Biggest Elephant of Them All

Bonds To Profit Amid Greece's Fallout

2012-02-16T07:13:00.001-08:00

The burning question on Greece (will they or won't they) has been answered with Parliamentarians in Athens agreeing on a brutal round of cost cutting (two-thirds of Parliament agreeing) to appease the international paymasters holding the strings to a €130 billion bailout.

The choices available to the Greeks are unenviable in spite of the ominous rumblings on the street (34 buildings alight and further 150 looted). However, they must continue on this course since the alternative, a forced conversion into drachma, will be significantly more disruptive for Greek recovery. Furthermore, they could potentially be forced out of international markets for decades, though investors' collective memory is mercifully short.

Additionally, Greece remains less self sufficient than other eurozone countries by way of industry, relying heavily on tourism (indeed tourism and shipping contribute 70% of Greek GDP) to counter significant imports in manufacturing and fuel, Germany being their largest counterparty.

A weak drachma, in the aftermath of an exit of the euro, may then mean dire consequences for Greece, especially if it will be unable to afford vital imports, and furthermore, if domestic industry is unable to meet the demands of a rising population. Indeed Italy could theoretically leave the euro, and withstand the ramifications of pariah status amongst trading partners, given their strong manufacturing base. Self sufficiency means they could well dictate terms to the Eurozone about their participation but that is a discussion for another day.

The Greek technocrat leaders are aware of the examples of hyperinflation and a weak currency (Weimer Republic in Germany and, in modern times, Zimbabwe) and therefore have to live with the forced bill through and deal with the vexed public as well. Additionally, both Germany and France have probably chanced too much already on the survival of the eurozone and in particular with the recent Long-Term Refinancing Operation (LTRO), a Greek withdrawal will be a step backward they can ill afford.

With that in mind, I have been scouring through for Greek exposure within credit and in spite of the supposed binary nature of events (a forced redenomination back into Drachma, will render most of these euro-denominated notes useless), I do think if the base thesis is accepted and Greece remains in the euro, yield levels remain incredibly attractive.

If you start at ground zero -- Greek government debt -- this has to be tempered with expectation of PSI, which has still not been agreed upon. It does look likely that investors will eventually have to take a hit of half their bond value, so common sense dictates favoring maturities with pricing <50 cash price.

The 10-year and 20-year at m-h 20s pricing are therefore much more compelling and have decent convexity relative to the GGB 4.3 03/20/12, (GR0110021236) currently offered at 43. The latter will most likely be included in the PSI, so offers lower convexity in comparison to the more competitively priced GGB 0 04/17 (GR0528002315), currently offered at 24, and the 10-year, GGB 4.5.9 10/22 (GR0133002155) at 26 and 20 years, GGB 2.3 07/30 (GR0338002547) at 29.

However, the most interesting trade remains in Greek financials, and it's a slight surprise that not much discussion has been had on secondary levels in outstanding bank debt. Under the EU stress testing for European banks, perhaps surprisingly 4 out of the 6 Greek banks came above the 5% threshold (with EFG just under at 4.9%).

Unfortunately, National Bank of Greek, the strongest bank in the test, recently tendered its outstanding Tier 1 bonds and single outstanding covered bond (around 10-15 points against secondary levels), so is less interesting. My favorites are Alpha Tier 1 (DE000A0DX3M2 ALPHA 6 PERPs offered at 28) and Pireaus Tier 1 (TPEIRFloat 07/16 offered at 46).

Secured debt is more difficult to come by, but EFG has a covered bond: XS0438753294 ETEGA 3.875 '16 at cash price 70. The collateral suggests strong mortgage performance in their pools, furthermore with low delinquencies and having first lien on their residential pool. This should make these bonds reasonably attractive.

Interestingly, following a call with EFG investor relations, they pointed out an outstanding RMBS transaction, originated by them, THEMELION (THEME 4 A XS0305113523) with well over €1 billion issued. EFG report very strong underlying performance, with minimal amount of repossessions and losses in the securitized pool, with an indexed LTV of 65%. This seems less compelling, given the lack of pricing sources (Bloomberg generic suggests a price of 60), and with a FRN coupon, and at 4 year maturity, suggests a yield of around 10%. Given high unemployment, there is also doubt as to whether performance can remain this resilient over the course of the next few years.

Obviously, it is important to stress the binary nature of the trade (though I would argue the base case is Greece remaining within the eurozone). If Greece does find itself out of the euro, forced redenomination into drachma will means a lot of foreign investors will be left with useless paper. It is why we prefer the lower dollar- and euro-priced bonds. It is why we prefer the lower cash-priced bonds (GGB 10 and 20 year, as well as the Alpha tier 1, all offered under 30 cash price).

Another personal objection I have with the trade is perhaps more personal. One of my favorite movies, Inside Man, had a stereotypical British banker play the villain. His fortune was made through the dealing with the Nazis, and one of his lines stick: "When there is blood in the streets, there is money." Given the fact that these cuts will be particularly brutal on the Greek masses, and the riots will play out for months on our television channels, there is something discomfiting about profiting in this Greek tragedy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

http://seekingalpha.com/article/369941-bonds-to-profit-amid-greece-s-fallout

Global Strategists Abandoning Bearish Views After Missing Rally

2012-02-02T04:18:00.001-08:00

Strategists at the biggest banks are capitulating on their bearish forecasts after the best start to a year for global stocks since 1994 and gains of more than 7 percent in emerging-market currencies.

http://www.bloomberg.com/news/2012-02-01/global-strategists-abandoning-bearish-views-after-missing-rally.html

January 2012 update - Sustainable rally? And Current Account Reward at 0.5% interest rate; no thanks mate, Ill just buy Italy!

2012-01-29T08:33:00.001-08:00

Dear all,

Following last month's Christmas special and despite a somewhat desultory January (as the month usually tends to be as we adjust to the new year and new tempo) there has been a sustained improvement in the wider markets. What was meant to be a short recap of my thoughts below on where we stand in the global economy and the European credit space has spiralled into a much denser picture that touches on the complex underpinning of the ongoing Sovereign issue in the eurozone and whether this mini-recovery as spurred on somewhat by the LTRO (Long term refinance option) by the ECB can in fact take on a more permanent picture and lift us collectively out of this market uncertainty.

I've opted to retain that initial dense stream to reflect in part that the picture remains very myriad, conditional and complex but even so these glimmers of recovery should not be ignored and instead value-seeking opportunities remain as compelling as ever. For the astute market observer must realise the beyond the gloom and doom there remains, as always, the sprouts that will redefine the next & ongoing market cycle.

Additionally, the current low rate environment is excellent if you are planning to get a mortgage, but what about all that cash festering away in a bank account, yielding almost naught. Some ideas on where to place your cash, at 5+% yield. In the current environment, with rates likely to be stuck here for 2-3 years, wealth creation can be a lot more simple through intelligent bond investing.

Enjoy the below and until next time have an excellent month as always ideas, questions and feedback always welcome.

Sincerely,

Thank you for listening; Stay Hungry Stay Foolish

Z.i.L

From the Desk of Zachary I. Latif

What a difference, a year makes! 2012 started with a convincing rally which has at least for now, batted away questions on sustainability of the PIIGS within the € project and while any bullish stance should be tempered, it is difficult to see a halt to the current recovery. The LTRO was mentioned in the last piece as a potential game changer, and the increased liquidity through this 3 year funding program has been a major catalyst for the recent risk asset rally. The "Black Swan" event of a complete market shut down with bank failures and a euro break-up were easy to visualise late in 2011; but the fact that the ECB has decided to embrace fiscal support and set off on a 3 year bank funding mission, has at least taken the unthinkable off the table.

With liquidity no longer a concern, capital raising remains the biggest challenge for European banks (the EBA has told banks to raise $150bn by Jun'12), yet for the discerning investor, this can represent the most interesting opportunity. Given how distressed secondary levels had become on Bank paper (across all spectrums: unsecured, covered and asset backed); the easiest way for banks to improve capital ratios is to launch buy backs (tenders) for these products. Its the perfect zero sum game, normally the premium over current secondary levels make it attractive for investors to tender their bonds to the originating bank, while for the bank its an easy get fix toimprove their core Tier 1 ratio. Even National Bank of Greece launched a tender on their covered bond issuance, almost 15 points higher than trading levels at the time. I suspect a number of peripheral banks, with pressing capital short falls, will continue this theme in the next few months andidentifying secondary paper which remain lucrative to tender back will be an interesting short term trade.

Finally the perfect storm for a sustained rally would not be complete without the Fed coming out with a statementprolongimg super low interest rates for at least another year and a half. Great for long term loans and perhaps even stimulating fixed investments, but bad for deposit holders. And this is where I think the opportunity within credit becomes so interesting for any discerning investor. One of my greatest bug bears has been the number of "unsophisticated" investors within equity markets (in spite of the greater volatility relative to credit), but now with interest rates so low, surely it is time for a number of smaller investors to start investing in high coupon investment grade credit. Without taking significant risk, yields of 4-7% are very achievable on benchmark liquid name,and surely that's a more interesting proposition than 1.5% at Natwest Advantage Current Account. If one were of the more discerning character,financials have very interesting risk-return profile. One of my favourites, Lloyds 7.5884% ECN note, currently trading at 85 cash price, implying a yield of around 10%. The risks associated with ECN's has reduced substantially over the last few months, and expect Lloyds to call this well before maturity date; so yield level can be a lot more compelling.

Or why not look at Sovereign debt? We discussed how Italian Government yields had hit a peak of 7% last year, and currently at 6%, with the threat of implosion now a mere dot in the horizon and a Greek debt deal nearing completion tomorrow evening, can this not equally be a nice coupon trade, while at the same time, a very compelling story to continue to grind in.

My dark horse favourite is Ireland, their response to the sovereign crisis has been the most credible (Michael Lewis's attempt notwithstanding) and the current sovereign/ financial rally is fully justified, given the fact that their medium term debt sustainability is credible. They have been the most active in announcing (and more importantly implementing) austerity measures, their economy remains significantly more competitive to other peripheral (or even main stream) European nations and with 10 year yields around 10%, this will continue to grind tighter based on positive economic growth this year. House price correction remains a concern but there is a lot to like about the Celtic Tigers.

Fundamentally I remain bullish going into the short term, it feels a lot like early 2009 soon after Lehman's collapse when the US announced TARP and other liquidity measures, which led to a furious rally in risk assets. This time, the ECB has reluctantly taken the mantle and while one can argue the systemic risks remain, the liquidity measures announced will once again lead to a sustained (and since this is Europe, I suspect slightly more subdued) rally. Its time to pile into risk.

www.hotelrafayel.com

2012 Outlook on Christmas Day

2011-12-25T15:32:00.000-08:00

Dear all,

I hope you have had a Happy Christmas. Below I share my thoughts on the year past and opportunities for the New Year ahead. If historians were to look back at 2011 they may note the insipid equity markets and dismiss it as a year of the “Lost Decade”.

They may further establish that neither indolent Governments nor aggressive Main Street, i.e. the 99%, fully appreciated the machinations of Wall Street and its will to survive & prosper.

Despite an increasingly uncertain future and a transformational decade (bringing to mind the curse “May you live in Interesting times”), returns remain sufficiently compelling that in spite of the vast challenges there remain incredible opportunities waiting to be exploited by the discerning investor. Importantly these opportunities no longer lie only in frontier markets but rather in our very own backyards and in markets previously deemed uninteresting.

Francis Fukuyuma predicted the “End of History” at the end of the Cold War; instead different clashes, ideologies have kick-started another global revolution whose consequences we have yet to experience let alone understand.

Sincerely,

Z.i.L

From the Desk of Zachary I. Latif

The violence of the market correction has created dislocations in certain sectors & alpha-generated returns are possible in secured assets, high-yield & financials across the credit spectrum selectively.

Investors back in the 1980s were known as "Yield Pigs" because of their relentless pursuit for yield as rates dropped from double-digits to low singles. Investors sacrificed credit quality for high yield and it led to the artificial bubble in the Junk bond market, which collapsed spectacularly later that decade. In a comparatively similar (indeed UST's and Gilts are now at record lows!) rate environment, the hunt for Alpha remains the same but the unflattering term PIGS is now used to categorise perhapsthe most lucrative yet volatile part of the investment market; ie the European sovereign space!

Perhaps the biggest shock was when Italian 5yr spreads went north of 7% and a spate of ECB leaders just watched terrified in impotence. Does 7% for 5yr Italian paper however really capture the right risk reward for what remains the third largest bond market in the market and what does it say about the € project, when the UK Gilts for 30yr duration trades inside of 3% against that?

The primary generators of wealth creation in the West over the last 2 centuries, the banks were despised for their inability to de-lever successfully and still required significant capital from over-levered sovereigns, who were also under fire from consistent investor pressure. However these battle scarred, brow beaten investors are no longer focused on fundamental value and there isopportunity in a value-driven approach in credit, in light of a market that is pricing in nearly a 50% default rate in Crossover (an index of high yield European credit names).

It proved to be a year of 2 halves; the first characterised by a rapid surge towards a normalised pre-07 world, while the second derailed on the back of issues in the continent and slowdown fear in the UK-US economic zone. Investors tend to have the ability to embrace trends, and the shift continued towards EM; in Asia, the Arab spring revolutions capturing popular imaginations globally, while Africa remained a lucrative after-thought.

The € project on the brink of collapse has been saved from the embers of extinction thanks in main to surreptitious quantitative easing introduced by the ECB through the LTRO program & consequently support in the covered bond and various other secured assets. Covered bonds now yielding north of double digit returns and secured on first lien basis to a bank’s prime real estate portfolio should be top of any discerning value driven investor.

Perhaps it is fitting to end with this warning that systemic risk remains a persistent overhang not necessarily because of the structural issues but in Government management and response. It speaks of the contradictions this year that consistent fears of a double-dip recession may itself prove to become a self-fulfilling prophecy in no small measure to media hysteria about the weakened consumer and unprecedented pre-Christmas discounts. Yet strikingly at the same time, Central London nightclubs have enjoyed a record year on the back of the infamous 1%?

EUR/USD Analysis

2011-11-25T06:53:00.001-08:00

Preface: The following analysis is a personal view point of the market and does not constitute to any trading advice or ideas. The prices of the asset talked about may well have moved by the time the post is public and so trading can lead to losses. It is not my responsibilities for any losses incurred by yourself.

Analysis

- EUR/USD has been moving down for a while. More recently it will be due to the uncertainty in the Eurozone; very low confidence, exposed debt to Portugal, Ireland, Greece and Spain; Germany also.

- Itlay bond yields currently at about 7%- very risky for investors and they are at risk of needing bail out.

- Looking at 4hr chart: Past 2 days: 1.3233 level held before breaking and moving lower today- Short selling taking place with a short bias.

- Fibonacci level: currently trading below 88.6 re-tracement at about 1.3265. If closed near 88.6, strategy to potentially have a sell at about 1.32720.

- However, note there is previous support at 1.3240 and the price could be at an exhaustion point considering.

- 1hour chart: showing some re-tracement toward the 88.6 level and testing. Lets observe and see what price does.

Thanks for reading. Please leave any comments below and also your own opinions.

What I'm reading and thinking on Bloomberg (the Daily Show too)

2011-11-21T04:25:00.001-08:00

Warren Buffett: Buy Tesco Shares
Births at 11-Year Low May Prolong Five-Year U.S. Housing Slump

The Daily Show Destroys OccupyWallStreet Better Than Any Banker (must-see)

Michael Milken – The Milken Institute

2011-11-14T10:20:00.001-08:00

Milken noted that he would ot making specific predictions, but a thematic view of how he sees the world
Thinks it’s valuable to understand history, and, unfortunately, we never learn from history
Churchill said that when a solution to a problem is manageable it is always neglected
It is no surprise why Germany is winning in the EU, their unit labor cost are much less than all the PIIGS
Germany’s unemployment level is less than 6% vs 21% in Spain
Northern Europe has routinely the least amount of problems, and Southern Europe has the most
Valuable to look at 1) Perception vs Reality and 2) Capital Markets
Perception: What came first the chicken or the egg? The correct answer is egg. Reptiles were laying eggs before chickens existed, and the birds that layed the egg to the first chicken were not chickens.
You just need a different perspective on the problem to find the solution. Are we asking the right questions?
The U.S. surprisingly has grown it’s oil production more than any other country in the past 3 years. Volatility created alternative production. North Dakota is the 4th largest producing state. ~ 6% of crude output
Digital real estate is the important real estate. 6 billion digital phones in the world. Who is going to control the real estate?
Brazil: Manaus Brazil use to be the rubber capital of the world. Now it is an electronic manufacturing powerhouse. Foxconn is investing 12 billion in Manuas.
The world is moving east. Of the 50 largest GDP cities, 20 will be in Asia. Half of the European cities will drop of the list.
Asia has 59% of their population that is 20-34 years old. This is where production and demand will be.

More here

Emerging markets get $2.1 bn inflow in a week: report

2011-11-14T10:19:00.001-08:00

Emerging markets attracted fresh capital worth $2.1 billion during the week ended November 9, given their superior growth prospects in the wake of debt crises in Italy and Greece, global fund-tracking agency EPFR has said.

"The turmoil surrounding Italy and Greece did, however, highlight the better fundamentals and superior growth prospects of many emerging markets, with China front and center," EPFR said in its weekly report.

EPFR noted that equity funds dedicated to Bric countries (Brazil, Russia, India and China) collectively snapped an outflow streak since mid-April. Besides, flows into Asia excluding Japan equity funds hit a 20 week high.

In its report, EPFR said that overall, equity funds dedicated to global markets saw net inflows of $9.59 billion during the week ended November 9, which is much higher than $4.9 billion net inflows witnessed in the previous week.

Hat-tip Eugene

Are Sarkozy (and Merkel) hinting at something?

2011-11-14T10:06:00.001-08:00

A two-speed Europe is the inevitable outcome of the crisis, according to French President Nicolas Sarkozy. During a debate with students at the University of Strasbourg, he said that a single currency required economic convergence and integration. But he warned that federalism within the wider EU was not possible, particularly when in the coming years western Balkan countries join. "I imagine that nobody thinks that federalism, total integration, is possible at 33, 34, 35, countries," he said. There would be "two European gears," Sarkozy predicted, "one gear towards more integration in the eurozone and a gear that is more confederal in the EU."

France's triple-A credit rating has been under pressure as the debt crisis has spread towards the eurozone core, and Sarkozy accepted that there had not been enough convergence among countries that joined the single currency from the outset. "Frankly, the single currency is a wonderful idea, but it was strange to create it without asking oneself the question of its governance, and without asking oneself about economic convergence," he said. "Honestly, it's nice to have a vision, but there are details that are missing: we made a currency, but we kept fiscal systems and economic systems that not only were not converging, but were diverging."

However, a "split union will not work" and the EU remains "our best chance of prosperity" – in the view of commission President José Manuel Barroso. "To create the idea that we have two unions means disunion. It means separation of the members of euro area from those who are not yet members of the euro area," he said, adding that the challenge was to deepen euro area integration without creating divisions between the ins and outs. "One thing we don't need in Europe is more institutions and more agencies and more entities to manage the euro". Barroso said that deepening convergence must involve deeper democracy.
http://www.publicserviceeurope.com/article/1102/europes-future-division-or-unity

What the Eurozone should look like to be successful

2011-11-14T09:40:00.001-08:00

A map of the Germanic language family in colour

Italy's cushion what to do about it

2011-11-14T09:34:00.001-08:00

EU growth rates have been remarked lower from 1.5% to 0.5% and yields on Italy have a breakdown point of 7% funding; my interest is will Europe actually be embarking on the fiscal transfers that Angela Merkel is hinting at?

Decline of the US ??

2011-11-14T09:33:00.001-08:00

For example, in the past six years the U.S. share of total global market capitalization has fallen from an average of 57% in 2003, to 49% currently, according to a report by Morgan Stanley. Much of this weight has swung to the BRIC countries, which now account for about 7.6% of world market cap. These countries are on an almost equal footing with the might of France and Germany combined.
http://seekingalpha.com/article/297518-why-emerging-markets-are-attractive-relative-to-developed-markets

On a roughly estimate BRIC comprised around 2-2.5billion people whereas France and Germany combined amount to around 130million people. That's a magnitude of little less than 20 times. Let's think about our comparisons; I understand the gist of the author's point but his first statement "In an increasingly globalized world, the dominance of the US over the global economy is declining." masks an increasingly complex picture.

What not to invest in- Unicredit??/

2011-11-14T07:34:00.001-08:00

So Unicredit posts a record loss of nearly 11bn Euro after writing down "goodwill on acquisitions and investments". This is what we'd call "slow-news" day try to shlep through the news on a time when the larger sovereign crisis (i.e Italy) is overwhelming headlines.

Just for my own amusement I looked through other wonderful European institutions that we can expect great things from (not):

Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; £2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

Dis ingenious comments from Angela Merkel?

2011-11-14T07:27:00.001-08:00

Its interesting that Angela Merkel is advocating "closer political union" for the European union; if anything she's advocating the rapid dissolution of the Eurozone. Has anyone come to consider that now both Italy and Greece are under unelected governments and leaders of governments.

It was joked earlier last week that without a single shot Merkel did what Kaiser and Hitler failed to do and that is take over Europe. In an European Union so strongly wedded to the notion of a currency zone that its now willing to dictate and determine the course of democratically elected countries.

Italy has more than 35bn Euros in cash storage; its finances are good till February (which in this market is a long time away; the Eurozone has been intermittently dealing with Greece since at least last April). If anything what optimism is leading Italian bond yields to recover from 7% to 6.3% over the course of a week?

28th oct Friday

2011-10-31T03:20:00.004-07:00

1015-1016 2 tap glasses of water
1033 1 camomile tea
1352 1 chocolate biscuit
1354 1 camomile tea
1356 2/5 chocolate biscuit
1552 2 sips of chocolate milk
1554 1 black coffee
2105 1 tap water ice
2358 7 pringles
1 mini snickers
0009 50 teaspoons of dahl makhni and rice (more daal than rice)
------------------

27th oct thursday

2011-10-31T03:20:00.002-07:00

0656 2 white chocolate squares
0718 2 white chocolate squares
0722 1 Kenyan green tea
0755 6 mouthful pita bread hommous
0757 5 mouthful pits bread achar
1124 1 camomile tea
4 slice of apple with each spoon of peanut butter
Remaining apple + half tablespoon peanut butter
1253 4 chocolate sips
1338 4 gulps of chocolate milk
1419 4 gulps of chocolate milk
1440 1 camomile tea
1442 1 camomile tea
1539 4 gulps of chocolate milk
1542 1 camomile tea
1622 2 chocolate biscuits
3/4 biscuits
17091/4 chocolate biscuit
1 chocolate biscuit
1812 1/4 tea spoon of halwa
15 handful edamame
1949 5 largish delicious salad.
1.5 largish spoon lasagne
1ish garlic bread
13 tea table spoons pasta sauce
Table spoon half pasta
21 bit piece of garlic bread
2158 1 black tea + 6 forkfuls of sinful organic sponge pudding
7 forkfuls of kir (harvirs mother)
4 forkfuls of sinful organic sponge puddings
------------------

30thoct The "Mindful Eating" Series 30th oct sunday

2011-10-31T03:20:00.000-07:00

1343 3/4 dark chocolate square (est. 8 chews)
1527 1.5 or so dark chocolate square (est. 12-15 chewing)
1551 1 green leaf (10 chewing per third)
1555 1 green leaf (8-12 chewing per third)
1557 1 greenleaf (7chewing)
1604 1 falafel (5 bites, ~10 chewing) over ~3 bites
1617 1/4 500ml bottled spring water
1619-23 2 tablespoons tabbouleh (8 teaspoons 9 chews each)
1625-1627 1 tablespoon moutabbel (8 teaspoons)
1728 2/3 bottled water 500ml
1733 1 mouthful toast and scrambled egg (owner rafi) 15 chews.
1800 1 small orange (size of mandarin/clementine) eaten with skin. Probably 20-40 bites (possibly 50) each chew around 10
1852 reheated sweetened milk tea
1950 1 green leaf (3bites 10-15 chews per bite)
1951 half regular cup costa green tea
1953 1 green leaf (3 bites 10-15 chews per bite)
1957 1 falafel with moutabbel (5 bites; each bite 10-17 chews)
1959 1 plum (10bites each bite 15 chews)
2155 3 bites of a small slice of gu cake (10 chews per bite)
2200 3 bit of a small slice of gu cake (10chews per bite)
2210-2216 2 small pieces of wholefoods pumpkin pie (each piece was eaten in 3parts, part part chewed 8-10 times)
2329 1 vine leaf (3 bites; each bite 10-15times)
1 vine leaf (3 bites; each bite 10-15 times)
2332quarter largish tablespoon tabbouleh (10-12 chews)
2335 1plum (7bites; each bite 10-12)
2339 1 small orange (8bited; each bite 10-12 chews)
------------------

Liquidations in London Hotelling Sector

2011-10-11T08:55:00.001-07:00

Morgan hotel group to sell Sanderson and St Martins hotel

For Q2 (Jun '11), It had a Net profit margin of -21.77%, an Operating margin of -0.35%. Other Key stats and ratios are : Return on average assets of -7.30%. The organization has an employee strength of 4,600

Fewer stars, less success

Though demand for London’s most opulent hotels appears to be insatiable, lower down the AA’s star ratings, many hoteliers are faring less well. A wave of businesses have gone to the wall, among them von Essen hotels, which included Cliveden, the Berkshire stately home at the centre of the Profumo affair. This month Menzies Hotels, which operates 16 four-star properties, was acquired in management buyout after its parent group, owned by property tycoon Robert Tchenguiz, fell into administration.

Jarvis Hotels, which runs 40 Jarvis sites and a further six Ramada hotels, remains in protracted restructuring talks with its lenders after dire trading left it unable to meet loan agreements. State-controlled Royal Bank of Scotland and others are expected to take control of the business shortly. The expected deal will echo the painful £650m debt for equity swap agreed at De Vere, which operates almost 70 hotels. Control of De Vere passed to Lloyds Banking Group, another taxpayer-backed lender, last year.

NAMA helps the Irish wind-down

2011-09-30T10:57:00.000-07:00

To my mind the biggest market news today, apart from the nearly unaminous passing by the German parliament of extra flexibility provisions to the EFSF agency, is the the fact the Barclay brothers (no relation to Barclays bank but incidentally owners of the Daily Telegraph) are taking direct control of the Maybourne Hotel Group; whose assets are worth some £800mn and include the prestigious Claridges, the Savoy, the Connaught hotel & the Berkeley Hotels.

There is a potential court action being launched by the erstwhile owner of the Maybourne consortium, northern Irish tycoon Paddy McKillen, however control of the loans and the 25% stake of the Barclay brothers in the Maybourne groups means that as sole lenders and partial equity holders they are effective owners of the entire group.

What particularly stood out is that the Barclay brothers "bought back" their loans from the National Asset Management Agency (short for NAMA), which is Ireland's bad bank in effect. NAMA had announced that it would be delevering its prime portfolio assets in the UK in early summer however this would be NAMA's largest transaction to date, the previous being the sale of Dublin's tallest tower to Google group for 100mm Euro earlier this year.

NAMA is one of the largest and key landlords of the London property market with more than £16bn of assets including the Leceister Square Odeon, Citigroup tower in Canary Wharf and Saville Row properties. At the moment the Irish sovereign crisis (the most muted in the "PIIGS" sovereign crisis; the rest being Portugal, Italy, Greece & Spain) has been managed in an orderly and structured fashion; no doubt because the Irish economy, containing the population just under that of Barcelona, doesn't factor in the same scale as the others.

I thought I would excerpt a passage on the extant and quality of Nama's holdings in London and an illustration of how it got them:

Nama bought the properties at a discounted price of about €9bn and has recouped €3.3bn from sale or refinancing deals that include Claridge's hotel and Battersea power station which was refinanced this month in a debt-for-equity swap. Much of the property was bought on the back of cheap credit from Irish banks, and now the property developers and investors who once enjoyed a high life of private jets, helicopters and second, third and fourth homes are under pressure.

Nama refuses to specify which properties it has but it is understood that the owner of the block housing Louis Vuitton is David Daly, a low-profile Dublin developer. David Daly. David Arnold, another Dubliner, has also had his business, D2 Private, absorbed into Nama. It is behind four prize London assets including 23 Savile Row, Paddington Waterside, Woolgate Exchange in the East End and 12 St James's Square.

The developer who took the most spectacular fall is the tax inspector turned property investor Derek Quinlan. He was forced to sell the "style mile" of shop space between Harrods and Harvey Nichols in Knightsbridge, which houses several top fashion chains. Elsewhere, he has also been forced to put his Citigroup tower in Canary Wharf up for sale with a £1bn price tag . Another high-profile Nama developer is Ray Grehan, who this month saw his London portfolio put into administration. The for-sale sign will go up on his assets, which include the 196-bed Crowne Plaza hotel in Shoreditch and two developments in the Docklands including a 128-flat block called the Forge in Canary Wharf and a proposed 62-storey residential and hotel tower, designed by Foster & Partners on the site of the City Pride pub near South Quay. Another property owned by Grehanis Ealing Arcadia, a retail park in Ealing Broadway.

As a short summation (for now) NAMA is proceeding on the correct trajectory begin an optimal and careful disposal of prime London property markets (it has to be an orderly liquidation to avoid "spooking" the London market, which while robust is still subject to a slow down in the larget global and financial markets) while retaining its stakes and "protecting" its Irish assets, which are undoubtedly weaker and slack over-supply, by doing a very careful and long-term disposal program (which of course would still adhere to the standards set by the IMF and ECB).

Market Recap 27th September - Lunch Session

2011-09-27T05:23:00.000-07:00

Markets: FTSE 100 buoyed by eurozone hopes

12:23 - British retail sales weakened at their fastest pace for 16 months in September, according to figures from the Confederation of British Industry (CBI). The retail sales balance fell to -15, compared to -14 in August. This is in line with expectations, but the figure is the lowest since May 2010.

12:09 - A bullish mood returned to the FTSE 100 (UKX) on Tuesday as a speech by the Greek Prime Minister George Papandreou during his visit to Germany boosted investor confidence.

He said German funding would not be an investment in past failures, but in future successes and spoke of Greece's "superhuman" efforts to cut its debt levels. "Your contribution can be crucial," he told delegates.

Commodities

Gold: $1,669.60

WTI crude oil: $82.37

Currencies

GBP/USD: 1.5570

GBP/EUR: 1.1507

EUR/USD: 1.3533

Theatre Idea

2011-01-15T12:38:00.000-08:00

"Forgotten Children of Persia"

"No Baha'is Please"

May 14 Saturday

Kurdish Cultural Centre Stannary Street SE11
~~White Bear~~
The Ship SE11
Dog House SE11
Spotlight (Actors venue)
Bedford Arms at Balham

Finally Alephbey is back and Redirect

2010-12-18T18:38:00.001-08:00

to Www.latif.blogspot.com