In-depth analysis on Credit Writedowns Pro.

Links: 2013-08-21

Spanish banks’ bad loan ratio rises to record in June | Reuters

“Spanish banks’ bad loans as a percentage of total credit rose to a fresh high of 11.6 percent in June, Bank of Spain data showed on Monday, as more households and small companies, particularly those from the property sector, struggle with debts.”

Greek current account surplus widens in June, helped by tourism | Reuters

“The current account balance, a key measure of economic competitiveness, showed a surplus of 663 million euros ($884 million) from 73.1 million euros in the same month last year.

Tourism receipts, the country’s biggest money earner, rose 21 percent year-on-year to 1.59 billion euros in June. This brings total tourism receipts in the first half of the year to 3.32 billion euros, up 18 percent compared with the same period last year.”

Emerging world can handle turmoil – FT.com

“Worries that this presages a full-scale financial meltdown are premature. Although many emerging countries are experiencing credit bubbles caused by the rich world’s crisis management, the composition of capital flows is healthier than before the Asian financial crisis. On average more than half of inflows to emerging markets are equity capital, much of it direct investment. Many countries have big reserves or floating currencies with which to mitigate portfolio flow reversals – lessons learnt in Asia’s last crisis. Even India, with a large current account deficit, has a tolerable net asset position (but many other problems). Things look worse for countries on the European fringe, such as Turkey.”

Emerging markets feel the heat – FT.com

“Turkey’s central bank unexpectedly raised rates to buttress its wilting currency as policy makers across the developing world scrambled to stem the turmoil rattling emerging markets.

The interest rate rise helped the Turkish lira to rally against the US dollar, but elsewhere in emerging markets the turmoil continued unabated. The FTSE Emerging Markets index shed a further 1 per cent to fall to its lowest level in a month, and borrowing costs rose higher across the developing world.”

EM storms could spread to Europe – FT.com

“The risk for Europe, however, is that periphery eurozone bond markets could be next in line for a sell-off. If German 10-year Bund yields are rising – they have this week exceeded 1.9 per cent, compared with less than 1.2 per cent in early May – yields below 4.5 per cent on Italian and Spanish equivalents look less compelling.

For now, eurozone bond yields have remained steady for the (not entirely positive) reason that fickle foreign investors have already fled the region’s weakest markets. But we are at the start of a long process in which US monetary policy will evolve – with effects nobody can predict with confidence. “

India rules out further capital controls – FT.com

“India has rejected suggestions that its faltering economy faces a balance of payments crisis and has ruled out new capital restrictions on foreign investors, despite rising concerns about rapid rupee depreciation, capital outflows and a falling stock market.

Prime Minister Manmohan Singh at the weekend reassured investors that India’s $279bn of reserves would be sufficient to let the country ride out what is arguably its most pressing economic crisis in two decades. “

Germany plans tax on bitcoin after virtual currency recognised as ‘private money’ – Telegraph

“Germany is to impose a 25pc capital gains tax on Bitcoin transactions following a ruling that the virtual currency is a form of money. “

Return of the interest-only mortgage – Telegraph

“Confidence in the rebounding property market is so high that a high street bank is offering controversial interest-only mortgages through its branches. “

India on the brink of its own financial crisis | Business | The Guardian

“In a reprise of the 1997-98 Asian crisis, India’s stock market is plunging, bond yields are nudging 10% and capital is flooding out of the country”

Male bosses’ bonuses are double those of female colleagues in identical jobs | Business | The Guardian

“Report reveals men in UK management roles earned average bonuses of £6,442 last year, compared with £3,029 for women”

North Sea faces record fall in oil and gas production – Telegraph

“North Sea oil and gas production could decline by as much as 22pc this year – the biggest annual slump on record – as maintenance on ageing infrastructure hits operations, the industry body has warned. “

Mortgage lending at five-year high, raising housing bubble fears | Money | theguardian.com

“Gross lending jumped to £16.6bn in July, up 12% on previous month and 29% higher than same period last year”

BBC News – CBI: UK manufacturers enjoying strong rebound

“Orders, especially for exports, have recovered strongly, according to the business group’s regular Industrial Trends survey of 400 firms, and the growth rate is expected to accelerate.

The buildings materials, electrical goods and metal manufacturing sectors are seeing particularly robust growth.”

Record numbers of Britons have no plans to retire – Telegraph

“Many expect to have to sell their home or “primary residence” to top up their pension pot.

The findings were described as “alarming” by fund manager Barings Asset Management, which commissioned the research.

Barings said that 18pc of over 65 year-olds still in work did not know when they would be able to call it a day. A further 34pc of 55 to 64-year-olds have no idea when they are likely to retire.

Both figures are the highest recorded by Barings over the past three years. “

Japan economy may have bottomed out in late 2012 – government panel | Reuters

“the panel decided that more data and evidence would be needed before coming to a conclusion, though GDP data released earlier this month showed the economy expanded 2.6 percent on an annualized basis in the second quarter of this year, slowing from 3.8 percent growth in the first quarter.

“If November were to be the bottom, that would make it quite a short period of contraction,” Hiroshi Yoshikawa, the panel’s chairman and a professor of the University of Tokyo’s graduate school, told a news conference after the meeting on Wednesday.

“When you look at GDP since the fourth quarter of 2012, personal consumption has made a big contribution to growth.””

Crippled Fukushima nuclear plant springs fresh leak – FT.com

“Shares in Tokyo Electric Power plunged as much as 15 per cent on Wednesday as Japan’s nuclear regulator raised concerns over a huge leakage of contaminated water at Tepco’s stricken Fukushima plant.

The Nuclear Regulation Authority said that the latest incident – in which 300 tons of contaminated water seeped from a storage tank – could rank as a “level 3” classification on an international eight-point scale. That marks a “serious extraordinary event”.”

Indian rupee plunges to record low despite RBI intervention | Reuters

“The rupee fell 2 percent to a record low of 64.5450 to the dollar despite what traders said was sporadic central bank intervention in both the spot and forward markets.

Measures by the Reserve Bank of India late on Tuesday to support longer-dated debt sent prices of beaten-down bonds sharply higher but also led traders to question the central bank’s resolve in defending the currency.”

Thailand Cuts Growth Outlook as Economy Enters Recession – Bloomberg

“Thailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis, with rising household debt limiting central bank scope to support the economy. Stocks fell.

Gross domestic product unexpectedly shrank 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic and Social Development Board said in Bangkok today. Only one of 11 analysts surveyed had predicted a decline. The economy rose a less-than-estimated 2.8 percent from a year earlier.”

Mexico slashes growth forecasts amid first contraction in four years – Telegraph

“The country’s finance ministry said it now expected the economy to go by 1.8pc this year, from a previous forecast of 3.1pc. The government had already cut its prediction from 3.5pc earlier this year. “

Mexican Economy Contracted in Second Quarter – WSJ.com

“Gross domestic product shrank 0.74% from the first quarter in seasonally adjusted terms, the National Statistics Institute, or Inegi, said Tuesday. That translates into an annualized decline of 2.9%.

Mexico has become another weak patch in the global economy, along with big emerging markets like Brazil which has been held back by a decline in commodity prices. The sluggish activity is adding a sense of urgency to the government of President Enrique Peña Nieto to press on with his reform agenda, including the recently proposed overhaul of Mexico’s state-run energy sector by allowing a far bigger role for private companies.”

Is the shale forecast curve hyperbolic, or exponential? | FT Alphaville

A good overview of the shale gas situation in the United States and the questions about growth and price.

German Government Fails to Get Past NSA Spying Scandal – SPIEGEL ONLINE

“As the election approaches, Chancellor Angela Merkel is working hard to dissipate anger over controversial surveillance by German and US intelligence agencies. But every time Berlin assures voters that all is well, its claims are discredited.”

White House wants pushover bubble-watching Fed chair who would be fun to have a beer with during a crisis | FT Alphaville

“That’s our exaggerated (but not too much) reaction to reading Neil Irwin’s column on the reasons that White House insiders are uneasy with Janet Yellen as Fed chair.

Roughly, the reasons are that she has demonstrated an independent streak in her role as Fed vice chair, is big on preparation and prefers deliberate thinking to a “manic” problem-solving approach, and is more worried about unemployment right now than about fighting asset bubbles.

To reiterate, those are considered bad things.”

Indonesia Rupiah, Stocks Plummet on Current-Account Gap – Bloomberg

“Indonesia’s rupiah fell to 10,500 per dollar for the first time since 2009, stocks dropped by the most in 22 months and government bonds plunged after the current-account deficit widened to a record last quarter.

The Jakarta Composite Index of shares has fallen 8 percent in two days, and is now the world’s worst performer this quarter. The yield on 10-year notes surged to the highest since March 2011 after Bank Indonesia said late Aug. 16 the current-account shortfall was $9.8 billion, the largest in data compiled by Bloomberg going back to 1989. Inflation quickened to a four-year high and economic growth slowed to the least since 2010, figures showed last week. “

Fannie Mae, Freddie Mac Ignoring Write-Offs, Report Says – Bloomberg

“Fannie Mae and Freddie Mac, which have reported record profits after a taxpayer bailout, are ignoring billions of dollars in potential losses on overdue loans as they take three years to adopt a new accounting system, a government auditor said in a letter made public today.

The accounting change should be made immediately and could have a material impact on the companies’ finances, according to the Aug. 5 letter to Federal Housing Finance Agency acting director Edward J. DeMarco from Steve Linick, the regulator’s inspector general. “

Judge endorses use of fraud law against Bank of America | Reuters

“A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the Justice Department is trying to use in cases against Wall Street banks.”

Greece will need third bailout, Germany concedes – FT.com

“Wolfgang Schäuble, Germany’s finance minister, acknowledged for the first time on Tuesday that Greece would need a third bailout, touching on a politically fraught subject less than five weeks before a general election.

Speaking at a campaign event near the northern port of Hamburg, Mr Schäuble said: “There will have to be another programme in Greece,” in order to help the country “get over the hill” of debt financing that it still faces. “

BBC News – China home prices continue to rise in July

“Prices of new houses rose in 69 of 70 major cities, compared with a year ago.

China has unveiled a series of measures in recent times to curb speculation in the sector, amid concerns of asset bubbles forming in the country.

Analysts said that despite the curbs, demand for property investment remained high in China, driving up prices. “

BBC News – Japan trade deficit worsens on back of weak yen

“Japan’s trade deficit worsened in July, almost doubling from a year ago, as a weak yen boosted import costs.”

Barack Obama’s lost youth | Harry J Enten | Comment is free | theguardian.com

“Little attention has been paid to which age groups Obama has been losing support from. Often, public polls have small sample sizes for subsamples, especially for young people, who are difficult to reach. The Gallup tracker (and yes, Gallup’s overall Obama approval matches other public polls) allows a way around this problem. Since it polls every day, we can add multiple polls together to get a very good idea of how Obama is doing by age group.

Obama’s overall approval was 50.8% per Gallup in the month before election, but it has decreased by 5.1pt, to 45.7%, since July. The decline, it turns out, can mostly be ascribed to younger voters”

NSA revelations of privacy breaches ‘the tip of the iceberg’ – Senate duo | World news | theguardian.com

“Leading critics of NSA Ron Wyden and Mark Udall say ‘public deserves to know more about violations of secret court orders'”

The NSA’s Alarming Misbehavior – Bloomberg

This is an editorial by Bloomberg News

“Intelligence professionals — especially those with a mission as important as the NSA’s — deserve the benefit of the doubt on many issues. But the alarming behavior the recent leaks have revealed shows that the NSA requires strong supervision, and it’s clear that the current system of oversight is failing. “

Cameron Proves Greenwald Right « The Dish

“Readers know I have been grappling for a while with the vexing question of the balance between the surveillance state and the threat of Jihadist terrorism. When the NSA leaks burst onto the scene, I was skeptical of many of the large claims made by civil libertarians and queasily sympathetic to a program that relied on meta-data alone, as long as it was transparent, had Congressional buy-in, did not accidentally expose innocent civilians to grotesque privacy loss, and was watched by a strong FISA court.

Since then, I’ve watched the debate closely and almost all the checks I supported have been proven illusory.”

Treasury Term Premium Increases to 2-Year High: Chart of the Day – Bloomberg

“A valuation model measuring the extra yield investors demand for holding 10-year Treasuries climbed to the highest level in two years after the June employment report suggested the need for Federal Reserve stimulus is easing.

The CHART OF THE DAY shows the term premium rose on July 5 to 0.46 percent, the highest since July 2011, according to a Columbia Management Investment Advisers LLC model.”

Germany Profiting from Euro Crisis Through Low Interest Rates – SPIEGEL ONLINE

The numbers here are dubious but this is the kind of stuff you use to tout your party’s case during an election. For people outside of Germany, it seems appalling that the numbers would stack up this way. My math shows a return of 68x taxpayer’s money using this calculation.

“Germany has profited from the euro crisis to the tune of 41 billion euros in reduced interest payments. Strong demand for its debt has cut yields and made it cheaper for Germany to borrow. Meanwhile, the crisis has only cost Germany a mere 599 million euros thus far.”

Also see here: http://www.creditwritedowns.com/2012/07/germany-biggest-winner-euro-fixed-exchange-rates.html

British have invaded nine out of ten countries – so look out Luxembourg – Telegraph

“Britain has invaded all but 22 countries in the world in its long and colourful history, new research has found. “

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

Comments are closed.