Here’s a curious thing … and an update

The presentation on Quindell by Gotham City Research, which the company has rejected as defamatory, is a long piece of work with plenty of screenshots of the source material quoted.

One such screenshot, on page 36 of the document, is curious for what it might indicate about the construction of that presentation. The purpose is to highlight the author of Quindell’s 2012 annual report, but note the file location.


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Stock picking works! (sort of, maybe)

A white paper lands from Commonfund, a type of investment consultant and asset manager for US endownments. It asks the question: does active management benefit endowment returns?

Concerned people really would like to know. And the answer is a qualified maybe, in that Commonfund finds correlation between the amount of US stock holdings that an endowment chooses to actively manage, and the likelihood that the stock portfolio will outperform the market.

However to get there involves some fun with statistics. Read more

ECB FX intervention, de facto or otherwise

RBI governor Rajan, when not being taken to task by a tie-less Bernanke, recently railed against QE spillovers. Most pertinently he said (with our emphasis):

By downplaying the adverse effects of cross-border monetary transmission of unconventional policies, we are overlooking the elephant in the post-crisis room. I see two dangers here. One is that any remaining rules of the game are breaking down. Our collective endorsement of unconventional monetary policies essentially says it is ok to distort asset prices if there are other domestic constraints to reviving growth, such as the zero-lower bound. But net spillovers, rather than fancy acronyms, should determine internationally acceptable policy.

Otherwise, countries could legitimately practice what they might call quantitative external easing or QEE, whereby they intervene to keep their exchange rate down and build huge reserves. The reason we frowned on QEE in the past is because we believed the adverse spillover effects for the rest of the world were significant. If we are unwilling, however, to evaluate all policies based on their spillover effects, there is no legitimate way multilateral institutions can declare that QEE contravenes the rules of the game. Indeed, some advanced economy central bankers have privately expressed their worry to me that QE “works” primarily by altering exchange rates, which makes it different from QEE only in degree rather than in kind.

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Markets Live: Wednesday, 23rd April, 2014

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,


Rubber not hitting the road in Russia

In Putin’s Russia, risk prices you. That includes tyres. Keeping an eye out for signs and signals from the Russian economy amid the Ukraine crisis… we note Citi’s Philip Watkins on some big drops in tyre sales: Read more

Further reading

Elsewhere on Wednesday,

- Globalization and premature deindustrialization.

- Why India isn’t suited to a strong hand.

- “Free to air” really means that broadcasters have no case. Read more

The 6am London Cut

Markets: Asian equities opened higher echoing a buoyant session in the US, but pared gains after the latest sign of a slowdown in China. HSBC’s preliminary purchasing managers index for China’s manufacturing sector hit 48.3, signalling that activity contracted for a fourth month in April. The Australian dollar dropped the most in a week, falling as much as 0.7 per cent against its US counterpart to US$0.9302, after consumer price inflation for the first quarter trailed economists’ expectations, lessening the chances of an interest rate hike. (FT’s Global Market OverviewRead more

The Closer


- Martin Wolf: a more equal society will not hinder growth. Read more

Bloody Quindell, Batman — Update

On Tuesday morning AIM listed Quindell plc was a “technology enabled claims outsourcing business”, whatever that is, worth £2.4bn.

Then Gotham City Research announced an initiation of coverage on the company with a target price of 3p and, well… Read more

Markets Live: Tuesday, 22nd April, 2014

Live markets commentary from 

The (early) Lunch Wrap

Novartis and GSK agree asset swap || Philips blames strong euro for slow growth || The bribery trial of a former Deutsche Bank salesman has begun in Japan || Japan has revamped the committee in charge of the world’s largest pot of retirement savings || Man U sacks Moyes || Stocks rise Read more

Travelling versus arriving, edition Man U

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Further reading

Elsewhere on Tuesday,

- The most expensive lottery ticket in the world.

- Cowen reviews Piketty.

- The contradiction in economicsRead more

The 6am London Cut

Markets: Asian markets were quiet, mirroring a subdued session on Wall Street. (FT’s Global Market OverviewRead more

The Closer


- The week in four charts, via Fast FT. And what’s coming next week.  Read more

Larry Summers on forwarding the Doozer economy

Larry Summers was interviewed by Chrystia Freeland at the INET conference in Toronto last week, in a conversation that very usefully expanded upon his thoughts about secular stagnation. (H/T Interfluidity)

It’s a reassuring interview for us because so many of the statements he made echo what we (and other bloggers such as Steve Randy Waldman) have been saying for some time. Namely, that there’s something more significant going on in the industrialised global economy than the effects of a banking crisis per se, and that that *something* is probably related to technological abundance. More so, that this phenomenon is having strange macro effects on capitalist incentives.

There was also a nod to the point we’ve made for a long time, that the financial intermediation industry loses its raison d’etre in such an environment, and worse than that, potentially becomes a malignant rather than constructive force on development and growth. In short, that negative rates are hardly the solution. Read more

Bonds for the long run

If we know one thing about investing, it’s that time and the power of compounding make stocks an essential holding for savers, right?

Well, maybe not, at least when the choice is to hold bonds with a reasonable yield instead and the excess returns from stocks have been on a long term downward trend, something suggested by this presentation from Claude Erb, the West Coast based manager of TR.

Which is going to take us on a mostly chart based and, we hope, relatively painless tour of a wonky concept — the equity risk premium. But it’s also a way to come at those arguments about long term measures of stock market valuation, the Cape ratio and Shiller PE, from another direction. Read more

Constructing negativity and the ECB

We wonder if, after a brief blaze of real scrutiny, people have started to look past the imposition of a negative deposit rate by the ECB in favour of the more seductive and mysterious ECB QE and how it might be constructed. And we wonder if that is something of a mistake.

How a move to negative is constructed will, of course, have much to do with what it is intended to achieve — a weaker euro at last check — but we also can’t help but think it would be cool to make sure it won’t cause too much harm either. Herein lies a plan. Read more

Markets Live: Thursday, 17th April, 2014

Live markets commentary from 

Leasing out mutuality

Sale and leaseback transactions represent an expensive addiction the cost of which does not appear, even now, to be fully appreciated by the Board.

– Lord Myners, update on review into the Co-operative Group Read more

The (early) Lunch Wrap

IBM hit by costs of restructuring || Google shares dip as earnings disappoint || Yahoo brings co-founder and Schwab on board ||
Diageo, the maker of Johnnie Walker scotch and Smirnoff vodka, on Thursday posted a sales drop of almost a fifth in Asia-Pacific in the third quarter, pushing the company to an overall 1.3 per cent decline in organic net sales || China’s Weibo raises a less than planned $285m in US IPO || Yellen warns inflation may lag recovery || American Funds warns on ‘Heartbleed’ bug || Markets Read more

China in gold collateral financing shock

This Reuters story about China having up to 1,000 tonnes of gold tied up in financing deals is doing the rounds, courtesy of information out of the WGC.

But it’s hardly a revelation.

We’ve known that China has been using gold (and almost everything else under the sun) for financing purposes for ages.

Goldman even blessed us with a more recent update about the shenanigans in March: Read more

Further reading

Elsewhere on Thursday,

- UK job market turning more American.

- The gritty reality of politics in India.

- Russian diplomats are eating America’s lunch.

- Secular stagnation or secular boom? Read more

The 6am London Cut

Markets: Asian markets are struggling to maintain an upbeat tone in spite of solid gains on Wall Street, but Hong Kong stocks were outperforming as Beijing cut the reserve requirement ratio for some rural banks. Wall Street prospered as a decline in the US dollar lifted the yen and hurt Japanese exporters. (FT’s Global Markets OverviewRead more

China’s FX grip is not what it seems

The influence of the ‘China factor’ on currency markets is waning.

That at least is the view of HSBC’s FX strategy team, headed by David Bloom. Read more

Yellen’s speech

Janet Yellen’s speech on Wednesday repeated some of her earlier points about labour market slack — she thinks there is plenty left and hasn’t followed the shifting centre of gravity within the FOMC — and also included remarks on her inflation outlook and the Fed’s new, qualitative forward guidance.

On inflation: Read more

Tesco’s lost decade – AV vs Lex

Some experimental video. This Alphaville blogger joined Lex’s Joseph Cotterill on the set of mastermind in the FT studio to debate exactly what is up with Tesco.

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Spot the difference, Tesco edition

Here is the Tesco share price, which you might notice is getting into lost decade territory.

Here meanwhile are Wednesday’s results: Read more

The linguistic verdict: Dorian is probably not Satoshi

Everyone has a linguistic signature (apparently).

Luckily for Bitcoin sleuths trying to determine the real identity of Satoshi Nakamoto the existence of *that* Bitcoin white paper provides everyone with some valuable clues. Read more