Daniel Stewart has a new shareholder

The Company has today been advised that Mr Rob Terry, directly and via company / family interests, now has an interest in 52,000,000 ordinary shares in Daniel Stewart, representing approximately 7.4% of the Company’s issued ordinary shares, having purchased 31,250,000 shares at prices ranging from initially 0.15p to 0.554p today.

One to watch. Read more

Eurozone: welcome to your currency board future

Citi’s Chief Economist Willem Buiter spent some time with FT Alphaville explaining why he believes Draghi’s concession on profit and loss sharing among ECB member national central banks turns, in all likelihood, the single monetary unit into nothing more than a glorified currency board.

Quick background: The ECB’s profit-and-loss sharing mechanism became a key negotiating point ahead of European QE. For the Bundesbank, QE was only viable if NCBs assumed most of the responsibility for losses on assets they brought into the consolidated balance sheet. In the end Draghi acquiesced by reducing risk-sharing to only 20 per cent of assets.

A currency board works by pegging liabilities (central bank reserves and currency) to an exchange rate target, rather than a CPI or employment target. The monetary authority managing the board achieves the target by ensuring all commercial entities served by the system can convert the authority’s liabilities into foreign currency at any point. In short, there’s a guaranteed FX convertibility promise at the central bank. Read more

M0 money, more problems

… By the notorious PBoC?

To be clear, the issue here is falling M0 in China.

SocGen’s China watcher in chief Wei Yao suggests that this is perhaps more important to real growth than the normally fixated-upon M2. Read more

Quindell, PWC’s review and fair disclosure of the facts

Quindell shareholders will soon be asked to approve the sale of substantially all of the company to Slater & Gordon, the Australian listed law group. The sale was agreed after S&G was granted the exclusive right to negotiate and conduct due diligence on the UK ambulance chasing law firm. Quindell is also strapped for cash and the list of alternative bidders seems small to non-existent.

Yet there remains a pertinent question: do Quindell shareholders have enough information to approve the sale?

PWC has conducted a review of Quindell’s accounting, one likely to lead to restatement of revenues and profits in recent years. S&G have seen the accountant’s work, yet shareholders have not. The review is price sensitive information – is it fair disclosure for the buyer to have seen it, but the selling investors to have been kept in the dark? Read more

The Fed’s inflation target doesn’t mean what you think it means

I consider short term as referring to less than, say, a year or two, medium term as ranging from around two to six years, and long term as anything beyond around six. Articulating a long-term inflation objective would be consistent with our past policy behavior and with, for example, the kind of optimal policy scenarios in recent Bluebooks that show convergence only after around a decade.

In contrast, I would interpret a medium-term inflation objective as one that we would be committed to hitting within several years. Even during normal circumstances, this would often require deemphasizing the employment part of our dual mandate. At this time, though, with such a huge adverse shock to navigate through, I don’t think a medium-term inflation objective is necessarily even attainable.

– Janet Yellen, January 16, 2009  Read more

The Fed’s grudging embrace of inflation targeting, part 1

It may seem odd given what else was happening at the time, but the first meeting of the Fed’s Open Market Committee in 2009, which took the form of a conference call on January 16, was devoted to a discussion about whether the central bank should have a public inflation target.

This wasn’t the first time the idea had come up — there was a long debate about the merits and costs of a formal target in January, 1995 — and it wouldn’t be the last. The Fed didn’t announce a “longer-run goal” of 2 per cent annual growth in the level of the personal consumption expenditures deflator until January, 2012. We want to compare the arguments in 1995 and 2009, which were conducted in private, as well as the subsequent public statements of various officials who seem to have changed their minds between 2009 and 2012. Read more

Further reading

Elsewhere on Tuesday,

- Born red, the rise of Xi Jinping.

- The strange tale of Carl Mark Force IV, Bitcoin secret agent and pirate. We await the film.

- Bernanke. Bernanke. Bernanke.

- The adventures of Wally the chief economist continue.

- A much needed Greek dictionary.  Read more

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Dealmaking is off to a running start this year – the value of mergers and acquisitions struck in the first three months this year is up 21 per cent on a year ago making this the fastest start to a year since 2007.

The Heinz takeover highlights some trends for the year – size-wise, big is good; the US rules the roost and independent advisory firms are nabbing more mandates. But the feverish search for new treatments by drugmakers facing a patent cliffs means the healthcare sector is leading the charge. The big leveraged buyout meanwhile is starting to look like an endangered species – deals have hit a six-year low. (FT) Read more

The Fed wonders where inflation comes from — 2009 transcripts edition

Professor Paul Krugman feels so strongly that the US and other rich countries would have recovered better if only prices had risen faster that he wrote two columns, one in April 2012, and another in May 2013, with literally the exact same headline: “Not Enough Inflation.”

While we’re inclined to agree with his reasoning, it’s worth repeating, as we have in earlier posts in this series, that the US actually ended up getting a lot more inflation than the Fed’s staff expected at the start of the recovery. Moreover, the staff almost always expected less inflation than any of the policymakers on the Fed’s Open Market Committee.

On December 16, 2009, researchers from several of the regional reserve banks gave a series of presentations that attempted to explain where inflation comes from and why it wasn’t behaving as the Fed’s staff had been expecting. Read more

Did Bernanke forget about QE?

Economics blogger Ben Bernanke wrote today on why interest rates are lower than they’ve been in the past. His argument is that changing estimates of future growth and inflation are to blame, rather than an overly activist Fed. While we have some sympathy for this view, we’re struck by the fact that it partly contradicts what Bernanke said when he was actually at the Fed.

In particular, compare this passage from Bernanke’s recent post (emphasis ours): Read more

Dear Slater & Gordon shareholders

Congratulations! Assuming Quindell shareholders give it the nod and UK financial and legal regulators approve, the Australian-listed law group Slater & Gordon will soon be the proud owner of Quindell’s professional services division.

What are you buying? The UK’s largest ambulance chasing law firm, for one, but rather more than that. We don’t have the answers, but here are the questions to ask about the deal, as well as the ongoing peculiarities of legal accounting.

First up: what is Quindell Professional Services? Read more

The ungagging of Bernanke

What death of blogging?

Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog.

- Ben S. Bernanke | March 30, 2015

Here’s his first, on interest rates and not murdering seniors… Read more

Your Shanghai equity frenzy, we have “a fresh crescendo” people

Just going to leave these few charts here for a second…

That’s from BNP Paribas, this is via Tom Orlik and a few others: Read more

Quindell legal sold to Slater & Gordon – Update

Quindell plc (AIM: QPP.L) announces that it has today entered into a conditional sale and purchase agreement to dispose of the Professional Services Division (“PSD”) to Slater and Gordon Limited (“SGH”) for an initial cash consideration of £637 million and further contingent cash consideration payable in respect of the future settlement of its clients’ noise induced hearing loss (“NIHL”) cases (“Disposal”).

Quindell’s law firm is to be sold to Slater & Gordon, the Australian listed law group, and shareholders will get half a billion returned to them in cash in the second half of 2015.

More disposals to come, restatement of past accounts likely, and a new chief executive is needed again, while the chief lingering question is what remains. Read more

Further reading

Elsewhere on Monday,

- Your Shanghai equity frenzy continues.

- Aren’t we all Keynesians now? Apparently not.

- In 2014 Apple spent more on repurchasing stock than the top 500 Asian firms combined.

- Three inequality tales.

- The Kabuliwalas (Afghan money lenders) are getting lost in the bylanes of Kolkata. Read more

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Iranian officials took nuclear talks to the wire, raising a further obstacle by saying that they are no longer willing to ship their atomic fuel out of the country – a critical element of a proposed deal and one with which Iran had previously been on board. (NYT)

Meanwhile tensions were rising elsewhere in the Middle East as Arab leaders hatched plans for a joint military force, underlining Middle Eastern Sunni nations’ determination to challenge Iran’s expanding influence in the region. (FT) Read more

HeinzKraft and the lack of leaks

The Wednesday morning announcement that Heinz would buy Kraft was that rare thing, a big deal which didn’t leak.

The circle of advisors was small. Heinz, controlled by Warren Buffett’s Berkshire Hathaway and Jorge Lemann’s 3G Capital, were advised by Lazard, while Kraft were advised by Centerview. The public relations team at Brunswick only got the call on Sunday night, we hear.

Still, there were some lucky buyers of Kraft stock in the market before the deal was announced, with a number of block trades going through at $62 per share. Read more

Buiter on soggy global growth in 2015

Willem Buiter, Citi’s global chief economist, believes global growth will come in at somewhere between “moderate and modest” in 2015, with his team shaving their growth target from 3 per cent last month (and 3.3 per cent six months ago) to 2.9 per cent.

As Buiter noted in a meeting in London on Friday, it’s also unlikely that in the long run currency wars, which wash each other out, will help to drive demand: Read more

Markets Live: Friday, 27th March, 2015

Live markets commentary from FT.com 

Dette er nødder. Hvornår er styrtet?

From the Wall Street Journal’s picture of the Danish housing market:

“People will often put in an offer even before they see the apartment,” said Christopher Christiansen, a property broker at Danish real estate agency Home A/S. “Sometimes they will even sign before they see it.”

A cost of debt close to zero for house buyers seems to be having some sort of effect. Read more

Yield of dreams

Your latest instalment in the perilous search for interest bearing investments: dividend Exchange Traded Funds.

Markit draws our attention to a section of the ETF world which has pulled in $125bn in assets since launching in 2003. In the last three years Europeans started to pay attention to easily tradedable funds up of high dividend stocks as well, with assets tripling to $13bn.

However they do so only to issue a warning. Past performance is definitely no guide when it consists of trailing dividend payouts. Read more

Further reading

Elsewhere on Friday,

- So you wanna be a professional Russian troll? Well, the quota is 135 comments per 12-hour shift.

- Munilass on how Chicago has used financial engineering to paper over its massive budget gap.

- How poor are the poor?

- Bitcoin might be an idiotic investment, but it’s not as bad as penny stocks.

- The war for sand.  Read more

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Airlines are toughening up rules after French prosecutors said the co-pilot of the Germanwings plane deliberately crashed in the Alps. EasyJet, Norwegian, Monarch, Emirates and Air Canada will now require two people in the cockpit at all times. (FT)

The recordings offer no clue as to why the pilot chose to crash the plane, and he had no known links to terrorism. The possibility that he wanted to take his own life, while rare, is not without precedent. (NYT) Read more

Is Ukraine’s Russian bond ‘official’ debt or not?

Update: Seems we were right to regard this as curious…

Late on Thursday the IMF walked back on the idea the Russian bond is official debt, per ReutersRead more

Rocket from the shelf

One of the useful aspects of German corporate filings lodged at the Federal Gazette (Bundesanzeiger) each year is a list of subsidiaries, along with an equity and net profit number.

Click for a Google translated version of the 2013 report for Rocket Internet, the recently listed and super-hyped e-commerce conglomerate, valued by the stock market at more than €7bn.

The list of shareholdings starts on page 14. Note first the proliferation of negative profit numbers. Second: Bambinos, Jades, Jewels and Platinums? Read more

Markets Live: Thursday, 26th March, 2015

Live markets commentary from FT.com 

Ukraine’s bonds: a little local leverage

The Russia problem aside, Ukraine’s other big task in its $15bn debt restructuring will simply be to convince private bondholders that it’s a deal worth taking.

One way to do that is for bondholders to realise they are dealing with a government burdened with the costs of war and as it happens, increasingly absorbed in an intense lustration campaign.

But some of them (quite possibly one that lives in San Mateo, CA) could have holdings large enough to block a bondholder vote. So, even if Natalie Jaresko, the Ukrainian finance minister, does like to quote Margaret Thatcher about there being no alternative… the new bond terms will need to justify taking a massive haircut compared to holding out for full payment.

Another way to do it? Note how ripe for abuse the old bond terms are.


When Lee Buchheit, Ignacio Tirado and Mitu Gulati were looking deep within the innards of Cypriot government bonds just over two years ago — shortly before the climax of the island’s debt crisis — they found something exciting. Read more

Of Chinese exceptionalism and price-to-whatever ratios

A Chinese rendering of jusqu’ici tout va bien courtesy of Bloomberg:

The chief China strategist at Bocom International Holdings Co. points to soaring price-to-earnings ratios, the shrinking yield advantage that stocks offer over bonds and the fact that mainland-listed equities now trade at a 34 percent premium over nearly identical shares in Hong Kong.

So what’s Hong’s advice to investors?

Keep buying, of course.

 Read more

Further reading

Elsewhere on Thursday,

- Silicon Valley’s bullshit empire is impervious to critique.

- “Maybe the deal is a money saver, maybe it isn’t, but in the 27 minutes since it was announced, I simply don’t know.”

- Keeping Indonesia supplied with cash isn’t easy.

- The changing politics of China’s smog.  Read more

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Saudi Arabia and its Gulf Arab allies launched air strikes againstHouthi fighters in Yemen. The 10-country coalition started its campaign in an effort to loosen the Houthis’ grip on Aden, the southern port city where President Abd Rabbuh Hadi had taken refuge. (FT)

The move sets up a confrontation between Sunni-majority Arab countries and Shia Iran, which they accuse of interfering in the Arab world through its support of groups such as the Houthi, followers of the Zaydi Shia sect. Brent crude prices rose by more than a dollar in early Asian trading but any concerns about supply disruptions seem muted. (Reuters) Read more