‘Massive fraud’ at centre of trial against BofA over U.S. mortgages

Updated: Wednesday September 25, 2013 MYT 9:28:34 AM

‘Massive fraud’ at centre of trial against BofA over U.S. mortgages

NEW YORK: Bank of America Corp’s Countrywide unit placed profits over quality in a “massive fraud” selling shoddy mortgages to Fannie Mae and Freddie Mac, a U.S. government lawyer said on Tuesday. The claim came at the start of the first case by the government to go to trial against a major bank over defective mortgage practices leading up to the 2008 financial crisis. Pierre Armand, a lawyer in the civil division of the U.S. Attorney’s Office in Manhattan, said Countrywide made $165 million selling loans that it promised were investment quality to Fannie and Freddie. Read more of this post

Lax Rules Give U.S. Upper Hand in Tussle Over Alibaba I.P.O.

SEPTEMBER 24, 2013, 6:07 PM

Lax Rules Give U.S. Upper Hand in Tussle Over Alibaba I.P.O.

By STEVEN M. DAVIDOFF

Never mind Twitter; the biggest initial public offering on the horizon is Alibaba. The company, a Chinese Internet behemoth, appears to be playing a game of global regulatory arbitrage, with suggestions that it may go public in New York if it can’t get its way in Hong Kong. A core group of 28 Alibaba executives known at the company as partners and led by Jack Ma want a corporate structure — as Google, Facebook and other United States companies have — that would allow them to keep control of the company after the I.P.O. The Hong Kong Stock Exchange, however, doesn’t allow dual classes of stock and other types of mechanisms to preserve corporate control. Despite persistent complaints that Washington regulations hamstring companies that want to go public — witness the push for last year’s the Jump-Start Our Business Startups Act, or JOBS Act — in this case, the United States has become the place to avoid more stringent regulation. Read more of this post

Growers Dump Tobacco for Stevia See $58 Billion Market

Growers Dump Tobacco for Stevia See $58 Billion Market

The once-idled leaf-processing machines at a former tobacco trading house in Alma, Georgia, are coming back to life. Except now the warehouse, which still smells like tobacco leaves and cigarette smoke, is becoming a hub for a sweeter crop: stevia. Approved for commercial use in the U.S. five years ago, stevia extracts are fast becoming the sugar substitute of choice for a population trying to slim down and avoid artificial options. The no-calorie, natural sweetener, grown mostly in China and South America, is creating an opportunity for U.S. farmers and processors looking to make up for dwindling tobacco demand and win business from Cargill Inc. and Coca-Cola Co. Read more of this post

Germany’s strange parallel universe; A huge structural current account surplus exports products – and bankruptcy

September 24, 2013 6:58 pm

Germany’s strange parallel universe

By Martin Wolf

A huge structural current account surplus exports products – and bankruptcy

Angela Merkel’s remarkable election result confirms her position as the dominant politician in Germany and so also in Europe. It is assumed she will get the eurozone she wants: Germany writ large. That may prove right. Alas, if she does, it is going to be a deeply depressing spectacle. Wolfgang Schäuble, Germany’s finance minister, laid out the view on which Berlin’s current policy is based, with sobering clarity, in the Financial Times last week. The doomsayers, he argued were wrong. Instead, “the world should rejoice at the positive economic signals the eurozone is sending almost continuously these days”. If depressions and mass unemployment are a success, then adjustment in the eurozone is indeed a triumph. Mr Schäuble accuses his critics of living in a “parallel universe”. I am happy to do so rather than live in his. Read more of this post

AQR’s Asness Says Pensions Will Struggle to Return 7 Percent

AQR’s Asness Says Pensions Will Struggle to Return 7 Percent

AQR Capital Management co-founder Cliff Asness said the average public pension fund will have a “very hard time” achieving average annual returns of 7 percent to 7.5 percent. A portfolio constructed of 60 percent stocks and 40 percent bonds will probably return 2.5 percent above inflation, compared with 5 percent historically, Assness said today at the Bloomberg Markets 50 Summit in New York. Most public pensions assume rates of return between 7 percent and 8 percent. “It’s still going to be hard in a world where markets give you 5 percent to make 7,” said Asness. “For the next 10 through 20 years, I think the average pension fund is going to have a very hard time hitting that bogey.” Read more of this post

America’s Toilet Turnaround Is a Microcosm of US Manufacturing Trends; After Years of Moving Work Overseas, Remaining Factories Ramp Up U.S. Output

Updated September 24, 2013, 7:30 p.m. ET

America’s Toilet Turnaround

After Years of Moving Work Overseas, Remaining Factories Ramp Up U.S. Output

JAMES R. HAGERTY

PERRYSVILLE, Ohio—In previous management jobs, Jim Morando watched Chinese imports engulf the U.S. market for vinyl tiles, wood flooring and window blinds. Now, as president of Mansfield Plumbing Products, a toilet manufacturer here, Mr. Morando says he has decided to “stand and fight.” After decades of losing out to foreign rivals, U.S. manufacturing of toilets is making a surprising, if modest, comeback—mostly under foreign ownership. Mansfield Plumbing, owned since 2004 by Organizacion Corona of Colombia, is spending $9 million to expand the capacity of its Perrysville plant by nearly 50%. Another toilet maker, Toto Ltd. 5332.TO -0.51% of Japan, is installing new casting machinery to raise capacity at its Morrow, Ga., plant about 5%. American Standard Brands, bought earlier this year by Lixil Corp.5938.TO -1.62% of Japan, is installing a new kiln and refurbishing other parts of its Nevada, Mo., plant, boosting capacity 5% to 10%. The toilet turnaround is a microcosm of U.S. manufacturing trends. Read more of this post

SocGen: “The world might be on the brink of a sixth merger wave since the 1880s – the previous being the 1990s wave in information technology. This time, the underlying reason is globalisation”

September 24, 2013 4:48 pm

Charge into M&A deals jolts ‘animal spirits’ to life

By Ralph Atkins in London

Have animal spirits returned to global markets? A pick-up this month in merger and acquisition activity, share listings and corporate bond issuance – especially in the US – has signalled a surge in the most precious commodity in finance: confidence. The latest exuberance was Tuesday’s acquisition by Applied Materials, the US semiconductor equipment company, of rival Tokyo Electron to create a $29bn electronics group. Identified in the 1930s by John Maynard Keynes as an important economic driver, an eruption of “animal spirits” could start a virtuous circle of entrepreneurial risk-taking and investment – and further lift equities. Any benefits would wane quickly, however, if deal activity were merely the result of aggressive central bank policy action or structural changes forced by regulators. Read more of this post

Chinese banks suspend mortgage approvals amid fund shortage

Chinese banks suspend mortgage approvals amid fund shortage

Staff Reporter

2013-09-24

China is once again facing a shortage of funds, with the benchmark overnight Shanghai Interbank Offered Rate (Shibor) rising to 3.56% from Sept. 6’s 2.95%, and banks have begun to suspend mortgage approvals, the Beijing-based China Times (not our sister paper) reports. China saw an unprecedented liquidity shortage in June, with the overnight Shibor on June 20 surging 578.4 basis points to 13.444%, a record high. Banks would typically start to tighten their mortgage approvals near the end of a year, but many have already begun doing so, the paper said. When Mr Lu applied for a mortgage for his house, a bank clerk told him that the bank may at best approve the mortgage a month later and there is no guarantee when the approval will be made. An unnamed bank executive confirmed that most banks have faced tightening approval practices in mortgages and other loans as demand for loans far exceeds the funds available. The executive, however, said the suspension of loan approvals began just one week before the Mid-Autumn Festival on Sept. 19, and liquidity will remain tight until the end of this month for his bank. Read more of this post

China Probes Juice Makers into Allegations of Processing Rotten Fruits

China Probes Juice Makers into Allegations of Processing Rotten Fruits

09-24 11:24 Caijing

Reports said some juice factories based in central China’s Anhui of purchasing bad fruits for 0.4 yuan($0.07) per kilogram to make fortified juice as a part of their cost-saving measures.

China’s food regulator has launched an urgent investigation into allegations against several home juice makers that reportedly use cheap rotten fruits for production in the country’s latest food scandal, highlighting increasing concerns over food safety among the public.  Reports said some juice factories based in central China’s Anhui purchased bad fruits for 0.4 yuan($0.07) per kilogram to make fortified juice as part of their cost-saving measures. Read more of this post

India and the danger of potential

India and the danger of potential

David Keohane

| Sep 24 11:47 | Comment | Share

If India continues its current path it will face a catastrophic shortage of jobs, creating a young and angry population, and with it conditions for social unrest and economic disaster. Whether India exploits or is undermined by its demographics will likely be determined by the policy choices over the next two administrations. It simply cannot afford a repeat of the last five years. That’s from a recent Espirito Santo note that makes for refreshing reading compared with the usual demographic dividend stories that cruise through our inboxes every few days. Read more of this post

McDonald’s Luring Starbucks Crowd With Pumpkin Lattes

McDonald’s Luring Starbucks Crowd With Pumpkin Lattes

McDonald’s Corp. (MCD) is adding pumpkin-spice lattes to lure the Starbucks crowd and boost traffic. The McCafe pumpkin latte — a mix of espresso, milk and flavored syrup — will come in three sizes and be available with whole or non-fat milk, the Oak Brook, Illinois-based company said. A 16-ounce latte with whole milk has 340 calories and will cost $2.89. A regular coffee is $1. The lattes are being introduced this month and will sell through mid-November. Read more of this post

Asian Coal Producers Have Increased Default Risk, Moody’s Says

Asian Coal Producers Have Increased Default Risk, Moody’s Says

Winsway Coking Coal Holdings Ltd. (1733) and Hidili Industry International Development Ltd. (1393) are among Asian coal producers at an increased risk of default on the outlook for prices, Moody’s Investors Service Inc. said. Weak coal prices will “pressure the credit quality and liquidity of most coal producers in the Asia Pacific region in the next 12 to 18 months,” Simon Wong, a vice president at Moody’s, said in a report today. The rating services company is “particularly concerned” about Winsway, a Chinese coking coal importer, which has a liquidity buffer of less than three months, Wong said. Read more of this post

The ECB’s very own tapering problem

The ECB’s very own tapering problem

Izabella Kaminska

| Sep 24 14:59 | Comment | Share

A while ago we speculated that because of the ongoing bifurcation of the eurozone market, Eonia rates could rise, and liquidity once again concentrate in core economies, as banks pay back their LTRO funds. Even if it appeared that the system could handle the repayments, banks in core economies would still be inclined to take advantage of extremely cheap negative rates available in collateral markets, so as to earn a spread on the deposit facility in a way that arguably encumbered the remaining liquidity. That would make it less available to periphery institutions. Meanwhile, without the additional layer of ECB liquidity in the system — which acts as a type of system-wide insurance mechanism — periphery banks would consequently be forced to make ever more competitive bids for Eonia funds, lifting rates across the board. In a note on Tuesday, Lena Komileva, chief economist at G+ Economics, stressed the degree to which excess liquidity had indeed been removed from the ECB system, and its greater than expected effect on Eonia rates (our emphasis): Excess liquidity in the Eurozone has fallen to €218.7bn, near its lowest level since end-2011. The decline is linked to banks’ repayment of the ECB’s 3yr LTROs, which in turn is linked to two developments: a reduction in market fragmentation and improved functioning of interbank markets, shrinking bank balance sheets due to recapitalisation pressures during the crisis which reduces lender demand for leverage but also curbs credit flows to the real economy . Read more of this post

S&L Relic Is Sword of Choice in U.S. Bid to Punish Banks

S&L Relic Is Sword of Choice in U.S. Bid to Punish Banks

Weeks after taking over as the U.S. Attorney in Manhattan in 2009, Preet Bharara said he considered whether his office could hold individuals and banks liable for the financial crisis when there wasn’t enough evidence to bring a criminal case. During an interview in his office overlooking the Brooklyn Bridge, Bharara recalled that he came upon an idea after long talks with staffers: maybe lawyers in the office’s civil division could go after these cases. After months of research, prosecutors dusted off the Financial Institution Reform, Recovery and Enforcement Act of 1989, known as FIRREA. Read more of this post

Chinese Rater Dagong Flags Local Debt; In Rare Downgrades, Firm Warns About Bonds From Construction Companies

September 23, 2013, 3:59 p.m. ET

Chinese Rater Dagong Flags Local Debt

In Rare Downgrades, Firm Warns About Bonds From Construction Companies

DINNY MCMAHON

BEIJING—Two years after it tried to position itself as a global player by downgrading U.S. government debt, China’s best known credit-ratings firm is raising red flags over a problem close to home: climbing local-government debt. At the end of June, Dagong Global Credit Rating Co. broke ranks with its local competitors and downgraded three bonds issued by infrastructure-construction companies wholly owned by Chinese cities. It said it was losing faith in the governments’ backing of the bonds. Read more of this post

China’s Generation Winnebago Avoids Traffic in RVs

China’s Generation Winnebago Avoids Traffic in RVs

While stuck in traffic on the Beijing-Shanghai Expressway last year, Yin Ximin decided he’d been smart to buy a recreational vehicle. “Women were so desperate they had their friends or family shield them so they could urinate on the side of the road,” said Yin, 48, who owns an advertising firm in Beijing. “An RV makes long trips less painful. We can lounge around, have drinks, listen to music — and use the bathroom.” Back in Beijing, Yin uses his 19-foot (6-meter) motor home from manufacturer Shandong Dream Trip RV Co. to fetch clients from the airport and schmooze on the way back into the increasingly gridlocked city, where the number of registered cars has more than tripled since 2000. As more Chinese embrace automobile culture, foreign RV makers are expanding in China. Researcher 21RV.com estimates the number of motor homes in China will surge from about 9,000 to 800,000 in the 10 years to 2022. The U.S. has some 9.6 million RVs on its roads, according to 21RV. Read more of this post

China said consumers will need to bear some of the costs of tighter fuel standards, opening the door to higher prices at fuel pumps

September 23, 2013, 11:15 a.m. ET

China Says Consumers Need to Bear Some Costs of Tighter Fuel Standards

China said consumers will need to bear some of the costs of tighter fuel standards, opening the door to higher prices at fuel pumps.

WAYNE MA

BEIJING—China said Monday that consumers will need to bear some of the costs of tighter fuel standards, opening the door to higher prices at fuel pumps as the nation balances growing public concern over the environment with worries about inflation. The announcement comes after a number of episodes of severe air pollution in recent months in Beijing and several other places. The government also Monday mapped out plans to combat air pollution, including limiting the number of motor vehicles in Beijing to six million by 2017. In January, the official Xinhua news agency said Beijing had around 5.18 million vehicles. Read more of this post

China Reforms Face Headwinds at Home and Abroad

China Reforms Face Headwinds at Home and Abroad

In the late 1980s, University of Chicago professor Robert Aliber proposed, partly in jest, what he called the Andy Warhol theory of economic growth: “In the future every country will grow rapidly for 15 years.” He had in mind the plethora of so-called miracle economies that seemed to take off one after the other in the postwar era. In every case, decades of high growth, almost always driven by very high levels of investment, eventually faltered. Read more of this post

Bribery claims infect drug companies’ dealings in China

September 23, 2013 4:00 pm

Bribery claims infect drug companies’ dealings in China

By Andrew Jack and Patti Waldmeir

It began as a rumour on a Chinese social media site in July, but the impact has swiftly spread around the world: allegations that GlaxoSmithKline was the “godfather” of a system of bribery in the country totalling up to $500m. The corruption claims, which have since expanded to other multinational pharmaceutical companies including Sanofi, Novartis and Eli Lilly, have created a growing sense of concern among executives, investors and doctors alike. Read more of this post

How Indonesia Lost Its Growth Mojo; Manufacturing’s share of the economy fell as Jakarta pushed for wage increases, let corruption grow and stifled competition

September 23, 2013, 12:20 p.m. ET

How Indonesia Lost Its Growth Mojo

Manufacturing’s share of the economy fell as Jakarta pushed for wage increases, let corruption grow and stifled competition.

ADAM SCHWARZ

The U.S. Federal Reserve’s decision last week to hold off on the much-awaited “taper” has elicited huge sighs of relief in Indonesia. Already the battered currency and equity markets have gained back a little ground as confidence is rising that the immediate crisis is over. A good deal of credit for Indonesia’s calmed nerves goes to Finance Minister Chatib Basri, who has quietly but effectively assembled a set of reforms that address key investor concerns. But many investors, domestic and foreign, say that it is too early to know whether any broader message has sunk in. Read more of this post

Grupo Lala SAB, Mexico’s biggest dairy producer, is seeking to raise at least $700 million as sales of milk, cheese and yogurt grow twice as fast as the country’s economy

Lala Said to Seek at Least $700 Million in Mexican Milk IPO

Grupo Lala SAB, Mexico’s biggest dairy producer, is seeking to raise at least $700 million in an initial public offering this year, two people with direct knowledge of the transaction said, as sales of milk, cheese and yogurt grow twice as fast as the country’s economy. The size and timing of the sale are subject to change based on market conditions, according to the people, who asked not to be identified because the details are confidential. JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Banco Bilbao Vizcaya Argentaria SA (BBVA) are managing the sale, according to a preliminary prospectus filed today with the Mexican stock exchange. Read more of this post

Reebok Turns to ‘Race From Hell’ to Revive Former Glory

Reebok Turns to ‘Race From Hell’ to Revive Former Glory

(Corrects story that ran Sept. 19 to clarify in third and fifth paragraphs that sponsorship is of CrossFit Games and since 2011)

When he reached his late 20s, Ryan Meade watched his friends get “kind of fat” as they married and settled down. To fight the pudge, he took up obstacle racing — endurance contests where he slogs through deep mud, scales walls and slithers under barbed wire. “The races on the weekend are a reason to go to the gym and wake up at 5 a.m. and get a workout,” said the 30-year-old financial executive from West Chester, Pennsylvania. When he wades through the muck at this weekend’s Spartan Race world championships in Vermont, Meade will be wearing $30 Reebok calf support sleeves, good news for a brand that’s seeking to remake itself as a leader in group fitness. The growing industry encompasses everything from the Spartan Race to CrossFit Games to Les Mills Body Attack classes — all of which Reebok now sponsors. Read more of this post

Japan’s Lixil Considers Buying Germany’s Grohe; Deal Would Be Largest Japanese Acquisition of a German Company

Updated September 23, 2013, 11:36 a.m. ET

Japan’s Lixil Considers Buying Germany’s Grohe

Deal Would Be Largest Japanese Acquisition of a German Company

EYK HENNING

Japanese housing-equipment maker Lixil Group Corp. 5938.TO -5.04% is in advanced talks to buy Germany’s Grohe, several people familiar with the deal said, a transaction that could value the bathroom-fittings maker slightly above €3 billion ($4 billion). Grohe’s owners, financial investors TPG and Credit Suisse‘s CSGN.VX -1.14%private-equity arm, are seeking to sell the company, but have been conducting a dual-track process in which they simultaneously prepare an initial public offering of stock in case a sale falls through. The two investors have jointly owned the Düsseldorf-based maker of faucets and showers for almost a decade. Read more of this post

Baseball reflects Japan’s changing economy; The country is realising outside competition is essential to progress

September 23, 2013 7:32 pm

Baseball reflects Japan’s changing economy

By Kurt Campbell

The country is realising outside competition is essential to progress, writes Kurt Campbell

Baseball, America and Japan’s shared national pastime, is a useful window through which to view the two countries’ contrasting and changing attitudes to foreigners in general – and in the economy in particular. Fans in the US have long embraced Japanese stars such as Ichiro Suzuki, the hit machine long with the Seattle Mariners; Hideki Matsui, the slugger beloved by the New York Yankees (and nicknamed Godzilla by fans); and Daisuke Matsuzaka, formerly of the Boston Red Sox, the thrower of the mythical gyroball pitch. Read more of this post

New Zealand’s Privatization Effort Propels IPO Market

Sep 23, 2013

New Zealand’s Privatization Effort Propels IPO Market

LUCY CRAYMER

New Zealand has a reputation for punching above its weight in everything from dairy exports to the America’s Cup. Now it is doing that in the financial arena. Despite being home to only 4.5 million people, the South Pacific nation this year ranks among major global markets for initial public offerings, thanks to a government privatization drive that has put the stock exchange on pace for one of its best-ever years for IPOs by value. So far this year, NZX Ltd.NZX.NZ -0.78% has hosted a total of US$2.3 billion of IPOs, nearly double the $1.3 billion raised over the previous six years combined, according to data provider Dealogic. That has catapulted it into sixth place among the Asian-Pacific region’s top IPO markets—behind Japan, Hong Kong, Singapore, Australia and Thailand—and puts it in 14th place world-wide. Read more of this post

Vietnam Stocks Emerge From Slump; “Investors are a fickle bunch. If there is not sustained progress in reforms, they’ll quickly sour and head onto the dance floor with someone else.”

September 23, 2013, 5:53 p.m. ET

Vietnam Stocks Emerge From Slump

Overhauls Pay Dividends as Peers in Developing Economies Struggle

JAMES HOOKWAY And NGUYEN ANH THU

HANOI—When Vietnam’s decadelong economic boom ended in 2009, Nguyen Huynh Diep lost about $50,000. A novice investor in the country’s stock market, Mr. Diep said he saw the value of many of his holdings slump. Now, though, he is back on the trading floors of Hanoi’s stock brokerages, picking up bargains when he can as Vietnam’s economy begins to heat up again after a long and often painful thaw. “The market’s back up this year,” the 40-year-old Mr. Diep said. “And I keep buying more stock.” Read more of this post

Vietnam’s bad debt attractive to some investors, but regulations still unclear“I don’t know if they physically moved the steel each time but they used the same inventory. Five guys in a row who pledged a bunch of steel that probably doesn’t exist”

Vietnam’s bad debt attractive to some investors, but regulations still unclear

By Associated Press, Published: September 23

HANOI, Vietnam — The soured loans clogging up Vietnam’s banks and the rows of abandoned houses gathering mold in the Hanoi rain are signs of a sick economy. But to foreign investors they represent an opportunity for sparkling returns — if only the Communist government makes them welcome. Neil Hagan, an American debt recovery specialist who wants to start a company servicing bad loans in Vietnam on behalf of foreign buyers, says he gets weekly calls from hedge funds based in Singapore and Hong Kong asking whether now is the time to scoop up some of the debt. So far at least, he advises them to stay put. Read more of this post