China and India lose their appeal for investors on inflation fears

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Fund managers are still super-bullish on Russia, betting that the energy boom has life yet. A net 62pc are overweight oil and gas shares. The most hated trio are travel and leisure (-66), banks (-62) and property (-60).

Karen Olney, Merrill’s European equity strategist, said oil is nearing its cycle peak. “Is the trade too crowded? Probably. As long as fundamentals remain strong, we retain our overweight stance,” she said.

“The burning question is when to sell oil companies and move back to banks.

“We resist the temptation. The time is nearer when inflation rolls over, towards the end of this year and certainly into 2009.”

A record number (net 29pc) are now underweight on European equities; many have switched into cash as they wait for the European Central Bank to inflict punishment – ever more likely after eurozone inflation reached an all-time high of 3.7pc in May.

The ECB’s chief economist, Jurgen Stark, said yesterday that the price spike was a “cause for alarm”.

Mr Bowers said Europe is now facing a triple whammy as the downturn in global export markets combines with a strong euro and a monetary squeeze.

“Eurozone retail sales have been worse than in the US on a year-on-year basis and eurozone GDP growth has also been worse,” he said. “If you look at Spain and Italy, and even France, they are very weak.

“The Fed has eased dramatically, but the ECB hasn’t eased at all. It intends to tighten regardless of the consequences on growth. This is what is eating away at confidence in Europe,” he said.

Merrill Lynch said fund managers were belatedly adapting to a global inflation shock that poses a serious danger to asset prices, and risks setting off “civil protest” in Argentina, Indonesia, South Africa and the Gulf states.

As the new story unfolds, America is coming back into favour, emerging as a sort of safe haven in a fast-changing world where trusted institutions command a premium. Investors are quietly rotating back into Wall Street – despite a chorus of pessimists. A net 23pc are overweight US equities, the highest since August 2001.

The long awaited “decoupling” has begun.

The United States looks like the winner after all.

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RBS issues global stock and credit crash alert

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By Ambrose Evans-Pritchard, International Business Editor

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.

A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the “Crossover” index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

“I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

“Cash is the key safe haven. This is about not losing your money, and not losing your job,” said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America’s fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

“Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point,” he said.

US Federal Reserve and the European Central Bank both face a Hobson’s choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. “The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation,” he said.

“The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets,” he said.

Kit Jukes, RBS’s head of debt markets, said Europe would not be immune. “Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

“The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured,” he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.

Homes foreclosure more than doubled in 1Q from 2007

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Tuesday April 29, 6:18 am ET, by Alex Veiga, AP Business Writer

Number of US homes facing foreclosure jumps 112 percent in first quarter from 2007 LOS ANGELES (AP) — The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Monday.

Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.

Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said.

The latest tally also represents an increase of 23 percent from the fourth quarter of last year.

RealtyTrac monitors default notices, auction sale notices and bank repossessions.

All told, one in every 194 households received a foreclosure filing during the quarter. Foreclosure filings increased in all but four states.

The most recent quarter marked the seventh consecutive quarter of rising foreclosure activity, RealtyTrac noted.

“What would normally alleviate the foreclosure situation in a normal market is people starting to buy properties again,” said Rick Sharga, RealtyTrac’s vice president of marketing.

However, the unavailability of loans for people without perfect credit and a significant down payment is slowing the process, he said.

“It’s a cycle that’s going to be difficult to break, and we’re certainly not at the breaking point just yet,” Sharga added.

The surge in foreclosure filings also suggests that much-touted campaigns by lawmakers and the mortgage lending industry aimed at helping at-risk homeowners aren’t paying off.

Hope Now, a Bush administration-organized mortgage industry group, said nearly 503,000 homeowners had received mortgage aid in the first quarter. Most of the aid was temporary, however.

Pennsylvania was a notable standout in the latest foreclosure data. The number of homes in the state to receive a foreclosure-related filing plunged 24.4 percent from a year earlier.

Sharga credited the decline to the state’s foreclosure relief measures, noting that cities such as Philadelphia put in place a moratorium on all foreclosure auctions for April and implemented other measures aimed at helping slow foreclosures.

Nearly 157,000 properties were repossessed by lenders nationwide during the quarter, according to RealtyTrac.

The flood of foreclosed properties on the market has contributed to falling or stagnating home values, yet lenders have yet to implement heavy discounts on repossessed homes, Sharga said.

Nevada posted the worst foreclosure rate in the nation, with one in every 54 households receiving a foreclosure-related notice, nearly four times the national rate.

The number of properties with a filing increased 137 percent over the same quarter last year but only rose 3 percent from the fourth quarter.

California had the most properties facing foreclosure at 169,831, an increase of 213 percent from a year earlier. It also posted the second-highest foreclosure rate in the country, with one in every 78 households receiving a foreclosure-related notice.

California metro areas accounted for six of the 10 U.S. metropolitan areas with the highest foreclosure rates in the first quarter, RealtyTrac said.

Many of the areas — including Stockton, Riverside-San Bernardino, Fresno, Sacramento and Bakersfield — are located in inland areas of the state where many first-time buyers overextend themselves financially to buy properties that have plunged in value since the market peak.

“California still hasn’t hit bottom,” Sharga said. “We have a lot of California homes that are in early stages of default that may not be salvageable because either there’s no market or financing available, or both.”

Arizona had the third-highest foreclosure rate, with one in every 95 households reporting a foreclosure filing in the quarter. A total of 27,404 homes reported at least one filing, up nearly 245 percent from a year ago and up 45 percent from the last quarter of 2007.

Florida had 87,893 homes reporting at least one foreclosure filing, a 178 percent jump from the first quarter of last year and a 17 percent hike from the fourth quarter last year. That translates into a foreclosure rate of one in every 97 households.

The other states among the top 10 with the highest foreclosure rates were Colorado, Georgia, Michigan, Ohio, Massachusetts and Connecticut.

RealtyTrac Inc.: http://www.realtytrac.com

How to Steal Money from the Stock Markets

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Revealed: the dirty tricks of rogue traders
By Robert Winnett, The Daily Telegraph 3/21/08

A hedge fund based in London set up a “dirty-tricks unit” to manipulate share prices and get illicit information on companies in an attempt to make millions on the stock market, an insider has revealed.

  • Jeff Randall: Rumour Mill mafia is destroying our savings
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  • As the official hunt began for the rogue traders who tried to bring down Britain’s biggest mortgage lender, HBOS, The Daily Telegraph can reveal a whistle-blower’s account of how a multi-billion pound fund allegedly used illegal tactics to drive down stock prices.

    the dirty tricks of rogue traders

    Wanted: the trader who allegedly made £100m from the 17 per cent slump in HBOS shares
    Private detectives were allegedly employed to hack into executives’ emails and telephone records.

    Front companies were set up to allow the hedge fund traders to pose as independent researchers or journalists.

    Negative information on companies was then distributed to leading investment banks in the hope that rumours would spread and some share prices would fall.

    The hedge fund, which cannot be named for legal reasons, stood to make millions from “short-selling” the shares as they fell in value.

    The allegations – made in a sworn statement seen by The Daily Telegraph and which has been sent to financial regulators – will add to growing concern over the activities of rogue traders in the City.

    The Financial Services Authority, the City regulator, has begun a criminal investigation to find the trader who allegedly made £100 million from the 17 per cent slump in HBOS shares on Wednesday.

    white collar crimes pays big

    The shares fell after “malicious” rumours were spread in the City about the bank, sparking fears that the price had been illegally manipulated – a move described as “the modern day version of bank robbery”.

    FSA investigators are seeking emails sent to traders that are thought to have prompted widespread selling of HBOS shares. They claimed the bank was experiencing difficulties.

    advertisementIt has emerged that the rumours are thought to have originated in the Far East, with Singapore named as the most likely source. Nick Leeson, the notorious rogue trader responsible for the collapse of Barings Bank, also operated in Singapore.

    In a separate development, Credit Suisse, the investment bank, admitted that it had uncovered a separate £1.4 billion share-dealing scam by rogue traders – many of whom were based in London – who were trying to protect their bonuses.

    The Credit Suisse traders are understood to have sought to cover up their trading losses at the end of last year.

  • Shadows who move markets | What is short-selling?
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  • The revelations follow a week of turmoil in the global markets after the near collapse of the American investment bank Bear Stearns.

    Following a meeting with the major banks, it emerged that the Bank of England was considering helping to alleviate the financial crisis by easing the restrictions on banks seeking to borrow money from it.

    The accusations about the hedge fund form the most detailed account yet of the illicit activity carried out by the London office of a major international hedge fund. Such tactics are also thought to be used by other hedge funds.

    The sworn statement containing the allegations is understood to have been sent to the FSA last year although it is not known what action the regulator took.

    The document alleges that:

    – Employees of the hedge fund ordered an American-based private detective to hack into the corporate email systems of two firms in which the hedge fund had an interest

    – A bogus firm — with a phoney internet address — was established to allow employees to pose as independent researchers and approach company executives to garner information on their firms’ future financial prospects. The firm was also used to gain access to industry conferences.

    – A false website — with a bogus address — was also registered to allow hedge fund traders to pose as journalists. The offices of American politicians were approached by people claiming to be journalists to obtain information about potential new laws banning internet gambling that would hit British firms.

    – Jurors and their families in a sensitive legal case into whether a firm had exclusive patent rights in which the hedge fund had invested were “tapped up”. Money was allegedly paid to jurors’ families for information about jury-room deliberations.
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    ? – Hedge fund staff gathered “sensitive” negative information on firms in which they had an interest in the share price falling. This information was distributed to leading investment banks whose experts were encouraged to take a dim view of the prospects of the company’s shares. A German “media consultant” was also used to disseminate information.

    – A safe containing large amounts of cash was installed in the hedge fund’s office. Money was paid to “sources” providing valuable inside information. On one occasion, an anonymous informant was paid $50,000.

    The hedge fund at the centre of the allegations has offices in London’s West End and traders spent their staff Christmas party on a luxury cruise.

    It was set up by former senior executives from a blue-chip investment firm. However, from 2005, the “dirty-tricks unit” was staffed by former corporate investigators and investigative journalists hired from newspapers.

    Pressure is growing on the FSA to clamp down on the worst excesses of the hedge fund industry after a series of scandals culminating in the attempt this week to start a run on HBOS.

    The hedge fund “dirty tricks unit” exposed today was set up in London but operated around the world. It is alleged that this was to avoid tougher regulatory controls in New York.

    On Thursday, Britain’s biggest banks met with the Bank of England to urge them to loan more money to help alleviate the impact of the global credit crunch.

    The Bank, which agreed to some of the demands, released another £5?billion for the money markets. The stock market, which dropped slightly, is now closed until Tuesday.

    HBOS shares recovered on Thursday, closing up more than six per cent.

    the audacity of hope

    Iran, China and Russia vs. America, Israel – Who will Win?

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    A Three Step Plan to Usher in the Amero

    1. Create a Financial Problemsub-prime mortgage fiasco, housing market collapse, recession, trillions of dollars in debt, uncontrolled military spending, federal reserve private banking monopoly engineered economics, Iran and Russia to form an OPEC like cartel to sell gas to China and India with trading done and prices pegged to the Russian Ruble, Neo-Cons boosting of impending financial crisis, keep dumping Chinese made goods in the usa and further erode the manufacturing base

    2. Predictable Reactionpeople go nuts, economy tanks, stock markets lose confidence, everyone starts to dump the dollar, governments intervene to prevent the run on the dollar and the banks, china iran and russia come out stronger and portrayed as the cause of the problem and the enemy

    3. Offer the Solution – American government offers the solution to solve the problem, The North American Union is formally introduced to the half asleep Americans, Amero replaces the dollar as the single north American wide currency, American economy now to fully exploit the cheap Mexican labor plus the cheap Canadian natural resources this solution offered as the perfect new troika, everything going according to plan, neo-cons further their agenda to eventually replace the Amero with the cashless micro-chip based society where rights and freedoms are things of the past

    It’s the classic Problem, Reaction, Solution – the Hegelian model for a new world order and new one world government run out of Jerusalem.

      America’s Dirty Little Secret – We are Bankrupt!

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      David Walker, the Comptroller General of the United States proclaims that our current standard of living is unsustainable unless drastic action is taken. He warns that funding shortfalls for the Medicare program is five times worse than Social Security, and it will take $8 TRILLION to pay for what is promised today to beneficiaries, of which we have ZERO!

      This unrealistic “promise” is fiscally irresponsible and is mortgaging the futures of our children and grandchildren.

      Watch as the federal government’s dirty little secret is revealed!

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      The the United States Top Accountant, the person who monitors and US Budget and Spending. And he is the one raising the alarm bells!

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      Even CNN, seems to be reporting part of the truth for a change – American has got nada – no mo money – bankrupt – in debt! Why does it take so much effort to wake up Americans from their slumber? Zombies would have an easier time understanding the facts.

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      Learn who REALLY controls the U.S.Dollar and how these people are destroying America by design. The Federal Reserve Bank is neither Federal nor a Reserve nor a real Bank. Owned by a corrupt group of International Bankers, it is a privately owned monopoly, largely responsible for creating America’s National Debt. It is also a parasitic and unnecessary entity that literally creates American currency out of nothing and then collects interest on the backs of taxpayers for doing so.

      Ever wondered why we keep trying to guess “Fed Speak”? Why are politicians elected to represent the people guessing and begging a private banker if he will or will not raise interest rates?

      Read the full story, on Wikipedia;

      Some believe the Federal Reserve System is shrouded in what its critics call excessive secrecy. Meetings of some components of the Fed are held behind closed doors, and the transcripts are released with a lag of five years.[69] Even expert policy analysts are unsure about the logic behind Fed decisions.[70] Critics argue that such opacity leads to greater market volatility, because the markets must guess, often with only limited information, about how the Fed is likely to change policy in the future. The jargon-laden fence-sitting opaque style of Fed communication, especially under the previous Fed Chairman Alan Greenspan, has often been called “Fed speak.”[70]

      Jerome Kerviel, French Trader Had an Accomplice

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      Collaboration at Société Générale? 2nd person taken into custody

      By Nicola Clark, Katrin Bennhold and James Kanter

      Friday, February 8, 2008

      PARIS: A French investigation into Jérôme Kerviel, the former trader who Société Générale says cost it nearly €5 billion, or more than $7 billion, last month, took on wider dimensions Friday as French financial police interrogated a second person in relation to the case, calling into question the bank’s assertion Kerviel had acted alone in setting up billions of euros worth of fictitious trades.The news came as a Paris court bowed to prosecutors’ arguments that Kerviel should be taken into custody, partly to prevent him from having contact with significant witnesses in the case.Legal experts said that the revelation that Kerviel – who courtroom observers said appeared shocked by the decision to detain him – might not have been the lone operator the bank has made him out to be suggested that oversight of Société Générale’s trading room may have been recklessly lax. That may put added pressure on Daniel Bouton, the bank’s chief executive, and other top managers to explain more fully the circumstances that led up to the losses.”

      It really suggests a higher-level failure of risk management than we thought two weeks ago” when the bank initially disclosed its trading losses, said Christopher Mesnooh, an international business lawyer based in Paris.”It’s one thing to overlook one person, but if it’s two people then it begins to stagger the imagination,” he said. “It looks as if there was probably a greater deal of collaboration than has so far been disclosed, as well as oversight failure.”

      According to two people with knowledge of the investigation, Société Générale has provided prosecutors with new evidence related to Kerviel’s fictitious trades, including a series of electronic message exchanges between Kerviel, 31, and Moussa Bakir, a 32-year-old broker at Newedge, Société Générale’s futures brokerage unit formerly called Fimat, that were sent using the bank’s internal computer system.

      According to these people, who requested anonymity because they were not allowed to discuss the case, one such message, sent by Bakir to Kerviel on Nov. 30, read: “You have done nothing illegal in terms of the law.”

      Both added that this message was only a “small part” of the communications linking the two men and that there was more “interesting” correspondence that had yet to be disclosed.

      The message was sent four days after Eurex, the Frankfurt-based derivatives exchange, had sent a query to Société Générale’s compliance department on Nov. 26 demanding clarification of several suspicious trades of stock index futures that Kerviel had made.

      This was the second letter from Eurex in less than three weeks questioning Kerviel’s investment strategy and, in particular, asking about his habit of entering trades through a broker at Fimat, rather than from Société Générale directly.

      In a letter Nov. 7 letter to Société Générale, Eurex even inquired whether Kerviel had entered the transactions automatically or manually.

      “Please explain the background for this procedure,” two Eurex officials wrote.

      Investigators are also examining Kerviel’s mobile phone bills, which Jean Veil, a lawyer for Société Générale, earlier this week described as unusually high, suggesting, he said, that there “could have been” others involved.

      Veil emphasized the bank had found no evidence to suggest that Kerviel had accomplices.

      “That said,” Veil said, “I am asking myself how he could have built up a €1,000 monthly cellphone bill given that he worked all day long in an office with telephones.”

      A spokeswoman for the Paris prosecutor’s office, Isabelle Montagne, confirmed that the police had taken a male employee of Newedge into custody around midday on Thursday and that he was expected to be held for questioning until around midday on Saturday.

      She added that the police had also raided Newedge’s offices on the Champs-Elysées in central Paris on Thursday, taking documents and computer files.

      A spokeswoman for the Société Générale, Joelle Rosello, declined to comment, saying the bank was “cooperating closely with the investigation.”

      Société Générale last month merged Fimat into Newedge, a joint-venture with the futures brokerage unit of Calyon, the investment banking arm of Crédit Agricole, another French bank. Spokespeople for Newedge referred all inquiries about the matter to Société Générale.

      Stéphane Bonifassi, a business crime expert at the law firm Lebray & Associes in Paris, said the emergence of Bakir as a possible accomplice could have played favorably for the prosecution at the hearing Friday.

      “The prosecution played it very subtly by having this other guy in the background,” Bonifassi said. “That there is this other guy may have strengthened the need to place Kerviel in pre-trial detention to avoid them talking together or coordinating their stories,” a risk often used to justify a request for pre-trial detention, he said.

      Frédérik-Karel Canoy, a lawyer acting for small shareholders who was present as the ruling was read, said that when informed of the decision, Kerviel appeared as if “the sky had fallen on his head.”

      “When he heard the words ‘placed in detention’ you could see his body crumple slightly as if it suddenly hit him that he really was going to prison,” Canoy said. Another lawyer who was present said that Kerviel was escorted away from the hearing room by three gendarmes but that he was not handcuffed. Kerviel’s lawyer, Elisabeth Meyer, wept, Canoy said.

      Looking ashen-faced as she addressed a crush of cameras after the verdict, Meyer spoke in short, clipped sentences and vowed to appeal the decision.

      “I cannot explain this decision,” Meyer said. “He’s met more than his match,” she said of Kerviel.

      Ulrike Weiss, a spokeswoman for the Paris prosecution described the court’s decision as being “in line with our arguments.”

      The Paris prosecutor, Jean-Claude Marin, last month requested that Kerviel be detained to protect him from media and professional pressure and because of concern about his mental health – and the possibility of suicide – before a trial.

      Veil, the Société Générale lawyer, said the decision also reflected the concerns of prosecutors and the bank’s defense team that letting Kerviel go might risk interference with important witnesses or evidence in the case.

      Kerviel, who was held by the police for two days of questioning last month was released under judicial supervision on Jan. 28. But that decision, by investigating judges in the case, was appealed by the prosecutor, Marin, which prompted Friday’s hearing.

      Weiss, the prosecution spokeswoman, said that Kerviel could be detained for a period of between four and 12 months.

      Kerviel was taken to La Santé prison, close to the center of Paris, where high-profile suspects like business leaders and politicians are often held while under investigation, according to Christophe Reille, his lawyer’s spokesman.

      Kerviel is being investigated on allegations of forgery, breach of trust and illegal computer use, but he has not been formally charged with a crime.

      In France, before formal charges can be brought, a judge must complete an investigation. If convicted, Kerviel could face a maximum sentence of three years in prison and a fine of €370,000.

      jerome.kerviel.societe.general.banktrader

      Bonifassi said that any chances of an appeal by Kerviel against an detention would be unlikely to succeed.

      “I’d give an appeal extremely thin chances,” Bonifassi said.

      He also said that the decision Friday represented a preliminary judgement on Kerviel’s guilt.

      “Although judges will not admit it because pre-trial detention should not be based on feelings about someone’s guilt, the decision does show a feeling among the judges that he is guilty of something,” Bonifassi said.

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