End of QE will drive a bond sell-off to remember; Debt losses will accelerate as equity markets gradually accept Fed taper

August 9, 2013 11:52 am

End of QE will drive a bond sell-off to remember

By Michael Mackenzie in New York

Debt losses will accelerate as equity markets gradually accept Fed taper

Bond investors hurt by this summer’s interest rate turmoil may be surprised to find the damage was small by previous standards. The rapid rise in bond yields from May fails to crack the top 10 list of fixed income routs for the past 50 years, according to Liberty Street Economics, a website that publishes research from economists at the Federal Reserve Bank of New York.* Of the 15 largest bond market debacles since 1961, this year’s interest rate shock ranks at number 13, based on the economists’ criteria for defining such events. Before fixed income investors take umbrage at such a lowly ranking for the hefty losses they have just experienced, Liberty Street has not yet called time on this year’s stampede out of bonds. Just like a sleeper song or film, the bond market’s current affliction could climb further up the hit parade, with September delivering another employment report and a Fed policy meeting that could well launch a reduction, or taper in the central bank’s $85bn of monthly bond buying. Read more of this post

Investors shun advice as costs are laid bare; Financial advisers are being forced to spell out their charges and many customers think they are too high

Investors shun advice as costs are laid bare

Financial advisers are being forced to spell out their charges and many customers think they are too high.

Richard Mills: ‘I was paying commission to the adviser and not really getting anything for it.’ 

By Richard Dyson

7:45AM BST 10 Aug 2013

Now that consumers can see more clearly how much they pay for financial advice, many no longer want it. One in three investors who have taken financial advice in the past five years says they will never consider paying for the service again. These findings – part of an authoritative survey into thousands of investors’ intentions – emerge just six months after new rules were introduced requiring financial advisers to declare their charges explicitly to clients, rather than receiving payment in the form of commissions. Read more of this post

City of London Investment Trust, one of the oldest and largest generalist investment trusts, said this week it would remove its performance fee and charge only a management fee, prompting analysts to predict that more would follow

August 2, 2013 6:31 pm

Trust performance fees axed

By Jonathan Eley

City of London Investment Trust, one of the oldest and largest generalist investment trusts, said this week it would remove its performance fee and charge only a management fee, prompting analysts to predict that more would follow. Henderson, which manages the trust, said it hoped the move would make it “more attractive to a wider audience of retail investors.” The annual management fee will henceforth by 0.365 per cent and the ongoing charges in respect for this year should be around 0.45 per cent – less than some tracker funds. Read more of this post

Buffett-Like Buyers Seen Lured to Hanesbrands

Buffett-Like Buyers Seen Lured to Hanesbrands: Real M&A

Boxers and bras may be next on the shopping list for private-equity buyers with Hanesbrands Inc. (HBI) offering one of the cheapest valuations in the retail industry.

The underwear maker’s $6.2 billion market value is 12 times its free cash flow from the past year, lower than all but two similar-sized U.S. apparel companies, according to data compiled by Bloomberg. While Warren Buffett’s Berkshire Hathaway Inc. has 43 percent of the U.S. industry through brands including Fruit of the Loom, suitors would get a second-place share of 19 percent by buying Hanes, data compiled by IBISWorld Inc. show. Read more of this post

Prepping for a bank bailout in China; China to let banks sell off loans in bid to tackle debt overhang

Prepping for a bank bailout in China

Izabella Kaminska

| Aug 09 16:01 | 5 comments | Share

A very intriguing little exclusive from Reuters on Friday:

(Reuters) – China is developing a new trading platform to enable banks to sell off loans to a wider range of investors, in a move that could pave the way for a government bailout of lenders or distressed asset sales to private investors. The trading platform, now in the testing phase, is designed to introduce banks to a new class of investors, including non-bank financial institutions and large companies. Currently, the lack of well-established precedents for asset disposals effectively leaves banks only two options: sell non-performing loans in private deals, mostly with big state-backed asset management firms, or keep rolling them over indefinitely to avoid booking a loss. Read more of this post

China’s Gleaming Ghost Cities Draw Neither Jobs Nor People

August 8, 2013, 11:02 p.m. ET

China’s Gleaming Ghost Cities Draw Neither Jobs Nor People

DINNY MCMAHON

China seeks economic gain through urbanization, but when one city, Tieling, built a whole new city nearby, it drew few residents. Urban planners spent millions of yuan to clean up surrounding marshland in this small city in northeastern China. Four years later, Tieling New City is virtually a ghost town.

TIELING, China—When this small city in northeastern China launched a plan to build a satellite city 6 miles down the road, it got off to a promising start. Urban planners spent millions of yuan to clean up surrounding marshland that had become a dumping ground for the city’s untreated sewage. A pristine environment, they hoped, would help attract the businesses that would raise incomes and swell the population. Four years later, Tieling New City is virtually a ghost town. Read more of this post

State Firms Cloud Chinese Growth Hopes

August 9, 2013, 3:22 p.m. ET

State Firms Cloud Chinese Growth Hopes

BEIJING—China added to its growing string of evidence of an economic rebound Friday with strong industrial-production figures, but the good news masked problems in its sprawling state sector that is increasingly seen as a major drag on growth. Factory output rose 9.7% in July from a year earlier, up from the June figure of 8.9%. Those results, taken together with strong trade numbers a day earlier, increasingly suggest the worst of the China’s slowdown is over. But the same data show that state-owned firms grew barely half as much as private firms—up 5.6% from 2012 for the year so far, compared with 10.9% for private firms. And all of the figures appear boosted by massive lending, which was up strongly in the first half before falling back in July. The recent decline in lending followed a cash crunch, engineered by China’s leaders to draw a line under spiraling credit. Read more of this post

China dream sours for foreign companies

August 9, 2013 11:44 am

China dream sours for foreign companies

By Tom Mitchell in Beijing

The “Chinese dream” articulated by China’s new president, Xi Jinping, is fast becoming a nightmare for some of the world’s most powerful corporations. Mr Xi’s speech, on his accession to the presidency in March, hinted at a more assertive approach to match China’s economic power – and since then, government investigations and state media exposés targeting foreign investors have become a regular feature of the country’s business landscape. Public officials say this simply reflects broader efforts to tackle bad practice, but some executives complain that foreign groups appear to be encountering particularly heavy scrutiny under the new leadership. Read more of this post

China’s Credit Expansion Slows as Li Curbs Shadow Banking

China’s Credit Expansion Slows as Li Curbs Shadow Banking

By Bloomberg News – Aug 9, 2013

China’s broadest measure of new credit fell to a 21-month low as Premier Li Keqiang extended a campaign to curb a record expansion of lending that’s added dangers to the nation’s financial system. Aggregate financing was 808.8 billion yuan ($132 billion), the People’s Bank of China said in Beijing yesterday, compared with the 925 billion yuan median estimate of analysts surveyed by Bloomberg News. New yuan loans exceeded forecasts and accounted for about 87 percent of the total, the most since September 2011. M2 money supply growth unexpectedly accelerated to 14.5 percent. Read more of this post

‘Cycling is the new golf’: Gel-Squeezing Cyclists in Lycra Fuel Science in Sport IPO

Gel-Squeezing Cyclists in Lycra Fuel Science in Sport IPO

Science in Sport Ltd. broke away from its parent company, Provexis Plc (PXS), and began trading today after an initial public offering as the maker of nutritional sports gels rides a surge in Britain’s Lycra-clad cyclists.

Provexis, a maker of nutritional additives, spun off the company so SiS could focus on expanding the market for Go brand gels, powders and bars. SiS rose 8 percent to 60.5 pence in London, giving the Windsor, England-based company a market value of about 11.7 million pounds ($18.1 million). Read more of this post

Orders Evaporate for Celebrity Perfumes

August 8, 2013, 8:16 p.m. ET

Orders Evaporate for Celebrity Perfumes

SERENA NG and SHELLY BANJO

Wall Street smells trouble in the fragrance business. Shares of perfume makers tumbled Thursday, after Elizabeth Arden Inc.RDEN +0.30% —the producer of fragrances including Justin Bieber’s “Girlfriend,” Taylor Swift’s “Wonderstruck Enchanted” and Nicki Minaj’s “Pink Friday”—said orders from one of its biggest customers, a major U.S. mass-market retailer, had been cut sharply in recent months. Executives at the company didn’t name the retailer, but Wal-Mart Stores Inc.WMT -0.45% is its biggest customer, according to Elizabeth Arden securities filings, accounting for 13% of its $1.24 billion sales in the year to June 2012 and about a fifth of its sales in North America. The cutback in so-called replenishment orders, Elizabeth Arden said, effectively reduced the retailer’s inventory on hand “with orders significantly below their pace of their retail sales.”

Read more of this post

Eating McDonald’s Is A Major Status Symbol Overseas

Eating McDonald’s Is A Major Status Symbol Overseas

JOHN W. SCHOEN, CNBC AUG. 9, 2013, 12:18 PM 1,411 4

Along the upward journey to middle-class status, a growing number of people around the world are working up quite a voracious appetite. The developing world has fallen big time for all-American exports like Footlongs, Big Macs and Extra Crispy Chicken Tenders. Despite early signs that a fast-food diet is no healthier in Beijing than it is in Boston, consumers who are new to middle-class dining seem less concerned about the health risks of the high-fat, high-sodium fare that many Americans now seek to avoid.

As the U.S. economy slogs along at a tepid pace, household incomes in much of the developing world are leaping ahead. Over the next two decades, those gains are expected to introduce billions of new consumers to menus from fast-food chains that are among some of the most iconic American brands. Read more of this post

Family restaurants chains in crisis in Korea; T.G.I. Friday’s, Tony Roma’s and Bennigan’s have closed down stores located in central Seoul; Marche and Sizzler, the first generation of family restaurants in Korea, recently went out of business

2013-08-09 18:15

Family restaurants chains in crisis

Marche, Sizzler shut down amid prolonged slump
By Rachel Lee

Gone are the times when family restaurants led the country’s dining industry and its culture. They are now on the brink of a precipice. According to the industry, major family restaurant chains such as T.G.I. Friday’s, Tony Roma’s and Bennigan’s have closed down stores located in central Seoul, reportedly due to the inability to pay higher rent under unfavorable economic conditions. “We decided not to renew our contact because we were not happy with the terms of lease offered by landlords,” said a T.G.I. Friday’s spokesman. T.G.I. Friday’s is an American casual restaurant chain that entered the country in 1992. The local franchise, taken over by the fast food chain Lotteria in 2009, currently operates 46 branches in the country. Its competitors Marche and Sizzler, the first generation of family restaurants in Korea, recently went out of business after failing to overcome business difficulties. “It’s true that we have had financial difficulties, but I think it’s the same everywhere in the saturated dining market,” a Marche spokesman said. “We acted quickly to prevent further trouble. “I am sure other big restaurant chains have also found it difficult to survive, except those run by conglomerates.” Marche, a Swiss restaurant chain that ran about 100 branches nationwide, closed in May, having operated in Korea since 1996. Sizzler, a family restaurant chain run by a TS Corp. subsidiary, also closed recently. Ashley, an American-style salad bar chain that Korean conglomerate E-Land runs, has the most outlets, 129, while CJ Foodville’s VIPS, which operates 87 stores, ranks first in sales. Read more of this post

Most Korean firms use UBS for bogus companies

2013-08-09 18:00

Most Korean firms use UBS for bogus companies

By Kim Tae-jong
An activist group of journalists said Friday that most Korean firms used UBS, the biggest banking group in Switzerland, to set up paper companies in off-shore tax havens.
Newstapa, run by the Korea Center for Investigative Journalism, said 32 out of 369 paper companies in off-shore tax havens were set up for Koreans through UBS branches in Singapore and Hong Kong. Lee Soo-young, chairman and CEO of OCI, a major chemical firm, and Choi Eun-young, Hanjin Shipping chairwoman, are some of the Korean corporate executives who used UBS to establish paper companies in tax havens, it said. The number is much higher than comparable figures by other international banks including German-based Deutsche Bank with eight and Singapore-based DBS with seven. Newstapa argued that these international banks also created secret accounts for bogus firms by Korean customers. “The accounts with false identities would not have been possible without the agreement from each bank. We suspect those banks played an important role in supporting their Korean customers to dodge due taxes through paper companies,” an official from Newstapa said. But he said UBS denied the allegation, saying that it was not involved in any illegal services for Korean customers. The online news outlet, working with the U.S.-based International Consortium of Investigative Journalists, has revealed names of Koreans who allegedly set up paper companies in an apparent move to dodge due taxes and creating slush funds.

The Rolling Student Loan Bailout; A consumer guide to all the ways you can avoid repaying Uncle Sam

Updated August 9, 2013, 7:08 p.m. ET

The Rolling Student Loan Bailout

A consumer guide to all the ways you can avoid repaying Uncle Sam.

The Consumer Financial Protection Bureau performed a genuine public service this week by alerting taxpayers to the tidal wave of student loan defaults coming their way. Too bad the intention was also to alert student borrowers to ways they can avoid repaying those loans.

A new analysis by the bureau shows federal-backed student loan debt surpassing $1 trillion, which is nearly double what it was at the start of the Obama Presidency. As college costs have continued to balloon in tandem with federal loan and grant subsidies, students have assumed more debt. Many jobless Americans have also sought asylum from the Obama economy by returning to school. Read more of this post

Japan’s Debt Exceeds 1 Quadrillion Yen as Abe Mulls Tax Rise

Japan’s Debt Exceeds 1 Quadrillion Yen as Abe Mulls Tax Rise

Japan’s national debt exceeded 1,000 trillion yen for the first time, underscoring the case for Prime Minister Shinzo Abe to proceed with a sales-tax increase to shore up government finances.

The country’s outstanding public debt including borrowings reached a record 1,008.6 trillion yen ($10.46 trillion) as of June 30, up 1.7 percent from three months earlier, the finance ministry said in Tokyo today. Larger than the economies of Germany, France and the U.K. combined, the amount includes 830.5 trillion yen in government bonds. Read more of this post

The Dark Side of Higher Yields; Income-hungry investors have flocked to energy-focused master limited partnerships and MLP funds this year. Yet risks are rising, and taxes can be hazardous

August 9, 2013, 6:52 p.m. ET

The Dark Side of Higher Yields

Income-hungry investors have flocked to energy-focused master limited partnerships and MLP funds this year. Yet risks are rising, and taxes can be hazardous.

LAURA SAUNDERS and JASON ZWEIG

Master limited partnerships, the publicly traded energy firms offering the steady high income many people crave, have been hotter than a wellhead fire. Investors should proceed carefully, however, or they might get scorched. Lured by generous quarterly cash payouts, investors poured nearly $8 billion into mutual funds and exchange-traded products specializing in MLPs in the first half of 2013, according toMorningstar, MORN +0.09% the investment-research firm. More than one-quarter of the roughly $26 billion in the total assets at these funds has arrived since Dec. 31. Read more of this post