L'Information est d'Or

More losses on proprietary trading in investment banks. With so much volatility in thé markets, one wonders how the proprietary desks can make regular and sustainable profits. Definitely not an easy time to be a prop trader! Bloomberg News, sent from my iPhone. Deutsche Bank Woes Said to Persist on Credit Bets Dec. 12 (Bloomberg) -- Deutsche Bank AG, shaken last quarter by a $1.68 billion loss trading for the firm's account, is reeling again, this time from about $1 billion of bad bets in a unit led by credit-trader Boaz Weinstein in New York, people familiar with the matter said. The magnitude of the group's loss, and its impact on the firm's fourth-quarter results, may change as the value of some stakes fluctuate with the markets and the Frankfurt-based bank seeks to unwind positions, according to the people, who declined to be identified because the circumstances haven't been disclosed. As of mid-Dece...

At least some of them! Here is a nice example: on July 22,2008, JP Morgan auto analyst advised to buy General Motors Bonds. (See the Reuters article ) At this time, the 7.2 bond expiring in 2011 was trading at $72, a bargain according to this analyst. Well, less than 5 months later, it's now trading at $27.5, 63% lower!! Source:Bloomberg What was the analyst thinking? GM has not been profitable since 2000, that's eight years! Source:Fortune In 2006, Carol Loomis, Fortune columnist, was already explaining why GM was heading for a wreck . What has changed since then?

Excellent video from Wallstrip. How much would you ask for your own bailout?

Since the top of October 2007, the Dow Jones is down by roughly 50%, which makes this crash the 4th in magnitude since 1900, but it happened in a much shorter period than the other ones. This is why I beleive that the Market has anticipated most of the economical slowdown. The economy is likely to get worse continuously in the next 2-3 years (the result of real-estate and credit crisis), but the stock market will follow a different cycle. As it has anticipated faster than usual the slowdown, it will also pick up the recovery faster. And boy, you don't want to miss that! However, such a rally can only be triggered by hard proof of things getting less worse, so in the meantime, we'll live in a time of high volatility and uncertainty, which will provide opportunities for short-term and active traders.

La Banque Centrale Européenne et à sa tête Jean-Claude Trichet, ont eu une gestion initialement contestable de la crise financière et leur politique risque de se revéler très négative à long terme. Lorsque la crise financière débuta en Aout 2007, ils ont mésestimé l'amplitude de la crise. J'en veux pour preuve qu'alors que la Fed a baisse ses taux très tôt, la BCE a pris la décision inverse en augmentant son principal taux directeur. Decision qui se révélera dans le future négative pour l'économie Europeenne. Pour rappel, l'Espagne était a l'époque déjà au bord de la récession et l'Italie a peine mieux. Seule l'Allemagne, généralement contra-cyclique résistait. Alors pourquoi avoir pris une telle décision? Officiellement, c'était pour combattre l'inflation provoquée par une hausse dramatique du cours des matières premières. Mais, il était pourtant prévisible que cette inflation allait ralentir en même temps que l'économie, d'autant plus q...

Comment Vladimir va-t-il profiter de la crise pour redistribuer les richesses en Russie? J'espère qu'il va redistribuer a plus d'acteurs les entreprises russes, sans les fragiliser. http://www.lesechos.fr/pdf.php

We should learn several lessons from the property crisis in the US 1. The government has unwisely promoted massive property ownership, hence encouraging people to borrow more and financial institutions to ease the restrictions on lending. As an illustration, George Bush's speech in 2002 below is retrospectively catastrophic: @scrap the downpayments@ is the worst... 2. Brokers and other intermediaries of the mortgage business had all incentive to encourage prospective home-buyers to engage into loans they could not afford: they are paid proportionally to the size of the loan (and of the interest rate) at the time of the transaction, hence not bearing any of the default risk. Their compensation method should be reviewed.

Nice sense of humor in a dramatic situation...

Analysis from John Mauldin about how close the World now is of an economical collapse and deep depression. Construction Lending: The Next Shoe to Drop Lehman at the Center Iceland Guarantees What? Letters of Credit: Going, Going Gone? What to Do and Where Do We Go from Here? London, Stockholm, and California I have been writing for almost a year that the next shoe to drop on US banks would be commercial construction lending. Today we look at some hard numbers. We look across the pond to sort out the problems in Europe. We look at the consequences of the losses stemming from Lehman. Then we look at one of the more serious consequences of the banking crisis, one that will bring the crisis home to you. Finally, we look at what the various governments of the world must do in response. It may not be fun, but it should be interesting. And it is important. Feel free to forward this letter to anyone who asks why we not only need the bailout but will need even more coordinated government action...

Go compare the ads: The original Apple ads "Get a Mac" "Happy New Year" And the Microsoft answer Vive la competition!

SAN JOSE, Calif. -- Way, way back in 1981, Apple ran a provocative ad headlined "Welcome IBM. Seriously." The ad was in response to IBM's debut of the company's first personal computer -- a market Apple helped pioneer years earlier, and which Big Blue's entry was set to further legitimize. Apple's competitors in the mobile market aren't taking out ads (yet) welcoming the iPhone, but they sure sound grateful. Earlier this month, Nokia's CEO publicly thanked Apple for showing the industry and consumers the exciting potential of mobile devices. Tuesday, an executive with Access Systems, a company that makes mobile device software for phone manufacturers like Sony Ericson and Samsung, thanked Apple (NASDAQ: AAPL) for helping it sell new products. "We're probably one of the ones capitalizing the most on the iPhone," said Albert Chu, vice president of global marketing and alliances for Access, during this week's Mobile Content & Marketi...

So funny...

John Mack, CEO of Morgan Stanley, said today: "we are in the midst market controlled by fear and rumours and short sellers are driving our stock down." At the start of the year, I asked in one of my blog posts: "After Nothern Rock, Bear Sterns, who will be next?" Well we have now the answer: it is Lehman Brothers and AIG that went under. Lehman is now under administration and AIG has been refinanced by the US government. This prompts two comments. 1. It is traditional, considered low risk institutions that have been hit the hardest by this financial crisis, and not the sophisticated and highly criticised institutions like hedge funds or private equities. Indeed, AIG was rated AAA by Standard and Poors no sooner than a few days ago. 2. The business model of investment banking itself seems to be broken. Hence, the last decade has seen the disappearance of Bearing's, JPMorgan, Bear Sterns and Lehman Brothers as independant entities( and even disappeare...

As real-estate companies have been thrashed in the markets, there are now good opportunities for buyers with a sensible long term strategy. And guess who that would be? The oracle of Ohama... http://www.bloomberg.com/apps/news?pid=20601109&sid=a6vQNjd7KR0A&refer=home Cyrille

After seven years of decrease during which the US Dollar lost 40% of its value against the Euro, it is now time to reverse the trade and buy EUR vs USD. Euro zone has fallen into serious recession while the US, though close to recession as well, have much more capacity to rebound quicker. GDP growth forcecasts (Source JPMorgan) 2008 2009 United States 1.5% 2.0% Euro area 1.2% 0.4%

Chosen extracts Discomfort index = unemployement rate + inflation rate 1971. Nixon announces wage and price controls to cure inflation 1975. Ford deregulation as advised by the Chicago School (Milton Friedman and al) " Deregulation greatly increased the economy's flexibility and resilience " 1979. Fed Chairman Volcker decides to clamp down on the amount of money available in the economy in order to reduce inflation. This caused economic misery - severe recession - but after 3 years, inflation was fully in check 1990. GDP replaces GNP as standard measure of aggregate output. 1991. Fall of the USSR . Chaos -> End of price control -> Hyperinflation -> Massive privatization -> Oligarch rule "Forced to make the shift overnight, the soviets achieved not a free-market system but a black-market one." Dutch disease . In 1970, natural gas was discovered in the Netherlands. Foreign demand for gas exports drove the price of the currency up, making all other e...

Warren Buffet has bet 1 million dollars that over the next 10 years, the S&P500 index will beat a selection of carefully selected Hedge Funds. His argument is that huge Hedge Funds fees ( 1.5% management fees + 20% performance fees + 1% management fee for the fund) will eat up any potential gain. Hedge Funds focus on absolute returns and low volatility so they tend to do better when the markets go down. As a result, it's likely that the result of this bet will depend on how the markets and the economy overall does. Who do you think will win? Join the survey

Trade Idea Now is a good time to start investing in India. Fears of inflation and global recession have taken the Indian index down. It is now trading at 4,500 down from 6350 in early January (30% loss). Although the Indian economy is forecasted to slow down, it will still do reasonbly well: JPMorgan predicts a GDP growth of 7% in 08-09 compared to 8.7% in 07-08. The inflation risk comes from surging commodity and food prices. I don't believe that commodity prices surge will last forever: it has the caracteristics of a bubble (just remember that a few years back oil was trading at $17, has now reached $135 and an oil company executive recently predicted $250). And by raising rates, the Federal Reserve of India has shown that it is ready to fight inflation. NIFTY now trades at 15.7 times the 12M forward earnings. That is a discount from the S&P500 who has to face a US recession. Incredible, isn't it? Lyxor offers an easy product to bet on the rise of the Nifty index: the Ly...

A recent study showed that UK companies paid much more taxes that French or German companies. Tax paid on value-added: - 6% Germany - 8% France and Germany - 12% United Kingdom

Send to a Friend Print Article View as PDF Permissions/Reprints Thoughts from the Frontline Weekly Newsletter In this issue: The Problem with the Euro The Euro at Par with the Dollar The Euro at Par with the Dollar About five years ago, I said that the euro, which was trading at about $.88 at the time would rise to $1.50 and then fall back to $1 over the course of a decade or more. It would be one huge round trip. By the way, giving credit where credit is due, that opinion was crystallized over a long dinner with bond expert Lord Alex Bridport and several companions in Geneva. The logic was compelling then and it still is now. We are halfway through that decade long trip and it remains to be seen if we get back to parity. I think we will. Why would the euro fall? Because the currency is still an experiment in cooperation. At some point, one or more of the weaker European countries is going to need more monetary stimulation than the majority of the countries in the union, for a var...

"This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks." - Thomas Friedman

Interesting article on the Tehran Times about why the old economy is now trendier than the "new economy". Extract: “The United States has become one of the lowest-cost producers of steel in the world,” said Michelle Applebaum, a top-ranked steel analyst with her own Chicago research firm. Who’s the high-cost producer? “China.”

S&P 500 sector ranking: 1. IT 16% 2. Financials 16% 3. Energy TBD On the back of the credit crisis, IT sector has overtaken financials as the leadingS&P sector, a place they have not occupied since the .com boom (in 2000, IT sector reached 32%). Which sectors will be the winners and loosers in the future? What are the trading opportunities?More analysis to come.

Let's have a look at the market saying that you should sell in may and walk away. Is there anything statistically true about it? Well, you will be surprised by what I found. If you split the returns of the S&P500 into two semester, one from May to October and another one from November to April, you find out that most of the gains happened in the first part of the year. Here is the strategy: - Invest 1st May $X of S&P500 - Sell 31st October whatever your investment is worth: $Y of S&P 500 - Then reinvest 1st May of next year $Y. ... This strategy would have returned 13 times your initial investment over 45 years. when the same strategy between November and April would have returned only 1.5 times your initial investment over 45 years. It is less than the total progression of the S&P but considering that you would thus reduce your exposure and risk considerably (by half), it is very rewarding.

Is the world turning upside down? As all the major economies are slowing down, Japan and Germany, the usual underperformers, have recorded record first quarter growth: 0.8% for Japan and 1.5% for Germany. In annual terms, it is 3.2% and 6%! It shows how de- correlated they are from the rest of the world. The reason is probably that their labour market is not flexible. But is it about to change? Germany has done some labour reforms and Japan is going to fight against China to keep its position of second largest economy in the World, which might be a catalyst for them. http://m.ft.com/srt/d/d2c/0.0?feed-article-id=fe141cfa-2301-11dd-93a9-000077b07658&channel-id=FT.com%20-%20UK%20Homepage Cyrille

http://www.wired.com/science/discoveries/news/2008/05/dayintech_0513

Microsoft has so far failed to catch up Google in online business. Microsoft first tried to build its own platform (Who remembers MSN or Windows Live?) then to purchase Yahoo (Yahoo CEO was too greedy). So what is MSFT's plan C? I think it should be online applications. But by the time Microsoft realises it, other competitors will already have installed strong position, or not?

Recession is often defined as two consecutive quarters of GDP contraction. Well it's not true in the US. The official definition, provided by The National Bureau of Economic Research, is: "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months." And this is not exactly the same. The NBER goes on to say: “ Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, ‘a significant decline in economic activity.' Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology.” The main problem...

French President Sarkozy gives a summary of his actions as head of France. He has done a lot - some say too much, 55 reforms started! - but has also created some deceptions that he will need to tackle. It's too early to judge his actions but my opinion is that he should focus on increasing France's economic competitivity. Come on France, you need to move on!

Apple's vertical strategy of controling both the software and the hardware was the reason why it lost to the PC (Microsoft-Intel alliance) in the 90s. At a time were technology was evolving at a record speed (Moore law stated that the speed of microprocessors would double every 18 months), exercising a tight control on the manufactoring chain left Apple trailing the more innovative PC business. But now that computers have become a mature market, the edge is not anymore to have a fast machine but to have an electronic device that looks and feels good. And Apple has the experience and structure to deliver such hit products. How Apple Got Everything Right By Doing Everything Wrong Yahoo! Finance Quote for AAPL/