World Markets Simplified

 
By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010). Jointly posted with Roubini Global Economics

The half-life of solutions to Europe's debt problem is getting ever shorter.

Recent hopes have relied on the ostensible success of the European Central Bank's ("ECB") LTRO – Long Term Refinancing Operation, more appropriately termed the Lourdes Treatment and Resuscitation Option. In December 2011 and February 2012, the ECB offered unlimited financing to European banks at 1% for 3 years, replacing a previous 13-month program. Banks drew over Euro 1 trillion under the facility – €489 billion in the first round and €529.5 billion in the second. Participation amongst European banks was widespread, especially in the second round where around 800 banks used the facility.

The funds borrowed were used to purchase government bonds, retire or repay existing more expensive borrowings and surplus funds were redeposited with the ECB. The first entailed banks borrowing at 1% purchasing higher yielding sovereign debt, such as Spanish and Italian bonds that paid 5-6%. This allowed banks to earn profits from an officially sanctioned carry trade – known as the Sarko trade after the French President.

The LTRO provided finance for both beleaguered sovereigns and banks, which need to raise around €1.9 trillion in 2012. It helped reduce interest rates for countries like Spain and Italy. It also helped banks covertly build-up capital, via the profits earned through the spread between the cost of ECB borrowings and the return available on sovereign bonds.

The LTRO was very clever, effectively monetising debt (printing money) without breaching European Treaties or the ECB's charter.

The sheer weight of money – at one €500 note per second it would take 63 ½ years count €1 trillion- proved successful. Financial market sentiment was overwhelmingly positive feeding a large rally in global stock markets and other risky assets.

As subsequent events have exposed, there were always reasons to be cautious.

The LTRO facility is for 3 years. It assumes that the conditions will normalise within that period. It is not clear what happens if that is not the case.

Economist Walter Bagehot advised that in a crisis central banks should lend freely but at a penalty rate and secured by good collateral. The ECB does not appear to have quite understood Bagehot's commandment. The rate is below market rates, amounting to a subsidy to banks. The ECB and Euro-Zone central banks have loosened standards, agreeing to lend against all manner of collateral. In effect, the ECB is now functioning as a financial institution, assuming significant credit and interest rate risks on its loans.

If the European Financial Stability Fund ("EFSF") was a Collateralised Debt Obligation, the ECB increasingly resembles a highly leveraged bank.

The ECB balance sheet is now around €3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012. It is supported by it own capital (scheduled to increase to €10 billion) and the capital of Euro-Zone central banks (€80 billion). This equates to a leverage of around 38 times.

Critically, the LTRO cannot address fundamental issues.

It does not reduce the level of debt in problem countries, merely finances them in the short-run. Europe is relying on its austerity program to reduce debt. As Greece demonstrated and Ireland, Portugal, Spain and Italy are demonstrating, massive fiscal tightening when combined with private sector reduction in debt merely puts the economy into recession. As public finance deteriorate rather than improve, it results in an increase not decrease in public debt.

Ultimately, it may be necessary to go Greek. Debt restructuring may be needed to achieve the required reduction in the public borrowings for many countries. Interestingly, financial markets price the risk of a Spanish debt restructuring at around 30-35%.

The LTRO does not improve the cost or availability of funding for the relevant countries beyond an immediate short term fix..

Government bond purchases financed by the LTRO artificially decreased the interest rates for countries, such as Spain and Italy. Unless additional rounds of LTRO are offered, interest rates are likely to return to market levels.

The real increase in liquidity available to support sovereign borrowings was lower than €1 trillion. Perhaps only one third of the LTRO loans and maybe as little as €115 billion were directed to this purpose. Banks used the bulk of funds to repay their own borrowings. As debt becomes due for repayment through the year, banks may need to sell sovereign bonds purchased with the funds drawn under the LTRO. Unless market conditions normalise and banks regain access to normal funding quickly, this will place increasing pressure on sovereign funding and its cost.

With European countries facing heavy refinancing programs in 2012 and beyond, the ability to raise funds at reasonable rates remains important. Existing bailout programs assume countries like Portugal and Ireland will be able to resume financing in money markets normally from 2013.

Events complicate the ongoing commercial financing of European banks and sovereigns. The need for collateral to support ECB funding makes other investors de facto subordinated lenders, reducing their willingness to lend or increasing the cost. In the Greek restructuring, European Central Banks and official institutions were exempted by retrospective legislation from loss while other investors suffered 75% writedowns. This has reduced investor willingness to finance countries considered troubled.

European banks already have large exposures to sovereign debt, which has increased since the start of the LTRO. Spanish banks are thought to have purchased around €90 billion, a jump of around 26% to €220 billion. Italian banks are thought to have purchased €50 billion, a jump of 31% to €270 billion.

Similar rise in government bond holding have occurred in Portugal and Ireland. As interest rates on these bonds have increased, buyers now have large unrealised mark-to-market losses on these holdings.

As with the sovereigns, the LTRO does not solve the longer term problems of the solvency or funding of the banks, which now remain heavily dependent on the largesse of the central banks. It is government sponsored Ponzi scheme where weak banks are supporting weak sovereigns who in turn are standing behind the banks – a process which can be best described as two drowning people clinging to each other for mutual support.

The LTRO has not materially increased the supply of credit to individual and businesses. The money is being used by banks to finance themselves as they reduce borrowings by selling off assets to reduce dependence on volatile funding markets. The LTRO does little to promote desperately needed economic growth in the Euro-Zone.

The initial euphoria faded as a number of concerns re-emerged, manifesting themselves in the form of increasing rates on Spanish and Italian debt which now hover around the key level of 6.00% per annum.

Increasingly poor economic growth figures from Europe pointed to a lack of growth and progress on debt reduction.

Attempts to reduce Spain's deficit has proved problematic. Both Spain and Italy have deferred balancing their budget in the face of a deteriorating economic outlook. It is unclear which markets fear most -Spain and Italy not achieving its targets through savage spending cuts resulting in higher debt or achieving its target putting their economies into an even deeper recession and increasing debt.

The difficulties faced by Spanish Prime Minister Mariano Rajoy and Italian Prime Minister Mario Monti implementing labour reforms have highlighted the resistance to structural change. Increasing protests in many countries point to the political difficulty in implementing the agreed austerity measures.

The problems of the banking system have resurfaced. Spanish bank bad and doubtful debts have increased, as the Iberian property bubble deflates.

Increased reliance by Spanish and Italian banks on financing from central banks has heightened concern. Spanish bank borrowings from the ECB increased to over €300 billion in March from €170 billion in February. Lending to Spanish banks now accounts for nearly 30% of total ECB lending. Italian banks have also been heavy borrowers, a reminder of the linkage between banks and their sovereigns.

Reluctance to increase the inadequate European firewall sufficiently to deal with potential problems means policy options are limited. At around €500 billion in available funds, the bailout fund is short of the €1 trillion sought by the International Monetary Fund and G-20 or €2-3 trillion thought necessary by financial markets. German leaders have repeated their unwillingness to increase the fund to the necessary size, arguing, probably correctly, that no firewall will be adequate.

Poorly judged and ill-timed comments by ECB President Draghi about the absence of need for further LTRO funding and planning for an exit drew attention to the fragility of the position and ongoing risks. The comments were driven by Bundesbank unease at the ECB's policy. The market reaction forced Mario Draghi to retract comments about an early exit from emergency funding. As rates continued to rise, Benoit Coeure, the French ECB board member, promoted a new round of direct purchases of Spanish bonds to reduce yields.

The failure of the LTRO to decisively solve European problems is unsurprising. Confidential analyses prepared by European Union officials and distributed to ministers meeting at the Copenhagen meeting in March 2012 concluded that the €1 trillion in loans was a "reprieve", rather than a solution.

Rather than take the time afforded to move on other fronts, European leaders reverted to type. Spanish Finance Minister Luis de Guindos opined that: "We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union". It was eerily reminiscent of his predecessor Elena Salgado who almost exactly one year earlier on 11 April 2011 said: "I do not see any risk of contagion. We are totally out of this". The optimism was echoed by French President Nicolas Sarkozy who was confident that the Euro-Zone had "turned the page". Italian Prime Minster Mario Monti stated that the "financial aspect" of the crisis had ended.

The European debt crisis is not over. Fundamental problems – debt levels, trade imbalances, problems of the banking sectors, required structural reforms, employment and economic growth – remain.

Beyond the German favoured remedy of asphyxiating austerity to either cure or kill the patient, Europe is rapidly running out of ideas and time to deal with the issues. As the real economy stalls and debt problems continue, the most likely policy actions may come from the ECB – an interest rate cut to near zero and further liquidity support, perhaps even full-scale quantitative easing. Bailout funds may be channelled to recapitalise Spanish banks, as means of helping Spain without resort to a full-blown bailout package.

It is doubtful whether any of these steps will work.

European politicians and citizens want a quick return to a period Spaniards now refer to ascuando pensábamos que éramos ricos which translated into "when we thought we were rich". Official policies and action are focused on deferring rather than dealing with the problem. Unfortunately, that means the inevitability of meeting the same problem somewhere down the road.

John Maynard Keynes observed in The Economic Consequences of the Peace that each action designed to bring closure to one crisis sows the seeds of greater economic, political and social problems. Europe is living the truth of that statement one day at a time.

 
We all know that Wall Street firms are often forward thinkers when it comes to product innovation and investment strategies. But it's unlikely that even they could have predicted the ease with which client information would flow thanks to the widely-used social media applications available today.

However, the issue of who owns client information is far from new. In 2004, a few of the larger broker/dealers in the United States came together to commonly address the kinds of basic client information registered representatives were allowed to take with them when moving between signatory firms. Known as the "Protocol for Broker Recruiting," here's what it covers:

When Registered Representatives move from one firm to another and both firms are signatories to this protocol, they may take only the following account information: client name, address, phone number, email address, and account title of the client that they serviced while at the firm ("the Client Information") and are prohibited from taking any other documents or information.

The idea is that the agreement — when properly executed by the departing employee and his or her new firm — reduces the likelihood of litigation by recognizing that departing employees are entitled to take limited client information to their new firms.

According to RIABiz, nearly 800 firms remain signatory firms of the agreement as of February 2012. The current list includes many advisory firms that are not directly affiliated with a broker.

Read the full article at

http://blogs.cfainstitute.org/marketintegrity/2012/04/30/who-owns-social-media-contacts-investment-professionals-or-employers/

 
ROCKET STOCK: TECHTRAN POLYLENSES LTD (BSE Code : 523455) at 23/- Target 50/- & 135/-

STOCK : TECHTRAN POLYLENSES LTD Trading in BSE CODE : 523455.

Now It's Bio Pharma Company

Another NATCO Pharma (Recommend at 40/- now 435/-); Same like this Techtran also move to 500/- 1 to 3 years time.

CMP : 23/-

Target : 50/- to 135/- in Short term and Medium terms For Long Term will go 500/- Like Natco Pharma.

Equity : 14 Cr

Face Value : 10/-

Promoters Holding : 38%

Techtran Poly Takeover by Mr Jayaram Chigurupati who was the promoter of Zenotech Lab Ltd. And earlier was the managing director of a subsidiary of Dr Reddy's.

Jayaram is Merged his Multi National company Hemarus Locating India and USA with Techtran Poly. Hemarus is a specialty plasma derived biopharmaceuticals company. (http://hemarus.co.in/)

Profits For 2011-12

First Quarter Net Profit was 1.5 Cr

Second Quarter was 1.7 Cr

Third Quarter was 1 Cr

Fourth Quarter expecting 1.9 Cr

So Total EPS of 20011-12 nearly 5/- above.

Expecting EPS for 2012- 13 is 10/-

Expecting EPS for 2013-14 is 23/-

Based on this Share will go 135/- 350/- and 500/- in 2 to 3 years time.

Techtran Polylenses Ltd is engaged in the business of Manufacture & Sale of Hard Resin Plastic Ophthalmic Lenses. It is the largest producer of plastic lenses in India and is the only ISO 9002 certified, Ophthalmic lens manufacturing unit in the country, offering full range of lenses. The plant is located in Andhra Pradesh and the total capacity is about five million lenses per annum

Recently (1 year) Company Changed Management. Takeover by Big NRI has been acquired by Mr Jayaram Chigurupati who was the promoter of Zenotech Lab Ltd. Jayaram earlier was the managing director of a subsidiary of Dr Reddy's and he was largely responsible for establishing the presence of Dr Reddy's in a number of emerging markets. Thereafter he floated the Zenotech Lab and then he sold Zenotech Lab to Ranbaxy Ltd and he also sold his own personal stake in Zenotech Lab to Ranbaxy.He is focussing bigtime now on techtran poly and aims to make it a company to reckon for in the industry it operates in.

Jayaram is Merged his company Hemarus with Techtran Poly. Hemarus is a specialty plasma derived biopharmaceuticals company (http://hemarus.co.in/) committed to innovate, develop and commercialize high-quality plasma derivatives to save lives and enhance quality of life for people with bleeding disorders. Hemarus operates through an integrated platform of safe and reliable collection of high-quality human plasma, a state-of-the-art fractionation facility capable of producing life-saving therapies in conformance to most stringent international standards, supported by a cross functional team of scientists

Manufacturing Facilities :
Hemarus has set up a state-of-the-art US FDA approvable cGMP integrated Plasma fractionation facility of 36,000 square feet of infrastructure at Hyderabad with a capacity to process 120,000 litres of plasma annually

The facility is the first of its kind in India that has been designed to use a complete end-to-end chromatography based process for production of plasma derivatives. Currently the majority of the life-saving plasma product requirement in India is met through imports. High quality plasma derivatives manufactured in our facility shall bridge this gap besides also being marketed globally.

R & D
Keeping in view Hemarus's commitment to innovate for life, the R&D team continuously strives to develop processes to produce the highest quality products using most advanced state-of-the-art technologies in the field. Plasma derivatives are manufactured using end-to-end advanced chromatography based processes as opposed to the older technology using Cohn's precipitation techniques. Viral safety is ensured by the incorporation of multiple orthogonal viral inactivation and removal steps in the process. The plasma derivatives manufactured by Hemarus conforms or exceed the most stringent international standards for safety and efficacy of plasma derivatives.

Scientists at Hemarus are actively engaged in a wide variety of projects ranging from development of new plasma products, new formulations to identifying new targets for therapeutic intervention.

In this Market Correction Time Buy Good Fundamental and Multi Return Stocks Like Techtran Polylences Ltd and hold it will get good return No risk at all like this stocks.

Techtran Polylences Ltd having Lot Expansion Plans in Future. Its a Multibagger stock. Just buy and hold 1 year will get 10 times Return like NATCO Pharma Ltd (I have Recommended at 40/- Now 435/-) and SE Investment (This Stock I have Recommended at 175/- levels after that reached 1200/- levels including Bonus and Split).

Positive Points for this stock for Up moving:
1) Company focusing on business segments – Bio Pharma, Company Circle people. Mutual Funds and Operators are accumulating at current price. Because Company Stock Good Value to buy at 23/- Good Profit making company and Good Assets.

 
Global economic imbalances have played a critical role in the development of the financial crisis, and financial markets are now central to bring about an economic rebalancing of the world as argued in a recent note by Ramin Toloui of PIMCO, the well known asset manager. To summarise:

-The nexus between global economic rebalancing and global portfolio rebalancing is key to bringing about stability in markets and economies.

Delta Air Lines Inc will buy a Pennsylvania oil refinery from ConocoPhillips for $150 million, an audacious bid to save money on fuel costs by investing in a sector shunned by many of the biggest oil firms.

Atlanta-based Delta said the first ever purchase of a refinery by an airline would allow it to cut $300 million annually from jet fuel costs, which reached $12 billion last year. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80 percent of its fuel needs in the United States.

The deal for the idled 185,000 barrel per day Trainer, Pa., refinery, which has puzzled analysts since it first surfaced last month, will come as some relief to politicians and officials, who had feared thousands of lost jobs and a potential summer spike in fuel costs if the plant was shut permanently.

And while the initial investment is no more than a wide-body jet liner, even including an additional $100 million to upgrade the plant to maximise jet fuel production, it will put Delta in the unique position of hoping that the recent rebound in refinery profit margins -- normally an indication of added costs for a fuel consumer -- doesn't prove too fleeting.

While Delta will remain hostage to fluctuating crude oil costs, the facility would enable it to save on the cost of refining a barrel of jet fuel, which is currently more than $2 billion a year for Delta and has been rising in the wake of U.S. refinery shutdowns, said Delta Chief Executive Richard Anderson.

"What we're tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively," Anderson told reporters during a phone briefing. "It's the fastest single growing cost in our book of expense at Delta."

As expected, Delta will effectively outsource all the oil trading requirements for the refinery, an increasingly frequent arrangement for smaller or less-experienced operators.

But instead of JP Morgan , which had been initially named as the trader last month, oil major BP will supply crude oil to be refined at the plant under a three-year agreement. And BP and former refinery owner Phillips 66 will get a share of the gasoline, diesel and refined fuel to sell, in exchange for supplying Delta with jet fuel in other locations.

It will be a familiar role for BP, which owned the plant in the 1990s before selling it to independent refiner Tosco in 1996 for $59 million, coupled with some additoinal assets. Tosco later merged with Phillips, which then merged with Conoco.

The refinery is expected to resume operations in the third quarter, Delta said, about a year after ConocoPhillips idled the plant as rising imported crude oil costs, a collapse in demand and tough competition from foreign refiners crushed margins.

Delta said the deal will include pipelines and other assets that will provide access to the delivery network for jet fuel reaching its Northeast operations, including its increasingly important hubs at New York's LaGuardia and JFK airports.

Fuel costs pushed major U.S. airlines into the red for the first quarter, although oil prices have since eased from March peaks. U.S. crude traded around $105 a barrel on Monday, while Brent crude was about $119 a barrel.

CAUTIOUS RESPONSE
The deal offers a reprieve to one of two key refineries that had been earmarked for permanent closure this year unless buyers were found. Delta said it would get $30 million in state government assistance on the deal.

"This announcement means the preservation of more than 5,000 jobs at the Trainer facility and in related industries," Pennsylvania Gov. Tom Corbett said in a statement.

But at the same time it will raise questions among oil sector analysts about whether the rush to revive one of the half-dozen East Coast facilities that has been shut in recent years may be premature given lingering questions over whether these plants can compete without access to cheap crude.

Profit margins in April rose to their highest since 2008, according to a Credit Suisse analysis, and are up more than 60 percent from the average of last year as the planned closure of some 1.5 million bpd, including two refineries in the Carribean, threatened to cut East Coast capacity to just a third of its peak in 2008. The cuts are deeper when factoring in Europe.

But in addition to Trainer, private equity fund The Carlyle Group is in talks to buy the biggest refinery in Philadelphia, potentially pulling another plant back from the brink.

The analysts at Credit Suisse say another 2.6 million bpd of refining capacity across the globe must be shut "to hit the "sweet spot" utilization level of 87 percent".

The Delta refinery would be run by a leadership team headed by Jeffrey Warmann, who last ran Murphy Oil USA's Meraux, Louisiana, refinery.

East Coast refineries, among the oldest and least advanced in the country, have been hammered by a series of bad turns: the 2008 recession that cut demand; the rapid injection of ethanol into the U.S. gasoline mix; tougher environmental norms; and the rise of new, more sophisticated plants in India and elsewhere.

The final blow for many has been the surge in cheap shale oil production from North Dakota and West Texas, which has handed a bounty of cut-priced crude to Midwest and Gulf rivals who are now running their plants flat-out.

WILL IT WORK?
Robert Mann, an airline consultant in Port Washington, New York, said Delta's statement did not address how it will handle exposure to fluctuations in energy prices or refined product costs or the actual refining process costs.

"It's clearly a very innovative approach, but I think it will be a number of years before we know whether it actually works out," Mann said.

Delta is the world's second-largest air carrier, behind United Continental Holdings . The airline expects the purchase to add to its earnings in the first year of operations.

Delta's Monroe Energy LLC unit expects to close the purchase in the first half. JP Morgan Chaseadvised it in the purchase, Delta said.

Delta shares were little changed in extended trading after the announcement, which was widely expected.

( Source: Reuters )
..................

Plants do it right. They’ve evolved to use the sun as their main energy source, converting solar energy into chemical energy in a process known as photosynthesis. The result, finely honed over billions of years, is a fast, efficient system that splits water (H2O) up into its component parts. Such a method would be the ideal clean-energy technology, using the sun’s rays to convert water into oxygen and hydrogen, the cleanest natural gas. Scientists have been trying to mimic the system for decades, but they always fell short. It was nearly impossible to split water fast enough for the process to be efficient.

Now, a group of researchers at the Royal Institute of Technology in Stockholm, Sweden, has developed a method that, for the first time, approaches speeds that approximate nature’s own process. The sticking point has always been finding the right catalyst, a molecule that could speed up the chemical reaction in just the right way.Splitting water into hydrogen and oxygen isn’t easy--it needs high energy.

“Splitting water into hydrogen and oxygen isn’t easy--it needs high energy,” says Licheng Sun, the organic chemist who led the research. The chemical reactions that are required need chemical prompting, and the catalysts that had been created just weren’t efficient enough. “The reported catalysts are too slow. Two hundred orders of magnitude slower than nature, and they couldn’t speed up the process enough for efficient splitting.”

Sun and his colleagues developed a catalyst that, at least when put into solution, split water at close to the same pace as that found in grass and leaves. They’re now working to integrate it into a device that can be commercialized. “I have been working in the field for more than 20 years, and on this catalyst for five years,” Sun says. “This can replace fossil fuels. We don’t need coal, petroleum, or natural gas. We’re only keeping them for energy. But we can use sunlight to drive the whole world.”

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