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

FirstFT (the new 6am Cut)

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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

FirstFT (the new 6am Cut)

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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

FirstFT (the new 6am Cut)

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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

The new old thing, investment management edition

Hey you, everyday rich person. Like many normal people in the top tenth of society, you probably think a few hedge funds sure would be interesting. If only there was a really great website…

No? How about a “Google of investment”, or something more conscionable? Read on for the new face of asset management. Read more

When markets become self aware

What are the chances that if and when an eccentric computer scientist with a psychology and neuroscience background does invent a workable and autonomous artificial intelligence model, he deploys said model on the financial markets to make himself a cool $1 trillion?

It’s not that untoward an idea. In fact, it’s a key plot in most “AI-goes nuts and causes havoc” Hollywood offerings, Transcendence amongst the most recent.

The usual storyline involves the AI realising — as soon as it goes sentient — that the acquisition of capital will be necessary to achieve its dastardly objective of obliterating humankind. Read more

Don’t panic about Cushing yet

An inundated inbox means we’re slightly late to this, but it’s worth flagging up two days on regardless.

It’s the EIA’s take on the US crude system’s “l’embarass de richesses” problem.

Inventory levels at Cushing may be at a record high, they note, but not as a percentage of total working storage capacity.

The great thing about the Cushing storage system is that it’s a private market. That means whenever storage gets tight the incentive to build new capacity increases for commercial operators. Read more

Tomato ketchup, mac n’ cheese, kool-aid, private equity existential doubt and anomie

Well, shouldn’t buyout firms be a little perturbed by things like this?

PITTSBURGH and NORTHFIELD, Ill., March 25, 2015 /PRNewswire/ — H.J. Heinz Company and Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced that they have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America with an unparalleled portfolio of iconic brands… Read more

Customer cash at Plus500

Plus500, the London listed Israeli contract for difference provider, has been growing at a breakneck pace. Last year trading revenues and net profits both doubled, to $229m, and $103m respectively, supporting an £800m ($1.2bn) market capitalisation.

We have pondered the sustainability of the business model before, but we were surprised by a line in the recently published annual report. Amid all the growth, the total for customer deposits held in segregated accounts at year end was just $35m, only $2m more than reported for the end of 2013.

Perhaps Plus500 customers withdraw all their funds at Christmas, then return in the New Year. Read more

Markets Live: Wednesday, 25th March, 2015

Live markets commentary from FT.com 

This is still nuts, Chinese equities edition

Sentences to remind us of the nuttiness of Chinese equities over the past few months from BNP Paribas’ Richard Iley (and yeah, the Shanghai Comp fell 0.8 per cent today we have to admit, but that just broke “a 10-session winning streak — the longest in 23 years, according to Bloomberg data — that had taken the index to its highest since May 2008″):

Against all odds, the best performing asset class on the planet over the last nine months or so has been Chinese equities. After languishing for the first seven months of 2014, Chinese stocks have since been on an incredible tear, ending 2014 up a remarkable 49% in USD terms, even outstripping the c.28% annual return posted by Bunds (Chart1). And the strong gains have continued so far in early 2015. Up almost 12% in USD year-to-date at time of writing, Chinese equities continue to sit atop the heap of global asset returns. All told, the Shanghai and Shenzhen markets have surged almost 80% in local currency terms since mid-2014 (Chart 2).

Yes, yes… “必有牛市” – “There must be a (dynastic) bull market”Read more

China short goes long

By Jennifer Hughes in Hong Kong

Watchers of the Hong Kong market might have classified a China short seller going long as a pigs-might-fly situation. But Shenguan Holdings, a maker of sausage casings, is flying (well, up 7 per cent at pixel) after Anonymous Analytics published a positive report on the stock on Wednesday.

Anonymous, which claims links to the shadowy hacker collective, says it is not actually a short seller. True enough. But it is still the first time a group best-known for putting out damning reports has published detailed research praising a company that has already come under attack from other short sellers.

 Read more

Further reading

Elsewhere on Wednesday,

- Banning cash — an idea so impractical that ideology must be to blame?

- Where are they now? Wall St execs from 2008 edition.

- Don’t throw the word “bubble” about so casually, redux.

- Yellen isn’t Yellin’ anymore. Embrace it. Read more