The Closer

FURTHER FURTHER READING

- Robot historians and the heroic idea. Read more

The collapse in “physical demand” for precious metals in the USA

Some precious metal bulls like to dismiss price declines in gold and silver by pointing to the strength of “physical demand.” (Savers who put their wealth into precious metals never seem to get paid for this “physical demand”, but whatever…)

For example, here is Jim Rickards: Read more

Zalando: are the anti-psychotics actually kicking in?

Study this chart carefully. It’s the first day of dealings in Zalander, the Frankfurt-listed online frock shop that claims to be Europe’s biggest.

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The anti-malarial bed net of capital markets

A good humoured defence of short selling arrives from Kerrisdale Capital who, setting expectations less than low, say that next week they will present on the biggest stock promotion since Sino Forest.

From Vimeo (where else?): Read more

Markets Live: Wednesday, 1st October, 2014

Live markets commentary from FT.com 

The (early) Lunch Wrap

Deutsche Bank withholds bonuses from co-chiefs and top executives || Financial regulator begins full investigation of Tesco || Mario Draghi pushes for ECB to accept Greek and Cypriot ‘junk’ loan bundles || UK manufacturing activity falls to 17-month low || Sainsbury suffers fall in second-quarter sales || France insists delay on deficit target justified || Markets Read more

Russia defence spending facts of the day

From a summary of Russia’s proposed new budget, by Free Exchange:

The budget shows how much trouble the Russian economy is in—and how unwilling the government is to face up to reality. Read more

Further Reading

Elsewhere on Wednesday,

- Schroedinger’s executive order: data is not “collected” until it is examined

- Arctic ice loss enough to shift planet’s gravity

- Fighting authority with kindness  Read more

The 6am London Cut

Ebay is to spin off PayPal which accounts for as much as half of its $65bn stock market value, in a further unravelling of one of the few remaining successes from the dotcom era of internet companies. The move marks a dramatic climbdown coming just months after the company rejected calls by the activist investor Carl Icahn to sell the online payments system. (Financial Times)

Just when good news was starting to flow again out of Ireland, along comes the European Commission to spoil the celebrations. The Irish economy is growing strongly after its three-year, €67bn bailout. But its cherished corporate tax regime, which has attracted billions of dollars of foreign direct investment over four decades, is now under intense international scrutiny. (Financial Times) Read more

The Closer

FURTHER FURTHER READING

- CDC confirms first Ebola case diagnosed in US, but don’t panic Read more

Illiquid, insolvent, what’s the difference?

Being illiquid means that you don’t have resources available to meet your current obligations. Figuring this out is straightforward: either you can pay your bills or you can’t.

Being insolvent means that you owe more than you own. That too seems straightforward. But while solvency is often discussed as a binary condition — either you are or you aren’t — the reality is more complicated. Read more

SEC charges two on Ackman announcement

The SEC has been busy turning over rocks related to one of the highest profile short seller battles in recent years.

On Tuesday, the regulator announced insider trading charges related to the announcement of Mr Ackman’s $1bn bet against Herbalife in December 2012. Nothing to do with Pershing Square, however. Instead it concerns two individuals, one of whom happened to share a room with a former Pershing analyst, and a rather more mundane amount of cash.

The Securities and Exchange Commission today announced charges against two individuals for insider trading on a prominent hedge fund manager’s announcement that his hedge fund had formed a negative view of Herbalife Ltd. and taken a $1 billion short position in its securities.

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Nothing to see at Santander, move along now

The disclosure of “material” information tends to generate a bit of discussion in corporate and financial circles, unless of course we’re talking Spanish banks.

Note this announcement from Santander on Tuesday: Read more

Markets Live: Tuesday, 30th September, 2014

Live markets commentary from FT.com 

The (early) Lunch Wrap

UK house price growth slows || Next warns on weather || RBS reverse impairment boost || Nissin to raise noodle prices || Ukraine fighting picks up || Naru faces ruin || Markets mixed Read more

The EU versus Apple & Ireland

In the light of the foregoing considerations, the Commission’s preliminary view is that the tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute State aid according to Article 107(1) TFEU. The Commission has doubts about the compatibility of such State aid with the internal market. The Commission has therefore decided to initiate the procedure laid down in Article 108(2) TFEU with respect to the measures in question.

Click for the full document laying out the case.

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Who likes European bonds?

The self-described data geeks at Citi have a new note on who buys euro-denominated bonds, and we want to share some highlights.

Even though European banks were endangered by their significant holdings of sovereign debt, their portfolios were relatively less exposed compared to pensions, insurers, and foreigners. Read more

Global disinflationary pressures

Consider some of the global non-policy forces that might now be weighing on price inflation:

– Aging demographics, high debt loads, weak nominal wage growth and persistent output gaps in advanced economies. Read more

Further Reading

Elsewhere on Tuesday,

- A Troll confesses, click here.

- The internet is broken.

- The measure of a desperate manRead more

The 6am London Cut

Two of the world’s largest securities depositories have finalised a joint venture to create a vast pool containing trillions of dollars of collateral to ease banks’ search for scarce assets to back trading. The US’s Depository Trust and Clearing Corporation and Belgium’s Euroclear confirmed they would create a venture called DTCC-Euroclear Global Collateral Ltd. The two have been in discussions for more than a year. (Financial Times)

The Frenchman nominated to be Europe’s next economics commissioner has had his authority to review national budgets curbed. The move was a nod to deficit hawks in Berlin who opposed Pierre Moscovici’s appointment. Mr Moscovici, the former French finance minister, will be unique among the 27 incoming commissioners in that he will be legally required to prepare and submit his assessments of national budgets jointly with another commissioner. (Financial TimesRead more

The Closer

FURTHER FURTHER READING

- Seriously, David CameronRead more

It all makes sense when you realise there are TWO US dollar currencies

Most people know that China’s currency is classified according to trading conditions. There is, for example, CNY, which refers to onshore yuan. There’s CNH, which refers to Hong Kong (offshore) yuan. And then there’s NDF, the non-deliverable forward market.

What differentiates these currencies are the terms and conditions that apply to those particular market zones, and how easy or not it is to transfer currency in and out. As implied yields of the respective markets show (chart via BNP Paribas), the rates of return for all of these markets varies significantly — because they are, to some extent, entirely different currencies:

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Occupied territory

Amid the protests in Hong Kong, a quick reminder of what a wonderful place it’s been to invest, whether in equities or housing. Strapping one’s economy to China’s growth rocket while hanging on to a US dollar-pegged currency and the rule of law was a recipe for success.

Hong Kong house prices v Hang Seng

Of course, for the multitude of investors who forget to read the warnings: past performance does not necessarily predict future results. Also, fabulous gains on property are frequently the precursor to not-so-fabulous losses on property. Hong Kongers should remember this: after the October 1997 peak was followed by a crash, it took until April 2012 for home prices to rise back to where they had been, with prices halving along the way. Read more

Reserve Bank of New Zealand really wants you to short the kiwi

It isn’t often that central bankers devote entire speeches to trashing their own currency.

Yet that is what Graeme Wheeler, the head of New Zealand’s central bank, did on September 25, calling the exchange rate “unjustified and unsustainable” — the same phrase used in the statement accompanying the July 24 rate hike and the introduction to the most recent monetary policy statementRead more

FOMC vs the cruel, cruel summer

This morning’s Personal Income & Outlays report revealed the third consecutive monthly decline in core and headline PCE PI inflation (though August), both now just below 1.5 per cent:

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23 years later…

The American Life radio show and the Pro Publica investigative journalism service set an interesting debate a-blaze last week, detailing the 46 hours of secret recordings undertaken by Carmen Segarra, a specialist hired (and subsequently fired) by the New York Fed.

The recordings have painted a vivid picture of regulatory dithering in the face of a rapacious Goldman Sachs as the bank sought to gain clearance for a share warehousing operation that would allow Spain’s Santander to sidestep European capital requirements.

Subsequent criticism has centred on the NY Fed’s apparent impotence in the face of Wall Street muscle. But is it more the case that Matt Taibbi has been right all along? Does the bank actively help clients dodge (if not break) the rules?

Let’s examine a largely forgotten example of Goldman’s past behaviour in London… Read more

Negative rates, in context

Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund, who now heads his own consulting company, is — as ever — on a mission to explain central bank actions for what they really are.

His latest focus area: the real story behind negative interest rates at the ECB.

Critical to understanding the purpose of these, he suggests, is the following chart:

 

 

 

 

 

 

 

 

 

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BitCon: The book

Jeffrey Robinson is an American author best known in media circles for his work on international financial crime via his 1995 book The Laundrymen.

Suffice to say, when one of the world’s best known financial-crime authors turns his attention to the world of cryptocurrencies, and in particular Bitcoin, it probably makes sense to pay attention. Especially when the book he publishes is called, BitCon: The Naked Truth About Bitcoin.

Sadly, for the Bitcoin faithful — as well as all the other reasonable institutions that seem to have been taken in — the verdict is not good. Robinson reduces the entire phenomenon to a classic swindle. A small cohort of ruthless predators taking advantage, as usual, of the naive and gullible via a carefully constructed and asymmetrical myth, which happens to appeal to those of a certain persuasion, encouraging them to take leave of their senses entirely.

Part of the fervour is driven by classic get-rich-quick sentiment, but the other and the more sinister part is based on the art of indoctrination, no different to that employed by cults focused on getting people to hand over their hard-earned cash for the the sake of reserving themselves a prime slot in heaven and/or the supposed system that comes after this one.

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Markets Live: Monday, 29th September, 2014

Live markets commentary from FT.com 

The (early) Lunch Wrap

Osborne to set out plans to curb welfare bill || Balfour Beatty warns on profits for fifth time || Middle-class swell profits at Aldi as it looks to expand ranges || HMRC to take tax debts from pay packets || Apple hit by Brussels finding over illegal Irish tax deals || Markets Read more