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Posted: 4 June 2012 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research


Paul Krugman rattling a few cages.


Has he got it right? I think so.




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Posted: 6 June 2012 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Research

Dorks at JPMorgan Chase & Co lose $2b

"The trading activities that generated the loss of $2 billion or more started in 2007 and 2008, when J.P. Morgan put together a portfolio of credit derivatives to "help protect the company from potential credit losses in a stressed global economy," according to Mr. Curry's testimony. But in late 2011 and early 2012, management at the bank shifted gears and decided to "offset its original position and reduce the amount of stress loss protection," he says.


"The instruments chosen by the bank to execute the strategy were not identical to the instruments used in the original position, which introduced basis, liquidity and other risks," Mr. Curry says. As the strategy was implemented in the first quarter, "actual performance deviated from expectations." Then, at the end of April and in early May, "the value of the position deteriorated rapidly."




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Posted: 7 June 2012 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

Krugman:The Urge to Punish


I’ve been hearing various attempts to explain the ECB’s utterly bizarre refusal to cut interest rates despite soaring unemployment, sliding inflation, and on top of all that the special problems of a monetary union that probably can’t survive unless overall demand is strong. The most popular story seems to be that the ECB wants to “hold politicians’ feet to the fire”, letting them know that they won’t get relief unless they do what’s necessary (whatever that is).

This really doesn’t make any sense. If we’re talking about enforcing austerity and wage cuts in the periphery, how much more incentive do these economies need? If we’re talking about broader fiscal union or something, what is it about the imminent collapse of the whole system that the Germans supposedly don’t understand? Is there any conceivable way that cutting the repo rate by 50 basis points will somehow undermine actions that would otherwise happen?

What does make sense, maybe, is a two-part explanation. First, the ECB is unwilling to admit that its past policy, especially its past rate hikes, were a mistake. Second — and this goes deeper — I suspect that we’re seeing the old Schumpeter “work of depressions” mentality, the notion that all the suffering going on somehow serves a necessary purpose and that it would be wrong to mitigate that suffering even slightly.

This doctrine has an undeniable emotional appeal to people who are themselves comfortable. It’s also completely crazy given everything we’ve learned about economics these past 80 years. But these are times of madness, dressed in good suits.



June 6, 2012, 9:38 AM

Think of the Children

Every time I hear some smug pundit or politician saying that we can’t spend to create jobs because that would be laying too much of a burden on our children, I get angry — because of reports like this:

For this generation of young people, the future looks bleak. Only one in six is working full time. Three out of five live with their parents or other relatives. A large majority — 73 percent — think they need more education to find a successful career, but only half of those say they will definitely enroll in the next few years.

No, they are not the idle youth of Greece or Spain or Egypt. They are the youth of America, the world’s richest country, who do not have college degrees and aren’t getting them anytime soon.

Everything we know says that this generation will never — never — recover from the terrible job market into which it has graduated. But hey, we can’t do anything about that; we must have austerity, for the sake of the next generation.



June 6, 2012, 9:33 AM

Doing Their Best to Destroy Europe

Martin Wolf is shrill (and rightly so):

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events.

Right on cue, the European Central Bank has declined to cut interest rates, or announce any other policies that might help. Because what possible reason might there be to take action?


Oh, and survey data suggest that the euro area economy is really plunging now, plus Spain is on the brink. What about inflation? It’s falling fast — which is a bad thing under the circumstances.

I don’t think there’s any conceivable economic logic for the ECB’s decision. It can only, I think, be understood as some kind of refusal to admit, even implicitly, that past decisions were wrong.

Like Martin Wolf, I’m starting to see how the 1930s happened.

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Posted: 18 June 2012 - 0 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

  The outgoing head of the World Bank, Robert Zoellick, will warn the G20 summit that Europe runs the risk of sparking a Lehman-style global crisis that will have dire consequences for developing nations.


Robert Zoellick, outgoing World Bank president


World Bank president Robert Zoellick will tell the G20 summit that the euro crisis could hit developing nations.
Photograph: Saul Loeb/AFP/Getty Images

Kyk my snor. Speaking for myself I'm finding it hard to overcome an inate prejudice that I have towards bureaucrats who resemble our erswhile Herstigte leiers.
I must work on this!


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Posted: 22 June 2012 - 1 comment(s) [ Comment ] - 0 trackback(s) [ Trackback ]
Category: Market news

Xstrata “considered very carefully the management incentive arrangements for the merger, particularly in light of the heightened public debate about executive remuneration,” Chairman John Bond said in the statement.


As I understand it , the resolution the minorities have been asked to approve inextricably links the bonus AND the merger


Assuming shareholders do benefit from the merger this means they are left with Hobson's Choice ie. No bonus means no merger


To be clear - this is a  retention bonus! Performance is irrelevant.


 Moneyweb posted a bland bloomberg article. As is often the case the interesting stuff lies way below the article.  No Fan of Xstrata has this to say:


If Davis has been going around promoting the benefits of the deal to Xstrata shareholders, why on earth does he need to be retained??  If he has doubts about taking the CEO position, then the board should ask him to step aside now and let Glasenberg fill the role.  however, they wont, because this entire transaction has been structured around pandering to the individual egos and greed of the senior Xstrata executives to get them to support a deal where the Glencore shareholders (of which Glasenberg is the largest) get to take over Xstrata at the wrong price.  This strategy of Xstrata minorities getting screwed at the expense of Glencore has been well established over the years and it is happening again - Glasenberg worked out long ago that he doesnt need to pay Xstrata minorities a premium running into the billions when he merely has to pay the Xstrata executives much lower amounts to act as his cheerleaders and promote the deal to their shareholders.  Also, does anyone REALLY believe that Glasenberg, as the largest single shareholder in the combined group, will be prepared to defer to CEO Davis in his new role as deputy CEO?   


I'm interested to hear what the tickertalk community has to say about this.




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