BWS Capital Partners, LLC

crisis fatigue, Chile’s quake not getting as much emotional plea as Haiti

Chicken and egg thing

Federal Reserve Chairman Ben Bernanke told Congress that it would be wise not to forget about the budget deficit when it spends money to spur the creation of jobs. If Congress intends to spend more money, it will “be good to combine that” with a concrete plan to get the deficit under control, he said. Even after the U.S. economy fully recovers, a deficit of 4% to 7% of GDP is expected, Bernanke said. “That is not a sustainable number,” he said.

Blue light special for him

A U.S. judge ordered Charles Conaway, former CEO of Kmart, to pay more than $10 million for misleading investors about the company’s finances before its 2002 bankruptcy. Conaway was fined $2.5 million and ordered to repay a $5 million loan and about $2.7 million in interest. Conaway’s lawyer said his client plans to appeal the verdict and penalty.

No cuts

Greece is getting ready to implement a second round of budget cuts that could reduce spending by as much as 1.5 percentage points of GDP. The move is backed by EU officials and is seen as smoothing a path toward an EU bailout, if necessary. “I believe this time around the government will be successful in convincing the markets that it is committed to cutting the budget deficit to 8.7% of GDP,” said Yiannis Stournaras, director-general of Greek think tank IOBE.

A lesson in the making

Toyota Motor’s rivals have not much gloated about the automaker’s highly publicized safety recalls, and there is a good reason, according to The Economist. “Although it is Toyota that is currently in the dock after a crushing series of safety-related recalls across the world, competitors are only too aware that it could be their turn next,” The Economist notes. Every major automaker modeled its supply-chain management, increasingly being blamed for Toyota’s quality problems, on the approach pioneered by Toyota, according to The Economist.

Following the trend

Greek government bonds declined after Moody’s Investors Service followed Standard & Poor’s in warning that the nation’s long-term debt could be downgraded “in a few months.” Moody’s is the only major credit rating agency that gives Greece’s debt an A rating. That rating is important because it allows Greece to offer its bonds as collateral for loans from the European Central Bank.

Internal default

Much attention has been given to Greece’s debt crisis, but U.S. states are facing difficulty as well, prompting questions about whether default is a possibility. “For U.S. states, it is not a debt problem, it is a spending problem,” said Peter Hayes, head of the municipal bond group at BlackRock. “The length and depth of the downturn is so much greater than anything we have seen that states cannot cut spending fast enough and they cannot really raise taxes further.”

Mods

Christopher Dodd, chairman of the U.S. Senate banking committee, is striving to unveil legislation to overhaul the financial regulatory system, but the bill might no longer include a measure to require that broker-dealers be held to a fiduciary standard. Members of the Senate panel continue to debate several issues in the legislation, and sources said a final decision on the fiduciary standard has not been made.

Talking to the customers

U.S. Treasury Secretary Timothy Geithner met with representatives from financial-services groups, saying they agreed that legislation overhauling financial regulation needs to be approved by Congress this year. “Secretary Geithner reiterated the administration’s determination to get strong financial reform done soon and done right,” said Andrew Williams, a representative of the Treasury Department. “He noted that passing a financial reform bill in the near term will create certainty for consumers, businesses and markets — certainty that is essential to laying a firm foundation for sustainable economic growth.”

On the tip of the horn, literally

Whether the euro makes it through the eurozone’s debt crisis intact could be determined by how Spain deals with its economy, experts said. The nation has been battered by a GDP that contracted 3.6% last year, a widening budget deficit and surging unemployment. “If Spain is in deep trouble, it will be difficult to hold the euro together,” said Desmond Lachman of the American Enterprise Institute.

Closer but yet so far

With U.S. President Barack Obama stepping directly into the congressional health care debate, Democrats are moving closer to using the parliamentary maneuver budget reconciliation to get their overhaul adopted, according to The Economist. This approach requires 51 votes in the Senate, not 60, depriving Republicans of their ability to block action through a filibuster. “Republicans are bitterly denouncing such a possibility as trickery, but there are clear signs that Democrats are getting ready to pursue such a tack if … bipartisan agreement is impossible,” The Economist notes.

Less right for lenders

The Obama administration is considering a proposal that would require lenders to examine mortgages for potential modification before foreclosing. The proposal is “one of the many ideas under consideration in the administration’s ongoing housing-stabilization efforts,” said Meg Reilly, a spokeswoman for the U.S. Treasury Department.

Reaping the reward

Japanese investment bank Nomura recently posted its third straight quarterly profit. The bank said its acquisition of the European and Asian operations of Lehman Bros. contributed to its turnaround. Nomura suffered a record loss in 2008. “Nomura hasn’t broken into the ranks of top global investment banks, but the Lehman acquisition has probably gone better than expected,” said a regional banking executive in Asia. Japanese investment bank Nomura recently posted its third straight quarterly profit. The bank said its acquisition of the European and Asian operations of Lehman Bros. contributed to its turnaround. Nomura suffered a record loss in 2008. “Nomura hasn’t broken into the ranks of top global investment banks, but the Lehman acquisition has probably gone better than expected,” said a regional banking executive in Asia.

Why GMAC?…union..that’s the answer

Auto lender GMAC Financial Services received three capital infusions from the U.S. government, prompting the Congressional Oversight Panel to examine the reason the government did not let GMAC go out of business. A Treasury Department official said GMAC had to be saved to keep General Motors in business. But an independent expert said the auto industry would have benefited more had the government allowed GMAC’s competitors to step in and take over its lending.

Retirees is worried

As Greece’s debt crisis spreads across Europe’s southern edge, Italian pensioners are worried about what the euro’s troubles might mean for them. At first glance, Italy’s economy is in a better shape than that of Greece, Ireland, Portugal and Spain. But Italy’s recovery is fragile, some economists said, and the nation could slip back into recession.

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Banks are hiding Greece’s debt (burning down the house) to make some money from their default (get the home insurance money)…sneaky

Sneaky vultures

Many of the banks that helped Greece create derivatives that concealed its borrowing are betting on default, hoping to make additional profit from the nation’s financial troubles, according to The New York Times. Banks’ and hedge funds’ purchases of credit default swaps on Greek bonds are driving up the cost of borrowing that Greece needs to roll over its maturing debt, according to the newspaper. “It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit.

Focusing on ½ of the problem

A report shows that another financial crisis could be in the works if regulators focus too heavily on increasing capital requirements for banks instead of forcing financial institutions to change the way they operate. Many banks likely did not have sufficient core Tier 1 capital to survive the financial crisis, researchers said, but increasing requirements would not resolve the issue. “The regulator is calling for bigger airbags, but airbags don’t avert crashes — what we need is better driving. We need to address how to stop banks failing rather than weighting the focus on softening any falls,” said Simon Ashby, author of the report.

CDS crackdown

Tougher regulation of the credit default swap market is being increasingly embraced by European officials. The German government said it is considering restricting the use of CDS contracts. Meanwhile, France is looking into implementing a CDS crackdown, said Finance Minister Christine Lagarde.

Uneasy in the Club Med

Spending cuts and other austerity measures are likely to touch off discontent, possibly creating strikes and protests, across the southern edge of the EU, called “Club Med,” The Times reported. Spain, Portugal and Italy, along with Greece, have a soaring budget deficit, high unemployment and a troubled economy. “The young are struggling to find work, the middle-aged are having their earnings squeezed and the old will see pension and benefit cuts,” according to the newspaper.

One more year frolicking

U.S. Treasury Secretary Timothy Geithner told the House Budget Committee that the White House’s plan for the future of government-sponsored enterprises Fannie Mae and Freddie Mac will not be disclosed until next year. Geithner also told lawmakers that the government wants to alter its role in the housing market to make it more productive and less risky.

Months

Standard & Poor’s said Greece’s sovereign debt could lose its BBB+ rating by March if the country’s financial condition worsens or the government loses public support for its austerity measures. “In our view, a further downgrade of one to two notches is possible within a month,” said S&P credit analyst Marko Mrsnik. Under S&P’s rating system, a downgrade of even two steps would leave Greece with an investment-grade rating.

How long can you be down there?

Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee that despite the “nascent” economic recovery in the U.S., interest rates will be kept low for an “extended period.” “The Federal Open Market Committee continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends and stable inflation expectations — are likely to warrant exceptionally low levels of the federal-funds rate for an extended period,” Bernanke said.

OTC is welcomed in Asia

Regulators in Asia are starting to tackle systemic risk in the over-the-counter derivatives market after witnessing the turmoil in Western markets during the financial crisis. Japan, China, India and several other Asian nations have developed task forces to study clearing operations for the market. The groups are looking into whether to use existing clearinghouses or establish clearers specifically for the market.

Crisis mode

The Group of 20 nations became the official global economic forum only months ago, but already the group’s ability to deal with challenges is being questioned. “The G-20 has achieved a tremendous amount in a short time, but the big question is are they are going to be able to move forward from crisis mode,” said Uri Dadush, former director of the global economy group at the World Bank.

Blame to go around

Although U.K. businesses can point to many foreign buyers that want their product, the export sector is experiencing a sluggish recovery. Exporters said they do not get the kind of government support enjoyed by counterparts in other countries. As an example, U.K. wallpaper-maker Graham & Brown said it is at a permanent disadvantage to big rivals in Germany. “They benefit from short-term German government export-credit guarantees, covering the risk that their Russian customers will not pay; the British government offers no such cover,” according to The Economist.

More spending

Senate Democrats plan to bring a barrage of programs aimed at reviving the labor market, after a $15 billion jobs bill backed by Majority Leader Harry Reid, D-Nev., cleared with a 70-28 vote. After the approval, in which 13 Republicans voted in favor, Reid said the Senate will soon take up a measure promoting foreign travel to the U.S. Other measures include pro-business tax breaks, system upgrades for air-traffic control and extensions of jobless benefits.

Here comes Iraq

Iraq, which has the world’s third-largest oil reserves, plans to expand its oil production by 400% or more. If it succeeds, this fresh supply entering the energy market will have consequences throughout the Middle East and beyond, according to The Economist. But Iraq would have to overcome huge obstacles to implement its plan. “Iraq will have to pull off an unprecedented feat,” The Economist notes. “In the history of the modern oil industry, no country has increased output with the speed the Iraqis envisage.”

Not so

Many market participants and observers have expressed concern that mortgage rates will surge when the U.S. Federal Reserve ends programs supporting the market at the end of next month. Analysts, however, said rates might not actually move much, at least not in the short term. “I don’t think we’ll see a major reaction and probably not a big spike higher in rates, even though the market is losing one of its major actors,” said Kim Rupert, managing director of global fixed-income analysis at Action Economics. “So we’re going to have to find some other sources of demand. The market’s pretty ingenious, and it can fill that hole without serious consequences.”

Toyota headache

Toyota Motor CEO Akio Toyoda’s testimony to Congress is over, but huge legal, regulatory and sales problems still confront the Japanese automaker, experts said. “There is still a very large bull’s-eye pinned to Toyota right now,” said Aaron Bragman of IHS Global Insight. U.S. prosecutors are considering criminal charges, the Securities and Exchange Commission is investigating the company, highway-safety officials are reviewing Toyota’s recalls, and lawyers anticipate an avalanche of civil lawsuits. On top of it all, Toyota sales fell 16% in January.

Antitrust approval

A bill supported by U.S. President Barack Obama to remove an antitrust-law exemption that applies to health insurers was approved with a 406-19 vote in the House, with most Republicans voting in favor. Aides said the Senate is busy working on a broad overhaul of the health care system and likely will not act on the House measure in the near future.

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Just got invited to speak at Loyola Marymount on US-ASEAN investing. Exciting.

The president is putting up an ideological defense for his agenda to his CEOs audience…troublesome.

Hummer going down the same road as Saab?…GM is winding them down.

Do it already…geez

Technical experts across the eurozone are putting together a financial bailout for Greece that would be “much more limited” than the $27 billion that finance ministers discussed earlier this month. At the same time, officials in Germany toned down their once-strident opposition to giving Greece any financial assistance. German officials said they might push for a “quite small” symbolic contribution from all eurozone members to cover any shortfall in Greece’s ability to roll over its debt on the bond market.

Round 2

The U.S. Securities and Exchange Commission is expected to approve a measure to restrict short sales on shares once they have fallen 10%, sources said. Charles Schwab, General Electric and thousands of people sent the SEC a petition urging the agency to adopt a permanent short-selling restriction. Meanwhile, Goldman Sachs, Citadel Investment Group and other hedge funds expressed opposition to such curbs.

Limiting loan to little brothers

Chinese regulators instructed banks to tighten their lending to financing arms of local governments, state media reported. Shanghai Securities News reported that the China Banking Regulatory Commission told banks not to make loans backed only by anticipated future revenue. The policy is intended to prevent loan defaults, according to the newspaper.

Surprisingly

Six metro areas in the U.S. saw their home prices rebound in 2009, according to the Standard & Poor’s/Case-Shiller Home Price Indices. In other areas, the housing market continued to suffer, but the rate of decline slowed down. The biggest winner was San Francisco, where house prices gained 4.8% last year. Other cities that saw an increase include Dallas, San Diego, Denver, Boston and Washington, D.C. Despite the positive data, Patrick Newport, an economist at IHS Global Insight, said he expects prices to head back down after a homebuyers’ tax credit expires and foreclosures accelerate.

The rain starts

Expecting Greece’s cost-cutting measures to drag on the economy and cut loan demand, Fitch Ratings downgraded the nation’s four biggest commercial banks. The credit rating agency downgraded Alpha Bank, EFG Eurobank Ergasias, National Bank of Greece and Piraeus Bank by one step, from BBB-plus to BBB. Fitch gave the banks a “negative” outlook, raising the possibility of further downgrades during the next two years.

How are you going to do this?

A Morgan Stanley reports shows that European banks will need to roll over more than €1 trillion in debt before the end of 2011. Banks will face competition from struggling sovereign states and likely will have to pay a higher cost to raise funds, according to the report. Morgan Stanley advised clients to be prepared as China and the U.S. begin to tighten monetary policy. “The scale of such issuance could raise a significant ‘crowding out’ issue, whereby government bonds suck up the vast majority of capital,” said Graham Secker, an equity strategist at Morgan Stanley.

Still not lending

U.S. bank lending fell 7.5% last year, the Federal Deposit Insurance Corp. said. The $587 billion drop marked the biggest yearly decline since the 1940s. Most of the decrease can be attributed to cutbacks by the biggest banks, said FDIC Chairwoman Sheila Bair.

The downside of living longer

Life expectancy in the richest countries is outpacing their official retirement age. On average, people in the countries of the Organization for Economic Co-operation and Development live the last 19 years of their lives in retirement. “As governments try to tackle huge structural budget deficits, one means of attack is to delay paying state pensions by gently raising the official state-retirement age,” according to The Economist. However, Spain’s plan to raise its retirement age to 67 sparked large, public protests.

On another front

The Conference Board said its consumer-confidence index dropped to 46 this month, compared with a revised 56.5 in January. “More than six months after the recovery started, consumer confidence is still close to a record low,” said Paul Ashworth, senior U.S. economist at Capital Economics. “Without a sustained acceleration in consumption growth, this recovery will eventually fade.”

Picking a fight with Google

Google’s search and advertising businesses in Europe are the subject of a preliminary antitrust inquiry by the European Commission. Issues being investigated include whether the company uses its strength in the European Internet market to artificially inflate advertising rates and whether it manipulates search rankings to put competitors at a disadvantage, Google said.

Something is rising

The default rate on commercial mortgages in the U.S. increased from 1.6% in the fourth quarter of 2008 to 3.8% in the same quarter last year. Real Capital Analytics said the rate could hit 5.4% at the end of 2011. “The level of distress continues to rise irrespective of improving economic trends,” said Sam Chandan, global chief economist at Real Capital.

Going strong for ECB top spot

Axel Weber, president of Germany’s Bundesbank, seems to be the most likely candidate to replace Jean-Claude Trichet as head of the European Central Bank next year, according to The Economist. “He’s no lightweight,” a U.K. academic said, speaking of Weber’s writings on economics. “Supporters say his empirical approach makes Mr. Weber a pragmatic policymaker, even if he is usually branded an inflation hawk,” The Economist notes. “… His strong academic grounding gives Mr. Weber an assurance that others on the ECB’s governing council may lack.”

Saving grace for Japan

Increasing demand in Asia for vehicles, semiconductor products and high-tech consumer goods helped Japan’s export sector expands 40.9% in January compared with the same month last year, the Finance Ministry said. Asian customers are becoming increasingly important for Japan’s recovery. Of $54.4 billion in goods exported, 55% was destined for other Asian markets. Exports to China jumped 79.9%.

Testing the securitization market

Securitizations are expected to indicate how difficult it will be for U.K. lenders to fund their mortgage books during the next couple of years. A residential mortgage-backed securities deal in the U.K. by Banco Santander, widely seen as the first true RMBS since the beginning of the crisis, is expected to provide some clues.

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Pretty typical and anticipated comment, in my opinion. The language is full of measure to give the market some sort of assurance the the tightening is still a bit way in front than originally thought. The new housing data is a bit unnerving but it should not be the only measuring stick for the housing market because it is a small part of the equation. Statistically, it might be insignificant, yet it might be the preview of what’s to come. As the home tax credit and the MBS purchase programs are being wound down, housing might still have long way to go to start trudging along the normal trend line.

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For all of you entrepreneurs out there, check out WED at worldeshipday.com…interesting idea worth supporting