Author: Serkadis

To carry trade or not to carry trade. That is the question.

In the last few weeks a host of different banks have stepped forward to question both the depth and degree of the current dollar carry trade.  Among them have been Goldman Sachs, UBS and Barclays Capital – all claiming the risks of executing speculative dollar-funded carry trades still outweigh the potential returns, meaning the trade isn’t half as popular as the market is making out, nor is it contributing to any such thing as a global asset bubble.

Considering the above then it’s interesting that Sean Corrigan of Diapason Commodities does his best to prove the exact opposite in his latest note.

Read the whole thing at FT Alphaville >>

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See Also:

• Proof That Everyone Is Obsessed With The Dollar Carry Trade
• Roubini Is Wrong About The Giant Dollar Carry Trade Going Bust
• Roubini: The New Dollar Carry-Trade Is A Disaster In The Making

(This guest post originally appeared at the author’s blog)

Goldman is increasingly confident in the end of year rally.  In fact, a recent piece of research says December could be one of the strongest months of 2009 (not an easy feat considering the year we’ve had).  Like other bullish investors, they believe seasonality will be an important influence on year-end action:

As we move into the year end, we take a look at the seasonality effect in equity markets. December stands out as one of the best months for equities, using both long- and short-term data; we think this year will be similar. In years when the first 11 months have yielded good returns, December has tended to be particularly strong. 

December yields good returns on average
Based on monthly data going back to 1974, December has on average returned twice as much as the monthly average (1.7% vs. 0.8%). It is the third best month based on average data and the second best one using median data. It is interesting to note that January is also a good month for equities based on long-term data. December and January both yielded a positive return in more than 70% of the cases.

Goldman goes on to note that December is particularly strong when the current year has been strong: 

The better the year, the better the December
There have been worries among market participants that the year end could see weakness in equities, following the strong year-to-date performance. However, historical data tell the opposite. In years when the return from January to November has been strong, December has tended to be very strong as well.

How to play it?  Don’t rely on commodities to continue their inverse dollar surge.  In fact, the best performing assets in big years have been financials cyclicals:

Oil & Gas has underperformed historically in December

Commodity related sectors exhibit the lowest relative returns among all sectors in December. This holds even when restricting the sample to years when the market went up by more than 20% in the run-up to December. Conversely, Financials and selected Cyclicals have been the best performing sectors in December when the market has risen by more than 20% in the first 11 months. Looking at countries, the results are less interesting as the differentiation is less marked than between sectors. Germany stands out as the best performing country on average inDecember.

 Conditional seasonality: The better the year, the stronger the December
Recently, there has been a lot of talk in the investor community about de-risking and investors locking in their performance for the year. This has resulted in more bearishness going into the year end, as many have questioned the potential for further market upside based on the sustainability of the economic recovery. A seasonal analysis conditional on year-to-date performance tells a very different story. The better the performance has been from January to November, the more positive the return has tended to be in December (Exhibit 5).

Where to play it?  Italy and Germany have been the best performers:

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See Also:

• Saut: Market Keeps Pushing Higher Despite A "Cacophany Of Crybabies"
• Jeff Saut: Even If Stocks Are A Bubble, Everyone Has To Keep Buying
• Goldman: It’s 2004 All Over Again

Filed under: Motorsports, Hirings/Firings/Layoffs, Earnings/Financials

With all the money that goes into running an F1 team, and the limited opportunity to make any of it back, we can’t see why anyone would view owning a team as a sound investment. Evidently Herr Toto Wollf feels otherwise, as the Austrian financier and gentleman racing driver has acquired a minority interest in Williams Grand Prix Engineering.

This marks the first time in over 30 years of operations that Frank Williams and Patrick Head, the two team principals, have sold shares to an outside party. For his part, Sir Frank insists that business will carry on as usual, that they’re not relinquishing control over the team, and that the sale was simply a way of ensuring the team’s financial viability. Tellingly, though, he also indicated that Wolff, some 30 years younger than Williams and Head and the veteran of local rallies and international sportscar racing, could take the reins some day in the future.

The announcement comes hot on the heels of reports that Renault – once Williams engine partner during its heyday – was considering a similar move. Follow the jump to read the official announcement, complete with Toto Wolff’s bio.

[Source: Williams]

Continue reading Williams sells minority stake to Austrian investor

Williams sells minority stake to Austrian investor originally appeared on Autoblog on Wed, 25 Nov 2009 07:55:00 EST. Please see our terms for use of feeds.

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At the time, nothing came of it, but Raj isn’t the first member of the Rajaratnam family to come under insider trading suspicion.

WSJ: In papers filed Tuesday in a New York federal court, the Galleon Group founder disclosed that he was deposed by federal authorities in 2007 in an insider-trading investigation involving “an unrelated hedge fund.” That fund was run by Rengan Rajaratnam, Raj’s brother, people familiar with the matter said. The investigation of Sedna began as an audit by the SEC and eventually turned into an insider-trading investigation into both Sedna and Galleon, a person close to the situation said.

The disclosure surfaced as Raj Rajaratnam denied civil insider-trading charges filed last month by the Securities and Exchange Commission. In response to the SEC complaint, Raj Rajaratnam’s lawyers argued that the wiretaps used in an insider-trading case filed last month against him violated his constitutional rights. As part of that filing, Mr. Rajaratnam’s lawyers argued the wiretaps were unnecessary because he was already providing information to the government in the 2007 investigation of his brother’s hedge fund. The status of the investigation of the fund run by Rengan Rajaratnam, the brother, isn’t clear. The SEC declined to comment, as did federal prosecutors bringing a separate criminal case against Raj Rajaratnam. A lawyer for Rengan Rajaratnam didn’t return calls for comment. Rengan Rajaratnam hasn’t been charged with any wrongdoing.

Obviously, we’ll assume there’s nothing there. However it would be interesting to know if being pulled in for a deposition on hedge fund insider trading in his brother’s case spooked Raj at all.

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See Also:

• Assessing Raj Rajaratnam’s Aggressive Legal Moves
• A Post-Galleon Legal Guide For Hedge Funds On Insider Trading
• The Insider Trading Alarm Bells Grow Louder

The BGR has Verizon’s Black Friday deals, and there is one that may be of interest to Windows Mobile fans.

The HTC Ozone, for those who think touch screens are passé, will be available for the low price of only $9.99 after a $100 Mail in Rebate and of course on a two year contract, and will be available with Verizon’s Buy One, Get One Free deal.

The Windows Mobile standard smartphone features GPS and a 528 Mhz processor, so is no slouch, and may be just what the business-focussed user needs.

Read more at BGR here.

Life insurance companies currently have $150 billion of commercial real estate exposure, and $308 billion total mortgage exposure according to Fitch Ratings.

The industry needs to brace itself for billions of losses unless commercial real estate markedly improves.

Fitch expects life insurers’ losses on commercial real estate investments to hit 9% of exposure.

Investment News: Fitch projects the potential losses from commercial-mortgage-backed securities owned by life carriers to be between $13.1 billion and $16.0 billion. Directly-placed mortgages will generate $5.4 billion to $6.6 billion in losses through 2011, under Fitch’s core stress scenario.

…

Fitch also notes that the steep declines in statutory capital over the last 18 months have hobbled the insurers’ ability to get through an extended downturn. To date, the life insurers have not recognized material impairments or losses on investments related to commercial real estate, according to Fitch.

Read more here.

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See Also:

• Bill Ackman Has Made An $800 Million Killing On Bankrupt Commercial Real Estate (GGP)
• Distressed Commercial Real Estate Now 600% Larger Than 2006
• Commercial Real Estate Slide Kills City Budgets

Things are moving as fast as usual at Mozilla Labs and, hardly a week after the previous release, the developers have released a new beta for Mozilla’s bookmark and settings sync project for Firefox and Fennec, the organization’s mobile version of the web browser. Weave Sync 1.0 Beta 2 fixes several bugs which affected the previous beta and is another step towards the final release which should come soon enough.

The new beta also brings several of updates and improvements of the existing features. Users should find it easier to recover their passwords or secret phrases in this new release and Mozilla says this should come in handy for those setting up the add-on on a second machine, as it looks like many were having trouble remembering their credentials at this point.

The new Weave Sync beta also improved the way it handles same-name folders which have different bookmarks on different computers. On occasions, Weave Sync would place the bookmarks in the wrong folder, but this issue should now be fixed. The add-on now syncs history deletion as well, so removing a website from the browser history on one machine will now remove it in all of the synced browsers. The functionality had been available only for bookmarks until now.

Lastly, Weave Sync now automatically labels tabs which were opened… (read more)

ChurchHatesTucker writes “The ABA Journal was unable to secure an interview with the USPTO chief, so they published a faux business method patent for securing an interview. Within four hours, they got their interview.”

Yes, but the real question is whether or not the USPTO would approve the patent…

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Gold is on a tear this morning, just breaking $1,182.

The dollar is losing serious ground against the Euro during early AM trading. Check out the Euro/Dollar spike in the second chart below.

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See Also:

• Panicked Gold Buying Forces Vietnam To Devalue Currency
• Get Gold Exposure For Just $940 An Ounce (ABX)
• HSBC Tells Gold Bugs To Take Their Bullion And Gold Coins Somewhere Else

‘The Zhu Zhu pet is one of this year’s must-have gifts, so popular it’s almost impossible to find in stores.”

“There is one place you can find them, online, but be ready to pay a premium.”

“Chris Handy bought 15 the day he first heard about Zhu Zhu’s. His wallet is thicker today… ‘We got about ten times what they were worth’”

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See Also:

• This Year’s Hottest Fad Toy: Zhu Zhu Pets
• FOMC Minutes: Fed Admits That ZIRP Could Fuel A New Speculative Bubble
• UBS: There’s A "Buffet Bubble" In Railroad Stocks That Could Burst Any Day Now (UNP)

Social media has grown tremendously this year pushed forward by the likes of Facebook and, to a lesser degree, Twitter. But despite having been around for years, businesses are still trying to get the hang of this new opportunity to bring in customers and, at the end of the day, make more money. One company which seems to get it, at least in this case, is Ikea which has put together a hugely successful campaign to promote a new store and did so at a significantly lower cost than if it had used traditional marketing methods.

The idea was simple enough but it didn’t need to be any more complicated. IKEA made a Facebook profile for Gordon Gustavsson, the manager of the new store in Malmo, Sweden, and then uploaded several images from the Ikea showroom over the course of two weeks. Nothing groundbreaking so far, but the interesting part was that the first Facebook user to tag his or her name on one of the products in the picture won it.

As you could expect, people got really into it and soon enough the story spread throughout Facebook from profile to profile as the people added Gustavsson as a friend or tagged one of the photos. Not only did the campaign got a lot of people to visit the profile and, more importantly, the actual showrooms most users lauded the company for the innovative approach.

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The modest recovery in house prices over the past four months caught almost everyone by surprise, including those who are now explaining it away as an obvious byproduct of artificially low interest rates and the home-buyer tax credit.

The recovery’s momentum is slowing, however, and it seems likely that house prices will now resume their fall and drop another 10%-15%.

Why?

First, prices are still too high. 

As these charts from Calculated Risk show, price-to-rent and price-to-income ratios have not yet reached their average levels from before the bubble.  Normally, after a bubble like this, ratios would be expected to fall through their long-term averages and trade below those levels for several years. 

Calculated Risk has detailed observations about the current state of prices here >

Second, two of the key forces that contributed to the bubble are continuing to unwind:

• Lending standards are still being tightened
• Consumers are reducing their debts

Third, the unemployment rate is still shockingly high and will likely remain elevated for years.  This will likely shrink the amount of money that consumers have to spend on housing.

Fourth, nearly a quarter of all households still have negative equity, which is a prime cause of foreclosures.  The more foreclosures that hit the market, the more housing supply there will be, and the more pressure this will put on prices.

Fifth, inventories are still high, especially if you include the “shadow inventory” of foreclosured houses and impending foreclosures, which some people estimate to be as high as 7 million units (vs. the 3.5 million that are currently on sale).

Sixth, rents are declining, as Americans take advantage of the tax credits and low interest rates to buy instead of rent.  This temporarily improves demand for existing houses, but it doesn’t eliminate the overhang of housing supply.  As rents fall, the price-to-rent ratio for houses rises, and renting becomes more attractive again.  House prices then need to fall to bring the ratios back in line.

Seventh, the current “affordability” of houses will change fast if rates begin to rise.  Houses are very affordable right now–if you have a solid job, lots of savings, and aren’t deeply underwater on your old house.  If and when rates begin to rise, however, this will quickly make them less affordable.

The good news is that, after what we’ve been through, another 10%-15% decline will feel like a walk in the park.  It does seem likely that the house price decline will resume in November and December, though.  If so, it will be interesting to see what impact that has on the stock market and the rest of the economy.

See Also: The Most Important Housing Chart Shows Things Are Still Getting Worse

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See Also:

• Case-Shiller: Home Price Recovery Stumbles, Results Worse Than Expected
• Latest Facts About The State Of The Housing Market
• The Most Important Housing Chart Shows Things Are Still Getting Worse

The United Nations Climate Change Conference will take place in Copenhagen, Denmark, between December 7 and December 18, 2009. The conference includes the 15th Conference of the Parties (COP 15) to the United Nations Framework Convention on Climate Change, the 5th Meeting of the Parties (COP/MOP 5) to the Kyoto Protocol as well as meetings of other working groups and subsidiary bodies. COP 15 is the supreme body of the Convention. It currently meets once a year to review the Convention’s progress.

The sessions (COP 15) of the United Nations Framework Convention on Climate Change are open to Parties of the Convention and Observer States (Governments), the United Nations System and observer organizations (IGOs and NGOs) duly admitted by the Conference of the Parties.

UNFCCC’s Overview Schedule of COP15 could be found here and the link to the Side Events at COP15 could be found here.

The European Union is working for an ambitious, comprehensive and legally binding global climate agreement that will prevent global warming reaching dangerous levels, that is, more than 2°C above pre-industrial temperatures, as researchers have projected for this century.

The EU has independently committed itself to reducing its emissions by at least 20 per cent by 2020 compared with 1990 levels, and is now implementing this reduction with the help of a legislation package that entered into force earlier this year, along with a comprehensive programme for increased energy efficiency.

What is expected to happen politically in Copenhagen?

Parties agreed at Bali in 2007 to jointly step up international efforts to combat climate change and get to an agreed outcome in Copenhagen in 2009. Thus, an ambitious climate change deal will be clinched to follow on the first phase of the UN’s Kyoto Protocol, which expires in 2012. The Copenhagen agreed outcome need not resolve all details, but it must provide clarity on four key issues:

–   Ambitious emission reduction targets for developed countries
–   Nationally appropriate mitigation actions of developing countries
–   Scaling up financial and technological support for both adaptation and mitigation
–   An effective institutional framework with governance structures that address the needs of developing countries

Copenhagen is to result both in a post-2012 outcome as well as important decisions and start-up finance to immediately kick-start action on climate change in 2010.

You could find more information about the event and its background on the following websites: http://en.cop15.dk/ and http://unfccc.int/

	Quick Spin: Nissan Leaf the tip of mass market EV spear Ghosn’s plan of attack makes sense, especially when the first shot is this silver (blue) bullet.		Volt battery life affected by hot weather, but 10 years means 10 years The most expensive part of the pack will last, says GM.
	REPORT: Electric Infiniti will be a performance-oriented ZEV Speaking of attack, here’s Round Two.	Other news: Consumer Federation of America pushing CAFE to climb to 45 mpg by 2020 Last Garage Team Standing: Illuminati Motor Works promising big things from Seven REPORT: Downey, CA mayor claims Tesla Model S plant deal 99.9% done

AutoblogGreen for 11.25.09 originally appeared on Autoblog on Wed, 25 Nov 2009 05:58:00 EST. Please see our terms for use of feeds.

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There are a lot of metrics for website traffic, unique visitors, user numbers, and the likes. Measuring a website’s “influence” is a harder proposition though, it’s not exactly something you can count. Some people beg to differ though and ://URLFAN aims to do just this, measure a website’s influence by counting the number of mentions it gets on blogs. It’s not the most objective metric out there, but it’s probably as good as it gets and it’s an interesting perspective.

The ReadWriteWeb blog put together a list of the top sites on the service and their standings a year ago. At this moment, despite the growing number of people predicting its demise, Wikipedia sits at the top as the most influential site on the planet. It’s not much of a surprise this one, the crowd-sourced encyclopedia holds huge amounts of content and information which comes in handy when you’re trying to put something in perspective or provide more background information.

Wikipedia is followed by YouTube and then Flickr, which have switched places since last year. Their presence is entirely expected, one being the most popular video site on the planet and the other being the most popular photo sharing site among bloggers, even if it’s not the biggest in its category. Things only get interesting on fourth place where Twitter… (read more)

The World’s Biggest / Largest / Longest Multi-Touch (and evidently Multi-User) Wall [sensory-minds.com, click Projects then choose 19.07.2009) seems to be installed in Nürburgring, a famous motorsport race track around the village of Nürburg, Germany The two-piece wall consists of a huge LED media facade (at the top), and a multitouch information-wall (at the bottom), and impresses by its physical size, as it totals a surface of about 425 square meters, equaling more than 6000 computer displays.

The interactive interface emerges out of 34 million pixels generated by 15 high definition projectors, supported by sound produced by 30 directional speakers. The multitouch capturing itself is based on laser technology, also called Laser Light Plane Illumination (LLP). This means more than 80 users can simultaneously get informed about news and activities around the ringworld. Now imagine the sorts of sparklines this device could display…

You can watch a documentary movie below.

Despite regulatory threats on the horizon, the outlook for the credit default swaps (CDS) market remains bright. While the CDS market’s notional value of outstanding contracts fell 14% in 2009, it’s still at massive $36 trillion of notional value.

Swaps brokers and clearinghouses don’t appear worried about its future according to DealBook.

DealBook: …trading in swaps has so far survived the crisis and market reforms are on the way. Barring unexpectedly draconian regulatory changes, a comeback looks likely, Breakingviews says.

…

it looks likely that reforms to improve the market’s workings will trump the idea of shutting it down. With that in mind, forecasting a return to robust market growth makes sense, according to Breakingviews. Central clearinghouses and electronic trading led the energy derivatives market to bloom in recent years. The return of credit risk-taking wouldn’t please everyone, Breakingviews concedes, but the credit-default swaps market could emerge bigger and stronger, too.

Despite the regulatory risk, recent data supports this view that the credit default swaps market will continue to grow. For example interdealer broker ICAP’s recent interim results showed that the company’s credit-related trading revenue 37% year over year, despite all the scorn.

Thus we’ll take DealBook’s view a step further — even draconian regulation won’t be able to stop this market’s expansion. What you might ban in the U.S. or Europe will simply move offshore.

the end it isn’t crazy that bondholders might want to purchase insurance against default. Given the gigantic size of the global bond market and today’s technology, someone will find a way to meet this massive need. Thus less regulation would be better than more, since it would keep these markets onshore and under closer supervision.

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See Also:

• Here Comes OTC Derivatives Regulation, At A Cost Of Nearly $1 Billion Over 4 Years
• That Chinese Company Might Actually Be A Giant Pile Of Derivatives (CCA, ZNH)
• Credit Default Swaps Augur Yen Body Slam

Perhaps a little reluctantly, Google has been slowly adding more rich content to its search engine. It’s still as spartan as it gets, but there’s certainly an evolution and now it’s making the same changes to the ads it serves on the search results page which now feature videos, images, and even maps.

“To provide a better search ads experience, we’ve been developing and testing a variety of new ad formats. These formats are focused on giving you the information you need, while retaining what you love about Google advertising: that the ads are relevant and useful,” Susan Wojcicki, VP of product management at Google, wrote. “If you’re looking to buy your mom a new handbag for the holidays, for instance, you might want to see pictures, prices, the addresses of boutiques in your area and a map of how to get there — all within the ad.”

Some of the new ad units have been in testing for a while now, but Google wanted to showcase them, perhaps because it’s ready to introduce them on a larger scale. The company is working on several new units, but the general theme is ‘bigger is better’. There’s a good reason for that, bigger ads equal more clicks therefore better revenue for the company, but this only works up to a point. Part of the reason why people chose Google to do their searches is the clean in… (read more)

Joseph Franklin has written about how a group of universities have agreed to some basic principles (pdf) about providing drugs to developing nations at reasonable costs (or even free) in the interest of better global healthcare. However, Franklin wonders how well this will work in practice, and why it should only apply to developing nations, and not domestically as well. It’s an interesting question, made more complicated by the fact that many drugs have their research started at universities — frequently backed by government money — but are later taken over by pharmaceutical companies who have no interest in such principles. I tend to think that such “principles” are nice to speak about, but are rarely effective in actually creating change. I would think that a much stronger argument is showing the economic benefits in keeping people alive. If you could rid some developing nations of certain diseases, you’d be able to open up vast new markets for other industries. Hell, imagine if you could get companies in other industries (food, clothing, transportation, etc.) to pay for drugs for the poor in developing nations, knowing that keeping them healthy will help those nations build their economy so they can start purchasing the same food, clothing and transportation…

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