Hedge fund made millions betting on Barclays crash

Barclays bank eagle logo
Shares in Barclays and other banks have been hit hard since the ban on short-selling was lifted. They fell 10% yesterday. Photo: Martin Godwin

One of London’s most successful hedge funds has made £12m in just four days by betting on a fall in the Barclays share price, a move that will heighten the controversy over so-called short-selling strategies.

Lansdowne Partners, which also profited from the fall in the share price of Northern Rock at the height of its problems, sold Barclays shares last Friday – when the bank lost almost a quarter of its value in frenzied trading – and bought them back again on Wednesday after they had fallen by almost £1.

Read moreHedge fund made millions betting on Barclays crash

Global Economic Crisis Accelerating

Icelandic government becomes first to be brought down by the credit crunch (Daily Mail)

Iceland’s prime minister resigns (Financial Times)

Obama Presses Lawmakers on Stimulus, Accountability (Bloomberg):
Jan. 23 (Bloomberg) — President Barack Obama pressed congressional leaders to reach a consensus on an $825 billion stimulus plan, warning the country may be facing an “unprecedented” economic crisis.

Obama team accuses China of manipulating its currency (Guardian)

Geithner Hints at Harder Line on China Trade (New York Times):
WASHINGTON — Timothy F. Geithner, who moved closer to confirmation as Treasury secretary on Thursday, told senators that President Obama believed China was “manipulating” its currency, suggesting a more confrontational stance toward that country than under the Bush administration. (More change!)

Good bank, bad bank all adds up to nationalization (Reuters)

China prepares for the Year of the Slump (Guardian)

Sterling plunges to record lows (Financial Times – 23 Jan 2009)

Recession figures heighten the gloom (Independent)

Financial crisis: It’s impossible to get any hard facts and figures from British banks (Telegraph)

Just The Early Stages of Economic and Financial Collapse (The International Forecaster)

Boston Scientific Founders Bash Baby on Lehman Bets (Bloomberg):
Jan. 23 (Bloomberg) — The men who built Boston Scientific Corp. into the world’s biggest seller of heart stents have dumped $484 million in shares to repay loans after other assets were frozen by the Lehman Brothers Holdings Inc. bankruptcy.

Bank deposits at ECB drop sharply (Financial Times):
Deposits have now fallen by €171.5bn over the past two days and are almost two-thirds down from the record €315.3bn reached less than a fortnight ago.

Where You Won’t Shop In 2009 (Forbes)

Microsoft’s days as an unstoppable force are over (Telegraph)

Samsung suffers its first quarterly loss (Financial Times)

GE profit falls 43% to $3.9bn (Financial Times)

Australian wine exports collapse (Telegraph)

Housing meltdown: one home repossessed every seven minutes

One family will have their home repossessed every seven minutes as the number of defaulted mortgage payments jumps dramatically this year, city regulators have warned.

The number of people losing their homes nearly doubled in the three months to the end of September last year, according to new figures released by the Financial Services Authority (FSA).

A total of 13,161 properties were repossessed around the UK during the third quarter of 2008, representing a 92% increase since the previous year.

However, a large proportion of these remained unsold, with the number of homes offloaded by lenders increasing by less than 10%.

The Council of Mortgage Lenders (CML) said that the situation was only likely to worsen during 2009, with up to 75,000 repossessions expected over the course of the year as hundreds of thousands of homeowners slip behind in their mortgage repayments.

Regulators recorded a 24% rise in the number of people failing to make mortgage payments in July to September, bringing the total to 340,000. The increase was 10% compared to the previous quarter, the watchdog said.

Read moreHousing meltdown: one home repossessed every seven minutes

Barclays, RBS and Lloyds need £80bn more in capital, analyst warns

Britain’s three top lenders need another £80bn of capital to end concerns about their solvency once and for all, stabilising the financial system, according to analysts at investment bank Nomura.

The warning will fuel fears that Royal Bank of Scotland, Lloyds Banking Group and Barclays may be fully nationalised, coming after a week in which share prices in all three banks have more than halved. Nomura added that the latest Government bail-out measures “do not change the key issue of the unknown and potentially unlimited losses of the banking system, and therefore whether it will ultimately require further capital injections”.

Investors in banks have been spooked by worse-than-expected losses at HBOS and RBS. Comparing the current recession with the 1990s, Nomura estimates that over four years Barclays will record credit losses of £33bn, Lloyds £56bn and RBS £61bn.

Read moreBarclays, RBS and Lloyds need £80bn more in capital, analyst warns

Global Economic Crisis Accelerating

Obama administration considers launch of ‘bad bank’ (Telegraph)

US Initial Jobless Claims Match Highest Since ’82 (Bloomberg)

Barack Obama inauguration: this Emperor has no clothes, it will all end in tears (Telegraph)

Despite billions, banks still teeter on the brink (MSNBC)

Microsoft to shed 5,000 jobs (Financial Times)

Intel to Cut at Least 5000 Jobs (New York Times)

GM Gets $5.4 Billion Loan Installment From Federal Government (CNNMoney)

US jobless claims surge, housing start tumble (Forbes)

Housing Starts, Permits in US Slump to Record Low (Bloomberg)

Banks Foreclose on Builders With Perfect Records (New York Times)

Jim Rogers: Now it’s time to emigrate, says investment guru (Independent)

Saudi prince’s firm loses $8.3B in 4Q (AP)

Investors flee after brutal losses at global markets (Emirates Business)

Indians Flee Dubai as Dreams Crash – Fall out of Economic Crisis (Daijiworld):
It’s the great escape by Indians who’ve hit the dead-end in Dubai.

China growth slows, Bank of Japan sees deflation (Forbes):
(Reuters) – China’s economy slowed sharply in the fourth quarter and Japan’s central bank on Thursday predicted two years of deflation as Asia’s largest economies buckle under the strain of the financial crisis.

Roubini Sees China Recession Despite ‘Massaged’ GDP (Bloomberg)

Asian economic woe grows as China slows and Japanese exports plunge (Telegraph):
China’s economy may have ground to a halt entirely between the third and fourth quarters of last year and Japanese exports plunged 35pc in December, underlining the scale of the slowdown in Asia.

ZIMBABWE: Inflation at 6.5 quindecillion novemdecillion percent (IRIN)

Sony forecasts $2.9bn operating loss (Financial Times)

Hedge funds’ $400bn withdrawals hit (Financial Times)

Google income drops 68% on one-time charges (IHT)

Is Britain facing bankruptcy? (Guardian)

Manufacturing outlook plummets (Financial Times)

Car production plummets as pressure for industry bail-out grows (Telegraph)

London’s Evening Standard sold to ex-KGB agent (Reuters)

AIG starts $20bn auction of Asian unit (Financial Times):
AIG, the stricken insurance giant, on Wednesday kicked off the sale of its Asian life assurance unit – one of its most prized assets – in the hope of raising up to $20bn to help repay the $60bn US government loan that is keeping the group alive.

UBS to Cut Securities Jobs, Close More Debt Units (Bloomberg)

Japanese Housewives Desperate After Currency Scheme Collapses (Bloomberg)

New age of rebellion and riot stalks Europe (Times Online)

Increase in burglaries shows effect of recession (Guardian)

Chinese media issues stinging attack on Barack Obama and George W Bush (Telegraph)

Barclays may lose control to Gulf investors (Telegraph)

Cars to be crushed in insurance crackdown (Scotsman)

Investors say jailed pilot swiped money for years (Washington Post)

Capital One Reports $1.42 Billion Loss on Charges (Bloomberg)

Nokia reports sharp fall in profits (Financial Times)

Bank of England Governor paves way to start Bank print presses

Bank of England Governor Mervyn King leaves 10 Downing Street in London

The Bank of England’s Governor paved the way last night to unleash the (Zimbabwe) weapon of “printing money” in a last-ditch drive to combat the rapidly deepening recession.

Mervyn King braced Britain for a further sharp slump and a “difficult year for all of us”, and laid the groundwork for the Bank to turn to “unconventional measures” as interest rates fall towards zero.

Related articles:
Jim Rogers: ‘Sell any sterling you might have; It’s finished’ (Times)
Jim Rogers: ‘UK has nothing to sell’ (Financial Times):
“The City of London is finished, the financial centre of the world is moving east.”
Sterling hits 23-year low against dollar (Financial Times)
UK cannot take Iceland’s soft option (Telegraph)
Gordon Brown brings Britain to the edge of bankruptcy (Telegraph)

The Governor made clear that the Bank is preparing to turn soon to so-called “quantitative easing” measures – pumping money into the economy by buying bonds from banks, firms and the Treasury – after interest rate cuts to a record low of 1.5 per cent left it short of ammunition.

Read moreBank of England Governor paves way to start Bank print presses

Global Economic Crisis Accelerating

Jim Rogers: ‘UK has nothing to sell’ (Financial Times):
“The City of London is finished, the financial centre of the world is moving east.”

Jim Rogers: Obama administration run by people who caused the latest financial problems (BBC News)

The Obama Stimulus Plan Won’t Work (Lew Rockwell)

(Even Mr. Ambrose Evans-Pritchard is now alarmed!)

King paves way to start Bank print presses (Times Online)

Sterling hits 23-year low against dollar (Financial Times)

Geithner pledges ‘dramatic’ action (Financial Times)

Portugal says S&P downgrade due to global crisis (Reuters)

Singapore Economy May Post Biggest Decline on Record (Bloomberg)

Emerging markets face $180 bn investment decline (Business Standard)

French government to pump €6bn into ailing car industry (Guardian)

Japan’s ‘Severe’ Recession May Last Three Years, Yoshikawa Says (Bloomberg)

BHP Billiton to cut 6000 jobs and close mine (Times Online)

Eaton to Cut 5200 Jobs in a 2nd Wave of Reductions (Bloomberg)

Record redundancies push unemployment to 1.92 million (Times Online)

Ecuador to Cut $1.5 Billion in Imports to Defend Use of Dollar (Bloomberg)

Ex-Scots bankers could face Holyrood inquiry (Times Online)

Ireland’s Banks Sink With Decline of ‘Celtic Tiger’ (Bloomberg)

Patrick Rocca, ‘poster boy’ of Ireland’s Celtic Tiger, kills himself (Times Online)

Bankers accused in crisis could face trials in US (Guardian)

Hedge Fund Run by Ex-Car Salesman Is Scam, SEC Says (Bloomberg)

Federal Home Loan Banks may have to borrow from US (Los Angeles Times)

Merrill Clients Pulled $10 Billion in Fourth Quarter (Bloomberg)

Standard Life investors demand compensation after ‘cash’ fund invests in toxic debt (Telegraph)

Toyota Tops GM in Global Car Sales in 2008 (Washington Post)

Citigroup Makes Stock Incentive Awards to Executives (Bloomberg)

Fury as Northern Rock’s 4,000 workers to get £8.8million in bonuses

Northern Rock staff will receive a handy bonus for helping the bank repay its £26bn Government loan

Nationalised Northern Rock is paying its staff a 10 per cent bonus – funded by the taxpayer, it emerged today.

The state-run bank will hand out £8.8million in total to its 4,000 staff after they met targets on repaying the bank’s £26billion loan from the Government.

They returned a quarter of the money by December 31.

The average bonus appeared to be £2,000 but senior bankers were expected to get much bigger sums in line with their salaries.

The once-beleaguered bank has now paid back half of it’s loan and sights are now set on the new bonus – a further ten per cent – once three-quarters is repaid.

Lib-Dem Treasury spokesman Vince Cable said: ‘This seems an extraordinary action from a state-owned bank which still owes billions to taxpayers.

‘When millions of people are facing pay cuts, or worse unemployment, this seems extremely crass.’

Read moreFury as Northern Rock’s 4,000 workers to get £8.8million in bonuses

UK cannot take Iceland’s soft option

The British government faces an excruciating choice. It cannot let Royal Bank of Scotland and its fellow mega-banks go to the wall. Yet it risks being swamped by the massive foreign debts of these lenders if it takes on their dollar, euro and yen exposure by opting for full nationalisation.

Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or twice annual GDP – according to the Bank of England. The mismatch is perilous.

It is why sterling has crashed 10 cents from $1.49 to $1.39 against the dollar in two days. The markets have given their verdict on Gordon Brown’s latest effort to “save the world”.

Related article:
Gordon Brown brings Britain to the edge of bankruptcy (Telegraph)

Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125 basis points, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 basis points since last week.

Standard & Poor’s has quashed rumours that it will soon strip Britain of its AAA credit rating – an indignity averted even after the International Monetary Fund bail-out in 1976. But there was a sting yesterday as it responded to the Treasury plan for the banks. “Market confidence in the sector has eroded to such a degree that it is not clear whether these measures by themselves will bring about a material improvement,” the IMF said. “As a result, full nationalisation of some banks remains a possibility in our view.”

Spain was relegated from AAA to AA+ on Monday, and Spain’s public debt is a much lower share of GDP.

Read moreUK cannot take Iceland’s soft option

Jim Rogers: ‘Sell any sterling you might have; It’s finished’

Outside frontline politics, few people can move financial markets simply by opening their mouths. One such is Jim Rogers, an American investment guru who yesterday pushed Britain deeper into gloom and austerity with apocalyptic words about the pound and the country’s economy.

Hours after the Prime Minister pledged hundreds of billions of pounds to sustain Britain’s banks, Mr Rogers added vinegar to the already souring international sentiment about the rescue plan, its impact on the public purse and its capacity to cure the sickening economy.

“I would urge you to sell any sterling you might have,” Mr Rogers advised his army of investment followers. “It’s finished. I hate to say it, but I would not put any money in the UK.”

The reaction was instant – though it is impossible to say how much was attributable to Mr Rogers. The pound slumped, by almost 4 per cent at one point, falling to a seven-year low against the dollar and an all-time low against the Japanese yen.

Not since Black Wednesday in 1992, when the currency was expelled from the European Exchange Rate Mechanism, had there been such a steep fall in a day.

Read moreJim Rogers: ‘Sell any sterling you might have; It’s finished’