Brian Bollen's Blog

RBS: Bonuses For What?

The Royal Bank of Scotland posts losses of over £5bn for 2012, bringing accumulated losses over the last few years to £34bn. Yet it is paying bonuses of £607m.

On what planet, in what universe, does a company making losses on such a Herculean scale pay ANY kind of bonus at all? It simply beggars belief to this astonished shareholder.

And David Cameron, the current UK Prime Minister, warns the EU against putting a cap on bank bonuses. Because, he says, it will scare away talent. This is the kind of talent that has racked up the RBS £34bn loss? I respectfully suggest that we would all benefit from that talent being scared off, pronto!

The View From Schroders: Increasing Transatlantic Divide; Downgrading Europe

The View From Schroders: Keith Wade, Chief Economist & Strategist, Azad Zangana, European Economist and James Bilson, Economist present this month's Economic Viewpoint. 

Key highlights include:

Global update: an increasing transatlantic divide

Downgrading Europe

Growth outlook diverges amongst the BRICs

Global update: an increasing transatlantic divide

Italy: Election And Equities: Schroders

Nicholette MacDonald-Brown, European equities fund manager at Schroders, gives her views on what the Italian elections mean for the European equities market

“Confusing Italian election exit polls yesterday afternoon have resulted in the market running the full gamut of emotions over the last twenty four hours. With an initial rally on polls indicating a Bersani victory to a fall on the realisation that the senate is hung with no clear majority winner. With the final detail still to be announced, the election appears to have resulted in a stalemate for Italian politics. While always a possibility, few expected the election to be such a close call with the swing factor proving to be the rise of the 5 Stars Movement. The unexpected surge in votes for the 5 stars movement led by comedian Beppe Grillo means that the market hoped for “reformist” coalition of Bersani and Monti combined do not control enough seats to control the Senate, leaving the Italian road map to debt reduction and economic growth unclear.

Skyfall At Morrisons

Just bought Skyfall on DVD, for £9.99 at Morrisons.

Italian Elections Deliver Gridlock: Schroders

Azad Zangana, European Economist at Schroders, gives his views on the outcome of the Italian elections

Following months of campaigning and deal making, the final results of the elections in Italy appear to have resulted in gridlock.

Pre-election poll favourite and leader of the centre-left coalition Pier Luigi Bersani has won the race for the lower house by a wafer thin majority, but failed to win enough votes to take the equally important upper house (senate). Bersani’s polling was not strong enough to suggest that he would be able to take the senate, but he was expected to join forces with the previous technocratic leader Mario Monti in order to secure enough votes. Unfortunately, both Monti and Bersani failed to secure enough votes for this outcome.

A Messy Bowl of Spaghetti

Jeff Taylor, head of European equities at Invesco Perpetual, considers what happens next following an indecisive Italian election

Italy’s election results are turning out far less clear cut than markets would have liked, with the Centre Left parties winning a clear majority in terms of seats in the Lower House of parliament but with no clear winner in the Senate.

The star of the election has been the anti-austerity, anti-establishment movement led by former comedian Beppe Grillo, which has picked up the votes of many angry, disgruntled Italians, to the detriment of the more traditional parties.

What happens next? Unhappy stock markets and higher Italian bond yields are a certainty for a while, as the doubtless lengthy haggling between the political parties takes centre stage. Suggested outcomes being touted this morning include: a grand coalition between the Centre Left (Bersani) and Centre Right (Berlusconi), or a coalition between the Centre Left and Grillo’s Five Star Movement party, some of whose policies on paper at least would overlap with Bersani’s thinking.

Negotiations will be led by Italy’s outgoing president Napolitano, who played a crucial role in Berlusconi’s exit from the political scene in late 2011. Local commentators this morning are by and large less convinced that a third option, i.e. a new election, is likely short term. If a coalition can be hammered out then market nerves will be soothed.

Another painful bump on the road towards Europe sorting itself, then. Ramifications for the Eurozone? Watch for a possibly softer line being taken by the EC on the pace of austerity. Watch for reactions from the European Central Bank, which is hyper-sensitive to anything which it perceives as disrupting the transmission of monetary policy.

Watch also possibly for a greater chance of a country accessing the Outright Monetary Transactions: Spaniards will see their financial markets suffer in Italy’s wake through no direct fault of their own and one has to wonder whether this will nudge Prime Minister Rajoy towards taking advantage of Mario Draghi’s largesse.

It was a bright day in April and the clock was striking 13

Mint – Bill Blain’s Morning Porridge  -   February 26 2013

One massive step back. With Italy bonds now nearly 90bps off their tights following yesterday’s bogus exit polls, it’s clear we’re now into a new game.

“Bit of a mess,” says Graham, our chartist, and he is usually the calmest, least overstated man in the markets… BUT.. I’m not sure why anyone is that surprised… the Porridge is not the only market blog that’s been warning for months a hung result and new elections were the likely outcome. Just how that plays out… watch and see. Pretty is not a hope that comes to mind. Well… at least it will take some of the focus off the UK’s downgrade late last week. 

I bet the euro elites wish they had a tame ratings agency. The Chinese do.. Dadong Global Credit Ratings can happily win column inches with its scathing attacks on Western governments’ loose money, currency wars and warnings the dollar will be toppled. Imagine how happy Brussels would be if "Euro-Ratings" could issue a new AAA rating to Italy this morning on the basis of its strong democratic principles, resolved government budgetary plans, and growth potential. Laf.. I could nearly choke. 

Italian elections. A predictable mess. What next?

The Pause That Refreshes? Load Up The Freezer!

By Dr. Jerry Webman, Ph.D., CFA, Chief Economist, OppenheimerFunds, Inc.

Markets ran into some turbulence last week as questions arose over the Fed’s commitment to continue buying Treasuries at the current pace, and investors began focusing on a series of potential upcoming headwinds. The growing list includes the looming $1.2 trillion in federal budget cuts known as the “sequester,”  a close Italian election campaign that could return Silvio Berlusconi to power, the nomination of a new Bank of Japan governor and concerns that China is entering a tightening cycle.

“Risk” assets, such as equities, have been rallying since mid-November, and some near-term investor sentiment indicators have become elevated.  Regardless of whether last week marked the beginning of the much-anticipated market correction, I expect such assets to continue to march upward over the longer term. 

Investors will likely be ill-served trying to time a potential market correction and better served focusing on longer-term opportunities.  Stocks continue to be as cheap to most fixed income securities as they have been in decades and easy monetary conditions, last week’s Fed Open Market Committee statement notwithstanding, will likely continue to support equity prices.

Fed minutes raise concerns over QE3

Standard Life Goes Ryding

The 2014 Ryder Cup at Gleneagles will welcome the first designated Worldwide Partner in the event’s history following an agreement between Standard Life Investments, Ryder Cup Europe and the PGA of America that will see the global asset management company become a Worldwide Partner to both the 2014 and 2016 Ryder Cups.

Never before has a company partnered with The Ryder Cup on both sides of the Atlantic, with the new ground-breaking agreement enabling Standard Life Investments to promote and market its association with The Ryder Cup on a truly global scale.

Downgrade No Surprise: Schroders

Schroders European Economist, Azad Zangana, comments on the UK's recent downgrade

"The downgrade comes as no surprise, with the economy double-dipping in 2012, and currently on the verge of a triple-dip recession. Indeed, both gilts and sterling have been under pressure since the end of 2012, as speculation of a downgrade had been building.

"Moody’s cited three key factors behind its downgrade:

1.         The continued weakness in the UK’s medium-term growth outlook;

2.         The implications of weak medium-term growth for the UK’s public finances, leading to higher debt;

3.         And, as a consequence, the deterioration in the UK’s ability to absorb future shocks using the government’s balance sheet.

PIMCO Speaks On Moody's UK Downgrade

PIMCO’s Mike Amey, managing director and head of sterling portfolios

“We are not surprised by the downgrade of the UK’s AAA credit rating over the weekend, as it is something we have been expecting. The UK remains stuck in a low growth environment, and will remain so for a number of years as the excesses of the past is worked through -  as we expected, this was a key part of the rationale in the Moody’s release.

“We have not seen a significant reaction in the gilt market, where the prospect for further quantitative easing  is driving market levels. However, sterling continues to depreciate, in a move which we expect to continue.”

That’s no bunny…Come no further...

Mint – Bill Blain’s Morning Porridge  -   February 22 2013

That’s no bunny… Come no further, for death awaits with nasty, big, sharp, pointy teeth

Looking like a few signs of green out there after yesterday’s sea of market red. Sorry for lack of porridge yesterday, but a proper Mayfair breakfast was on offer... so I missed the opening moments of yesterday’s significant wobble. All feels a tad corrective today and I’ve got my buying boots on!

Although yesterday’s ructions already looks like a minor scrabble, it does feel like the market has reached a new place - look at the charts and news-snaps in recent days, and it points to a momentum breakdown. Wednesday’s Fed Minutes took some of the heat out the market – like pushing a few control rods back into a reactor to calm the market -  by restraining some of the easing expectations that have been driving the anticipation of growth.

Factors like how quickly folk invested into the stock rally, or draining liquidity from the system (the repayment window on the second LTRO opens next week (estimate €120bn-€135bn repayment)) ) and weak economic data all serve to remind herd investors how swift it’s all been. Don’t be surprised if we see a number of similar volatile days. Expect to see “buy the dippers” out in force.

Ezra Zask 2.0: Available At A Book Shop Near You, Now

Now available is the eagerly awaited second edition of All About Hedge Funds, written by hedge fund luminary and industry expert Ezra Zask.

This comprehensive introduction to hedge funds tells investors and industry professionals everything they need to know about the subject in easy-to-understand English. All About Hedge Funds includes discussion of the opportunities and risks in popular strategies, including long-short equity, global macro and fixed income as well as leverage, derivatives, short selling and other tools of the trade.

Jungfrau Marathon 2013: Registration Open

Registration has started for the 21st Jungfrau Marathon, which starts at 09.00 on Saturday September 14 2013, in front of the Kursaal/Casino in Interlaken, a landmark stop in Switzerland's Jungfrau Region. Registration proceeds on a strictly first-come first-served basis, and closes as soon as the numbers reach the maximum 4,000 permitted in the field. Having taken part in, and completed, it last year, I can recommend the experience whole-heartedly. I had an absolute ball from start to finish, 6h 31m 16s later.

For more information see www.jungfrau-marathon.ch

 

Catch 22 For BNP Paribas Securities Services

BNP Paribas Securities Services (BNP Paribas) reports that it has qualified in 22 markets in the annual Global Investor Sub Custody survey, published in February, achieving the top score in 18 markets.

This marks the first industry recognition for sub custody in three markets for BNP Paribas – Australia, Brazil and India. See the table below for a full break down of BNP Paribas’ sub custody survey results this year.

Alain Pochet, Head of clearing and custody services at BNP Paribas, said:

UK Coming A Qropper

Government and Bank of England policies are prompting a growing number of British pre-retirees and pensioners to move their pension funds out of the UK, reveal figures from the world’s largest independent advisory firm.

The deVere Group confirms that it transferred 35% more UK pensions into HMRC-recognised Qualifying Recognised Overseas Pension Schemes (QROPS) during 2012, compared to the year before.

Nigel Green, chief executive of the firm that specialises in expat wealth management solutions, comments:  “More and more Britons who can move their pensions into a QROPS – in general terms that’s those with a British pension and who have left the UK or are planning to – are doing so.  Our QROPS business is up more than a third over a 12-month period.

Analysing Italy's Elections: Schroders

Azad Zangana, European Economist at Schroders, looks at whether investors are finally about to get a stable and strong government which can tackle the problems behind Italy’s lacklustre performance over the past two decades

Italy holds its next general election on 24 and 25 February.

Based on the final polls, Bersani still has a comfortable lead and should take the lower house with a relative majority.

There is a slim chance that Berlusconi wins an overall majority in the upper house. In this scenario, Italy may backtrack on some austerity and structural reforms.

However, the pressure from markets, the European community and the European Central Bank would force even Berlusconi’s party to undertake the necessary measures.

We expect Bersani to become the next Prime Minister of Italy, and will probably have to join forces with Monti’s coalition to take the upper house.

Sequestration Looming: Schroders

Joanna Shatney, Head of US Large Cap Equities at Schroders, gives her views on the upcoming sequestration in the US:

We are now just a few weeks away from sequester taking place in the US. Sequestration refers to the mandatory cuts in spending that go into effect March 1 in the US, directly impacting defense and Medicare spending (part of the Budget Control Act of August 2011).  While some of these cuts are already partially reflected in analyst estimates, there are likely to be some downward revisions to GDP by Wall Street economists. We are watchful of these cuts, but remain optimistic that: growth prospects for corporate earnings could be stronger than consensus expects, government cuts will not translate into a significant headwind, and valuation of equities should capture investor interest.

Hedge Funds Care Annual New York “Open Your Heart to the Children Benefit”

Hedge Fund Industry’s Premier Charity Gala Reaches 15th-year Anniversary Milestone

Industry Luminary Paul Roth to Receive Lifetime Achievement Award

The 15th Annual New York Open Your Heart to the Children Benefit will take place on Thursday March 7, 2013 at Cipriani 42nd Street in the heart of Manhattan (110 East 42nd Street, opposite Grand Central Station), from 6pm-10pm.

This landmark annual benefit is organised by Hedge Funds Care, an international non-profit organisation that raises funds from the hedge fund industry to help prevent child abuse and treat its victims in cases where prevention proves impossible.

It will unite more than 1,000 senior executives for an evening of cocktails, networking and entertainment in support of a common charitable cause.

In recognition of his extraordinary commitment to philanthropy, Paul Roth, founding partner of Schulte Roth & Zabel LLP, will be presented with a Lifetime Achievement Award.

I met the Emperor of China and the working British miner

Mint – Bill Blain’s Morning Porridge  -   February 19 2013

I met the Emperor or China and the working British miner, but I've never met a....

Stronger growth signals everywhere (except peripheral Europe of course) are impacting rates. But worries like the Italian election, Cyprus and Sequester are in folks’ minds.

We're expecting to see US bonds continue to back off on the Fed minutes - tomorrow will be interesting in terms of how markets read change signals on Fed buying and sequester growth threats. Yesterday's German ZEW confidence numbers confirmed the European nightmare scenario is on the cards - stronger Germany and weaker Europe. Rising Bund yields...ouch! Light euro blue touch paper and step well back.

Meanwhile, some analyst on Radio 4 was pointing out the dramatically weaker yen will only be good for exporters in Japan. NSS. That's OK then.... most of Japan makes things which ultimately get exported! Not a problem. Strong Japan corporates remain a sustainable growth driver across the Pacific.