E Quarterly Reports Day

The trouble with stashing all your ill-got gains into a secret offshore account is that you may be found out. This happened to Jean-Marie Le Pen, founder of the French right-wing Front National party. He turned out to be less up-front or nationalistic than expected, with a Swiss bank account.

The trouble with stashing all your ill-got gains into a secret offshore account is that you may not be able to access your money if you need it. This happened to the accused British flash-crash trader Navidar Singh Sarao, so far unable to raise £5 mn in bail from his alleged secret accounts. His parents in Hounslow raised £50,000 of the total. Navindar is alleged to have made £26 mn from his spoof trading which caused the May 2010 market selloff. The proceedes were placed in an Employee Benefit Trust and then written off. The remainder was put in a company called Nav Sarao Futures Ltd in Anguilla, an offshore Caribbean island, with a fellow Sikh partner who manages a bank in Abu Dhabi. Unless he can pay up, Sarao, 36, may face British jail before he is extradited to the US where he faces multiple charges mounting to 380 years of prison.

European inflation in April rose from -0.1% in Q1 to zero. This means that its quantitative easing policy may encourage people to spend money rather than keeping it for another day when it will buy more. The eventual boost in spending will help the US economy and that of Third World countries (I hope, fingers crossed.) However in trading on Thursday, my Euroland favorites fell more sharply that Wall Street did on Wednesday after the Fed by silence extended the period for low interest rates beyond June. More on what this means and other macro news for paid subscribers below. And the dollar continues to drop.

Pope Francis keeps on getting things right. So far this week he has backed calls for a full accounting of the Argentina “disappearances” under the military junta. He also stated that the underpayment of women doing the same jobs as men was a “pure scandal” (despite the 30% discount for valuing females in the Bible.) And he has granted a Papal Knighthood to NY Rabbi Arthur Schneier, 85, for his work in supporting religious freedom. Austrian-born Rabbi-Knight Schneier, rabbi emeritus at Park East Synagaogue, came to the US as a child. While almost all Papal Knights are Catholics, Pope John XXIII also knighted a rabbi.

Given a sword by Cardinal Timothy Dolan at the ceremony to mark his becoming a Knight of St. Sylvester, particularly appropriate for someone born in Austria, Rabbi Schneier said he supported arms control. “What should I do? I'm in favor of gun control and sword control” he asked the NY Cardinal who replied “beat it into a plowshare.”

Hard and Soft

*Brazil's iron ore miner Vale reported a Q1 loss of $3.1 bn compared to a profit last year of $2.5 bn because of glut in its major business. It continued its policy of exiting marginal businesses like transport and non-ferrous but these moves were inadequate given the China-generateed collapse in iron demand and prices. Its revenues fell by a third to $6.24 bn. It also reported a drop in cash flow (earnings before interest, taxes, depreciation, and amortization) of 61% to $1.6 bn. Note that VALE reporting in US$ is because it is a global company whose basic costs are incurred in declining Brazilian reais. It should gain an edge against miners whose costs are incurred in stronger currencies like the A$. VALE.

*Nokia released its Q1 figures in Finnishletting the locals cut the price of its stock nearly 10% before the rest of the world could react to the awful news. By now it is only off 8% as US trading has begun.The Finnish edge may go the way of the dodo before long, if NOK completes its planned takeover of Alcatel-Lucent of France, which is now also in question.

The results were lousy at the very Networks part of NOK's business the ALU deal is supposed to beef up. There sales cratered along with margins which sank to 3.2% from 9.3% a year earlier. Sales fell to euros 85 mn from year-earlier euros 216 mn. This poor showing destroyed the profits Nokia built up in its HERE map business which is supposed to be sacrificed at the altar to enable the ALU deal to proceed, a tough strategy to grasp. HERE sales rose 25% and its location software for new cars sales rose 29%. Why kill the golden goose?

Overall NOK sales rose 20% y/y to euros 3.2 bn but fell 16% sequentially from a good final 2014 quarter. The same pattern also applied to earnings. In non-IFRS terms, they were up over Q1 2014 at euros 200 mn from 172 mn a year earlier, but sharply down from the euros 356 mn of Q4. Per share earnings were a non-IFRS 5 eurocents vs 4 eurocents in Q1 '14, but off from 9 eurocents in Q4 '14. The company also reported diluted figures where the trend was the same as for the non-International Financial Reporting Standards ones.

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