pay a so-called “reverse break fee” of £298m to Xstrata if its board withdraws the support for the merger.
Xstrata is being advised by Deutsche Bank, Goldman Sachs, Nomura and JPMorgan. Citigroup and Morgan Stanley and are advising Glencore. Linklaters and Freshfields are providing legal advice. Michael Klein, the former Citi senior banker and now independent dealmaker, also advised. "
REF : Javier Blas, Commodities Editor, FT.com
Both companies with South African Heritage.
Enjoy the read.
"Glencore and Xstrata on Tuesday announced an all-share merger that would create a $90bn giant combining the world’s largest commodities trading house with one of the biggest miners of thermal coal, copper, nickel and zinc.
Under the agreement announced in a joint statement, investors in the miner would receive 2.8 Glencore shares for every Xstrata share they hold. That ratio puts a greater relative value on Xstrata shares than most investors had expected, representing a 15.2 per cent premium over the closing share price on February 1.
"We have a fantastic opportunity to create a new powerhouse in the global commodities industry,” said Ivan Glasenberg, chief executive at Glencore.
Mr Glasenberg and Mick Davis, his counterpart at Xstrata, agreed the make-up of the combined company’s board and senior management. Sir John Bond, Xstrata’s chairman, will stay on as chairman of the enlarged group. Mr Davis will become chief executive and Mr Glasenberg deputy chief executive.
Mr Davis said in a statement that the merger offered “a unique opportunity to create a new business model” to respond to a changing environment. “It is the logical next step for two complementary businesses,” he added.
Glencore’s shareholders will control 55 per cent of the new company, to be called Glencore Xstrata International, with Xstrata’s shareholders controlling the rest. Glencore shares rose 1.3 per cent to 466.6pp, while Xstrata was down 2 per cent at £12.35 in early trading in London, making it one of the biggest fallers on the FTSE 100.
The merger plan – codenamed “Everest” in a nod to a joint Himalayan expedition by the two companies’ chairmen a few years ago – marks the culmination of five years of attempts to combine the two companies by Mr Glasenberg.
The deal comes less than a year after the trading house floated its shares, raising $10bn and turning its top executives into billionaires overnight.
The merger would shake up the mining sector in a similar fashion to the multibillion-dollar combination of BHP and Billiton in 2001 that triggered a decade of consolidation in the industry. The combined company would rank as the world’s fourth largest mining group by market capitalisation, behind BHP Billiton, Vale of Brazil and Rio Tinto. Industry observers said the merger would in the medium term give the new company the financial firepower to bid for rivals, including Anglo American, Fortescue, ENRC and others.
The deal, which both companies have described as a “merger of equals”, is set to be implemented via a so-called “scheme of arrangement”, which requires 75 per cent of shareholders to agree. This differs from a straightforward offer to shareholders, which would only require 50 per cent agreement.
Three quarters of Xstrata’s shareholders would have to approve the deal – with Glencore’s 34 per cent holding unable to vote – meaning that only 16.4 per cent of Xstrata’s shareholders need to vote against the deal to block it. Nonetheless, people involved in the discussions are confident of broad-based acceptance from shareholders, noting that many of the large institutional shareholders in Xstrata also own Glencore shares.
Xstrata and Glencore disclosed their annual results together with the merger details. The mining group said that net profits, excluding exceptional items, rose 12 per cent to $5.78bn, in line with the consensus estimate, on the back of higher metal prices.
Glencore published an estimate of its financial results, which the trading house will restate on March 5. It said its net profit in 2011 rose to $4.06bn, up 7 per cent from last year, on the back of stronger metal prices and higher production, but weighed down by falling profits in trading, particularly in agricultural commodities.
The companies said that they hoped to close the transaction in the second half of the year. Glencore has agree to pay a so-called “reverse break fee” of £298m to Xstrata if its board withdraws the support for the merger.
Xstrata is being advised by Deutsche Bank, Goldman Sachs, Nomura and JPMorgan. Citigroup and Morgan Stanley and are advising Glencore. Linklaters and Freshfields are providing legal advice. Michael Klein, the former Citi senior banker and now independent dealmaker, also advised. "
REF : Javier Blas, Commodities Editor, FT.com
Friday, 3 February 2012
IPO already well liked FACEBOOK'S $5bn-plus initial public offering won’t bring a major status update.
"FACEBOOK'S $5bn-plus initial public offering won’t bring a major status update.
Listing on a stock exchange typically brings lots of changes. But tick through the list, and it’s clear that the social network, which filed for its long-awaited US initial public offering on Wednesday evening, is already largely there.
First, consider capital-raising. Facebook, founded in 2004 and led by Mark Zuckerberg, hasn’t had any trouble raising money.
It has already collected more than $2bn from the likes of Silicon Valley venture capitalists, Goldman Sachs and Microsoft. Anyway, it doesn’t need money to build out is business, because it has been cash flow positive since 2009.
Facebook’s operations generated $1.5bn of cash last year, while the company invested less than half that amount.
True, the IPO will make it easier for existing investors and employees to cash out - some are selling shares in the offering.
But the stock has been trading actively on grey market venues such as SecondMarket for some time. And workers got liquidity from Russian investment fund DST three years ago, when it offered to buy $100m of stock directly from employees.
Going public often has the benefit of raising a company’s profile, and shareholders can become loyal customers and vice versa.
But Facebook has 845 million monthly users worldwide and already has been the subject of an Oscar-nominated film. It's hard to see how ringing the bell on an exchange can make it any better known.
Another major adjustment can be transparency. And for sure, Facebook will have to file quarterly financial statements and everything else regulators demand, and these will be publicly available for the first time.
But the company already has about 1 200 shareholders and releases financial information to them. Moreover, Zuckerberg meets with employees regularly and fields probing questions about the firm’s finances. So management already knows what it’s like to be scrutinised by investors.
It’s not even likely that executives will suddenly have to listen more carefully to outside shareholders. Only a small chunk of Facebook is up for grabs in the IPO, and Zuckerberg will retain majority voting control thanks to the 10 votes attached to each share in the special class he and other insiders will own and all the investors who have ceded voting rights to him.
Facebook’s IPO, which could value the company at $100bn may be one of the biggest floats in years, but that doesn’t mean it changes much. With one 27-year-old geek remaining very much in charge, it may just turn the most public of private companies into one of the more private public ones. - Reuters "
(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)
Listing on a stock exchange typically brings lots of changes. But tick through the list, and it’s clear that the social network, which filed for its long-awaited US initial public offering on Wednesday evening, is already largely there.
First, consider capital-raising. Facebook, founded in 2004 and led by Mark Zuckerberg, hasn’t had any trouble raising money.
It has already collected more than $2bn from the likes of Silicon Valley venture capitalists, Goldman Sachs and Microsoft. Anyway, it doesn’t need money to build out is business, because it has been cash flow positive since 2009.
Facebook’s operations generated $1.5bn of cash last year, while the company invested less than half that amount.
True, the IPO will make it easier for existing investors and employees to cash out - some are selling shares in the offering.
But the stock has been trading actively on grey market venues such as SecondMarket for some time. And workers got liquidity from Russian investment fund DST three years ago, when it offered to buy $100m of stock directly from employees.
Going public often has the benefit of raising a company’s profile, and shareholders can become loyal customers and vice versa.
But Facebook has 845 million monthly users worldwide and already has been the subject of an Oscar-nominated film. It's hard to see how ringing the bell on an exchange can make it any better known.
Another major adjustment can be transparency. And for sure, Facebook will have to file quarterly financial statements and everything else regulators demand, and these will be publicly available for the first time.
But the company already has about 1 200 shareholders and releases financial information to them. Moreover, Zuckerberg meets with employees regularly and fields probing questions about the firm’s finances. So management already knows what it’s like to be scrutinised by investors.
It’s not even likely that executives will suddenly have to listen more carefully to outside shareholders. Only a small chunk of Facebook is up for grabs in the IPO, and Zuckerberg will retain majority voting control thanks to the 10 votes attached to each share in the special class he and other insiders will own and all the investors who have ceded voting rights to him.
Facebook’s IPO, which could value the company at $100bn may be one of the biggest floats in years, but that doesn’t mean it changes much. With one 27-year-old geek remaining very much in charge, it may just turn the most public of private companies into one of the more private public ones. - Reuters "
(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)
Naspers effective interest in Facebook & Major Share Split of Face Book IPO
A summary received for good understanding & list of the main players
"In the Facebook IPO initial filing, DST Mail.ru’stake 5.4% which would equate to $4.05bn to $5.4bbn assuming a valuation of between $75bn-$100bn which Facebook is expecting the company to be valued. Mail.ru’s stake is up from 2.28% disclosed late last year. They have bought in the market through Sharepost, mainly from Facebook employee’s keen to cash in their stock. Mail.ru valued their stake at $1.48bn implying the latest valuation would give an uplift of between $2.57bn - $3.92bn. Naspers share of this uplift is $700m - $1.1bn or in ZAR, R5.6bn – R8.8bn. This is 3.4% to 5.4% of the current market cap. The share is up 4.38% since the disclosure, which is in the expected range of my uplift calculations.
Facebook valuation appear very steep though. At the top end of the placement range, the company trades at a price to revenue of 27x CY2011 revenue of $3.7bn, and price to earnings ratio of 100x 2011 net income of $1bn. Expectations are for profits to double in CY2012 which gives a forward PE of 50x. The company does not intend to pay any dividends in the foreseeable future. The principal purposes of the initial public offering is to create a public market for the stock and enable future access to the public equity market. In the short term they intend to use the net proceeds from the initial public offering for working capital and other general corporate purposes but do not currently have any specific uses of the net proceeds planned. Additionally, they intend using a portion of the proceeds for acquisitions of complementary businesses, technologies, or other assets but have no commitments with respect to any such acquisitions or investments at this time.
Facebook Top Ten Shareholders
1. 28.4% Mark Zuckerberg, Co-founder and CEO. Retains 56.9% voting interest.
2. 11.4% Accel Partners, Venture capital funder
3. 7.7% Dustin Moskowitz, Co-founder
4. 5.4% Mail.ru, Russian firm
5. 5% Eduardo Saverin, Co-founder
6. 4% Sean Parker, Facebook first president
7. 2.5% Peter Thiel, Angel Investor, Co-founder of Pay-pal, now Global Macro Hedge fund manager
8. 1.5% Greylock Partners, Venture capital
9. 1.5% Meritech Capital Partners, Venture capital
10. 1.5% Microsoft, Software Company
REF : Farai Mapfinya Equity Analyst, Sanlam Private Investments
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
"In the Facebook IPO initial filing, DST Mail.ru’stake 5.4% which would equate to $4.05bn to $5.4bbn assuming a valuation of between $75bn-$100bn which Facebook is expecting the company to be valued. Mail.ru’s stake is up from 2.28% disclosed late last year. They have bought in the market through Sharepost, mainly from Facebook employee’s keen to cash in their stock. Mail.ru valued their stake at $1.48bn implying the latest valuation would give an uplift of between $2.57bn - $3.92bn. Naspers share of this uplift is $700m - $1.1bn or in ZAR, R5.6bn – R8.8bn. This is 3.4% to 5.4% of the current market cap. The share is up 4.38% since the disclosure, which is in the expected range of my uplift calculations.
Facebook valuation appear very steep though. At the top end of the placement range, the company trades at a price to revenue of 27x CY2011 revenue of $3.7bn, and price to earnings ratio of 100x 2011 net income of $1bn. Expectations are for profits to double in CY2012 which gives a forward PE of 50x. The company does not intend to pay any dividends in the foreseeable future. The principal purposes of the initial public offering is to create a public market for the stock and enable future access to the public equity market. In the short term they intend to use the net proceeds from the initial public offering for working capital and other general corporate purposes but do not currently have any specific uses of the net proceeds planned. Additionally, they intend using a portion of the proceeds for acquisitions of complementary businesses, technologies, or other assets but have no commitments with respect to any such acquisitions or investments at this time.
Facebook Top Ten Shareholders
1. 28.4% Mark Zuckerberg, Co-founder and CEO. Retains 56.9% voting interest.
2. 11.4% Accel Partners, Venture capital funder
3. 7.7% Dustin Moskowitz, Co-founder
4. 5.4% Mail.ru, Russian firm
5. 5% Eduardo Saverin, Co-founder
6. 4% Sean Parker, Facebook first president
7. 2.5% Peter Thiel, Angel Investor, Co-founder of Pay-pal, now Global Macro Hedge fund manager
8. 1.5% Greylock Partners, Venture capital
9. 1.5% Meritech Capital Partners, Venture capital
10. 1.5% Microsoft, Software Company
REF : Farai Mapfinya Equity Analyst, Sanlam Private Investments
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
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