Sunday, 11 January 2009

Earlybird Jan. 12, 2008 (Update)

Headlines for Monday Jan. 12:

U.S. -- Bank Earnings Data Might Be Disappointing (Reuters): The correct reading of this story is the following, that government efforts to clean up balance sheets and encourage capitalisation in the financial industry will take time to come to fruition. The most likely development is that banks will have to continue shedding assets and preparing a round of additional measures to counter the deterioration in the quality of their assets as the recession gets worse.

U.S. -- Citigroup CEO Pandit Gets Backing From Board, Sources Say (WSJ): Pandit is paying for the sins of his predecessor, Chuck Prince. there's not much he can do about the falling apart of the bank, which may continue to shed assets to stay afloat. One question remains whether Citigroup will afford to keep some of its Latin American operations -- they continuously say they will. Brazil's Citi operations are considered a jewel fro some fo the international and local banks trying to expand in that country.

U.S. -- Citigroup Nears Agreement on Sale of Brokerage Unit to Morgan Stanley (Bloomberg): According to Bloomberg, Citigroup would be able to book a $10 billion gain if the sale gets through. Remember that Pandit had to take back his words that he wouldn't sell the brokerage unit (Smith Barney) to raise cash -- that is why we have to maintain the possibility of the Brazil unit sale open -- it is clearly a likely move at this moment. The gains would flow into Citigroup’s capital, Bloomberg says in this exclusive report.

BRAZIL -- Ecuador Makes Payment on Defaulted BNDES Loan to Brazil (Estado): As expected, Ecuadorean President Rafael Correa backed off from his initial rhetoric and decided to make a roughly $30 million dollar payment due to Brazil for the $286 million loan to build a dam there. We insist that Ecuador is trying to play hardball, seeking better conditions to repay and more financing at a time Correa's efforts to radicalise his proto-socialist government (yes, call it his unnecessary decision to default on $3.5 billion of bonds!!!) are leaving the nation with no funding sources for the next years.

MEXICO -- President Calderon to Meet Obama; Talks to Focus on Economy, Immigration (El Economista): Calderon's agenda includes meetings with business leaders and members of Obama's transition team. Finance Minister Agustin Carstens is among the visiting officials. Colombian President Alvaro Uribe is, on the other hand, travelling to the U.S. to speak to incumbent U.S. President George Bush. Oh! This is funny -- he will be awarded some medal, the Freedom Medal, whatever the name be. Good God! Being awarded a prize by George W. Bush ain't exactly a compliment or the result of an accomplishment.

BRAZIL -- BNDES President is Confident Foreign Investors Will Fund Brazilian Infrastructure (Estado): What the hell does these Lula administration officials have in the morning? LSD? Pot? Luciano Coutinho, the president of state development bank BNDES, is planning to visit investors in the Middle East and Asia to raise money for Brazil´s $210 billion infrastructure programme. Coutinho is confident Middle East countries (which used to be flush with cash until weeks before the crisis turned something a bit more than messy,) will pay for the Brazil penalty (awful bureaucracy, legal uncertainty, delays, etc.) demanding little premium. Hope he does just fine with that ...

BRAZIL -- Government Sources Say More Than 600,000 Jobs Lost in December (Estado): This is going to be the detonator that ruling coalition politicians -- who happen to be in a great majority hostile to prudent economic policies -- were looking for to press for a decline in the Selic interest rate. Labour Minister Carlos Lupi, himself a trade union leader, must be peeing on his pants if this happens to be true.

PERU -- Former President Toledo Urges Government Transparency for Anti-Crisis Plan (Comercio): Transparency, what a hateful word! President Alejandro Toledo, the former president and whose economic platform is credited with having earned the rich of Peru the honourable title of Investment-Grade bastards, suggested the government's plan to face the crisis is being too ''optimistic´´ and that there would be a scenario where things don't go just that fine. Maybe this lends us enough reasons to understand why Toledo was the most unpopular president Peru ever had (check graph on right-hand side:) too much sincerity.

MINING -- Rusoro President Salamis Says Russian Gold Investors Are Winning Trust of Venezuela Government (Incakolanews): This is a nice interview story you, dear reader specialised in mining, should read. You read the interview and you sense that George Salamis really opened up and talk with great sincerity. He says that operating in Venezuela isn't necessarily easy, that the system of government-directed dollar sales is favourable for business such as Rusoro's, that the company have solidly won the trust of the government, at all levels, because of its history of delivering on promises. One thing that I find interesting about this article is the emphasis that IKN puts on questions regarding community relations -- this is not exactly hardcore market questions but they are relevant because, when it comes to Venezuela, you need to examine those aspects so you can foresee what the government stance towards any company will be in there future.

ECUADOR -- Correa Urges Use of $700 Million from Pension Savings to Pay for Spending Plans (Comercio): Jesus! Every time Latin America is at risk of falling apart, the peculiar gestures and actions of regional heads of state only create more noise, instead of diffusing it. After having defaulted on $3.5 billion of bonds he deems as ''illegal,´´ (???) President Rafael Correa is now following the steps of Argentina's Cristina Fernandez, who a couple of months ago seized money from private pension funds to pay for ... more spending!

1 comment:

  1. Quote of the Day:
    Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.

    Karl Marx, 1867
    (Hat tip, Tony Volpon, CM Capital)