TARP now more than 90% repaid, but how?

You might have thought that a headline of TARP almost being repaid would be met by cheers in the markets and I seem to remember that at the time some thought that the money going to TARP would never be repaid or that as the financial world was ending there would be worse to come. Regardless of the rights and wrongs of the various bailouts, and there is a lot to be annoyed about in rescuing the feckless, it might come as a surprise to some that TARP is apparently 90% repaid.

The U.S. Treasury said Tuesday more than 90%, or about $380 billion, of the $418 billion spent under the Troubled Asset Relief Program (TARP) during the financial crisis has been recovered through repayments and other income.

http://www.marketwatch.com/story/tarp-program-now-more-than-90-repaid-us-2012-12-11

The trouble is, does this tell us the entire story? Perhaps not, back in July of this year it was reported that many of the banks that had borrowed TARP funds were in fact repaying with further Fed loans.

Of the 707 banks that received taxpayer money from the government's Troubled Asset Relief Program starting in 2008, also known as TARP, about half have repaid the Treasury.

However, 137 of those banks used a government-loan program to repay their taxpayer debts, according to the quarterly report to Congress of the Office of the Special Inspector General for TARP.

Of the 325 banks still propped up with taxpayer money, 203 have missed dividend or interest payments, with some missing as many as 13 payments since receiving capital injections at the height of the financial crisis, the report said. 

http://www.msnbc.msn.com/id/48313448/ns/business-us_business/t/many-tarp-banks-used-federal-loans-repay-taxpayer-debts/

The financial system is such that as usual all is not necessarily as it seems on the surface.

IG Group, still looking for volatility

A while back I posted that spread betting provider IG Group seemed to be a company that needed volatile markets to help it go forward (IG Group, a company that needs volatility), today we see more evidence to back this up.

Revenue in the period was £169m, 14% lower than the prior year's. Sales for the second quarter, at £87.5m, were 7% higher than in the first quarter although still 9% behind the prior year. 

The group said the performance reflected the particularly tough comparators which the group faced due to extreme levels of volatility in financial markets in 2011 and the continuing subdued markets which were impacting client activity currently. 

During the period the business did respond well to short spells of heightened market activity and continued to grow market share in its biggest markets. 

http://www.digitallook.com/news/20557816/First_half_revenue_falls_at_IG_Group_as_volatility_remains_muted.html?username=&ac=

The chances are that if and when the markets become volatile again, IG and other spread betting companies will probably do well, but what do they offer if it doesn't happen? In the case of IG a decent enough dividend, but they need clients to want to trade and subdued markets seem to dampen that. The unfortunate thing for spread bettors however, is that while they may well crave volatility most of them are probably going to lose if it happens.

Average Brit to make a million by 56 according to the Pru'

No, that doesn't mean that every Brit will win the lottery by the age of 56, but according to the Prudential that's the amount of money that Mr and Mrs Average would expect to earn by that age. For men it's even better, you should expect to reach the figure by 50 while for women, still lagging behind in the money equal opportunities stakes, it is 72. By 65 you should expect to hit the £1.2 million mark. Along the way however, you will on average pay £137,101 in income tax and £84,129 in income tax mark 2 otherwise known as National Insurance.

Of course, most of the above will be well and truly understated if you happen to be in your 30's now given the rate of monetary credit inflation that banks and central banks like to create. Winning a million on the lottery probably won't be much help in 50 years time either, by then it will probably be lottery billions.

http://www.moneyvista.com/news/news-articles/average-brit-to-make-a-million-by-age-56/

Tesco to give up on the USA?

Tesco reported to the market today and while expectations were low on what to expect, the company did actually say something that the city has probably wanted to hear for some time, that the company is considering what to do with its loss making US operation, Fresh and Easy.

It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.

We have therefore appointed Greenhill to assist with the review of options. In recent months, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.

http://www.digitallook.com/news/rns/20544734-10091/TSCO-Strategic_Review_of_Fresh_Easy_html

The chances are that this side of the business will be sold or at the very least a US based partner will be taken on, I expect it will be the former. There is a good chance that once this decision is finalised, Tesco's share price could see a boost, if only because it is one less negative for them to worry about. They got out of loss making Japan, so no one should be surprised if and when they do exit the US.

AIM stocks in ISA's from next year?

For UK investors perhaps one of the best things to come out of today's Autumn statement is that from next year AIM stocks may be allowed into ISA's. I say may because while the Twittersphere was saying that they would be allowed from 2014, it was clear that many hadn't read or heard what Chancellor Osborne actually said, so here it is.

And we will consult on allowing investment in SME equity markets like AIM to be held directly in stocks and shares ISAs, to encourage investment in growing businesses.

http://www.telegraph.co.uk/finance/budget/9724128/Autumn-Statement-2012-the-full-speech.html

So, it actually says that he will consult about allowing AIM stocks to be held in ISA's. Chances are that it may well happen, but consult means what it says, they could decide against it - after consultation.

 

FTSE100 Update

Surprisingly perhaps, the FTSE 100 is actually looking more positive on the longer term charts. It's a surprise because over the weekend lots of negative comment regarding the US fiscal cliff seem to dominate the financial news. So far this week the markets seem to have taken it in their stride. In part this is a continuation of the recent recovery trend that can be seen on the charts, but it also might be suggesting that despite all the political position taking by the politicians, the markets are pricing in a deal that has to happen. There is some justification for this as history shows.

....seasoned Washington hands say that once this rather gloomy back and forth has played out - and it might take another week or more - the work towards reaching a solution that both sides can sell to their parties and their lawmakers will begin in earnest.

A deal by Christmas, a week before the fiscal cliff deadline, remains uncertain but not out of the question. The so-called fiscal cliff is a combination of U.S. government spending cuts and tax increases due to be implemented under existing law in early 2013 that may cut the federal budget deficit but also tip the economy back into recession.

The pattern of little happening until very close to a holiday is well-established on Capitol Hill. The past three pre-Christmas seasons brought important eleventh-hour developments on health care in 2009, tax cut extensions in 2010 and the payroll tax holiday in 2011.

It's so ingrained that many Capitol Hill veterans routinely, and sometimes mistakenly, dismiss as theater pronouncements of progress or stalemate that occur more than a few weeks before the holiday.

"The Congress doesn't work on the clock; it works on the calendar," said Republican Senator Roy Blunt of Missouri, who in 15 years of serving in Congress, including leadership jobs, has been through plenty of tough scrapes.

"There is just that required moment when something has to happen because you've run out of time," said Blunt. In the meantime, "there is a desire to maximize your negotiating position until you realize you don't have any room any more to negotiate. It almost invariably works that way."

http://articles.chicagotribune.com/2012-12-03/news/sns-rt-us-usa-fiscal-congressbre8b205w-20121202_1_fiscal-cliff-representatives-john-boehner-payroll-tax-holiday

So, there you have it, politics will play its part and its a system where things regularly go down to the wire because that is part of the game. On this occasion neither side will want to be seen as being responsible for there being no deal that results in a panic and puts the US economy back towards recession.

For the markets the time up to Christmas with no deal in sight is still likely to be a rocky one, but if a deal is reached then the charts suggest we are setting up to go higher. The Santa rally may still be on.

Charts:

Video market round up for week ending 30th November

A week ending round up of the markets from Steve Briggs YouTube channel.

A review of the markets for the last trading week, including FTSE100, S&P, Dow and Dax.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/