FRANKFURT (Reuters) – Volkswagen’s (VOWG_p.DE) supervisory board Chairman Ferdinand Piech unexpectedly resigned on Saturday in the wake of a leadership crisis he kicked off earlier this month by saying he had “distanced” himself from Chi…
To be sure, we’ve had our share of laughs at the expense of China’s margin-fueled equity mania. First there was the realization that more than 4 million new stock trading accounts were created in China last month alone — the country is now adding nearly that many each week. Then we discovered that if statistics are to be trusted, around one in three of those millions of new accounts likely belongs to someone with an elementary school education or less. Finally, we learned that the rally has minted an army of day trading housewives, security guards, and most recently, banana salesmen who last Monday traded so much that they literally overwhelmed the Shanghai Exchange’s volume-tracking software.
But not everyone thinks it’s a veritable tulip mania, just ask HSBC’s head of China equity strategy Steven Sun who “wouldn’t say it’s a bubble,” or Citi who figures turnover in Hong Kong could double from here boosting exchange operator HKEx’s bottom line by 40% in the process. So against this backdrop we wondered: are foreign investors as enthusiastic about the prospects for a continuation of the rally in Asia?
The answer, it turns out, is no. Here’s JPM:
How are investors positioned in China? Chinese equities continued to rally this week driven by Shanghai-Hong Kong Stock Connect program flows. The Shanghai-Hong Kong Stock Connect program, which allows investors in each market to trade shares on the other market, was launched on Nov 17th 2014, triggering a wave of inflows and speculation into the Chinese equity market initially and the Hong Kong equity market more recently. Figure 7 shows the cumulative Southbound and Northbound flow since Nov 17th. Both flows accelerated over the past week boosting the Chinese and the Hong Kong equity market. Another evidence of domestic support to Chinese equities comes from the continued opening of new trading accounts by mainland traders. The Chinese Securities Depository and Clearing Corporation reports the opening of new accounts in the stock market every week. Weekly account openings reached a new historical high with 3.3 million account openings last week alone. A record 14 million accounts opened so far this year. These account openings suggest that the speculative wave that the Shanghai-Hong Kong Stock Connect program triggered within China is currently accelerating.
What about overseas investors? The flows into Chinese equity ETFs have been rather negative in recent months suggesting that there is little appetite by overseas investors to chase the Chinese equity rally. How overweight in Chinese equities are these overseas investors? Looking at the share of China in equity ETFs divided by China’s share in MSCI AC World index (Figure 8), we find that overseas investors’ positioning in Chinese equities is rather neutral vs. its history.
* * *
Don’t worry though — this guy is still bullish:
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Climate change is going to affect agriculture across the world as rising temperatures make many dry regions even drier, hot regions hotter, and wet regions more prone to flooding. All of those changes are going to affect the way the world’s food is grown. Some regions are going to get better for growing food, but […]
BERGAMO, Italy (Reuters) – UBI , Italy’s fifth-biggest bank, does not rule out a tie-up with troubled Monte dei Paschi di Siena but will not be pushed into an unwanted deal, its chief executive said on Saturday.
No Contemporary Thinking At The Fed
The picture of this very old telephone reminds of our “esteemed” Federal Reserve. They really seem incapable of any modern thought. Their parallels to, and fears of, the Great Depression [Former Chair Bernanke], seem to drive 2009-2015 monetary policy. It reminds me of incredibly stale thinking… sort of like their incredibly stale personalities. I suppose it’s a good match for them but not for the citizens of the world subjected to their currently ineffective and intellectually lazy policies… rooted in very ancient [just like most of them] history. Currency debasement goes back thousands of years i.e. the Romans debased their currency by lowering the content of silver in their coins.
Of course plenty can be learned from history. Frankly, I love history. But, remember, things do change…like the economy. Every cycle is akin to a fingerprint…completely unique…and requires unique solutions along with some “tried and true” ideas. Yet the policies of Bernanke and his mini-me [Yellen] seem almost entirely based on Bernanke’s obsession [and PhD thesis] with the “Depression”.
Now I am not going to list all of the differences in the economies of the 1930’s with the early 21st century. But just look at that picture up above and now think about the iPhone 6. Obviously…much different along with so many other things. And the changes are obviously MASSIVE.
Unfortunately, the members of The Fed just cannot determine why the current economy [the present dilemma is low wages and low inflation] is not accelerating like the old textbooks and intellectual “papers”, they frequently reference, say they should… given their unwavering commitment to both currency debasement and financial asset purchases. Frequently they point to the “tight” monetary policies of the mid to late 1930’s as an inhibitor to that period’s economic growth and, therefore, the exact opposite ought to be today’s remedy. That may be true…or not…but should that really be the driving force behind their easy money policies of 2009-2014…as it seems to be? They have to rationalize it somehow and this “dated” policy point seems to be the convenient “ration”.
My response to them is…Really….That’s All You Have. The 1930’s as a model for today’s economy along with Roman-esque currency dilution. All of your Ivy League educations and these are your ONLY real solutions. If the infamously innovative Howard Hughes or Steve Jobs were in that room, orchestrating the discussion for economically dynamic thinking, I suppose they would both “blow their tops” and start firing people yesterday. Thanks for your service but we require MODERN thought too. On your way out the door please leave your “Treo” phones and VCR’s in the recycling bin. You know what that is …RIGHT? The big blue container that looks like an over-sized trash can. FYI…It’ll accept your empty bottles of “Geritol” too.
RING…RING…RING…The Fed is accepting CONTEMPORARY AND GROUND-BREAKING IDEAS TO ATTACK OUR ECONOMIC MALAISE. Please leave your ideas on the answering machine…OH F _ _ K…I mean voice-mail, text, “page” or blog. Thank you.
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Over the past four decades, large corporations have learned to play the Washington game. Companies now devote massive resources to politics, and their large-scale involvement increasingly re-directs and constricts the capacities of the political system. The consequence is a democracy that is increasingly unable to tackle large-scale problems, and a political economy that too often […]
UBI Bank CEO Victor Massiah gestures during an interview with Reuters in downtown Milan July 6, 2012. To match Interview UBI-CEO/
MILAN (Reuters) – Foreign banks are not “queuing up” to buy lenders in Italy after a…
FRANKFURT (Reuters) – If running a global bank is complicated, cutting one back is even more difficult.
More than 16.8 million people tuned in Friday night to watch the ABC News television special in which Bruce Jenner said that he identified as a woman, according to preliminary ratings data provided by the network.
Mr. Jenner, the Olympic gold medalist and longtime member of the Kardashian family, told Diane Sawyer during the interview that he was making the transition to female from male.
â€œFor all intents and purposes, I am a woman,â€ he said. â€œPeople look at me differently. They see this macho male, but this female side is part of me, itâ€™s who I am. I was not genetically born that way.â€
The two-hour, wide-ranging interview appeared during a special edition of ABCâ€™s â€œ20/20â€ news program. It scored a much higher audience than the average viewership for â€œ20/20,â€ which is about 6.2 million.
The highly promoted interview was noteworthy because Mr. Jenner is among the most prominent people to come out as transgender. He said that the transition, which has captured headlines, was not a publicity stunt.
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It has been a very disturbing 24 hours for Greece.
It all started during yesterday’s surprisingly short, just one hour long Eurozone finmin meeting in Riga, where Yanis Varoufakis not only got the most “hostile” reception yet being called “a time-waster, gambler, and amateur“, but for the first time one minister openly said that maybe it was time governments prepared for the plan B of a Greek default. This happened after Jeroen Dijsselbloem slammed the door on Varoufakis’ proposal for early cash after partial reforms.
“A comprehensive and detailed list of reforms is needed,” Dijsselbloem told a news conference following a meeting in Riga. “A comprehensive deal is necessary before any disbursement can take place … We are all aware that time is running out.”
And so, what was once anathema, namely the official hints that a Grexit is being contemplated at the highest ranks, has now become almost commonplace, courtesy of the backstop provided by the ECB’s QE, which has lulled everyone into a sense of calm because somehow the hope has been kindled that the ECB (which is rapidly running out of government bonds to buy) can offset the realization that what was once an “unbreakable union” is suddenly not only breakable, but no longer a union. As such the trillions in deposit outflows that will sweep the periphery are somehow to be ignored because, well, “Draghi.”
This continued earlier today, when none other than German Finance Minister Schaeuble hinted that Berlin was preparing for a possible Greek default, drawing a parallel with the secrecy of German reunification plans in 1989.
As Reuters reports, at a briefing with reporters after a tense meeting of euro zone finance ministers on Greece on Friday, Schaeuble was asked if euro zone finance ministers were working on a “Plan B” in case negotiations on funding with cash-strapped Athens fail.
“You shouldn’t ask responsible politicians about alternatives,” Schaeuble answered, adding one only need to use one’s imagination to envisage what could happen.
He indicated that if he were to answer in the affirmative that ministers were working on a Plan B — what to do when Greece runs out of money and cannot pay back its debt — he could trigger panic.
To explain his position, he drew a parallel with the secrecy that was necessary during the initial stage of planning for German reunification in 1989.
“If back then a minister in charge — I was one of them — would have said beforehand, we have a plan for reunification, then the whole world probably would have said: ‘The Germans have gone completely crazy.'”
He is correct, but what is left unsaid is that the mere suggestion that Grexit no longer not being contemplated is a major escalation in Europe’s attempts to launch a bank run, which they have done an admirable job at so far, leading to more than half of total Greek deposits being funded by the ECB’s ELA as of this moment.
In other words, should the ECB boost the haircut on Greek bank collateral, and both a depositor bail-in and capital controls become inevitable.
Which incidentally, is what was also touched upon today, when the head of the Bundesbank and ECB governing council member Jens Weidmann said at a press conference in Riga, Latvia, that officials will discuss haircuts on collateral for emergency funding for Greek banks.
“As you know I have doubts about the provision of this emergency liquidity, because the banks are not doing all they can to improve their liquidity position, which I would expect from banks that avail of this assistance.”
“Instead, they are extending their loans — so-called T-bills — to the Greek state, which is each time a new credit decision. As these T-bills aren’t liquid, this means that in comparision with the alternatives, this is a deterioration of the liquidity situation which I find unacceptable.”
“The haircuts are designed according to the quality of the collateral — which in this case is mostly government debt securities — and that depends on the outlook for debt sustainability which is connected to a successful conclusion of the aid program.”
“From my point of view it is clear: time is running out, the solution cannot come from the central banks, we have a clearly limited task, a clearly limited mandate, and must abide by our rules.”
He, too, is of course correct, and yet his statement is also quite hypocritical, considering it is precisely the check-kiting scheme that Greek banks are engaged in and which the ECB “suddenly” finds objectionably, that has been the norm across Italy, Spain and Portugal for years: all countries whose reform efforst are laughable, and the only reason they haven’t imploded in the same pile of rubble as Greece is because the ECB has remained ss a buyer of last resort of their sovereign debt.
For now: because should Podemos or Beppe Grillo take chart in Spain or Italy, all bets are off, and the Greek “contagion”, which is really just the realization that there is no ECB bid into insolvent paper, will spread overnight.
Which brings us to the final reason why it has been a very nerve-wracking 24 hours for Greece.
In an interview with Bild, Mark Hauptmann, a lawmaker from German Chancellor Angela Merkel’s political party said that “if Greece stays in the euro, it will need not only a third bailout, but also a fourth, fifth or even more.”
He added that a Greek euro exit would be good in the long term because European contracts would regain their validity and Greece could regain its competitiveness.
He, too is correct.
Still, even with three “correct” statements laying out clearly why Greece should Grexit, somehow we doubt that anything will happen even as the posturing on all sides reaches a fever pitch, because while Europe may have Q€ as recourse to a Greek contagion, Greece now has a Putin threat as its final trump card. Because the second Greece is kicked out (or is forced to leave), the construction of the Turkish Stream begins, and with it the cementing of Russian energy dominance for the next decade, as well as the collapse of Ukraine (and the billions of western aid flowing into Kiev over the past year) into irrelevance.
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AbbVie Inc (NYSE:ABBV), the second leading drug maker in the fast-expanding hepatitis C drugs market, has yet another victory to add to its long established success story. Its new drug application (NDA) for its investigational hepatitis C virus (HCV) treatment has won a priority review from the US Food and Drug Administration, as announced on […]
Last month, CEO Elon Musk tweeted that Tesla would unveil a new product — not a car — on April 30, at the company’s facility in Hawthorne, California.
Now that the big event is near, we can pretty accurately predict what to expect when Musk takes to the stage: a battery.
Actually, two batteries. Tesla investor relations head Jeffrey Evanson revealed on Wednesday that the company would reveal a home battery and a “utility scale” battery — a battery for normal folks and a big battery for businesses.
We could still be surprised, by a heretofore unheard of or unrumored Tesla product. But that’s unlikely (although there was a bit of speculation that Tesla would roll out … a motorcycle!)
So here’s everything we know:
Elon Musk is also chairman of SolarCity, a provider of home solar panels. SolarCity has in the past offered home energy storage, using Tesla batteries. According to SolarCity’s website, the company will have installed about 450 of these systems through 2015. The idea is that a customer always has backup power.
When you draw power from the grid, you pay whatever the price is at the time you use the power. A Tesla battery would enable you to draw power during off-peak periods and “bank” that power, using it during peak periods. The big Tesla battery would permit businesses and institutions to do likewise.
As Bill Howard and Extreme Tech noted, “The [energy] draw is highest in late afternoon and evening, especially in air-conditioning months. So the Tesla battery, or competitors, could take a load off the grid at peak periods.” The US electricity infrastructure has endured some rough episodes in recent years, typically when the heat rises and millions of customers are making demands on the grid to stay cool. If some of those customers were using off-grid battery power, the burden would be eased.
Various news outlets have reported that hundreds of home batteries are already in use, as Tesla beta tests the technology. Wal-Mart stores are also using the tech.
It’s a white box with a Tesla logo and a bunch of sealed lithium-ion batteries inside. Minimalist chic.
Obviously, if you have a solar setup, you want to be able to bank as much power as possible when the Sun is shining. A high-capacity Tesla battery would allow you to do that.
Again, here’ s Extreme Tech’s Howard: “[The battery] would work financially through energy company rebates for conservation devices. There could also be tax credits. That lowers the effective cost of the battery packs, just as credits do for high-efficiency furnaces or solar panels.”
The facility is supposed to produce enough lithium-ion cells to build battery packs for, ultimately, 500,000 Tesla vehicles. Each Tesla car has about 8,000 li-ion cells in its battery pack. The home battery will contain a similar number. There aren’t enough cells being produced globally to fulfill Tesla demands on the vehicle side. So it’s imperative that the Gigafactory come online to serve the home battery market.
Currently, most people have to spend around $100,000 to obtain a Tesla battery — by buying a Model S sedan. The battery is the most expensive part of a Tesla, but compared to buying an entire car, the pack alone is a relative bargain.
Before Tesla came along with its offbeat design, nobody could create a battery pack that was relatively compact and could keep an electric car going for 200 miles. Tesla uses sophisticated battery and powertrain management systems to optimize the electricity that one of its cars draws from a battery pack. The company’s home and utility scale batteries should be similarly well managed — and probably will have software that would be frequently updated over-the-air.
With new market research showing that Apple managed to sell more watches in a single day than Android Wear did in a year, it’s easy to dismiss Google’s smartwatch software as a bust. But there are still some big reasons why an Android Wear watch …
“The Elder Scrolls V: Skyrim” has been one of the world’s most popular games since 2011, selling millions of copies across PCs and consoles.
A big reason for its continued success is the “mod” community, where PC gamers concoct creative modifications to the giant open world of Skyrim that others can download and enjoy.
There are some wildly creative “Skyrim” mods out there: Some add entirely new regions to the world, some tweak gameplay mechanics, and there’s even one that transforms all dragons into Thomas the Tank Engine.
But now, producers and consumers of those Skyrim modifications are in an uproar.
Bethesda, the maker of “Skyrim,” announced a jointly run venture with the popular gaming company Valve to create a paid “Skyrim” mods store within the Steam Workshop, Valve’s platform that lets people share and download player-created content to their PCs.
The program lets people list their creations at any price they want, or they can offer it for free as before. This is the first time Valve or Bethesda have no say in the pricing or curation of their own content.
You might think this sounds like good news: People now have an official way to get paid, whereas before they had to ask for donations. It should, in theory, result in more and better mods.
And yet, people are furious, including the modders themselves. And here’s why.
According to the deal, “Skyrim” modders will take only 25% of their sales, while the rest is split between Valve and Bethesda. That’s quite far behind Apple’s deal with its own developers, in which iOS app makers reap 70% of the profits while Apple only takes 30%. This seems rather backwards, considering “Skyrim” has survived for so long simply because of these modders and their creations.
There are legal ramifications, too. As Eurogamer points out, a paid “Skyrim” mod has already been taken down because it used animations from another mod.
The original animator, named “Fore,” was not happy that he wasn’t contacted about his animation being used in another paid mod.
“Making money with mods is totally against my attitude,” he said on the Steam Workshop, though that page has since been taken down. “It’s the end of a working and inventive modding community,” he added.
Modders have reportedly begun removing their creations from the Steam Workshop to prevent others from stealing their work, building upon it, and selling it for profit.
It doesn’t seem to be a good deal for consumers, either. Steam has a 24-hour return policy for all mods, so you can “return” something if you don’t like it. But as one modder points out, 24 hours “isn’t much time to test if a mod will glitch out or not.”
Here’s more from that Skyrim modder:
“Let’s say a consumer buys a mod, then one week later, the modder releases an update. This update has a bug, and the game crashes or glitches out. Then let’s say, for whatever reason — even a good one, like real life got in the way — the modder doesn’t release an update to fix the bug. Before today, bit deal. You could either uninstall the mod or revert to a previous version. Given it was free, most people wouldn’t complain too much. But NOW, a consumer will likely be stuck with a useless piece of software they paid good money for. Software that is now worth zilch. They will be, understandably, really upset, with no way to get their money back.”
In some ways, Bethesda and Valve have created their own system of microtransactions: Why create extra content yourself when you can split up to 75% of the revenue for each modification created and sold by someone else? Whether it’s a new weapon or a new area of the map, it’s easy and profitable to simply rely on the work of modders.
Valve is clearly paying attention to the backlash, as the company is now denying users access to discussion boards about the paid mods. There’s even a petition with 82,000+ signatures requesting Valve and Bethesda change their minds about paid mods.
We’ve reached out to Valve and Bethesda and we’ll update this story when we learn more.
A Deutche Post sign stands in front of the Bonn Post Tower, the headquarters of German postal and logistics group Deutsche Post DHL in Bonn March 11, 2015.
FRANKFURT (Reuters) – If running a global bank is complicated, cutting one back is even more difficult.
Deutsche Bank (DBKGn.DE) faces a long and costly battle, analysts say, to sell Postbank (DPBGn.DE) and pare investment banking, the new strategic goals it outlined late on Friday.
While the bank is due to publish results on Sunday, investors will get no details on its overhaul before Monday at a news conference. The scope of the challenge is already clear, however.
Germany’s flagship lender comes late to restructuring after European rivals such as Barclays (BARC.L) and Credit Suisse (CSGN.VX) already slashed their global franchises years ago, cutting jobs and hiving off businesses.
Deutsche will face an especially difficult challenge in selling off Postbank without having to post losses.
Deutsche aims to cut its stake to below 50 percent next year from 94 percent by selling shares on the stock market and then to reduce its holding to zero in the medium term, a source close to the matter said on Saturday.
But a battle is already building over the conditions for a sale as the government signals that big layoffs at Postbank should be banned from any deal.
“We’re worried about jobs at Postbank,” Carsten Schneider, finance expert and deputy SPD parliamentary floor leader, told Reuters.
“The policy goal is that it won’t be leveled following a sale to an investor. Deutsche Bank has a social-political responsibility here that extends beyond its economic interests.”
Postbank could fetch close to 3.6 billion euros ($3.9 billion) if it sells for a multiple of 0.8 times a book value of 4.5 billion euros, according to analysts’ calculations. That points to hefty losses unless the bank can find a strategic buyer willing to pay a premium.
Deutsche Bank had spent around 6 billion euros ($6.5 billion) to purchase Postbank in stages starting in 2008.
Postbank serves 14 million clients from 1,100 branches integrated into the postal system. Deutsche’s own brand serves some 8.5 million retail clients through some 730 branches.
“With unions seeking a 5 percent wage increase and job security, it’s not obvious Deutsche Bank has easy levers to pull fast,” analyst Huw van Steenis at Morgan Stanley wrote in a recent note.
The group may go further than just selling Postbank to reduce its activities in retail, a low-profit battlefield in Germany dominated by highly competitive savings and cooperative banks.
“We’re also looking at them to reduce the scope of their European retail operations, preferably to zero, and to trim back the residual German retail operations,” said Omar Fall, equity analyst at investment bank Jefferies.
Deutsche Bank runs retail banking operations in half a dozen countries including Italy, Spain and Poland, with some 830 branches and 5 million customers altogether.
The division contributed 753 million euros to the group’s pretax profit in 2014, according to a JP Morgan report. Citibank calculates that Deutsche could sell the division for little more than 2.8 billion euros.
THE HARDER THEY FALL
Nor will it be easy to trim 150 billion to 200 billion euros in assets, a sum expected by analysts, from its investment bank. Such a move would strengthen the ratio of its capital to its assets, which is a measure of financial stability that is increasingly important to regulators.
The bank has already pared business lines such as making markets in U.S. commercial paper and in single-name credit default swaps to get rid of balance sheet burdens. Exiting other areas such as long-term repurchase agreements and interest rate swaps could be costly if the bank sells its positions at a loss.
“It’s going to be decisive how much investment banking it cuts and which markets it withdraws from,” said analyst Dirk Becker at brokerage Kepler.
Deutsche needs to pull out of prime brokerage and any high volume business where margins are thin and capital requirements are high, he said.
“In investment banking, the bank needs to get out of anywhere it’s not earning money,” he said.
(Additional reporting by Kathrin Jones, Matthias Sobolewski, Markus Wacket and Andreas Kroener; editing by Jane Baird)
ATHENS (Reuters) – Greece’s governors and other local officials agreed on Saturday to lend cash to the near-bankrupt central government after Prime Minister Alexis Tsipras assured them the measure would last for only a short period of time.