Tuesday, 30 October 2012
Nissan warns of slowing China expansion
Breaking News
FT.com
"Nissan warns of slowing China expansion
Carlos Ghosn, chief executive of Nissan, has warned that a protracted breakdown in relations between Japan and China could slow his company’s aggressive expansion into the Chinese car market, which Nissan has come to rely on for one-quarter of its sales.
In an interview with the Financial Times, Mr Ghosn said Nissan’s current investment plans, such as a factory in Dalian that is to be built in 2014, would go ahead despite a consumer backlash in China against Japanese car brands that has led to a sharp fall-off in demand.
But he cautioned that additional commitments would “be subject to a lot of scrutiny and analysis, and a little bit of time.”
Friday, 26 October 2012
Asian Stocks Fall After Apple Earnings as Metals, Yen Advance
Oct. 26 (Bloomberg) --
"Asian stocks fell, with the regional benchmark index erasing its gain for the month, and U.S. futures slid as China Unicom (Hong Kong) Ltd. and Apple Inc. joined companies posting results that missed analysts’ estimates. Metals rose and Japan’s yen climbed.
The MSCI Asia Pacific Index lost 0.9 percent as of 1:01 p.m. in Tokyo as Standard & Poor’s 500 Index futures fell 0.8 percent. Zinc contracts in London gained 0.3 percent to $1,840.5 a metric ton as nickel rose 0.2 percent. The yen climbed 0.2 percent against the dollar and China’s yuan touched the upper limit of its allowed trading band for a second day.
Apple, the world’s largest company by market value, announced yesterday forecasts on earnings that fell short of projections for the crucial holiday quarter. China Unicom, the country’s No. 2 mobile-phone carrier, was among 60 percent of companies on the Asia-Pacific gauge whose earnings have missed estimates. U.S. data today may show the world’s largest economy expanded 1.8 percent in the third quarter, for the first back- to-back readings below 2 percent since 2009.
“Economic data has been positive, but earnings as a whole has been disappointing,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “We’ve seen the worst in terms of economic growth downgrades, and the general economy is starting to improve from a low level. But we are still in the process of seeing the impact on earnings of that lower growth.”
Canon Inc., the world’s largest camera maker, slid 2.5 percent in Tokyo after it lowered its full-year profit and sales forecasts on slowing demand. Fanuc Corp., the largest maker of controls that run machine tools, fell the most in six months after reporting first-half profit that missed estimates.
Samsung, TSMC
A gauge of technology stocks fell 0.5 percent on the MSCI Asia Pacific Index, led by a 1.8 percent decline in Samsung Electronics Co. in Seoul. The company, both a rival and supplier to Apple, reported today third-quarter profit that beat analysts’ estimates. Samsung has the heaviest weighting among the 1,006 members of the Asia-Pacific index.
Taiwan Semiconductor Manufacturing Co. rose 2.8 percent, pacing gains on the regional benchmark after forecasting profit margins that also beat expectations.
Apple expected profit in the current period will be about $11.75 a share on sales of about $52 billion, the company said yesterday in a statement. That compares with $15.49 a share on sales of $55.1 billion according to the average of analysts’ estimates compiled by Bloomberg. Last quarter’s profit rose to $8.67 a share, shy of the $8.75 a share projected by analysts.
Nikkei 225
Japan’s Nikkei 225 Stock Average dropped 1.1 percent, extending declines after the government announced a further $9.4 billion stimulus package.
"Japan needs bigger stimulus as the economy is slowing faster than expected, but it will be hard to have larger spending due to political gridlock and worsening fiscal conditions,” said Yoshimasa Maruyama , chief economist at Itochu Corp. in Tokyo. “Political pressure will build on the BOJ.”
South Korea’s Kospi Index dropped 1.6 percent. Hong Kong’s Hang Seng Index declined 0.8 percent after yesterday capping the longest streak of gains since 2006. Markets in Indonesia, Malaysia, Singapore and the Philippines are closed for a holiday.
Industrial metals rallied following five days of losses in the London Metal Exchange Metals Index. Copper, aluminum and tin futures rose at least 0.3 percent.
Korea GDP
South Korea’s gross domestic product expanded 1.6 percent in the three months to September, the slowest pace since 2009, according to Bank of Korea data today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News.
Japan’s consumer prices, excluding fresh food, fell 0.1 percent in September, the fifth month of decline, the statistics bureau reported today. The median of 27 estimates in a Bloomberg News survey was for a 0.2 percent drop.
The yen strengthened after touching a four-month low earlier, amid speculation the central bank will expand monetary easing next week. The currency was headed for a second weekly drop as a survey of economists showed the Bank of Japan will probably undertake additional measures when it meets Oct. 30.
Upper Limit
China’s yuan climbed to a 19-year high, with the advance exceeding the People’s Bank of China’s reference rate by the maximum allowed 1 percent. The daily fixing was raised 0.06 percent today to 6.3010 per dollar.
Benchmark U.S. 10-year notes yielded 1.81 percent, less than 1 basis point from yesterday’s close, before the U.S. GDP report later today. Treasuries were headed for a second weekly loss before the government report economists said will show consumer spending drove a pickup in growth.
The Thomson Reuters/University of Michigan final index of sentiment is also due today. The gauge jumped to 83 in October, the highest level since September 2007, according to a Bloomberg survey.
To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks fell, with the regional benchmark index erasing its gain for the month, and U.S. futures slid as China Unicom (Hong Kong) Ltd. and Apple Inc. joined companies posting results that missed analysts’ estimates. Metals rose and Japan’s yen climbed.
The MSCI Asia Pacific Index lost 0.9 percent as of 1:01 p.m. in Tokyo as Standard & Poor’s 500 Index futures fell 0.8 percent. Zinc contracts in London gained 0.3 percent to $1,840.5 a metric ton as nickel rose 0.2 percent. The yen climbed 0.2 percent against the dollar and China’s yuan touched the upper limit of its allowed trading band for a second day.
Apple, the world’s largest company by market value, announced yesterday forecasts on earnings that fell short of projections for the crucial holiday quarter. China Unicom, the country’s No. 2 mobile-phone carrier, was among 60 percent of companies on the Asia-Pacific gauge whose earnings have missed estimates. U.S. data today may show the world’s largest economy expanded 1.8 percent in the third quarter, for the first back- to-back readings below 2 percent since 2009.
“Economic data has been positive, but earnings as a whole has been disappointing,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “We’ve seen the worst in terms of economic growth downgrades, and the general economy is starting to improve from a low level. But we are still in the process of seeing the impact on earnings of that lower growth.”
Canon Inc., the world’s largest camera maker, slid 2.5 percent in Tokyo after it lowered its full-year profit and sales forecasts on slowing demand. Fanuc Corp., the largest maker of controls that run machine tools, fell the most in six months after reporting first-half profit that missed estimates.
Samsung, TSMC
A gauge of technology stocks fell 0.5 percent on the MSCI Asia Pacific Index, led by a 1.8 percent decline in Samsung Electronics Co. in Seoul. The company, both a rival and supplier to Apple, reported today third-quarter profit that beat analysts’ estimates. Samsung has the heaviest weighting among the 1,006 members of the Asia-Pacific index.
Taiwan Semiconductor Manufacturing Co. rose 2.8 percent, pacing gains on the regional benchmark after forecasting profit margins that also beat expectations.
Apple expected profit in the current period will be about $11.75 a share on sales of about $52 billion, the company said yesterday in a statement. That compares with $15.49 a share on sales of $55.1 billion according to the average of analysts’ estimates compiled by Bloomberg. Last quarter’s profit rose to $8.67 a share, shy of the $8.75 a share projected by analysts.
Nikkei 225
Japan’s Nikkei 225 Stock Average dropped 1.1 percent, extending declines after the government announced a further $9.4 billion stimulus package.
"Japan needs bigger stimulus as the economy is slowing faster than expected, but it will be hard to have larger spending due to political gridlock and worsening fiscal conditions,” said Yoshimasa Maruyama , chief economist at Itochu Corp. in Tokyo. “Political pressure will build on the BOJ.”
South Korea’s Kospi Index dropped 1.6 percent. Hong Kong’s Hang Seng Index declined 0.8 percent after yesterday capping the longest streak of gains since 2006. Markets in Indonesia, Malaysia, Singapore and the Philippines are closed for a holiday.
Industrial metals rallied following five days of losses in the London Metal Exchange Metals Index. Copper, aluminum and tin futures rose at least 0.3 percent.
Korea GDP
South Korea’s gross domestic product expanded 1.6 percent in the three months to September, the slowest pace since 2009, according to Bank of Korea data today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News.
Japan’s consumer prices, excluding fresh food, fell 0.1 percent in September, the fifth month of decline, the statistics bureau reported today. The median of 27 estimates in a Bloomberg News survey was for a 0.2 percent drop.
The yen strengthened after touching a four-month low earlier, amid speculation the central bank will expand monetary easing next week. The currency was headed for a second weekly drop as a survey of economists showed the Bank of Japan will probably undertake additional measures when it meets Oct. 30.
Upper Limit
China’s yuan climbed to a 19-year high, with the advance exceeding the People’s Bank of China’s reference rate by the maximum allowed 1 percent. The daily fixing was raised 0.06 percent today to 6.3010 per dollar.
Benchmark U.S. 10-year notes yielded 1.81 percent, less than 1 basis point from yesterday’s close, before the U.S. GDP report later today. Treasuries were headed for a second weekly loss before the government report economists said will show consumer spending drove a pickup in growth.
The Thomson Reuters/University of Michigan final index of sentiment is also due today. The gauge jumped to 83 in October, the highest level since September 2007, according to a Bloomberg survey.
To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Thursday, 25 October 2012
Britain moves out of recession
Britain’s double-dip recession has ended after the economy grew 1 per cent between the second and third quarters, much more robustly than economists had expected.
The strong rise in gross domestic product will come as a relief to the coalition government, whose austerity programme has come in for fierce criticism as the economy has faltered.
The strong rise in gross domestic product will come as a relief to the coalition government, whose austerity programme has come in for fierce criticism as the economy has faltered.
Tuesday, 23 October 2012
Facebook fillip from mobile growth
FT.com
"Facebook reported better than expected revenues in the third quarter, mainly driven by its aggressive push into mobile advertising.
The social networking company is starting to show success from its aggressive push into mobile advertising in recent months, reporting better than expected revenues for the third quarter.
The company generated $1.26bn in revenues, more than the $1.22bn analysts had anticipated. Earnings per share were 12 cents, on par with analysts’ expectations."
"Facebook reported better than expected revenues in the third quarter, mainly driven by its aggressive push into mobile advertising.
The social networking company is starting to show success from its aggressive push into mobile advertising in recent months, reporting better than expected revenues for the third quarter.
The company generated $1.26bn in revenues, more than the $1.22bn analysts had anticipated. Earnings per share were 12 cents, on par with analysts’ expectations."
IMPORTANT VAT 201 SUBMISSION DATE NOTIFICATION - FURTHER STATEMENT
IMPORTANT VAT 201 SUBMISSION DATE NOTIFICATION - FURTHER STATEMENT
Just received 5 Mins ago
Further statements have been issued by SARS indicating that the move of the required submission date for VAT201 returns to the 25th of the month is a "significant unintended change in tax law".
As a result, SARS is not requiring VAT vendors who use eFiling to submit VAT returns on the 25th of the month. The benefit of no interest, penalties, or prosecution will remain effective if the return and payment are submitted via eFiling (or EFT) on or before the last business day of the month.
A perception has been created that to enjoy the benefit of no interest, penalties or criminal prosecution the due date for filing a VAT return electronically (i.e. via eFiling) is now the 25th of the month, though payment could still be made until the last business day of the month. This was the result of an amendment to proviso (iii) to section 28(1) of the Value-Added Tax Act came into effect on 1 October 2012 when the Tax Administration Act became operational. To clarify this matter, a further amendment to the proviso will be included in the current draft Tax Administration Amendment Bill.
This will ensure that the due date for both filing and payment remains the last business day of the month if the return is filed via eFiling and payment is made either via eFiling or EFT on or before that day and the payment reflects in the SARS account on or before that day.
To conclude, SARS is not requiring eFiling users to submit VAT returns on the 25th of the month. This means that the benefit of no interest, penalties or prosecution will remain effective if the return and payment is submitted via eFiling (or EFT) on or before the last business day of the month.
eFiling users should note that interest and penalties are chargeable with effect from the 25th of the month where such a return is filed or payment is made after the last business day of the month.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Just received 5 Mins ago
Further statements have been issued by SARS indicating that the move of the required submission date for VAT201 returns to the 25th of the month is a "significant unintended change in tax law".
As a result, SARS is not requiring VAT vendors who use eFiling to submit VAT returns on the 25th of the month. The benefit of no interest, penalties, or prosecution will remain effective if the return and payment are submitted via eFiling (or EFT) on or before the last business day of the month.
A perception has been created that to enjoy the benefit of no interest, penalties or criminal prosecution the due date for filing a VAT return electronically (i.e. via eFiling) is now the 25th of the month, though payment could still be made until the last business day of the month. This was the result of an amendment to proviso (iii) to section 28(1) of the Value-Added Tax Act came into effect on 1 October 2012 when the Tax Administration Act became operational. To clarify this matter, a further amendment to the proviso will be included in the current draft Tax Administration Amendment Bill.
This will ensure that the due date for both filing and payment remains the last business day of the month if the return is filed via eFiling and payment is made either via eFiling or EFT on or before that day and the payment reflects in the SARS account on or before that day.
To conclude, SARS is not requiring eFiling users to submit VAT returns on the 25th of the month. This means that the benefit of no interest, penalties or prosecution will remain effective if the return and payment is submitted via eFiling (or EFT) on or before the last business day of the month.
eFiling users should note that interest and penalties are chargeable with effect from the 25th of the month where such a return is filed or payment is made after the last business day of the month.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
VAT e-filing shock
Take note of the changes to VAT submissions from 1 October 2012 :
"VAT vendors may be caught off guard by a confirmation from SARS that all VAT vendors using e-filing will now have to submit their returns by the 25th of the month that follows after their tax period, and no longer have leeway until the last business day of the month. Payments may still be made via e-filing up to the last business day of the month.
This follows the non-binding opinion, issued on 16 October 2012 by SARS’ Cape Town legal department. The amendment to section 28 of the VAT Act came into operation through amendments included in the Tax Administration Act (TAACT) which came into effect on 1 October 2012.
The specific amendment read as follows:
‘‘(iii) a vendor registered with the Commissioner to submit returns [and payments] electronically [(other than by means of a debit order), must furnish the return] is deemed to have made payment within the period contemplated in subsection (1) [and make] if the vendor makes full payment of the amount of tax within the period ending on the last business day of the month during which that twenty-fifth day falls; ([ ] means deletion and underlining means inclusions)
The deletion of the words “must furnish a return” seems to have the effect that returns submitted via e-filing must now be submitted by the 25th of the month."
It is uncertain at this stage whether this amendment was intentional or just a general oversight by the legislature. Adding to the confusion is that the SARS short guide to the TAACT does not mention this significant amendment. Even SARS’ website, under benefits of e-filing, still states “e-filers are also given more time to make their submissions and payments”.
Taxpayers would, at the very least, have expected SARS to notify them, either by e-filing or a general notice on SARS’ website, , about the change. As a result of this amendment, vendors now have less time to obtain the relevant financial information to complete and submit their VAT returns. This could lead to an increase in
human error and the unfortunate possibility of penalties and interest being levied by SARS.
Taxpayers put processes in place immediately to ensure that they submit their VAT returns, which are due from 1 October 2012, by the due date now being 25 October.
Take note of the changes and don't get caught off guard.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
"VAT vendors may be caught off guard by a confirmation from SARS that all VAT vendors using e-filing will now have to submit their returns by the 25th of the month that follows after their tax period, and no longer have leeway until the last business day of the month. Payments may still be made via e-filing up to the last business day of the month.
This follows the non-binding opinion, issued on 16 October 2012 by SARS’ Cape Town legal department. The amendment to section 28 of the VAT Act came into operation through amendments included in the Tax Administration Act (TAACT) which came into effect on 1 October 2012.
The specific amendment read as follows:
‘‘(iii) a vendor registered with the Commissioner to submit returns [and payments] electronically [(other than by means of a debit order), must furnish the return] is deemed to have made payment within the period contemplated in subsection (1) [and make] if the vendor makes full payment of the amount of tax within the period ending on the last business day of the month during which that twenty-fifth day falls; ([ ] means deletion and underlining means inclusions)
The deletion of the words “must furnish a return” seems to have the effect that returns submitted via e-filing must now be submitted by the 25th of the month."
It is uncertain at this stage whether this amendment was intentional or just a general oversight by the legislature. Adding to the confusion is that the SARS short guide to the TAACT does not mention this significant amendment. Even SARS’ website, under benefits of e-filing, still states “e-filers are also given more time to make their submissions and payments”.
Taxpayers would, at the very least, have expected SARS to notify them, either by e-filing or a general notice on SARS’ website, , about the change. As a result of this amendment, vendors now have less time to obtain the relevant financial information to complete and submit their VAT returns. This could lead to an increase in
human error and the unfortunate possibility of penalties and interest being levied by SARS.
Taxpayers put processes in place immediately to ensure that they submit their VAT returns, which are due from 1 October 2012, by the due date now being 25 October.
Take note of the changes and don't get caught off guard.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Website : www.stevenmorris.co.za
Monday, 22 October 2012
Cycling's governing body gives Lance Armstrong life ban
Breaking News
FT.com !!
Lance takes the fall for the Cycling sport !!
I feel he did so much for this sport.
"Cycling's governing body gives Lance Armstrong life ban
Cycling’s governing body has banned Lance Armstrong from the sport for life and stripped him of his seven Tour de France titles, saying the American had “no place in cycling”.
Union Cycliste Internationale announced at a press conference in Geneva that it was endorsing the report of the US Anti-Dopiong Agency, which implicated Mr Armstrong in an organised doping ring that encouraged the use of banned substances over several years.
Pat McQuaid, president of the UCI, said this was “a landmark day for cycling”, but insisted that the sport had a future.
He talked about “the painful process of confronting its past”, adding the governing body, which is under pressure to explain why it failed to prevent doping scandal, had nothing to hide. It would hold a special meeting to discuss the USADA report and look at measures to prevent a repeat of the scandal."
FT.com !!
Lance takes the fall for the Cycling sport !!
I feel he did so much for this sport.
"Cycling's governing body gives Lance Armstrong life ban
Cycling’s governing body has banned Lance Armstrong from the sport for life and stripped him of his seven Tour de France titles, saying the American had “no place in cycling”.
Union Cycliste Internationale announced at a press conference in Geneva that it was endorsing the report of the US Anti-Dopiong Agency, which implicated Mr Armstrong in an organised doping ring that encouraged the use of banned substances over several years.
Pat McQuaid, president of the UCI, said this was “a landmark day for cycling”, but insisted that the sport had a future.
He talked about “the painful process of confronting its past”, adding the governing body, which is under pressure to explain why it failed to prevent doping scandal, had nothing to hide. It would hold a special meeting to discuss the USADA report and look at measures to prevent a repeat of the scandal."
Friday, 19 October 2012
China Growth Suggests Economy on the Mend
REF : Bloomberg Business Week !!
"Has China’s economy bottomed out?
Economists and analysts are posing that question following the Oct. 18 announcement that gross domestic product grew 7.4 percent in the third quarter, from a year earlier, down from 7.6 percent growth in the previous three months. China’s economic growth has started to stabilize, Premier Wen Jiabao said in a recent meeting with heads of Chinese companies, industrial leaders, and local government officials, the Xinhua News Agency reported on Oct. 17. The economy will continue to show “positive changes,” Wen said. He has set a target of 7.5 percent growth for the year.
With continued weakness in Europe and North America, “what we see is a good performance. It augurs well for continued soft landing,” John Quelch, professor of international management and dean of China Europe International Business School in Shanghai, said in a telephone interview after China’s statistics bureau released the latest growth figure.
Contributing to the optimistic sentiment: a slew of positive indicators throughout the economy, suggesting a corner may have been turned, following seven quarters of slowing growth. Industrial production, for example, grew 9.4 percent; fixed asset investment in cities grew 20.5 percent; and retails sales were up 14.2 percent—all ahead of estimates. Exports and money supply also grew faster than expected. “In our view the September data suggest that a bottoming out may be in sight,” Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong, wrote in an Oct. 18 note.
Add Ting Lu and Larry Hu, China economists at Bank of America Merrill Lynch (BAC) in Hong Kong, in an Oct. 18 note: “We are seeing an increasing amount of evidences for green shoots. This evidence comes from a wide range of sectors including transportation, commodity, exports, property market, credit and money data, tourism in Golden Week [China’s week-long October holiday] and restocking by manufacturing companies.”
The good news has lessened pressure on Beijing to take further loosening measures, even as it prepares for a once-in-a-decade leadership transition, beginning at a Party Congress opening on Nov. 8. China’s central bank has left interest rates alone since July, following two cuts to the benchmark rate in one month. That followed three cuts in bank reserve ratio requirements, starting last November.
“As we saw in 2008 in the U.S., one never wants an economic crisis to accompany a leadership transition,” says Quelch, who predicts China is unlikely to take further accommodative steps before the end of the year. “The Chinese economy has been well managed; there won’t be any urgent or significant challenges that new leadership will have to face within the first 90 days.”
But even as these latest numbers have raised hopes, there are still worrying signs in the Chinese economy, particularly in such industries as steel, cement, and autos, now facing overcapacity following several years of hyper-charged investment growth. “Investment outside of real estate and infrastructure—mainstream corporate investment—appears to be losing speed, weighed down by spare capacity and weak profits,” says RBS’s Kuijs.
Still, Kuijs is predicting that China will grow 7.5 percent this year, meeting the official target, and tick up to 7.8 percent in 2013. “This assumes subdued growth globally but no major turmoil and, in China, a continued pro-growth macro stance but no major, game-changing stimulus,” says Kuijs. “The biggest risk to our outlook is still a larger global downturn combined with financial turmoil.”"
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Has China’s economy bottomed out?
Economists and analysts are posing that question following the Oct. 18 announcement that gross domestic product grew 7.4 percent in the third quarter, from a year earlier, down from 7.6 percent growth in the previous three months. China’s economic growth has started to stabilize, Premier Wen Jiabao said in a recent meeting with heads of Chinese companies, industrial leaders, and local government officials, the Xinhua News Agency reported on Oct. 17. The economy will continue to show “positive changes,” Wen said. He has set a target of 7.5 percent growth for the year.
With continued weakness in Europe and North America, “what we see is a good performance. It augurs well for continued soft landing,” John Quelch, professor of international management and dean of China Europe International Business School in Shanghai, said in a telephone interview after China’s statistics bureau released the latest growth figure.
Contributing to the optimistic sentiment: a slew of positive indicators throughout the economy, suggesting a corner may have been turned, following seven quarters of slowing growth. Industrial production, for example, grew 9.4 percent; fixed asset investment in cities grew 20.5 percent; and retails sales were up 14.2 percent—all ahead of estimates. Exports and money supply also grew faster than expected. “In our view the September data suggest that a bottoming out may be in sight,” Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong, wrote in an Oct. 18 note.
Add Ting Lu and Larry Hu, China economists at Bank of America Merrill Lynch (BAC) in Hong Kong, in an Oct. 18 note: “We are seeing an increasing amount of evidences for green shoots. This evidence comes from a wide range of sectors including transportation, commodity, exports, property market, credit and money data, tourism in Golden Week [China’s week-long October holiday] and restocking by manufacturing companies.”
The good news has lessened pressure on Beijing to take further loosening measures, even as it prepares for a once-in-a-decade leadership transition, beginning at a Party Congress opening on Nov. 8. China’s central bank has left interest rates alone since July, following two cuts to the benchmark rate in one month. That followed three cuts in bank reserve ratio requirements, starting last November.
“As we saw in 2008 in the U.S., one never wants an economic crisis to accompany a leadership transition,” says Quelch, who predicts China is unlikely to take further accommodative steps before the end of the year. “The Chinese economy has been well managed; there won’t be any urgent or significant challenges that new leadership will have to face within the first 90 days.”
But even as these latest numbers have raised hopes, there are still worrying signs in the Chinese economy, particularly in such industries as steel, cement, and autos, now facing overcapacity following several years of hyper-charged investment growth. “Investment outside of real estate and infrastructure—mainstream corporate investment—appears to be losing speed, weighed down by spare capacity and weak profits,” says RBS’s Kuijs.
Still, Kuijs is predicting that China will grow 7.5 percent this year, meeting the official target, and tick up to 7.8 percent in 2013. “This assumes subdued growth globally but no major turmoil and, in China, a continued pro-growth macro stance but no major, game-changing stimulus,” says Kuijs. “The biggest risk to our outlook is still a larger global downturn combined with financial turmoil.”"
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Goldman Ex-Employee Says Firm Pushed Europe Bank Options
Oct. 18 (Bloomberg) --
The Saga carries on !!
"Greg Smith, the former Goldman Sachs Group Inc. salesman who publicly accused the firm of ripping off its clients, was denied a raise and a promotion in the weeks before he resigned in March, documents provided by Goldman show.
Smith, 33, told one of his managers in a December 2011 meeting that he expected to earn more than $1 million a year, about double what he was making at the time as an executive director in London, according to a summary of Goldman Sachs’s investigation into Smith’s claims. He also said in the meeting that he wasn’t advancing up the corporate ladder fast enough and expected to win the promotion to managing director he had repeatedly stated as a goal in self-evaluations.
His bosses were incredulous. New York-based Goldman Sachs, the fifth-largest U.S. bank, was about to book its second-lowest profit in a decade and that year had eliminated almost a tenth of its workforce -- 3,400 jobs. The equity-derivatives desk Smith worked for in London had been told that compensation would be down “significantly,” according to the firm’s summary.
“Greg Smith off the charts unrealistic, thinks he shld [sic] trade at multiples,” one of Smith’s managers wrote in a January 2012 internal e-mail after informing him that his raise request and demand for promotion had been turned down.
‘Moral Fiber’
Two months later, Smith made one of the most public exits in Wall Street history, announcing his resignation in a scathing op-ed in the New York Times entitled “Why I Am Leaving Goldman Sachs.” He called the environment at the firm “toxic and destructive,” said senior staff referred to clients by the derogatory term “muppets” and blamed Chairman and Chief Executive Officer Lloyd Blankfein and President Gary Cohn for “a decline in the firm’s moral fiber.”
Smith has since documented his views and experiences in a 276-page book, “Why I Left Goldman Sachs.” Published by Grand Central, it’ll be available for purchase Oct. 22.
Seeking better compensation is “the American way,” according to John Farrell, JPMorgan Chase & Co.’s former human- resources chief. “I don’t think there’s anything wrong with trying to earn more and be promoted.” He added that any writing by former employees about their old workplaces should be taken “with a grain of salt.”
Blankfein Mission
The sudden and public nature of the departure caught Goldman Sachs off-guard. Smith was one of 13,000 vice presidents. Blankfein and Cohn had no idea who Smith was or why he decided to go public with his resignation, according to two people familiar with their thinking at the time.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the Times on March 14.
That day, Blankfein, 58, set in motion a soul-searching mission that would become a months-long investigation into Smith’s allegations. According to two people close to the CEO, he indicated he and the board wanted to know why Goldman Sachs’s radar failed to detect Smith’s dissatisfaction.
Among Wall Street firms, Goldman Sachs was dragged most publicly through Congressional inquiries over its role in the financial crisis, and it paid $550 million in a settlement with regulators. Now Goldman Sachs would have to defend its conduct again.
Jake Siewert, a Goldman Sachs spokesman, says all of the firm’s attempts to talk to Smith after his resignation were rebuffed. Jimmy Franco, director of publicity at Grand Central, said in an e-mail that Smith would not be making statements at this time.
Forensic Specialists
The firm hired forensic specialists to troll through e- mails and taped conversations, according to four people with direct knowledge of the probe. It also conducted interviews with 125 employees who had contact with Smith, going as far back as his summer internship in 2000.
The results of that investigation were shared with Goldman Sachs’s board and regulators including the Washington-based Financial Industry Regulatory Authority and the U.K.’s Financial Services Authority, according to one of the people familiar with the probe.
A nine-page summary was provided to Bloomberg News. While it includes excerpts from Smith’s self-evaluations and quotes directly from internal e-mails, much is excluded. The summary does not, for example, show the context in which some of Smith’s remarks were made, leaving open the possibility of misinterpretation.
Still, the documents paint a picture of Smith that is at odds with the image he fashioned for himself in the op-ed: an altruistic kid from Johannesburg, out of place in the rapacious, wealth-obsessed world of American high finance.
Stanford Grad
Smith wrote in the Times that Goldman Sachs “has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”
Goldman Sachs’s document shows Smith as a striver, eager to make more money and frustrated when he didn’t advance. In his 2010 self-evaluation he made clear he wanted to stay at Goldman Sachs, saying, “it is my goal to get promoted to managing director.”
“It creates some doubt, some question about his credibility and whether in fact he had an axe to grind,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics.
Smith, a graduate of Stanford University in Palo Alto, California, joined Goldman Sachs full-time in 2001 as an analyst in the equities division in New York. He was promoted to associate in 2003 and then vice president in 2006. He transferred to London in 2011 to take a position supporting the desk that sells U.S. equity derivatives to European clients.
Falling Behind
By 2012, Smith had fallen behind his peers. According to Goldman Sachs, he was the lowest-paid among the VPs who started in the same training class. A third of his classmates had become managing directors.
In the op-ed, Smith said he’d advised some of the world’s largest money managers and that his “clients have a total asset base of more than a trillion dollars.” According to Goldman Sachs’s investigation, that description is a stretch.
While Smith did work for some of the firm’s biggest clients, including AQR Capital Management LLC, Government of Singapore Investment Corp., T. Rowe Price Group Inc., Vanguard Group Inc. and the asset-management units of Morgan Stanley and Deutsche Bank AG, he had no direct responsibility for those accounts and didn’t perform an advisory role.
Promotion Denied
At the same time, Smith had, in Goldman Sachs’s assessment, an overgenerous view of his own performance. The documents say he placed in the bottom half of the firm in regular evaluations from 2007, while giving himself scores that were “significantly above” those he received from others.
When his request for a promotion to managing director was denied in January, Smith asked to be moved to a different sales desk. The investigation report says he wanted to generate revenue and cover clients, a step up from the support role he was providing as a marketer and one with a better shot at a bigger paycheck.
Goldman Sachs put a different managing director in charge of Smith as it considered giving him a sales job. The report says he “found the transition difficult” and considered the female MD who ran the desk a peer and not his boss.
‘Vague Concerns’
In February, Smith told a colleague he was concerned that the move he wanted to a different sales desk might not happen, according to Goldman Sachs’s account. A month later, he was gone.
The investigation exonerated Smith’s managers, saying they had not missed warning signs. When he had formal opportunities to raise concerns or criticize individuals, such as performance reviews, he gave his colleagues top marks.
According to Goldman Sachs, Smith never let on that he was disenchanted or resentful until March 12, two days before he resigned. At a regular meeting with a Goldman partner he “expressed vague concerns” about the firm’s direction and complained that its focus was on making money, not serving clients.
Goldman Sachs executives now say they believe Smith had submitted his op-ed by the time that meeting was held.
Taken together, the materials provided by Goldman Sachs challenge the storyline Smith has presented in his op-ed and excerpts from his forthcoming book. Only Smith knows if his public denunciation of the firm was motivated by loathing for what it had become, or instead resentment upon realizing that his career was stuck and a promotion unlikely.
What Smith didn’t know: His future at Goldman Sachs might have been short-lived anyway. The investigation report says Smith’s managers “discussed the possibility of Greg’s departure from the firm.”
To contact the reporters on this story: Erik Schatzker in New York at eschatzker@bloomberg.net ; Stephanie Ruhle in New York at sruhle2@bloomberg.net .
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
The Saga carries on !!
"Greg Smith, the former Goldman Sachs Group Inc. salesman who publicly accused the firm of ripping off its clients, was denied a raise and a promotion in the weeks before he resigned in March, documents provided by Goldman show.
Smith, 33, told one of his managers in a December 2011 meeting that he expected to earn more than $1 million a year, about double what he was making at the time as an executive director in London, according to a summary of Goldman Sachs’s investigation into Smith’s claims. He also said in the meeting that he wasn’t advancing up the corporate ladder fast enough and expected to win the promotion to managing director he had repeatedly stated as a goal in self-evaluations.
His bosses were incredulous. New York-based Goldman Sachs, the fifth-largest U.S. bank, was about to book its second-lowest profit in a decade and that year had eliminated almost a tenth of its workforce -- 3,400 jobs. The equity-derivatives desk Smith worked for in London had been told that compensation would be down “significantly,” according to the firm’s summary.
“Greg Smith off the charts unrealistic, thinks he shld [sic] trade at multiples,” one of Smith’s managers wrote in a January 2012 internal e-mail after informing him that his raise request and demand for promotion had been turned down.
‘Moral Fiber’
Two months later, Smith made one of the most public exits in Wall Street history, announcing his resignation in a scathing op-ed in the New York Times entitled “Why I Am Leaving Goldman Sachs.” He called the environment at the firm “toxic and destructive,” said senior staff referred to clients by the derogatory term “muppets” and blamed Chairman and Chief Executive Officer Lloyd Blankfein and President Gary Cohn for “a decline in the firm’s moral fiber.”
Smith has since documented his views and experiences in a 276-page book, “Why I Left Goldman Sachs.” Published by Grand Central, it’ll be available for purchase Oct. 22.
Seeking better compensation is “the American way,” according to John Farrell, JPMorgan Chase & Co.’s former human- resources chief. “I don’t think there’s anything wrong with trying to earn more and be promoted.” He added that any writing by former employees about their old workplaces should be taken “with a grain of salt.”
Blankfein Mission
The sudden and public nature of the departure caught Goldman Sachs off-guard. Smith was one of 13,000 vice presidents. Blankfein and Cohn had no idea who Smith was or why he decided to go public with his resignation, according to two people familiar with their thinking at the time.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the Times on March 14.
That day, Blankfein, 58, set in motion a soul-searching mission that would become a months-long investigation into Smith’s allegations. According to two people close to the CEO, he indicated he and the board wanted to know why Goldman Sachs’s radar failed to detect Smith’s dissatisfaction.
Among Wall Street firms, Goldman Sachs was dragged most publicly through Congressional inquiries over its role in the financial crisis, and it paid $550 million in a settlement with regulators. Now Goldman Sachs would have to defend its conduct again.
Jake Siewert, a Goldman Sachs spokesman, says all of the firm’s attempts to talk to Smith after his resignation were rebuffed. Jimmy Franco, director of publicity at Grand Central, said in an e-mail that Smith would not be making statements at this time.
Forensic Specialists
The firm hired forensic specialists to troll through e- mails and taped conversations, according to four people with direct knowledge of the probe. It also conducted interviews with 125 employees who had contact with Smith, going as far back as his summer internship in 2000.
The results of that investigation were shared with Goldman Sachs’s board and regulators including the Washington-based Financial Industry Regulatory Authority and the U.K.’s Financial Services Authority, according to one of the people familiar with the probe.
A nine-page summary was provided to Bloomberg News. While it includes excerpts from Smith’s self-evaluations and quotes directly from internal e-mails, much is excluded. The summary does not, for example, show the context in which some of Smith’s remarks were made, leaving open the possibility of misinterpretation.
Still, the documents paint a picture of Smith that is at odds with the image he fashioned for himself in the op-ed: an altruistic kid from Johannesburg, out of place in the rapacious, wealth-obsessed world of American high finance.
Stanford Grad
Smith wrote in the Times that Goldman Sachs “has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”
Goldman Sachs’s document shows Smith as a striver, eager to make more money and frustrated when he didn’t advance. In his 2010 self-evaluation he made clear he wanted to stay at Goldman Sachs, saying, “it is my goal to get promoted to managing director.”
“It creates some doubt, some question about his credibility and whether in fact he had an axe to grind,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics.
Smith, a graduate of Stanford University in Palo Alto, California, joined Goldman Sachs full-time in 2001 as an analyst in the equities division in New York. He was promoted to associate in 2003 and then vice president in 2006. He transferred to London in 2011 to take a position supporting the desk that sells U.S. equity derivatives to European clients.
Falling Behind
By 2012, Smith had fallen behind his peers. According to Goldman Sachs, he was the lowest-paid among the VPs who started in the same training class. A third of his classmates had become managing directors.
In the op-ed, Smith said he’d advised some of the world’s largest money managers and that his “clients have a total asset base of more than a trillion dollars.” According to Goldman Sachs’s investigation, that description is a stretch.
While Smith did work for some of the firm’s biggest clients, including AQR Capital Management LLC, Government of Singapore Investment Corp., T. Rowe Price Group Inc., Vanguard Group Inc. and the asset-management units of Morgan Stanley and Deutsche Bank AG, he had no direct responsibility for those accounts and didn’t perform an advisory role.
Promotion Denied
At the same time, Smith had, in Goldman Sachs’s assessment, an overgenerous view of his own performance. The documents say he placed in the bottom half of the firm in regular evaluations from 2007, while giving himself scores that were “significantly above” those he received from others.
When his request for a promotion to managing director was denied in January, Smith asked to be moved to a different sales desk. The investigation report says he wanted to generate revenue and cover clients, a step up from the support role he was providing as a marketer and one with a better shot at a bigger paycheck.
Goldman Sachs put a different managing director in charge of Smith as it considered giving him a sales job. The report says he “found the transition difficult” and considered the female MD who ran the desk a peer and not his boss.
‘Vague Concerns’
In February, Smith told a colleague he was concerned that the move he wanted to a different sales desk might not happen, according to Goldman Sachs’s account. A month later, he was gone.
The investigation exonerated Smith’s managers, saying they had not missed warning signs. When he had formal opportunities to raise concerns or criticize individuals, such as performance reviews, he gave his colleagues top marks.
According to Goldman Sachs, Smith never let on that he was disenchanted or resentful until March 12, two days before he resigned. At a regular meeting with a Goldman partner he “expressed vague concerns” about the firm’s direction and complained that its focus was on making money, not serving clients.
Goldman Sachs executives now say they believe Smith had submitted his op-ed by the time that meeting was held.
Taken together, the materials provided by Goldman Sachs challenge the storyline Smith has presented in his op-ed and excerpts from his forthcoming book. Only Smith knows if his public denunciation of the firm was motivated by loathing for what it had become, or instead resentment upon realizing that his career was stuck and a promotion unlikely.
What Smith didn’t know: His future at Goldman Sachs might have been short-lived anyway. The investigation report says Smith’s managers “discussed the possibility of Greg’s departure from the firm.”
To contact the reporters on this story: Erik Schatzker in New York at eschatzker@bloomberg.net ; Stephanie Ruhle in New York at sruhle2@bloomberg.net .
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Monday, 15 October 2012
Have you put your portfolio on hold?
Great Article from BLACK ROCK !!
RETHINK THE COST OF CASH
Cash is an essential part of every portfolio. But holding cash and putting your portfolio "on hold" is not a long-term investment strategy, since cash holdings historically have produced negative returns after considering the effects of taxes and inflation.
Cash Averages a Negative Return After Taxes and Inflation1
"So what do I do with my money?"
Cash is an essential part of everyone’s finances and plays an important role in saving and investing. In terms of investment risk, cash is also probably the most conservative option. But safety and comfort come at a price—the probability you will not meet your long-term investment goals. While today’s market conditions understandably produce anxiety, investors with large amounts of cash should take a step back, assess their goals, and work with their financial advisors to make their money work harder for them. Ask your financial advisor about how to build a balanced, diverse portfolio designed for growth even as markets stagnate.
Watch this video, it is so True but get advise before taking any steps !!
http://www.youtube.com/watch?feature=player_embedded&v=KBJ3Ne-BXf8
Steven
Go to the Black Rock Website !!
Interesting ideas :
http://t.co/jO0kDE77
RETHINK THE COST OF CASH
Cash is an essential part of every portfolio. But holding cash and putting your portfolio "on hold" is not a long-term investment strategy, since cash holdings historically have produced negative returns after considering the effects of taxes and inflation.
Cash Averages a Negative Return After Taxes and Inflation1
"So what do I do with my money?"
Cash is an essential part of everyone’s finances and plays an important role in saving and investing. In terms of investment risk, cash is also probably the most conservative option. But safety and comfort come at a price—the probability you will not meet your long-term investment goals. While today’s market conditions understandably produce anxiety, investors with large amounts of cash should take a step back, assess their goals, and work with their financial advisors to make their money work harder for them. Ask your financial advisor about how to build a balanced, diverse portfolio designed for growth even as markets stagnate.
Watch this video, it is so True but get advise before taking any steps !!
http://www.youtube.com/watch?feature=player_embedded&v=KBJ3Ne-BXf8
Steven
Go to the Black Rock Website !!
Interesting ideas :
http://t.co/jO0kDE77
Thursday, 11 October 2012
Goldman Sachs’s Cohn Sees Pain When Fed Ends Quantitative Easing
Oct. 11 (Bloomberg) --
"The Federal Reserve will struggle to end its quantitative easing program, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer.
“I understand what they’re trying to do and I will tell you this, this is going to be difficult to stop or to exit,” Cohn told Bloomberg Television today in Tokyo. “At the end of this -- there will be an end to quantitative easing -- we will have to go through the pains of stopping quantitative easing.”
The Fed last month announced its third round of large-scale asset purchases since 2008, with no limit this time on the ultimate amount it would buy or the duration of the program. Fed Chairman Ben S. Bernanke says stimulus will be expanded until the Fed sees “sustained improvement” in the labor market and that the strategy works in part by boosting the prices of assets such as equities.
“We know the Fed wants to create job growth,” Cohn said. “We know that the Fed wants to create asset appreciation.”
Fed Vice Chairman Janet Yellen said in Tokyo yesterday that policy makers have a plan to normalize monetary policy when the time comes. After it begins to raise its benchmark interest rate from near zero, the U.S. central bank has indicated it wants to sell many of the assets on its balance sheet in a “very gradual and predictable way,” she said.
Normalizing Policy
“We know that this will be a challenging feat to normalize monetary policy,” she said, noting bank balance sheets may be vulnerable to any sharp increase in rates.
The Fed isn’t alone in easing monetary policy, with the European Central Bank and Bank of Japan both adding to stimulus in the past three months. The ECB cut its benchmark interest rate to a record low of 0.75 percent and pledged to buy the bonds of governments that agree to austerity conditions. The Bank of Japan last month boosted its asset-purchase fund by 10 trillion yen and abandoned a floor rate for bond purchases.
“They are all kind of doing the same thing so it has less impact than if other players were on the sideline,” said Cohn.
While he praised ECB President Mario Draghi for doing a “spectacular job” and removing “a lot of risk off the table,” Cohn said the ECB can’t “deal with the real long-term problem of Europe, which is economic growth.” Draghi worked at Goldman Sachs from 2002 to 2005.
Cohn echoed his June view that Europe needs a “moment” like Lehman Brothers Holdings Inc.’s 2008 bankruptcy to solve its debt stress.
“I’m not sure what the moment will be, but I do believe there’s going to be a moment when everyone takes a deep breath and says ‘we’ve got to fix this situation,’” Cohn said.
With the annual meetings of the International Monetary Fund under way in Tokyo, Cohn said the world economy is in a tough place and lacks leadership. Goldman Sachs’ business model is correlated to economic growth, he said. "
To contact the reporters on this story: Sara Eisen in Tokyo at seisen2@bloomberg.net ; Simon Kennedy in Tokyo at skennedy4@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"The Federal Reserve will struggle to end its quantitative easing program, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer.
“I understand what they’re trying to do and I will tell you this, this is going to be difficult to stop or to exit,” Cohn told Bloomberg Television today in Tokyo. “At the end of this -- there will be an end to quantitative easing -- we will have to go through the pains of stopping quantitative easing.”
The Fed last month announced its third round of large-scale asset purchases since 2008, with no limit this time on the ultimate amount it would buy or the duration of the program. Fed Chairman Ben S. Bernanke says stimulus will be expanded until the Fed sees “sustained improvement” in the labor market and that the strategy works in part by boosting the prices of assets such as equities.
“We know the Fed wants to create job growth,” Cohn said. “We know that the Fed wants to create asset appreciation.”
Fed Vice Chairman Janet Yellen said in Tokyo yesterday that policy makers have a plan to normalize monetary policy when the time comes. After it begins to raise its benchmark interest rate from near zero, the U.S. central bank has indicated it wants to sell many of the assets on its balance sheet in a “very gradual and predictable way,” she said.
Normalizing Policy
“We know that this will be a challenging feat to normalize monetary policy,” she said, noting bank balance sheets may be vulnerable to any sharp increase in rates.
The Fed isn’t alone in easing monetary policy, with the European Central Bank and Bank of Japan both adding to stimulus in the past three months. The ECB cut its benchmark interest rate to a record low of 0.75 percent and pledged to buy the bonds of governments that agree to austerity conditions. The Bank of Japan last month boosted its asset-purchase fund by 10 trillion yen and abandoned a floor rate for bond purchases.
“They are all kind of doing the same thing so it has less impact than if other players were on the sideline,” said Cohn.
While he praised ECB President Mario Draghi for doing a “spectacular job” and removing “a lot of risk off the table,” Cohn said the ECB can’t “deal with the real long-term problem of Europe, which is economic growth.” Draghi worked at Goldman Sachs from 2002 to 2005.
Cohn echoed his June view that Europe needs a “moment” like Lehman Brothers Holdings Inc.’s 2008 bankruptcy to solve its debt stress.
“I’m not sure what the moment will be, but I do believe there’s going to be a moment when everyone takes a deep breath and says ‘we’ve got to fix this situation,’” Cohn said.
With the annual meetings of the International Monetary Fund under way in Tokyo, Cohn said the world economy is in a tough place and lacks leadership. Goldman Sachs’ business model is correlated to economic growth, he said. "
To contact the reporters on this story: Sara Eisen in Tokyo at seisen2@bloomberg.net ; Simon Kennedy in Tokyo at skennedy4@bloomberg.net
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Wednesday, 10 October 2012
Asian Summary 10 October 2012
"Asian stocks decline overnight (MSCI Asia Pacific falling 0.8%) after Chinese growth and Europe's debt crisis hurt profits. Alcoa Inc said Chinese growth will cut global demand for Aluminium, while Japanese car sales in China slumped on a territorial dispute. A report later today may show that French and Italian industrial production fell in August. The Dow closed down 0.13% and the S&P off 0.21% after SA futures close."
Asian Stocks Drop With Oil on China, Europe Concern; Won Weakens
Oct. 10 (Bloomberg) --
"Asian stocks fell for a third day, credit risk in the region rose to a one-week high and oil declined as slowing Chinese growth and Europe’s debt crisis hurt corporate profits. The won retreated from an 11-month high.
The MSCI Asia Pacific Index slipped 0.8 percent at 12:11 p.m. in Tokyo, led by Japanese shares. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. Bond risk in the Asia-Pacific region rose to the highest level in at least a week. South Korea’s won weakened 0.4 percent to 1,114.80 per dollar. Commodities as measured by the S&P GSCI Index decreased 0.3 percent as oil fell 0.5 percent. Markets in Taiwan are closed.
Alcoa Inc. said slowing Chinese growth will cut global demand for aluminum, while Japanese car sales in China plunged on a territorial dispute. Data today may show French and Italian industrial production fell in August as Europe’s debt crisis hampers growth. Spain’s Prime Minister Mariano Rajoy is struggling to contain the country’s deficit as he meets with French President Francois Hollande in Paris today.
“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run. So, it won’t be surprising if they go through some correction.”
More than three stocks fell for every one that climbed on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and the broader Topix Index slumped at least 1.4 percent. Toyota Motor Corp. sank 1.8 percent after reporting the biggest drop in China sales since at least 2008. Data today may show Chinese passenger-vehicle sales rose at the slowest pace in eight months.
Alcoa, S&P
The Shanghai Composite Index dropped 0.3 percent, led by materials producers, and Hong Kong’s Hang Seng Index slipped 0.5 percent. Aluminum Corp. of China Ltd., the nation’s biggest producer, declined at least 0.6 percent in Hong Kong and Shanghai. Alcoa, the first company in the Dow Jones Industrial Average to report results, posted earnings and sales that beat analysts’ estimates.
Third-quarter profits and sales for the S&P 500 probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Five years after the S&P 500 began its decline from a record, per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan added 3.5 basis points to 134, Credit Agricole SA prices show. The gauge is set for its highest close since Oct. 2, according to data provider CMA.
Yuan, Won
China’s yuan weakened for a third day, the longest run of declines since August, on heightened concern the economy is losing momentum. The country’s money-market rate dropped for a second day on speculation cash supply will increase as the central bank adds funds to the financial system. The People’s Bank of China injected a total of 265 billion yuan ($42 billion) via reverse repos yesterday, the second-biggest amount for a single day since Bloomberg started compiling the data in 2004.
The won, which touched 1,109.57 on Oct. 8, the strongest level since Nov. 1, 2011, retreated as 13 out of 16 economists in a Bloomberg survey forecast interest rates will be cut at a central bank policy meeting tomorrow.
The peso fell 0.2 percent as data today showed Philippine exports declined in August for the first time in five months. Malaysia’s ringgit weakened 0.2 percent before a report tomorrow that economists predict will show industrial output fell for the first time in a year.
Euro Weakens
The euro weakened against most of its major counterparts, losing 0.3 percent against the dollar and yen. German Chancellor Angela Merkel urged Greece yesterday to maintain austerity while reiterating her desire to keep the country in the euro. Spain’s economy minister Luis de Guindos said the nation will decide on the “sensitive” issue of a full bailout, taking into account the impact for the whole euro area.
The euro was at $1.2845, after earlier touching $1.2836 the lowest since Oct. 1. The common currency declined to 100.44 yen, also the least since Oct. 1, before trading at 100.53. The Dollar Index, a gauge against six major peers, rose 0.2 percent.
Crude in New York declined to $91.91 a barrel after climbing to the highest close in a week yesterday on increased tension in the Middle East. Brent oil slipped 0.5 percent to $113.98 a barrel. The spread between the two contracts reached $22.49 on Oct. 8, the widest since October 2011.
London-traded Brent prices are “still high” and Saudi Arabia will work toward “moderating” them, Oil Minister Ali al-Naimi said yesterday. U.S. crude inventories probably rose by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Department report tomorrow.
Aluminum for three-month delivery on the London Metal Exchange decreased 0.5 percent to $2,043 a metric ton. Alcoa, the largest U.S. aluminum producer, said global demand for the metal will climb by 6 percent this year, paring a July projection of 7 percent.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Asian stocks fell for a third day, credit risk in the region rose to a one-week high and oil declined as slowing Chinese growth and Europe’s debt crisis hurt corporate profits. The won retreated from an 11-month high.
The MSCI Asia Pacific Index slipped 0.8 percent at 12:11 p.m. in Tokyo, led by Japanese shares. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. Bond risk in the Asia-Pacific region rose to the highest level in at least a week. South Korea’s won weakened 0.4 percent to 1,114.80 per dollar. Commodities as measured by the S&P GSCI Index decreased 0.3 percent as oil fell 0.5 percent. Markets in Taiwan are closed.
Alcoa Inc. said slowing Chinese growth will cut global demand for aluminum, while Japanese car sales in China plunged on a territorial dispute. Data today may show French and Italian industrial production fell in August as Europe’s debt crisis hampers growth. Spain’s Prime Minister Mariano Rajoy is struggling to contain the country’s deficit as he meets with French President Francois Hollande in Paris today.
“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run. So, it won’t be surprising if they go through some correction.”
More than three stocks fell for every one that climbed on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and the broader Topix Index slumped at least 1.4 percent. Toyota Motor Corp. sank 1.8 percent after reporting the biggest drop in China sales since at least 2008. Data today may show Chinese passenger-vehicle sales rose at the slowest pace in eight months.
Alcoa, S&P
The Shanghai Composite Index dropped 0.3 percent, led by materials producers, and Hong Kong’s Hang Seng Index slipped 0.5 percent. Aluminum Corp. of China Ltd., the nation’s biggest producer, declined at least 0.6 percent in Hong Kong and Shanghai. Alcoa, the first company in the Dow Jones Industrial Average to report results, posted earnings and sales that beat analysts’ estimates.
Third-quarter profits and sales for the S&P 500 probably fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Five years after the S&P 500 began its decline from a record, per-share earnings may have dropped 1.7 percent on average after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan added 3.5 basis points to 134, Credit Agricole SA prices show. The gauge is set for its highest close since Oct. 2, according to data provider CMA.
Yuan, Won
China’s yuan weakened for a third day, the longest run of declines since August, on heightened concern the economy is losing momentum. The country’s money-market rate dropped for a second day on speculation cash supply will increase as the central bank adds funds to the financial system. The People’s Bank of China injected a total of 265 billion yuan ($42 billion) via reverse repos yesterday, the second-biggest amount for a single day since Bloomberg started compiling the data in 2004.
The won, which touched 1,109.57 on Oct. 8, the strongest level since Nov. 1, 2011, retreated as 13 out of 16 economists in a Bloomberg survey forecast interest rates will be cut at a central bank policy meeting tomorrow.
The peso fell 0.2 percent as data today showed Philippine exports declined in August for the first time in five months. Malaysia’s ringgit weakened 0.2 percent before a report tomorrow that economists predict will show industrial output fell for the first time in a year.
Euro Weakens
The euro weakened against most of its major counterparts, losing 0.3 percent against the dollar and yen. German Chancellor Angela Merkel urged Greece yesterday to maintain austerity while reiterating her desire to keep the country in the euro. Spain’s economy minister Luis de Guindos said the nation will decide on the “sensitive” issue of a full bailout, taking into account the impact for the whole euro area.
The euro was at $1.2845, after earlier touching $1.2836 the lowest since Oct. 1. The common currency declined to 100.44 yen, also the least since Oct. 1, before trading at 100.53. The Dollar Index, a gauge against six major peers, rose 0.2 percent.
Crude in New York declined to $91.91 a barrel after climbing to the highest close in a week yesterday on increased tension in the Middle East. Brent oil slipped 0.5 percent to $113.98 a barrel. The spread between the two contracts reached $22.49 on Oct. 8, the widest since October 2011.
London-traded Brent prices are “still high” and Saudi Arabia will work toward “moderating” them, Oil Minister Ali al-Naimi said yesterday. U.S. crude inventories probably rose by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Department report tomorrow.
Aluminum for three-month delivery on the London Metal Exchange decreased 0.5 percent to $2,043 a metric ton. Alcoa, the largest U.S. aluminum producer, said global demand for the metal will climb by 6 percent this year, paring a July projection of 7 percent.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
Tuesday, 9 October 2012
UIF earnings ceiling increase
Increase in UIF ceiling 2012 from 1 October 2012.
The maximum earnings ceiling used for the calculation of UIF contributions has been increased from
R149 736 to R178 464 per annum with effect from 1st October 2012.
This makes the new earnings ceiling for the calculation of UIF as follows:
Period Ceiling :
From 1 October 2012 : Year R178 464
(Before 1/10/2012 : R149 736)
From 1 October 2012 : Monthly R14 872
(Before 1/10/2012 : R12 478)
From 1 October 2012 : Fortnight R6 864
(Before 1/10/2012 : R6 239)
Week R3 432
(Before 1/10/2012 : R3 120)
This translates to max UIF to be deducted monthly as follows:
1% of the income for UIF is paid by the employee & 1% is paid by the employer.
This is based on your Monthly, fortnightly, weekly salary from the first R1 up to the Capp.
The Max monthly salary of R14 872 Max UIF is deducted on this amount if the salary is higher it is capped at this amount for UIF.
Example: On Max - Monthly Salary of R14 872
Employee : R148.72 (OLD : R124.78)(MAX : R12 478)
Employer : R148.72 (OLD : R124.78)(MAX : R12 478)
Total monthly : R297.44 (OLD : R249.56)(MAX : R12 478)
Do yourself a favour - do what you have to right now to make sure this change is implimented in your October payroll.
This is just the sort of relatively "small change" problem for small business owners to clean up down the line if you don't do it right when you're supposed to. If you need any help or any queries regarding this issue give me a call/e-mail
The maximum earnings ceiling used for the calculation of UIF contributions has been increased from
R149 736 to R178 464 per annum with effect from 1st October 2012.
This makes the new earnings ceiling for the calculation of UIF as follows:
Period Ceiling :
From 1 October 2012 : Year R178 464
(Before 1/10/2012 : R149 736)
From 1 October 2012 : Monthly R14 872
(Before 1/10/2012 : R12 478)
From 1 October 2012 : Fortnight R6 864
(Before 1/10/2012 : R6 239)
Week R3 432
(Before 1/10/2012 : R3 120)
This translates to max UIF to be deducted monthly as follows:
1% of the income for UIF is paid by the employee & 1% is paid by the employer.
This is based on your Monthly, fortnightly, weekly salary from the first R1 up to the Capp.
The Max monthly salary of R14 872 Max UIF is deducted on this amount if the salary is higher it is capped at this amount for UIF.
Example: On Max - Monthly Salary of R14 872
Employee : R148.72 (OLD : R124.78)(MAX : R12 478)
Employer : R148.72 (OLD : R124.78)(MAX : R12 478)
Total monthly : R297.44 (OLD : R249.56)(MAX : R12 478)
Do yourself a favour - do what you have to right now to make sure this change is implimented in your October payroll.
This is just the sort of relatively "small change" problem for small business owners to clean up down the line if you don't do it right when you're supposed to. If you need any help or any queries regarding this issue give me a call/e-mail
Tuesday, 2 October 2012
Pimco Investment Outlook for October 2012
REF : PIMCO Investment Outlook
A good read I came across from my brokers enjoy :
October 2012
"Damages
William H. Gross
The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.
I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”
My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.
For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.
The ring of fire
In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?
Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.
I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.
And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.
As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
Investment conclusions
So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.
William H. Gross
Managing Director "
A good read I came across from my brokers enjoy :
October 2012
"Damages
William H. Gross
The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.
I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”
My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.
For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.
The ring of fire
In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?
Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.
I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.
And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.
As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
Investment conclusions
So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.
William H. Gross
Managing Director "
Monday, 1 October 2012
Xstrata Recommends Glencore Bid After Winning Assurance on Board
Oct. 1 (Bloomberg) --
"Xstrata Plc’s board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.
“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata Chairman John Bond said in a statement today. This will “enable shareholders to vote in line with their convictions” without influencing their voting on the Glencore combination, he said.
Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its Chief Executive Officer Mick Davis.
Sweetened Bid
The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.” As little as 16.5 percent of investors can prevent the merger because Glencore can’t vote its 34 percent stake.
The combination of the two commodity giants, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc mines, creating the fourth-largest mining company.
A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.
To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Website: www.stevenmorris.co.za
"Xstrata Plc’s board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.
“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata Chairman John Bond said in a statement today. This will “enable shareholders to vote in line with their convictions” without influencing their voting on the Glencore combination, he said.
Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its Chief Executive Officer Mick Davis.
Sweetened Bid
The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.” As little as 16.5 percent of investors can prevent the merger because Glencore can’t vote its 34 percent stake.
The combination of the two commodity giants, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc mines, creating the fourth-largest mining company.
A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.
To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net "
Steven
Steven Morris CA (SA)
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