Thursday 30th October 2014
slib33
THURSDAY TICKER: OCTOBER 30TH 2014: - The re-election of President Dilma Rousseff on Sunday has important implications for Brazil's Baa2 sovereign rating, as well as for the credit quality of the country's banks, corporations and securitisations, says Moody's. The rating agency says the narrow margin of her victory underscores the challenges she faces as she looks to revive Brazil's lacklustre economic performance - Facebook has reported third quarter results, again showing strongest year-on-year growth in mobile, where daily active users (DAUS) rose by 39% to 703 million, while overall daily users rose 19% to 864 million DAUS - Francisco Partners, a global technology-focused private equity firm, today announced it has completed the acquisition of Vendavo, Inc., a leader in business-to-business (B2B) pricing solutions. David Mitchell, an operating partner of Francisco Partners, will join Vendavo as CEO and lead the company’s worldwide business strategy and operations. Incumbent CEO Neil Lustig will transition into an advisory role with Vendavo. Francisco Partners now has a controlling stake in the Silicon Valley company. The acquisition by Francisco Partners provides additional resources to bolster Vendavo’s aggressive growth strategy, enabling the company to expand sales and marketing while accelerating cloud development. Vendavo completed a record first half of 2014, with nearly 30-percent growth in bookings, and the release of two breakthrough solutions for price and sales effectiveness. Based in Mountain View, Calif., Vendavo provides revenue and price optimisation solutions for B2B mid-market and enterprise companies.Francisco Partners was advised by JMP Securities, and Vendavo was advised by William Blair. Financial terms of the transaction were not disclosed – The International Finance Corporation, or IFC, issued the four-year, triple-A rated bond only to Japanese retail investors, tapping into the growing interest in low-risk investments with a social or environmental focus. The World Bank, has sold several billion dollars in green bonds over the past six years, with proceeds going to help countries and firms cut greenhouse gas emissions and adapt to climate change. The latest offering, Inclusive Business bonds, would finance firms that work with or sell to the 4.5bn people in the world that make less than $8 a day. IFC said while most poor people do not spend a lot individually, as a whole they represent an estimated $5trn consumer market that firms could tap into - NAKA Mobile, a telecoms and technology specialist based in Switzerland, has claimed the industry’s first virtualised evolved packet core (vEPC). Utilising Cisco’s NFV services, NAKA claims it will transform its network architecture, expand beyond Switzerland, and provide its mobile Internet services to customers across the world - The Internet Society and Alcatel-Lucent have agreed to provide support and equipment for the development of the Bangkok Internet Exchange Point (BKNIX). The project will utilise the Internet Society’s Interconnection and Traffic Exchange (ITE) programme and is intended to deliver a stronger and more robust Internet infrastructure for South East Asia.

Of mice and men and bailouts

Wednesday, 25 July 2012
Of mice and men and bailouts With the sovereign debt crisis still in full swing it is becoming a moot point as to where you should place your money. Popular reflection throws up the usual suspects, gold, bunds, gilts, US T-bonds and so on, but one does begin to wonder whether this accepted order of security is actually right. We have seen haircuts taken on quite a bit of sovereign debt. However, were not for central banks still accepting such debt as collateral, the yields on certain national issuance would be considerably higher than they are at right now. Simon Denham, managing director of spread betting firm, Capital Spreads gives the bearish view. http://www.ftseglobalmarkets.com/

With the sovereign debt crisis still in full swing it is becoming a moot point as to where you should place your money. Popular reflection throws up the usual suspects, gold, bunds, gilts, US T-bonds and so on, but one does begin to wonder whether this accepted order of security is actually right. We have seen haircuts taken on quite a bit of sovereign debt. However, were not for central banks still accepting such debt as collateral, the yields on certain national issuance would be considerably higher than they are at right now. Simon Denham, managing director of spread betting firm, Capital Spreads gives the bearish view.

Simon DenhamSimon Denham, managing director of spread betting firm Capital Spreads. Photograph kindly supplied by Capital Spreads.We have the curious situation of New Spanish issuance being bought by Spanish banks then repoed at favorable rates back into the ECB as collateral against debt taken out for this very purpose. The politicians have now agreed bailouts for the banks (but not for Spain itself) in the full knowledge that most of such bailout monies will be used for exactly the purposes described above.

The question must be: how much more will northern Europe tolerate? As times get tougher in Greece, Spain and Italy more of the little business still being done is actually flowing into the black market, exacerbating already critical deficit problems. 



Forcing through stern excise adherence needs to be done when times are good not when many businesses are struggling for survival. This actually is the knub of the problem of the eurozone since its inception; Southern States previously accepted a generally deteriorating currency in exchange for a certain laxness in fiscal responsibility. Other the other hand, the much bigger North (economically) certainly did not.

When the good times rolled all the politicians basked in the supposed genius of the new bloc studiously ignoring all of the ever more strident warnings of productivity dislocation and failing dismally to impose any form of regional spending controls. The saying ‘your sins will find you out’ could hardly be more apposite in this situation as Germany and France (who were amongst the first to break the piously agreed deficit limitations back in 2003) are now requiring just such a response from the weaker members.

Where then, does this leave equities?

Well, oddly enough there is an argument to say that corporate assets might well become the safe haven investment of the future. The ability to move companies from one jurisdiction to another if the regulatory/tax burdens becomes too extreme, the general fiscal responsibility of the vast majority of executive boards, their generally low debt position and the high profit margins lead one to consider that equities and corporate bonds are a rather safer home than ­sovereign debt (of whichever nation).  

The major advantage of a sovereign nation has always been the accepted lore of their ability to raise taxes no matter what the economic situation. Even so, as we see from Spain and Italy’s recent tax receipt numbers—and even the UK over the past few months—this accepted truism may be starting to wear thin.  People in general continue to lose any respect for their government’s ability to spend wisely. If then the average German, Finn or Dutchman decides that bailing out Southern Europe is not his responsibility and we effectively move towards a Greek position on paying tax, or voting for parties that espouse a more isolationist policy, the general deficit situation may well ­deteriorate exponentially.

All the while, returns on equities look to be attractive in the current interest rate environment. The FTSE 100 yield is over 4% as is the Stoxx 50 and the dividend adjusted price versus the cost of acquisition is now at historically high levels. Obviously, dividends might well be lowered over the coming years as growth looks more remote, but interest rates are likely to remain sub 1% as well, so even a reduction in payments might not be accompanied by a fall in price. Returns on stocks have remained remarkably stable despite the current political brouhaha. However, this might be the time that this ‘value’ was reappraised upwards to reflect falling returns elsewhere. 

For all of the truly awful news of the last six to twelve months the FTSE is still pretty much where it was this time last year. It might not take much in the way of good news to send us higher. Of course, this said, we do still need the politicians to make at least a couple of good choices!

As ever ladies and gentlemen, place your bets! 

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