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Markets Live: Friday, 29th May, 2015

Live markets commentary from FT.com 

A possible cash solution to the New World debacle

The end of May arrives and shares in London market minnow New World Oil & Gas remain suspended until settlement problems are resolved. For the gory details, see our previous post, as well as a press release from the shareholder action group below.

Before that, something else to note for anyone who finds themselves waiting for undelivered stock or, more dangerously, is on the hook to deliver shares in the Aim listed exploration company under so-called extended settlement terms. There is precedent for how this ends: cash payments.

Room Service, subsequently renamed Azure Holdings, was suspended in 2003 after more shares were sold short than existed. As with New World now, there was a proposed open offer of the companies stock, but the exchange determined the situation “represents extreme circumstances that make an unassisted resolution of this issue very unlikely.” Read more

Further reading

Elsewhere on Friday,

- Modern slavery.

- Of bribery and banks.

- The dramatic rise of life expectancy around the world.

- Dick is back.

- The thrill is gone in Latvia.

- On the chances of your start-up becoming a unicorn. Read more

FT Opening Quote – Telecity elopes with Equinix for £2.3bn

Telecity has eloped with Equinix and the pre-nup is worth £2.3bn, Hornby is crowdsourcing toy launches and there’s a gaggle of GDP numbers waddling towards us this Friday. FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the full email here.  Read more

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The Fifa presidency goes to a vote today with the organisation mired in scandal and Sepp Blatter defiant, refusing to step downand saying it is too late for him to withdraw.

The scandal has engulfed the world of football. The former head ofBrazil’s football federation has been charged with rampant corruption while nerves are frayed in Qatar over the tide of graft claims against its bid and the calls for greater protection for the labourers building the stadiums. Read more

Calling CDS users, Citi would like your opinion

OK, yes, online surveys are mostly of dubious use. Still, as we might be interested to know what the world thinks about single name Credit Default Swap liquidity, and Matt King & co at Citi are only asking three questions, follow this link to take part.

If you would like to know the questions first, they are: Read more

Markets Live: Thursday, 28th May, 2015

Live markets commentary from FT.com 

Stranded assets and climate stimulus

It was Climate Finance Day in Paris last week, a conference convened under the auspices of UNEP and the UNPRI to address the specific challenges and issues of redirecting capital towards a resilient low-carbon global economy ahead of the United Nations Climate Change Conference also to be held in Paris, in December.

The big takeaway was consensus is shifting, especially among asset managers and real money investors who no longer view environmental sustainability as a fringe theme. Climate is a bona fide risk for beneficiaries which professional investors must guard against to fulfil their fiduciary duties. To do nothing, essentially, is to encourage a disorderly capital transition and, potentially, a financial panic.

As example, Axa’s chief executive pledged the insurer would divest €500m of coal assets between now and the end of the year. Read more

Further reading

Elsewhere on Thursday,

- Is anyone other than me rattled by the FIFA arrests?

- The human toll of FIFA’s corruption.

- Borrowing to replenish depleted pensions.

- When bots collude. Read more

FT Opening Quote – IAG’s ‘final’ Aer Lingus price

Has IAG chief Willie Walsh shot Ryanair boss Michael O’Leary’s fox? Tate & Lyle profits have soured, Japanese shares have soared and UK first-quarter GDP may edge higher. FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the full email here. Read more

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Allegations of “rampant, systemic and deep-rooted” corruption andbribes worth over $150m emerged after yesterday’s dramatic dawn raid and the arrest of seven Fifa officials. Fifa delegates are trying toput on a brave face but the organisation is looking at the worst crisis in its history and American authorities are adamant that they are not finished yet. While “US law enforcers and courts reaching overseas to get their men and women often irritates”, John Gapper reckons America is the perfect referee for Fifa’s many fouls. Read more

Goldman goes astray on Grand Theft Auto and productivity

There’s always a danger, when you question official statistics, that you come off sounding like a nutter.

But some forms of scepticism are more respectable than others. At one end of the spectrum, we’ve previously indulged the possibility that seasonal adjustment algorithms inadvertently distorted the GDP and employment figures. At the other, you have people who add fixed constants to the reported growth rate of consumer prices because they disagree with methodological changes from the 1980s and 1990s, but speak as if they are uncovering a conspiracy. Read more

Summers and Swiss bitcoin hoards

The FT’s Richard Waters reports that Larry Summers, former US treasury secretary and secular stagnation theorist, is to form part of the advisory board at Xapo, a Silicon Valley Bitcoin start-up specialising in deep cold storage of bitcoins in Swiss vaults and the issuance of bitcoin debit cards.

Worth noting in this context, of course, is that Larry Summers is also the man arguing that bubbles are a bit of an inevitability in a secular stagnated world. Or as he explained in the Financial Times back in December 2014: Read more

The Great Camp Alphaville Quiz — call for entries

Think you are smart and know stuff? Do you have two or three friends or colleagues who are similarly gifted?

Prove it.

Enter our fab quiz at 6pm on July 1 at Camp Alphaville, under canvas on the grounds of the Honourable Artillery Company, London. Read more

Guest post: The pitfalls of internal corporate investigations

Anil Rajani, Partner at law firm Fladgate, reckons the SFO should take a leaf out of the FCA’s book when it comes to the “self reporting” of wrong-doing within companies.

_______ Read more

Markets Live: Wednesday, 27th May, 2015

Live markets commentary from FT.com 

Short Qatar stocks, long paper shredders

And so to the US Department of Justice’s indictment on Wednesday of nine Fifa officials, alleging a RICO conspiracy, wire fraud, money laundering, etc…

The indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments. Read more

India: A billion shareholders now

There are lots of people in India. Nobody argues about that.

What’s also true is not many of them care about equities.

Of course, there are exceptions. In absolute terms, rather large exceptions. The Bombay Stock Exchange (founded in 1875 as the “The Native Share & Stock Brokers Association”) is Asia’s oldest and ever since Reliance founder Dhirubhai Ambani — the ‘guru of the equity cult’ as Hamish McDonald put it — tapped into India’s small investor to fund his company, they have been in the mix. Read more

The crowd has money, but few rights

Fans of buzzy peer finance and sourcing money from crowds should read a great piece in the FT about Crowdcube, an equity funding site, by Murad Ahmed.

We’ve looked at individual opportunities for crowds to lose money, but this considers more structural problems for small investors tempted to bet on tiny, risky companies in return for a precarious stake in a start-up.

All crowdfunding groups make it clear to investors that they are likely to lose money as the vast majority of start-ups will fail. But the UK’s Financial Conduct Authority recently rebuked the five-year-old industry, saying that many groups give a “misleading or unrealistically optimistic impression of the investment”.

 Read more

Further reading

Elsewhere on Wednesday,

- “A sufficiently large market predicting an individual’s death is also, necessarily, an assassination market, and similarly other “prediction” markets are also act markets, changing incentives to act outside that market to bring about the predicted events.”

- The geek heretic.

- “The highest form of derivatives artistry is achieved when a bank sells derivatives on its derivatives to itself, and this trade comes alarmingly close to that.”

- UK monetary policy is too complacent.

- Chicago, where, “five years later, however, many municipal market participants remain locked in an unproductive dialogue with an irrelevant personality.” Read more

FT Opening Quote – Brexit bill heads Queen’s Speech

The Brexit bill will be the highlight of this morning’s Queen’s Speech, Fifa officials have been arrested in dawn raids in Europe and what will Ryanair do with its Aer Lingus stake now IAG has published its offer? FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the email here. Read more

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China’s currency has received a vote of confidence from the International Monetary Fund, which declared that it was ‘no longer undervalued’. The IMF has shifted its stance after more than a decade of criticising Beijing’s tight management of the renminbi.

The fund’s position puts it at odds with its biggest shareholder. The US insists, along with many economists, that China still gets an unfair trade advantage from an undervalued renminbi. (FT) Read more

The mysterious decline in the number of US public companies

A new paper from Craig Doidge, G Andrew Karolyi, and René M Stulz investigates the reasons why the number of publicly listed US companies peaked in 1996, even as the number of publicly listed foreign firms climbed.

From the study:

The number of U.S. listings fell from 8,025 in 1996 to 4,101 in 2012, whereas non-U.S. listings increased from 30,734 to 39,427.

(Click to enlarge, and careful with the dual Y-axes.) Read more

Central banking: just when you understand it, it changes

Ask most monetary policymakers how they think about their job and the conversation generally goes like this:

  1. There is “an equilibrium interest rate” that somehow balances out the desires of savers and borrowers
  2. This “equilibrium rate” can be estimated roughly in real time
  3. The role of the central bank is to ensure that actual interest rates align with this theoretical ideal

We don’t really buy any of these points, especially 2) — see our earlier post discussing research by BAML’s Ethan Harris and Goldman’s Jan Hatzius, among others, on the difficulty of determining the “equilibrium” rate at any point in time — so naturally we want to highlight some new papers that reinforce our monetary policy nihilism. Read more

Wirecard Gibraltar and an asset rich wind-up

Gibraltar places few obligations on companies to report. Filings can be sparse and, in practice, lodged years after the financial events they record. Yet even limited information may be useful: in the case of Wirecard Gibraltar, it shines a light on a subsidiary subject to a long liquidation.

The entity, which appears to have contained around €50m in retained earnings and a larger amount of intangible assets, remains in the wind-up process more than two years after being placed in a solvent liquidation by Wirecard, the German listed electronic payment provider valued at €4.6bn.

Documents filed in the British Overseas Territory contain different figures from those in accounts filed in Germany, variations the company says are due to differences in accounting standards. Read more

Markets Live: Tuesday, 26th May, 2015

Live markets commentary from FT.com 

Of mangled markets and the Chatham House Rule*

Some of you may remember how the ECB fecked up last week, when “an internal procedural error” meant an eventually market moving speech given by one Benoît Coeuré on Monday to, amongst others, a load of hedgies wasn’t made public until Tuesday morning.

The speech — apart from starting a debate about Chatham House rules, priviliged information and knee jerk responses by the ECB — was about ECB plans to front-load their bond purchases in May and June.

And as Citi’s credit specialist Matt King said: “If the ECB had wanted to test the extent to which traders were hanging on their every word, they could hardly have come up with a better experiment than to promise to boost the pace of QE purchases today, only to cut it back during the summer.” Read more

Further reading

Elsewhere on Tuesday,

- Dear buy side? Worried about liquidity? How about you pay for it?

- Technology, inflation and the Fed.

- The big Meh.

- Grexit: the real risk to the euro is not that Greece will fail but that it will succeed.

- Yanis, redux: Austerity is the only deal-breaker.

- Who owns Witanhurst, London’s most expensive mansion? Read more

FT Opening Quote – Ryanair profits propelled 66% higher

Ryanair playing nice with passengers has boosted profits 66 per cent, Cineworld is looking forward to some summer blockbusters and we’re close to a $55bn Charter-Time Warner Cable deal. FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the email here. Read more