21 Dec 2009
On the first day of Christmas a large, private Indian bank informed its customers that credit limits would be reduced by 15% and the cash withdrawal facility was being, well, withdrawn. This message went not to delinquent but good customers paying over 36% interest a year.
The week before the RBI circulated an inquiry of bank holdings in debt mutual funds. The concern was that money printed by the RBI was not being lent but deposited in mutual funds and delivered to corporate clients in the commercial paper market because bank lending limits had been exhausted.
The banks response to the RBI was not to stop the mutual fund subterfuge but reduce lending to paying customers.
Depriving paying customers of spending power at the end of the quarter is not a choice banks make willingly unless there is much more to the story. The runaway food price inflation, 20% year over year, has handcuffed the RBI sooner than expected. Banks need to reduce risk and make room on the balance sheet for more government paper.
The ten year government bond yield has sauntered north of 7.75% from 7.4% one month ago. Rising rates lead to declining price for bonds held in bank trading portfolios and those lesser values must be marked to market at the end of each quarter.
Dealers are holding $10 billion worth of an unpopular, off period, 9 year and 11 month bond that is flailing in the face of a new ten year issue. There are few buyers for the new paper, and no buyers for the old paper which, even though it matures one month earlier, is 20 basis points less valuable.
The RBI plan to withdraw the 3% of GDP government spending over the course of the next two years has been truncated. In 2010 short term rates will rise by 3% while government borrowing will rip long term rates above 8.4%.
The Planning Commission is to be commended for its useful insight requesting $50 billion, half annual government borrowing, to prepare 500 million workers for jobs in 2030. Presumably a few of those jobs would be for a new economic team.
Make it a line item for the season of giving.
Monday, December 21, 2009
Friday, December 18, 2009
Clairvoyant
18 Dec 2009
The Treasury Secretary went up the hill to fetch a pale of integrity for TARP claiming that banks would repay TARP money early and there would be more of it for the taxpayer, money that is.
Citibank dutifully priced and sold shares to return $17 billion to Treasury which, along with $38 billion in tax concessions, removed Citi from the ICU list and permits it to pay executives market rates for losing money at a declining rate.
Unfortunately Citibank sold the shares at 3.18, which Treasury bought at 3.25 and were trading at $4.05 before the Secretary went up the Hill. Treasury says now it will hold the share for twelve months, conveniently past the mid term elections next year.
Citibank has friends in the Gulf. Saudi has come to its rescue early and often. In May of 2007 it was Abhu Dhabi which invested $7.5 billion at $37 a share with the right to buy more at $37.
AD was miffed that Citi sold shares at 3.18 without the courtesy to reduce the strike price on AD’s converts (the right at which AD can buy more Citi shares). Newly litigious AD sued Citibank for “misrepresentation” while it slipped $10 billion to Dubai to keep it out of the Arabian Sea.
The Kuwaiti's, though, got out $1 billion ahead of the game in Citi stock a week before the Secretary went up the Hill.
Clairvoyant.
The Treasury Secretary went up the hill to fetch a pale of integrity for TARP claiming that banks would repay TARP money early and there would be more of it for the taxpayer, money that is.
Citibank dutifully priced and sold shares to return $17 billion to Treasury which, along with $38 billion in tax concessions, removed Citi from the ICU list and permits it to pay executives market rates for losing money at a declining rate.
Unfortunately Citibank sold the shares at 3.18, which Treasury bought at 3.25 and were trading at $4.05 before the Secretary went up the Hill. Treasury says now it will hold the share for twelve months, conveniently past the mid term elections next year.
Citibank has friends in the Gulf. Saudi has come to its rescue early and often. In May of 2007 it was Abhu Dhabi which invested $7.5 billion at $37 a share with the right to buy more at $37.
AD was miffed that Citi sold shares at 3.18 without the courtesy to reduce the strike price on AD’s converts (the right at which AD can buy more Citi shares). Newly litigious AD sued Citibank for “misrepresentation” while it slipped $10 billion to Dubai to keep it out of the Arabian Sea.
The Kuwaiti's, though, got out $1 billion ahead of the game in Citi stock a week before the Secretary went up the Hill.
Clairvoyant.
Wednesday, December 16, 2009
Desert Excrement
16 December 2009
The Prime Ministers Office is paying 100% more for its mealtime onions and its intrepid economic team headed by an ex IMF professor observes that inflation will be over 7% by March 2010.
StanChart Bank thinks inflation will be closer to 8.5%. Either way, it is much higher than the RBI expectation of 5%, higher than the expected GDP growth of 7% (Asian Development Bank) before government spending is weaned, and without consideration for government borrowing to keep the printing press running through the fiscal year.
Moody’s believes that India is in a “comfortable” foreign exchange and fiscal position so it will upgrade India’s debt rating. Maybe Moody’s is reviewing data that is three years old, or the RBI supplied data that is three years old, or Moody’s is applying Nakheel Construction math to the data.
India imports capital to pay its oil bill and balance the budget. The foreign exchange position of the RBI, over $270 billion, does not come without claims. The net claim number, the amount India would have to pay or receive if creditors cashed in their chips simultaneously, is actually a negative $50 billion, plus or minus.
Now, creditors, investors, will not head for the exit at the same time, but “comfort” is in the eye of the beholder.
Creditors in Dubai have beheld that despite $10 billion supplied by Abhu Dhabi to Nakheel’s bondholders, Dubai lacks a legal framework for restructuring, or, subtly put, no bankruptcy law that protects lenders from Bedouins in the desert.
Nakheel creditors may be comforted in thorough financial analysis that reveals the only cash flow or collateral for attachment is money received by Nakheel to collect Dubai’s sewage.
Precisely.
Dubai creditors are in deep, desert excrement.
They should retain Elin Woods' California divorce lawyer who will use California’s “no fault” divorce laws to nuke the pre nuptial agreement rewarding Mrs Woods half of whatever Mr Woods was able to earn in his few waking moments.
The easy math. $1 billion divided by 14 admitted consorts is roughly $70 million each.
Mrs Woods could send flowers and chocolates to the seven in her column and have enough left over to buy a condo, or a few, in Dubai, cheap, with all the modern facilities.
The Prime Ministers Office is paying 100% more for its mealtime onions and its intrepid economic team headed by an ex IMF professor observes that inflation will be over 7% by March 2010.
StanChart Bank thinks inflation will be closer to 8.5%. Either way, it is much higher than the RBI expectation of 5%, higher than the expected GDP growth of 7% (Asian Development Bank) before government spending is weaned, and without consideration for government borrowing to keep the printing press running through the fiscal year.
Moody’s believes that India is in a “comfortable” foreign exchange and fiscal position so it will upgrade India’s debt rating. Maybe Moody’s is reviewing data that is three years old, or the RBI supplied data that is three years old, or Moody’s is applying Nakheel Construction math to the data.
India imports capital to pay its oil bill and balance the budget. The foreign exchange position of the RBI, over $270 billion, does not come without claims. The net claim number, the amount India would have to pay or receive if creditors cashed in their chips simultaneously, is actually a negative $50 billion, plus or minus.
Now, creditors, investors, will not head for the exit at the same time, but “comfort” is in the eye of the beholder.
Creditors in Dubai have beheld that despite $10 billion supplied by Abhu Dhabi to Nakheel’s bondholders, Dubai lacks a legal framework for restructuring, or, subtly put, no bankruptcy law that protects lenders from Bedouins in the desert.
Nakheel creditors may be comforted in thorough financial analysis that reveals the only cash flow or collateral for attachment is money received by Nakheel to collect Dubai’s sewage.
Precisely.
Dubai creditors are in deep, desert excrement.
They should retain Elin Woods' California divorce lawyer who will use California’s “no fault” divorce laws to nuke the pre nuptial agreement rewarding Mrs Woods half of whatever Mr Woods was able to earn in his few waking moments.
The easy math. $1 billion divided by 14 admitted consorts is roughly $70 million each.
Mrs Woods could send flowers and chocolates to the seven in her column and have enough left over to buy a condo, or a few, in Dubai, cheap, with all the modern facilities.
Tuesday, December 15, 2009
The Worm Turns
Indian advance tax paid on income admitted to by businesses is expected to rise 3% this year net of refunds despite an economy that was reported to grow by 7%.
Domestic debt mutual fund assets doubled because banks absorbed printed government money with no intention of lending but collecting interest instead.
Domestic equity mutual fund outflows increased the last two months because taxi drivers appreciate markets that double are blessings from above.
Economists agree that Indian inflation will exceed 8% next year while economic growth without government intervention will be less than 6%. The RBI will have to increase short term interest rates by at least 3% (300 basis points) while the government will continue borrow goosing ten year bond yields toward 8%
McDonalds, Dominos, Toyota, and Honda will pay more for materials but will not be able to raise prices because money for their customers will be more expensive and there will be less available after the RBI does its job.
Markets are complacent.
The cost of insurance measured by the expected price changes of options traded on stocks and indices is nestled at 20% annualized, roughly 20% below historical averages, and half of what insurance will cost if indices drop by 5%.
In January it was twice as expensive to insure lending to the Turks than the Greeks (credit default swaps which payout if the government defaults on an interest payment, wonder what the Ottoman Empire would have made of them). Today, the Turks are a better risk (cheaper insurance).
Abu Dhabi bailed out Dubai with $10 billion, $4 billion for the bond payment and $6 billion more for pain and suffering to come. The cost of this good deed was to equalize the cost of insuring oil blessed Abu Dhabi debt with that of oil less Dubai.
Major US banks have returned the TARP handcuffs foisted on them a year ago by Secretary Paulson. When summoned a year ago, the bank chiefs came to Washington early, stayed late and long enough to collect $10-$25 billion of taxpayer money each.
On the Monday morning after Oprah, the same suspects, “fat cat bankers”, claimed to be grounded by “inclement weather” and were unable to accept the President’s hospitality though they did attend the meeting by conference call.
The worm turns.
Domestic debt mutual fund assets doubled because banks absorbed printed government money with no intention of lending but collecting interest instead.
Domestic equity mutual fund outflows increased the last two months because taxi drivers appreciate markets that double are blessings from above.
Economists agree that Indian inflation will exceed 8% next year while economic growth without government intervention will be less than 6%. The RBI will have to increase short term interest rates by at least 3% (300 basis points) while the government will continue borrow goosing ten year bond yields toward 8%
McDonalds, Dominos, Toyota, and Honda will pay more for materials but will not be able to raise prices because money for their customers will be more expensive and there will be less available after the RBI does its job.
Markets are complacent.
The cost of insurance measured by the expected price changes of options traded on stocks and indices is nestled at 20% annualized, roughly 20% below historical averages, and half of what insurance will cost if indices drop by 5%.
In January it was twice as expensive to insure lending to the Turks than the Greeks (credit default swaps which payout if the government defaults on an interest payment, wonder what the Ottoman Empire would have made of them). Today, the Turks are a better risk (cheaper insurance).
Abu Dhabi bailed out Dubai with $10 billion, $4 billion for the bond payment and $6 billion more for pain and suffering to come. The cost of this good deed was to equalize the cost of insuring oil blessed Abu Dhabi debt with that of oil less Dubai.
Major US banks have returned the TARP handcuffs foisted on them a year ago by Secretary Paulson. When summoned a year ago, the bank chiefs came to Washington early, stayed late and long enough to collect $10-$25 billion of taxpayer money each.
On the Monday morning after Oprah, the same suspects, “fat cat bankers”, claimed to be grounded by “inclement weather” and were unable to accept the President’s hospitality though they did attend the meeting by conference call.
The worm turns.
Monday, December 14, 2009
Sublime
The US Congress will vote to increase the debt limit from $12 trillion to $14 trillion before the end of the year to avoid having to do so in an election year, 2010.
When does the ridiculous become sublime?
Is there a US debt Chandrasekhar Limit
The Chandrasekhar Limit is defined as:
"For main-sequence stars with a mass below approximately 8 solar masses, the mass of this core will remain below the Chandrasekhar limit, and they will eventually lose mass (as planetary nebulae) until only the core, which becomes a white dwarf, remains.
Stars with higher mass will develop a degenerate core whose mass will grow until it exceeds the limit. At this point the star will explode in a core-collapse supernova, leaving behind either a neutron star or a black hole.".
Is there a limit on the amount of debt the US can generate before a total implosion occurs (the end result of a supernova).
It seems Iceland could not print or generate enough debt to save itself. Zimbabwe has the market cornered in 10 Billion dollar notes. How long will the dollar as Reserve Currency and medium for exchange in oil last?
The US has 3 Trillion dollars committed to this "rescue" effort. Is 6 trillion too much? 9 Trillion? 30 Trillion? At what point will the system break down and go supernova?
http://seekingalpha.com/article/177907-u-s-debt-is-there-a-limit
When does the ridiculous become sublime?
Is there a US debt Chandrasekhar Limit
The Chandrasekhar Limit is defined as:
"For main-sequence stars with a mass below approximately 8 solar masses, the mass of this core will remain below the Chandrasekhar limit, and they will eventually lose mass (as planetary nebulae) until only the core, which becomes a white dwarf, remains.
Stars with higher mass will develop a degenerate core whose mass will grow until it exceeds the limit. At this point the star will explode in a core-collapse supernova, leaving behind either a neutron star or a black hole.".
Is there a limit on the amount of debt the US can generate before a total implosion occurs (the end result of a supernova).
It seems Iceland could not print or generate enough debt to save itself. Zimbabwe has the market cornered in 10 Billion dollar notes. How long will the dollar as Reserve Currency and medium for exchange in oil last?
The US has 3 Trillion dollars committed to this "rescue" effort. Is 6 trillion too much? 9 Trillion? 30 Trillion? At what point will the system break down and go supernova?
http://seekingalpha.com/article/177907-u-s-debt-is-there-a-limit
Sunday, December 13, 2009
California Christmas
NEW YORK: Privately-held real estate company Fairfield Residential LLC filed for bankruptcy protection on Sunday, saying that the collapse of the US real estate and capital markets has made it difficult to continue without restructuring.
The company, which filed a voluntary Chapter 11 bankruptcy petition in Delaware, said it has agreed with its significant lenders on the framework of a plan of reorganization that would allow it to continue its property management, asset management, construction services and general partner functions.
Fairfield said in a statement that the plan maintains the company's existing infrastructure in a new operating company, but that some assets not assigned to the new operating company will be assigned to a liquidating trust.
Fairfield specializes in multifamily housing and is based in San Diego, Calif. The case is In re: Fairfield Residential LLC, US Bankruptcy Court, District of Delaware, No. 09-14378.
The company, which filed a voluntary Chapter 11 bankruptcy petition in Delaware, said it has agreed with its significant lenders on the framework of a plan of reorganization that would allow it to continue its property management, asset management, construction services and general partner functions.
Fairfield said in a statement that the plan maintains the company's existing infrastructure in a new operating company, but that some assets not assigned to the new operating company will be assigned to a liquidating trust.
Fairfield specializes in multifamily housing and is based in San Diego, Calif. The case is In re: Fairfield Residential LLC, US Bankruptcy Court, District of Delaware, No. 09-14378.
Saturday, December 12, 2009
Bondos
The Petroleum Minister requested $6 billion in oil bonds from the Finance Ministry in the supplemental budget and was refused.
To save face the Minister said that oil subsides are not viable in the long run and that a formula will be worked out to pass “excessive cost” to the consumer through price increases above some level. What level and what formula?
The short story is that the borrowing demands of the government are catching up with it. The supplementary funding list recently submitted, $5 billion, included monies for food and fertilizer subsidies, the metro, Air India, and the National Calamity Fund, which may well be the oil policy, but no bonds for the oil marketing companies.
Ten year government bond yields are 7.51% with the march futures trading above 8.4%. The market expected that the oil bonds would be issued in December, and without them the oil marketing companies will post a loss for the quarter. When the ten year vaults past 8% enthusiasm for holding equities wanes.
Worse still is the implication that the government is up against its borrowing ceiling without a sensible plan, or clue, for the 75% of the countries oil requirement that is imported.
The supplementary budget request gives way to the budget to be announced in February which promises to be an exercise in anxiety, or, at the very least putting the arm on the World Bank to do more than recapitalize the banking sector.
To save face the Minister said that oil subsides are not viable in the long run and that a formula will be worked out to pass “excessive cost” to the consumer through price increases above some level. What level and what formula?
The short story is that the borrowing demands of the government are catching up with it. The supplementary funding list recently submitted, $5 billion, included monies for food and fertilizer subsidies, the metro, Air India, and the National Calamity Fund, which may well be the oil policy, but no bonds for the oil marketing companies.
Ten year government bond yields are 7.51% with the march futures trading above 8.4%. The market expected that the oil bonds would be issued in December, and without them the oil marketing companies will post a loss for the quarter. When the ten year vaults past 8% enthusiasm for holding equities wanes.
Worse still is the implication that the government is up against its borrowing ceiling without a sensible plan, or clue, for the 75% of the countries oil requirement that is imported.
The supplementary budget request gives way to the budget to be announced in February which promises to be an exercise in anxiety, or, at the very least putting the arm on the World Bank to do more than recapitalize the banking sector.
Monday, December 7, 2009
Pushing on a Chinese String
The US consumer borrows to spend one out of four dollars in the global economy. US consumer debt approached $1 trillion in 2008 but declined 20% since. This year banks mailed 40% less pre approved invitations for consumers to spend.
The US Treasury bailed out banks to encourage consumers to spend. The Federal Reserve and foreign governments lend money to the US Treasury to encourage banks to encourage consumers. Banks are spending money on bonuses to reward management for abysmal performance while depriving the US postal service of income from shipping credit cards to consumers.
The Treasury Secretary says that $150 billion of the $700 billion TARP money will be returned by the end of 2010 and may be spent on initiatives to create jobs, which presumably TARP has not done.
The Treasury Secretary presumes that the commercial real estate market is fairly priced with mausoleums of office space for which mortgages will continue to be paid in 2010. The financial stability of the global economy is an interesting speculation and may be outside the Secretary’s expertise and opinion whether TARP monies will be repaid.
This is not good news for textile makers in Bangladesh who require US consumers to consume with great vigor. The elimination of $200 billion from US consumer demand deprives the global economy of $1.6 trillion in spending.
If the US consumer does not spend who will? The Indians?
India’s bilateral with the US is less than $50 billion. It runs an annual trade deficit of about $90 billion, $180 billion of exports against $270 billion of imports. Oil accounts for one third of the imports which is subsidized for the masses.
Government owned oil marketing companies pay the market price for oil and sell it at a lower government set price. In exchange the OMC’s receive government IOU’s, oil marketing bonds, which are in turn sold to the Reserve Bank of India at a premium placing the RBI in the business of printing money to buy oil.
The Indian consumer is genetically apt at price discovery. McDonald's has been in India for over six years with branches throughout the country and has yet to turn a profit or repatriate a dividend. Undeterred they press on with value meals priced at $2 which cost $2.05 to deliver. But the bathrooms are the cleanest in town.
There are consumers in India able to afford global brands at international prices but they account for less than half a million of the 41 million registered tax payers and most of India’s $25 billion of non essential imports.
India was insulated from global financial adventures because money cannot come and go as it pleases, the government owns seventy percent of the highly regulated banking industry, and international trade, other than remittances from laborers building castles to the sky in the Gulf, is modest.
Even if India grows its $1.2 trillion economy by 5% in fiscal 2010, though the financial community prays for twice that, the net addition to global commerce will be less than $60 billion or a bad week at the office for Berkshire Hathaway.
There is always the Chinese.
The Bank of International Settlements (BIS) reports that the Chinese have lent $1 trillion since March of this year without concern for the capital to support lending or the creditworthiness of the borrowers.
The BIS observes that “asset quality” in China may be challenging, which is a polite way of saying that Chinese banks have a date with uncertain repayment destiny unless they lay off the risk or raise more money to cover expected losses.
In fairness to the Chinese, existing bad loans, before the fresh lending, are higher than admitted because in a military dictatorship bank managements have little discretion.
The Chinese would turn to their advisers, Goldman Sachs, for advice on which suspects would provide takeout financing before the Chinese economy is taken out.
And Goldman may point them in the direction of Sovereign Wealth Funds which traffic in $3.1 trillion. Kuwait on request invested $3 billion in Citibank earlier this year and exited with a billion dollar profit last week.
Why exit from the poster child for TARP if the recovery is just beginning as the Treasury Secretary promises?
Fair question from Sheiks who understand inflating paper is easier than the pushing the economy up a string of Chinese lending.
The US Treasury bailed out banks to encourage consumers to spend. The Federal Reserve and foreign governments lend money to the US Treasury to encourage banks to encourage consumers. Banks are spending money on bonuses to reward management for abysmal performance while depriving the US postal service of income from shipping credit cards to consumers.
The Treasury Secretary says that $150 billion of the $700 billion TARP money will be returned by the end of 2010 and may be spent on initiatives to create jobs, which presumably TARP has not done.
The Treasury Secretary presumes that the commercial real estate market is fairly priced with mausoleums of office space for which mortgages will continue to be paid in 2010. The financial stability of the global economy is an interesting speculation and may be outside the Secretary’s expertise and opinion whether TARP monies will be repaid.
This is not good news for textile makers in Bangladesh who require US consumers to consume with great vigor. The elimination of $200 billion from US consumer demand deprives the global economy of $1.6 trillion in spending.
If the US consumer does not spend who will? The Indians?
India’s bilateral with the US is less than $50 billion. It runs an annual trade deficit of about $90 billion, $180 billion of exports against $270 billion of imports. Oil accounts for one third of the imports which is subsidized for the masses.
Government owned oil marketing companies pay the market price for oil and sell it at a lower government set price. In exchange the OMC’s receive government IOU’s, oil marketing bonds, which are in turn sold to the Reserve Bank of India at a premium placing the RBI in the business of printing money to buy oil.
The Indian consumer is genetically apt at price discovery. McDonald's has been in India for over six years with branches throughout the country and has yet to turn a profit or repatriate a dividend. Undeterred they press on with value meals priced at $2 which cost $2.05 to deliver. But the bathrooms are the cleanest in town.
There are consumers in India able to afford global brands at international prices but they account for less than half a million of the 41 million registered tax payers and most of India’s $25 billion of non essential imports.
India was insulated from global financial adventures because money cannot come and go as it pleases, the government owns seventy percent of the highly regulated banking industry, and international trade, other than remittances from laborers building castles to the sky in the Gulf, is modest.
Even if India grows its $1.2 trillion economy by 5% in fiscal 2010, though the financial community prays for twice that, the net addition to global commerce will be less than $60 billion or a bad week at the office for Berkshire Hathaway.
There is always the Chinese.
The Bank of International Settlements (BIS) reports that the Chinese have lent $1 trillion since March of this year without concern for the capital to support lending or the creditworthiness of the borrowers.
The BIS observes that “asset quality” in China may be challenging, which is a polite way of saying that Chinese banks have a date with uncertain repayment destiny unless they lay off the risk or raise more money to cover expected losses.
In fairness to the Chinese, existing bad loans, before the fresh lending, are higher than admitted because in a military dictatorship bank managements have little discretion.
The Chinese would turn to their advisers, Goldman Sachs, for advice on which suspects would provide takeout financing before the Chinese economy is taken out.
And Goldman may point them in the direction of Sovereign Wealth Funds which traffic in $3.1 trillion. Kuwait on request invested $3 billion in Citibank earlier this year and exited with a billion dollar profit last week.
Why exit from the poster child for TARP if the recovery is just beginning as the Treasury Secretary promises?
Fair question from Sheiks who understand inflating paper is easier than the pushing the economy up a string of Chinese lending.
Friday, December 4, 2009
Hard Stuff
The RBI is long 200 tones of Gold at $1,178 an ounce and wants to buy another 200 tones from the IMF to keep Vietnam out of the sea.
Goldman Sachs and the World Bank believe India’s GDP can return to 9% year over the next three years. Morgan Stanley is in the 7-9% range. The World Bank is talking its book having increased India exposure to $7 billion while pumping $400 million into Rajasthan looking for water.
In the first two quarters reported Indian GDP growth was 6.1% and 7.9%. But if government spending is subtracted the numbers are 5.5% and 4.7%.
The Finance Minister today agreed that return to 9% growth is an ambition for India, but “may be challenging” in the short term.
Yes, doubling real growth is a challenge for any economy in a world expected to be one percent better off next year, and a fairytale with an unseemly end for those who should know better.
The Russians are swapping old rubles for new rupees.
A Russian government agency is buying 20% of another Russian government agencies holding in an Indian telecom joint venture for $700 million. The payment works down the Rupee Ruble roulette wheel outstanding between the countries since the government reinvented math 30 years ago.
Portfolio investors added $15 billion to the pot this this year but accepted less invitations to the party, 111, about half the five year average of 250, despite the index being up 70% this year. Good performnace numbers not unexpected with the printing press in the RBI basement overheating, but difficult to replicate when the Government comes to market to borrow through February.
The market trades at 17 times earnings facing a rising ten year bond yield, 7.36% expected to reach 8.35% by March, and onion prices that are ripping.
Yields over 8% imply a fair value for earnings of roughly 12 times. The market is pricing in an expectation of 33% growth in earnings over the medium term to break even.
The RBI has pumped M3 by 40% since 2007, and 18% this year. The market remains 20% below the best levels of 2007.
Gold at $1,800?
Goldman Sachs and the World Bank believe India’s GDP can return to 9% year over the next three years. Morgan Stanley is in the 7-9% range. The World Bank is talking its book having increased India exposure to $7 billion while pumping $400 million into Rajasthan looking for water.
In the first two quarters reported Indian GDP growth was 6.1% and 7.9%. But if government spending is subtracted the numbers are 5.5% and 4.7%.
The Finance Minister today agreed that return to 9% growth is an ambition for India, but “may be challenging” in the short term.
Yes, doubling real growth is a challenge for any economy in a world expected to be one percent better off next year, and a fairytale with an unseemly end for those who should know better.
The Russians are swapping old rubles for new rupees.
A Russian government agency is buying 20% of another Russian government agencies holding in an Indian telecom joint venture for $700 million. The payment works down the Rupee Ruble roulette wheel outstanding between the countries since the government reinvented math 30 years ago.
Portfolio investors added $15 billion to the pot this this year but accepted less invitations to the party, 111, about half the five year average of 250, despite the index being up 70% this year. Good performnace numbers not unexpected with the printing press in the RBI basement overheating, but difficult to replicate when the Government comes to market to borrow through February.
The market trades at 17 times earnings facing a rising ten year bond yield, 7.36% expected to reach 8.35% by March, and onion prices that are ripping.
Yields over 8% imply a fair value for earnings of roughly 12 times. The market is pricing in an expectation of 33% growth in earnings over the medium term to break even.
The RBI has pumped M3 by 40% since 2007, and 18% this year. The market remains 20% below the best levels of 2007.
Gold at $1,800?
Thursday, December 3, 2009
Onions
The RBI admits that reduction in remittances from the Gulf may have a larger affect on certain parts of India than others.
It is comforting to know that the RBI is conversant enough with over half India’s annual capital requirement to appreciate that if Indian workers from the UAE have not been paid for four months, and a fraction may not be paid ever, that this may not be good news in Kerala.
The good sheiks running Nakheel Construction indicated to the Nasadq Bourse in Dubai that the trading of their bonds was inconvenient, price down 50%, and that trading should be halted until the sheiks believed it convenient, or had a better story to tell.
The RBI is nonetheless emboldened with the second quarter GDP growth numbers, 7.9% versus an expected 6.1%, to suggest that it will review its forecast of 6% GDP growth for the fiscal year in January.
Presumably the RBI will contrast the GDP growth numbers with the growth in direct tax collection, + 3.7%, for the same period and ask the niggling question, well, how is that possible?
The intrepid sleuths at Live Mint are to be commended for their review of the Indian GDP numbers excluding the effect of public spending concluding that growth comes in at 4.9%.
Yes, 4.9%, not 7.9%, and not even the adjusted 5.5% of the previous quarter and closer to the economic reality of direct tax collection. Indirect tax collection, customs and excise, by the way, for the month of October was down by 10%.
Government spending in India has included tax cuts, lower interest rates, and an increase in pay for government employees.
The RBI began the process of making credit less available last month by increasing the amount of money banks had to set aside to buy Indian government bonds because, among other things, Indian equity prices are up over 65% for the year.
That was before food prices started hopping. Onions have doubled, potatoes are up 40%, pulses 50% and prices for essential items in November 17%. Onions are a killer, and can be for bankers well as politicians. The bonus for government employees has been paid.
The RBI should revisit its 6% growth estimate for the year, but get the direction right.
It is comforting to know that the RBI is conversant enough with over half India’s annual capital requirement to appreciate that if Indian workers from the UAE have not been paid for four months, and a fraction may not be paid ever, that this may not be good news in Kerala.
The good sheiks running Nakheel Construction indicated to the Nasadq Bourse in Dubai that the trading of their bonds was inconvenient, price down 50%, and that trading should be halted until the sheiks believed it convenient, or had a better story to tell.
The RBI is nonetheless emboldened with the second quarter GDP growth numbers, 7.9% versus an expected 6.1%, to suggest that it will review its forecast of 6% GDP growth for the fiscal year in January.
Presumably the RBI will contrast the GDP growth numbers with the growth in direct tax collection, + 3.7%, for the same period and ask the niggling question, well, how is that possible?
The intrepid sleuths at Live Mint are to be commended for their review of the Indian GDP numbers excluding the effect of public spending concluding that growth comes in at 4.9%.
Yes, 4.9%, not 7.9%, and not even the adjusted 5.5% of the previous quarter and closer to the economic reality of direct tax collection. Indirect tax collection, customs and excise, by the way, for the month of October was down by 10%.
Government spending in India has included tax cuts, lower interest rates, and an increase in pay for government employees.
The RBI began the process of making credit less available last month by increasing the amount of money banks had to set aside to buy Indian government bonds because, among other things, Indian equity prices are up over 65% for the year.
That was before food prices started hopping. Onions have doubled, potatoes are up 40%, pulses 50% and prices for essential items in November 17%. Onions are a killer, and can be for bankers well as politicians. The bonus for government employees has been paid.
The RBI should revisit its 6% growth estimate for the year, but get the direction right.
Wednesday, December 2, 2009
Borrow Long to Lend Short
India is an emerging market economy privileged with a current account and budget deficit. The country imports more than it exports and its government spends more than it taxes. Unfortunately for India the rupee is not the reserve currency of the world nor is oil priced in it.
The Reserve Bank of India understands that for India to pay its oil bill it has to import capital to do so. For a banker borrowing long to lend short is welcome provided there are interested suppliers of capital. Too little capital investment will put the country back on the World Bank respirator. Too much capital investment will inflate assets beyond the living standard of the average, impoverished farmer.
Fortunately for India the world believes the country will have GDP growth of between 7-9% for the next three years, Stephen Roach, Chairman, Morgan Stanley Asia, and that inflation and deficits are of no concern. Ok.
Then tax collection should be of no concern either. Direct tax collection from business and individuals has been flat through November of this year despite the Government claiming economic growth of over 7%. Economists have scurried to cubicles to update excel spreadsheets.
The trade numbers tell another story. India exported $90 billion and imported $150 billion of goods and services in the first half of the year. For India to be self sufficient in trade it would have to increase exports by 50% in relation to imports, which is hard to do when oil accounts for 30% of the import bill, or over 70% of India’s requirements, and is subsidized for the masses.
This $100 billion annual deficit is met by FDI (Foreign Direct Investment), FII (portfolio investment in stocks), Remittances, ECB’s (External Commercial Borrowings), and Erin Wood's divorce settlement.
Half the deficit is covered by $45 billion remitted by workers from the Gulf, think Dubai. FII runs at roughly $15 billion a year, and FDI recently about the same. The RBI turns on and off the ECB faucet to cover the difference before deciding whether to put the arm on the World Bank recapitalize Public Sector Banks and fund IIFCL.
The capital flows are defensible for investors provided GDP growth is growth, and asset prices rise.
But the RBI would rather hold gold than paper having bought a chunk from the IMF which will need the money to buy the lows if the tax guys are right.
The Reserve Bank of India understands that for India to pay its oil bill it has to import capital to do so. For a banker borrowing long to lend short is welcome provided there are interested suppliers of capital. Too little capital investment will put the country back on the World Bank respirator. Too much capital investment will inflate assets beyond the living standard of the average, impoverished farmer.
Fortunately for India the world believes the country will have GDP growth of between 7-9% for the next three years, Stephen Roach, Chairman, Morgan Stanley Asia, and that inflation and deficits are of no concern. Ok.
Then tax collection should be of no concern either. Direct tax collection from business and individuals has been flat through November of this year despite the Government claiming economic growth of over 7%. Economists have scurried to cubicles to update excel spreadsheets.
The trade numbers tell another story. India exported $90 billion and imported $150 billion of goods and services in the first half of the year. For India to be self sufficient in trade it would have to increase exports by 50% in relation to imports, which is hard to do when oil accounts for 30% of the import bill, or over 70% of India’s requirements, and is subsidized for the masses.
This $100 billion annual deficit is met by FDI (Foreign Direct Investment), FII (portfolio investment in stocks), Remittances, ECB’s (External Commercial Borrowings), and Erin Wood's divorce settlement.
Half the deficit is covered by $45 billion remitted by workers from the Gulf, think Dubai. FII runs at roughly $15 billion a year, and FDI recently about the same. The RBI turns on and off the ECB faucet to cover the difference before deciding whether to put the arm on the World Bank recapitalize Public Sector Banks and fund IIFCL.
The capital flows are defensible for investors provided GDP growth is growth, and asset prices rise.
But the RBI would rather hold gold than paper having bought a chunk from the IMF which will need the money to buy the lows if the tax guys are right.
Tuesday, December 1, 2009
Ghosts
The Government of India will borrow $1 billion in Treasury bills and $20 billion in ten year bonds by Friday. GOI needs to add $50 billion to the till by February to keep the lights on in addition to the $50 billion borrowed already.
Borrowing is up because tax revenue is down no matter that Government statisticians claim that the economy grew at 7.9% in the second quarter of this year. The tax guys have still put less in the sack than expected so either they are collecting more and reporting less, friendly assessments, or the statisticians need to goose their models.
Government bond yields before the GDP data was released were at 7.19% for the 10 year and jumped to 7.29%, not because of the GDP numbers but because of the coming supply. The interest rate futures curve in India, yes, there is one, implies interest rates of 8.33% by March 2010.
This growth, or expected growth, comes with a price. The rains in India were less than expected so crop supplies are down and prices are up. India may import essential commodities this fiscal year, and, in the meantime, the 50-100% increase in agricultural line items may run inflation into the double digits so 7% growth is underwater with inflation over 8%.
How bad is it?
The realty fraternity has approached public markets to issue $3 billion in shares, again. They claim that $1 billion of it will be used to repay lenders, $1.3 billion will be used in buying properties that they only partially own, if at all, and the remaining $700 million, well, it is not precisely clear though important to note that Rolls Royce just launched the Ghost in India with a baseline price tag of half a million dollars.
Sounds like about 1400 units sold.
Borrowing is up because tax revenue is down no matter that Government statisticians claim that the economy grew at 7.9% in the second quarter of this year. The tax guys have still put less in the sack than expected so either they are collecting more and reporting less, friendly assessments, or the statisticians need to goose their models.
Government bond yields before the GDP data was released were at 7.19% for the 10 year and jumped to 7.29%, not because of the GDP numbers but because of the coming supply. The interest rate futures curve in India, yes, there is one, implies interest rates of 8.33% by March 2010.
This growth, or expected growth, comes with a price. The rains in India were less than expected so crop supplies are down and prices are up. India may import essential commodities this fiscal year, and, in the meantime, the 50-100% increase in agricultural line items may run inflation into the double digits so 7% growth is underwater with inflation over 8%.
How bad is it?
The realty fraternity has approached public markets to issue $3 billion in shares, again. They claim that $1 billion of it will be used to repay lenders, $1.3 billion will be used in buying properties that they only partially own, if at all, and the remaining $700 million, well, it is not precisely clear though important to note that Rolls Royce just launched the Ghost in India with a baseline price tag of half a million dollars.
Sounds like about 1400 units sold.
Monday, November 30, 2009
Printing Press
Pretty self explanatory
1. The Fed prints money
2. The Fed buys Agency Securities from Foreign Governments at face value through the Fed Custody Account
3. The Fed sells Treasury Securities to Foreign Governments in the Custody Account
4. The Fed prints money to buy Treasury Securities
5. The Moon is a Balloon
http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806
1. The Fed prints money
2. The Fed buys Agency Securities from Foreign Governments at face value through the Fed Custody Account
3. The Fed sells Treasury Securities to Foreign Governments in the Custody Account
4. The Fed prints money to buy Treasury Securities
5. The Moon is a Balloon
http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806
Sunday, November 29, 2009
Threads from the Desert
The Dubai Government owns 32% of Emaar which is in a real estate joint venture with an Indian firm. The joint venture filed for a public offering of shares in India, $1 billion, for the second time in two years. The first attempt to raise money by the JV at the market peak in December 2007 met with less investor interest than Lehman shares.
The joint venture proposes to use half the proceeds to repay lenders and the other half to execute its business plan. The lenders to the JV are a representative sample of Indian Public Sector Banks with the largest being the Life Insurance Corp of India.
The auditors certificate from 30 September which expressed an opinion on the health of the JV and the individual firms has been trumped by the default of Dubai World last week.
The Emaar that was at prices before 30 September is not the Emaar that is now at prices expected to decline by at least 20%. And the Indian firm still marinates in litigation that is multiplying by disgruntled sellers of land to the JV that want promised balance payments.
The proposed public offering in India will remain proposed leaving Indian lenders to consider why Indian government officials from the Finance Minister, RBI Governor, to the DEA believe that developments in the desert have been “overblown.”
The Ministers should be encouraged to review the Indian budget line item that indicates $20 of the $45 billion in remittances received in fiscal 2008 from the 4 million Indian workers in the Gulf and West Asia, an amount greater than foreign portfolio and foreign direct investment combined.
The RBI strives to match capital inflows with the current account deficit, roughly 3% of GDP, or $30 billion in a year. These invisible flows, remittances, are the base from which the capital flows start. Lower the base and, well, yes, lower the base.
Indian workers from the UAE on leave for Eid in India were terminated by text message and promised that their four month overdue salary and belongings would be shipped to India which begs the question whether shoes bought in India, transported to the Gulf and returned to India count as an export, import, or remittance.
Maybe the Shipping Corporation of India can bid for the contract
The joint venture proposes to use half the proceeds to repay lenders and the other half to execute its business plan. The lenders to the JV are a representative sample of Indian Public Sector Banks with the largest being the Life Insurance Corp of India.
The auditors certificate from 30 September which expressed an opinion on the health of the JV and the individual firms has been trumped by the default of Dubai World last week.
The Emaar that was at prices before 30 September is not the Emaar that is now at prices expected to decline by at least 20%. And the Indian firm still marinates in litigation that is multiplying by disgruntled sellers of land to the JV that want promised balance payments.
The proposed public offering in India will remain proposed leaving Indian lenders to consider why Indian government officials from the Finance Minister, RBI Governor, to the DEA believe that developments in the desert have been “overblown.”
The Ministers should be encouraged to review the Indian budget line item that indicates $20 of the $45 billion in remittances received in fiscal 2008 from the 4 million Indian workers in the Gulf and West Asia, an amount greater than foreign portfolio and foreign direct investment combined.
The RBI strives to match capital inflows with the current account deficit, roughly 3% of GDP, or $30 billion in a year. These invisible flows, remittances, are the base from which the capital flows start. Lower the base and, well, yes, lower the base.
Indian workers from the UAE on leave for Eid in India were terminated by text message and promised that their four month overdue salary and belongings would be shipped to India which begs the question whether shoes bought in India, transported to the Gulf and returned to India count as an export, import, or remittance.
Maybe the Shipping Corporation of India can bid for the contract
Friday, November 27, 2009
Default in the Desert
A Dubai government arm, Dubai World, asked its lenders to "standstill" on lending agreements for six months. Standard and Poors observed that what smelled like a payment default usually is and downgraded Dubai's debt. Happens all the time.
Dubai borrowed $80 billion to build islands, skyscrapers and golf courses, Dubai World borrowed $55 billion of it. Nakheel, Dubai World's construction unit, was to repay $3.5 billion to Shariah lenders on 14 December. Without tenants or buyers for partially developed units Nakheel was hard pressed to make the payment and six months here or there probably will not make a difference.
The banks involved include HSBC and the Royal Bank of Scotland, HSBC shares are down 6% in London looking for the nearest cliff.
India exports over $24 billion worth of merchandise to Dubai, has 1 million citizens employed there, receives over $2 billion a year in remittances from workers annually, and sources 70% of its annual oil requirement from the region. Naturally, none of the Indian companies involed in business with Dubai admit to having any exposure.
But what is the big deal about a $3.5 billion default in the desert?
Dubai could be Denver, or any other US city with commercial real estate being used as museum space for construction equipment. Property prices in Dubai are expected to decline another 20% before buyers dip their toes, presuming there are any toes left. A commensurate decline in the US would knock $1 trillion off the carrying value on the books of FDIC banks, and make TARP look like a minnow in the mouth of Moby Dick.
Dubai borrowed $80 billion to build islands, skyscrapers and golf courses, Dubai World borrowed $55 billion of it. Nakheel, Dubai World's construction unit, was to repay $3.5 billion to Shariah lenders on 14 December. Without tenants or buyers for partially developed units Nakheel was hard pressed to make the payment and six months here or there probably will not make a difference.
The banks involved include HSBC and the Royal Bank of Scotland, HSBC shares are down 6% in London looking for the nearest cliff.
India exports over $24 billion worth of merchandise to Dubai, has 1 million citizens employed there, receives over $2 billion a year in remittances from workers annually, and sources 70% of its annual oil requirement from the region. Naturally, none of the Indian companies involed in business with Dubai admit to having any exposure.
But what is the big deal about a $3.5 billion default in the desert?
Dubai could be Denver, or any other US city with commercial real estate being used as museum space for construction equipment. Property prices in Dubai are expected to decline another 20% before buyers dip their toes, presuming there are any toes left. A commensurate decline in the US would knock $1 trillion off the carrying value on the books of FDIC banks, and make TARP look like a minnow in the mouth of Moby Dick.
Wednesday, November 25, 2009
Recycling
Moody's opines that debt to economic production for the global economy will be 80% up from 63% before governments borrowed money to spend. Sovereign debt will be $15.3 trillion, or over "100 times the inflation adjusted spending of the Marshall Plan."
Presume a tax rate of 10% of economic production, a guess, then the quantum of government borrowing is expected to be 8 times economic production (80/8). Presume an interest rate of 5%, then governments will have debt service of 4% (5% of 80)of economic production or 40% (4/10) of tax revenues.
Increasing cash flow requires growth of economic production, and that is lacking in developed economies.
Economic production in the past year has been banks bailed out without replacing managements, bad assets being shifted to government balance sheets, and an artificial increase in equity prices that make marking collateral to market bearable for US financial institutions.
Economic production has been a mirage of revalued clunkers and one time tax incentives for borrowers to buy houses today that will be worth less tomorrow, especially in California.
In the real world the FDIC is operating at negative net worth of $8 billion and expects another 500 of its flock of banks to fail in the next year. The expected cost to FDIC is $100 billion, half of which has been accounted for and the other half is to be supplied by bailed out banks pre paying 3 years worth of premiums into the FDIC fund ($45 billion).
This is before the commercial real estate market (CRE) is considered. In 2007 commercial real estate assets in the system were valued at $4.5 trillion with $3 trillion of loans outstanding. Presently CRE is conveniently valued at $3 trillion with $3 trillion of loans. Asset values have been adjusted by 30% despite residential real estate prices having declined by double.
The bell tolls in the first half of 2010 with CRE loans maturing (5-7 year maturities) and variable rate payments adjusting upward. Refinancing and extending were this years option. Next year bank, government, balance sheets may be on the hook for another $500 billion.
Goldman Sachs has been downgraded by the analyst tha advised buying it in the spring. A leading regional securities firm calculates that if all banks in the mortgage system pay 5% of expected loan origination income to Fannie Mae and Freddie Mac then the value of those companies is precisely Nada.
Indian Industrial production figures indicated growth while excise tax collections decline. One of those numbers is wrong. No bonus for the right guess.
The Reserve Bank has started to restrict credit because asset prices (equities) have increased by 65%, and chastised banks in the system for not banking. The RBI had lowered borrowing rates by 4.5%, banks lowered lending rates by 2.5%, but instead of making loans invested the money in Indian government bonds.
An Indian real estate developer in a joint venture with a Dubai compnay that tried to issue shares to the public in the spring of 2008 is back asking for half as much money at 30% lower prices to pay off their bankers.
The developer has been busy in the meantime fending off over 150 criminal and civil suits, and fighting with his father and sister over necessary financial disclosures that the latter refuse to make despite being shareholders in the over 100 family firms that are tangentially and spatially involved in the share offering.
The failure to disclose has restricted the offering to Indian residents and specifically prohibited the offering in the US. The largest lender to the group companies, in varied forms, is the Government of India.
The US budget deficit is expected to be $1.5 trillion. The Chinese hold $2.25 trillion.
The President now admits that $750 billion may have been too little to solve a $2.5 trillion valuation problem, and the prospect for a "double dip" exists if Congress is not prudent with spending.
The over under on the Treasury Secretary keeping his job is 6 months
Presume a tax rate of 10% of economic production, a guess, then the quantum of government borrowing is expected to be 8 times economic production (80/8). Presume an interest rate of 5%, then governments will have debt service of 4% (5% of 80)of economic production or 40% (4/10) of tax revenues.
Increasing cash flow requires growth of economic production, and that is lacking in developed economies.
Economic production in the past year has been banks bailed out without replacing managements, bad assets being shifted to government balance sheets, and an artificial increase in equity prices that make marking collateral to market bearable for US financial institutions.
Economic production has been a mirage of revalued clunkers and one time tax incentives for borrowers to buy houses today that will be worth less tomorrow, especially in California.
In the real world the FDIC is operating at negative net worth of $8 billion and expects another 500 of its flock of banks to fail in the next year. The expected cost to FDIC is $100 billion, half of which has been accounted for and the other half is to be supplied by bailed out banks pre paying 3 years worth of premiums into the FDIC fund ($45 billion).
This is before the commercial real estate market (CRE) is considered. In 2007 commercial real estate assets in the system were valued at $4.5 trillion with $3 trillion of loans outstanding. Presently CRE is conveniently valued at $3 trillion with $3 trillion of loans. Asset values have been adjusted by 30% despite residential real estate prices having declined by double.
The bell tolls in the first half of 2010 with CRE loans maturing (5-7 year maturities) and variable rate payments adjusting upward. Refinancing and extending were this years option. Next year bank, government, balance sheets may be on the hook for another $500 billion.
Goldman Sachs has been downgraded by the analyst tha advised buying it in the spring. A leading regional securities firm calculates that if all banks in the mortgage system pay 5% of expected loan origination income to Fannie Mae and Freddie Mac then the value of those companies is precisely Nada.
Indian Industrial production figures indicated growth while excise tax collections decline. One of those numbers is wrong. No bonus for the right guess.
The Reserve Bank has started to restrict credit because asset prices (equities) have increased by 65%, and chastised banks in the system for not banking. The RBI had lowered borrowing rates by 4.5%, banks lowered lending rates by 2.5%, but instead of making loans invested the money in Indian government bonds.
An Indian real estate developer in a joint venture with a Dubai compnay that tried to issue shares to the public in the spring of 2008 is back asking for half as much money at 30% lower prices to pay off their bankers.
The developer has been busy in the meantime fending off over 150 criminal and civil suits, and fighting with his father and sister over necessary financial disclosures that the latter refuse to make despite being shareholders in the over 100 family firms that are tangentially and spatially involved in the share offering.
The failure to disclose has restricted the offering to Indian residents and specifically prohibited the offering in the US. The largest lender to the group companies, in varied forms, is the Government of India.
The US budget deficit is expected to be $1.5 trillion. The Chinese hold $2.25 trillion.
The President now admits that $750 billion may have been too little to solve a $2.5 trillion valuation problem, and the prospect for a "double dip" exists if Congress is not prudent with spending.
The over under on the Treasury Secretary keeping his job is 6 months
Friday, November 13, 2009
Sell Em
13 November 2009
Friday
Sell Em
The last time real estate companies tried to sell shares to the public the Sensex was 25% higher and promptly lost half its value. The boys are back this time asking for $5 billion.
Raising less money at 25% lower prices indicates either that they really need the money, really believe that prices are not going much higher, really need to use the auditors certificates from the end of the September quarter, or really a combination of all.
The certificates obtained at the end of September are valid for six months. An optimist may wait for the next half year certificate to obtain better valuations if the next six months were expected to be better. A pessimist, well, would rush the existing certificate into the hands of investment bankers and instruct them to sell while they can.
Indian companies have raised over $20 billion this year in direct placement to institutions (QIP’s) because there is less paperwork, environmentally friendly, and because the money was there.
The Government of India is joining the queue to sell another $10 billion in shares of Public Sector Undertakings.
The buyers are expected to be institutions well equipped to evaluate the potential value of land bank not owned by the companies asking for money, and the general public that will borrow money to invest in a Draft Red Herring Prospectus that it would not know from, well, a Herring.
The good news is that the US budget deficit is expected to be a tad less than $1.5 trillion in fiscal 2010.
$5 billion does not sound so bad after all
Friday
Sell Em
The last time real estate companies tried to sell shares to the public the Sensex was 25% higher and promptly lost half its value. The boys are back this time asking for $5 billion.
Raising less money at 25% lower prices indicates either that they really need the money, really believe that prices are not going much higher, really need to use the auditors certificates from the end of the September quarter, or really a combination of all.
The certificates obtained at the end of September are valid for six months. An optimist may wait for the next half year certificate to obtain better valuations if the next six months were expected to be better. A pessimist, well, would rush the existing certificate into the hands of investment bankers and instruct them to sell while they can.
Indian companies have raised over $20 billion this year in direct placement to institutions (QIP’s) because there is less paperwork, environmentally friendly, and because the money was there.
The Government of India is joining the queue to sell another $10 billion in shares of Public Sector Undertakings.
The buyers are expected to be institutions well equipped to evaluate the potential value of land bank not owned by the companies asking for money, and the general public that will borrow money to invest in a Draft Red Herring Prospectus that it would not know from, well, a Herring.
The good news is that the US budget deficit is expected to be a tad less than $1.5 trillion in fiscal 2010.
$5 billion does not sound so bad after all
Thursday, November 12, 2009
Creaks and Leaks
11 November 2009
Creaks and Leaks
The Reserve Bank of India gently applied the internal brakes last month by requiring Indian Banks to set aside more money to invest in Indian Government Bonds. The Government could use the help because it has to borrow $100 billion this year to keep the lights on and has been doing so at an average of $3 billion a week. Those are real numbers.
The not so real numbers are measures of the percentage change in Industrial Production which suggest that the manufacturing sector is expanding by 10%. The GDP numbers suggest the economy is growing by 6.5%.
But the taxes collected in customs, excise, and duties declined 12% year over year to $5 billion for the month of October. Higher economic growth, lower tax collection, and the Planning Commission is not involved in any of this?
The Finance Ministry promises to get to the bottom of the apparent contradiction provided Indian equity prices do not arrive there first.
Manana
Creaks and Leaks
The Reserve Bank of India gently applied the internal brakes last month by requiring Indian Banks to set aside more money to invest in Indian Government Bonds. The Government could use the help because it has to borrow $100 billion this year to keep the lights on and has been doing so at an average of $3 billion a week. Those are real numbers.
The not so real numbers are measures of the percentage change in Industrial Production which suggest that the manufacturing sector is expanding by 10%. The GDP numbers suggest the economy is growing by 6.5%.
But the taxes collected in customs, excise, and duties declined 12% year over year to $5 billion for the month of October. Higher economic growth, lower tax collection, and the Planning Commission is not involved in any of this?
The Finance Ministry promises to get to the bottom of the apparent contradiction provided Indian equity prices do not arrive there first.
Manana
Wednesday, November 11, 2009
Civililty
11 November 2009
The FCPA insures that market opportunities are left to those countries that consider gratuities to benevolent dictators, or their husbands, tax deductible. The French have long appreciated the civility of lubricating the process of supplying armaments to those countries unable to afford rice.
The Zardari of 2002 was husband to the late Benazir Bhutto and his act of civil obedience coupled with more criminal complaints than criminal statutes in Pakistan has elevated him to the highest elected office in the land
Paris, Islamabad
Citing documents acquired by it, the daily 'Liberation' in Tuesday's edition claimed Zardari received $4.3 million in kickbacks from the sale of three Agosta-90 submarines for 825 million euros (currently $1.23 billion). In addition, the daily said investigators believed that the non-payment of the full amount of the agreed kickbacks may have led to the deaths of 11 French nationals in a 2002 terror attack in the port city of Karachi.
The FCPA insures that market opportunities are left to those countries that consider gratuities to benevolent dictators, or their husbands, tax deductible. The French have long appreciated the civility of lubricating the process of supplying armaments to those countries unable to afford rice.
The Zardari of 2002 was husband to the late Benazir Bhutto and his act of civil obedience coupled with more criminal complaints than criminal statutes in Pakistan has elevated him to the highest elected office in the land
Paris, Islamabad
Citing documents acquired by it, the daily 'Liberation' in Tuesday's edition claimed Zardari received $4.3 million in kickbacks from the sale of three Agosta-90 submarines for 825 million euros (currently $1.23 billion). In addition, the daily said investigators believed that the non-payment of the full amount of the agreed kickbacks may have led to the deaths of 11 French nationals in a 2002 terror attack in the port city of Karachi.
Thursday, July 2, 2009
Turn Flop River
The magic number is $10 billion. The Indian bond market expects that the government will have to borrow $10 billion more than expected in the next fiscal year. Indian bond yields are at 7%.
The budget announcement is Monday. His shortness, the Finance Minister, will speak for an hour or two, but only one phrase matters to Indian financial markets, $10 billion. A bigger number, bond yields to the moon and equities to the basement. A smaller number and the next financial leg to nirvana begins.
Global markets are not conducive. Oil and commodities are turning lower after the run in the first half of 2009, taking the commodity linked countries, Australia and Cnanda, with them. US markets are creaking with an esoteric indicator, the directional index, forecasting lower prices.
Monday. $10 billion. Turn Flop River.
The budget announcement is Monday. His shortness, the Finance Minister, will speak for an hour or two, but only one phrase matters to Indian financial markets, $10 billion. A bigger number, bond yields to the moon and equities to the basement. A smaller number and the next financial leg to nirvana begins.
Global markets are not conducive. Oil and commodities are turning lower after the run in the first half of 2009, taking the commodity linked countries, Australia and Cnanda, with them. US markets are creaking with an esoteric indicator, the directional index, forecasting lower prices.
Monday. $10 billion. Turn Flop River.
Tuesday, June 30, 2009
Look Out Below
Markets had a tantalizing flirtation with recovery until the news that a crumbling part of Buckingham Palace missed crowning Princess Anne. It appears that the Queen, and retinue, have run through one third of their financial reserves in the last ten years (23 million pounds down from 32 million pounds) because an annual allowance of 8 million pounds from the Treasury is insufficient (69 pence per citizen).
The stipend is up for renewal in 2010 by which time the till may run dry. A thought that troubles markets more than federally insured financial institutions re insuring trillions of dollars of risk with offshore hedge funds operated by fellows named Ivan from a bungalow in the Caymans.
More interesting is the Reserve Bank of India bent on tarnishing its image as the banker of refuge. Mark to expectation accounting has been accepted by the US for financial institutions to account for federal largess received. Simply, put a deal on the books, project what is to be earned for its duration provided the counterpart pays, discount the future cash flows for the next twenty years, and
book the income today.
India feels slighted in not having to engage in these accounting gymnastics, so the RBI has begun debate on permitting the use of Credit Default Swaps in the country. A good idea for the buyers of insurance in the event that an issuer of a bond defaults, but an exercise in black hole creation for the unregulated sellers of the insurance that will pocket premiums and advise claimants to take a long walk
off a short pier when the bell tolls, and who, presumably, are lobbying the RBI for the opportunity.
United Spirits is in the liquor business and airline business. Shawl Wallace owns 11%of US, and US owns 31% of SW. SW sold its 11% of US in the open market for $190 million, which means that US received $60 million, while retaining its SW stake. US had borrowed $620 million to buy Whyte & Mackay (scotch), has repaid $150 million, owes $470 million, and will use the $60 million toward the $470 million.
All of which is being funded by the Airport Authority of India and the oil marketing companies because the US airline (Kingfisher) owes both over $60 million which it pays through bounced checks.
AAI is to be congratulated for its expansion in the banking business
The stipend is up for renewal in 2010 by which time the till may run dry. A thought that troubles markets more than federally insured financial institutions re insuring trillions of dollars of risk with offshore hedge funds operated by fellows named Ivan from a bungalow in the Caymans.
More interesting is the Reserve Bank of India bent on tarnishing its image as the banker of refuge. Mark to expectation accounting has been accepted by the US for financial institutions to account for federal largess received. Simply, put a deal on the books, project what is to be earned for its duration provided the counterpart pays, discount the future cash flows for the next twenty years, and
book the income today.
India feels slighted in not having to engage in these accounting gymnastics, so the RBI has begun debate on permitting the use of Credit Default Swaps in the country. A good idea for the buyers of insurance in the event that an issuer of a bond defaults, but an exercise in black hole creation for the unregulated sellers of the insurance that will pocket premiums and advise claimants to take a long walk
off a short pier when the bell tolls, and who, presumably, are lobbying the RBI for the opportunity.
United Spirits is in the liquor business and airline business. Shawl Wallace owns 11%of US, and US owns 31% of SW. SW sold its 11% of US in the open market for $190 million, which means that US received $60 million, while retaining its SW stake. US had borrowed $620 million to buy Whyte & Mackay (scotch), has repaid $150 million, owes $470 million, and will use the $60 million toward the $470 million.
All of which is being funded by the Airport Authority of India and the oil marketing companies because the US airline (Kingfisher) owes both over $60 million which it pays through bounced checks.
AAI is to be congratulated for its expansion in the banking business
Monday, June 29, 2009
Liars Poker
A big shot is a lot of little shots that keep shooting
Are the Chinese bluffing?
Iron ore contracts are coming up for renewal. The Chinese account for one half the world demand and negotiate with three major suppliers (miners). Prices are up from the lows of the fall because the miners settled deals with the Japanese and the South Koreas before having tea with the Chinese. The Chinese loaded up on iron ore inventories in the first quarter of 09, 75 million tonnes from 45 million tonnes, to tide over if negotiations were less than congenial.
This Chinese saving for a rainy day led to a tripling in shipping rates (baltic dry index from 1400 to 4200), a twenty per cent increase in the Australian Dollar (one of the larger suppliers) and doubling in value of stock exhanges from Shanghai to Mumbai.
Alas the Chinese inventory figures are reported by their Customs Department two months in arrears (February most recent) which leaves the best guess, best evidence, the daily reported direction of shipping rates which have cooled to 3600 hovering near a twenty day average.
The diviners of chart prices believe that there is one more leg up in shipping rates, something to do with a full moon, new moon, and no moon, but they are remarkably accurate. Were this so then markets, and the miners, are calling the Chinese bluff.
Indian equities seem to agree. The market have cooled in the last month but the correction (decline) in prices has been less than expected. As a matter of full disclosure the author had bet against India stock prices the last two weeks and covered those position with a modest profit on 26 June.
There is the small matter of the Indian government budget that will be announced on 6 July. The Finance Minister will say that Indian GDP is growing, it is, that the government needs to borrow more money than expected, which in India is itself an expectation, but that there is a plan that presumably will not dwell impolitely on the oil and fertilizer subsidies that do not appear on the government's balance sheet.
Despite this looming shadow of financial reality India equity markets refuse to die. There is much to look forward to. $500 billion in infrastructure spending, a defence budget that will generate $25 billion in ofset requirements (domestic production capability) in the next five
years, and the political will to disinvest (sell shares) in Public Sector Undertakings (government companies).
The latter being the most important because raising money by selling shares is a gift in the closed financial world of government debts and deficits. The Indian Governmen is at once the largest shareholder (30% of the Indian market cap, $300 billion) and potential share issuer.
Naturally a seller of shares prefers higher prices, especially when unloading equity in a national air carrier that loses a buck for every four bucks in revenue.
Though the author enjoys the ski slope of price correction, it appears that the universe of real midcap Indian companies ready for a +20=50% run
manana
WWIL DISHTV SPICEJET KFA GVKPIL HOTELEELA IFCI
Are the Chinese bluffing?
Iron ore contracts are coming up for renewal. The Chinese account for one half the world demand and negotiate with three major suppliers (miners). Prices are up from the lows of the fall because the miners settled deals with the Japanese and the South Koreas before having tea with the Chinese. The Chinese loaded up on iron ore inventories in the first quarter of 09, 75 million tonnes from 45 million tonnes, to tide over if negotiations were less than congenial.
This Chinese saving for a rainy day led to a tripling in shipping rates (baltic dry index from 1400 to 4200), a twenty per cent increase in the Australian Dollar (one of the larger suppliers) and doubling in value of stock exhanges from Shanghai to Mumbai.
Alas the Chinese inventory figures are reported by their Customs Department two months in arrears (February most recent) which leaves the best guess, best evidence, the daily reported direction of shipping rates which have cooled to 3600 hovering near a twenty day average.
The diviners of chart prices believe that there is one more leg up in shipping rates, something to do with a full moon, new moon, and no moon, but they are remarkably accurate. Were this so then markets, and the miners, are calling the Chinese bluff.
Indian equities seem to agree. The market have cooled in the last month but the correction (decline) in prices has been less than expected. As a matter of full disclosure the author had bet against India stock prices the last two weeks and covered those position with a modest profit on 26 June.
There is the small matter of the Indian government budget that will be announced on 6 July. The Finance Minister will say that Indian GDP is growing, it is, that the government needs to borrow more money than expected, which in India is itself an expectation, but that there is a plan that presumably will not dwell impolitely on the oil and fertilizer subsidies that do not appear on the government's balance sheet.
Despite this looming shadow of financial reality India equity markets refuse to die. There is much to look forward to. $500 billion in infrastructure spending, a defence budget that will generate $25 billion in ofset requirements (domestic production capability) in the next five
years, and the political will to disinvest (sell shares) in Public Sector Undertakings (government companies).
The latter being the most important because raising money by selling shares is a gift in the closed financial world of government debts and deficits. The Indian Governmen is at once the largest shareholder (30% of the Indian market cap, $300 billion) and potential share issuer.
Naturally a seller of shares prefers higher prices, especially when unloading equity in a national air carrier that loses a buck for every four bucks in revenue.
Though the author enjoys the ski slope of price correction, it appears that the universe of real midcap Indian companies ready for a +20=50% run
manana
WWIL DISHTV SPICEJET KFA GVKPIL HOTELEELA IFCI
Friday, June 26, 2009
Boondoggle
What was the band on the Titanic playing?
WASHINGTON: The US Senate has unanimously passed the Kerry-Lugar Bill, which triples America's civilian assistance to Pakistan to $7.5 billion in
the next five years and advocates an equal amount for another five years -- $15 billion in 10 years.
Unlike the House version of the bill, which was voted against by the Republican members, the Kerry-Lugar Bill, which is called Enhanced Partnership with Pakistan Act (S962), received bi-partisan support from Senators and is supported by the Obama administration.
The Obama administration had expressed its reservations over the House version of the bill -- the Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009 (HR 1886), which imposes strict conditions on Pakistan. HR 1886 was passed by the House on June 11.
Since there are differences in the two bills -- HR 1886 and S962 -- the House of Representatives and the Senate would now hold a conference to arrive at a consensus to merge the two documents into one, before it is sent to the US president for signing it into law.
"I look forward to working with our House colleagues to get this important bill to the White House for the President's signature," said Senator John Kerry, chairman of the Senate Foreign Relations Committee, after the passage of the bill.
"This legislation marks an important step toward sustained economic and political cooperation with Pakistan, while establishing mechanisms to help ensure that funds are spent efficiently," Senator Richard Lugar, Ranking Member of the Senate Foreign Relations Committee, said.
Lugar said the bill subjects US security assistance to a certification that Pakistani government is using the money for its intended purpose -- to combat the Taliban and al-Qaida.
"The bill also calls for tangible progress in governance, including an independent judiciary, greater accountability by the central government, respect for human rights, and civilian control of the levers of power, including the military and the intelligence agencies," he said.
"Finally, it includes multiple reporting requirements, certifications, and audit mechanisms to ensure that the administration is implementing a sound strategy and using funds effectively," Lugar said.
A joint statement by Kerry and Lugar, said one of the key provisions of the bill on Pakistan is that it delinks military from non-military aid.
WASHINGTON: The US Senate has unanimously passed the Kerry-Lugar Bill, which triples America's civilian assistance to Pakistan to $7.5 billion in
the next five years and advocates an equal amount for another five years -- $15 billion in 10 years.
Unlike the House version of the bill, which was voted against by the Republican members, the Kerry-Lugar Bill, which is called Enhanced Partnership with Pakistan Act (S962), received bi-partisan support from Senators and is supported by the Obama administration.
The Obama administration had expressed its reservations over the House version of the bill -- the Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009 (HR 1886), which imposes strict conditions on Pakistan. HR 1886 was passed by the House on June 11.
Since there are differences in the two bills -- HR 1886 and S962 -- the House of Representatives and the Senate would now hold a conference to arrive at a consensus to merge the two documents into one, before it is sent to the US president for signing it into law.
"I look forward to working with our House colleagues to get this important bill to the White House for the President's signature," said Senator John Kerry, chairman of the Senate Foreign Relations Committee, after the passage of the bill.
"This legislation marks an important step toward sustained economic and political cooperation with Pakistan, while establishing mechanisms to help ensure that funds are spent efficiently," Senator Richard Lugar, Ranking Member of the Senate Foreign Relations Committee, said.
Lugar said the bill subjects US security assistance to a certification that Pakistani government is using the money for its intended purpose -- to combat the Taliban and al-Qaida.
"The bill also calls for tangible progress in governance, including an independent judiciary, greater accountability by the central government, respect for human rights, and civilian control of the levers of power, including the military and the intelligence agencies," he said.
"Finally, it includes multiple reporting requirements, certifications, and audit mechanisms to ensure that the administration is implementing a sound strategy and using funds effectively," Lugar said.
A joint statement by Kerry and Lugar, said one of the key provisions of the bill on Pakistan is that it delinks military from non-military aid.
No Juice
$40 million for statutes + a new Hawker parkes at IGI + no water, no power for 12 hours a day in UP
NEW DELHI: Uttar Pradesh chief minister Mayawati is all set to unveil 40 statues — including six of her own — on July 3, along with the Kanshi Ram
Memorial and the Gautam Buddhasthals, which has cost the state exchequer dear.
According to the reply of an RTI filed in the Lucknow Development Authority (LDA), statues of Mayawati and Kanshi Ram at various places in Lucknow and erected by LDA, cost Rs 6.68 crore. And, the 60 marble elephants at the Ambedkar memorial cost Rs 52 crore, according to the reply. If the figures in the Uttar Pradesh budget are anything to go by, this is just the tip of the iceberg.
The Uttar Pradesh culture department's budget for 2009-10 shows that in 2008-09, the department had allocated more than Rs 194 crore for building statues of "great leaders" — the entire amount was spent.
NEW DELHI: Uttar Pradesh chief minister Mayawati is all set to unveil 40 statues — including six of her own — on July 3, along with the Kanshi Ram
Memorial and the Gautam Buddhasthals, which has cost the state exchequer dear.
According to the reply of an RTI filed in the Lucknow Development Authority (LDA), statues of Mayawati and Kanshi Ram at various places in Lucknow and erected by LDA, cost Rs 6.68 crore. And, the 60 marble elephants at the Ambedkar memorial cost Rs 52 crore, according to the reply. If the figures in the Uttar Pradesh budget are anything to go by, this is just the tip of the iceberg.
The Uttar Pradesh culture department's budget for 2009-10 shows that in 2008-09, the department had allocated more than Rs 194 crore for building statues of "great leaders" — the entire amount was spent.
Cricket
BPCL (jet fuel) sued Kingfisher Airlines (KFA)for $60 million in past dues. Indian Oil Corp cashed KFA's bank guarantee of $10 million after KFA bounced a post dated cheque. AAI (Airport Authority of India) wants KFA to pay cash for landing and parking planes because KFA owes AAI $30 million, which is $10 million more than the bank guarantee. The KFA promoters borrowing money from Indian banks against a personal guarantee of $400 million which is worth less than the paper it is written on. Air India wants employees to take 2 years leave without pay or allowance but will continue to underwrites its cricket team.
Thursday, June 25, 2009
Deflation
Deflation
Halliburton FCPA fines paid exceed $500 million. Iraqi oil fields, second largest reserves in the world, are being auctioned for the first time since 1972. India and the US have wed a nuclear future. The Russians have lost their monopoly on the Indian defence market.
Looks like the publisher got a good deal
Washington DC: Former US vice president Dick Cheney has signed a deal with an imprint of Simon & Schuster to write his memoir. Mary Matalin, his close friend and adviser, is editor in chief of Threshold Editions, which will publish the book.
The memoir is scheduled for release in the spring of 2011 and will cover his time in four presidential administrations and as chief executive officer of the oilfield services provider at Halliburton Co. Cheney will reportedly be paid about $2 million for the book.
Halliburton FCPA fines paid exceed $500 million. Iraqi oil fields, second largest reserves in the world, are being auctioned for the first time since 1972. India and the US have wed a nuclear future. The Russians have lost their monopoly on the Indian defence market.
Looks like the publisher got a good deal
Washington DC: Former US vice president Dick Cheney has signed a deal with an imprint of Simon & Schuster to write his memoir. Mary Matalin, his close friend and adviser, is editor in chief of Threshold Editions, which will publish the book.
The memoir is scheduled for release in the spring of 2011 and will cover his time in four presidential administrations and as chief executive officer of the oilfield services provider at Halliburton Co. Cheney will reportedly be paid about $2 million for the book.
Specious Specie
The USG will take specie in AIG units and count that as partial repayment of cash relief extended in the expectation that the businesses will be run well enough to attract buyers at higher prices in the future.
Those buyers will materialize through an IPO, public offering, Morgan Stanley and Deutsche Bank to arrange, in which the SEC (USG agency) has an obligation to protect the investing public from buying specious specie and the USG will have first right on the proceeds of the offer.
Better yet would be an IPO in Japan, where one of the AIG units receives half of its revenue, and, presumably, the conflicted SEC would be less so
Fire in the hole
NEW YORK (Reuters) - The federal government has agreed to accept $25 billion of preferred stock in two American International Group Inc (AIG.N) businesses as partial repayment of debt, the company said on Thursday.
The agreement will reduce AIG's debt of about $40 billion under a Federal Reserve Bank of New York credit facility, but it will still be a while before taxpayers get any cash back for their bailout of the insurer.
Since its near-collapse last September, U.S. taxpayers have committed up to about $180 billion to rescue AIG, including the loan under the credit facility and a $40 billion equity injection.
AIG also said the agreement positions the two businesses, American International Assurance Co Ltd (AIA) and American Life Insurance Co (Alico), for initial public offerings, depending on market conditions.
AIG has already begun the process for an IPO of AIA early next year, selecting Morgan Stanley (MS.N) and Deutsche Bank AG (DBKGn.DE) as global coordinators for the offering.
The pact on AIA and Alico follows an agreement AIG reached with the government in March. At that time, the company said the preferred stock in the two units would reduce its balance under the credit facility by up to $26 billion.
The embattled insurer said on Thursday it will put the equity of the units into special purpose vehicles, and the New York Fed will receive preferred stakes of $16 billion in AIA and $9 billion in Alico.
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and Alico transactions are expected to close in the second half of 2009, pending regulatory approvals.
Alico operates in more than 50 countries but generates more than half its revenue in Japan.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Those buyers will materialize through an IPO, public offering, Morgan Stanley and Deutsche Bank to arrange, in which the SEC (USG agency) has an obligation to protect the investing public from buying specious specie and the USG will have first right on the proceeds of the offer.
Better yet would be an IPO in Japan, where one of the AIG units receives half of its revenue, and, presumably, the conflicted SEC would be less so
Fire in the hole
NEW YORK (Reuters) - The federal government has agreed to accept $25 billion of preferred stock in two American International Group Inc (AIG.N) businesses as partial repayment of debt, the company said on Thursday.
The agreement will reduce AIG's debt of about $40 billion under a Federal Reserve Bank of New York credit facility, but it will still be a while before taxpayers get any cash back for their bailout of the insurer.
Since its near-collapse last September, U.S. taxpayers have committed up to about $180 billion to rescue AIG, including the loan under the credit facility and a $40 billion equity injection.
AIG also said the agreement positions the two businesses, American International Assurance Co Ltd (AIA) and American Life Insurance Co (Alico), for initial public offerings, depending on market conditions.
AIG has already begun the process for an IPO of AIA early next year, selecting Morgan Stanley (MS.N) and Deutsche Bank AG (DBKGn.DE) as global coordinators for the offering.
The pact on AIA and Alico follows an agreement AIG reached with the government in March. At that time, the company said the preferred stock in the two units would reduce its balance under the credit facility by up to $26 billion.
The embattled insurer said on Thursday it will put the equity of the units into special purpose vehicles, and the New York Fed will receive preferred stakes of $16 billion in AIA and $9 billion in Alico.
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and Alico transactions are expected to close in the second half of 2009, pending regulatory approvals.
Alico operates in more than 50 countries but generates more than half its revenue in Japan.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Lalitha
Revenue department objects to foreign loans routed through Mallya's mother's firm.
The department of revenue in the finance ministry has raised objections to an application by United Breweries (Holdings) Ltd (UBHL) seeking approval for raising Rs 708 crore by issuing fully convertible equity warrants to FirStart Inc, a company owned by UB group promoter Vijay Mallya’s mother, Lalitha, and headquartered in the British Virgin Islands.
The approval is being sought “ex post-facto”, meaning the deal has been partially concluded.
UBHL plans to use the money from FirStart to invest in various UB Group ventures — which includes Kingfisher Airlines (in which it owns 32.48 per cent), McDowell Holdings (36.17 per cent), Kingfisher Finvest and UB Infrastructure Projects Ltd (both wholly-owned) and UB Electronics (96.25 per cent).
The revenue department rejected the proposal on three grounds. First, it contends that the foreign direct investment (FDI) in this proposal is primarily a loan given by Nexgen Capital Ltd and Standard Chartered Bank and is being routed through FirStart Inc as an investment in UBHL and, therefore, is not strictly FDI.
Second, Vijay Mallya has extended his India-based funds as a guarantee for the Standard Chartered and Nexgen Capital loans. The department of revenue has argued that if FirStart defaults, the guarantor — in this case Mallya — would have to pay money from funds in India which implies that funds could flow out of the country.
Third, the department has said Mallya’s net worth is less than the amount for which he has given the guarantee and the reason for the gap is not explained.
The department of revenue in the finance ministry has raised objections to an application by United Breweries (Holdings) Ltd (UBHL) seeking approval for raising Rs 708 crore by issuing fully convertible equity warrants to FirStart Inc, a company owned by UB group promoter Vijay Mallya’s mother, Lalitha, and headquartered in the British Virgin Islands.
The approval is being sought “ex post-facto”, meaning the deal has been partially concluded.
UBHL plans to use the money from FirStart to invest in various UB Group ventures — which includes Kingfisher Airlines (in which it owns 32.48 per cent), McDowell Holdings (36.17 per cent), Kingfisher Finvest and UB Infrastructure Projects Ltd (both wholly-owned) and UB Electronics (96.25 per cent).
The revenue department rejected the proposal on three grounds. First, it contends that the foreign direct investment (FDI) in this proposal is primarily a loan given by Nexgen Capital Ltd and Standard Chartered Bank and is being routed through FirStart Inc as an investment in UBHL and, therefore, is not strictly FDI.
Second, Vijay Mallya has extended his India-based funds as a guarantee for the Standard Chartered and Nexgen Capital loans. The department of revenue has argued that if FirStart defaults, the guarantor — in this case Mallya — would have to pay money from funds in India which implies that funds could flow out of the country.
Third, the department has said Mallya’s net worth is less than the amount for which he has given the guarantee and the reason for the gap is not explained.
Wednesday, June 24, 2009
Collections
25 June
The GOI expects to collect $71 billion in income related taxes for 2008-2009, out of a total expected collection of $137 billion.
The LIC (Life Insurance Corporation of India) collected $30 billion worth of premium in the same period, with $10 billion being initial premium payments. LIC intends to invest $10 billion in Indian equities this year up from $8 billion last year.
Maybe LIC should advise the GOI on tax collections
The GOI expects to collect $71 billion in income related taxes for 2008-2009, out of a total expected collection of $137 billion.
The LIC (Life Insurance Corporation of India) collected $30 billion worth of premium in the same period, with $10 billion being initial premium payments. LIC intends to invest $10 billion in Indian equities this year up from $8 billion last year.
Maybe LIC should advise the GOI on tax collections
Launched
Wednesday, June 24, 2009
Sea Launch Files Chapter 11
Long Beach-based Sea Launch, which was a provider of ocean-based launch services to the commercial satellite industry, said this week that it has filed for voluntary Chapter 11 bankruptcy. According to the firm, it had assets of between $100M and $500M, and liabilities of between $500M and $1 billion. The firm said it would continue all of its normal business operations, using existing cash and possibly tapping Debtor in Possession financing if necessary. Sea Launch is backed by Boeing, as well as Russian, Norwegian, and Ukrainian firms.
http://www.sea-launch.com/
Sea Launch Files Chapter 11
Long Beach-based Sea Launch, which was a provider of ocean-based launch services to the commercial satellite industry, said this week that it has filed for voluntary Chapter 11 bankruptcy. According to the firm, it had assets of between $100M and $500M, and liabilities of between $500M and $1 billion. The firm said it would continue all of its normal business operations, using existing cash and possibly tapping Debtor in Possession financing if necessary. Sea Launch is backed by Boeing, as well as Russian, Norwegian, and Ukrainian firms.
http://www.sea-launch.com/
Raining Frogs
25 june 2005
Frogs wed in Nagpur to bring rain. Air India loses one rupee for every 4 rupees of revenue. Kingfisher hedges fuel and operational costs by not paying for either, except for the ubiquitous red army.
Paramount buys 20 Airbus aircraft below the price of Chinese manufacture. France will partner the next Civil Aviation Airshow.
Jet pilots sue DGCA and Jet to avoid serving their notice period. A Boeing pilot contractor sues Air India in the US claiming his Civil Rights were violated. The Federal Judge summons Air India, which apparently is the 52d State.
The USG will spend $8 billion in Pakistan. The first $11 billion spent in FATA is unacounted for but did resettle the Taliban in Islamabad.
The Pakistani Rupee has declined 30% against the INR in five years. Bravehearts should sell INR (48) and buy PKR (78) (1.62) in an Obama spread with a target of INR (45) PKR (60) (1.33) + 18%. Otherwise vote Republican next election
Frogs wed in Nagpur to bring rain. Air India loses one rupee for every 4 rupees of revenue. Kingfisher hedges fuel and operational costs by not paying for either, except for the ubiquitous red army.
Paramount buys 20 Airbus aircraft below the price of Chinese manufacture. France will partner the next Civil Aviation Airshow.
Jet pilots sue DGCA and Jet to avoid serving their notice period. A Boeing pilot contractor sues Air India in the US claiming his Civil Rights were violated. The Federal Judge summons Air India, which apparently is the 52d State.
The USG will spend $8 billion in Pakistan. The first $11 billion spent in FATA is unacounted for but did resettle the Taliban in Islamabad.
The Pakistani Rupee has declined 30% against the INR in five years. Bravehearts should sell INR (48) and buy PKR (78) (1.62) in an Obama spread with a target of INR (45) PKR (60) (1.33) + 18%. Otherwise vote Republican next election
Out of Africa
Moscow's ties with former client states came to a sudden halt with the Soviet collapse but the Kremlin has now emphasised its wish to revive relationships in Africa, rich in oil, gas, diamonds, metals and uranium.
Russian energy giant Gazprom International immediately unveiled plans to build a possible first Trans-Saharan gas pipeline linking vast reserves in Nigeria to Europe, its chief Boris Ivanov said.
Russian energy giant Gazprom International immediately unveiled plans to build a possible first Trans-Saharan gas pipeline linking vast reserves in Nigeria to Europe, its chief Boris Ivanov said.
Hiking
Sanford's staff at first said the governor was hiking the Appalachian Trail, but then retracted that statement, provoking a media frenzy that culminated in Wednesday's bizarre press conference. The governor spent much of his opening remarks offering apologies -- to his wife and four children, his friends, supporters and voters from South Carolina -- before announcing his adultery.
Monsoon Madness
farmers in the western city of Nagpur organised a wedding of two frogs to please the rain gods.
When El Nino, a weather condition marked by warming of the eastern equatorial Pacific Ocean waters, hits the monsoon it can cause a lack of rains and even drought.
The farm sector accounts for nearly 17 percent of India’s gross domestic product and provides a livelihood for most of the 1.1 billion population.
Robust monsoon rains often leads to bumper harvests, which in turn raises farm incomes and increases demand for goods ranging from television to cars and lends support to factory output.
Poor monsoon rains could dent rural demand, hurt corporate profitability and undermine sentiment in financial markets.
When El Nino, a weather condition marked by warming of the eastern equatorial Pacific Ocean waters, hits the monsoon it can cause a lack of rains and even drought.
The farm sector accounts for nearly 17 percent of India’s gross domestic product and provides a livelihood for most of the 1.1 billion population.
Robust monsoon rains often leads to bumper harvests, which in turn raises farm incomes and increases demand for goods ranging from television to cars and lends support to factory output.
Poor monsoon rains could dent rural demand, hurt corporate profitability and undermine sentiment in financial markets.
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