Off the Wires

Ruble Tumbles Past 60 Per Dollar as Traders Press Central Bank

December 15th, 2014  |  Source: Bloomberg

The ruble tumbled past 60 for the first time as traders tested the Russian central bank’s willingness to defend the currency amid an oil slump that is pushing the economy closer to recession.

The ruble weakened as much as 5 percent to 61.25 per dollar, leading the Bank of Russia to sell $350 million to stem the slide, according to BCS Financial Group. Three-month implied volatility for the currency, which traded 4 percent weaker at 60.5840 by 4:24 p.m., climbed to a six-year high, while the yield on 10-year government bonds rose 11 basis points to a five-year high of 13.11 percent.

Traders are pressing the Bank of Russia to buy more rubles to put a floor on a selloff that wiped out 18 percent of the currency’s value this month. Policy makers failed to stop the retreat with more than $6 billion of interventions and a 100 basis-point interest-rate increase this month. Oil’s slide toward $60 a barrel in London and sanctions over the conflict in Ukraine are undermining confidence in the Russian assets.

“To a large extent it’s a foreign outflow, triggered by a reconsideration of Russia’s long-term prospects,” Dmitry Dudkin, the head of fixed income research at Uralsib Financial Corp. in Moscow, said by e-mail. “People start pricing a long period of low oil prices. And in these circumstances Russia doesn’t look like a place where one should invest money, even without sanctions.”

Greek markets plunge after government brings forward presidential vote

December 9th, 2014  |  Source: Reuters

Greek share and sovereign bond markets plunged on Tuesday after the government brought forward a presidential vote, in a political gamble that heightened uncertainty over the country's transition out of its IMF/EU bailout.

The surprise decision also drove yields on other lower-rated euro zone debt higher.

The vote in parliament next week could trigger early elections if Prime Minister Antonis Samaras fails to get his candidate chosen. That could open the door for the far-left Syriza party to come to power, an outcome feared by bondholders who prefer pro-business governments that stick to the rigours of the IMF/EU programme.

Athens stock exchange's main index was down 8.9 percent, setting it on course for its sharpest one-day drop since 2009. An index of Greece's listed banks fell 12 percent, with Attica Bank down 25 percent.

Euro zone finance ministers earlier said they were willing to grant Greece's request for only a two-month extension to its bailout, giving the country just enough time to wrap up a delayed EU/IMF review before it exits the programme for good.

Greece was the epicentre of the bloc's sovereign debt crisis which started in 2010 and culminated in 2012, when markets feared Athens was on the brink of leaving the currency union. In the past four years, Athens has been bailed out by its European Union partners and the International Monetary Fund to the tune of 240 billion euros.

Opinion polls show Syriza, which has vowed to end cooperation with the lenders and reverse the austerity cuts praised by bondholders, would win if early elections were held right now.

"Snap elections, if they come, does not look good for the government," said Jan von Gerich, chief fixed income analyst at Nordea in Helsinki.

"It could easily mean that their recovery could stop short once again. And looking at Syriza's plans, it is not out of the question at all that people would start doubting again that Greecehas a future in the euro area."

Greek 10-year bond yields, which rise when bond prices fall, were up 49 basis points to 7.83 percent, having hit their lowest since Oct. 22 at 7.27 percent on Monday.


Expectations of ECB government bond purchases early next year to boost the bloc's ultra-low inflation could not prevent a rise in other low-rated euro zone bond yields. Italian and Portuguese yields were 3-6 basis points higher.

German 10-year Bund yields, which fall in times of uncertainty as investors seek refuge in top-rated assets, were down 2 bps at 0.70 percent, near record lows. European shares hit two-week lows.

Samaras needs the support of 180 lawmakers in the 300-seat chamber to win the vote, which will be held over three rounds with the first scheduled for next week and the last expected in late December.

He currently does not have that support, but some analysts say his move may indicate he is confident he can win over independent members of parliament to push his candidate, former EU environment commissioner Stavros Dimas, through.

Torgeir Hoien, portfolio manager at Skagen Tellus, said he sold all his Greek bonds "about a week ago" when it became obvious that the troika of international lenders cannot complete their final bailout review as planned in early December.

But he keeps tracking that market as a rise in yields over the next weeks or months on the back of political uncertainty could open up an opportunity to invest in Greece again.

"The troika will not push Greece out of the euro zone because of the risk of contagion," Hoien said, adding that "Syriza has mellowed in terms of realpolitik."

But Syriza spooks many others in the financial world.

"We believe the non-orthodox rhetoric coming from Syriza echoes that from the Kirchners of Argentina in the early 2000s, or from Chavez of Venezuela. We think it is real," said Charlie Robertson, global chief economist at Renaissance Capital. 

China becomes world's largest economy - putting USA in second place for the first time in 142 years

December 4th, 2014  |  Source: Daily Mail

Figures show the Chinese economy is worth $17.6 trillion, compared to America's $17.4 trillion

The IMF estimates China's economy will be worth a whopping $27 trillion in 2019

The US has been the global economic performance leader since it overtook Britain in 1872 

White House seemed oblivious on Wednesday, crowing that 'the economic policies that this president put in place are the envy of the world'

Read more:

Four-pound white truffle could fetch $1 million

December 3rd, 2014  |  Source: CNBC

If you have $1 million to spend, and a very large plate of spaghetti, we have the perfect truffle for you.

Sabatino Truffles just unearthed the largest white truffle on record in central Italy, weighing in at 4.16 pounds.

The company says it has already received offers of $1 million from buyers in China. But the company is auctioning it off this week in New York City to set the final price, and the proceeds will go to charity.

White truffles are one of the rarest and most coveted food ingredients in the world, sniffed out by specially trained dogs in specific areas of Italy during the months of October, November and December.

It's unclear, however, if the Sabatino truffle will really fetch $1 million. News reports say a 3.3-pound white truffle sold to top Asian casino owner Stanley Ho for $330,000 in 2007.

Black Friday Fizzles With Consumers as Sales Tumble 11%

December 1st, 2014  |  Source: Bloomberg

Even after doling out discounts on electronics and clothes, retailers struggled to entice shoppers to Black Friday sales events, putting pressure on the industry as it heads into the final weeks of the holiday season.

Spending tumbled an estimated 11 percent over the weekend from a year earlier, the Washington-based National Retail Federation said yesterday. And more than 6 million shoppers who had been expected to hit stores never showed up.

Consumers were unmoved by retailers’ aggressive discounts and longer Thanksgiving hours, raising concern that signs of recovery in recent months won’t endure. The NRF had predicted a 4.1 percent sales gain for November and December -- the best performance since 2011. Still, the trade group cast the latest numbers in a positive light, saying it showed shoppers were confident enough to skip the initial rush for discounts.

“The holiday season and the weekend are a marathon, not a sprint,” NRF Chief Executive Officer Matthew Shay said on a conference call. “This is going to continue to be a very competitive season.”

Consumer spending fell to $50.9 billion over the past four days, down from $57.4 billion in 2013, according to the NRF. It was the second year in a row that sales declined during the post-Thanksgiving Black Friday weekend, which had long been famous for long lines and frenzied crowds.

The Fed Under Goldman's Thumb: Segarra's Picture Gets Senate Hearing

November 21st, 2014  |  Source: Bloomberg

William C. Dudley defended his supervisory record in heated exchanges with U.S. senators, who accused the Federal Reserve Bank of New York president of being too cozy with the biggest Wall Street banks.

“I wouldn’t accept the premise that there’s been a long list of failures by the New York Fed since my tenure,” Dudley said in response to an assertion by Elizabeth Warren, a Massachusetts Democrat.

“Is there a cultural problem at the New York Fed? I think the evidence suggests that there is,” Warren said. “Either you need to fix it, Mr. Dudley, or we need to get someone who will.”

The hearing was prompted by allegations by a former New York Fed bank examiner, Carmen Segarra, who said her colleagues were too deferential to Goldman Sachs Group Inc., the Wall Street bank where Dudley once worked. Segarra, who attended today’s hearing, declined to speak with reporters.

Senators questioned Dudley, 61, on issues ranging from whether some banks are too big to regulate to the Fed’s role in overseeing their commodities businesses.

Some of the criticism was pointed. Warren, a frequent critic of financial regulators, asked Dudley if he was “holding a mirror to your own behavior.”

Bank Misdeeds

Jeff Merkley, an Oregon Democrat, complained that bank employees involved in misdeeds haven’t been prosecuted and are “too big to jail.” Dudley repeatedly disagreed with assertions that the New York wasn’t doing enough to regulate banks and said lenders have become stronger and safer in the past few years.

Dudley took issue with Warren’s description of regulators as the “cop on the beat,” saying the Fed is concerned more with the safety and soundness of the financial system and refers potential crimes to law-enforcement agencies.

“I think of it more like a fire warden makes sure that the institution is run well so that it’s not going to catch on fire and burn down,” he said.

Sherrod Brown, an Ohio Democrat and chairman of the subcommittee that held the hearing, urged the Fed to increase its emphasis on oversight and said only two of the central bank’s 12 regional presidents have “any background in supervision.”

Brown also asked Dudley if he thought banks should have commodities businesses, the subject of another congressional hearing today at which Fed Governor Daniel Tarullo testified.

“I think there are serious questions of whether they should be,” Dudley said.

Broad Review

The Fed yesterday announced a broad review of its supervision of the largest banks and asked an internal watchdog to look into whether dissenting views among its bank examiners got sufficient attention within the central bank.

Spinach by Way of Panasonic: Fine Tuning the Art of High-Tech Farming

November 19th, 2014  |  Source: Bloomberg

In what was once a semiconductor plant, Fujitsu is growing lettuce. Instead of sunlight, Sharp uses LED lamps to feed its lab-grown strawberries. And in a factory that used to crank out floppy discs, Toshiba is growing endives. Welcome to the next generation of high-tech farmhands.

Buoyed by the Japanese government's drive to replace aging farmers and improve farm productivity, Japan's tech giants are learning new tricks as they expand into agriculture. Yet for farmers like Norimitsu Morishita, the new high-tech approaches are mostly just high-tech gimmicks.

After the 2011 nuclear disaster devastated spinach farmers further up north, Morishita who together with his brother, oversees production and distribution on several farms north of Tokyo, began growing the vegetable. To boost productivity, Morishita began looking in to high-tech technology but found most of the methods too expensive.

Instead, last year he began growing spinach through Panasonic's pilot program of cheaper semi-automated greenhouses. These greenhouses still use soil to grow produce, but optimize natural energy such as sunlight and wind to maintain ideal environments for raising crops.

Morishita says the greenhouses have allowed him to contain labor costs while harvesting spinach about eight times a year instead of the usual four. And he thinks the spinach from Panasonic's greenhouses tastes better than batches grown outside because it requires fewer pesticides and is fine-tuned more carefully. He plans to order more greenhouses next year if the rest of the trial finishes successfully.

"Unlike competitors who rely on expensive, large, or close-ended facilities, we can control the environment passively in standard plastic greenhouses," says Takayoshi Tanizawa, head of the Agri-Engineering Project at Panasonic. "Complete control of temperature or humidity is expensive, so instead of a fixed number we aim for appropriate ranges."

Tanizawa says the Panasonic greenhouses, which went on sale this year, cost about 2.5 times more than typical greenhouses and are being targeted at Japan's mid-sized farm companies as well as foreign farmers who may be interested. The company is aiming to generate 5 billion yen ($42 million) of revenue with sales of 1,000 units in Japan by 2018.

Panasonic also has teams developing more experimental methods such as hydroponic farming, which grows plants in water instead of soil.

But for Morishita, those technologies at least for now, don't offer the best solution. "The stuff grown in labs doesn't taste as good or remain as fresh as what comes from the soil," he says. "It just feels better to have something come directly from the earth."


Halliburton and Baker Hughes Agree to Friendly $34.6 Billion Merger

November 18th, 2014  |  Source:

Halliburton agreed on Monday to buy its rival Baker Hughes for about $34.6 billion, uniting two big oil field services providers in a friendly deal only days after a hostile takeover battle appeared to be brewing.

But the tie-up raises questions about whether the takeover will survive antitrust scrutiny, given the level of consolidation that it promises within the oil production services business.

The deal came after an announcement by Baker Hughes on Friday that Halliburton had submitted a list of board nominees after talks between the two companies broke down. Halliburton’s submission suggested that it was willing to go hostile if rebuffed.

A merger would help the two companies, both based in Houston, compete better against Schlumberger, which is by far the leader in oil field services.

Combining the two companies would merge two decades-old competitors in the oil field services business. Halliburton was founded in 1919, and has since become one of the leading suppliers of equipment for hydraulic fracturing, better known as fracking — the drilling technique underpinning the American energy boom.

Over the years, Halliburton has been involved in several prominent events in the industry. It pleaded guilty to destroying evidence and agreed to pay a large settlement over losses suffered from the 2010 Deepwater Horizon oil rig explosion. Former Vice President Dick Cheney served as chairman and chief executive of the company for a number of years, and it and its subsidiaries were involved with rebuilding contracts in Iraq after the gulf war.

Baker Hughes was created in 1987 with the union of Baker International and the Hughes Tool Company, both of which date back to the early 20th century. Among the products that the company’s predecessors created is a rotary bit for drilling wells through rock.

The combined company will keep the Halliburton name and will be led by David J. Lesar, the current chairman and chief executive of Halliburton.


Netflix Founder Reed Hastings: Make as Few Decisions as Possible

November 17th, 2014  |  Source: Stanford Business

The CEO of Netflix discusses what he's learned while redefining movie-watching.

What does it take to be a great chief executive officer? For many CEOs, it means making most of the major decisions and settling the tough calls. For others, it means being a product genius, akin to Steve Jobs, able to divine the next big thing again and again. But none of those attributes applies to Reed Hastings, the cofounder and CEO of Netflix.

Hastings prides himself on making as few decisions as possible, and he lets his team dream up new products and new initiatives. That may sound like a recipe for failure, but it obviously isn’t. Worth more than $23 billion, Netflix has redefined how American consumers watch movies and is disrupting the established business model of cable television. In September, Stanford Graduate School of Business awarded Netflix its 2014 ENCORE award for the most entrepreneurial company of the year. In accepting the award, Hastings discussed some of the lessons he has learned during his 17 years at the helm of the company.

Stay ahead of the competition.

When Netflix was founded in 1997, Americans who wanted to watch a movie at home went to a video store, rented a DVD or VHS tape, and then tried to return it on time. The largest rental chain by far was Blockbuster, which at one time had more than 9,000 stores and 60,000 employees. Hastings says he realized that a plastic disc has room for a huge amount of data and weighs next to nothing, making it feasible to distribute movies on DVDs by mail. The idea caught on, but Blockbuster was slow to respond, not recognizing Netflix as a serious competitor until 2004. “They had a big advantage, were 15 times our size, and if they had started [a mail-order business] two years sooner, they probably would have won,” Hastings says.

Employee freedom and responsibility go together.

“I take pride in making as few decisions as possible, as opposed to making as many as possible,” Hastings says. One example: Netflix’s decision to produce the popular House of Cards was a huge one, but the meeting that gave the project a green light lasted just 30 minutes. Others had already laid down the groundwork and details, making it easy for Hastings to sign off. “It’s creating a sense [in your employees] that ‘If I want to make a difference, I can make a difference.’” Freedom is only one part of the Netflix culture; the other is responsibility. Netflix, says Hastings, has created a culture of high performance. “Adequate performance gets a generous severance package,” he says, adding that “we turn over a lot of people.”

Islamic State Mints Coins as Jihadis Develop Trappings of Power

November 13th, 2014  |  Source: Bloomberg

After seizing oil refineries to fund its self-declared caliphate, Islamic State militants will mint their own money.

The group plans to issue gold, silver and copper coins, according to a statement released by its Beit al Mal, or treasury, and posted on websites used by jihadist movements. The currency aims to replace the existing “tyrannic monetary system” that has contributed to poverty, it said.

As Islamic State conquered territory from the Syrian city of Aleppo to the outskirts of Baghdad, it has sought to entrench its strict interpretation of Islam. It has meted out brutal punishments to those who opposed its march.

In issuing coins, the group is making its latest pitch for statehood, said Mohsin Khan, a senior fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East. “One of the attributes of a state is that it issues its own currency,” he said by phone from Washington. “That defines you as a state at least in the eyes of your own people and perhaps in the eyes of others.”

Islamic State leader Abu Bakr al-Baghdadi ordered the coins to be circulated and the group’s shoura council approved the measure, according to the statement, which couldn’t immediately be verified. Instructions will be issued later on how the money will be used, it said.

The group’s gold dinar coins bear inscriptions and images of what appears to be wheat, while the copper coins feature a crescent moon. Silver coins with denominations of 1, 5 and 10 dirhams include depictions of mosques and a shield and spear.

Khan said minting coins instead of the cheaper option of issuing paper money was also symbolic of the group’s desire to replicate early Islam when “coins were issued and they were either gold or silver.”

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