How JPMorgan’s storm in a teapot grew – FT.com

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KAL’s cartoon | The Economist

KAL's cartoon | The Economist.

Il contrario di tutto

Nelle sue considerazioni finali dello scorso Maggio 2011 il Governatore della banca d’Italia Mario Draghi aveva indicato un percorso di riforme orientato alla crescita. Il Governatore di bankitalia suggeriva di investire in infrastrutture (spesa in conto capitale) e di tagliare la spesa corrente:

Senza sacrificare la spesa in conto capitale oltre quanto già previsto nello scenario tendenziale e senza aumentare le entrate, la spesa primaria corrente dovrà però ancora contrarsi, di oltre il 5 per cento in termini reali nel triennio 2012-14, tornando, in rapporto al PIL, sul livello dell’inizio dello scorso decennio.

Per evitare il rischio di sottrarre risorse a settori importanti e, soprattutto, per evitare impatti depressivi, consigliava di evitare “tagli lineari”:

Per ridurre la spesa in modo permanente e credibile non è consigliabile procedere a tagli uniformi in tutte le voci: essi impedirebbero di allocare le risorse dove sono più necessarie; sarebbero difficilmente sostenibili nel medio periodo; penalizzerebbero le amministrazioni più virtuose. Una manovra cosiffatta inciderebbe sulla già debole ripresa dell’economia, fino a sottrarle circa due punti di PIL in tre anni.

Soltanto sulla base di un’accurata “spending review”, voce per voce, di tutti i capitoli di spesa è possibile, secondo il Governatore, ridurre la spesa corrente senza impattare negativamente sulla crescita e con parte dei risparmi così ottenuti finanziare le spese in conto capitale (infrastrutture):

Occorre invece un’accorta articolazione della manovra, basata su un esame di fondo del bilancio degli enti pubblici, voce per voce, commisurando gli stanziamenti agli obiettivi di oggi, indipendentemente dalla spesa del passato; affinando gli indicatori di efficienza dei diversi centri di servizio pubblico (uffici, scuole, ospedali, tribunali) al fine di conseguire miglioramenti capillari nell’organizzazione e nel funzionamento delle strutture; proseguendo negli sforzi già avviati per rendere più efficienti le amministrazioni pubbliche; impiegando una parte dei risparmi così ottenuti in investimenti infrastrutturali.

Per integrare ulteriormente la manovra di effetti espansivi – sostanzialmente per incidere sulla componente legata ai consumi ormai fermi ai livelli del 2000 secondo l’ultima ricerca di Confcommercio – il Governatore suggeriva inoltre un taglio significativo alle aliquote fiscali:

Andrebbero inoltre ridotte in misura significativa le aliquote, elevate, sui redditi dei lavoratori e delle imprese, compensando il minor gettito con ulteriori recuperi di evasione fiscale, in aggiunta a quelli, veramente apprezzabili, che l’Amministrazione fiscale ha recentemente conseguito.

Una manovra così articolata secondo il Governatore ci avrebbe protetto – almeno in parte – dagli effetti avversi legati al quadro macroeconomico generale e soprattutto dalla profonda crisi di fiducia legata ai debiti sovrani dell’area euro:

Una manovra tempestiva, strutturale, credibile agli occhi degli investitori internazionali, orientata a favore della crescita, potrebbe, anche mediante una significativa riduzione dei premi al rischio che gravano sui tassi d’interesse italiani, sostanzialmente limitare gli effetti negativi sul quadro macroeconomico.

Il Governatore non mancava inoltre di richiamare l’attenzione del legislatore sulla riforma “federalista”:

Il federalismo fiscale può aiutare, responsabilizzando tutti i livelli di governo, imponendo rigidi vincoli di bilancio, avvicinando i cittadini alla gestione degli affari pubblici. Due condizioni sono cruciali: che i nuovi tributi locali siano compensati da tagli di quelli decisi centralmente e non vi si sommino; che si preveda un serrato controllo di legalità sugli enti a cui il decentramento affida ampie responsabilità di spesa.

Che fine hanno fatto questi suggerimenti? In che misura sono stati ascoltati ed accolti dal Governo? La risposta a questi interrogativi la troviamo nel testo preparato dalla Corte dei Conti per l’audizione alle commissioni bilancio di Camera e Senato ed avente per oggetto la seconda manovra presentata dal Governo (DL 138/2011 “Ulteriori misure urgenti per la stabilizzazione finanziaria e per lo sviluppo”).

Gia a Luglio, con riferimento alla prima manovra varata dal Governo (DL 98/2011), la Corte aveva espresso dubbi:

Meno convincente appariva alla Corte (…) la composizione della manovra orientata verso un impiego molto significativo del prelievo fiscale (…) e caratterizzata da tagli di spesa, a livello centrale e territoriale, non sufficientemente selettivi.

Nell’audizione di luglio, infatti, la Corte annotava:

(…) va considerato che, nell’ipotesi della sua piena attuazione, si avrebbe una ripartizione in misura pressoché equivalente delle risorse provenienti da maggiori entrate (…) e dai tagli alle spese (…). Nel caso della mancata attuazione della delega, è prevista, come già ricordato, una modalità di copertura alternativa affidata ad un’apposita “clausola di salvaguardia”: i 14,7 miliardi di contributo alla correzione dei conti pubblici scaturirebbero da una riduzione lineare (dell’ordine del 10 per cento) dell’insieme delle agevolazioni fiscali censite (poco meno di 500, per oltre 160 miliardi di minor gettito).

Le stesse critiche sono state avanzate anche rispetto alla manovra correttiva (DL 138):

(…) il ricorso prevalente alla leva fiscale (quasi tre quarti della manovra se si sommano interventi diretti e indotti) e, in particolare, le modalità di intervento prescelte, determinando la compressione del reddito disponibile, accentuano i rischi di effetti depressivi.

Per citare ancora la Corte:

Ne deriverà un aumento di pressione fiscale le cui dimensioni dipenderanno anche dagli effetti che la manovra produrrà sul Pil. Nell’ipotesi più ottimistica – ossia nel caso in cui non debbano registrarsi effetti depressivi sul prodotto (la cui dinamica tendenziale è ufficialmente confermata all’1,3% nel 2012 e all’1,5% nel 2013) – l’aumento di pressione fiscale, considerando anche gli effetti delle misure contenute nel Dl 98/2011, alla fine del periodo preso in considerazione dai documenti programmatici risulterebbe più elevata di circa 2 punti (dal 42,6% al 44,5%). Peraltro, la crescita della pressione fiscale potrebbe subire un’ulteriore accelerazione a causa degli aumenti impositivi indotti dalla manovra sul versante del federalismo fiscale: l’attivazione fin dal 2012 dei margini di autonomia tributaria riconosciuti a regioni e comuni, come contropartita dell’anticipo e dell’inasprimento della stretta finanziaria sui bilanci delle amministrazioni locali.

Il quadro che esce fuori appare quindi sostanzialmente l’opposto a quello suggerito da bankitalia ed il tutto lascia pensare che altri interventi dolrosi saranno necessari.

Aspettiamoci una manovra-ter.

Default in Today’s Advanced Economies: Unnecessary, Undesirable, and Unlikely

The state of the public finances has worsened substantially in the main advanced economies as a result of the 2008–09 global financial and economic crisis. For some “peripheral” European countries, market participants and some commentators occasionally seem to believe that default (here intended as some form of debt restructuring) will sooner or later inevitably occur. Concerns about fiscal solvency in those countries have been reflected in financial market pressures, large default risk premiums on sovereign bonds, and downgrades by rating agencies. At the time of writing (late August 2010), credit default swap spreads are about 900 basis points in Greece and 300 basis points in Ireland and Portugal. In general, volatility remains high and every auction of government paper—especially in Europe, including in the largest countries—is closely monitored to discern possible triggers of abrupt market reactions.
In our view, the risk of debt restructuring is currently significantly overestimated. Although it is generally wise to assume that market developments reflect economic fundamentals, market overreaction does occur from time to time, with adverse implications for countries’ borrowing costs and debt dynamics. For example, considering data on sovereign bond spreads over the past decades, markets sounded false alarms in the vast majority of episodes.

[…] challenge stems mainly from the advanced economies’ large primary deficits, not from a high average interest rate on debt. Thus, default would not significantly reduce the need for major fiscal adjustment. In contrast, the economies that defaulted in recent decades did so primarily as a result of high debt servicing costs, often in the context of major external shocks. We conclude that default would not be in the interest of the citizens of the countries in question. Fiscal adjustment supported by reforms that enhance economic growth is a more effective response.

Link

Firms exposed to Madoff’s alleged fraud

Following a list of some of the firms exposed to the alleged fraud:

FAIRFIELD SENTRY LTD

The $7.3 billion hedge fund run by Walter Noel’s Fairfield Greenwich Group had accounts with Madoff Investment Securities.

KINGATE GLOBAL FUND LTD

The $2.8 billion hedge fund run by Kingate Management Ltd had invested in Madoff Investment Securities.

UBS

The investment bank unit of the Swiss financial group has a limited and insignificant counterparty exposure, its spokesman told Reuters.

BENEDICT HENTSCH

The Swiss private bank said its exposure to products linked to Bernard Madoff amounted to 56 million Swiss francs ($47 million), or less than 5 percent of the bank’s assets under management.

PIONEER INVESTMENTS

UniCredit SpA’s fund management unit is exposed through its Primeo Select hedge fund, according to two people familiar with the matter.

BRAMDEAN ALTERNATIVES LTD

The UK asset manager, headed by well-known fund manager Nicola Horlick, said almost 10 percent of its holdings were exposed to Madoff.

Bramdean said it had two holdings that maintain trading accounts with Bernard L. Madoff Investment Securities that represented 9.5 percent of its net asset value at the end of October.

TV network CNBC also reported that the following firms were clients of Madoff:

* Tremont Capital Management — The manager of funds of hedge funds portfolios could not be reached for comment.

* Nomura Holdings Inc — The Japanese brokerage house did not return a call seeking comment.

* Palm Beach Country Club — The institution did not return a call seeking comment.

* Santander’s Optimal Fund — The unit of Spanish bank Santander could not be reached for comment.

* Sterling Equities — The investment firm, owner of the New York Mets baseball team, did not return a call seeking comment.

* Bank Syz — The Swiss bank dedicated to asset management could not be reached for comment.

* Lombard Odier — The Swiss private bank could not be reached for comment.

source: Yahoo News

Ecuador debt default

I gave the order not to pay the interest and to go into default,” Mr Correa told reporters in Guayaquil. ”We know very well who we are up against — real monsters.

Ecuador declared default on its 2012 global bonds on Friday over charges the debt was illegally contracted by past governments, leaving investors to deal with its second debt default in less than a decade.

President Rafael Correa’s decision to not pay a $31 million coupon on the government’s 2012 bonds means the country’s two other global bond issues due in 2015 and 2030 are also considered in default, according to cross-default clauses in the contracts.

Possible scenarios after Ecuador debt default

Ecuador defaults on sovereign bonds

Don’t ask, don’t tell

The original “Don’t ask, don’t tell” Madoff story
Barrons had this story in 2001 but no-one wanted to listen
:

Two years ago, at a hedge-fund conference in New York, attendees were asked to name some of their favorite and most-respected hedge-fund managers. Neither George Soros nor Julian Robertson merited a single mention. But one manager received lavish praise: Bernard Madoff.

Folks on Wall Street know Bernie Madoff well. His brokerage firm, Madoff Securities, helped kick-start the Nasdaq Stock Market in the early 1970s and is now one of the top three market makers in Nasdaq stocks. Madoff Securities is also the third-largest firm matching buyers and sellers of New York Stock Exchange-listed securities. Charles Schwab, Fidelity Investments and a slew of discount brokerages all send trades through Madoff.

But what few on the Street know is that Bernie Madoff also manages $6 billion-to-$7 billion for wealthy individuals. That’s enough to rank Madoff’s operation among the world’s three largest hedge funds, according to a May 2001 report in MAR Hedge, a trade publication.

What’s more, these private accounts, have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.

When Barron’s asked Madoff Friday how he accomplishes this, he said, “It’s a proprietary strategy. I can’t go into it in great detail.”

Nor were the firms that market Madoff’s funds forthcoming when contacted earlier. “It’s a private fund. And so our inclination has been not to discuss its returns,” says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. “Why Barron’s would have any interest in this fund I don’t know.” One of Fairfield Greenwich’s most sought-after funds is Fairfield Sentry Limited. Managed by Bernie Madoff, Fairfield Sentry has assets of $3.3 billion.

A Madoff hedge-fund offering memorandums describes his strategy this way: “Typically, a position will consist of the ownership of 30-35 S&P 100 stocks, most correlated to that index, the sale of out-of-the-money calls on the index and the purchase of out-of-the-money puts on the index. The sale of the calls is designed to increase the rate of return, while allowing upward movement of the stock portfolio to the strike price of the calls. The puts, funded in large part by the sale of the calls, limit the portfolio’s downside.”

Among options traders, that’s known as the “split-strike conversion” strategy. In layman’s terms, it means Madoff invests primarily in the largest stocks in the S&P 100 index — names like General Electric , Intel and Coca-Cola . At the same time, he buys and sells options against those stocks. For example, Madoff might purchase shares of GE and sell a call option on a comparable number of shares — that is, an option to buy the shares at a fixed price at a future date. At the same time, he would buy a put option on the stock, which gives him the right to sell shares at a fixed price at a future date.

The strategy, in effect, creates a boundary on a stock, limiting its upside while at the same time protecting against a sharp decline in the share price. When done correctly, this so-called market-neutral strategy produces positive returns no matter which way the market goes.

Using this split-strike conversion strategy, Fairfield Sentry Limited has had only four down months since inception in 1989. In 1990, Fairfield Sentry was up 27%. In the ensuing decade, it returned no less than 11% in any year, and sometimes as high as 18%. Last year, Fairfield Sentry returned 11.55% and so far in 2001, the fund is up 3.52%.

Those returns have been so consistent that some on the Street have begun speculating that Madoff’s market-making operation subsidizes and smooths his hedge-fund returns.

How might Madoff Securities do this? Access to such a huge capital base could allow Madoff to make much larger bets — with very little risk — than it could otherwise. It would work like this: Madoff Securities stands in the middle of a tremendous river of orders, which means that its traders have advance knowledge, if only by a few seconds, of what big customers are buying and selling. By hopping on the bandwagon, the market maker could effectively lock in profits. In such a case, throwing a little cash back to the hedge funds would be no big deal.

When Barron’s ran that scenario by Madoff, he dismissed it as “ridiculous.”

Still, some on Wall Street remain skeptical about how Madoff achieves such stunning double-digit returns using options alone. The recent MAR Hedge report, for example, cited more than a dozen hedge fund professionals, including current and former Madoff traders, who questioned why no one had been able to duplicate Madoff’s returns using this strategy. Likewise, three option strategists at major investment banks told Barron’s they couldn’t understand how Madoff churns out such numbers. Adds a former Madoff investor: “Anybody who’s a seasoned hedge- fund investor knows the split-strike conversion is not the whole story. To take it at face value is a bit naïve.”

Madoff dismisses such skepticism. “Whoever tried to reverse-engineer, he didn’t do a good job. If he did, these numbers would not be unusual.” Curiously, he charges no fees for his money-management services. Nor does he take a cut of the 1.5% fees marketers like Fairfield Greenwich charge investors each year. Why not? “We’re perfectly happy to just earn commissions on the trades,” he says.

Perhaps so. But consider the sheer scope of the money Madoff would appear to be leaving on the table. A typical hedge fund charges 1% of assets annually, plus 20% of profits. On a $6 billion fund generating 15% annual returns, that adds up to $240 million a year.

The lessons of Long-Term Capital Management’s collapse are that investors need, or should want, transparency in their money manager’s investment strategy. But Madoff’s investors rave about his performance — even though they don’t understand how he does it. “Even knowledgeable people can’t really tell you what he’s doing,” one very satisfied investor told Barron’s. “People who have all the trade confirmations and statements still can’t define it very well. The only thing I know is that he’s often in cash” when volatility levels get extreme. This investor declined to be quoted by name. Why? Because Madoff politely requests that his investors not reveal that he runs their money.

“What Madoff told us was, ‘If you invest with me, you must never tell anyone that you’re invested with me. It’s no one’s business what goes on here,'” says an investment manager who took over a pool of assets that included an investment in a Madoff fund. “When he couldn’t explain \ how they were up or down in a particular month,” he added, “I pulled the money out.”

For investors who aren’t put off by such secrecy, it should be noted that Fairfield and Kingate Management both market funds managed by Madoff, as does Tremont Advisers , a publicly traded hedge-fund advisory firm.
http://online.barrons.com/article/SB989019667829349012.html