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Mon, 27th March 2017

Anirudh Sethi Report

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Latest Posts

Dijsselbloem calls for ESM to be turned into a European IMF

Jeroen Dijsselbloem is Minister of Finance of the Netherlands and is  president of the Eurogroup (the group of  euro zone finance ministers)

  • “I think it would make a lot of sense for the euro zone bailout fund ESM to be developed into a European IMF in the medium to long term”
  • That would also mean that Greece’s current “troika” of lenders – the European Commission, European Central Bank and the IMF – would need to be broken up in the longer term
  • “The ECB feels increasingly uncomfortable in its troika role, and rightly so I think”
Jeroen Dijsselbloem speaking with the German press –  Frankfurter Allgemeine Zeitung, Reuters have more

Deutsche Bank Prices €8 Billion Stock Offering At 35% Discount

Two weeks after Deutsche Bank first announced it would raise €8 billion in capital as part of a comprehensive restructuring, the German lender on Sunday announced the terms of its upcoming massive dilution.

In a nutshell, Deutsche Bank said it will raise €8 billion ($8.6 billion) by selling stock at a 35% discount to Friday’s closing price in a rights offering. The TERP (Theoretical ex-right price) of €15.79, is based on the last closing price of €17.86. The transaction subscription price is €11.65. The Subscription price represents a 26% discount to TERP based on the March 17 closing price.

The mechanics of the offering: Deutsche Bank will issue 687.5 million new shares at €11.65 apiece, it said in a statement Sunday, in-line with the firm’s March 5 announcement on the planned sale. The offer compares with the stock’s closing price of €17.86 on Friday, and is almost 41% lower than where the stock traded when Bloomberg first broke the news of the imminent capital raising on March 3.

As part of the rights offering, DB shareholders may subscribe for 1 new ordinary share for every 2 existing shares held. The subscription rights expected to be traded on German exchanges March 21-April 4, and on NYSE March 21-31. As Bloomberg adds, the reference price for rights is expected to be approximately €2.07.

USD weakness (small) persists in Asia

Ranges have been small so far for the Asian opening to the forex week.

Net, though, it’s a story of USD weakness, with currencies up pretty much across the board.
Update:
  Cable is the laggard, EUR, CHF, NZD, AUD, yen all a little stronger, GBP/USD barely changed

David Stockman Offers “More Proof Of Janet Yellen’s Idiocy”

During the last 129 months, the Fed has held 86 meetings. On 83 of those occasions it either cut rates or left them unchanged.

So you can perhaps understand why Wednesday’s completely expected (for the last three weeks!) 25 bips left the day traders nonplussed. The Dow rallied over 100 points that day.

Traders understandably believe that this monetary farce can continue indefinitely, and that our Keynesian school marm’s post-meeting presser was evidence that the Fed is still their friend.

No it isn’t!

Our monetary politburo has expanded its balance sheet by a lunatic 22X during the last three decades and in the process has systematically falsified financial asset prices and birthed a mutant debt-fueled of simulacrum of prosperity.

But once it begins to withdraw substantial amounts of cash from the canyons of Wall Street as per its newly reaffirmed “normalization” policy, the whole house of cards is destined to collapse.

There will be a stock market implosion soon, and that will in turn generate panic in the C-suites as the value of stock options vanish. Like in the fall of 2008 — except on an even more sweeping and long-lasting scale — corporate America will desperately unload inventories, workers and assets to appease the robo-machines of Wall Street.

But there is nothing left to brake the casino’s fall.

With principal set to testify, scandal threatens to trip up Abe

The embattled chief of a nationalist school operator in Osaka will testify in parliament this week, raising the specter of an ever-widening scandal entangling Prime Minister Shinzo Abe and other ruling party lawmakers.

Yasunori Kagoike, who plans to resign as principal of Moritomo Gakuen, has been summoned to the Diet to give sworn testimony on a shady land deal on Thursday.

 The central controversy involves the sale of a 8,770-sq.-meter plot in the Osaka Prefectural city of Toyonaka, appraised at 956 million yen ($8.48 million). The Finance Ministry’s regional bureau sold the land to the school operator at a steep discount of 134 million yen, citing the cost of waste cleanup at the site, estimated at around 800 million yen. But the location of debris said to be buried in the lot has not be confirmed.

Opposition party Diet members say ruling Liberal Democratic Party lawmakers applied pressure to get Moritomo Gakuen the land at a cut-rate price. If Kagoike testifies that he gave cash gifts to lawmakers in hopes of winning a favorable deal or that politicians applied pressure on behalf of the school, the implicated lawmakers could be in trouble for using political clout for a private transaction.

The school operator has been soliciting donations by touting that the planned school, whose permit application has since been rescinded, would be named after the current prime minister. The school also said Abe’s wife, Akie, would serve as honorary principal.

G20 trade wording considered a setback for export champion Germany

The failure of the world’s financial leaders to agree on resisting protectionism and support free trade marks a setback in the G20 process and poses a risk for growth of export-driven economies such as host Germany, economists said on Sunday.

Acquiescing to an increasingly protectionist United States after a two-day meeting in the German town of Baden-Baden, the finance ministers and central bank governors of the 20 biggest economies dropped a pledge to keep global trade free and open.

Instead, they only made a token reference to trade in their main communique by saying the G20 would work together to strengthen the contribution of trade to their economies.

“The weak wording on trade is a defeat for the German G20 presidency,” Ifo economist Gabriel Felbermayr told Reuters.

“This is particularly true in the light of the fact that Germany is one of the world’s strongest export nations and relies on open markets to maintain its prosperity like hardly any other country.”