Slater & Gordon: complicated, indebted and yet to be audited

Slater & Gordon, the Australian listed law group, on Friday released a complex set of accounts full of restatements, unusual accounting policies and changes to the way the figures are prepared and presented.

The company under investigation by the Australian Securities and Investment Commission, but these are preliminary figures — and so not audited yet. Andrew Grech, managing director, signed a statement saying “The financial report is in the process of being audited and is not likely to be subject to audit dispute or qualification.” The accounting firm doing the work has not been named.

Slater & Gordon recently purchased almost all of the scandal hit UK group Quindell for A$1.3bn. More details from the results below, but first some highlights: the Australian group has significantly more debt than expected, the numbers don’t match the pro forma set presented at the time of the acquisition, and in a month of operation the businesses acquired managed to lose A$5m. Read more

Markets Live: Friday, 28th August, 2015

Live markets commentary from 

Some Fed thoughts: QE4 and all that

After a considerable period of boredom, trying to figure out America’s central bank has gotten interesting again.

For months, the mid-September meeting of the Federal Open Market Committee was being telegraphed as the most likely start date of the “normalisation” process. Or, to use another bit of central banker-ese, the day when short-term interest rates would begin “liftoff” from the current range of zero to 25 basis points. Read more

Guest post: Trying to throw our arms around the (sick) Chinese economy

By Christopher Balding, Professor of Economics at Peking University, HSBC Business School, and blogger at Balding’s World.

Throughout the Chinese stock market run up and subsequent collapse, the most fundamental question revolved around the robustness of the overall economy. Read more

FT Opening Quote – Jimmy Choo’s Cinderella shoe sales

Jimmy Choo is not going to the ball with its shoe sales, despite the success of its Cinderella slipper. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

China’s ongoing FX trilemma and its possible consequences

From UBS’s Tao Wang on what, post China’s surprise revaluation, is now an oft used phrase, the impossible trinity — AKA the corner China finds itself in:

The impossible trinity says that a country cannot simultaneously have an open capital account, independent monetary policy, and stable tightly managed exchange rate. Some academics (such as Hélène Rey) argue that since capital controls are no longer as effective in the current day world, complete monetary policy independence is still not possible without some degree of exchange rate flexibility, even without a fully open capital account – or impossibly duality.

Regardless of whether it is an impossible trinity or duality, the fact is that in recent years, as a result of substantial capital controls relaxation, China has found it increasingly difficult to manage independent monetary policy while simultaneously maintaining a fixed exchange rate.

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Further reading

Elsewhere on Friday,

- “To Merkel”, defined.

- “The people who knew the most about the company, because they were running it, told themselves one story about Dole’s future, and told the special committee another story.”

- Now the BoE is worried about bond market liquidity.

- “So is this the hour of China’s crisis? Highly unlikely.”

- Some of the people, some of the time. Read more

FirstFT – Oil jumps most since 2008, Google comes out fighting and the meaning of Merkel

Brent crude jumped $4.42 a barrel trading to settle at $47.56 Read more

Barclays Boys Club now admitting girls

Amazingly, Barclays does have some female clients who play golf. A year ago, we detailed the golf outing that occurs ahead of the Barclays PGA Tour event in New Jersey where the bank’s most senior professionals invite their best clients to tee it with tour pros the day before the official competition begins. Among the participants were well-known bankers, hedge fund and private equity investors, and C-level executives. Yet, remarkably not a single woman made the cut.

It may seem frivolous to study who got invited to an ultra-elite golf outing. But as we noted last year, social networking is often key to career advancement. And we also detailed golf’s particular legacy of exclusion. We spoke both with Ms. Winston and Ms. Junega after they completed their rounds.

Equities soar. Have some Albert

One of the many lessons from equity investing during Japan’s Lost Decade is that in a secular bear market hope is a killer. In a secular bear market hope should only be flirted with briefly during cyclical upturns, but it must be ruthlessly rejected as the cycle turns. In a secular bear market being wedded to hope destroys portfolios as the bear slashes to ribbons the hard-fought gains of the previous bull market. Gains that have taken years to accumulate are gone in months. One key measure we monitor informs us conclusively: we are now in a bear market.

The ‘key measure’ SocGen strategist Albert Edwards is referring to here is one of six models developed by his quant-ist colleague, Andrew Lapthorne. And, in chart form, it looks like this: Read more

Imagineering markets in our quantum computing future

A company called Cambridge Quantum Computing, which is developing qubit algos for commercial applications, has just received £50m worth of investment from private equity firm Grupo Arcano, a.k.a this man:

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All those San Francisco meetings paid off.

Franklin Templeton and other private creditors will agree to swallow a writedown on their Ukrainian bonds. Cutting a fifth off bond principal, it’s much less than many expected. Bond prices were rallying hard at pixel time.

Then there is the issue of Moscow. Since Russia’s said no about restructuring its own Ukrainian bond. Read more

Markets Live: Thursday, 27th August, 2015

Live markets commentary from 

Fancy some $$$$ raw? Best follow Markets Live at 11am

No hints in advance. We’re still doing the checking calls.

But we are pretty sure we will have details of a rather sizeable US takeover during FT Alphaville’s regular Markets Live session on Thursday. Read more

FT Opening Quote – CRH cements $1.3bn windows deal

CRH is behaving like a legendary Irish giant, while the law is behaving like an ass. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Thursday,

- A tale of two liquidities.

- Liquidity needs the return of the heroes.

- Dalio: The dangerous long bias and the end of the supercycle.

- So you think you can… time the stock market?

- Hold on, now we’re talking negative Chinese growth? Hmmm. Read more

FirstFT – Asia bourses follow Wall Street higher, glitch rocks fund world and mobile phone addiction

Major markets across the Asia-Pacific region were broadly positive this morning, taking their cue from a strong overnight session on Wall Street. In China, both the benchmark Shanghai Composite and the tech-heavy Shenzhen Composite were up about 2 per cent, offering respite to investorsafter the wild gyrations of previous days.

On Wednesday, US stocks snapped a six-day losing streak in a volatile and tense session that saw the S&P 500 post its biggest one-day gain since November 2011. (FT) Read more

Alibaba’s market edge? AI behavioral mindtricks

Here’s something for our running financial inclusion really means financial intrusion theme, courtesy of Alibaba — the internet marketplace which also benefits from extremely close relations with China’s premier shadow banky Money Market fund YueBao. (Alibaba’s cash management feature feeds the YueBao fund.)

From Techcrunch on Tuesday (our emphasis): Read more

Note the frightening effects of financial glyphosate*


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Slater & Gordon were sold a pup, watch this space…

Slater & Gordon, the Australian listed law group, will report full year results on Friday, the first since buying almost all of the UK listed basket case Quindell for A$1.2bn.

Presentation of the figures had been set for the 24th, but was pushed back four days. The reason, Slater & Gordon told us, was “to provide our shareholders with the fullest update possible on our FY15 results and our FY16 outlook”.

One risk here is that a full update will include the admission it bought a billion dollar basket case. We’ll consider that and other issues below, in search of an answer to the underlying question: why did Slater & Gordon get suckered by Quindell? Read more

China’s ‘asset bubble’ growth solution hangs in the balance

Whether the yuan is technically or fundamentally overvalued doesn’t really matter. China has reached the point in its growth cycle where it can no longer defend the yuan’s valuation against the USD without shedding reserves, something FT Alphaville readers may have heard us warning about since 2012. That was the moment it became obvious (to us at least) that something had changed in China. Enough external private debt had built up in the system to compromise the pegging regime unless it was accompanied with offsetting FX reserve dumps, or new capital inflows.

While it’s true FX reserves continued to build (chart below from Kit Juckes at SocGen), what was of greater interest was the overall UST position which — a better proxy for how many dollars are in the system — and the theoretical portion of those FX inflows which are coming into China on essentially leveraged terms: Read more

Markets Live: Wednesday, 26th August, 2015

Live markets commentary from 

Making China’s FX reserves feel inadequate

Things that are not infinite include… China’s FX reserves. Even at $3.7trn.

It’s an obvious point, but maybe the point is worth remaking.

From Soc Gen’s Wei Yao: Read more

China’s ‘major correction’, charted and extrapolated

It’s indeed a major correction, say Goldman, surprising precisely nobody:

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FT Opening Quote – Betty Power takes on Coral Lad in £6.5bn merger

Paddy Power said it was merging with Betfair and calling itself Betty Power in a spoof tweet last month, but it’s not joking now. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Wednesday,

- It’s getting tighter.

- Nathan Rosenberg and the innovation system.

- Balding on China contagion and that rate cut.

- A 21st-century migrant’s essentials: Food, shelter, smartphone.  Read more

FirstFT – Chinese stocks gyrate after rate cut, Ashley Madison sued and the new banking landscape

The Shanghai Composite drops as much as 2.3 per cent in the opening minutes of trade Read more

Why China’s stock market implosion might not be very meaningful

Whilst there’s nothing like a Black Monday bloodbath in China to invigorate the bear case, it is worth bearing in mind that the Chinese stock market isn’t quite the NYSE.

Yes, Chinese investors have been turning to stock market investing at accelerating rates over the past decade, but despite all that growth, stock ownership is still the exception not the norm in China. And because it isn’t the norm, the feed through to the real economy is unlikely to be as significant as it would be in say, America, where every man and his dog is taught from birth to watch CNBC and to own a portfolio. Read more

Alphachat podcast: Joe Stiglitz on minimum wage, monetary policy, TPP and more

We recorded this podcast on Tuesday, August 18th. Alphachat is on iTunes and Stitcher, and to give us feedback you can email us at or call us at 917-551-5012. Read more

Putting China’s cuts in some context

As you’ve surely just seen, China has cut its reserve requirement ratio, by 50bps with effect from Sept 6, and its 1yr lending rate by 25bps to 4.6 per cent with immediate effect.

Markets will like this. And the timing suggests that the ongoing stock market puke did have something to do with the decision.

But there’s also certainly a broader rationale to these moves. Read more