Got a e-mail from FT on Line to say the deal in principal has been apporved, Tomorrow it should be announced !!
Tomorrow will be an interesting day !!
Sunday, 30 September 2012
Thursday, 27 September 2012
Asian Stocks Advance With Aussie on Prospect for More Stimulus
Sept. 27 (Bloomberg) --
"Asian stocks rebounded from the biggest slide in two months and the Australian dollar rose as China’s industrial profits fell for a fifth month, increasing speculation the government will do more to support economic growth. Emerging-market currencies strengthened.
The MSCI Asia Pacific Index climbed 0.4 percent at 1:45 p.m. in Tokyo, as the Shanghai Composite Index added 0.3 percent. Futures on the Standard & Poor’s 500 Index advanced 0.4 percent while contracts on the FTSE 100 Index added 0.2 percent. The so-called Aussie, Malaysia’s ringgit and the Philippine peso rose at least 0.3 percent against the dollar.
A government report showed Chinese industrial companies’ profits dropped in August and a Bank of Korea index of manufacturers confidence for October was at 72 from 75 the previous month, after reaching 70 in August, the lowest level since May 2009. China’s central bank added a net 365 billion yuan ($58 billion) to the financial system this week, the highest in Bloomberg data going back to 2008, as cash demand rises before a weeklong holiday next week.
“The positive would be a big China stimulus package that could send markets higher,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “The signals are that they are not really itching to do that.”
China Overseas
About five stocks gained for every four that fell on the MSCI Asia Pacific Index, which climbed 3.7 percent this quarter through yesterday as central banks in Europe, the U.S., Japan and China took action to boost their economies. The gauge slumped 1.4 percent yesterday, the most since July 23.
China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, rose 0.5 percent. Komatsu Ltd., a maker of construction equipment that gets about 15 percent of its sales in China, gained 0.3 percent.
Baoshan Iron & Steel Co., the nation’s largest publicly traded steelmaker, fell 0.2 percent as the company suspended production at a Chinese plant after demand dropped for slabs used to make ships and bridges. China is unlikely to introduce any large stimulus plans on infrastructure investment in the near term because economic development is already “unbalanced,” a company executive said at a conference today.
Aussie, Kiwi
The Australian dollar was at $1.0398, rebounding from a two-week low, while the country’s bonds pared gains. New Zealand’s dollar added 0.2 percent after data showed the business outlook improved this month. The euro was 0.3 percent from a two-week low against the dollar and was last at $1.2876.
Asian currencies rose toward a four-month high, led by the Philippine peso and Malaysia’s ringgit, on optimism regional economies have scope to combat slowdowns by boosting state spending. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was at 116.80. The gauge reached 117.06 on Sept. 21, the highest level since May 2.
“The Philippines and Malaysia would have the fiscal space to deal with the slowdown from the external side,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc. “I don’t see a massive gain in Asian currencies. Globally, markets are still looking at the developments in Europe.”
A final reading of the consumer confidence index in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News before the data due today, while a U.S. report may show orders for durable goods orders fell.
Euro Prospect
The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said. An accord that paved the way to cut Ireland’s legacy bank debt won’t unravel, said Irish deputy prime minister Eamon Gilmore. Germany, the Netherlands and Finland indicated a retreat from the agreement to allow the euro-area bailout fund to recapitalize banks.
U.S. stocks fell for a fifth day yesterday in the longest slump since July as protests against European austerity measures fueled concern the region’s fiscal crisis may escalate. Spanish protesters yesterday marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse budget cuts, while police in Athens dispersed protestors with tear gas.
The S&P 500 has erased all its gains since the Federal Reserve said Sept. 13 that it will undertake a third round of quantitative easing and probably hold the federal funds rate near zero until at least the middle of 2015.
Worldwide corporate issuance of $949 billion since June 30 brings the total for the year to $2.9 trillion, the second- fastest pace on record, according to data compiled by Bloomberg, as unprecedented investor demand allows issuers to refinance debt with borrowing costs at all-time-lows. "
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ;
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks rebounded from the biggest slide in two months and the Australian dollar rose as China’s industrial profits fell for a fifth month, increasing speculation the government will do more to support economic growth. Emerging-market currencies strengthened.
The MSCI Asia Pacific Index climbed 0.4 percent at 1:45 p.m. in Tokyo, as the Shanghai Composite Index added 0.3 percent. Futures on the Standard & Poor’s 500 Index advanced 0.4 percent while contracts on the FTSE 100 Index added 0.2 percent. The so-called Aussie, Malaysia’s ringgit and the Philippine peso rose at least 0.3 percent against the dollar.
A government report showed Chinese industrial companies’ profits dropped in August and a Bank of Korea index of manufacturers confidence for October was at 72 from 75 the previous month, after reaching 70 in August, the lowest level since May 2009. China’s central bank added a net 365 billion yuan ($58 billion) to the financial system this week, the highest in Bloomberg data going back to 2008, as cash demand rises before a weeklong holiday next week.
“The positive would be a big China stimulus package that could send markets higher,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “The signals are that they are not really itching to do that.”
China Overseas
About five stocks gained for every four that fell on the MSCI Asia Pacific Index, which climbed 3.7 percent this quarter through yesterday as central banks in Europe, the U.S., Japan and China took action to boost their economies. The gauge slumped 1.4 percent yesterday, the most since July 23.
China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, rose 0.5 percent. Komatsu Ltd., a maker of construction equipment that gets about 15 percent of its sales in China, gained 0.3 percent.
Baoshan Iron & Steel Co., the nation’s largest publicly traded steelmaker, fell 0.2 percent as the company suspended production at a Chinese plant after demand dropped for slabs used to make ships and bridges. China is unlikely to introduce any large stimulus plans on infrastructure investment in the near term because economic development is already “unbalanced,” a company executive said at a conference today.
Aussie, Kiwi
The Australian dollar was at $1.0398, rebounding from a two-week low, while the country’s bonds pared gains. New Zealand’s dollar added 0.2 percent after data showed the business outlook improved this month. The euro was 0.3 percent from a two-week low against the dollar and was last at $1.2876.
Asian currencies rose toward a four-month high, led by the Philippine peso and Malaysia’s ringgit, on optimism regional economies have scope to combat slowdowns by boosting state spending. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was at 116.80. The gauge reached 117.06 on Sept. 21, the highest level since May 2.
“The Philippines and Malaysia would have the fiscal space to deal with the slowdown from the external side,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc. “I don’t see a massive gain in Asian currencies. Globally, markets are still looking at the developments in Europe.”
A final reading of the consumer confidence index in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News before the data due today, while a U.S. report may show orders for durable goods orders fell.
Euro Prospect
The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said. An accord that paved the way to cut Ireland’s legacy bank debt won’t unravel, said Irish deputy prime minister Eamon Gilmore. Germany, the Netherlands and Finland indicated a retreat from the agreement to allow the euro-area bailout fund to recapitalize banks.
U.S. stocks fell for a fifth day yesterday in the longest slump since July as protests against European austerity measures fueled concern the region’s fiscal crisis may escalate. Spanish protesters yesterday marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse budget cuts, while police in Athens dispersed protestors with tear gas.
The S&P 500 has erased all its gains since the Federal Reserve said Sept. 13 that it will undertake a third round of quantitative easing and probably hold the federal funds rate near zero until at least the middle of 2015.
Worldwide corporate issuance of $949 billion since June 30 brings the total for the year to $2.9 trillion, the second- fastest pace on record, according to data compiled by Bloomberg, as unprecedented investor demand allows issuers to refinance debt with borrowing costs at all-time-lows. "
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ;
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Tuesday, 25 September 2012
Not all growth is equal
Another great article from PSG :
"In our strive toward continual improvement, we unashamedly look for guidance and wisdom from some of the world’s leading investors and historians which can then be applied and adapted to our methodology of investing. In many cases one needs to look no further than the Sage of Omaha.
In his 2007 letter to shareholders, Mr. Buffett fondly writes about See’s Candy, a business that has managed to deliver excellent growth while requiring very little in the form of additional capital.
See’s Candy was acquired for $25m in 1972 and at the time had invested capital of $8m, generating $5m in pre-tax earnings, a 60% pre-tax return on capital.
Fast forward to 2007 and See’s made pre-tax profits of $82m while the capital required to run the business amounted to $40m. On a cumulative basis the business earned a total of $1.35bn in pre-tax profits over the years, while only requiring $32m in the form of additional capital. All of the $1.35bn earned, except for the $32m, was “up-streamed” to See’s owner, Berkshire Hathaway to be used at their discretion, mostly to buy and grow other attractive businesses.
In Buffett’s own words, “Just as Adam and Eve kick-started an activity that led to six billion humans, See’s has given birth to multiple new streams of cash for us. (The biblical command to “be fruitful and multiply” is one we take seriously at Berkshire.)” – Berkshire Shareholder Letter 2007
As an investor, the See’s example appears to be the holy grail of investing; only paying an additional $32m to receive $1.3bn in dividends!
Behind See’s success were its strong brand positioning, which afforded the company extraordinary pricing power, the fact that the product was sold for cash, eliminating debtors, and its short production and distribution cycle, which minimized cash tied up in stock.
However, as growing companies generally have significant working capital and fixed infrastructure investment requirements, according to Buffett the typical company (as shown in table 1) would spend $400m in additional capital to grow earnings from $5m to $82m. While each additional dollar of invested capital generated $42 pre-tax earnings for See’s, company B only made an additional $3.4 for each dollar invested.
Company B’s 20% return on invested capital in 2007 is certainly not to be sneezed at, but the example clearly demonstrates the value inherent in growth for a capital light business.
While there aren’t many See’s available in today’s market, the investment team at PSG Asset Management is on the continual lookout for and proud owner of companies with strong sustainable competitive advantages, that are able to show capital light growth. In most cases these companies have exceptional management teams that are aligned to shareholders and not shy to part with excess cash resources should available investment opportunities either not strengthen their existing moat or satisfy shareholders’ stringent return requirements, as after all, not all growth is equal. "
REF : Philipp Wörz
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
"In our strive toward continual improvement, we unashamedly look for guidance and wisdom from some of the world’s leading investors and historians which can then be applied and adapted to our methodology of investing. In many cases one needs to look no further than the Sage of Omaha.
In his 2007 letter to shareholders, Mr. Buffett fondly writes about See’s Candy, a business that has managed to deliver excellent growth while requiring very little in the form of additional capital.
See’s Candy was acquired for $25m in 1972 and at the time had invested capital of $8m, generating $5m in pre-tax earnings, a 60% pre-tax return on capital.
Fast forward to 2007 and See’s made pre-tax profits of $82m while the capital required to run the business amounted to $40m. On a cumulative basis the business earned a total of $1.35bn in pre-tax profits over the years, while only requiring $32m in the form of additional capital. All of the $1.35bn earned, except for the $32m, was “up-streamed” to See’s owner, Berkshire Hathaway to be used at their discretion, mostly to buy and grow other attractive businesses.
In Buffett’s own words, “Just as Adam and Eve kick-started an activity that led to six billion humans, See’s has given birth to multiple new streams of cash for us. (The biblical command to “be fruitful and multiply” is one we take seriously at Berkshire.)” – Berkshire Shareholder Letter 2007
As an investor, the See’s example appears to be the holy grail of investing; only paying an additional $32m to receive $1.3bn in dividends!
Behind See’s success were its strong brand positioning, which afforded the company extraordinary pricing power, the fact that the product was sold for cash, eliminating debtors, and its short production and distribution cycle, which minimized cash tied up in stock.
However, as growing companies generally have significant working capital and fixed infrastructure investment requirements, according to Buffett the typical company (as shown in table 1) would spend $400m in additional capital to grow earnings from $5m to $82m. While each additional dollar of invested capital generated $42 pre-tax earnings for See’s, company B only made an additional $3.4 for each dollar invested.
Company B’s 20% return on invested capital in 2007 is certainly not to be sneezed at, but the example clearly demonstrates the value inherent in growth for a capital light business.
While there aren’t many See’s available in today’s market, the investment team at PSG Asset Management is on the continual lookout for and proud owner of companies with strong sustainable competitive advantages, that are able to show capital light growth. In most cases these companies have exceptional management teams that are aligned to shareholders and not shy to part with excess cash resources should available investment opportunities either not strengthen their existing moat or satisfy shareholders’ stringent return requirements, as after all, not all growth is equal. "
REF : Philipp Wörz
"The PSG Angle is an electronic newsletter of PSG Asset Management. "
Friday, 21 September 2012
Apple Poised to Sell 10 Million IPhones in Record Debut
Sept. 21 (Bloomberg) --
Apple Inc. is poised for a record iPhone 5 debut and may not be able to keep up with demand as customers lined up in Sydney, Tokyo and New York to pick up the latest model of its top-selling product.
Global sales started at the Apple Store in Sydney’s George Street at 8 a.m., as about 500 people waited to buy the device. Besides Australia, the phone will debut in Japan, Hong Kong, Singapore, France, Germany, the U.K., Canada and the U.S. today. With a new wireless contract, the device costs $199, $299 and $399 in the U.S., depending on the amount of memory.
Pedro Mendez, a 21-year-old student from Elmhurst, New York, got in line at Apple’s flagship store on Fifth Avenue in New York on Sept. 18 to make sure he’d get the new phone.
“It’s something you have to do,” said Mendez, who plans to sell his iPhone 4S to a friend. “You stand in line, you see everyone the next day at school and talk about it.”
The crowds reinforce estimates from analysts that the iPhone 5 will be the largest consumer-electronics debut in history. Apple may sell as many as 10 million iPhones during the weekend sales rush, according to Gene Munster, an analyst at Piper Jaffray Cos. Because Apple generates about two-thirds of its profit from the iPhone, a successful introduction is critical to fuel growth that has led investors to catapult Cupertino, California-based Apple to the world’s most valuable company.
‘Cool Kids’
“We’ve never seen anything like this before,” said Andrew McAfee, principal research scientist at Massachusetts Institute of Technology’s Center for Digital Business. “It used to be that with tech products the nerds got them, obsessed about them, and talked about them, and the cool kids wanted no part of that conversation. That’s just not true anymore.”
Apple may have trouble keeping up with initial demand because of supply shortages of components such as in-cell screen displays, according to Barclays Plc. Already, the company had to push out some deliveries to October after early online purchases topped 2 million in 24 hours, double the record set last year with the iPhone 4S.
Apple is introducing the iPhone across the world faster than any of the device’s five previous debuts. The iPhone will go on sale in 22 more countries on Sept. 28, Apple said, and it will be in more than 100 countries by the end of the year.
Steve Wozniak, who co-founded Apple with Steve Jobs, was among those waiting at an Apple Store before the opening. He wrote on Twitter that he was in line in Australia to pick up the new iPhone.
Sydney, Tokyo
In Sydney, the first 11 places in line were taken up by companies using the sale to promote their own business. Some of them were there since Sept. 18, and were paid as much as A$200 ($209) a day to stand and advertise for business. Apple employees in blue T-shirts applauded as the first shoppers got into the store while police tried to manage the crowd outside.
At the Apple Store in Tokyo’s shopping district Ginza, about 750 people had lined up by 8 a.m.
“I’ve been taking time-offs since Saturday and waiting,” said Mitsuya Hirose, 37, who was the first in line. “When I bought the iPad, I was the third person in line, so I am happy now,” said Hirose, who bought his first iPhone three years ago.
In Hong Kong, hundreds of people jammed the entrance of the Apple Store in Hong Kong’s IFC mall, chanting and cheering as customers waited to be let in. Police and security guards were standing by as the store opened at 8 a.m., two hours earlier than usual. Only those customers who registered online to reserve a handset were allowed in.
Stolen Phones
Among them was Michael Chan, a 29-year-old airline industry worker, who called in sick at work to be able to buy two 64 GB black-colored iPhones. Chan said he had bought all previous versions of the iPhone, since they were introduced in 2007.
At three outlets in western Japan’s Osaka, 191 iPhone 5s were stolen earlier today, Kyodo News reported, citing police at the prefecture. A resident near one of the outlets saw three men break into the store and then leave in a car, the news agency said. Thefts were also reported from Kobe City, Kyodo said, citing local police.
The new iPhone has a bigger screen, lightweight body design and faster microprocessor, and is compatible with speedier wireless networks. Software upgrades include new mapping and turn-by-turn navigation features.
Technology gadget reviewers mostly praised the new device, especially for its swifter wireless speeds that improve Web browsing and other data-hungry tasks. One criticism was the new mapping features, which don’t include details on how to navigate public transportation.
Android Competition
On Sept. 19, two days before the introduction, about 17 people were lined up at Apple’s Fifth Avenue store in New York.
The lines around the world show how customers remain loyal to Apple once they buy one of its products, said Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which owns Apple shares.
“The longer people are in the Apple ecosystem, the harder it is for them to switch away,” he said.
Apple shares fell less than 1 percent to $698.70 at the close in New York. The stock has risen 73 percent this year.
Apple is vying with rivals including Samsung Electronics Co., HTC Corp. and Google Inc.’s Motorola Mobility for dominance in a global smartphone market that reached $219.1 billion last year, according to data compiled by Bloomberg Industries. Those manufacturers primarily use Google’s Android operating system, which is the world’s most popular mobile software. Microsoft Corp., which has been working closely with Nokia Oyj, also is introducing a new mobile version of Windows later this year.
IPhone’s Popularity
The benefits of a successful iPhone debut extend beyond Apple. Suppliers including Qualcomm Inc., Broadcom Corp., LG Display and Hon Hai Precision Industry Co., the owner of Foxconn Technology Co., also will see a gain, according to Barclays.
To take advantage of the iPhone’s popularity, some of the first to get in line were there for the publicity.
In what may be the biggest consumer electronics debut in history, more than 200 people are expected to hold places in line for strangers at stores around New York and the San Francisco bay area for the iPhone 5, Bloomberg.com reported on its Tech Blog. These arrangements were made on the website TaskRabbit Inc., where a user can find workers to do odd jobs such as assembling Ikea furniture or waiting in long lines.
Joseph Cruz, 19, said Gazelle.com offered to pay for his iPhone, along with four others in line in New York, if he agreed to wear the company’s T-shirts and wrist bands.
“I’ve just got to wear this stuff for the whole week and they’ll pay for my iPhone,” he said. “I was going to stand out here regardless.”
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net ; Ryan Faughnder in New York at rfaughnder@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Apple Inc. is poised for a record iPhone 5 debut and may not be able to keep up with demand as customers lined up in Sydney, Tokyo and New York to pick up the latest model of its top-selling product.
Global sales started at the Apple Store in Sydney’s George Street at 8 a.m., as about 500 people waited to buy the device. Besides Australia, the phone will debut in Japan, Hong Kong, Singapore, France, Germany, the U.K., Canada and the U.S. today. With a new wireless contract, the device costs $199, $299 and $399 in the U.S., depending on the amount of memory.
Pedro Mendez, a 21-year-old student from Elmhurst, New York, got in line at Apple’s flagship store on Fifth Avenue in New York on Sept. 18 to make sure he’d get the new phone.
“It’s something you have to do,” said Mendez, who plans to sell his iPhone 4S to a friend. “You stand in line, you see everyone the next day at school and talk about it.”
The crowds reinforce estimates from analysts that the iPhone 5 will be the largest consumer-electronics debut in history. Apple may sell as many as 10 million iPhones during the weekend sales rush, according to Gene Munster, an analyst at Piper Jaffray Cos. Because Apple generates about two-thirds of its profit from the iPhone, a successful introduction is critical to fuel growth that has led investors to catapult Cupertino, California-based Apple to the world’s most valuable company.
‘Cool Kids’
“We’ve never seen anything like this before,” said Andrew McAfee, principal research scientist at Massachusetts Institute of Technology’s Center for Digital Business. “It used to be that with tech products the nerds got them, obsessed about them, and talked about them, and the cool kids wanted no part of that conversation. That’s just not true anymore.”
Apple may have trouble keeping up with initial demand because of supply shortages of components such as in-cell screen displays, according to Barclays Plc. Already, the company had to push out some deliveries to October after early online purchases topped 2 million in 24 hours, double the record set last year with the iPhone 4S.
Apple is introducing the iPhone across the world faster than any of the device’s five previous debuts. The iPhone will go on sale in 22 more countries on Sept. 28, Apple said, and it will be in more than 100 countries by the end of the year.
Steve Wozniak, who co-founded Apple with Steve Jobs, was among those waiting at an Apple Store before the opening. He wrote on Twitter that he was in line in Australia to pick up the new iPhone.
Sydney, Tokyo
In Sydney, the first 11 places in line were taken up by companies using the sale to promote their own business. Some of them were there since Sept. 18, and were paid as much as A$200 ($209) a day to stand and advertise for business. Apple employees in blue T-shirts applauded as the first shoppers got into the store while police tried to manage the crowd outside.
At the Apple Store in Tokyo’s shopping district Ginza, about 750 people had lined up by 8 a.m.
“I’ve been taking time-offs since Saturday and waiting,” said Mitsuya Hirose, 37, who was the first in line. “When I bought the iPad, I was the third person in line, so I am happy now,” said Hirose, who bought his first iPhone three years ago.
In Hong Kong, hundreds of people jammed the entrance of the Apple Store in Hong Kong’s IFC mall, chanting and cheering as customers waited to be let in. Police and security guards were standing by as the store opened at 8 a.m., two hours earlier than usual. Only those customers who registered online to reserve a handset were allowed in.
Stolen Phones
Among them was Michael Chan, a 29-year-old airline industry worker, who called in sick at work to be able to buy two 64 GB black-colored iPhones. Chan said he had bought all previous versions of the iPhone, since they were introduced in 2007.
At three outlets in western Japan’s Osaka, 191 iPhone 5s were stolen earlier today, Kyodo News reported, citing police at the prefecture. A resident near one of the outlets saw three men break into the store and then leave in a car, the news agency said. Thefts were also reported from Kobe City, Kyodo said, citing local police.
The new iPhone has a bigger screen, lightweight body design and faster microprocessor, and is compatible with speedier wireless networks. Software upgrades include new mapping and turn-by-turn navigation features.
Technology gadget reviewers mostly praised the new device, especially for its swifter wireless speeds that improve Web browsing and other data-hungry tasks. One criticism was the new mapping features, which don’t include details on how to navigate public transportation.
Android Competition
On Sept. 19, two days before the introduction, about 17 people were lined up at Apple’s Fifth Avenue store in New York.
The lines around the world show how customers remain loyal to Apple once they buy one of its products, said Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which owns Apple shares.
“The longer people are in the Apple ecosystem, the harder it is for them to switch away,” he said.
Apple shares fell less than 1 percent to $698.70 at the close in New York. The stock has risen 73 percent this year.
Apple is vying with rivals including Samsung Electronics Co., HTC Corp. and Google Inc.’s Motorola Mobility for dominance in a global smartphone market that reached $219.1 billion last year, according to data compiled by Bloomberg Industries. Those manufacturers primarily use Google’s Android operating system, which is the world’s most popular mobile software. Microsoft Corp., which has been working closely with Nokia Oyj, also is introducing a new mobile version of Windows later this year.
IPhone’s Popularity
The benefits of a successful iPhone debut extend beyond Apple. Suppliers including Qualcomm Inc., Broadcom Corp., LG Display and Hon Hai Precision Industry Co., the owner of Foxconn Technology Co., also will see a gain, according to Barclays.
To take advantage of the iPhone’s popularity, some of the first to get in line were there for the publicity.
In what may be the biggest consumer electronics debut in history, more than 200 people are expected to hold places in line for strangers at stores around New York and the San Francisco bay area for the iPhone 5, Bloomberg.com reported on its Tech Blog. These arrangements were made on the website TaskRabbit Inc., where a user can find workers to do odd jobs such as assembling Ikea furniture or waiting in long lines.
Joseph Cruz, 19, said Gazelle.com offered to pay for his iPhone, along with four others in line in New York, if he agreed to wear the company’s T-shirts and wrist bands.
“I’ve just got to wear this stuff for the whole week and they’ll pay for my iPhone,” he said. “I was going to stand out here regardless.”
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net ; Ryan Faughnder in New York at rfaughnder@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Wednesday, 19 September 2012
SA MPC rate decision TOMORROW
View from Nedbank :
· We think that the MPC will keep rates unchanged tomorrow.
The decision to either cut rates or keep them steady will depend on whether the combined global monetary stimulus sparks some recovery later in the year, in which case rates are likely to remain stable.
However, if the global economy slips into recession then further easing can be expected.
Our baseline view is that rates will remain stable with some reversal in policy easing possible in late 2013 or even early 2014.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
· We think that the MPC will keep rates unchanged tomorrow.
The decision to either cut rates or keep them steady will depend on whether the combined global monetary stimulus sparks some recovery later in the year, in which case rates are likely to remain stable.
However, if the global economy slips into recession then further easing can be expected.
Our baseline view is that rates will remain stable with some reversal in policy easing possible in late 2013 or even early 2014.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Tuesday, 11 September 2012
Rand may fall vs dollar as challenges multiply - RTRS
Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own --
By Neal Kimberley
"LONDON, Sept 11 (Reuters) - South Africa's rand may be set to weaken against the dollar ZAR= as economic and social challenges conspire to curb investor demand for the currency.
Even with the gold XAU= price buoyant, often seen by traders as rand-positive given South Africa's precious metal output, the dollar/rand is nudging its 100-day moving average line (currently 8.2360).
A daily close above that line could evolve into a test of the base of the pair's daily ichimoku cloud (presently 8.2510) and from there a possible move to the top of the cloud at 8.3580, and then the 8.4970 Aug. 31 high.
Apart from a brief plunge to a three-year low of 8.71 to the dollar in early June, the rand has held within a 8.00-8.56 range since mid-May and last traded on Tuesday around 8.22.
But the sight of around 10,000 striking South African platinum miners marching from one Lonmin LMI.L mine shaft to another on Monday, threatening to kill strike breakers, is unlikely to encourage investor demand for the rand. (Full Story)
The month-long strike has already seen violence with 44 deaths at the Marikana mine in mid-August, and footage of the clashes between strikers and police seen around the world.
An illegal stoppage has also hit South Africa's Gold Fields GFIJ.J, the world's fourth biggest gold miner, with 15,000 workers downing tools on Monday at its KDC West operation, less than a week after a similar strike at KDC East.
Labour problems are at least partly rooted in an intra-trade union turf war which in turn has a political dimension.
The National Union of Mineworkers (NUM), a key stakeholder in the governing African National Congress-led (ANC) government, is being challenged by the more militant Association of Mineworkers and Construction Union (AMCU).
Opponents of South African President Jacob Zuma, such as expelled former leader of the ANC Youth League Julius Malema, have been quick to get involved.
The timing of the unrest is particularly sensitive given that the ANC holds a leadership conference in December.
With all these factors in play, the rand might be hit.
CURRENT ACCOUNT
Tuesday's widening of South Africa's second-quarter current account deficit to its biggest since 2008 is not going to help the rand retain its poise.
In its September quarterly bulletin, which reports on data from the second quarter, the South African Reserve Bank said the deficit hit 6.4 percent of gross domestic product, expanding from a 4.9 percent shortfall in the first quarter of the year.
Economists polled by Reuters had expected the deficit to moderate slightly because of robust portfolio inflows.
The central bank also said that South Africa's Q2 growth of 3.2 percent had been largely propelled by a big recovery in the mining sector which may not be sustainable.
Not good news with an unemployment rate, categorised by the International Monetary Fund on Aug. 23 as "stubbornly high", of around 25 percent.
South Africa's Oscar Pistorius may have won the final Paralympic track gold medal on Saturday but the rand currently looks as if it is running out of steam.
(Editing by Nigel Stephenson)
((neal.kimberley@thomsonreuters.com,
By Neal Kimberley
"LONDON, Sept 11 (Reuters) - South Africa's rand may be set to weaken against the dollar ZAR= as economic and social challenges conspire to curb investor demand for the currency.
Even with the gold XAU= price buoyant, often seen by traders as rand-positive given South Africa's precious metal output, the dollar/rand is nudging its 100-day moving average line (currently 8.2360).
A daily close above that line could evolve into a test of the base of the pair's daily ichimoku cloud (presently 8.2510) and from there a possible move to the top of the cloud at 8.3580, and then the 8.4970 Aug. 31 high.
Apart from a brief plunge to a three-year low of 8.71 to the dollar in early June, the rand has held within a 8.00-8.56 range since mid-May and last traded on Tuesday around 8.22.
But the sight of around 10,000 striking South African platinum miners marching from one Lonmin LMI.L mine shaft to another on Monday, threatening to kill strike breakers, is unlikely to encourage investor demand for the rand. (Full Story)
The month-long strike has already seen violence with 44 deaths at the Marikana mine in mid-August, and footage of the clashes between strikers and police seen around the world.
An illegal stoppage has also hit South Africa's Gold Fields GFIJ.J, the world's fourth biggest gold miner, with 15,000 workers downing tools on Monday at its KDC West operation, less than a week after a similar strike at KDC East.
Labour problems are at least partly rooted in an intra-trade union turf war which in turn has a political dimension.
The National Union of Mineworkers (NUM), a key stakeholder in the governing African National Congress-led (ANC) government, is being challenged by the more militant Association of Mineworkers and Construction Union (AMCU).
Opponents of South African President Jacob Zuma, such as expelled former leader of the ANC Youth League Julius Malema, have been quick to get involved.
The timing of the unrest is particularly sensitive given that the ANC holds a leadership conference in December.
With all these factors in play, the rand might be hit.
CURRENT ACCOUNT
Tuesday's widening of South Africa's second-quarter current account deficit to its biggest since 2008 is not going to help the rand retain its poise.
In its September quarterly bulletin, which reports on data from the second quarter, the South African Reserve Bank said the deficit hit 6.4 percent of gross domestic product, expanding from a 4.9 percent shortfall in the first quarter of the year.
Economists polled by Reuters had expected the deficit to moderate slightly because of robust portfolio inflows.
The central bank also said that South Africa's Q2 growth of 3.2 percent had been largely propelled by a big recovery in the mining sector which may not be sustainable.
Not good news with an unemployment rate, categorised by the International Monetary Fund on Aug. 23 as "stubbornly high", of around 25 percent.
South Africa's Oscar Pistorius may have won the final Paralympic track gold medal on Saturday but the rand currently looks as if it is running out of steam.
(Editing by Nigel Stephenson)
((neal.kimberley@thomsonreuters.com,
PAYE Interim reconciliations - Deadline 31 October 2012
Take note !!
All employers who are registered with SARS for PAYE and UIF are required to submitt -
The Bi-annual -
EMP501 PAYE and; UIF recon's to SARS electronically and; for the period 1 March 2012 to 31 August 2012 by 31 October 2012.
Also generate EMP501 reconciliations, IRP5's & IT3A's.
If this is not done a penalty and Interest calculated on non submission could be levied.
Contact me for assistance :
Steven
Steven Morris Chartered Accountant (SA)
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
All employers who are registered with SARS for PAYE and UIF are required to submitt -
The Bi-annual -
EMP501 PAYE and; UIF recon's to SARS electronically and; for the period 1 March 2012 to 31 August 2012 by 31 October 2012.
Also generate EMP501 reconciliations, IRP5's & IT3A's.
If this is not done a penalty and Interest calculated on non submission could be levied.
Contact me for assistance :
Steven
Steven Morris Chartered Accountant (SA)
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Monday, 10 September 2012
Equities are riskier than bonds. Except when they are not.
PSG ASSET MANAGEMENT on the boil
"We have often written about the margin of safety we demand from equity investments. This prerequisite should ensure that we stay way clear of equities when they trade at grossly inflated prices, i.e. we avoid the equity bubbles. It is not only shares which can pose this trap. In February 1637, during the famous “Tulip Mania”, some single tulip bulbs sold for more than 10 times the annual salary of a skilled craftsman. Any asset class can be grossly overpriced, even cash. To ensure that our clients don’t suffer the permanent loss of capital which results from the bursting of asset bubbles, “margin of safety” transcends our entire asset allocation process.
In earlier Angles, we discussed how we determine whether an equity investment offers a sufficient margin of safety. But how would one go about determining whether bonds offer a margin of safety?
A first question could be: What could drive bonds to inflated levels?
There are mainly three possible scenarios:
Firstly, domestic yield greed. When cash rates drop yield seekers tend to move up the risk ladder into bonds. The lower the rates on cash, the more drastic this migration.
Secondly, international yield greed. Investors could be driven into, for example, South African bonds when the yields on their domestic bonds become relatively unattractive.
The last scenario is a flight to safety. Frightened investors tend to seek safety in government bonds. Decisions are no longer driven by rational yield comparison, purely the fear of capital loss. During these periods, return of capital becomes more important than return on capital.
The next step would be to consider whether any of these scenarios currently prevail. We think so, in fact we think all three prevail.
Interest rates in South Africa are currently at record low levels and investors desperate for yield have moved from cash into bonds.
Government bonds in many countries in the Western World are yielding near zero and foreigners have been snapping up emerging market bonds, like our own, yielding significantly higher rates.
Concerns around defaults in Europe have drawn investors to the government bonds of safe haven countries like the US and the UK.
The third bullet does not seem to have bearing on domestic bonds, but on closer investigation it seems that our bonds have moved in step with these bonds over time.
Although the South African bonds still yield much higher absolute rates, this difference is currently entirely explained by South Africa’s credit risk premium and the inflation differential:
US 10 Year Government Bond yield + SA Credit Spread (USD) + Inflation differential ≈ SA 10 Year Government Bond yield.
In numbers:
1.57% + 1.37% + (4.9% - 1.4%) = 6.44% vs. 6.62% yield on SA 10 Year Government Bonds.
In more simple terms: Ignoring country specific risks, our domestic 10 Year Government Bonds are priced on par with their US equivalents.
Another purely quantitative measure of the margin of safety offered by bonds is portrayed in the below chart.
The chart indicates by how much the bond yield needs to shift (bond prices need to fall) for investors to have been better off in cash over a 12 month period. So beyond the gold line the higher yield is negated by capital loss to such an extent that cash would offer a better total return. Clearly the margin is thin, 32.5 bps at the widest point.
We are not advocating that the South African bonds are the tulips of our time. We are, however, finding more margin of safety at selected equities and therefore our asset allocation funds are allocated accordingly."
The PSG Angle is an electronic newsletter of PSG Asset Management.
REF : Paul Bosman
"We have often written about the margin of safety we demand from equity investments. This prerequisite should ensure that we stay way clear of equities when they trade at grossly inflated prices, i.e. we avoid the equity bubbles. It is not only shares which can pose this trap. In February 1637, during the famous “Tulip Mania”, some single tulip bulbs sold for more than 10 times the annual salary of a skilled craftsman. Any asset class can be grossly overpriced, even cash. To ensure that our clients don’t suffer the permanent loss of capital which results from the bursting of asset bubbles, “margin of safety” transcends our entire asset allocation process.
In earlier Angles, we discussed how we determine whether an equity investment offers a sufficient margin of safety. But how would one go about determining whether bonds offer a margin of safety?
A first question could be: What could drive bonds to inflated levels?
There are mainly three possible scenarios:
Firstly, domestic yield greed. When cash rates drop yield seekers tend to move up the risk ladder into bonds. The lower the rates on cash, the more drastic this migration.
Secondly, international yield greed. Investors could be driven into, for example, South African bonds when the yields on their domestic bonds become relatively unattractive.
The last scenario is a flight to safety. Frightened investors tend to seek safety in government bonds. Decisions are no longer driven by rational yield comparison, purely the fear of capital loss. During these periods, return of capital becomes more important than return on capital.
The next step would be to consider whether any of these scenarios currently prevail. We think so, in fact we think all three prevail.
Interest rates in South Africa are currently at record low levels and investors desperate for yield have moved from cash into bonds.
Government bonds in many countries in the Western World are yielding near zero and foreigners have been snapping up emerging market bonds, like our own, yielding significantly higher rates.
Concerns around defaults in Europe have drawn investors to the government bonds of safe haven countries like the US and the UK.
The third bullet does not seem to have bearing on domestic bonds, but on closer investigation it seems that our bonds have moved in step with these bonds over time.
Although the South African bonds still yield much higher absolute rates, this difference is currently entirely explained by South Africa’s credit risk premium and the inflation differential:
US 10 Year Government Bond yield + SA Credit Spread (USD) + Inflation differential ≈ SA 10 Year Government Bond yield.
In numbers:
1.57% + 1.37% + (4.9% - 1.4%) = 6.44% vs. 6.62% yield on SA 10 Year Government Bonds.
In more simple terms: Ignoring country specific risks, our domestic 10 Year Government Bonds are priced on par with their US equivalents.
Another purely quantitative measure of the margin of safety offered by bonds is portrayed in the below chart.
The chart indicates by how much the bond yield needs to shift (bond prices need to fall) for investors to have been better off in cash over a 12 month period. So beyond the gold line the higher yield is negated by capital loss to such an extent that cash would offer a better total return. Clearly the margin is thin, 32.5 bps at the widest point.
We are not advocating that the South African bonds are the tulips of our time. We are, however, finding more margin of safety at selected equities and therefore our asset allocation funds are allocated accordingly."
The PSG Angle is an electronic newsletter of PSG Asset Management.
REF : Paul Bosman
Friday, 7 September 2012
Glencore sweetens offer for Xstrata
Glencore has made a last ditch proposal to save its $80bn combination with London listed Xstrata, improving its offer for the miner’s shares, after the involvement of Tony Blair, the former UK prime minister.
Glencore, which has adjourned a meeting to vote on a tie-up, has raised the merger ratio from 2.8 of its shares for every Xstrata share to 3.05 shares and proposed that Ivan Glasenberg, the chief executive of the trader, lead the enlarged group.
Glencore, which has adjourned a meeting to vote on a tie-up, has raised the merger ratio from 2.8 of its shares for every Xstrata share to 3.05 shares and proposed that Ivan Glasenberg, the chief executive of the trader, lead the enlarged group.
Hopes for last-minute Glencore-Xstrata deal rise
Glencore and Qatar are in last minute negotiations to save the $80bn merger between the trading house and miner Xstrata.
Glencore on Friday morning adjourned an extraordinary shareholder meeting set to approve the deal in an effort to reach agreement on a revised offer in the next two hours.
Glencore on Friday morning adjourned an extraordinary shareholder meeting set to approve the deal in an effort to reach agreement on a revised offer in the next two hours.
Thursday, 6 September 2012
Draghi Credibility at Stake as ECB Tries to Save The Euro
Sept. 6 (Bloomberg) --
TIME WILL TELL !!
"European Central Bank President Mario Draghi’s task today is straight-forward: produce a plan to save the euro.
Draghi pledged more than a month ago to do what’s needed to preserve the single currency; now he’s under pressure to follow through with details of a bond-purchase plan to lower borrowing costs in Spain and Italy and prevent a breakup of Europe’s monetary union. Expectations have built to such an extent that Draghi risks losing credibility unless he delivers at a press conference after today’s Governing Council meeting in Frankfurt, economists and investors said.
“Draghi has put his credibility squarely on the line,” said Julian Callow, chief European economist at Barclays Capital in London. “He has made it his business to save the euro, so he is going to be called on that.”
Draghi told the European Parliament this week that the ECB needs to intervene in bond markets to wrest back control of interest rates in a fragmented euro-area economy and save the currency, according to a recording of a closed-door session obtained by Bloomberg News. His blueprint, sent to council members just two days ago and opposed by Germany’s Bundesbank, proposes unlimited buying of government debt with maturities of up to about three years, two central bank officials said yesterday on condition of anonymity.
Rate Cut?
Draghi will hold a press conference at 2:30 p.m., 45 minutes after the ECB announces its interest-rate decision.
Economists are split over whether policy makers will lower the benchmark rate to a new record low, with 30 of 58 in a Bloomberg survey predicting a quarter-point cut to 0.5 percent and 28 forecasting no change.
Separately, the Bank of England will keep its key rate at 0.5 percent and maintain its bond purchase target at 375 billion pounds ($597 billion), another survey shows. That decision is due at noon in London.
The ECB’s 23 council members have a full agenda. As well as discussing rates and the modalities of Draghi’s asset-purchase plan, they will also consider new economic projections and decide whether to loosen rules on the collateral banks can submit in return for central bank loans.
“We think that a loosening of collateral requirements for refinancing operations is likely to be announced, but the ECB does not yet seem ready to move its deposit rate into negative territory,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam.
Negative Territory
If the ECB were to cut its benchmark, it would also need to lower its deposit rate if it wanted to maintain the 75 basis- point gap between them. That would mean taking the deposit rate, currently at zero, into negative territory, so that banks would have to pay the ECB to park excess cash with it.
Still, the main focus will be on the bond plan, and Draghi “has set the bar very high for market expectations,” said Andrew Bosomworth, head of Pacific Investment Management Co. in Germany. “To not disappoint, the ECB will have to make its reaction function transparent and at least spell out the maturities it is going to buy.”
Draghi’s plan involves the ECB buying short-dated bonds on the secondary market of countries that ask Europe’s bailout fund to purchase their debt on the primary market, which would require them to sign up to conditions. Neither Spain nor Italy has made such a request yet.
Draghi’s Rationale
Draghi’s rationale for the purchase plan is that ECB interest rates are not being transmitted in most euro-area countries because investors are pricing in the risk of a breakup, something he considers unacceptable. The ECB must regain control of rates in order to fulfill its primary mandate of price stability, he told lawmakers in Brussels on Sept. 3.
The ECB will sterilize its purchases to soothe concerns about printing money, two officials said yesterday. The ECB won’t have seniority on any bonds it buys, and no yield-spread targets or bands will be set publicly, they said.
Draghi will stress the conditionality of the program, with the ECB likely to stop buying the bonds of any government that fails to meet the terms it agrees to when it signs up for aid from Europe’s rescue fund, the people said.
Prime Minister Mariano Rajoy and German Chancellor Angela Merkel meet in Madrid today to discuss the euro crisis and are due to hold a joint news conference at about 2:30 p.m. in Madrid, the same time Draghi speaks.
Tightrope
French President Francois Hollande also meets with U.K. Prime Minister David Cameron in London and Italian Premier Mario Monti hosts European Commission President Jose Manuel Barroso in Florence.
Draghi is walking a tightrope, said Ken Wattret, chief euro-area economist at BNP Paribas in London.
Because Italian and Spanish bond yields have dropped in anticipation of ECB action, there’s a risk that the two countries won’t see the need to ask for help, Wattret said. On the other hand, disappointment with Draghi’s plan today may trigger a market selloff that “could be the circuit breaker that forces Spain at least to ask for aid,” he said.
Spain’s two-year yields dropped to as low as 3.04 percent yesterday from a euro-era high of 7.15 percent on July 25. Italy’s two-year yields have dropped almost three percentage points over the same period.
Spain plans to sell as much as 3.5 billion euros ($4.4 billion) of short-dated bonds at an auction at about 10:40 a.m. in Madrid today.
German Opposition
The ECB has been at the forefront of fighting the debt crisis, which has so far pushed five countries into bailouts and driven the 17-nation euro economy to the brink of recession.
In addition to governments dragging their heels, Draghi’s bond-purchase plan faces opposition from German policy makers, politicians and executives.
“An unlimited and far-reaching intervention by the central bank by buying sovereign debt is beyond the mandate of the ECB,” Commerbank AG Chief Executive Officer Martin Blessing said at a banking conference in Frankfurt yesterday. “I cannot image how one can build trust and a strong currency union by violating the law. There is the danger that we keep on buying time while the pressure to reform is declining.”
Germany’s Constitutional Court could also throw a spanner in the works when it rules on the legality of Europe’s permanent bailout fund, the European Stability Mechanism, on Sept. 12.
“The ECB is taking a leap of faith that governments will pursue and implement the reform agenda,” Bosomworth said. Still, unlike in the past, “there is more of an awareness among governments about how important this is,” he said.
Draghi’s bond-purchase plan won’t solve Europe’s debt crisis, said Erik Nielsen, global chief economist at UniCredit Bank AG in London. “But he’s fed up with markets pricing in euro-area breakups, and I wouldn’t mess with him if I were a trader.”
To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net "
TIME WILL TELL !!
"European Central Bank President Mario Draghi’s task today is straight-forward: produce a plan to save the euro.
Draghi pledged more than a month ago to do what’s needed to preserve the single currency; now he’s under pressure to follow through with details of a bond-purchase plan to lower borrowing costs in Spain and Italy and prevent a breakup of Europe’s monetary union. Expectations have built to such an extent that Draghi risks losing credibility unless he delivers at a press conference after today’s Governing Council meeting in Frankfurt, economists and investors said.
“Draghi has put his credibility squarely on the line,” said Julian Callow, chief European economist at Barclays Capital in London. “He has made it his business to save the euro, so he is going to be called on that.”
Draghi told the European Parliament this week that the ECB needs to intervene in bond markets to wrest back control of interest rates in a fragmented euro-area economy and save the currency, according to a recording of a closed-door session obtained by Bloomberg News. His blueprint, sent to council members just two days ago and opposed by Germany’s Bundesbank, proposes unlimited buying of government debt with maturities of up to about three years, two central bank officials said yesterday on condition of anonymity.
Rate Cut?
Draghi will hold a press conference at 2:30 p.m., 45 minutes after the ECB announces its interest-rate decision.
Economists are split over whether policy makers will lower the benchmark rate to a new record low, with 30 of 58 in a Bloomberg survey predicting a quarter-point cut to 0.5 percent and 28 forecasting no change.
Separately, the Bank of England will keep its key rate at 0.5 percent and maintain its bond purchase target at 375 billion pounds ($597 billion), another survey shows. That decision is due at noon in London.
The ECB’s 23 council members have a full agenda. As well as discussing rates and the modalities of Draghi’s asset-purchase plan, they will also consider new economic projections and decide whether to loosen rules on the collateral banks can submit in return for central bank loans.
“We think that a loosening of collateral requirements for refinancing operations is likely to be announced, but the ECB does not yet seem ready to move its deposit rate into negative territory,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam.
Negative Territory
If the ECB were to cut its benchmark, it would also need to lower its deposit rate if it wanted to maintain the 75 basis- point gap between them. That would mean taking the deposit rate, currently at zero, into negative territory, so that banks would have to pay the ECB to park excess cash with it.
Still, the main focus will be on the bond plan, and Draghi “has set the bar very high for market expectations,” said Andrew Bosomworth, head of Pacific Investment Management Co. in Germany. “To not disappoint, the ECB will have to make its reaction function transparent and at least spell out the maturities it is going to buy.”
Draghi’s plan involves the ECB buying short-dated bonds on the secondary market of countries that ask Europe’s bailout fund to purchase their debt on the primary market, which would require them to sign up to conditions. Neither Spain nor Italy has made such a request yet.
Draghi’s Rationale
Draghi’s rationale for the purchase plan is that ECB interest rates are not being transmitted in most euro-area countries because investors are pricing in the risk of a breakup, something he considers unacceptable. The ECB must regain control of rates in order to fulfill its primary mandate of price stability, he told lawmakers in Brussels on Sept. 3.
The ECB will sterilize its purchases to soothe concerns about printing money, two officials said yesterday. The ECB won’t have seniority on any bonds it buys, and no yield-spread targets or bands will be set publicly, they said.
Draghi will stress the conditionality of the program, with the ECB likely to stop buying the bonds of any government that fails to meet the terms it agrees to when it signs up for aid from Europe’s rescue fund, the people said.
Prime Minister Mariano Rajoy and German Chancellor Angela Merkel meet in Madrid today to discuss the euro crisis and are due to hold a joint news conference at about 2:30 p.m. in Madrid, the same time Draghi speaks.
Tightrope
French President Francois Hollande also meets with U.K. Prime Minister David Cameron in London and Italian Premier Mario Monti hosts European Commission President Jose Manuel Barroso in Florence.
Draghi is walking a tightrope, said Ken Wattret, chief euro-area economist at BNP Paribas in London.
Because Italian and Spanish bond yields have dropped in anticipation of ECB action, there’s a risk that the two countries won’t see the need to ask for help, Wattret said. On the other hand, disappointment with Draghi’s plan today may trigger a market selloff that “could be the circuit breaker that forces Spain at least to ask for aid,” he said.
Spain’s two-year yields dropped to as low as 3.04 percent yesterday from a euro-era high of 7.15 percent on July 25. Italy’s two-year yields have dropped almost three percentage points over the same period.
Spain plans to sell as much as 3.5 billion euros ($4.4 billion) of short-dated bonds at an auction at about 10:40 a.m. in Madrid today.
German Opposition
The ECB has been at the forefront of fighting the debt crisis, which has so far pushed five countries into bailouts and driven the 17-nation euro economy to the brink of recession.
In addition to governments dragging their heels, Draghi’s bond-purchase plan faces opposition from German policy makers, politicians and executives.
“An unlimited and far-reaching intervention by the central bank by buying sovereign debt is beyond the mandate of the ECB,” Commerbank AG Chief Executive Officer Martin Blessing said at a banking conference in Frankfurt yesterday. “I cannot image how one can build trust and a strong currency union by violating the law. There is the danger that we keep on buying time while the pressure to reform is declining.”
Germany’s Constitutional Court could also throw a spanner in the works when it rules on the legality of Europe’s permanent bailout fund, the European Stability Mechanism, on Sept. 12.
“The ECB is taking a leap of faith that governments will pursue and implement the reform agenda,” Bosomworth said. Still, unlike in the past, “there is more of an awareness among governments about how important this is,” he said.
Draghi’s bond-purchase plan won’t solve Europe’s debt crisis, said Erik Nielsen, global chief economist at UniCredit Bank AG in London. “But he’s fed up with markets pricing in euro-area breakups, and I wouldn’t mess with him if I were a trader.”
To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net "
Monday, 3 September 2012
At Jackson Hole, a growing fear for Fed's independence
REF : REUTERS
By Pedro Nicolaci da Costa
"JACKSON HOLE, Wyoming (Reuters) - Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank's hard-won independence and undermine confidence in the nearly 100-year old institution.
That was the pervasive sentiment among economists gathered at the Fed's annual monetary policy symposium in Jackson Hole, Wyoming. Against the dramatic backdrop of the Grand Teton mountain, many said a closely-contested presidential race has turned the monetary authority into a political football.
"I do fear for it a bit if the election comes out that way, especially if some of the more radical voices, that happen to be Republican voices nowadays, get reelected," said Alan Blinder, Princeton economics professor and a former Fed vice chairman, adding that historically opposition to the U.S. central bank had come predominately from the left.
"There's a lot of hostility," said Blinder, who was appointed to the Fed by former president Bill Clinton.
The primary topic of conversation at the rustic mountainside resort was whether or not Fed Chairman Ben Bernanke and his colleagues would deliver another round of monetary stimulus soon.
But, when probed on the issue on the sidelines of the meeting, many participants voiced concern about the heated political rhetoric aimed at the Fed, including a bill that would audit the conduct of monetary policy that is gaining increasing traction among Republicans.
Republican presidential nominee Mitt Romney has said the Fed should be audited and that he would not reappoint Bernanke, himself a Republican who was originally picked for the job by George W. Bush, to a third term when his current one expires in early 2014. Still, he has pledged to respect central bank independence.
The Fed is already subject to regular audits, but congressman Ron Paul's bill would remove an exemption for monetary policy deliberations.
For some observers, that pressure is already affecting the Fed's behavior, preventing it from pushing more aggressively for stronger economic growth following the sharp blowback received back in 2010, when policymakers announced their last large scale bond purchase program.
Some analysts outside the Fed's inner circle -- the ones that weren't invited to Jackson Hole -- argue top central bank officials brought some of the political heat on themselves. By backing bank bailouts that came with few strings attached and allowing some of the chief culprits of the financial crisis to continue doing business as usual, these critics say, the Fed was seen as too close to Wall Street, making it an easy political target.
LONE RANGERS
Ironically, the complete political gridlock that characterizes U.S. fiscal policy has left the Fed in the difficult position of being "the only game in town."
Both the Fed and the independent Congressional Budget Office have said a looming "fiscal cliff" of spending cuts and expiring tax breaks at the end of this year could shove a fragile economy into a new recession.
In response to the financial crisis and deep recession of 2007-2009, the Fed cut interest rates to effectively zero and bought some $2.3 trillion in government bonds and mortgage debt to keep borrowing costs down and stimulate investment. Despite such aggressive efforts, growth remains subpar, registering an annual rate of just 1.7 percent in the second quarter, a level seen as too tame to bring down the country's 8.3 percent jobless rate.
Bernanke, during his keynote speech here on Friday, spent much time outlining the benefits of recent Fed policies, arguing they prevented a much deeper slump and helped put unemployment on a downward trajectory.
But many Republicans in Washington have cried foul, berating the central bank for risking high inflation in the future -- even if there has been little sign of substantial upward price pressures from the expansion of the Fed's balance sheet five years after officials started cutting rates.
Critics also contend the Fed's loose monetary policy has made it easier for the government to run large deficits.
"Central banks are under a lot of scrutiny right now," said Karen Dynan, a former Fed economist now at Brookings Institution. "It's partly because they are using these unconventional measures that people don't really understand and don't really trust."
Romney's choice of Paul Ryan -- an ardent Fed critic who supports "sound money" -- as his running mate appeared to ratchet up the potential for a possible Romney administration to tighten the screws on the central bank.
Such an attack would most likely come in two forms: support for Texas libertarian Ron Paul's Audit the Fed bill, which Bernanke has said would be a "nightmare" for Fed independence, and an attempt to curtail the Fed's mandate and force it to focus solely on inflation rather than giving equal weight to unemployment.
Fed officials including Bernanke have warned that monetary policy cannot go it alone in supporting the economy, and yet there is little prospect of any resolution to Washington's long-running showdown over fiscal policy and the budget.
"Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve," Bernanke said in his Jackson Hole remarks.
UPSIDE DOWN
Historically, the notion of political interference in monetary affairs boiled down to fears that, if politicians with short-term horizons had their way, they would always have central bankers crank up the printing presses in order to juice up growth -- leading, in extreme cases, to hyperinflation.
In the current case, however, opposition has emerged against a proactive central bank that has been forced to widen its range of policy tools in a zero interest rate environment.
Susan Collins, professor of economics at the University of Michigan's Gerald R. Ford School of Public Policy, stressed the dangers of political interference in monetary policy of either stripe.
"Compromising that (independence), maybe not immediately but over the medium- to longer-term, would have some really unfortunate consequences," said Collins.
These could include a loss of market confidence that perversely pushes borrowing costs higher and tarnishes the central bank's credibility.
"I absolutely hope that some wiser council would prevail should that issue come to the fore," added Collins.
Comments from Romney advisor Martin Feldstein, also attending the Jackson Hole event, suggested a more Fed-friendly tone could yet reemerge from Republican side. Feldstein, a Harvard professor who would likely be on Romney's short-list to replace Bernanke at the Fed, downplayed the Republican push to strip the Fed of its dual mandate.
"I don't think that is a realistic idea," he said, noting that even central banks with single mandates have to pay close attention to growth and employment. "I don't think the dual mandate has handicapped them in their focus on keeping inflation down."
Steven
By Pedro Nicolaci da Costa
"JACKSON HOLE, Wyoming (Reuters) - Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank's hard-won independence and undermine confidence in the nearly 100-year old institution.
That was the pervasive sentiment among economists gathered at the Fed's annual monetary policy symposium in Jackson Hole, Wyoming. Against the dramatic backdrop of the Grand Teton mountain, many said a closely-contested presidential race has turned the monetary authority into a political football.
"I do fear for it a bit if the election comes out that way, especially if some of the more radical voices, that happen to be Republican voices nowadays, get reelected," said Alan Blinder, Princeton economics professor and a former Fed vice chairman, adding that historically opposition to the U.S. central bank had come predominately from the left.
"There's a lot of hostility," said Blinder, who was appointed to the Fed by former president Bill Clinton.
The primary topic of conversation at the rustic mountainside resort was whether or not Fed Chairman Ben Bernanke and his colleagues would deliver another round of monetary stimulus soon.
But, when probed on the issue on the sidelines of the meeting, many participants voiced concern about the heated political rhetoric aimed at the Fed, including a bill that would audit the conduct of monetary policy that is gaining increasing traction among Republicans.
Republican presidential nominee Mitt Romney has said the Fed should be audited and that he would not reappoint Bernanke, himself a Republican who was originally picked for the job by George W. Bush, to a third term when his current one expires in early 2014. Still, he has pledged to respect central bank independence.
The Fed is already subject to regular audits, but congressman Ron Paul's bill would remove an exemption for monetary policy deliberations.
For some observers, that pressure is already affecting the Fed's behavior, preventing it from pushing more aggressively for stronger economic growth following the sharp blowback received back in 2010, when policymakers announced their last large scale bond purchase program.
Some analysts outside the Fed's inner circle -- the ones that weren't invited to Jackson Hole -- argue top central bank officials brought some of the political heat on themselves. By backing bank bailouts that came with few strings attached and allowing some of the chief culprits of the financial crisis to continue doing business as usual, these critics say, the Fed was seen as too close to Wall Street, making it an easy political target.
LONE RANGERS
Ironically, the complete political gridlock that characterizes U.S. fiscal policy has left the Fed in the difficult position of being "the only game in town."
Both the Fed and the independent Congressional Budget Office have said a looming "fiscal cliff" of spending cuts and expiring tax breaks at the end of this year could shove a fragile economy into a new recession.
In response to the financial crisis and deep recession of 2007-2009, the Fed cut interest rates to effectively zero and bought some $2.3 trillion in government bonds and mortgage debt to keep borrowing costs down and stimulate investment. Despite such aggressive efforts, growth remains subpar, registering an annual rate of just 1.7 percent in the second quarter, a level seen as too tame to bring down the country's 8.3 percent jobless rate.
Bernanke, during his keynote speech here on Friday, spent much time outlining the benefits of recent Fed policies, arguing they prevented a much deeper slump and helped put unemployment on a downward trajectory.
But many Republicans in Washington have cried foul, berating the central bank for risking high inflation in the future -- even if there has been little sign of substantial upward price pressures from the expansion of the Fed's balance sheet five years after officials started cutting rates.
Critics also contend the Fed's loose monetary policy has made it easier for the government to run large deficits.
"Central banks are under a lot of scrutiny right now," said Karen Dynan, a former Fed economist now at Brookings Institution. "It's partly because they are using these unconventional measures that people don't really understand and don't really trust."
Romney's choice of Paul Ryan -- an ardent Fed critic who supports "sound money" -- as his running mate appeared to ratchet up the potential for a possible Romney administration to tighten the screws on the central bank.
Such an attack would most likely come in two forms: support for Texas libertarian Ron Paul's Audit the Fed bill, which Bernanke has said would be a "nightmare" for Fed independence, and an attempt to curtail the Fed's mandate and force it to focus solely on inflation rather than giving equal weight to unemployment.
Fed officials including Bernanke have warned that monetary policy cannot go it alone in supporting the economy, and yet there is little prospect of any resolution to Washington's long-running showdown over fiscal policy and the budget.
"Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve," Bernanke said in his Jackson Hole remarks.
UPSIDE DOWN
Historically, the notion of political interference in monetary affairs boiled down to fears that, if politicians with short-term horizons had their way, they would always have central bankers crank up the printing presses in order to juice up growth -- leading, in extreme cases, to hyperinflation.
In the current case, however, opposition has emerged against a proactive central bank that has been forced to widen its range of policy tools in a zero interest rate environment.
Susan Collins, professor of economics at the University of Michigan's Gerald R. Ford School of Public Policy, stressed the dangers of political interference in monetary policy of either stripe.
"Compromising that (independence), maybe not immediately but over the medium- to longer-term, would have some really unfortunate consequences," said Collins.
These could include a loss of market confidence that perversely pushes borrowing costs higher and tarnishes the central bank's credibility.
"I absolutely hope that some wiser council would prevail should that issue come to the fore," added Collins.
Comments from Romney advisor Martin Feldstein, also attending the Jackson Hole event, suggested a more Fed-friendly tone could yet reemerge from Republican side. Feldstein, a Harvard professor who would likely be on Romney's short-list to replace Bernanke at the Fed, downplayed the Republican push to strip the Fed of its dual mandate.
"I don't think that is a realistic idea," he said, noting that even central banks with single mandates have to pay close attention to growth and employment. "I don't think the dual mandate has handicapped them in their focus on keeping inflation down."
Steven
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