China Bad-Loan Alarm Sounded by Record Bank Spread Jump

China Bad-Loan Alarm Sounded by Record Bank Spread Jump

Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans.

The yield spread for one-year AAA bank bonds over similar-maturity sovereign notes jumped 56 basis points so far this month to 163 basis points, the most in ChinaBond records going back to 2007. The similar AA gap widened 59 basis points to 188. Even as China Construction Bank Corp. (939) President Zhang Jianguo said yesterday cash conditions have normalized, the benchmark seven-day repurchase rate was fixed at 6.85 percent, almost twice the 3.84 percent average for this year. Read more of this post

Pot Bellies Transform $2,000 Suits With India Expanding

Pot Bellies Transform $2,000 Suits With India Expanding

A few months ago, Corneliani SpA, an Italian maker of svelte $2,000 suits, noticed it was losing some business in India. Then it realized why: It wasn’t catering to overweight customers, especially those with pot bellies.

So, in April, it began a made-to-measure service that includes options for shoppers seeking “odd”-sized suits, overcoats or trousers, said Prem Dewan, who oversees Indian retail operations. Businessmen, celebrities and politicians have come calling. Read more of this post

REIT Rout Seen Curtailing Deals as Rising Rates Cut Share Sales

REIT Rout Seen Curtailing Deals as Rising Rates Cut Share Sales

Property purchases by U.S. real estate investment trusts are likely to be curtailed after almost $36 billion of deals this year as a tumble in share prices makes a key source of capital costlier.

The Bloomberg REIT Index has dropped 11 percent from an almost six-year high in May as the yield on 10-year Treasury notes surged amid speculation the Federal Reserve would reduce bond purchases, which have kept borrowing costs low. The decline was three times the slump in the Standard & Poor’s 500 Index. Read more of this post

Bill Gross monthly investment outlook (July 2013): The Tipping Point

INVESTMENT OUTLOOK

July 2013

The Tipping Point

William H. Gross

I’ve spun a few yarns in recent years about my days as a naval officer; not, thank goodness, tales told by dead men, but certainly echoes from the depths of Davy Jones’ Locker. A few years ago I wrote about the time that our ship (on my watch) was almost cut in half by an auto-piloted tanker at midnight, but never have I divulged the day that the USS Diachenko came within one degree of heeling over during a typhoon in the South China Sea. “Engage emergency ballast,” the Captain roared at yours truly – the one and only chief engineer. Little did he know that Ensign Gross had slept through his classes at Philadelphia’s damage control school and had no idea what he was talking about. I could hardly find the oil dipstick on my car back in San Diego, let alone conceive of emergency ballast procedures in 50 foot seas. And so…the ship rolled to starboard, the ship rolled to port, the ship heeled at the extreme to 36 degrees (within 1 degree, as I later read in the ship’s manual, of the ultimate tipping point). One hundred sailors at risk, because of one twenty-three-year-old mechanically challenged officer, and a Captain who should have known better than to trust him. Read more of this post

Here’s the Real Crisis in Australia; “Australia is a leveraged time bomb waiting to blow. It is not just a CDO, but a CDO squared.”

Here’s the Real Crisis in Australia

By William Pesek – Jun 27, 2013

Australia (AUNAGDPC) has been called many things: Oz; the land Down Under; the lucky country. But the equivalent of a collateralized-debt obligation?

Canberra can’t be happy to hear its AAA-rated economy likened to one of the reviled investment vehicles that blew up amid the 2008 global crisis. Yet the comparison is being made by some economists, who see the asset underlying Australia — demand from China — beginning to evaporate. No country is more vulnerable to the much-dreaded slowdown in China than resource-rich Australia. The mining boom that fueled nearly all of its recent growth is nearing a cliff of economic risk. “Australia is a leveraged time bomb waiting to blow,” says Albert Edwards, Societe Generale SA’s London-based global strategist. “It is not just a CDO, but a CDO squared. All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China.” Read more of this post

TFs under scrutiny in market turbulence

Last updated: June 27, 2013 1:42 pm

ETFs under scrutiny in market turbulence

By Tracy Alloway and Arash Massoudi in New York

Like a tremor that rattles the girders of a gleaming skyscraper, a market sell-off can be the moment that exposes flaws in the plumbing of Wall Street’s favourite products.

For exchange traded funds, a $2tn industry that has boomed in recent years, last week’s tumble in asset prices has unearthed possible cracks in the pipework. Commentators are probing beneath the surface to look at how ETFs, which allow “mom and pop” investors instant access to a multitude of assets, hold up when faced with market turbulence. Read more of this post

No Easy Answers for Clean-up of Milk Powder Industry; The government wants domestic companies to consolidate and increase their market share, but this is easier said than done

06.27.2013 19:10

No Easy Answers for Clean-up of Milk Powder Industry

The government wants domestic companies to consolidate and increase their market share, but this is easier said than done

By staff reporters Qu Yunxu and He Chunmei

(Beijing) – Premier Li Keqiang said in late May at a State Council meeting that the government would supervise the quality of infant milk powder using the same standards as those used for drugs.

Then, on June 4, the Ministry of Industry and Information Technology (MIIT) said that from June 1 to August 31 it would launch a safety inspection of milk powder production in an aim to improve quality and boost consumer confidence. Read more of this post

3 factors you never knew could cut Singapore home prices by 40%

3 factors you never knew could cut Singapore home prices by 40%

Staff Reporter, Singapore Published: 47 min 49 sec ago

Mortgage rates must rise to 3.5%.

According to CIMB, assuming 1) mortgage rates rise to normalised levels of 3.5%, 2) a benign housing rental growth, and 3) rental yield spreads over mortgage rates are kept at around 100bp (currently achieved), we estimate that residential property prices could fall by 30-40% from current levels with all else remaining constant. Read more of this post

Deceit, fraud, and first world problems: How BRICS graduated to the sports big leagues—and now regret it

Deceit, fraud, and first world problems: How BRICS graduated to the sports big leagues—and now regret it

By Sharda Ugra June 27, 2013

Sharda Ugra is senior editor at ESPN Cricinfo. She has been a sports journalist for more than 23 years.

Somewhere between the first protest over transit fare hikes in Sao Paulo and president Dilma Rousseff’s public address three weeks later, football and the Olympic Games found themselves swept into the heart of Brazilian anger.

The outcry had centered around failed social services, corruption, and misplaced expenditure. As the crowds grew from tens of thousand to a million-strong on June 20, Brazil’s two biggest sporting show pieces—the 2014 World Cup football and the 2016 Olympic Games—were turned into symbols of everything wrong with the government and the country’s elite. Read more of this post

Cracking Down on Corrupt Mining Industry Deals

Cracking Down on Corrupt Mining Industry Deals

By Matthew Campbell and Jesse Riseborough on June 27, 2013

http://www.businessweek.com/articles/2013-06-27/cracking-down-on-corrupt-mining-industry-deals

For a business that routinely makes multibillion-dollar deals with governments and controversial leaders in the developing world, the mining industry has been remarkably free of regulatory scrutiny. No longer. World leaders gathering in Northern Ireland for the Group of Eight summit in mid-June called for tighter oversight by requiring companies to disclose all payments made to foreign governments. The new rules, aimed at exposing corruption, come as U.S. and British regulators probe companies including BHP Billiton (BHP) and Eurasian Natural Resources (ENRC). “Mining has been caught in the headlights in the past few months,” says Raj Karia, a partner in London at law firm Norton Rose Fulbright. “The environment has changed. There is more need now to be very sure of what you’re buying and aware of the history of an asset.” Read more of this post

Weber Grills: Mostly Made in America by Private Equity

Weber Grills: Mostly Made in America by Private Equity

By Bryan Gruley on June 27, 2013

Mike Kempster, Weber’s chief marketing officer and self-described gonzo griller

Sixty-one years ago, George Stephen got tired of wind and rain messing up his cooking on an open-air grill, the main barbecue tool of the day. He grabbed a buoy made where he worked, Weber Brothers Metal Works in Illinois. He sliced it in half and fashioned a tight-fitting dome lid. It didn’t work very well until a neighbor suggested he poke holes in the kettle so air could fuel the fire. The Weber grill was born.

Stephen eventually bought the Weber metal shop, creating Weber-Stephen Products of Palatine, Ill., which is now the world’s largest grill manufacturer. The privately held company doesn’t disclose financials, but Euromonitor International says Weber-Stephen claims 35 percent of the $2.5 billion U.S. market, with rival Char-Broil a distant second. Read more of this post

Why Americans Are Eating Fewer Hot Dogs; The slump is surprising in light of the sluggish economy—hot dogs are usually considered the ideal recession foodstuff

Why Americans Are Eating Fewer Hot Dogs

By Paul Lukas on June 27, 2013

http://www.businessweek.com/articles/2013-06-27/why-americans-are-eating-fewer-hot-dogs

Americans spent $1.7 billion on hot dogs last year—and that’s just at supermarkets; it doesn’t count wieners purchased at restaurants and sports facilities or from street vendors. And no day is better for hot dog consumption than the Fourth of July, when Americans are expected to eat about 150 million of them—enough to stretch from Washington, D.C., to Los Angeles more than five times. Read more of this post

Wielding Derivatives As a Tool For Deceit

June 27, 2013

Wielding Derivatives As a Tool For Deceit

By FLOYD NORRIS

Derivatives are not always “financial weapons of mass destruction,” as Warren Buffett famously called them.

But they are often weapons of mass deception.

For some derivatives, a desire for deception is the only reason they exist. That deception can allow those who own derivatives to evade taxes or accounting rules. It can allow activity that might otherwise be illegal, were it not called a derivative, or that would face regulation if it were labeled what it truly is. Read more of this post

It’s Stunning How Aggressively Investors Dumped Emerging Market Bonds This Week

It’s Stunning How Aggressively Investors Dumped Emerging Market Bonds This Week

SAM RO JUN. 27, 2013, 8:31 PM 1,235 2

It’s almost unbelievable how rapidly investors are yanking their money out of the Emerging Markets. The sucking sounds particularly loud in the EM debt markets. “Emerging Markets debt-dedicated funds recorded net outflows of $5,578MM (2.19% AUM) for the week ending on June 26, 2013, reports EPFR,” said Morgan Stanley’s Robert Habib. “This is the largest outflows ever recorded by EPFR from EM-dedicated funds, twice as large as last week’s $2.6bn outflow. This is also a third of the net inflows into EM-dedicated funds year-to-date.” The numbers are breath-taking. And this is troubling as these developing economies are at risk of a sudden stop —the nightmare scenario where a country effectively gets shut out of the global credit markets. Earlier today, bond god Jeff Gundlach recommended investing in the emerging markets as a contrarian idea. Here’s a geographic breakdown: This chart offers some historical context to the magnitude of the outflow.

ANALYST: The Bond Crash Is Worse Than 1994

ANALYST: The Bond Crash Is Worse Than 1994

MATTHEW BOESLER JUN. 27, 2013, 2:36 PM 11,321 9

Remember in January, when all the buzz was about the possibility of a “1994 moment” – a repeat of the bloodbath in the bond market that year when the Federal Reserve unexpectedly tightened monetary policy? Go figure – in terms of the size of the move in yields, the sell-off the Treasury market has seen since early May is actually already worse than what went down 20 years ago, as ISI’s Ed Hyman points out in a note to clients this week. “Looking ahead in 1994, bond yields surged another +100 [basis points] in the next 3.5 months,” writes Hyman. “Of course, the huge difference is that in 1994 fed funds were hiked +75bp during this period, and another +175bp by the end of the year.” Needless to say, the situation in 2013 is drastically different from that in 1994. “In sharp contrast, this year, there is no chance of a fed funds hike, and even with tapering, the Fed’s balance sheet will increase another +$450b, which could be viewed as equivalent to cutting the fed funds rate by roughly -50bp,” says Hyman. The yield on the 10-year U.S. Treasury note has backed off a little from the high of 2.64% reached on Monday, and is now trading around 2.48%.

Textiles: How the World Clothes America

Textiles: How the World Clothes America

By Dorothy Gambrell on June 27, 2013

U.S. demand for clothing has spurred the growth of a huge worldwide industry. Below are apparel exports to the U.S. for the year ended March 2013.

China’s Message to Banks: No More Easy Money, Lax Oversight

China’s Message to Banks: No More Easy Money, Lax Oversight

By Dexter Roberts and Peter Coy on June 27, 2013

Chinese Premier Li Keqiang has shown China’s bankers that he’s not to be trifled with. Since assuming office in March, Li has urged them to curb speculative lending, with little effect. In mid-June, he abruptly cracked down. The People’s Bank of China (PBOC)—which, unlike the Federal Reserve, takes orders from the government—broke with custom and didn’t supply funds to the banking system to offset a liquidity shortage. Interbank lending rates, the interest that banks charge each other for short-term loans, soared as banks scrambled to fill the hole in their balance sheets. It was the central banking equivalent of whacking a hog across the snout. Read more of this post