Markets News Friday: Hedge-fund manager Paulson personally netted $5bn+ in profits in 2010; Aviva raises health premiums 14%
By Finfacts Team
Jan 28, 2011 - 9:03 AM

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Bill Clinton, founder, William J. Clinton Foundation; President of the United States (1993-2001); UN Special Envoy to Haiti gestures while speaking during the session 'A Conversation with William J. Clinton' at the Annual Meeting 2011 of the World Economic Forum in Davos, Switzerland, January 27, 2011. ©World Economic Forum by Sebastian Derungs

Hedge Fund Billions: The Wall Street Journal reports today that hedge-fund manager John Paulson personally netted more than $5bn in profits in 2010 - - likely the largest one-year haul in investing history, trumping the nearly $4bn he made with his “short” bets against subprime mortgages in 2007.

Paulson’s take, described by investors and people close to investment firm Paulson & Co., shows how profits continue to pile up for elite hedge-fund managers.

The Journal says the performance last year, nevertheless, paled in comparison to his 2007 returns, when Mr. Paulson made a huge wager against subprime mortgages and his funds scored gains of as much as 590%.

Microsoft/Amazon: Microsoft on Thursday announced record second-quarter revenue of $19.95bn for the quarter ended Dec. 31, 2010. Operating income, net income and diluted earnings per share for the quarter were $8.17bn, $6.63bn - - slightly down on the same quarter last year - - and $0.77 per share, respectively.

Sales were boosted by strong demand for Kinect controllers for Xbox 360 consoles.

Meanwhile, Amazon reported net sales increased 36% to $12.95bn in the fourth quarter, compared with $9.52bn in fourth quarter 2009. Excluding the $139m unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 37% compared with fourth quarter 2009.

Operating income was $474m in the fourth quarter, compared with $476m in fourth quarter 2009. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $18m.

Net income increased 8% to $416m in the fourth quarter, or $0.91 per diluted share, compared with net income of $384m, or $0.85 per diluted share, in fourth quarter 2009.

Health Insurance: Aviva this morning confirmed it will increase health insurance premiums by 14% from March 1st.

It said it has to increase the premium prices because of the rise in the cost of private beds in public hospitals, medical inflation of 9% and the health insurance levy.

It also said that if the health insurance levy was removed, it would be able to reduce its prices by up to 30% overnight.

The planned increase will result in Aviva's most popular plan rising in cost from €848 a year to €967 a year. Families with two adults and two children will typically see their bill rise by €356 a year to €2,900.

Earlier in January, VHI announced premium rises of an average of 15% and up to 45% in some cases.

The cost of Quinn Healthcare plans will rise from next Tuesday, when premiums will increase by 8%, with some policies seeing increases of up to 25%.

Bill Cllinton discusses his plans to improve employment, with CNBC's Maria Bartiromo:

Davos 2011: Addressing the participants of the World Economic Forum Annual Meeting 2011 on Thursday, Nicolas Sarkozy, President of France, framed his vision for the Group of 20 nations by noting that, "We are 11 years into the 21st century, yet we are still functioning with the rules of the 20th Century." We have entered an age where it is ever more important to talk and listen to each other, to identify the collective common interest, and find news ways of thinking to help us build the future.

Over the past 18 months, at the brink of the precipice, there was little choice behind the decisions made by the G-20; it is now time to keep cool heads as the decisions get tougher. The G-20 must be productive, and its agenda will focus on three major risks: sovereign debt, monetary and financial imbalance, and the impact of inflation on growth and the soaring price of commodities.

When asked by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, whether the euro has the capacity to survive, he said that, for the 17 member countries, the euro is a magnificent symbol of lasting peace. There is a need to deepen and integrate the defence of the euro and never turn away from it.

President Sarkozy said that France and Germany would never allow the euro to collapse and warned currency operators that they would be taking huge risks if they speculated against it.

In an address to global business, financial and political leaders at the World Economic Forum Annual Meeting in Davos, he said the euro was an integral part of the European identity and of the drive to unity and cooperation on the continent that had ensured peace and turned old enemies into close friends.

“Never, listen to me carefully, never will we turn our backs on the euro, never will we drop the euro,” declared President Sarkozy, saying that he was speaking also for Chancellor Angela Merkel of Germany,

“The euro is Europe,” he said. “We will never let the euro be destroyed … It is not simply a monetary or an economic issue. It has to do with our identity as Europeans.”

Responding to a question on the future of the currency, he said he had been reading wild predictions that the currency would collapse for several months, but noted that they were now dying down.

“For those who would like to speculate on the euro, I say: Be careful,” President Sarkozy, current chairman of the G-20, told participants. The European Union has set up a mechanism that would back up the currency in any crisis. “The euro is of such overwhelming importance that we will be there whenever it needs to be defended.”

The results of a collapse “would be so cataclysmic that we cannot even think of it, nor even play around at thinking about it,” he added.

Insight on where the tech giant's revenue is coming from, with Ted Moore, Fifth Third Asset Management and CNBC's Jon Fortt:

UK Consumer Confidence: The GfK NOP Consumer Confidence Index has dropped eight points this month to -29, the lowest figure since March 2009, when it was -30. January saw decreases across all five measures; the most notable being in the "major purchase” index, which dropped 21 points.

Nick Moon, MD of GfK NOP Social Research, comments: "January’s eight point drop represents an astonishing collapse in consumer confidence. In the 35 years since the Index began, confidence has only slumped this much in a single month on six occasions, the last being November to December 1994.

"The VAT increase is the first of the government’s austerity measures that has had a widespread impact on consumers, and it seems to have hit people's economic confidence hard, especially as the biggest drop was in consumers' appetite for major purchases. With inflation on the up and the full force of the cuts yet to hit, these figures could be the beginning of a very painful period.

"There is a chance that these figures represent a post-Christmas blip, but even if there is a rally in February it is extremely unlikely that it will reverse this massive drop. Today's figures, when combined with the bleak economic forecast, will make talk of a double dip recession unavoidable."

Irish Housing: The EBS / DKM Affordability Index released today shows that the average first time buyer (FTB) working couple is paying 12.6% of their joint disposable income to fund their mortgage. This means that, according to the index, housing is more affordable today than at any time in the past twenty five years.

Based on quarterly figures derived by DKM for the period 1988 to 2004, the average working couple is paying slightly less today than at the lowest points in pre­vious housing affordability cycles i.e. in Q2 1988 and Q1 1995. Despite average house prices today being 2.1 to 3.2 times their average levels in Q1 1995 and Q2 1988 respectively, the proportion of net income required to fund a mortgage has reached its lowest point in twenty five years: December 2010 12.6%; versus 13.4% in Q2 1988 or 13.8% in Q1 1995.

This significant shift in affordability is particularly evident when the cost of servicing a mortgage today is compared with the same cost at the height of the boom: in December 2006, monthly mortgage repayments for the average first time buyer couple were €1,323 or 26.4% of their net income, this has more than halved to monthly repayments of €639 or 12.6% of a couple’s net income.

Stock markets look to US Q4 GDP release today: Davy economist, Conall Mac Coille, comments  - -"Today stock markets will focus on the long-awaited US Q4 GDP numbers. The monthly data for consumer spending, industrial production, business investment and other indicators suggest that Q4 should have been a very strong quarter for the US economy. The market expects that growth in Q4 was 3.5% on an annualised basis, up from 2.6% in the third quarter. However, it appears that the risk around this expectation probably lies on the upside. Consumer spending is set to post its strongest quarter in five years. In addition, the net trade contribution is likely to be positive after negative contributions in Q2 and Q3.

It is clear though that the US will have recorded very strong growth in the fourth quarter. In recent days, sentiment towards the US economy has been very positive following improving housing market data and the Federal Reserve's Open Market Committee statement indicating that a change in monetary policy was unlikely given recent positive macroeconomic data and the upward pressure on inflation from higher commodity prices. A surprisingly strong GDP number could be positive for stock prices but may already be largely priced in.

Today also sees the release of the Michigan measure of consumer confidence for January which is expected to only post a small rise. Given the sharp improvement in the Conference Board measure last week, the risk again lies on the upside for the Michigan measure relative to the market's expectation. If both GDP and consumer confidence beat expectations they may coalesce into even more positive sentiment towards the US economy."

Insight on Japan's debt threat, with Michael Pento, Euro Pacific Capital and David Goldman, First Things Magazine:

Economic View: More than just weather affecting Irish consumers - - Goodbody chief economist, Dermot O’Leary, comments  - - "With a record cold snap and unprecedented economic uncertainty surrounding the IMF/EU programme, it came as no surprise to learn that Irish retail sales were weak in December.

On an annual basis, retail sales volumes fell by 3% in December (+0.5% in November), while the pace of decline in core sales accelerated to -4% (from -1% in November). It is impossible to disentangle the two major influences on consumers in December, but there is no doubt that both impacted negatively. While most categories continue to show continuing weakness, there are some that are seeing gains.

The best performing is department stores, where sales volumes were up 5% yoy in December. Unsurprisingly, price discounts have to be used to increase demand, but even allowing for that, the value of sales in department stores grew by 1% yoy. Although deflation pressures overall seem to be easing (deflator at lowest level since Q4 2008), it continues to be a problem for retailers who are struggling with fixed, and sometimes rising, rental costs.

Trends at the start of 2011 will determine whether the political and economic uncertainty is having more lasting impacts. However, underlying trends in disposable income are likely to have the most important impact.  We know that will be impacted by higher income tax rates and lower employment. Unless we see a significant drop in the savings ratio, another fall in consumer spending is in prospect in 2011."

US Markets

In New York Thursday, the Dow dipped 4 points or 0.04% to 11,990.

The S&P 500 added 0.22% and the Nasdaq rose 0.58%.

Asia Markets

The MSCI Asia Pacific fell 0.6% Friday.

Japan's Nikkei 225 dropped 1.10%; China's Shanghai Composite rose 1.49%; Australia's S&P/ASX 200 Index slid 0.04% and India's Sensex slipped 0.85%.

Asia benchmarks

Finfacts Reports

Return to normal growth in Ireland may take up to 10 years says IMF chief; Japan and US warned on debt challenges
Dr. Peter Morici: US debt should be downgraded to below Japan's: Japan sound, US insolvent
Standard & Poor's says top 50 non-financial global publicly traded companies have cash hoard of over $1trn
Markets News Afternoon: Finance Bill passes in Dáil; Nokia Q4 profit dips 21%; Irish Stock Exchange equity turnover fell 15% in 2010
Eurozone companies increased credit demands from banks in Q4 of 2010; Demand for house loans also increased but fell in Ireland
US orders for capital equipment grew in December; New weekly jobless claims jump 51,000 - - spike resulted from backlog of claims
UK retail sales rose in January but the pace of growth is starting to slow
Eurozone business climate indicator improved again in January; Economic sentiment indicator unchanged
Irish retail sales volume dipped by 3.1% in 12 months to December 2010; Bad weather impacted sales in the month

In Europe, the Dow Jones Stoxx 600 is down 0.33% in early trading Friday.

The ISEQ has risen 0.14% in Dublin.

CRH is down 0.44%; Elan has dipped 0.39%; BoI is up 2.78% and Aer Lingus has risen by 2.83%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report


The euro is trading at $1.3681 and at £0.8624.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.


The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Thursday this week, the BDI fell 48 points or 3.90% to 1,186.

The Financial Times reported last Thursday week, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for March 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $85.64 per barrel at no change from Thursday's close. In London, Brent for March delivery is trading on the International Commodities Exchange at $97.96.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,313.90, down $1.00 from Thursday's close.

Irish Financials: Euro bank lending survey; Goodbody's Eamonn Hughes  commented - - "The Irish contribution to the Euro Area Lending Survey was published yesterday. At this stage, Irish bank equity investors will be less interested in the survey results which focus predominantly on the asset side of the balance sheet.

For the record, the survey results show little change from the last survey in October. However, we note the results from the ad hoc question on funding. The first one relates to market access for wholesale funding. It will be no surprise to you that the results vary from Deteriorated Considerably to Deteriorated Somewhat over the past 3 months across a range of short and long dated wholesale instruments.

Interestingly, in the expectations component for the next 3 months, the January readings are lower in 6 of the 7 categories, showing further anticipated weakness in this area. In addition, the financial crisis and its impact on capital has weakened their ability to lend and they expect this to continue to weaken in the coming 3 months. The results of the survey continue to highlight the precarious position of our domestic banks and highlight a need to move quickly to recapitalise and restructure, notwithstanding the resultant dilution for existing shareholders."

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