Financial Mail

Lloyds faces new rights issue delay -- 25 October 2009,

Lloyds Banking Group is poised to launch an 11bn rights issue to help it escape the Government's Asset Protection Scheme, but it will be forced to wait at least until the end of this week for the Treasury to give its verdict.

Despite rumours that Chancellor Alistair Darling would make up his mind this weekend, Government sources said a decision would take much longer.
It is understood that the rights issue would be at a discount of almost 50% to the market price for Lloyds shares of 96p.

The bank also plans to raise a further 14bn by converting some of its debts into shares, selling off non-core businesses and issuing convergent capital - debt that could convert into shares.

With 25bn raised, Lloyds would claim that it could weather the recession and would not need to join the APS, the State insurance scheme for toxic bank debts.

Government sources said Lloyds' joining the APS was still 'Plan A'.

Under that scheme Lloyds will pay the Treasury a 15.6bn premium in exchange for the Government bearing the bulk of any losses on the bank's portfolio of 260bn worth of potentially toxic loans and assets.

The bank would pay the premium by issuing new shares to the Government, so joining the APS would boost the State's stake from 43% to more than 60%.

Raising its own new capital would avoid outright State control, but Lloyds would need the Government to stump up an extra 5bn of taxpayers' money to play its part in the rights issue.

The Government would also demand a break fee of at least 1bn from Lloyds for quitting the APS because, even though it has not yet signed up, the bank has been enjoying implicit protection since it said it would join the scheme eight months ago.

A Treasury spokesman insisted that the decision on whether to let Lloyds out of the APS would be made on the best likely return to taxpayers.

But banking observers suspect the Chancellor will inevitably weigh up the political price of his options.

From The Sunday Times -- October 25, 2009

MPC told: dont panic over recession figures

Economists have warned policymakers not to be fooled into pumping too much money into the economy on the back of Fridays unexpectedly weak gross domestic product figures.

The 0.4% drop in GDP in the third quarter, which went against City and Bank of England expectations of a 0.2% rise, prompted speculation about a further boost to the money supply by the Bank through quantitative easing.

However, analysts said that the economy was stronger than the official figures suggested. Chris Williamson, chief economist at Markit, which produces the monthly purchasing managers indexes, said he was bemused by data suggesting Britain was still in recession while other European countries were pulling out, and that the result could be serious policy errors.

The whole reason central banks began using surveys like these, beginning with the Federal Reserve in the 1930s, was to get a true picture of what is happening, he said.

Economists at Goldman Sachs published a detailed research note saying that the GDP figures were not only inconsistent with the purchasing managers surveys, which suggested growth of up to 0.7% in the quarter, but that they were hard to square with other official data.

Kevin Daly, an economist at Goldman Sachs, said: Does this data tell us anything about what is really going on in the economy? Probably not.

Part of the criticism of the figures was because economists got their predictions wrong, but it also reflected deeper concern about the datas reliability. Treasury economists, who had expected a flat third quarter, were said to be astonished.

In the past the Bank has expressed unhappiness about the reliability of data from the Office for National Statistics and attempted to backcast the figures, based on the assumption that they are likely to be revised. This is just a first estimate. These numbers will be revised, one official said of the latest announcement.

However, they could tip the balance on the Banks monetary policy committee (MPC) in favour of more quantitative easing when it meets on November 5. One MPC member, Adam Posen, hinted in The Sunday Times last week that the programme needed to go beyond the 175 billion so far agreed.

Paul Tucker, a deputy governor of the Bank, said last Thursday that it would not be clear until next summer whether the official measures had helped the economy to grow.

Figures out this week are expected to show that America pulled out of recession in the third quarter, with annualised growth of 3% or more. Also this week, the Bank is expected to report another rise in monthly mortgage approvals.

I must admit I have watched your chart things with interest, Master RSI. Don't get incvolved in the Fundie thing though. ;-)))))

Things looking better at the moment as the Indicators are positive, and the chart is signaling
the CUP and Handle formation reaching the end of it soon.

Cup with Handle

As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance.

Cup-and-handle Pattern
A cup-and-handle is a reversal pattern formed when a market makes a rounded bottom (the "cup"), begins to rally, pulls back (the "handle"), and resumes the uptrend.


Below is an example of the Cup and Handle pattern lines.

and sweet dreams

Lloyds sells Employee Equity Solutions business

Lloyds Banking Group is selling its Employee Equity Solutions to Computershare for up to 40m.

EES offers a complete share plan service to over 400 companies in 100 different countries.

This includes a full range of share plans; such as all-employee, international sharesave plans, performance-based executive plans, UK tax approved plans and structured offshore trust and administration services.

Computershare will continue to service all existing clients.

EES employs approximately 420 people across three main locations: Halifax, Jersey and Purley and it is expected that they will transfer, on completion of the sale, to Computershare.

Lloyds Banking Group has consulted with the unions (Accord, LTU and Unite) and they will continue to be consulted throughout the transfer process.

The transfer is expected to complete by the end of the year, subject to regulatory approval.

looks as though cup has been spilled........another DOWN DAY

and still that useless ED isstill being paid dam disgrace

rather polite using useless......mind you another yank idiot bischoff is there too now

Lloyds in talks to hand HBOS land assets to housebuilders
Bellway, Barratt and Persimmon linked to tentative discussions over 'land giveaway' plan
Proposals could prevent further crash in land values sparked by sale of HBOS's vast holdings

Lloyds Banking Group is in preliminary talks to give away swaths of its land assets built up during HBOS's disastrous investment and lending strategy.

Lloyds is tentatively discussing handing over major HBOS land holdings to a select group of Britain's leading housebuilders. The plan would see thousands of new homes built in a series of profit-sharing joint ventures, with Lloyds recouping cash once the houses have been sold.

In recent weeks, the FTSE-250 quoted builder Bellway has approached Lloyds to discuss the proposal. Other builders including Barratt Developments and Persimmon are also thought to be involved in talks.

"This is beginning to stir," said a senior executive at one of the UK's leading housebuilders. "[Talks] are devoid of specifics and are tentative but it's a logical step."

Formal agreements will only be signed once Lloyds enters the government's asset protection scheme or raises cash in the City through a rights issue. There is increasing speculation that Lloyds' 23bn capital raising plan is nearing completion, with a 12bn rights issue and 11bn new loan package designed to boost the fallen bank's shattered balance sheet.

For Lloyds and the bombed-out housebuilding sector, "the land giveaway" plan is tempting as it would prevent a further crash in land values sparked by a mass sale of HBOS's vast land holdings, and so protect asset valuations on bank and construction firms' balance sheets.

HBOS's commercial loan book grew to 109bn by 2007, with a huge proportion linked to commercial property and housebuilding. It is likely HBOS owns enough land to build well over 150,000 houses double the number that will be built in England and Wales this year.

For the building sector, which has laid off about 250,000 workers in the recession, the plan would also ensure steady work with little risk at a time when the UK is on course to see the lowest number of homes built since the second world war.

A senior source close to discussions between Bellway and Lloyds said: "There's been dialogue. Lloyds is trying to assimilate what it has got and is looking at forming joint ventures. And Bellway has made a success of working with Tesco on building homes, so it is interested."

Under Peter Cummings, its former head of corporate banking, HBOS became the property industry's bank of choice. It lent cash to private equity and management buyouts of building firms and took equity stakes in businesses such as Crest Nicholson and McCarthy & Stone.

The collapse of the property market was partly responsible for the forced sale of HBOS to Lloyds 13 months ago. Inheriting vast tracts of land could also cause problems for Royal Bank of Scotland, which could copy what Lloyds is doing, as neither bank has the internal expertise to maximise profits from property

http://www.guardian.co.uk/business/2009/oct/25/lloyds-hbos-land-builders

m
ref your posts on the other lloy thread, have you posted these on the wrong thread in error? why not on this one? i must say it is an easy mistake when we have 2 threads running at same time.
i do hope you wont think me "stalking " you. its not something i had ever thought about or considered, just never entered my thought process.
you may like to read page 22 in its entirety and decide if there is or is not a "stalker" on the other thread . please decide for yourself if we have a "stalker" or not, and i if so who it might be.
as always please do your own research.
regards
jkd

Is Wall Street about to sneeze?

Oct. 26 (Bloomberg) -- The U.S. Standard & Poors 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.

Declines are likely because banks will need to sell more shares to raise capital, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloombergs Tokyo office. A 40 percent tumble from the S&P 500s price at the end of last week of 1,079.60 would take the gauge to 647.76, below its March low.

Markets are very vulnerable to an end of quantitative easing, said Smithers, 72, who recommended avoiding stocks in 2000 just as the U.S. benchmark entered a two-year bear market. Central banks, theyve got to stop some time and if that happens everything will come down.

Central banks from the Federal Reserve to the Bank of England last year embarked on unprecedented measures to flood credit markets with cash in order to rescue the global financial system from the worst crisis since the Great Depression.

Those purchases may be nearing an end, said Smithers, who worked for 27 years at S.G. Warburg & Co. where he ran the investment management business. The Feds emergency liquidity programs including the Term Auction Facility and commercial paper purchases have shrunk as the central bank completes the scheduled purchases of housing debt and Treasuries. Bank of England policy makers voted unanimously at their latest meeting to leave the asset purchase program unchanged, minutes showed.

Asset Prices

Asset purchases have doubled the size of the Feds balance sheet to $2.1 trillion since the start of the current financial crisis. The Bank of England has spent 175 billion pounds ($286 billion) over the last seven months to rescue the economy.

The boost to asset prices globally helped send the S&P 500 up by 60 percent from its 12-year low on March 9. Crude-oil prices have more than doubled from last years bottom in December, reaching as high as $82 a barrel. This month, a Hong Kong apartment sold for a record price-per-square foot.

The S&P 500 climbed 1.1 percent to 1,090.89 as of 10:07 a.m. today in New York.

Quantitative easing has set off another sharp, and so far containable asset bubble, Smithers said. But if it gets too high and starts to come down then well go straight back into recession.

Stopped Buying

The economist said that he stopped buying equities in the 1990s because of expensive valuations and began purchasing them again only for a brief period during the lows of the current crisis.

The worst performance by U.S. stocks compared with junk bonds since at least 1986 is making some investors even more bullish on equities. While owning debt in the riskiest companies has paid about the same as the Standard & Poors 500 Index over the last 23 years, bonds are returning more than twice as much in 2009, according to Merrill Lynch & Co. and Bloomberg data.

Barclays Plc and ING Groep NV are increasing share purchases on speculation that improving corporate earnings will prolong the rally in equities and shrink the gap again. Profits for S&P 500 companies are forecast to climb 53 percent over the next two years as the Federal Reserve holds interest rates close to zero to end the worst recession since the 1930s, according to analyst estimates compiled by Bloomberg.

2000 Call

Smithers, along with fellow economist Stephen Wright, argued that U.S. equities were overvalued in a March 2000 book the two co-authored entitled Valuing Wall Street. The S&P 500 Index plunged 49 percent over 2 1/2 years from a record high reached that month.

He based his prediction in the book on Tobins Q, an indicator of whether the market is overvaluing or undervaluing company assets compared with their replacement cost. He uses both the Q ratio, as well as a cyclically adjusted price-to- earnings ratio compiled by Yale Universitys Robert Shiller, for his estimate that U.S. shares are 40 percent overvalued.

In his latest book published in July, Wall Street Revalued, Smithers argues central banks need to police asset prices such as equities, real estate and debt in order to prevent the bubble and crash cycle seen in recent years.

Imperfectly Efficient

In the book he proposes a successor to the efficient markets hypothesis, naming it the imperfectly efficient market hypothesis. Smithers contends that asset prices rotate around a fair value level that can be objectively measured, whereas efficient market theorists say assets are always valued at the correct price and therefore need no regulation by authorities.

Federal Reserve Chairman Ben S. Bernanke said on Oct. 19 asset bubbles present a challenge that Asian governments will have to address in the future. That contrasts with his 2002 statement that monetary policy cant be directed finely enough to guide asset prices.

Not all equity markets are as overpriced as the U.S., Smithers said. Japan may be the worlds cheapest major market though he doesnt forecast short-term gains from betting on the nations stocks.

Profit margins at Japanese companies are likely to improve as companies invest less, lowering depreciation costs, he said. Depreciation eats up about two-thirds of earnings in Japan, compared with less than half for U.S. corporations, according to Smithers. Firms plan to cut capital spending 10.8 percent this year, the Bank of Japans quarterly Tankan survey released this month showed.

Investment, Depreciation

Its quite likely that Japan is the only significant market in the world that is not seriously overvalued, he said. When investment comes down, depreciation comes down.

The economist also said banks such as Goldman Sachs Group Inc. will likely break up when they become subject to sliding- scale capital requirements that penalize them for being too large. Rising profits at financial institutions has largely been the result of shrinking competition in market-making, which has in turn provided banks with inside information on trading patterns, Smithers said.

Market-making has become a doomsday machine, Smithers said. People are arrogant and think they can do wonders and theyll be all too happy to split off. And you should raise the capital requirements until they do split off.

60p looks like good support

As long as over half the world is experiencing growth, over 7%, we will now face the problems you are discussing here. Growth and increasing land price in China, India, and many other highly populated countries will helpthe developed countries.

Remember people over there have no debt, and can buy the same houses in USA at cheaper price than in their own countries.

I don't think so ahoj.

masters profits will soon be gone

Handle has just fallen off his cup.

if he's a day-trader, then maybe not, but i must say i find (a) his method far too esoteric for me and (b) i cannot believe peeps can actually make decent profits day in, day out as a day-trader - it's too akin to backing horses as far as i can see, though i am sure someone will highlight otherwise

It's definitely possible, cynic, particularly using margin, but you have to watch the screen all day and be ruthless. I decided many years ago now that intraday wasn't what I wanted so trade in timescales from days to weeks/months. Some are actual shares and some are CFDs.

It suits me and my lifestyle far better. ;-))