Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between the lines - Bernhard Eschweiler
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between
the lines - Bernhard Eschweiler
05.11.2012 / 12:58
---------------------------------------------------------------------
- Markets waiting for outcome of US election and next Euro area moves
- Inflation concerns are rising in Germany
- However, monetary and real economic inflation flags are missing so far
Financial markets have been moving sideways since the rally reached a peak
in September. The initial euphoria over central bank actions, especially
the OMT announcement by the ECB and the launch of QE3 by the Fed, is gone,
but market sentiment remains positive despite disappointing earnings
releases and mixed economic news (economic figures in Europe were mostly
weaker, but the rest of the world was doing a tick better, notably the US
and China). In our judgment, markets are poised to move higher, but two
obstacles have to be overcome.
- The most immediate issue is the US election. Our guess is as good as
those of the bookmakers and polls, but we fear that the fiscal policy
implications are underestimated. We share the consensus view that
eventually a compromise will be reached to avoid the fiscal cliff and
raise the debt ceiling. However, gridlock may well prevent a fiscal
compromise before yearend, which would imply a temporary (albeit
reversible) step over the fiscal cliff.
- The other issue is the next steps in coping with the Euro-debt crisis.
In the forefront is Greece. Even Germany is starting to accept that
more time will be needed. However, the German government remains set
to avoid any vote on Greece in parliament. Thus, most likely is a
fudge, which allows the disbursement of the next payment later this
month and postpones the final decision on additional support for
Greece. Spain has done its funding for this year, but riding just on
the ECB OMT announcement is unlikely to be enough for next year. Both
Spain and Germany (where the parliament would have to vote on a
precautionary credit line for Spain) are playing for time. In our
judgment, bad news from Spain and market pressure will force both
sides' hands between yearend and the first quarter of next year.
Thus and as we wrote before, there is significant risk that markets will
experience a temporary setback due to these two issues. However, we are
also confident that these issues will be overcome and that a more positive
economic and financial picture will emerge in the course of next year.
German inflation angst
The ECB's OMT announcement has also reduced fears among Germans that the
Euro may break up. At the same time, it has created more inflation angst.
That the public is worried is no surprise, given Germans' inflation DNA.
Shocking is how little those who should know better, namely the German
academic elite, are doing to dispel the inflation angst. In fact, it seems
that they enjoy adding fuel to the fire. Milton Friedman said that
inflation is always a monetary phenomenon. That is true, but cannot be
reduced to the quantity identity as a causal relationship between the
central bank money supply and inflation, as many German academics like to
do.
As we wrote before, the relationship between monetary action and broad
money supply (money multiplier) has broken down. While the ECB's balance
sheet has mushroomed, broad monetary aggregates have stalled (the
multiplier has nearly halved since 2007, see first chart on previous page).
The reasons are the well-known troubles in the banking system. As a
result, banks prefer to park extra cash at zero interest with the ECB
rather than lending it to others. The flipside is a poor credit
performance, which in fact is contracting (see second chart on previous
page).
Furthermore, the issue is not just an impaired banking sector. The problem
is also generally weak demand due to the deleveraging dynamics in most
parts of the economy. Some argue that the excess liquidity could lead to
asset bubbles, which eventually could boost goods demand and inflation. To
be sure, central banks operating at the zero-interest-rate margin, notably
the Fed, hope that their policies will lift asset prices and through that
channel stimulate economic activity. However, even if successful, that is
unlikely to lead to a bubble. Missing is the key ingredient of any bubble,
excessive leverage.
Will German inflation rise above euro average?
While the fear that ECB policy will inevitably lead to more overall
inflation in Europe seems misplaced, there are good reasons to believe that
the inflation dynamics within Europe should reverse. In the decade prior
to the crisis, Germany underperformed the rest of the Euro area and had
lower-than-average inflation. This should reverse as Germany consistently
outperforms the rest of the region. So far, however, that has not been the
case. German inflation is roughly half a percentage point lower than the
euro average. The reason may simply be distortions due to hikes in sales
taxes and public-service fees in the crisis economies. If true, those
distortions should fade in the course of next year. On the other hand,
wages in Germany are accelerating, while they are decelerating if not
declining in other parts of Europe.
In some sectors, inflation is clearly picking up. Most notable are the
increases in house prices and rents. But even those are modest by
international standards. Missing in Germany as in the rest of the Euro
area are signs of monetary excesses and leverage. The German component of
Euro-area M3 is growing less anemic, but not out of line with the economy
and past standards. Moreover, much of the recent pick-up in German M3
growth was driven by people moving into cash (checking accounts). The high
preference for liquidity is a sign of uncertainty among retail investors
and not pending consumer demand. Indeed, bank credit to households and
companies is hardly growing, which is a sign that parts of the German
banking system are also struggling as well as companies either finding
other funding sources or being reluctant to invest more.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 5 November 2012, Silvia Quandt Research GmbH,
Grüneburgweg 18, 60322 Frankfurt is responsible for its preparation. German
Regulatory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht
(BaFin), Graurheindorfer Str. 108, 53117 Bonn and Lurgiallee 12, 60439
Frankfurt.
Publication according to article 5 (4) no. 3 of the German Regulation
concerning the analysis of financial instruments (Finanzanalyseverordnung):
Number of recommendations Thereof recommendations for issuers to which
from Silvia Quandt investment banking services were provided during
Research GmbH in 2012 the preceding twelve months
Buys: 74 24
Neutral: 47 4
Avoid: 10 0
Company disclosures
Article 34b of the German Securities Trading Act (Wertpapierhandelsgesetz)
in combination with the German regulation concerning the analysis of
financial instruments (Finanzanalyseverordnung) requires an enterprise
preparing a securities analysis to point out possible conflicts of interest
with respect to the company or companies that are the subject of the
analysis. A conflict of interest is presumed to exist, in particular, if an
enterprise preparing a security analysis:
(a) holds more than 5 % of the share capital of the company or companies
analysed;
(b) has lead managed or co-lead managed a public offering of the
securities of the company or companies in the previous 12 months;
(c) has provided investment banking services for the company or companies
analysed during the last 12 months for which a compensation has been or
will be paid;
(d) is serving as a liquidity provider for the company's securities by
issuing buy and sell orders;
(e) is party to an agreement with the company or companies that is the
subject of the analysis relating to the production of the recommendation;
(f) or the analyst covering the issue has other significant financial
interests with respect to the company or companies that are the subject of
this analysis, for example holding a seat on the company's boards.
In this respective analysis the following of the above-mentioned conflicts
of interests exist: none
Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG, and its affiliated
companies regularly hold shares of the analysed company or companies in
their trading portfolios. The views expressed in this analysis reflect the
personal views of the analyst about the subject securities or issuers. No
part of the analyst's compensation was, is or will be directly or
indirectly tied to the specific recommendations or views expressed in this
analysis. It has not been determined in advance whether and at what
intervals this report will be updated.
Equity Recommendation Definitions Silvia Quandt Research GmbH analysts rate
the shares of the companies they cover on an absolute basis using a 6 -
12-month target price. 'Buys' assume an upside of more than 10% from the
current price during the following 6 - 12-months. These securities are
expected to out-perform their respective sector indices. Securities with an
expected negative absolute performance of more than 10% and an
under-performance to their respective sector index are rated 'avoids'.
Securities where the current share price is within a 10% range of the
sector performance are rated 'neutral'. Securities prices used in this
report are closing prices of the day before publication unless a different
date is stated. With regard to unlisted securities median market prices are
used based on various important broker sources (OTC-Market).
Disclaimer This publication has been prepared and published by Silvia
Quandt Research GmbH, a subsidiary of Silvia Quandt & Cie. AG. This
publication is intended solely for distribution to professional and
business customers of Silvia Quandt & Cie. AG. It is not intended to be
distributed to private investors or private customers. Any information in
this report is based on data obtained from publicly available information
and sources considered to be reliable, but no representations or guarantees
are made by Silvia Quandt Research GmbH with regard to the accuracy or
completeness of the data or information contained in this report. The
opinions and estimates contained herein constitute our best judgement at
this date and time, and are subject to change without notice. Prior to this
publication, the analysis has not been communicated to the analysed
companies and changed subsequently. This report is for information purposes
only; it is not intended to be and should not be construed as a
recommendation, offer or solicitation to acquire, or dispose of, any of the
securities mentioned in this report. In compliance with statutory and
regulatory provisions, Silvia Quandt & Cie. AG and Silvia Quandt Research
GmbH have set up effective organisational and administrative arrangements
to prevent and avoid possible conflicts of interests in preparing and
transmitting analyses. These include, in particular, inhouse information
barriers (Chinese walls). These information barriers apply to any
information which is not publicly available and to which any of Silvia
Quandt & Cie. AG and Silvia Quandt Research GmbH or its affiliates may have
access from a business relationship with the issuer. For statutory or
contractual reasons, this information may not be used in an analysis of the
securities and is therefore not included in this report. Silvia Quandt &
Cie. AG and Silvia Quandt Research GmbH, its affiliates and/or clients may
conduct or may have conducted transactions for their own account or for the
account of other parties with respect to the securities mentioned in this
report or related investments before the recipient has received this
report. Silvia Quandt & Cie. AG and Silvia Quandt Research GmbH or its
affiliates, its executives, managers and employees may hold shares or
positions, possibly even short sale positions, in securities mentioned in
this report or in related investments. Silvia Quandt & Cie. AG in
particular may provide banking or other advisory services to interested
parties. Neither Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG or
its affiliates nor any of its officers, shareholders or employees accept
any liability for any direct or consequential loss arising from any use of
this publication or its contents. Copyright and database rights protection
exists in this publication and it may not be reproduced, distributed or
published by any person for any purpose without the prior express consent
of Silvia Quandt Research GmbH. All rights reserved. Any investments
referred to herein may involve significant risk, are not necessarily
available in all jurisdictions, may be illiquid and may not be suitable for
all investors. The value of, or income from, any investments referred to
herein may fluctuate and/or be affected by changes in exchange rates. Past
performance is not indicative of future results. Investors should make
their own investment decisions without relying on this publication. Only
investors with sufficient knowledge and experience in financial matters to
evaluate the merits and risks should consider an investment in any issuer
or market discussed herein and other persons should not take any action on
the basis of this publication.
Specific notices of possible conflicts of interest with respect to issuers
or securities forming the subject of this report according to US or English
law: None
This publication is issued in the United Kingdom only to persons described
in Articles 19, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001 and is not intended to be distributed,
directly or indirectly, to any other class of persons (including private
investors). Neither this publication nor any copy of it may be taken or
transmitted into the United States of America or distributed, directly or
indirectly, in the United States of America.
Frankfurt am Main, 05.11.2012
Silvia Quandt Research GmbH
Grüneburgweg 1860322 Frankfurt
Tel: + 49 69 95 92 90 93 -0
Fax: + 49 69 95 92 90 93 - 11
Ende der Corporate News
---------------------------------------------------------------------
05.11.2012 Veröffentlichung einer Corporate News/Finanznachricht,
übermittelt durch die DGAP - ein Unternehmen der EquityStory AG.
Für den Inhalt der Mitteilung ist der Emittent / Herausgeber
verantwortlich.
Die DGAP Distributionsservices umfassen gesetzliche Meldepflichten,
Corporate News/Finanznachrichten und Pressemitteilungen.
Medienarchiv unter http://www.dgap-medientreff.de und
http://www.dgap.de
---------------------------------------------------------------------
191492 05.11.2012
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between
the lines - Bernhard Eschweiler
05.11.2012 / 12:58
---------------------------------------------------------------------
- Markets waiting for outcome of US election and next Euro area moves
- Inflation concerns are rising in Germany
- However, monetary and real economic inflation flags are missing so far
Financial markets have been moving sideways since the rally reached a peak
in September. The initial euphoria over central bank actions, especially
the OMT announcement by the ECB and the launch of QE3 by the Fed, is gone,
but market sentiment remains positive despite disappointing earnings
releases and mixed economic news (economic figures in Europe were mostly
weaker, but the rest of the world was doing a tick better, notably the US
and China). In our judgment, markets are poised to move higher, but two
obstacles have to be overcome.
- The most immediate issue is the US election. Our guess is as good as
those of the bookmakers and polls, but we fear that the fiscal policy
implications are underestimated. We share the consensus view that
eventually a compromise will be reached to avoid the fiscal cliff and
raise the debt ceiling. However, gridlock may well prevent a fiscal
compromise before yearend, which would imply a temporary (albeit
reversible) step over the fiscal cliff.
- The other issue is the next steps in coping with the Euro-debt crisis.
In the forefront is Greece. Even Germany is starting to accept that
more time will be needed. However, the German government remains set
to avoid any vote on Greece in parliament. Thus, most likely is a
fudge, which allows the disbursement of the next payment later this
month and postpones the final decision on additional support for
Greece. Spain has done its funding for this year, but riding just on
the ECB OMT announcement is unlikely to be enough for next year. Both
Spain and Germany (where the parliament would have to vote on a
precautionary credit line for Spain) are playing for time. In our
judgment, bad news from Spain and market pressure will force both
sides' hands between yearend and the first quarter of next year.
Thus and as we wrote before, there is significant risk that markets will
experience a temporary setback due to these two issues. However, we are
also confident that these issues will be overcome and that a more positive
economic and financial picture will emerge in the course of next year.
German inflation angst
The ECB's OMT announcement has also reduced fears among Germans that the
Euro may break up. At the same time, it has created more inflation angst.
That the public is worried is no surprise, given Germans' inflation DNA.
Shocking is how little those who should know better, namely the German
academic elite, are doing to dispel the inflation angst. In fact, it seems
that they enjoy adding fuel to the fire. Milton Friedman said that
inflation is always a monetary phenomenon. That is true, but cannot be
reduced to the quantity identity as a causal relationship between the
central bank money supply and inflation, as many German academics like to
do.
As we wrote before, the relationship between monetary action and broad
money supply (money multiplier) has broken down. While the ECB's balance
sheet has mushroomed, broad monetary aggregates have stalled (the
multiplier has nearly halved since 2007, see first chart on previous page).
The reasons are the well-known troubles in the banking system. As a
result, banks prefer to park extra cash at zero interest with the ECB
rather than lending it to others. The flipside is a poor credit
performance, which in fact is contracting (see second chart on previous
page).
Furthermore, the issue is not just an impaired banking sector. The problem
is also generally weak demand due to the deleveraging dynamics in most
parts of the economy. Some argue that the excess liquidity could lead to
asset bubbles, which eventually could boost goods demand and inflation. To
be sure, central banks operating at the zero-interest-rate margin, notably
the Fed, hope that their policies will lift asset prices and through that
channel stimulate economic activity. However, even if successful, that is
unlikely to lead to a bubble. Missing is the key ingredient of any bubble,
excessive leverage.
Will German inflation rise above euro average?
While the fear that ECB policy will inevitably lead to more overall
inflation in Europe seems misplaced, there are good reasons to believe that
the inflation dynamics within Europe should reverse. In the decade prior
to the crisis, Germany underperformed the rest of the Euro area and had
lower-than-average inflation. This should reverse as Germany consistently
outperforms the rest of the region. So far, however, that has not been the
case. German inflation is roughly half a percentage point lower than the
euro average. The reason may simply be distortions due to hikes in sales
taxes and public-service fees in the crisis economies. If true, those
distortions should fade in the course of next year. On the other hand,
wages in Germany are accelerating, while they are decelerating if not
declining in other parts of Europe.
In some sectors, inflation is clearly picking up. Most notable are the
increases in house prices and rents. But even those are modest by
international standards. Missing in Germany as in the rest of the Euro
area are signs of monetary excesses and leverage. The German component of
Euro-area M3 is growing less anemic, but not out of line with the economy
and past standards. Moreover, much of the recent pick-up in German M3
growth was driven by people moving into cash (checking accounts). The high
preference for liquidity is a sign of uncertainty among retail investors
and not pending consumer demand. Indeed, bank credit to households and
companies is hardly growing, which is a sign that parts of the German
banking system are also struggling as well as companies either finding
other funding sources or being reluctant to invest more.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 5 November 2012, Silvia Quandt Research GmbH,
Grüneburgweg 18, 60322 Frankfurt is responsible for its preparation. German
Regulatory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht
(BaFin), Graurheindorfer Str. 108, 53117 Bonn and Lurgiallee 12, 60439
Frankfurt.
Publication according to article 5 (4) no. 3 of the German Regulation
concerning the analysis of financial instruments (Finanzanalyseverordnung):
Number of recommendations Thereof recommendations for issuers to which
from Silvia Quandt investment banking services were provided during
Research GmbH in 2012 the preceding twelve months
Buys: 74 24
Neutral: 47 4
Avoid: 10 0
Company disclosures
Article 34b of the German Securities Trading Act (Wertpapierhandelsgesetz)
in combination with the German regulation concerning the analysis of
financial instruments (Finanzanalyseverordnung) requires an enterprise
preparing a securities analysis to point out possible conflicts of interest
with respect to the company or companies that are the subject of the
analysis. A conflict of interest is presumed to exist, in particular, if an
enterprise preparing a security analysis:
(a) holds more than 5 % of the share capital of the company or companies
analysed;
(b) has lead managed or co-lead managed a public offering of the
securities of the company or companies in the previous 12 months;
(c) has provided investment banking services for the company or companies
analysed during the last 12 months for which a compensation has been or
will be paid;
(d) is serving as a liquidity provider for the company's securities by
issuing buy and sell orders;
(e) is party to an agreement with the company or companies that is the
subject of the analysis relating to the production of the recommendation;
(f) or the analyst covering the issue has other significant financial
interests with respect to the company or companies that are the subject of
this analysis, for example holding a seat on the company's boards.
In this respective analysis the following of the above-mentioned conflicts
of interests exist: none
Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG, and its affiliated
companies regularly hold shares of the analysed company or companies in
their trading portfolios. The views expressed in this analysis reflect the
personal views of the analyst about the subject securities or issuers. No
part of the analyst's compensation was, is or will be directly or
indirectly tied to the specific recommendations or views expressed in this
analysis. It has not been determined in advance whether and at what
intervals this report will be updated.
Equity Recommendation Definitions Silvia Quandt Research GmbH analysts rate
the shares of the companies they cover on an absolute basis using a 6 -
12-month target price. 'Buys' assume an upside of more than 10% from the
current price during the following 6 - 12-months. These securities are
expected to out-perform their respective sector indices. Securities with an
expected negative absolute performance of more than 10% and an
under-performance to their respective sector index are rated 'avoids'.
Securities where the current share price is within a 10% range of the
sector performance are rated 'neutral'. Securities prices used in this
report are closing prices of the day before publication unless a different
date is stated. With regard to unlisted securities median market prices are
used based on various important broker sources (OTC-Market).
Disclaimer This publication has been prepared and published by Silvia
Quandt Research GmbH, a subsidiary of Silvia Quandt & Cie. AG. This
publication is intended solely for distribution to professional and
business customers of Silvia Quandt & Cie. AG. It is not intended to be
distributed to private investors or private customers. Any information in
this report is based on data obtained from publicly available information
and sources considered to be reliable, but no representations or guarantees
are made by Silvia Quandt Research GmbH with regard to the accuracy or
completeness of the data or information contained in this report. The
opinions and estimates contained herein constitute our best judgement at
this date and time, and are subject to change without notice. Prior to this
publication, the analysis has not been communicated to the analysed
companies and changed subsequently. This report is for information purposes
only; it is not intended to be and should not be construed as a
recommendation, offer or solicitation to acquire, or dispose of, any of the
securities mentioned in this report. In compliance with statutory and
regulatory provisions, Silvia Quandt & Cie. AG and Silvia Quandt Research
GmbH have set up effective organisational and administrative arrangements
to prevent and avoid possible conflicts of interests in preparing and
transmitting analyses. These include, in particular, inhouse information
barriers (Chinese walls). These information barriers apply to any
information which is not publicly available and to which any of Silvia
Quandt & Cie. AG and Silvia Quandt Research GmbH or its affiliates may have
access from a business relationship with the issuer. For statutory or
contractual reasons, this information may not be used in an analysis of the
securities and is therefore not included in this report. Silvia Quandt &
Cie. AG and Silvia Quandt Research GmbH, its affiliates and/or clients may
conduct or may have conducted transactions for their own account or for the
account of other parties with respect to the securities mentioned in this
report or related investments before the recipient has received this
report. Silvia Quandt & Cie. AG and Silvia Quandt Research GmbH or its
affiliates, its executives, managers and employees may hold shares or
positions, possibly even short sale positions, in securities mentioned in
this report or in related investments. Silvia Quandt & Cie. AG in
particular may provide banking or other advisory services to interested
parties. Neither Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG or
its affiliates nor any of its officers, shareholders or employees accept
any liability for any direct or consequential loss arising from any use of
this publication or its contents. Copyright and database rights protection
exists in this publication and it may not be reproduced, distributed or
published by any person for any purpose without the prior express consent
of Silvia Quandt Research GmbH. All rights reserved. Any investments
referred to herein may involve significant risk, are not necessarily
available in all jurisdictions, may be illiquid and may not be suitable for
all investors. The value of, or income from, any investments referred to
herein may fluctuate and/or be affected by changes in exchange rates. Past
performance is not indicative of future results. Investors should make
their own investment decisions without relying on this publication. Only
investors with sufficient knowledge and experience in financial matters to
evaluate the merits and risks should consider an investment in any issuer
or market discussed herein and other persons should not take any action on
the basis of this publication.
Specific notices of possible conflicts of interest with respect to issuers
or securities forming the subject of this report according to US or English
law: None
This publication is issued in the United Kingdom only to persons described
in Articles 19, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001 and is not intended to be distributed,
directly or indirectly, to any other class of persons (including private
investors). Neither this publication nor any copy of it may be taken or
transmitted into the United States of America or distributed, directly or
indirectly, in the United States of America.
Frankfurt am Main, 05.11.2012
Silvia Quandt Research GmbH
Grüneburgweg 1860322 Frankfurt
Tel: + 49 69 95 92 90 93 -0
Fax: + 49 69 95 92 90 93 - 11
Ende der Corporate News
---------------------------------------------------------------------
05.11.2012 Veröffentlichung einer Corporate News/Finanznachricht,
übermittelt durch die DGAP - ein Unternehmen der EquityStory AG.
Für den Inhalt der Mitteilung ist der Emittent / Herausgeber
verantwortlich.
Die DGAP Distributionsservices umfassen gesetzliche Meldepflichten,
Corporate News/Finanznachrichten und Pressemitteilungen.
Medienarchiv unter http://www.dgap-medientreff.de und
http://www.dgap.de
---------------------------------------------------------------------
191492 05.11.2012