Wednesday, 7 November 2007
Investment in financial media
Take a look at an article in Le Figaro today highlighting investment in financial media both in France and globally.
Sunday, 4 November 2007
Press coverage on victims of subprime mortgages
Here is some coverage from US local media on the experiences of ordinary people taking out mortgages and the problems they are getting into potentially leading to foreclosures. This is driving the issue of subprime mortgages and the current problem facing all the major banks - how much provisions should they make for these. There is a particular category of sub-sub prime mortgages which some analysts are saying may have to be provisioned nearly up to 100%.
From Battle Creek, Michigan in the heart of the American industrial belt.
Finally a sobering perspective of the scale of the problem from the Sun Times Chicago Group with a US wide perspective on US repossessions. Potentially over a millon homes are likely to be involved in repossession orders over the coming 12 months up 100% from last year. Florida, California and Nevada have the highest rates.
Stories like these highlight how regional and local stories on this issue providing information from the front line will have an impact on financial markets as they are picked up by analysts and investors. Equally the Florida, California and Nevada housing markets will be closely watched over the next 12 months to see the point where better news (hopefully) starts to permeate through to financial markets and where reposessions start to head down.
From Battle Creek, Michigan in the heart of the American industrial belt.
Finally a sobering perspective of the scale of the problem from the Sun Times Chicago Group with a US wide perspective on US repossessions. Potentially over a millon homes are likely to be involved in repossession orders over the coming 12 months up 100% from last year. Florida, California and Nevada have the highest rates.
Stories like these highlight how regional and local stories on this issue providing information from the front line will have an impact on financial markets as they are picked up by analysts and investors. Equally the Florida, California and Nevada housing markets will be closely watched over the next 12 months to see the point where better news (hopefully) starts to permeate through to financial markets and where reposessions start to head down.
Thursday, 25 October 2007
Visit to Bloomberg
What struck me strongly as a result of our visit to Bloomberg's were the following:
1. Power of Bloomberg global network. 250,000 on a proprietary network is a very large and significant number. The importance and value of networks, both real and virtual, has become a major area of research in communications.
2. The importance of what Bloomberg's call Analytics which is the information at the heart of the Bloomberg Terminal. This is part news, part data, part knowledge and analysis.
3. The building in Finsbury Square which is a very visible statement of their strategy of being transparent as an organisation and bringing transparency to the workings of financial markets.
4. The ambiguity of their business model, with financial media, their most public face, only responsible for a very small share of their revenue.
1. Power of Bloomberg global network. 250,000 on a proprietary network is a very large and significant number. The importance and value of networks, both real and virtual, has become a major area of research in communications.
2. The importance of what Bloomberg's call Analytics which is the information at the heart of the Bloomberg Terminal. This is part news, part data, part knowledge and analysis.
3. The building in Finsbury Square which is a very visible statement of their strategy of being transparent as an organisation and bringing transparency to the workings of financial markets.
4. The ambiguity of their business model, with financial media, their most public face, only responsible for a very small share of their revenue.
Bank of England responds
Reply received from Bank of England to an email which I sent in via their web site, urging the Governor to take some action. This was just at the time of scenes of people queuing up outside Northern Bank brandches. Response below:
Dear Mr Phillimore
Thank you for your e-mail.
As you may know, the Bank has two core purposes - monetary stability and
financial stability.
Perhaps I can first explain the Bank's responsibilities regarding
monetary policy. Our task is to set interest rates to meet the
Government's inflation target of 2% (as measured by the 12-month
increase in the Consumer Prices Index). In setting the official Bank
interest rate, we have to judge the outlook for the economy and
inflation and decide what level of interest rates will ensure inflation
remains low and in line with the target of 2%. Our decisions involve
difficult judgements about the direction of the economy, the state of
overall demand and the pressure on prices. There is inevitable
uncertainty about the future. But what we are clear about is the need to
ensure that inflation stays low. Only by keeping inflation low can we
ultimately maintain the value of our money - in terms of what it will
buy - and avoid the cycles of high inflation, high interest rates and
recession which characterised previous decades.
The Bank's financial stability objective entails detecting and reducing
threats to the financial system as a whole. In pursuit of this objective
the Bank works closely with the FSA and HM Treasury under the terms of a
Memorandum of Understanding which formalises the responsibilities of
each institution. The turmoil in financial markets since the beginning
of August has increased demand for liquidity by the banking system,
leading to a rise in inter-bank rates. As a consequence effective
borrowing rates facing households and companies may also rise somewhat,
but it is too soon to tell how persistent and how large any change in
credit conditions for household and corporate borrowers will prove to
be. However, the MPC is continually monitoring these factors to
establish their likely effect upon consumer credit and, ultimately,
inflation. If the economy was to weaken more than we anticipate,
resulting in future inflation potentially falling below our 2% target,
then our likely policy response would be to reduce interest rates.
For further information you may like to refer to the Governor's recent
speech to the Northern Ireland Chamber of Commerce and Industry at
http://www.bankofengland.co.uk/publications/speeches/2007/speech324.pdf
Thank you again for your views.
Kind regards
Di Davies
Public Information & Enquiries Group
Bank of England
Tel: +44 (0)20 7601 4878
E-mail: enquiries@bankofengland.co.uk
Dear Mr Phillimore
Thank you for your e-mail.
As you may know, the Bank has two core purposes - monetary stability and
financial stability.
Perhaps I can first explain the Bank's responsibilities regarding
monetary policy. Our task is to set interest rates to meet the
Government's inflation target of 2% (as measured by the 12-month
increase in the Consumer Prices Index). In setting the official Bank
interest rate, we have to judge the outlook for the economy and
inflation and decide what level of interest rates will ensure inflation
remains low and in line with the target of 2%. Our decisions involve
difficult judgements about the direction of the economy, the state of
overall demand and the pressure on prices. There is inevitable
uncertainty about the future. But what we are clear about is the need to
ensure that inflation stays low. Only by keeping inflation low can we
ultimately maintain the value of our money - in terms of what it will
buy - and avoid the cycles of high inflation, high interest rates and
recession which characterised previous decades.
The Bank's financial stability objective entails detecting and reducing
threats to the financial system as a whole. In pursuit of this objective
the Bank works closely with the FSA and HM Treasury under the terms of a
Memorandum of Understanding which formalises the responsibilities of
each institution. The turmoil in financial markets since the beginning
of August has increased demand for liquidity by the banking system,
leading to a rise in inter-bank rates. As a consequence effective
borrowing rates facing households and companies may also rise somewhat,
but it is too soon to tell how persistent and how large any change in
credit conditions for household and corporate borrowers will prove to
be. However, the MPC is continually monitoring these factors to
establish their likely effect upon consumer credit and, ultimately,
inflation. If the economy was to weaken more than we anticipate,
resulting in future inflation potentially falling below our 2% target,
then our likely policy response would be to reduce interest rates.
For further information you may like to refer to the Governor's recent
speech to the Northern Ireland Chamber of Commerce and Industry at
http://www.bankofengland.co.uk/publications/speeches/2007/speech324.pdf
Thank you again for your views.
Kind regards
Di Davies
Public Information & Enquiries Group
Bank of England
Tel: +44 (0)20 7601 4878
E-mail: enquiries@bankofengland.co.uk
Tuesday, 16 October 2007
Fox Business
Appropriately for the first course, and just prior to the visit to Bloombergs, we have a major media giant, Fox, part of News International, launching a dedicated business TV channel and web site. News International has just bought the Wall Street Journal further strenghtening the Group's position in this sector. Take a look at the coverage
which highlights that Fox Business is taking a different, lighter viewer on business coverage. You might want to take a look at the web site
which highlights that Fox Business is taking a different, lighter viewer on business coverage. You might want to take a look at the web site
Thursday, 11 October 2007
Transparency and hedge funds
The "great and the good" in the UK hedge fund world, have decided that the political and regulatory pressure is getting too great and it is time that the veil of mystery is lifted. Not too much (probably) but just enough to satisfy stakeholders and regulators.
The Hedge Fund Working Group has come out with a report and recommendations. Interestingly this body currently does not appear to have a web site, at least a search on Google did not turn one up. However the Wall Street Journal has a copy of the report embedded in its coverage of the report.
Key recommendations of the initial report suggest that there are four areas of disclosure which need to be addressed:
Investment policy, commercial policy, performance measurement and disclosure to lenders. The report looks set to also provide us with a good insight into how hedge funds operate.
There is no doubt a thread runs from the subprime crisis to this Report even though this was set up over six months ago. Regulators and bankers are concerned about understanding better the location of risk with more sophisticated financial products. There is also political pressure growing in Europe in particular Germany at the role of hedge funds in takeovers.
It is interesting to see a survey in 2003 of US hedge funds which suggested that transparency only where it did not impact on the proprietary nature of the fund was necessary. Those days are long gone. Greater disclosure, if the markets are operating efficiently, will result in reduced profitability for the sector, but that is a process which all markets go through in their development.
Other links:
US regulation
US financial blog
Germany and hedge fund concerns
The Hedge Fund Working Group has come out with a report and recommendations. Interestingly this body currently does not appear to have a web site, at least a search on Google did not turn one up. However the Wall Street Journal has a copy of the report embedded in its coverage of the report.
Key recommendations of the initial report suggest that there are four areas of disclosure which need to be addressed:
Investment policy, commercial policy, performance measurement and disclosure to lenders. The report looks set to also provide us with a good insight into how hedge funds operate.
There is no doubt a thread runs from the subprime crisis to this Report even though this was set up over six months ago. Regulators and bankers are concerned about understanding better the location of risk with more sophisticated financial products. There is also political pressure growing in Europe in particular Germany at the role of hedge funds in takeovers.
It is interesting to see a survey in 2003 of US hedge funds which suggested that transparency only where it did not impact on the proprietary nature of the fund was necessary. Those days are long gone. Greater disclosure, if the markets are operating efficiently, will result in reduced profitability for the sector, but that is a process which all markets go through in their development.
Other links:
US regulation
US financial blog
Germany and hedge fund concerns
Thursday, 4 October 2007
Two sides of the coin
Last week we looked at the financial news process, this week we look at the investor relations and financial communications. A good example of the different perspectives on the same story can be seen in how Marriott, the major US global hotel chain operator's latest quarterly results have been covered by CNBC
Then take a look at the financial quarterly announcement made by Marriott's financial PR and investor relations team which set off the coverage of the story by financial media and commentators. You have to go down a long way before you see the announcement that quarterly profit is down compared with the same figure last year - 12 paragraphs down. Interestingly debt is up significantly over a US1bn over the last 9 months. Overall headline for the story is: Marriott International Reports Strong Third Quarter Results. Spin or a fair assessment of underlying trends? Has the media just concentrated too much on the net profit figure? A good contrast of the different agendas for different parts of the communications chain. Remember what the journalists were saying about how skeptical they were of company announcements in last week's academic paper.
What has been the market reaction to the story. Thursday pm, Marriott is trading at 43 dollars, (CNBC) down nearly 3% on the start of the day and down nearly 9% on the year to date. The market is perhaps suggesting that the press are closer to the heart of the story than the Marriott IR team.
Then take a look at the financial quarterly announcement made by Marriott's financial PR and investor relations team which set off the coverage of the story by financial media and commentators. You have to go down a long way before you see the announcement that quarterly profit is down compared with the same figure last year - 12 paragraphs down. Interestingly debt is up significantly over a US1bn over the last 9 months. Overall headline for the story is: Marriott International Reports Strong Third Quarter Results. Spin or a fair assessment of underlying trends? Has the media just concentrated too much on the net profit figure? A good contrast of the different agendas for different parts of the communications chain. Remember what the journalists were saying about how skeptical they were of company announcements in last week's academic paper.
What has been the market reaction to the story. Thursday pm, Marriott is trading at 43 dollars, (CNBC) down nearly 3% on the start of the day and down nearly 9% on the year to date. The market is perhaps suggesting that the press are closer to the heart of the story than the Marriott IR team.
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