A big PBOC bluff? Alot of the FX purchase were the result of borrowed dollars coming into the Chinese system, rather than pure trade dollars, and that much of the RMB liquidity created against those dollars headed straight into the weapons of mass ponzi market instead of Chinese Treasury bills

A big PBOC bluff?

Izabella Kaminska

The PBOC’s “this is not the liquidity crisis you’re looking for” statement at the weekend may have drawn attention, but it didn’t really manage to reassure equity markets. The Shanghai Composite closed over 5 per cent lower on the day. The issue at hand may be linked to this: That would be the Chinese RMB weakening against the US dollar, in the context of a generally strengthening dollar index:

This is worth bearing in mind in light of the ‘other‘ hypothesis explaining some part of the trouble in China at the moment. This is based on the idea that the mother of all carry-trades may be being pushed to its limits by rising US bond yields, FX volatility and Fed taper speculation (if not the Chinese’ own attempt to stamp out over-invoicing practices). Read more of this post

China’s ‘Shadow Banks’ Fan Debt-Bubble Fears

June 24, 2013, 10:36 p.m. ET

China’s ‘Shadow Banks’ Fan Debt-Bubble Fears

By LINGLING WEI and BOB DAVIS

A statue of Citic Trust founder Rong Yiren, known as China’s ‘Red Capitalist,’ is in the headquarters lobby.

BEIJING—In a 52-story office tower overlooking the leafy streets of this city’s embassy district, some 400 deal makers at Citic Trust Co. arrange financing for property developers, steel mills and other businesses starved for cash and shunned by China’s traditional banks. Read more of this post

Li’s Cash Squeeze Risks 1st China GDP-Goal Miss Since ’98

Li’s Cash Squeeze Risks 1st China GDP-Goal Miss Since ’98

China’s biggest squeeze on credit in at least a decade is increasing the chance that Li Keqiang will be the first premier to miss an annual growth target since the Asian financial crisis in 1998.

Goldman Sachs Group Inc. and China International Capital Corp. yesterday joined banks from Barclays Plc to HSBC Holdings Plc in paring their growth projections this year to 7.4 percent, below the government’s 7.5 percent goal. The cuts followed a tightening in central bank liquidity that yesterday left the overnight repurchase rate more than double the year’s average. Read more of this post

China Loses Control of Its Frankenstein Economy

China Loses Control of Its Frankenstein Economy

The world has grown used to the idea that China’s leaders are masterful stewards of their gargantuan economy. They steered brilliantly around the iceberg of the 2008 financial crisis, maintaining growth of near-double-digit rates. So when People’s Bank of China chief Zhou Xiaochuan began clamping down on excessive liquidity last week, some observers viewed him as a Chinese Paul Volcker. Now that the worst was over, Zhou seemed to indicate, it was time for China to rein in lending and prevent a credit bubble from swelling.

Then reality intervened. After the overnight repurchase rate zoomed to a record 13.91 percent, Zhou had to back off, hastily injecting fresh funds to stem the turmoil. The chaos traumatized money markets. Some were dismayed by signs that Zhou would end the era of easy money in China. Others feared that he couldn’t. Read more of this post

The co-founder of Specialty Medical Supplies has been held since Friday in his factory on the outskirts of Beijing, as about 80 employees are refusing to let him go until they get severance packages

Updated June 24, 2013, 8:44 p.m. ET

Chinese Workers Hold Executive Captive in Office

By LAURIE BURKITT

Entreprenuer Chip Starnes says he has been held since Friday.

BEIJING—The co-founder of Florida-based Specialty Medical Supplies has been held since Friday in the executive quarters of his factory on the outskirts of Beijing, he said. About 80 of his 110 employees are blocking doors and locking gates, refusing to let the 42-year-old entrepreneur go until they get severance packages, according to Chip Starnes, the co-founder.

“What they don’t understand is that they aren’t losing their jobs,” he said. He said his workers have misunderstood his intentions to move part of his manufacturing operations to India and instead believed he was closing up the entire shop. Read more of this post

Carrefour considering sale of China, Taiwan businesses; Carrefour has been exiting non-strategic markets to raise cash and to cut its debt

Carrefour considering sale of China, Taiwan businesses: report

3:45pm EDT

(Reuters) – Carrefour SA (CARPD.PA: Quote, Profile,Research, Stock Buzz), the world’s second largest retailer, is exploring a sale of its businesses in China and Taiwan, including a possible initial public offering in Hong Kong or a combination of some of those assets with another company, The Wall Street Journal reported on Monday, citing people familiar with the matter. An IPO route could represent around $1 billion in funds, the Journal said, citing a source, adding that Carrefour’s plans were still at a preliminary stage. (r.reuters.com/mug29t) Carrefour has not hired bankers yet, The Wall Street Journal said, citing sources. Carrefour declined to comment on the report. The French group, which is Europe’s largest retailer, has been struggling for years in Europe, partly due to a reliance on hypermarkets, which have been losing out as time-pressed shoppers buy more goods locally and online and prefer to buy general merchandise from specialists. Carrefour has been exiting non-strategic markets to raise cash and to cut its debt. However, investors are concerned that the company is retreating from too many high-growth markets.

Big business is taking advantage of recession-hit Spain’s hunger for cash, striking advertising deals for landmarks that have seen a Columbus statue dressed in a Barcelona soccer shirt and a metro station named after a telco

Advertising spreads onto landmarks in crisis-hit Spain

1:44pm EDT

By Clare Kane

MADRID (Reuters) – Big business is taking advantage of recession-hit Spain’s hunger for cash, striking advertising deals for landmarks that have seen a Christopher Columbus statue dressed in a Barcelona soccer shirt and a metro station named after a telecoms company.

With local councils and transport authorities across Europe feeling the squeeze as governments battle to cut deficits, these deals could be a taste of things to come.

“Advertising seeking controversy isn’t anything new … what’s different here is the inventive ways local authorities are coming up with to make money,” said Manuel Martin, communication theory professor at Spain’s University of Navarra. Read more of this post

So many exploration and production special-purpose acquisition companies (SPACs) is troubling; What you want to see less of are the so-called deal-maker types

Tuesday June 25, 2013

So many exploration and production special-purpose acquisition companies is troubling

Raison D’etre – By Risen Jayaseelan

THAT there are so many exploration and production (E&P) special-purpose acquisition companies, or SPACs, is troubling me. Aren’t there other businesses that can fit into a SPAC model? One would almost think that only E&P concepts are allowed to float as SPACs.

Read more of this post

Yingluck Risks Farmer Ire to Curb Fiscal Burden: Southeast Asia

Yingluck Risks Farmer Ire to Curb Fiscal Burden: Southeast Asia

Thai Prime Minister Yingluck Shinawatra risks a backlash from farmers who helped put her in power after cutting guaranteed rice prices following criticism that the program put the country’s finances at risk.

The Cabinet on June 19 approved a 20 percent reduction in rice-purchase prices to help stem losses from the program that the government estimates at about 137 billion baht ($4.4 billion) last year. Moody’s Investors Service said on June 3 the subsidies hamper Thailand’s goal of achieving a balanced budget by 2017 and are negative for the nation’s sovereign ratings. Read more of this post

India plc goes shopping

June 24, 2013 5:17 pm

India plc goes shopping

By Avantika Chilkoti

The largest ever Indian acquisition of a US company was announced this month.Apollo Tyres is to acquire Cooper Tire and Rubber, the world’s 11th largest tyre producer by revenues, for $2.5bn. Shares in Apollo tanked following the news, with investors sceptical about how the two businesses will be integrated.

Such negative reactions are not uncommon. Indian companies have completed a series of high-profile overseas acquisitions over the past decade and the initial response has often been bearish. But the doubters have often been proved wrong. Read more of this post

Exit From the Bond Market Is Turning Into a Stampede

June 24, 2013

Exit From the Bond Market Is Turning Into a Stampede

By NATHANIEL POPPER and PETER EAVIS

Wall Street never thought it would be this bad.

Over the last two months, and particularly over the last two weeks, investors have been exiting their bond investments with unexpected ferocity, moves that continued through Monday.

A bond sell-off has been anticipated for years, given the long run of popularity that corporate and government bonds have enjoyed. But most strategists expected that investors would slowly transfer out of bonds, allowing interest rates to slowly drift up. Read more of this post

Falling Debt Prices Roil Market; Fielding Calls From a Pushy Bond Dealer as Buyers Vanish

Updated June 24, 2013, 9:05 p.m. ET

Falling Debt Prices Roil Market

Fielding Calls From a Pushy Bond Dealer as Buyers Vanish

By KATY BURNE, AL YOON and KELLY NOLAN

The rout in the credit markets has gotten so messy some investors are having trouble finding people willing to buy what they are selling.

From municipal bonds to corporate debt to mortgage-backed securities, prices fell sharply again Monday, extending big declines that began last week. Read more of this post

CITI: We’re ‘Shocked’ By The Surge In Negative Earnings Preannouncements

CITI: We’re ‘Shocked’ By The Surge In Negative Earnings Preannouncements

SAM RO JUN. 24, 2013, 7:10 PM 2,172

The S&P 500 closed at 1,573 today, which is down over 6% from its recent all-time highs. Many have attributed much of the pullback to the hawkish tone that the Federal Reserve has recently adopted. However, stock market fundamentals have been deteriorating lately too.  Specifically, earnings expectations have come down sharply. And earnings are arguably the most important driver of stocks. In his latest note to clients, Citi’s Tobias Levkovich says he is “shocked” by how negative these trends have been. The Street had become a bit too happy of late and then got upended by the Fed and the likely tapering of QE amidst some prior hopes of a delay in ending such accommodative policy, almost without spending any time looking at earnings estimates or trends less than a month before second quarter results are released. Such a thought process seems ill-founded since earnings matter the most for equities, in our opinion, and there is relatively robust statistical evidence to back up that contention. In this respect, we have been a tad shocked by the surge in negative-to-positive preannouncement trends that make 2009’s surge appear less worrisome in retrospect (see Figure 1). Upward earnings guidance has dipped as well (see Figure 2) and there has been little consternation or discussion about it. Read more of this post

Junk bond investors burnt in Fed retreat

June 24, 2013 5:25 pm

Junk bond investors burnt in Fed retreat

By Michael Stothard, Vivianne Rodrigues and Josh Noble

Those who followed the “close your eyes and buy” strategy that swept through junk bond markets since the start of the year have just had their fingers burnt.

The hardest hit casualties of a rout in high yielding debt over the past few weeks have been the more esoteric or lowly rated instruments, the very credits into which investors had been pouring money due to the slight pick-up in yield on offer. Read more of this post

EU Leaders to Stave Off Market Turmoil After Bank Talks Fail

EU Leaders to Stave Off Market Turmoil After Bank Talks Fail

European Union leaders will this week attempt to stave off a resurgence of market tremors after talks on setting up unified banking rules broke down.

Negotiations among the 27-member bloc’s finance ministers stalled over the weekend in Luxembourg after they tried to reach agreement on assigning losses at failing banks as part of proposed rules on bank resolution and recovery. They will regroup June 26, before EU leaders gather the next day for a summit meeting in Brussels.

“We shouldn’t be lulled by the current calm in the markets,” German Finance Minister Wolfgang Schaeuble said in a statement after the meeting. “Rather we should quickly ensure that we’re prepared for every eventuality.” Read more of this post

Cash hard to raise as Fed jars credit markets

Cash hard to raise as Fed jars credit markets

7:52pm EDT

(Reuters) – Prospective borrowers ranging from U.S. companies to county governments on Monday shelved a raft of deals to raise new capital or refinance debt as a suddenly uncertain interest rate environment dented demand.

In the municipal bond market, half a dozen deals aimed at raising collectively more than $300 million were postponed, while several companies pulled plans to refinance syndicated bank loans. Corporate bonds, meanwhile, passed a fourth day with no deals brought to market, either in the risky high-yield sector or the safer investment-grade sphere. Read more of this post

Mass Layoffs at Top-Flight Law Firm Weil, Gotshal & Manges, among the nation’s most prestigious and profitable law firms

JUNE 24, 2013, 9:39 AM

Mass Layoffs at a Top-Flight Law Firm

By PETER LATTMAN

Layoffs are a brutal reality of corporate America. During fallow periods, publicly traded companies, including the big banks, routinely cull their ranks. The country’s largest law firms, by contrast, have historically taken a kinder, gentler approach, rarely firing employees en masse.

The news on Monday that Weil, Gotshal & Manges, among the nation’s most prestigious and profitable law firms, was laying off a large number of lawyers and support staff while also reducing the pay of some of its partners, sent shock waves through the industry and underscored the financial difficulties facing the legal profession. Read more of this post

Student-Aid Scams Targeted by Schools, Government; a growing number of recipients—acting alone or as part of organized crime rings—are pocketing federal loans and grants without any intent of going to school

Updated June 23, 2013, 9:25 p.m. ET

Student-Aid Scams Targeted by Schools, Government

By JOSH MITCHELL

Federal officials are cracking down on fraud in student-aid programs, responding to evidence that a growing number of recipients—acting alone or as part of organized crime rings—are pocketing federal loans and grants without any intent of going to school.

The Education Department in January began using a database to flag applicants for federal Pell grants who have an “unusual enrollment history”—having received aid for three or more schools within a year, primarily. The department sends the names to colleges and universities, which then ask applicants to provide prior transcripts and other documents. A school can deny a grant or loan if it deems the applicant’s responses to be unsatisfactory. Read more of this post

The Dark Side Of Soaring Rates: A Housing Market That Lost 16% Of Its Value In Under Two Months

The Dark Side Of Soaring Rates: A Housing Market That Lost 16% Of Its Value In Under Two Months

Tyler Durden on 06/24/2013 14:32 -0400

A week ago, we provided a simple, irrefutable analysis of “What The Recent Surge In Rates Means For Your Home Purchasing Power” in which we demonstrated how the average home affordability goes down (due to the declining marginal purchasing power in a rising rate environment) as interest rates (for mortgages and all rate-sensitive products) go up. What this means is that all else equal, absent a massive increase in disposable income (especially when the opposite is happening to disposable income), the average home affordability plunges as rates go up. So here is the benchmark price-rate curve updated for a reality, in which the national average 30 Year fixed has exploded from 3.40% on May 1 to a whopping (for the New Normal) 4.875% as of today for Wells Fargo customers. The matching affordability collapse: from $450K to $378K, or a stunning 16% equilibrium price drop in under two months! So much for that wealth effect…