Inside the world of business
Those who kept faith in the euro reap rewards
SUMMER IS usually the silly season, but yesterday's Handelsblattbusiness daily served up that dish Germans do best: schadenfreude.
They took their readers back to last May: the euro is under serious pressure as, with drops of Greek blood in the euro zone waters, international money market sharks are driving themselves into a frenzy by betting against the single currency.
“They are conducting a war against the euro zone,” noted German banking regulator Jochen Sanio tersely, as financial experts predicted the euro would be driven to just $1.10 or even parity with the dollar. What a difference a quarter makes: the euro was up to $1.32 yesterday and the speculators are, according to analysts, licking their wounds.
“The euro is rising because catastrophe was averted and the speculators have gone to rack and ruin,” said hedge fund manager Lee Munson to the Handelsblatt, enjoying a tidy profit after deciding to bet against the flow, and on a rising euro.
Other funds who bet against the euro spotted that the wind had changed and changed their bets just in time. Autonomy Capital, a fund headed by a former Lehman Brothers executive, turned an 18 per cent profit. Blue Crest Capital, a large London-based fund, also jumped in time, the newspaper reported, and reported an 11 per cent profit in the first half of the year.
Yet not all were so quick to act. A study by the financial information service Hedge Fund Research found that funds have lost on average 1.2 per cent of their value this year: whereas a record 100,000 funds bet on a falling euro in May now it is just 24,000.
Crucial to the change in the euro’s fortunes, according to several hedge fund managers, is the €750 billion rescue fund agreed by EU leaders in early May.
“The fund prevented the feared core meltdown,” said Dorothea Huttanaus of Germany’s BZ bank to the paper.
An anonymous hedge fund manager quoted by the Handelsblattagreed that "the crisis in the euro zone is over for the moment, at least as an event that moves markets . . . The fundamental problems are still not solved but the EU has bought itself time," added the manager. "It'll be another 12 to 18 months before the problem flares up again."
Taxpayer taken for a ride by CIÉ’s mysterious ways
HOW Is possible that a State company can lose €77 million and no one cares? The answer is that it has to be the State transport company CIÉ, which despite receiving €754.5 million in public funds last year feels under no compulsion to explain how it has spent all this taxpayer money.
In keeping with its usual practice the company quietly produced its annual report and accounts for 2009 last week and told nobody. Unlike its peers, the other large State companies, CIÉ eschews any sort of publicity and thus avoids scrutiny. This paper only obtained a copy of the accounts after it contacted the company following an article in another publication in which the group executive chairman John Lynch disclosed selected figures. No mention was made of the annual report.
It’s a sensible enough policy from the company’s perspective, particularly when you are the public transport business.
The logic is not quite so compelling from the vantage point of the taxpayer or the consumers who pay for and depend on the organisations three subsidiaries, Iarnród Éireann, Bus Éireann and Dublin Bus.
It is hard to see how they benefit from CIÉ being allowed operate is quasi-secrecy rather than being subjected to the sort of public scrutiny that you might expect given the importance of the company.
They might be interested in knowing the justification for the huge State subsidies and how efficiently or otherwise they are spent. Equally, they might be curious about the extent to which it fulfils its public service mandate in return.
They might also wonder about the company’s pension deficit of €547 million – some €422.6 million of which was incurred in 2008 – which remains an unexplained mystery to most.
CIÉ enthusiasm for avoiding public scrutiny is one thing, but the willingness of the Minister of Transport and his department to go along with it is another.
But Noel Dempsey seems content with the current situation. Could this be because he does not fancy having to explain what he is going to do about anything in the annual report that does not please the travelling public?
AIB’s Doherty adds voice to business-lending debate
AIB MANAGING director Colm Doherty waded into the business-lending debate yesterday saying the issue was firmly one of lack of demand rather than supply.
He was armed with a fairly convincing array of numbers to back up his assertion. Demand for credit from SMEs in the first quarter of 2010 was behind the levels seen in the first quarter of 2009, he said.
In addition AIB – which has 41 per cent of the SME market – had over €1 billion of working capital facilities agreed with SME customers that had not be drawn down.
Doherty’s figures were quickly overtaken – but not contradicted – by the latest data from the Central Bank which indicated that there might have been a reversal in the second quarter. New lending to businesses exceeded loan repayments in May and June for the first time in 10 months, according to the banks.
What the Central Bank cannot tell us it whether this came about as a result of increased demand or the availability of more credit, or even a combination of both.
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Today
Results: Aviva, Kraft Foods, Ladbrokes, RSA Insurance, Smith Nephew,Tesco, Unilever, Zurich Financial Services
Meeting: CC agm
Other: The CSO is due to release Live Register figures for July
