23rd May 2012: GREXIT Could Be The Blueprint For A Complete Rewire Of The Euro

Quote of the Day:

A stitch in time saves nine

Old English Proverb

Macro Overview

The Cost Of Re-wiring A System

• When we were renovating our new house, we obtained many quotes for many things. One of which was the re-vamping of the electrical circuitry in the house. Much of the lighting was in need of repair and re-design and there was some seriously dodgy stuff going on – like spurring plug sockets off lighting rings etc!
• As it turned out, we needed to lift 80% of the floorboards in the house and the cost was, like, $9,000 for full works. The cost completely stripping out the entire aged (and slightly dodgy) circuitry was $10,000. On top of this we’d get a new distribution box with the latest RCDOs – a device which sorta combines the functionality of an RCD (surge protector) and a fuse (overload protector), which is pretty important when you have a family with small, inquisitive kids running around the house. But more importantly, because the electricians were doing all the work themselves for the entire house, they’d do an official test on the entire circuitry of the house and giving us a certificate to approve it under the (new) UK regulation by the necessary regulatory body.
• It was a no brainer – for the extra 1,000 bucks we just lifted every floorboard in the house and went for a full rewire, so our house is rigged to the highest standard and we knew everything about every circuit in the house (something which came in very useful when we installed solar panels!).
• What am I getting at here? Well, I’ve been thinking about Greece. I’d love to write about something else, like the US or China or even Japan. Yes! Japan! Nothing goes on there but I’m so tired of talking about Europe I’d rather write about paint drying. But, alas, we must, so Greece… where was I?

A Greek Holiday

• Ah yes… Today the finance minister of Luxembourgwas on Bloomberg TV talking very openly about a Greek exit – and very objectively assessing the risks of a bailout rejection by voters. Former Greek Prime Minister Lucas Papademos (remember him?) said that a Greek exit cannot be excluded, even El Erian says that at Greek exit is not possible but “probable”. Yesterday I commented on Pettis’ nonchalant attitude to (in his opinion) the almost inevitable crumbling of the Eurozone – I even hinted at some discussion on possible end-games for the Euro. Let’s start with a scenario I’ve been dreaming up… so here we go…
• Firstly, there is no mechanism for any member state to exit the Euro. As a portfolio manager I’m simply aghast that such a massively risky and complicated challenge was undertaken with no exit strategies of any sort. Still, moving on… no exit strategy and it seems that most of the administrative tasks of engineering an exit are feasible in theory with a bit of creativity and a lot of intestinal fortitude with one exception: the nightmare of achieving the redenomination of all the securities and instruments which reside on the balance sheets of many, many institutions including the banks and even on the balance sheets of individual people!
• But this is not out of the realm of European politicians. The European Council are bad at many things, but bureaucracy and legislation is actually something they are actually quite adept at when they need to be. Remember, Merkel’s grand Treaty Change happened pretty much exactly as I was writing about months before it occurred, but, for such an iconic piece of legislation, it was drafted pretty quickly – it just took them ages to come round to my ways, heheh!
• I think it is possible for the European elite (God bless their souls) to come up with a pretty comprehensive plan which would allow the Greeks to “take a sabbatical” from the Euro or a holiday from their austere oppressors in Northern Europe! This could be achieved while simultaneously predetermining certain conditions for Greek re-entry into the Eurozone orbit. Let’s face it, Europe managed to achieve something much more challenging than this, with 17, seemingly randomly independent economies – I think they can take care of one – even if it feels like a step backwards, psychologically.

Re-wiring The Euro

• But here’s the thing. The markets will react with some severity to a GREXIT and the European politicians, if they’ve learnt anything over the last 4 years (ahem!) need to prepare for this and be prepared to be politically pro-active.
• No sooner than the minute the first Drachma hits the street the market will turn it’ attention to Ireland, Portugal [insert for favourite candidate here]. It may be wise for European politicians to prepare to use Greece as a blueprint for a complete overhaul of the entire Euro model. After all Greek debt has its tentacles in every single banking system of very single European state. The GREXIT will blaze a trail for the rest of Europe as most of the legislative, legal, administrative, political and (importantly) psychological heavy-lifting would have already been achieved with the Greek proto-type model.
• I do not believe that the European public (never mind the politicians) would be willing to throw away half a century of political accomplishment and vote for a complete disintegration of the Euro – where a large number of countries revert back to their national currencies/monetary governance indefinitely. However, GREXIT would give the European Council a blueprint and a testing ground for a complete “re-wire” of the Eurozone monetary circuit.
• Re-wire the system – what does this mean? Well, for example (and let’s just fire any absurd notion that comes to mind here)…  a complete dissection of the Euro into two currencies (a strong, Northern, austere currency and a weak, Southern, profligate currency) or perhaps a Euro-core with a number of satellite Euro-derivatives (i.e. hard-coding a pan-Eurozone exit strategy). This is not completely impractical, given the circumstances. Afterall… figuratively speaking, by slogging through GREXIT have already lifted up 80% of the floorboards so they might as well re-wire the whole house – a stitch in time saves nine.

Market Overview

It’s A Cyclical Old Game

• Well, after Nat Gas and Volatility surged I’ve had to think of something else to talk about (until they correct a little again). I’ve been thinking of the Euro discussion we’ve been having (well, OK, I’ve been having with myself, then). Whatever happens, the future of the Euro is uncertain. The probability of the composition of the Euro changing (i.e. one of more member leaving or a complete overhaul of the currency) is not significant.
• It’s not easy to think about how to invest in this circumstance. For example, shorting the Euro at this level could prove to be very painful even if the Eurozone were to split or disintegrate, the basis of that trade would end up being the sum of those parts which (the market may anticipate to be) worth more than the whole (Euro) in the first place.
• One thing I think we can be quite optimistic about is the potential for Euro volatility. I’m not talking so much about buying Euro volatility per se (although I think the long-dated Euro straddle trade is still relevant and would have made you a decent clip so far), but rather volatility in the companies with cost structures in Northern and Southern Eurozone (but not companies which have pan-European operations and are therefore more hedged to any form of Euro disintegration).
• I think initially a split of any form will see the peripheral currency fall very sharply while the core currency will rise (to an extent dependent on how many weak currency nations are still members).
• If we imagine, for a minute a Northern Germanic Euro and a Southern Mediterranean Euro, it’s quite clear that the Northern Euro will get suddenly stronger and the Southern Euro will weaken significantly. But it’s a cyclical old game, dear reader – this would be a great time to sell the spread between the two… I know I’m getting ahead of myself here but let’s remember… Germany has never had to export products to a European customer with a devalued currency, nor has it ever had to compete with Europeans companies with a devalued cost structure. There is a point at which Eurozone peripherals would (and should) be able to claw back competitiveness… I suppose that’s the whole point really…
• The rest of the market… well, look on the bright side… at least Facebook opened UP.
• Chart of the Day – The Euro (of course) but I also have to throw in the British 5 year interest rate as indicated by GBP swaps. That’s a 20 year chart… yep, we’re at a 20 year low… in fact probably an all time historic low… people are buying government bonds that promise to yield only 1.4% in a country with a debt to GDP closing pretty quickly in on 100%, where inflation is 3% and the central bank is hell bent of printing the currency (the denomination of those very same bonds) into oblivion… hmmm… that should give you an idea about risk appetite!

Chart of the Day

Euro (Source: Bloomberg)

GBP 5yr Swap – 20 year chart (Source: Bloomberg)

 

Events

Macro Events:

Update:

• Malaysian GDP pretty much in line at 4.7% YoY

Alerts:

• Germany GDP
• Mexico GDP
• UK GDP

 

Corporate Events:

Results:

• Costco [COST], Royal Bank of Cananda [RY CN], SAB Miller [SAB LN],

Dividends:

•  Johnson & Johnson [JNJ], SAP [SAP GR],

Reading, Links:

Nothing Significant

10th January 2012: Fat-Tail Obsession – When Is A Black Swan A White Swan?

Quote of the Day:

‘The only predictable thing about 2012 is its unpredictability.” This insight, which came in a holiday greeting from a professional acquaintance whom I respect highly, is important for any investor looking to generate returns and manage risk over the next 12 months.

Mohammed El Erian – PIMCO

Macro Overview

Thinner Fat Tails?

• I get nervous when people agree with me. It’s hardwired into my brain that real opportunities exist on the themes that few are thinking about. As you know, one of my main themes over the past few months has been the rise of what Nicholas Taleb calls “Black Swans” or what I call “fat-tail risks”. These are the type of events which can wipe out an entire portfolio performance in one fell swoop.
• But I’m a bit nervous about my nervousness (can you tell I’m paranoid, dear reader?). The reason I’m nervous is because everybody else seems to now be agreeing with me. Bill Gross opens his first letter of 2012, Towards the Paranomal, with the following sentence:

The New Normal, previously believed to be bell-shaped and thin-tailed in its depiction of growth probability and financial market outcomes, appears to be morphing into a world of fat-tailed, almost bimodal outcomes.

• This is almost exactly what I’ve been saying about the investment environment – especially with respect to credit risk in Asia and political risk in Europe. For example, remember my piece, Gambling on the Euro Roulette Wheel, quoting Soc Gen’s Kit Kuckes’ bimodal outcome on the Eurocrisis: “the Euro is either Strong or Gone”) and also see my piece Tails of Black Swans and Red Dragons.
• El Erian too, jumped on the band wagon “Investing n a ‘Fat Tail’ World”. Nice to have the World’s biggest fund manager confirm your thoughts a few months after you first made them but I do worry a little. If everybody expects a fat tail it ceases to become fat because, by definition, fat tail events are unexpected. That said I think the main risks to a portfolio will be the multitude of idiosyncratic fat tails (investment minefields – e.g. rising default rates in Asia) as well as potential macro events (political fall out in Europe).
• I also thought I was quite controversial citing Ron Paul as a potential black swan in American political landscape but no sooner had I written this, ZeroHedge published an article saying the exact same thing.
• While attention to risk is welcome, all this hysteria can at times be counterproductive. Hedging against a portfolio against a potential risk which is hard to quantify and will likely never occur can be very costly. Instead, I think the key to managing investment through 2012 will be adequate diversification and maintaining a close scrutiny of macro economic and political developments.

Market Overview

Equity Rally Is Back On Track

• Earnings season will be in full flow by the end of this month so it’ll be interesting to see how the rally holds up through this.
• Still we see the divergence in risk perception between the equity markets and the credit markets. While equities are looking sanguine the credit market treads cautiously. Chart of the Day is the Markit SovX Western Europe Index (showing a compilation of CDS spreads from the 15 Eurozone members plus Denmark, Norway, Sweden and the UK.

Chart of the Day

WE SovX CDS Levels (Source: Bloomberg)

Events

Macro Events:

Update:

• Nothing Significant

Alerts:

• Germany GDP
• Portugal CPI

 

Corporate Events:

Results:

• Nothing Significant

Dividends:

• Yum! Brands [YUM]

Reading, Links:

Nothing Significant

3rd October 2011: It’s been emotional … and it may get more so

 

Crazy Gang's Vinny... and his Painful Antics

 

Quote of the Day:

… well I’m very worried about the situation in the periphery of the Eurozone. You have a recession coming… there’s a fiscal crisis… a banking crisis… a liquidity crisis … a sovereign debt crisis…and also a competitiveness crisis…

Nouriel Roubini

Macro Overview

• It’s been emotional. Those were the final words of Vinny Jones’ character in that great film: Lock Stock and Two Smokin’ Barrels. Vinny, and ex-footballer, not known for his gentlemanly sportsmanship was one of the Wimbledon FC Team affectionately known as “ The Crazy Gang”. For good reason too – see the photograph! Now the whole world is crazy, and European peripheral states have the economy by the balls.
• There is no debate as to whether we are entering into a recession born in the Eurozone; we are already in one, according to Roubini. The only question is whether we’ll enter a crisis as protracted and deep as we had in 2009.
• Today, as just and exercise, we’ll explore the potential downside to equities. If you think this market is emotional – you ain’t seen nothing yet.
• But on this Manic Monday I’m not going to dwell too much on macro economic events. I’m going to look directly at valuations and how people may be prone to come to incorrect conclusions. Firstly, “cheap” is a relative term. Yes stocks are cheap when compared to the valuations during the goldilocks era of grotesque credit extension and confluence of structural factors in the global economy – which I have written about before:

1. End of Cold War
2. Excessive Liquidity and Lax Regulation from Central Banks
3. Internet Boom
4. Major Policy Changes in Emerging Super-Markets like India, Brazil and China

• But those days are over and we, the children of a debt-addicted revolution must lick our self-inflicted wounds and move forward… global economic conditions in the future will be much more like the century preceding these events and when you take out that decadent decade… well we’re at PE ratios that are about average. In fact during periods of severe economic malaise it’s not unusual for PEs to hit sub 7. That implies stocks 40% lower than where they are today (that’s being generous). Look I’m not saying that’s gonna happen… but it makes you think. Consider the economic backdrop: does it feel like 2005 to you? Does it feel like 1995 to you?
• Look at the charts below. If your valuation metrics go back only 20 years, while the world was rosy and those 4 factors I listed above were simultaneously in driving the global economic engine, your PEs don’t mean jack.

 

Historic PE for S&P 500

Schiller PE Ratios (inflation adjusted earnings from previous 10 years)

• El-Erian pointed this out succinctly yesterday on CNBC’s site. In fact, I’m going to leave this section to the PIMCO man, I’ll simply copy it word for word – he’s better at writing than me.

Should investors buy good companies trading at historically attractive prices? This simple question is rightly on the mind of many investors as they survey the damage inflicted by the third quarter’s sharp and generalized collapse in global equity markets.

It has already enticed some to buy at prices that, as Warren Buffett observed this week for his company, appear below “intrinsic value.”

According to conventional wisdom, this simple question has an equally simple answer – “of course” – that is supported by the vast majority of historical cases. And it is an answer that would seem particularly appropriate today given that so many multinationals are still in great financial shape, pay relatively high dividends and trade at compelling historical valuations.

But before acting on conventional wisdom, investors should ask themselves why so many unthinkables have turned into reality over the last few months. By doing so, they would be forced to consider important qualifiers arising from historic structural changes buffeting the global economy and, therefore, financial markets.

Cheap stocks and corporate bonds can get a lot cheaper before regaining their footing. This is especially true when the combination of too much debt and too little income growth forces a system to delever, as is increasingly the case these days.

In such a world, markets are driven by top-down economic and policy factors (“macro”) rather than company earnings and balance sheets. It is also a world in which “bad technical” can result in price behavior that deviates significantly from “fundamentals,” and for a long time.

The dilemma confronting investors is essentially the same as that facing a home buyer looking at a good house in a rapidly-deteriorating neighborhood. It makes sense to buy if, and only if, the neighborhood is likely to stabilize, the buyer has the ability to hold on to the property, and he/she secures a sufficient price discount on account of the inherent uncertainty.

Investors with “permanent capital,” like Mr. Buffett, are particularly well placed to strike this volatile balance. Yet they should only do so if they also believe that the combination of a bad macro and bad technicals will not, in itself, cause company fundamentals to deteriorate substantially and, thus, lower intrinsic values.

Economists have a term for this. They call it “multiple equilbria.” It is a dangerous path-dependent phenomenon where one bad situation materially increases the risk of a subsequent situation that is even worse. It is the basic reason why so many well-run companies prefer to accumulate cash that earns virtually no interest income rather than invest and hire.

These dynamics are particularly worrisome today as market after market falls victim to volatile and destabilizing feedback loops fueled by weak economic growth, high unemployment, debt overhangs, fragile banks and inept policymaking. It is most evident in Europe where just the prospect of firesales can, and has totally destabilized intrinsic values. It also threatens the US where too many politicians and policymakers remain asleep at the wheel.

Have no doubt, there will be lots of opportunities down the road to buy good companies at cheap prices. If you do so today, you are betting that markets can escape decisively the grips of both bad macro and bad technicals. This is not a call on companies. It is about policymaking in Athens, Berlin, Frankfurt, Rome, and Washington DC.

• Finally, if you think this has been bearish so far. I’ll leave you with a line from Nomura’s infamous Bob Janjuah courtesy of ZeroHedge:

My secular view remains bearish. In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an ‘undershoot’ into the 700s is entirely possible. In this bearish outcome I would expect 10-year bund yields at 1% to 1.25%, 10 year UST yields at 1.25% to 1.5%, and 10-year gilts below 2%. The USD should do well, credit and commodities should not.

My view over the next month also remains unchanged. I expect stocks to reach their lows for 2011 in this time frame. I still expect the S&P 500 to bottom in the low 1000s in October. And I expect to see 10-year bund yields below 1.5%, 10-year UST yields below 1.75%, and 10-year gilts close to 2%. Beyond October 2011, on a two- to three-month basis into year-end/early 2012, I still see a possibility of a decent counter-trend risk rally. Should this materialise, the S&P500 could move from a low in October of around 1000, up to/towards 1200 by end-December 2011/January 2012.

• Who Let the Bears Out!!??
• Are stocks going up or down in Q4? I honestly don’t know, but the risks in the credit markets are all there to see and whatever they do… it’ll be volatile … and… it’ll be emotional.

 

Market Overview

• The Hang Seng hit a 2 year low and appears to be heading to 2008 levels. This is pretty much the worst performer of the markets that I follow – mean it makes the Nikkei look good… and the Nikkei performance has been toilet (remember that Tsunami and the small matter of that nuclear incident in Fukushima?). Hong Kong stocks are down 32% in 6 months, for those unhedged and long it has been a horrible investment. It’s clear that the only thing you should have been long this year are Treasuries and Volatility.
• Europe took the baton seamlessly from Asia and proceeded to plunge into the swirling vortex of stock-market terror. Aided by the rather pathetic news that Dexia, a bank already bailed out once, may have to be bailed out… again. Like their American counterparts, European banks have got used to taking the gains and socializing the losses. This is hardly capitalism at its best is it?
• In the US the VIX screams to the mid 40’s again despite the positive ISM number and the S&P is hovering around this 1100 resistance level. This is crucial to the momentum guys. We could bounce here and drive the entire equity markets into a pretty comfortable year end (hey we could even close flat on the year!)… … or we could break below and stare annihilation in the face. 1100 pretty much markets -20% (official bear market territory) while also being the lowest level we have seen for over a year. It’s a 50/50 call in my book and will probably depend on the data out this week. 1100 is the crucial level… the S&P closed at 1099.

 

Chart of the Day

Crucial S&P level

 

 

Events

Macro Events:

Update:

• US ISM Manufacturing BETTER than expected.  51.6 vs 50.5 expected … so indicating actually that the US may NOT be heading into recession. Of course this means that it may be less likely that the Fed will engage in any more extreme easing policy.
• Japan the Tankan Survey – worse than expected.
• HK Retail Sales – slightly below expectations.

 

Alerts:

• South Korean CPI

 

Corporate Events:

Results:

• Yum! Brands [YUM]

 

Dividends:

• CISCO [CSCO], JP Morgan [JPM],

 

Reading, Links:

Who let the Bears out?

• Bear #1
• Bear #2
• Bear #3

 

27th September 2011: The Drugs Don’t Work, They Just Make “EU” Worse

The Drugs Don't Work - They Just Make "EU" Worse

Quote of the Day:

Greece is going to default and the only question in my mind is does it exit the Eurozone or not.

I think there will most likely be a recession [in Europe] because regardless because a lot of damage has been created already

Mohamed El Erian – PIMCO

Macro Overview

• See? Don’t take my word for it – take El Erian’s.

• JPM asset managers say that global investors outside the Eurozone “underestimate” the Euro crisis – from what I observe, I think they are right, actually. I would add, especially investors in Emerging Markets and Asia– decoupling is even more a myth now than it was 3 years ago. Quoting the article:

‘We are seeing more panic in the European region and the global markets have viewed it as a Europe-specific crisis and we think this is about to change. We think this crisis is going to take on a more global dimension and that is a worry,’ said Sheikh.

• I found Pettis’ latest article in Seeking Alpha quite amusing.

Europe’s travails in particular can’t be good for exports. What’s worse, it’s now pretty much official that the euro will fail soon enough. We have this on no less an authority than Angela Merkel. Here is what Thursday’s Financial Times says:

Angela Merkel, German chancellor, declared on Wednesday that “the euro will not fail” after the country’s powerful constitutional court rejected a series of challenges to the multibillion-euro rescue packages agreed last year for Greece and other debt-strapped members of the eurozone.

In a passionate restatement of Germany’s determination to defend the common currency, the chancellor welcomed the court’s judgment as “absolutely confirming” her government’s policy of “solidarity with individual responsibility”.

No, I didn’t misread the article. I just have a very different understanding of the logistics of a denial. Last year, for example, I wrote on my blog about ferocious denials by both Spain and Portugal that they would need any official help in funding themselves. But according to one of my favorite British television comedies, Yes, Minister, an official denial means something very different from what is intended. “The first rule of politics,” Sir Humphrey, the wily civil servant in the show, insists is: “never believe anything until it is officially denied.”

• The unfortunate reality is this. JPM, Mohamed and Michael are right. The path of least resistance now is towards a Greek default – however absurd that may be after the EU states have plugged tens of billions already into the state. Investors around the World need to be prepared for the consequences of this shakeout.
• The reality is that a $250 billion bailout package would probably put an end to the Greek debt issue, yet the $20 Trillion economy that is Europe cannot seem to find the remedy to stop the bleed. That should imply that there is much more to this issue than just a Greek default. El Erian’s analogy is well founded, the “infected toe” (Greece) is no longer the problem, neither is contagion risk (the infection has already spread). The Drugs Don’t Work – they just make you worse… The only immediate question now is: which limbs will be amputated to save the life of the Eurozone?

Market Overview

• Massive rebound on the way inEuropewith BNP up 14%. This is the age of volatility alright. The only thing that surprises me is that the VIX was under 40 today.
• It’s very rare that one gets to see a sovereign CDS spread quintuple in just two months to a level approaching 10,000bps. But if you want to see what that looks like, check out Chart of the Day – Greek 1 yr CDS.

Chart of the Day

Greek 1 Year CDS (Source: Bloomberg)

Events

Macro Events:

Update:

• US Consumer Confidence slightly below expectations

Alerts:

• French GDP
• German CPI

Corporate Events:

Results:

• Nothing Significant.

Dividends:

• Aisin Seiki [7259 JT], Chubu Electric Power [9502 JT], Deere [DE], Denso [6902 JT], Dow Chemicals [DOW], Fujitsu [6702 JT], Hitachi [6501 JT], Honda [7267 JT], Kansai Electric[ 9503 JT], Komatsu [6301 JT], Kraft [KFT, Kubota [6326 JT], Kyocera [6971 JT], Marubeni [8002 JT], Mitsubishi Chemicals [4188 JT], Mitsubishi [8058 JT], Mitsubishi Electric [6503 JT], Mitsubishi Real Estate [8802 JT], Mitsubishi Heavy Industry [7011 JT], Mitsubishi UFJ [8306 JT], Mitsui [8031 JT], Mitsui Fudosan [8801 JT], Mizuho [8411 JT], Nidec [6594 JT], Nike [NKE], Nippon Steel [5401 JT], NTT [9432 JT], Nissan Motor [7201 JT], Nomura [8604 JT], NTT Docomo [9437 JT], Panasonic [6752 JT], Ralph Lauren [RL], Shin-Etsu [4063 JT], Sony [6758 JT], Sumitomo Corp [8053 JT], Sumitomo Electric [5802 JT], Sumitomo Metal Industries [5405 JT], Sumitomo Mitsui Financial [8316 JT], Suzuki Motor [7269 JT], Tokyo Gas [9531 JT], Toshiba [6502 JT], Toyota [7203 JT], Tullow Oil [TLW LN], Xerox [XRX]

Reading, Links:

• European Crisis…
  • European Crisis #1
  • European Crisis #2

26th September 2011: If you owe €50 Million to Europe, you have a problem. If you owe €50 BILLION to Europe, Europe has a problem

All in the same boat - Greece's Debt is Germany's Debt

Quote of the Day:

Greece is never going to default because that would have been catastrophic for the euro area and for many other countries beyond the euro area…

Evangelos Venizelos – Greek Finance Minister

—

The threat of cascading default, bank runs, and catastrophic risk must be taken off the table…

Timothy Geithner – US Treasury Secretary

—

We now face a crisis that is the economic equivalent of war. This is not the time for business as usual or politics as usual. The financial crisis is still with us. It never went away.

Vince Cable –UK Business Secretary

—

The eurozone has six weeks to resolve this political crisis.
George Osborne – UK Chancellor of the Exchequer

Macro Overview

• There was so much hot air coming out of the “government bond salesmen” (aka Treasury secretaries) that I decided to go with four of their choice quotes.
• Just six weeks to save the World, huh, Mr Osborne? Well, El Erian agrees that time is short; he thinks we’re in a runaway vehicle and, instead of doing something, politicians “bickering” among themselves. What should we do? Prepare for more volatility, he says.

This is especially the case in Europe where policymakers have little — and I stress, little — time left to get their act together. Remember, their dithering and bickering has already allowed the crisis in Greece o spread to far too many parts of the Eurozone.

• But Osborne did not pick the deadline out of thin air, this was the infamous Troika’s self-imposed time frame. Troika has one thing going for it now: Christine Lagarde. The new IMF chief appears to show the characteristics of impressive leadership and appears to understand the gravity of the situation. But Troika is a word which neatly sums up the political dysfunction within the Euromess. Troika is the Russian term for “collective leadership” – if that is not a direct oxymoron in itself there have only been two things missing in the Troika during this crisis: collectivism and leadership.
• Now one of the big things to put in your diary this week is Germany’s important election which I pointed out in my comment on another Manic Monday, three weeks ago. I pointed out that her party’s crushing defeat in her own constituency of Mecklenburg highlighted that:

Merkel faces an internal political crisis of her own. Caught between a rock and a hard place, voters in the South don’t like her leaning towards European Union while voters in the North accept the idea but don’t like they way she’s handled it. This may signify the beginning of Germany’s assertion on the entire Eurozone project. Like Obama, Merkel can no long follow the debate over the fiscal and economic challenges she faces – she must lead it, or risk losing power.

• There is a lot of chatter about controlled default of Greece and building a firewall around the peripherals. Translation: we were asleep at the switch and incompetently slow to react, it’s now too late to save Greece. So we must organize agree to the terms of a Greek default while avoiding severe contagion within Europe. For me the best way to do this would be to engineer a huge haircut on Greek debt (say, 50%) and then bolster the EFSF not to provide less funding to the sovereigns and more direct funding to the Eurozone banking sector. How will this all work itself out? Well, keep a close eye on how this vote on 29^th goes and indeed the debate thereafter – the German voter will play a large part in crafting the solution.

Market Overview

• The markets continue their roller-coaster but I think it’s important to differentiate between new trends or turning points and noise. One of the biggest turning points I have seen is the bounce in the Dollar. Loyal readers will note, in a rather controversial piece, I alluded to huge but transient “back-door sterilization” of the US Dollar by the Fed. Concluding with the abandonment of a bearish view I’d held for 10 years on the Dollar. The low for the Dollar was on 27^th of July. When did I write this comment? 27^th of July:

Perhaps this all sounds too incredulously insane to be put into print and yet here I am, putting it into print. Indeed a cessation in the rate of this capital flow of Dollars (from the Fed) to the Euro (via the European Banking System) may be the tipping point for a reversal in trend for a number of asset prices. It may be why we may see a prolonged rally in the Dollar, a prolonged correction in commodities and perhaps even equities. That is, until Bernanke brings other innovative forms of quantitative easing (QE3) back into his language.

Chart of the Day

Dollar Index (Source: Bloomberg)

Events

Macro Events:

Update:

• Nothing Significant.

Alerts:

• US Consumer Confidence

Corporate Events:

Results:

• Accenture [ACN],

Dividends:

• Nothing Significant.

Reading, Links:

European Recession…

• • European Recession #1
  • European Recession #2
  • European Recession #3

22nd September 2011: Contemplating Contagion

The Contagion Effect

Quote of the Day:

The key is for policymakers to act with conviction and urgency in tackling today’s challenges, while at the same time being nimble, should circumstances change,

Christine Lagarde – Head of IMF

Macro Overview

• If you remember, at Jackson Hole Bernanke procrastinated communication emphasizing September’s big 2 day meeting. As I reminded readers, after Jackson Hole attention would shift back to the calamitous situation in Europe. The Fed has no bullets left the politicians have all the bullets in the world but no guns. Welcome to the farce that is the global economy.

• This is a good interview. It was Lagarde who got my attention with her straight-talking and rather forthright speeches recently, so far I’m quite impressed. She coined the phrase “chains of contagion”. El Erian now warns of an institutional run on the French Banking system (BNP says significant cuts are coming) and thinks we’re on the eve of a global financial crisis over sovereign debt. If you’re wondering how to position your portfolio to primary risks – you’re too late and you should have been paying attention. I’m afraid we have already reached the time when we should consider the secondary contagion effects of this recession (that’s right, I used the “R-word”), should it occur. There are a million charts I could have chosen but they all look the same (volatility and credit spreads up, treasury yields and equity prices down). I have chosen today’s charts not because of the way they look but because of their geography – just to demonstrate how far-reaching the contagion effects are. Brazil. Denmark. Indonesia. The economies themselves are not performing all that badly… yet.
• In another dimension of the contagion effects it’s interesting to see ZeroHedge remind us that Morgan Stanley has exposure to French Banks over 60% of its market cap and more than half its book value. Everybody wants to talk about France now. Remember only last week (read: Land of the Brave and the Poor) I showed you the web of contagion diagram inEurope and told you: Here’s a little reminder of the inter-dependencies between the PIIGS. Notice how France is locked into huge exposure, proportionally, from both Greece and Italy.
• However, I should comment on the Irish GDP number: +2.3% YoY. Yes that’s a PLUS sign in front of the number – you see not everything is bad! This is a great result (even though some say once you strip out earnings from multinationals it should only be 1.1%). Austerity is working inIreland; the economy is growing at its fastest rate in 3 years, in fact. This is also good news for the British Banking sector – if the trend continues UK banks may actually be an attractive buy soon. Slow down? What slow down? Not in Ireland apparently.
• I recently showed you the steepness of the US yield curve, today I show the UK yield curve – looks kinda similar right? Crazy how flat these curves are given that short-term rates are effectively at zero… we are turning Japanese (I really think so).

Market Overview

• You don’t need me to lay this out for you. From a market perspective you should have been expecting this – if you were not, you may want to go back and read some of my comments – and then slap yourself about the face a bit. Sure politicians are incompetent, but that just scratches the surface. The truth is, both fiscal and monetary authorities are caught between a rock (called DEBT) and a hard place (called DELEVERAGING). Stimulus, both monetary and fiscal has a limit – this quarter we just found out where that is. The question is: what are you going to do about it? Buy equities and hope it all goes away? Good luck to you.
• This is not 2008/9. Although there may be many similarities, the way we are going. But let’s be clear, it’s unlikely the US banking system will suffer another sudden, singular Lehman-type event any time soon. There is simply too much liquidity spewing from the Fed and too much coordination between the central banks right now. But there is genuine contagion risk among the banking system as a whole, this could literally bring entire sovereign states to their knees and/or enable the virtuous circle to cause a seizure in the entire financial system within a very short space of time.
• That’s the reality, but, even in the midst of this horrific sell-off, there are some encouraging signs in some parts of the financial business which remind us that this is not like 2008/9. For example, the Alternative Investment Industry still shows consistent investor inflows, even with the horrors of 2008/9 still fresh in the memory. This may largely be because, the structural integrity of the shadow-banking system is quite high (indeed better than it ever has been) and, despite the volatility of the markets, there is a high degree of confidence that there will not be a structural fracture like the Lehman event – which nearly killed the hedge fund industry overnight. They say, what fire does not burn, it hardens. But another reason is that hedge funds have learnt their lessons and reduced risk and leverage well ahead of this sell-off and also the obvious fact that, as treasuries yield negative and equity markets roll over time and time again, there is greater demand for absolute return strategies and capital preservation.
• Hedge funds and arbitrageurs need to be aware, then. The window of opportunity in this sell-off may only be very short (a matter of weeks rather than quarters). In the last recession we had quite a quick rebound in the economy and equity markets after QE measures were implemented but the, structurally impaired, hedge fund industry took many quarters to heal. Hedge fund strategies were mired under their high-water marks for prolonged periods. This time it’s different. One feels, when the timing is right, low-leveraged hedge fund opportunists will aggressively take advantage of low-valuations within their market-neutral strategies. Unlike 2009, arbitrage strategy performance and arbitrage opportunities may bounce back much quicker than the equity markets and broader economy. For hedge funds, don’t be too cute and wait expecting you’ll have the luxury of a couple of quarters to pick your moment to get into market neutral/arbitrage strategies. Even if we lapse into another deep recession, remember this is NOT 2008. Hedge funds are poised to strike and they will strike hard and fast. Indeed, it could be a turning point for the entire multi-trillion dollar asset management industry.

Chart of the Day

Danish CDS (Source: Bloomberg)

Brazilian CDS (Source: Bloomberg)

Indonesian CDS (Source: Bloomberg)

UK Yield Curve Steepness (Source: Bloomberg)

Events

Macro Events:

Update:

• US Jobs – roughly in line with expectations – that means they were bad.
• New Zealand GDP much less than expected in Q2 (+0.1% vs +0.5% expected)
• Dutch GDP slightly more than expected in Q2 (+0.2% vs +0.1% expected)
• Irish GDP at +2.3% YoY (vs just +0.4% expected) – incredible really.

Alerts:

• Singapore CPI
• Taiwanese Industrial Production

Corporate Events:

Results:

• Nothing Significant

Dividends:

• Philip Morris [PM]

Reading, Links:

• Apocalypse Now:
• • Apocalypse Now #1
  • Apocalypse Now #2
  • Apocalypse Now #3

6th September 2011, The Great Depression 2.0?

Another Jobless Recovery.

Quote of the Day:

…this is like 1931 midway through the Great Depression when a major banking crisis in central Europe, sparked by the failure of Creditanstalt, plunged the World into the Great Depression’s second and worst round.

Niall Ferguson – Historian and Professor at Harvard

Macro Overview

• Today’s Guardian gives are rather sick diagnostic for Europe’s countries in focus. But Europe’s woes may only just be beginning. Historian Niall Ferguson thinks that Europe’s deterioration resembles The Great Depression all too closely, with 2011 resembling the 1931 inflection point – when the crisis took a turn for the worse and crossed the Atlantic hitting the European financial system.
• Not to sound too dramatic, it’s a good exercise to consider how the global economy relapsed into an even deeper recession in 1931.  One uncovers worryingly similar developments to those occurring right in front of our very noses today (see this Business Insider article from a year ago – still very relevant).
• 1931 was the year things turned from bad to worse during The Great Depression. After an initial financial shock and a “severe recession” in America a couple of years earlier the markets actually turned up for a year.
• But the financial plague not been eradicated, rather, its symptoms had only been suppressed. Severe downturns are sometimes likened to diseases or viruses, their birthplace is not always important, it’s the contagion dynamic, it’s where they finish, that matters. Like true epidemic-level illnesses they are persistent, subsiding occasionally only to reappear elsewhere, mutated, opening up old wounds and preying on the weakest organisms.
• Thus, true to form, during The Great Depression this American-born virus spread to socialistic to a region known at times for their lack of economic coherence and complacent financial rigidity: Europe – specifically Central Europe (predominant economies: Switzerland, Germany, Austria).
• At the height of the crisis banks, teetering on insolvency, were forced to bail out their failing counterparts or risk collapse themselves, but this only transferred obligations to larger, more complicated, more infectious institutions. Eventually the sovereigns themselves were pulled into the crisis, but this was always a failure of the financial system at heart.
• As a result of both incompetence and various measures of political financial protectionism (akin to Swiss Currency manipulation today) during the early 1930’s, meant the European political elite were woefully unprepared for the rapid and relentless cascading capitulation that occurred, despite years of warnings to get their act together.
• Secret credit lines were hurriedly set up within the banking system to prevent financial institutions (which had bailed out other ailing financial institutions) from triggering a domino-effect in the European financial system. But alas it was too late. The collapse of a giant bank in Central Europe, Credit Anstalt, brought the crisis home to the continent East of the North Atlantic. It was on these European shores it would wreak the most destruction.
• As Bernanke himself said, when speaking about the causes of The Great Depression, in a Council on Foreign Relations presentation back in 2009.

Globally, there were massive bank failures.  I think perhaps the most critical, in May of 1931, the Creditanstalt, which was one of the largest banks in Europe, failed, which generated a wave of financial crisis around the world.  Up till early 1931, arguably the 1929 downturn was just a ordinary — severe but ordinary downturn.  It was the financial crises and the collapse of banks and other institutions in late 1930 and early 1931 that made the Great Depression great.

Market Overview

• The Swiss intervention was swift, harsh and unexpected. Everything that you need a direct currency manipulation to be. It’s like a guerilla ambush – striking fear into forex traders: buy our currency and we’ll come and get you… GRRRR!! But the same currency traders who slew Japan’s Ministry of Finance with ease will retreat, lick their wounds, then sit back and smile – OK you got me this time, they’ll say. But we’ll just come back with more numbers and smarter tactics. Fighting the market is a war of attrition not an act of financial terror. Each manipulation by the SNB will become harder and harder to execute with time. The crucial element of surprise will diminish with each act. Just ask Trichet – his institution is far more powerful than the SNB and he may be having difficulty keeping the market at bay himself – see El Erian’s comment on CNBC’s website today:

For a while, outright ECB purchases of Italian bonds on the secondary market had succeeded in keeping that yield at or below the 5 percent level for the “old” Italian ten-year benchmark bond. In recent days,

The jury is still out as to whether the ECB “allowed” the yield to rise, as a way of putting pressure on the Italian authorities (and other European fiscal agencies) to get their act together, or whether the ECB itself is getting “overwhelmed” by market dynamics. But either way, European markets are troubled.

• Perhaps buoyed by that ISM number the markets closed only down a smidge in the US (by current standards). In fact the UK and Brazil both closed up on the day. I’d say that was a result – we could easily rally into the end of the week now.

Chart of the Day

Consolidated European CDS (Source: Bloomberg)

Greek Borrowing Costs Back to the Highs (Source: Bloomberg)

Events

Macro Events:

• Update:
  • South Korean GDP +0.9%  — which I think is actually quite good, especially considering how poorly Korean markets have performed.
  • Filipino Inflation lower than expected — that’s the good thing about a global slowdown!
  • ISM Non-Manufacturing came out at 53.3 (vs 51 expected) – pretty good number in my opinion – what recession?
• Alerts:
  • Belgian GDP – more poignant that most think, actually. We want to know ifBelgium is going to slump – it has one of the worst balance sheets in the Eurozone (Debt to GDP at 100% – worse than Spain, Ireland and Portugal)
  • German Industrial Production
  • Hope you spotted my deliberate mistake last comment – Obama’s speech is not until tomorrow (8^th)!

 

Corporate Events:

• Results:
  • Vimpelcom [VIP],

• Dividends:
  • ADP [ADP], Baxter [BAX], BHP Billiton [BLT LN], CME [CME], Diageo [DGE LN], Glencore [GLEN LN], Henderson Land [12 HK], Kimberly-Clark [KMB], PetroChina [857 HK], Shire [SHP LN],

Reading, Links:

• European Abyss:
  • European Abyss #1
  • European Abyss #2
  • European Abyss #3

17th August 2011, Market Update: The Shrewd IPO Swindlers

The IPO Group

Quote of the Day:

At the end of the day political systems matter a lot in determining sovereign creditworthiness. Looking at the trajectory our deficits are on, looking at the maximum dysfunction taking place in Washington, the fact that our political leaders are much more concerned about their own re-election than about doing the work of the American people, it’s hard for me to criticize the S&P’s decision. Until we turn our trajectory of deficits down, I think they made the right call.

Neel Kashkari, Pimco

Debt Inheritance

Macro Overview

• And I thought Group-On was cunning. So let me get this straight. A company which specialized in knowing exactly what value to attribute to a private company versus a public company (and how to exploit ignorance in this respect), is asking investors (who think they know more about the company’s market worth) to pay up so then can achieve taking their own company public!? You may remember Blackstone did a similar thing don’t you – see the lawsuits on IPO disclosures? I’ll attach two charts of the day – one showing how the stock markets performed in relation to the Blackstone IPO and one showing how Blackstone shares performed after IPO. I mean Blackstone timed that with near perfection, suckering investors (including China’s Sovereign Wealth Fund, CIC) into a deal which now trades 60% below IPO. Wow. Wonder if CIC will go in for a $3 billion slug of Carlyle too?
• Keep an eye on the news in India– something’s bubbling below the surface.
• I’m copying El-Erian’s piece on the ECB – good write up: Europe’s Central Bank at Sea.
• Swiss authorities continue to play forex games with the giant fx market – bit like David and Goliath that one.

Market Overview

• Dell and Carlsberg Beer are weighing on the markets after pretty awful numbers.
• UK yield curve flattening like crazy as people hoover up the 10year and sell the 2 year. See Chart of the Day #3.
• VIX coming down but we’re still 100% above the July lows.

Chart of the Day

Blackstone IPO Performance to Date (Source: Bloomberg)

Private Equity IPO - Timing the Market (Source: Bloomberg)

UK Flattening: 10yr - 2yr (Source: Bloomberg)

Events

Macro Events:

• Update:
  • Malaysian GDP better than expected (+4.0% YoY vs +3.5% expected)
  • Malaysian CPI better (lower) than expected (+3.4% YoY vs +3.5% expected)
  • UK Unemployment rises from 7.7% to 7.9%
  • US Core PPI higher than expected (+0.4% MoM vs +0.2% expected)
• Alerts:
  • US Jobs Data
  • US CPI

 

Corporate Events:

• Results:
  • Bank of Communications [3328 HK], China Mobile [941 HK], Hewlett-Packard [HPQ], Holcim [HOLN VX], Oil & Nat Gas Corp [ONGC IN], Ping An [2318 HK], Wesfarmers [WES AU],

• Dividends:
  • Cummins [CMI], UPS [UPS],

Reading, Links:

• Europeand the ECB
  • ECB – El Erian
  • ECB – WSJ

10th August 2011, Market Update: Deflationary Eurogeddon

Cameron brings out the heavy artillery

Quote of the Day:

You don’t need a major in English to know that The Fed came right out and said that the economy is really staring a recession in the face…

David Rosenberg

Macro Overview

• I’m a fan of Rosenberg, if only for his principles of making a call and sticking to it in the face of adversity and humiliation. Rosenberg’s staunch deflationary view has been ridiculed by many over the past couple of years. He don’t look so dumb now, huh? Neither do Gross or El Erian who’ve come in for heavy criticism for implying that we were entering a period of Sovereign risk and lower growth – what they called the “New Normal”.
• BoE Governor, Merv “the Swerve” King came out with his inflationary report today and he hardly calmed the markets down with all his talk of “headwinds” being stronger and “risks to the downside” not to mention the fact that he revised growth projections down – can they get any lower without it being a recession, Merv? I think he also made poignant remarks about the ECB which has been dragged kicking and screaming into the European political fray. He said they’d reached the “outer limit” of what can be expected from a Central Bank – perhaps that is an understatement. His message was quite clear: don’t expect Central Banks to “fix the economy”, there is only so much a Central Bank can do – the rest is up to politicians. El Erian said the same thing today.
• RIM just cannot win. As if capitulating market share is not enough it looks like they are to blame for the viral nature of communication during the UK riots.  What a fall from grace: one minute the ultimate executive accessory, the next a hooligan rally-hooter. Meanwhile Cameron rolls out the heavy artillery to deal with the rioters. What’s alarming is the profile of some of the looters emerging… sure most of them are hoodlums but school assistants, organic chefs, opera-house stewards? I mean these guys have respectable jobs there must be deeper cause than just spill-over gang-based and “hoody” street crime.

Market Overview

• Another strange reversal market. Strong morning in Europe only for the fears over French banks (remember yesterday’s comment about BNP freezing funds). This time it’s Soc Gen – rumour has it they’re insolvent and that Sarkozy was locked in hours of intense meetings today. Of course all rumours were denied by both Sarkozy and Soc Gen. Within minutes Soc Gen was staring at a 20% loss, BNP down just 15% – although they did rally a little into the close.
• This fed into the US markets and they fell heavily in the morning only to rebound after lunch. Rollercoaster!
• Basically this is all about the Financials… Citi, BoA and (I never thought I’d say this) Goldman all getting mullered to the tune of 10% or more! Huge sell off into the close though and everybody is talking about the volume of selling. Market in the US was never in positive territory but this is an ugly close again.
• Apple is now the largest company in the World.
• Fed up with talking about Gold. It almost hit $1800 today. Why don’t you just wake me up when it hits $2000. It’s already up over 550% (not a typo) in the last decade – I don’t know what more there is to say.

Chart of the Day – I can guarantee these resistance levels will hold

Longest losing streak on the German stock exchange (the DAX) since 1978.

This is how it looks. Sad thing is it may not be over.

DAX cracks.

Events

Macro Events:

• Update:
  • German Inflation in line with expectations (no wiggle room for ECB  yet)
  • Japanese Inflation higher than expected … hmmmm – highest level since pre-Lehman (decoupling?)
• Alerts:
  • Japanese Machine Orders

 

Corporate Events:

• Results:

* Anheuser-Busch [ABI BB], Cia De Bebidas [AMBV4 BZ], MTR [66 HK] (AAA-rated – the last of a dying breed!), RWE [RWE GR], Singapore Tel [ST SP], Standard Bank [SB SJ], Swire Pacific [19 HK], Swisscom [SCMN VX], Telstra [TLSN AU], Zurich Financial [ZURN VX]

• Dividends:

* AIA [1299 HK], Dupont [DD], Eli Lilly [LLY],

Reading, Links:

• Bank of England’s Mervin King on growth deterioration:
• Merv The Swerve #1
• Merv the Swerve #2
• Merv the Swerve #3

1st August 2011, Market Update: KABOOM!

Macro Overview

Quote of the Day: “Kaboom!…” – Bloomberg’s economic reporter describing what happened to tonnes of explosives stored in containers and left in an open field in Cyprus.

• Remember last comment I said:
  • US ISM (Manufacturing) – looking for something around 55.
    • Anything North of 60 and the market will puke (QE3 off the table)
    • Anything South of 50 and the market will puke (recession coming?)
  • We’ll  it came out at 50.9… I mean we’re really scraping the barrel here aren’t we? Growth came out so low last week it was well into stall speed and now ISM manufacturing is barely above recessionary levels. All I can say is the ISM non-manufacturing had better be blistering.
• Despite a deal being worked out in America it would appear the markets are not buying it. As I write this US indices are down for their SEVENTH day in a row. Debt to GDP concerns are still prevalent, indeed with respect to the ratio of concern Debt/GDP El-Erian thinks that we may have done so much damage to the Denominator (GDP) in this debacle that the Numerator (Debt) is no longer the point of concern.
• Sentiment in Europe and the US is so bad… (I can’t believe I’m even going to write this, but check this out)… the situation is so bad… (drum roll…) that people are talking about Britain(?!?!) as a safe haven! HAHA! Well apparently UK gilt yields have literally never been this low… man what is the World coming to if the UK gilt market is regarded a “safe haven” for assets?
• Well that’s one way to get downgraded. Poor old Cyprus, the little island state East of Greece not only has to grieve the deaths of lost ones they’ve also shot their economy in the foot. Cypriot authorities thought it was a good idea to leave a massive store of explosives in an open field in the blistering heat next to a power station responsible for half the country’s energy… KABOOM! Now they face a downgrade because they literally have no energy – kinda hard to run a business with the lights off. According to one site:

The force of the dawn explosions blew out virtually every window in the neighboring villageof Zygiand extensively damaged the islands main power station, which remains offline.

Large-scale damage could be seen to a huge section of the barriers of the main Larnaca-Limassol highway and a huge crater about 500 meters from the power station was shown on state TV.

Market Overview

• Stocks just can’t seem to get a bid in this market.Europeis puking again. Why? Because there is no reason to buy. The debt ceiling is just a side show right now, there are risks all over the market from slow growth, rising inflation and structurally levitated unemployment. None of this is news, it’s just all coming to a head once more because the medication we’ve been receiving are actually more pain-killers than remedies. My chart of the day is the French index [CAC] – looking like a horrific close – the lowest level since August of last year. It’s worth noting that the Italian stock market had its lowest close since Lehman aftermath!
• The corporate news is dominated by HSBC. Last week in my “Banks are Slashing” I mentioned that HSBC may cut 10,000 jobs. The figure being reported now is between 25,000 and 30,000 jobs. This means one of the largest banks in the World is about to reduce 1 in 10 of its personnel. Coming to an HSBC near you!

Chart of the Day

French are revolting.

French Kissing the Bottom (Source: Bloomberg)

Events

Macro Events:

• Update:
  • US ISM Manufacturing we talk about – lets just say it’s the same feeling as when your wife says she’s got a “nice surprise for you tonight” only for you to find out that she’s finally found a good colour for the curtains… and they’re only five times over budget…
  • Alerts:
    • US Core Inflation number (PCE Core)
    • Irish Consumer Confidence numbers out. No more nasty surprises please!

Corporate Events:

Results (busy day in Japan):

*American Tower [AMT], CBS [CBS], Coach [COH], Cognizant Tech [CTSH], Duke Energy [DUK], Eisai Pharm [4523 JT], Emerson Electric [EMR], FirstEnergy [FE], Honam PetroChemical [011170 KS], Kubota [6326 JT], Mitsui [8031 JT], NTT Data [9613 JT], Och-Ziff Capital (Hedge Fund) [OZM], PetroHawk [HK], Sumitomo [8053 JT], Toyota Motor [7203 JT]

Dividends:

*Mosaic [MOS]

Reading, Links:

• Cypriot Economy Up in Smoke:
• Cyprus #1
• Cyprus #2
• Cyprus #3
• HSBC (Horrifically Slashing Banking Costs):
• HSBC #1
• HSBC #2
• UKsafe haven:
• UK Safe Haven #1
• UK Safe Haven #2