>>> Q1 European timeline of Key Risk Event : ECB / Greece...

22/01 : ECB Monetary Policy Decision
25/01 : Greek Natioanl Elections
26/01 : Eurogroup Meeting
16/02 : Eurogroup Meeting
28/02 : Bailout extension Expires
5/03 : ECB Monetary policy Decision
9/03 : Eurogroup Meeting
During the month of March : Grek national elections if first attempt fails

From: thechek@mac.com At: Jan 3 2015 20:27:40
To: LAURENT CHEKROUN (MAKOR SECURITIES LLP)
Subject: Fwd:>>> Q1 European timeline ECB / Greece...

>>> Lenovo unaware of rumour that Compal may acquire stake (translated)

Lenovo unaware of rumour that Compal may acquire stake (translated)
Story
Lenovo, the listed Chinese computer maker, is unaware of the market rumour that said Taiwan-based laptop manufacturer Compal may acquire a stake in the company, the Hong Kong Economic Journal reported, citing Lenovo management.

The Chinese language HKEJ report cited a report from the Economic Daily News in Taiwan that Compal may acquire a stake in Lenovo in order to ensure continuous business orders from Lenovo. The EDN report said a spokesperson from Compal declined to comment on the news, while Lenovo management told the HKEJ that s/he has never heard that Compal plans to take a stake in the company.


Lenovo reported revenues of USD 20.87bn for the six months ended September 2014.

Hong Kong Economic Journal

NYT : Oil Price Slump May Spur European Oil and Gas Deal-Making

Oil Price Slump May Spur European Oil and Gas Deal-Making

There was $383 billion in mergers and acquisitions in the oil and gas sector last year, as of Dec. 11. Yet Europe has largely missed out: About three-quarters of the targets have been in North America, according to Thomson Reuters data. Shale has played a big role. In 2015, oil and gas bankers in Europe will get a bigger slice of the action.

The sharp drop in the price of crude oil, to around $60 a barrel, will make it harder to get deals done in the short term. It makes everyone more cautious. Buyers worry that prices can fall further, while the seller’s instinct is to hold out for a recovery. The last big fall in oil prices, at the end of 2008, was too short to push a big merger and acquisition wave.

But if the current oil price persists, financial stress may make small players vulnerable. Net debt at explorers including Afren, EnQuest, Premier Oil and Tullow Oil could all reach three times earnings before interest, taxes, depreciation and amortization, or more, if oil remains at $60 through 2015, Barclays estimates.

Cash-rich Repsol of Spain already took the plunge with an $8.3 billion bid last month for the Canadian oil and natural gas producer Talisman Energy. Chinese companies, active in the past, have a lot on their plate with big capital commitments, but buyout groups have raised billions of dollars to invest, including in energy infrastructure assets.

All-stock defensive mergers of the type seen in the late 1990s are possible, too. This has already started on a small scale with Ophir Energy’s all-share takeover of Salamander Energy. The industry has a cost problem that cannot be met forever by shrinking capital expenditures and selling assets. BP’s former chairman, John Browne, wrote in his memoir that a merger with Shell, pondered while he was at the helm, might have delivered $9 billion in annual synergies.

BP faces big liabilities in the Gulf of Mexico and volatility in Russia. BG Group of Britain has long been a target, and the new chief executive starts in March. It’s not clear that Shell, the wallflower in the 1990s, will make a move. Exxon and other majors in the United States might be tempted. Either way, chances are Big Oil will get even bigger next year.

WSJ : What the World Will Speak in 2115

What the World Will Speak in 2115
A century from now, expect fewer but simpler languages on every continent

In 1880 a Bavarian priest created a language that he hoped the whole world could use. He mixed words from French, German and English and gave his creation the name Volapük, which didn’t do it any favors. Worse, Volapük was hard to use, sprinkled with odd sounds and case endings like Latin.

It made a splash for a few years but was soon pushed aside by another invented language, Esperanto, which had a lyrical name and was much easier to master. A game learner could pick up its rules of usage in an afternoon.

But it didn’t matter. By the time Esperanto got out of the gate, another language was already emerging as an international medium: English. Two thousand years ago, English was the unwritten tongue of Iron Age tribes in Denmark. A thousand years after that, it was living in the shadow of French-speaking overlords on a dampish little island. No one then living could have dreamed that English would be spoken today, to some degree, by almost two billion people, on its way to being spoken by every third person on the planet.

Science fiction often presents us with whole planets that speak a single language, but that fantasy seems more menacing here in real life on this planet we call home—that is, in a world where some worry that English might eradicate every other language. That humans can express themselves in several thousand languages is a delight in countless ways; few would welcome the loss of this variety.

ENLARGE
YAREK WASZUL
RELATED READING

You Heard ’Em Here First: Words of 2015
But the existence of so many languages can also create problems: It isn’t an accident that the Bible’s tale of the Tower of Babel presents multilingualism as a divine curse meant to hinder our understanding. One might even ask: If all humans had always spoken a single language, would anyone wish we were instead separated now by thousands of different ones?

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Thankfully, fears that English will become the world’s only language are premature. Few are so pessimistic as to suppose that there will not continue to be a multiplicity of nations and cultures on our planet and, along with them, various languages besides English. It is difficult, after all, to interrupt something as intimate and spontaneous as what language people speak to their children. Who truly imagines a Japan with no Japanese or a Greece with no Greek? The spread of English just means that earthlings will tend to use a local language in their own orbit and English for communication beyond.

But the days when English shared the planet with thousands of other languages are numbered. A traveler to the future, a century from now, is likely to notice two things about the language landscape of Earth. One, there will be vastly fewer languages. Two, languages will often be less complicated than they are today—especially in how they are spoken as opposed to how they are written.

Some may protest that it is not English but Mandarin Chinese that will eventually become the world’s language, because of the size of the Chinese population and the increasing economic might of their nation. But that’s unlikely. For one, English happens to have gotten there first. It is now so deeply entrenched in print, education and media that switching to anything else would entail an enormous effort. We retain the QWERTY keyboard and AC current for similar reasons.

Also, the tones of Chinese are extremely difficult to learn beyond childhood, and truly mastering the writing system virtually requires having been born to it. In the past, of course, notoriously challenging languages such as Greek, Latin, Aramaic, Arabic, Russian and even Chinese have been embraced by vast numbers of people. But now that English has settled in, its approachability as compared with Chinese will discourage its replacement. Many a world power has ruled without spreading its language, and just as the Mongols and Manchus once ruled China while leaving Chinese intact, if the Chinese rule the world, they will likely do so in English.

A Chinese teacher gives an English lesson to students in the Gansu province of northwest China in July 2013. Some have predicted that Mandarin Chinese will eventually become the world’s language, but its elaborate tones are too difficult to learn beyond childhood. ENLARGE
A Chinese teacher gives an English lesson to students in the Gansu province of northwest China in July 2013. Some have predicted that Mandarin Chinese will eventually become the world’s language, but its elaborate tones are too difficult to learn beyond childhood. IMAGINECHINA/CORBIS
Yet more to the point, by 2115, it’s possible that only about 600 languages will be left on the planet as opposed to today’s 6,000. Japanese will be fine, but languages spoken by smaller groups will have a hard time of it. Too often, colonialization has led to the disappearance of languages: Native speakers have been exterminated or punished for using their languages. This has rendered extinct or moribund, for example, most of the languages of Native Americans in North America and Aboriginal peoples of Australia. Urbanization has only furthered the destruction, by bringing people away from their homelands to cities where a single lingua franca reigns.

Even literacy, despite its benefits, can threaten linguistic diversity. To the modern mind, languages used in writing, with its permanence and formality, seem legitimate and “real,” while those that are only spoken—that is, all but a couple hundred of them today—can seem evanescent and parochial. Few illusions are harder to shed than the idea that only writing makes something “a language.” Consider that Yiddish is often described as a “dying” language at a time when hundreds of thousands of people are living and raising children in it—just not writing it much—every day in the U.S. and Israel.

It is easy for speakers to associate larger languages with opportunity and smaller ones with backwardness, and therefore to stop speaking smaller ones to their children. But unless the language is written, once a single generation no longer passes it on to children whose minds are maximally plastic, it is all but lost. We all know how much harder it is to learn a language well as adults.

In a community where only older people now speak a language fluently, the task is vastly more difficult than just passing on some expressions, words and word endings. The Navajo language made news recently when a politician named Chris Deschene was barred from leading the Navajo nation because his Navajo isn’t fluent. One wishes Mr. Deschene well in improving his Navajo, but he has a mountain to climb. In Navajo there is no such thing as a regular verb: You have to learn by heart each variation of every verb. Plus it has tones.

That’s what indigenous languages tend to be like in one way or another. Languages “grow” in complexity the way that people pick up habits and cars pick up rust. One minute the way you mark a verb in the future tense is to use will: I will buy it. The next minute, an idiom kicks in where people say I am going to buy it, because if you are going with the purpose of doing something, it follows that you will. Pretty soon that gels into a new way of putting a verb in the future tense with what a Martian would hear as a new “word,” gonna.

In any language that kind of thing is happening all the time in countless ways, far past what is necessary even for nuanced communication. A distinction between he and she is a frill that most languages do without, and English would be fine without gonna alongside will, irregular verbs and much else.

These features, like he versus she, certainly don’t hurt anything. A language isn’t something that can be trimmed like a bush, and children have no trouble picking up even the weirdest of linguistic frills. A “click” language of southern Africa typically has not just two or three but as many as dozens of different clicks to master (native speakers have a bump on their larynx from producing them 24/7). For English speakers, it seems hard enough that Mandarin Chinese requires you to distinguish four tones to get meaning across, but in the Hmong languages of Southeast Asia, any syllable means different things according to as many as eight tones.

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But the very things that make these languages so fabulously rich also makes it hard to revive them once lost—it’s tough to learn hard stuff when you’re grown, busy and self-conscious. There are diligent efforts to keep various endangered languages from dying, but the sad fact is that few are likely to lead to communities raising children in the language, which is the only way a language exists as its full self.

Instead, many communities, passing their ancestral language along by teaching it in school and to adults, will create new versions of the languages, with smaller vocabularies and more streamlined grammars. The Irish Gaelic proudly spoken by today’s English-Gaelic bilinguals is an example, something one might call a “New Gaelic.” New versions of languages like this will be part of a larger trend, growing over the past few millennia in particular: the birth of languages less baroquely complicated than the linguistic norm of the premodern world.

The first wave in this development occurred when technology began to allow massive, abrupt population transfers. Once large numbers of people could cross an ocean at one time, or be imported by force into a territory, a new language could end up being learned by hordes of adults instead of by children. As we know from our experiences in the classroom, adults aren’t as good at mastering the details of a language as toddlers are, and the result was simpler languages.

Vikings, for example, invaded England starting in the eighth century and married into the society. Children in England, hearing their fathers’ “broken” Old English in a time when schooling was limited to elites and there was no media, grew up speaking that kind of English, and the result was what I am writing now. Old English bristled with three genders, five cases and the same sort of complex grammar that makes modern German so difficult for us, but after the Vikings, it morphed into modern English, one of the few languages in Europe that doesn’t assign gender to inanimate objects. Mandarin, Persian, Indonesian and other languages went through similar processes and are therefore much less “cluttered” than a normal language is.

The second wave of simplification happened when a few European powers transported African slaves to plantations or subjected other people to similarly radical displacements. Adults had to learn a language fast, and they learned even less of it than Vikings did of English—often just a few hundred words and some scraps of sentence structure. But that won’t do as a language to fully live in, and so they expanded these fundamentals into brand-new languages. Now these languages can express any nuance of human thought, but they haven’t existed long enough to also dangle unnecessary things like willfully irregular verbs. These are called Creole languages.

It’s far easier to manage a basic conversation in a Creole than in an older language. Haitian Creole, for example, is a language low on the complications that make learning Navajo or Hmong so tough. It spares a student from having to know that boats are male and tables are female, which is one of the reasons that it’s so hard to master French, the language from which it got most of its words.

Creole languages were created world-wide during the era that the textbooks call Western “exploration.” African soldiers created an Arabic Creole in Sudan; orphans created a German one in New Guinea. Aboriginal Australians created an English Creole, which was passed on to surrounding locations such as, again, New Guinea, where under the name Tok Pisin it is today the language of government for people speaking hundreds of different native languages. Jamaican patois, South Carolina’s Gullah and Cape Verdean are other examples.

ENLARGE
YAREK WASZUL
Modern population movements are now creating a third wave of language streamlining. In cities world-wide, children of immigrants speaking many different languages are growing up speaking among themselves a version of their new country’s language that nibbles away at such arbitrary features as irregular verbs and gendered objects. It’s a kind of compromise between the original version of the language and the way their parents speak it.

Linguists have no single term yet for these new speech varieties, but from Kiezdeutsch in Germany to “Kebob Norsk” in Norway, from the urban Wolof of Senegal to Singapore’s “Singlish,” the world is witnessing the birth of lightly optimized versions of old languages. These will remain ways of speaking that are rarely committed to the page. Yet as we know from languages like Yiddish, this will hardly disqualify them as thriving human languages.

This streamlining should not be taken as a sign of decline. All of the “optimized” languages remain full languages in every sense of the term, as we know from the fact that I’m writing in one: An Old English speaker who heard modern English would consider it confounding and “broken.” That any language has all irregular verbs, eight tones or female tables is ultimately a matter of accident, not design.

Hopefully, the languages lost amid all of this change will at least be described and, with modern tools, recorded for posterity. We may regret the eclipse of a world where 6,000 different languages were spoken as opposed to just 600, but there is a silver lining in the fact that ever more people will be able to communicate in one language that they use alongside their native one.

After all, what’s peculiar about the Babel tale is the idea of linguistic diversity as a curse, not the idea of universal comprehension as a blessing. The future promises both a goodly amount of this diversity and ever more mutual comprehension, as many languages become easier to pick up, in their spoken versions, than they once were. A future dominated by English won’t be a linguistic paradise, in short, but it won’t be a linguistic Armageddon either.

Barron's : A Contrarian View of Emerging Markets

A Contrarian View of Emerging Markets
An interview with Brian Singer, head of dynamic allocation strategies at William Blair in Chicago.

The vast majority of mutual fund managers are bottom-up stock or bond pickers. While they pay attention to macroeconomics, it isn’t their focus. Brian Singer, co-manager of the William Blair Macro Allocation fund (ticker: WMCNX), approaches portfolio management differently. He does keep an eye on valuations, but macro themes are a big part of his playbook, as well. For Singer, a big focus in recent years has been currencies, long and short, and he has reduced his exposure to stocks and bonds. Based in Chicago, Singer, 54, heads the dynamic allocation strategies team at William Blair, where he has worked since 2011. He had a similar role at UBS, his employer for many years. In his current job, Singer oversees about $1.2 billion, $950 million of which is in the mutual fund. The fund, which has a five-star rating from Morningstar, aims to offer its shareholders diversification away from traditional stock and bond holdings. Its three-year annual return of 9.84% beats its Morningstar category average by more than five percentage points, putting it in the top 5% of multi-alternative funds over that stretch. Barron’s recently spoke to Singer by phone to hear his thoughts about his portfolio, how he has changed it, and what’s ahead for the New Year.

Barron’s: Unlike many fund managers, you have a top-down approach. Tell us about your key macro themes.

Singer: We have five major macro themes that shape our thinking in running this fund. The first one is currency. We’re taking most of our active risk in currencies now, owing to relatively extreme divergent central bank activity. The second one is global economic growth. There are a lot of discussions about the “new normal,” secular stagnation, and low growth. Generally speaking, our views are not inconsistent with the market over the next couple of years. But our sense is that the fears that get priced into the market vary quite dramatically and provide investing opportunities. That leads us to be somewhat long in our exposure to a positive growth surprise on a global basis.

Enlarge Image

“We have consistently been bringing our equity exposure down to manage risk.” —Brian Singer Photo: Bob Stefko for Barron’s
The third theme is geopolitics. Unlike the careers of almost every investor out there that were dominated by the Cold War and the post–Cold War U.S. hegemony, systemic change is the new norm. And geopolitics drives asset prices. We need to keep that on our front burner. Another theme is that we are on the backside of the commodity supercycle. And the final one is interest rates. Our view a few years ago was that quantitative easing would ultimately lead to inflation. However, the longer we have quantitative easing, the more uncertain the outcome becomes, whether it’s significant price inflation or debt deflation. So we have reduced our short interest-rate exposure.

Explain how you go about running this fund.

Our decisions are all based on fundamental valuation, which, in the case of assets, we define as the present value of future cash flows. For currencies, it is purchasing-power parity, which is a way to value one currency against another. That’s the starting point. Where prices deviate from fundamental values, there are potential opportunities to invest in. However, we are well aware that prices deviate from fundamental values over periods that can last a few years, and we have to navigate those periods. That involves understanding the conventional wisdom that drives prices, either away from or toward fundamental values. And that’s what leads to the long and short positions in our portfolio.

Where do you stand on stocks?

We have a long position in equities, but it is about half of what it would be if we just acted on pure valuation metrics. The reason for that is we perceive heightened risk in global capital markets, and we have reduced that long position. It currently accounts for about 40% of the portfolio on a net basis, factoring in the longs, shorts, and options—about half of the equity position we had 18 months ago. The long positions are primarily in Europe and emerging Asia. We have consistently been bringing our equity exposure down to manage risk.

Is that because you see a lot less value in global equities than you did 18 months ago?

Absolutely. A lot of the value has disappeared, and you can actually isolate that to a couple of countries. One is Japan. When we look back at Shinzo Abe being elected prime minister in 2012, Japanese equities were very, very cheap, and his three arrows of reform pushed Japanese equities up to their fundamental values. We had a 15% position in Japanese equities at the end of 2012, and we’ve brought that down to roughly zero. The other region where we have cut our equity exposure is the U.S. Generally speaking, the world has viewed the U.S. as the only source of growth and stability. The response has been to invest in U.S. equities as the safest of the equity markets. That has driven U.S. stocks to what we believe is slightly above fundamental value. We brought our position down from 20% to 25% of the portfolio two years ago to around zero now. We’ve maintained a position in Europe and in emerging markets, mainly Asia, excluding Japan, for most of this period.

What makes European stocks attractive?

In the European monetary union, equity prices are about 30% to 40% below fundamental value. The primary areas of opportunity are the United Kingdom, Italy, Spain, and the Netherlands. Italy and Spain are perhaps the most interesting because there has been a drive for growth and stability in the stock market, but Italy and Spain have been, in effect, the antithesis of growth and stability. That conventional wisdom has led market participants to keep equity prices in those two countries below what we see as fundamental value. That’s why there are opportunities there as far as valuation. But we are keeping some of these positions below what pure valuation would suggest they should be.

Which sectors are attractive?

On a global basis, we’re mildly long financials and now energy, where stocks have sold off amid falling oil prices, and we are mildly short the industrial sector. And we are also leaning a little bit more toward value stocks, which look a little bit more attractive based on our analysis, and a little bit more away from growth stocks.

Turning to credit, how are you positioned?

Just to be clear, when I speak about credit, we separate interest-rate risk from credit-spread risk. That’s why we can be short interest-rate risk and long credit-spread risk at the same time. In terms of our portfolio, in aggregate, factoring in longs and shorts, we are short sovereign bonds around the world. In fact, our net global sovereign-bond short position is 14.4% of the portfolio. We are long the U.S. bond market, but we are short other markets, including those in Europe and Japan.

How have your changed your exposure to credit spreads?

About 15% of the portfolio is long credit spreads, but it has come down significantly as spreads have narrowed. We have sold most of our high-yield credit-spread exposure, which we took from about 15% of the portfolio 18 months ago down to about 2% or 3% now. We have some U.S. investment-grade bonds, about 10% or 12% of the portfolio.

So that, combined with what’s left of the high-yield holdings, makes up our credit-spread holdings. We also have eliminated our mortgage-backed-securities holdings, again owing to valuation. And we don’t have any municipal-bond exposure. Our credit portfolio has become higher quality, and it’s much smaller.

You will notice there is a theme here, which is that we were very long the macro theme of real gross-domestic-product growth globally. We are still long that theme, but we’ve brought it down considerably and focused it more on what we believe are mispricings across Europe, as evidenced by our equity holdings there. But we’ve also dialed back the growth theme in credit, an example of which is our lightening up on high yield.

Tell us more about how you are playing the uncertain growth theme?

As I noted earlier, even though there are valuation opportunities out there, and there are often discrepancies between prices and fundamental values, a key driver of our strategy is big macro themes. One of which is the uncertainty of real GDP growth. It is something that everybody is talking about—whether it is the new normal, as some have described it. Everybody is talking about the poor global growth outlook, and that has been priced into equity markets to a significant degree. As the market has accommodated that view, and investors have shifted away from the riskier markets to the one in the U.S., it has created an environment where we de-risked the portfolio—i.e., lowering our overall exposures to equities and bonds. But this has led to opportunities. For instance, there is excessive concern about the euro zone’s growth, and that’s why we’ve left some of our equity exposure there.

Emerging markets are another area of concern. That has caused prices to come down, relative to fundamental values, and has created opportunities, especially in markets that are commodity importers or energy importers—notably the Southeast Asian emerging markets such as China, Taiwan, and Korea. So we’ve reduced our equity holdings, and we’ve concentrated the equity exposure in Europe and Asian emerging markets. We’ve also reduced our exposure to growth through changes to our credit holdings, focusing much more on investment-grade credits.

How would you sum up how you’ve repositioned the entire fund?

For us, the past year or two has been about migrating from taking market risk to taking currency risk, and we’ve reduced our overall exposure to equities and bonds. Supplanting that has been an increase in our currency positions.

Why is currency such an important theme?

Central banks around the world are moving in very different directions. They are diverging in their policies, and currency in that environment becomes much, much more important than it has been since the early 1970s. Tom Clarke, who is the co-manager of this fund, does tons of work with me on currency. For us, the divergence of monetary policies among central banks around the world means that the focus on currency will be a critical aspect of any global portfolio’s performance in 2015 and beyond.

How have your positioned the portfolio in terms of currency?

We are short the Swiss franc, the euro, the Australian dollar, and the New Zealand dollar. First and foremost, it is valuation driven by a core analysis of purchasing-power parity, which, as I mentioned earlier, is a way to compare currencies with one another. Those exchange rates are not consistent with relative prices of tradable goods and services. That’s the valuation opportunity. Second, there are those significant differences in central-bank policies. We are short the Swiss franc and other developed-country currencies, and those central banks have inflated their balance sheets. That has put pressure on those currencies. In contrast, our big long positions are in the Southeast Asian currencies, predominately the Chinese yuan, the Indian rupee, the Malaysian ringgit, and the Indonesian rupiah. Those central banks have not bloated their balance sheets, and those currencies are cheap, relative to fundamental values.

Another currency theme is the commodity supercycle, which we believe we are on the backside of. The currencies I mentioned as long positions, including India and China, are beneficiaries of declining commodity prices. On the other hand, you would generally expect the Australian and New Zealand dollars to be hurt by declining commodity prices. The final element as far as currency is regulatory differences. The regulatory environment, on a relative basis, is improving in many of those developing economies, including India and Indonesia. We’ve found that playing the currency is more beneficial than being exposed to the equity markets in those countries.

How about a couple of examples of how you combine your long and short themes?

Going into 2013, we were net long Japanese stocks. We had an equity exposure of about 15%, but we were net short the yen by about 15%. As a result, we were able to take advantage of the equity-market appreciation from quantitative easing and the yen depreciating, also from quantitative easing in Japan. Similarly, today in the euro zone, we are long the equity markets.

We have not only hedged out our currency exposure there, but we’ve also gone net short. We benefit if the equity market does well and when the currency depreciates. What happens to most investors in this environment is that they benefit from the equity-market appreciation, but the gain is mitigated by a depreciation in the currency, and that’s what happened to many people who invested in Japanese equities. This gives us the opportunity to take advantage of both assets and not just watch gains get washed away by a currency depreciation.

Thanks, Brian.

Barron's : Renault Finds a New Gear

Renault Finds a New Gear
The French car maker is poised to profit from a savvy production plan

Renault ’s shares look set to accelerate as the French car maker profits from a savvy production plan.

Benefits from its alliance with Japanese auto maker Nissan Motor could provide a turbo boost to drive up the stock (ticker: RNO.France) more than 20% in 2015.

Renault, in which the French government owns a 15% stake, certainly looks cheap. Based on Friday’s closing price of 59.90 euros ($71.92), it trades at just 6.7 times forecast 2015 earnings. In comparison, Volkswagen (VOW.Germany) trades at a slightly better, if still modest, multiple of 7.5, while Peugeot (UG.France) looks rich at almost 13.

A consensus price target of €73.65 euros points to possible upside of more than 21% for Renault, which has a market value of €17.70 billion. There are plenty of estimates at €80 and above, suggesting impressive potential.

Analysts at Société Générale have a price target of €76. The price is derived from the median average of a discounted sum-of-the-parts valuation of €69, and the value of estimated 2015 earnings at a historic multiple of 8.4, which totals €83. What has analysts excited is the greater realization of synergies to come in 2015. Renault and Nissan (7201.Japan), both headed by Carlos Ghosn, established a new manufacturing approach to generate economies of scale through standardization of parts and modules.

Introduced in 2013, the approach will be extended across Renault and Nissan vehicle ranges through 2020, when it will cover 70% to 80% of the alliance’s production volume. This year will see Renault stepping up its use of the platform to market several new models, including an Espace, a crossover, a Laguna, and a Megane.

The strategy is projected to reduce Renault’s initial outlay per model by 30% to 40%, which will add to an impressive track record of savings. The Renault-Nissan alliance shared synergies of €2.8 billion in 2013. That figure should reach at least €4.3 billion by 2016. The impact on Renault’s bottom line will be immediate. In 2015, the company is forecast to report earnings before interest, tax, depreciation, and amortization of €4.85 billion, or €8.93 a share, on revenue of €42.35 billion. It is expected to post 2014 Ebitda of €4.28 billion, or €6.49, on revenue of €40.44 billion.

RENAULT’S PERFORMANCE IN THE IMPROVING European market is encouraging. Through the first three quarters of 2014, sales were ahead 7.6% year on year in a market that was up 5.5%. Its no-frills Dacia brand is performing particularly well. Renault has a 9.5% share of the European market, which accounted for about half of the 2.6 million vehicles Renault sold in 2013.

A solid performance in Europe is critical for Renault, especially at a time when emerging markets are a little bumpy. It has been hurt by a financial squeeze in Argentina and by sanctions in Russia, its third-largest market after France and Brazil. Renault owns a 25% stake in Russian car maker Avtovaz (AVAZ.Russia). Renault had targeted an operating margin of more than 5% by 2016 -- up from just 3% in 2013 -- but the challenging economy forced it to abandon that time frame. Still, Renault is headed in the right direction.

The Stoxx Europe 600 index rose 4.4% in 2014, to 342.54, a third-straight annual gain. Germany’s benchmark DAX eked out a 2.7% increase in 2014, while London’s FTSE-100 index fell 2.7%, snapping a two-year winning streak.

>>> Week in Review: Stocks Slide Into 2015


Week in Review: Stocks Slide Into 2015


The holiday-shortened week began with a full day of trading on Monday, yet the stock market acted like it was still on vacation. Volume was light and the major indices held to narrow trading ranges that bracketed the unchanged line for much of the session. The S&P 500 managed to eke out its seventh gain in the last eight sessions. In doing so, it established another record closing high that pulled it ever closer to the 2100 level. However, most of the action happened away from the U.S. stock market. To that end, European bourses had a roller-coaster session, riding a wave of Greek politics that included a third failed vote for the prime minister's preferred presidential candidate, the subsequent announcement that parliament would be dissolved, and news that snap elections would be held on January 25.

The stock market ended Tuesday on a broadly lower note. The Nasdaq Composite (-0.6%) was the weakest performer among the major averages while the S&P 500 (-0.5%) ended a bit ahead of the tech-heavy index. Equities began the day in negative territory and remained below their flat lines until the close. However, participation was very limited with just 524 million shares changing hands at the NYSE floor. The light activity was also reflected by narrow trading ranges with the S&P 500 bounded between 2,080 and 2,084 for most of the session. Cyclical sectors were responsible for the bulk of the weakness as three of six growth-sensitive groups settled in-line with or behind the broader market while the utilities sector (-2.1%) was the only laggard on the countercyclical side.

Equities ended the last session of 2014 on a lower note. The S&P 500 lost 1.0%, but that did not stop the benchmark index from gaining 11.4% over the course of 2014. Meanwhile, the tech-heavy Nasdaq ended the session (-0.9%) and the year (+13.4%) ahead of the S&P 500. All ten sectors settled in the red with utilities (-1.9%) ending at the bottom of the leaderboard. In all likelihood, the selling was a function of profit taking after the countercyclical sector led the 2014 market rally with a gain of 24.3%. The remaining groups did not fare much better. The top-weighted technology sector (-1.2%) was among the early leaders, but began fading from its high not long before noon ET, dragging the broader market down with it.

Bond and equity markets were closed on Thursday for New Year.

>>> Weekly Market Update: New Year's Blues

Weekly Market Update: New Year's Blues

Trading volumes were very light in the New Year's holiday week. Global equity markets dipped during the final session of 2014 and then fell lower on the first day of trading in the New Year as weak data and jitters about upcoming Fed and ECB action drove risk appetite into the deep freeze. Manufacturing industry data from around the globe out this week was not especially positive, adding to the tepid atmosphere.

Looking back, 2014 was very good for major US equities: the S&P 500 rose 11% to 2,059, its sixth year of positive returns and its third straight year of double-digit gains. The DJIA added 7.5% to 17,823 after slipping below 18,000 on the final two days of trading, and the Nasdaq advanced 13%. Small-cap stocks were not quite as solid: the Russell 2000 climbed 3.5%. Europe's EuroStoxx 600 Index gained 3.9% on the year and Germany's DAX Index added 2.7%, although France's CAC40 dropped 1.2%. Chinese equities had their best performance since 2009 even as overall emerging-market shares posted the first back-to-back annual loss in 12 years.

US housing market data out this week remained tepid. The S&P/CaseShiller October home price survey showed that real estate price gains slowing a bit. The y/y gain dropped to +4.5% from +4.8% in September. Yale economist Shiller commented that the housing market is fragile and is still reliant on low interest rates. The November pending home sales m/m figure beat expectations and returned to positive territory after October's contraction. The December Chicago Purchasing Manager survey and the ISM Manufacturing Index missed expectations, hitting their lowest levels since mid-2014.

Oil prices sagged to fresh five-year lows, with front-month WTI dropping from the mid-$55 area on Monday as low as $52.50 on Wednesday. The contract bounced off the lows but by Friday came very close to the $52 level. Brent crude bottomed around $55.50 but closed out the week around $56. Interestingly the oil equities themselves continue hold up better. The OIH and XLE remain above their mid-December lows which expedited the latest move to fresh all-time highs for US stock indices.

Comments from ECB President Draghi and ECB Chief Economist Praet left little doubt that quantitative easing is imminent. On Tuesday, Praet said euro zone inflation was below 0% and would stay there for an extended period. The official December euro zone CPI reading is out next week could cement expectations for European QE after the November reading matched a 4-year low at 0.3%. Praet argued that sovereign bonds were the only asset class with enough volume to make an impact on the inflation issue. Draghi was less sanguine, but highlighted that the risk of deflation in euro zone cannot be ruled out. Unsurprisingly, various German figures refuted these assertions. Germany's 'wisemen' said there was no deflation while the CDU Deputy party Chairman Fuchs said the euro zone was no longer obligated to rescue Greece as they were no longer systemically important. Between imminent QE and the Greek situation, EUR/USD gravitated toward the psychological 1.2000 level (though did not break through) and the 10-year bund yield fell to fresh all-time lows of 0.49% while the 5-year now offers a negative yield for the first time ever.

The Greek political crisis helped push yield spreads to fresh record levels as the Greek 10-year yield approached 10% even as most other EU government bonds are at or near record low yields. After lawmakers rejected the government's candidate for president last weekend, Greek PM Samaras was forced to dissolve the parliament and call a general election on January 25th. Polls showed Syriza, the leftist, anti-bailout opposition party of Alexis Tsipras, to be the frontrunner in the race. Tsipras has promised to get a better deal from the Troika on Greece's bailout payments. The EU has sternly warned that any new government must abide by prior obligations, suggesting that in the event of a Syriza victory irreconcilable differences could lead to a "Grexit."

China's official December Manufacturing PMI survey hit its lowest level since mid-2013, even as the non-manufacturing survey recovered to a four-month high. Manufacturing PMI components New Orders and Output were at 2014 lows, and inventories and employment were at 10-month lows. November industrial profits data fell by 4.2%, the largest y/y decline in 27 months. The PBoC published a report confirming that the government would change the rules on loan-to-deposit ratio calculations in 2015 to inject further liquidity into the system. The new rules would allow the inclusion of savings held by banks for non-deposit-taking financial institutions in banks' deposits, expanding the ratios and boosting lending capacity.

In Japan, Prime Minister Abe continues to fine-tune his efforts to extinguish deflation and jumpstart the economy. The government said it is planning a $29B (¥3.5T) fiscal stimulus package, featuring subsidies for households to help stimulate consumption along with more relief for earthquake-hit areas. The plan is estimated to add 0.7% to 2015 GDP growth. The government also announced it would aim to cut the corporate tax rate to below 30% over the next several years. The FY15/16 tax reform will cut the corporate rate to 32.1% from 34.6%.

(ZH) The Elephant Dragon In The Room: China's Hard Landing, In 21 Charts

The Elephant Dragon In The Room: China's Hard Landing, In 21 Charts
 
Back in September, before the crude crash started in earnest driven far more by the relentless Chinese - and global - economic slowdown than anything OPEC may or may not have done (and whose output, as a reminder, hasn't changed in years and actually declined, indicating the plunge is demand not supply driven) we showed, with the help of a few clear charts, that China is gripped by the worst commodity, and economic, crash in ages.
Today we update where China stands on its path to a very hard landing. As the charts below show, what has been so far a controlled descent is rapidly sliding out of control as the elephant-dragon in the room can no longer be ignored.
China's NBS manufacturing PMI at 50.1 in December, down from 50.3 in November, the lowest in one and a half years.

 

Industrial production (IP) growth declined to 7.2% yoy in November from 7.7% yoy in October. Growth in power production decelerated to 0.6% yoy in November from 1.9% in October.

 

Output growth of electricity, steel, cement and oil refining fell to 0.6%, 1.2%, -4.0% and 5.5% respectively from 1.9%, 2.0%, -1.1% and 6.3% in October.

 

Headline year-to-date FAI growth ticked down to 15.8% yoy in November from 15.9% yoy in October, in line with consensus. Real ytd FAI growth could have edged down to 15.3% yoy in November from 15.4% yoy in October. On a monthly basis, nominal FAI growth increased to 14.9% yoy in November from 14.4% yoy in October.

 

Investment growth of local projects (88% of total FAI) was 16.2% yoy in November, unchanged from September. Investment growth of central government projects  dropped to -11.0% yoy in November from 0.2% yoy in October.

 

Real estate FAI growth edged down to 10.5% yoy in November from 10.9% yoy in October.

 

Retail sales growth quickened to 11.7% yoy in November from 11.5% in October. In real terms, it accelerated to 11.2% from 10.8%. It was buoyed by surging sales during the Single Day (11 November).

 

Growth in total auto sales in volume dropped to 2.3% in November from 2.8% in October.  Growth in passenger cars fell to 4.7% in November from 6.4% in October.

 

CPI and PPI inflation slowed o 1.4% and -2.7% yoy in Nov from 1.6% and -2.2% in Oct. Both CPI and PPI inflations surprised on the downside.

 

In mom terms (not seasonally adjusted), food prices decreased by -0.4% in November as the warmerthan- usual weather ensured ample supply of vegetables and fruits.

 

Otstanding Total Social Financing edged down to 15.3% in November from 15.4% in October (read: "China's Shadow Banking Grinds To A Halt As Bad Debt Surges Most In A Decade")

 

November export growth came in below expectations at 4.7% vs. 11.6% in October (market consensus 8.0%). Import growth surprised on the downside at -6.7% from 4.6% in October and (market consensus 3.8%).

 

Growth in processing imports, a leading indicator of processing exports, declined to 3.9% yoy in November from 24.0% in October. Low-value-added processing exports plummeted to 1.6% yoy from 9.1% in October.

 

In November, new export orders dropped further to 48.4 from 49.9, likely showing the impact of CNY appreciation in NEER terms in 2014. In the meantime, monthly export growth dropped to 4.7% from 11.6% in October.

 

Export growth to the US declined sharply to 2.6% yoy in November from 10.9% yoy in October, while export growth to Japan improved to - 5.8% yoy in November from - 8.1% in October. Export growth to the EU was largely unchanged at 4.1% yoy in November. Export growth to ASEAN slowed to 14.6% yoy in November from 18.0% in October.
Growth in imports from ASEAN declined to -8.2% in November from 24.5% in October. Meanwhile, import growth from EU dropped to -6.8% from 10.4% yoy in October.

 

In volume terms, growth in iron ore, copper and crude oil imports slumped to -13.4%, - 3.6% and 7.9% yoy in November from 17.0%, -2.4% and 18.0% yoy, respectively, in October. In value terms, growth in iron ore, copper and crude oil imports dropped to -46.2%, - 9.8% and -10.9% yoy in November from -24.7%, - 5.6% and 3.8% in October, respectively.

 

In yoy terms, the number of cities that saw new home prices down/flat/up changed to 68/0/2 in November, compared to 67/0/3 in October. Prices of new commodity residential properties for 70 medium-to-large-sized cities surveyed by the National Bureau of Statistics (NBS) declined by 0.59% mom in November, versus 0.83% in October.

 

On the demand side, the yoy growth in new home sales in floor space terms and value terms slumped to -13.3% and -7.9% yoy in November from - 3.4% and -3.1% yoy, respectively, in October.

 

New home starts growth plummeted to -33.8% yoy in November from 38.6% yoy in October. The volatility in the yoy growth rates of new starts was partly due to big swings in the data last year. Growth in residential property investment dropped to 5.5% in November from 9.5% yoy in October.

 

Credit conditions for property developers worsened in November. Growth in domestic loans, a main source of funding for property development, declined to -10.6% yoy in November from 3.3% yoy in October. Meanwhile, growth in pre-sale proceeds dropped to -20.3% yoy in November from -12.1% yoy in October partly due to deceleration in home sales growth.

 

And the punchline chart: the Shanghai Composite over the past 12 months.
Source: BofA, Bloomberg

WSJ : Investors Pull $19.4 Billion From Pimco Fund

Investors Pull $19.4 Billion From Pimco Fund
December Withdrawals Were the Third-Highest for Total Return Fund During 2014

Withdrawals from Pacific Investment Management Co.’s flagship mutual fund jumped sharply again in December, suggesting the giant bond manager is still grappling with the abrupt departure of co-founder Bill Gross.

Investors pulled $19.4 billion from the Pimco Total Return Fund, up from the $9.5 billion yanked in November. However, the new outflows were down from $23.5 billion and $27.5 billion lost in September and October as investors reacted to Mr. Gross’s surprise exit to Janus Capital Group Inc. Total assets in the Total Return fund are down to $143.4 billion from $162.8 billion in November.

The December pullback indicates the Newport Beach, Calif., firm is not yet clear of the investor flight triggered by months of internal strife and the departure of its best-known manager at the end of September. Pimco, a unit of German insurer Allianz SE , also lost its former Chief Executive Mohamed El-Erian last year after clashes with Mr. Gross, who managed the Total Return Fund for 27 years.

The jump in December withdrawals came as Total Return’s performance slipped. The fund was down 0.48% for the month, worse than the benchmark Barclays U.S. Aggregate index and the average return of other funds in its category, according to fund tracker Morningstar. The return figure includes price changes and interest payments.

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For the full year, the Total Return Fund gained 4.69% compared with 5.97% for the Barclays U.S. Aggregate index. Pimco Total Return was ranked 190th in its category, which includes 276 funds that had data for full-year returns, said Russ Kinnel, director of manager research at Morningstar.