Tuesday, October 18, 2011

UPDATE 1-Economy weighs on Steel Dynamics forecast

Oct 18 (Reuters) - Steel Dynamics Inc likely will post fourth-quarter results that are little changed from three months earlier, when it was hurt by weak demand for automotive industry products and consumer appliances.The Fort Wayne, Indiana-based steel producer and metals recycler reported a third-quarter per-share profit that missed Wall Street estimates by a penny. Revenue was higher than expected.”Current financial expectations for Q4 suggest a similar financial result as Q3,” said Chief Operating Officer Mark Millett in a conference call on Tuesday.Steel use is expected to increase 6.5 percent this year, less than half as much as 2010’s growth rate of 15.1 percent, the World Steel Association said in a report last week.2012 does not appear likely to buck any steel trends.”We’re probably going to have some progress made during that year, but it’s not going to be substantial,” said Chief Executive Keith Busse, whom Millett will succeed as CEO next year.Steel Dynamics was founded in 1993. It started producing steel in 1996, and competes with U.S. Steel , AK Steel and Nucor Corp .The company’s shares, which have lost about 40 percent of their value this year, were up 3 percent at $11.20 on the Nasdaq stock market.

Daimler says sticking with 2011 outlook

Daimler shares pared losses and were down 1.5 percent at 35.98 euros by 1000 GMT after dropping as much as 4 percent earlier during the session.Daimler last said it expects 2011 earnings before interest and tax (EBIT) to very significantly exceed the year-earlier level.

Monday, October 17, 2011

Adventures with FDIC secrecy, cont.

Last week, we saw how the Federal Housing Finance Agency was above the law, with the government seemingly having no ability to tell it what to do. This week, it’s the FDIC. In the wake of its obstreporous obstructionism upon receipt of FOIA requests, the FDIC’s smug above-the-law impunity is now coming to light: JunketSleuth worked for months with an attorney from the Office of Governmental Information Services, which mediates disputes between federal agencies and people requesting public records under FOIA. The attorney was able to help persuade a number of other agencies to provide JunketSleuth with electronic and paper travel records. But she was unable to get the FDIC to provide the exact same types of records… Federal agencies routinely violate FOIA, as they’ve done since the law was created decades ago. Still, few agencies have rejected requests identical to those that others have granted, especially when the government’s own attorneys (in this case at OGIS) have worked with the agencies to secure access to the records. This letter, in particular, from the FDIC simply drips with contempt and condescension for anybody daring to file a FOIA from the FDIC. And the long history of correspondence in this case clearly exhibits an utter lack of goodwill at the FDIC, or any desire at all to comply with the spirit of the FOIA law. In general, it’s the financial agencies within the government — the FHFA, the FDIC, the Federal Reserve (especially the NY Fed, which considers itself not to be a public entity at all), and of course Treasury — which are by far the worst when it comes to transparency and disclosure. We’re constantly told that certain information is commercially sensitive, for example, only to discover when it finally does get disclosed that there’s nothing commercially sensitive about it. I’m not sure how to fix this. The White House doesn’t seem to be able to change anything: Barack Obama, for instance, released an executive memo on his inauguration day, making it clear that the Freedom of Information Act “should be administered with a clear presumption: In the face of doubt, openness prevails.” The financial arms of government barely blinked, and continued in their secretive ways. But in this one particular case, at least, I think it might help if a sympathetic journalist started asking for the FDIC’s travel records independently from JunketSleuth. The FDIC doesn’t consider JunketSleuth a legitimate news organization, and seems to be treating it with especial prejudice. Would they send these kind of letters to an established mainstream news outlet which asked for the exact same information? There’s only one way to find out. Update: Andrew Gray of the FDIC responds by email: I’m regretting not getting involved the first time that this was raised but wanted to commit to you that I will personally look into it to see what the issues are.  From my experience, the FDIC is strongly in favor of the transparency required in both the letter and spirit of FOIA.  I know of at least two recent sensitive requests from your Reuters colleagues that were handled to their full satisfaction and have worked with numerous other news outlets and other outside individuals to ensure that their requests are handled appropriately and expeditiously.  While I still need to learn more about the facts in this specific request, I would submit that it is a bit of a stretch to cast a sweeping generalization about our commitment to FOIA based on this one case. Particularly during the last few years, the FDIC has consistently demonstrated is commitment to openness and transparency.  We make public extremely detailed data about the banking industry, our P&A agreements from failed banks, structured sales and other programs.  During the crisis, we led the development, implementation and management of the Temporary Liquidity Guarantee Program, including posting public monthly reporting on debt issuances.  As an agency, we have led an unprecedented and voluntary transparency initiative throughout the implementation of Dodd/Frank, including posting the names and affiliations in all meetings with outside groups.  Our mission is public confidence – and our reputation as an agency has been enhanced by our willingness to be forthcoming with the public about our actions and views.

Thursday, October 13, 2011

RPT-Gross’ PIMCO makes a big move into mortgages

NEW YORK Oct 13 (Reuters) - Bill Gross, manager of the world’s largest bond fund, ramped up buying of mortgage-backed securities in September on the likelihood the Federal Reserve’s reinvestment program in those securities will boost prices significantly.Gross increased mortgage debt to 38 percent of assets in his $242 billion PIMCO Total Return Fund in September, from 32 percent in August, as the U.S. central bank announced last month that it “will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”PIMCO’s latest bet on mortgages isn’t going unnoticed.Gross, who helps oversee $1.2 trillion as co-chief investment officer at PIMCO, made headlines earlier this year and came under heavy criticism when the manager widely known as the “bond king” bet heavily against U.S. Treasuries — one of the biggest outperformers of this year.His move into mortgage-backed securities also comes as the PIMCO Total Return fund’s cash equivalents and money-market securities fell to negative 19 percent September, from negative 9 percent in August.In having a so-called negative position in cash equivalents and money-market securities, it is an indication of derivative use and short-term securities being put up as collateral as a way to boost leverage and increase the fund’s holdings in bonds with longer maturities such as mortgage-backed securities, Treasuries and corporate bonds, according to Eric Jacobson, director of fixed-income research at Morningstar who has covered PIMCO for more than a decade.Over the years, some analysts in the fixed-income world have pointed out that Gross’ use of derivatives to boost leverage and exposure to higher-yielding assets is what distinguishes the Total Return Fund from an ordinary plain vanilla bond fund.”One very basic thing to know, too, is that PIMCO classifies anything with a duration of one year or shorter as cash — regardless of sector,” Jacobson added.Jacobson said after careful examination of the PIMCO fund’s effective duration of 7.14 years — about double over the last six months — “it doesn’t necessarily mean PIMCO raised their pure interest-rate risk to the United States. They didn’t double down on Treasuries.”Rather, PIMCO took on “loose” interest rate risk to other credit and government markets, he said, noting that the Total Return fund increased exposure in non-U.S. developed and emerging markets securities in September.Duration is a bond’s sensitivity to interest rate fluctuations, and going longer duration is an investment strategy when rates are expected to remain low or drop further and vice versa.All told, the PIMCO Total Return fund’s bad call on Treasuries earlier this year has cost it.It is up only 1.06 percent year to date versus the benchmark BarCap U.S. Aggregate Index which is up 3.99 percent. But on a three-year basis, the fund is up 10.14 percent against the benchmark’s 9.36 percent returns. The fund has also held up well over the last five years, with the fund up 7.80 percent versus the BarCap’s 5.48 percent returns.