Markets Live: Thursday, 18th December, 2014

Live markets commentary from FT.com 

Caesars: Et tu, 1st lien?

One of our favorite themes is the lengths to which shareholders will go to expropriate value from creditors.

In March we told the story of Verso Paper, a listed US paper company that was slouching towards bankruptcy. That is, until it announced in January a merger with its biggest rival, NewPage Holdings. Verso Paper shares shot from under $0.65 to over $4, the biggest M&A acquiror pop of the year. The pop was not just about the merger synergies but about who got to keep the value of the synergies. Read more

Christmas 2014, charted

An “asset return tree” (really), from Credit Suisse:

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The SNB goes negative

From the SNB, click through for the full thing:


Timing is a bit odd no? Worried about all them roubles perhaps? Read more

Further reading

Elsewhere on Thursday,

- When the gold standard was really a dollar standard.

- “As much as you think of the possibility that the hike is delayed, think also of the possibility of 1994.”

- The Cuba that was, 1963 edition.

- Putin’s “aides assured him Russia was rich enough to withstand the financial repercussions from a possible incursion into Ukraine”. Read more

FirstFT (the new 6am Cut)

The US is to open talks with Cuba about establishing full diplomatic relations . The thaw, brokered with the help of Canada and Pope Francis, could bring an end to more than five decades of hostility. It comes after a prisoner swap this week saw the release of Alan Gross, an American development worker who has been imprisoned in Cuba for five years on spying charges. (FT, FT, Foreign Policy)

Barack Obama also used his executive authority to loosen restrictions such as the limit on remittances, which will be raised to $2,000 per quarter from $500. The FT’s John Paul Rathbone says that although the changes made by the president do not fully repeal the US embargo, they do recognise its failure : “Mr Obama has done as much as he can… including a new rule which allows US citizens to import up to $100 worth of Cuban cigars. Much like the new policy itself, this may not be enough to buy 1,000 Petit Upmanns. But it still makes for a very good smoke.” (FT)

In the news

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US Markets Live, special FOMC presser edition

Live markets commentary from FT.com 

FOMC statement from 17 December 2014

Remember that we’ll be hosting a special edition of US Markets Live starting at 2:25pm EST. Join us here.

The highlights from the statement, which we’ll update as we make our way through it: Read more

Reminder: US Markets Live, special FOMC presser edition

Joseph and I will be kicking off at 2:25pm EST (7:25pm in London) at the usual place. We’ll have a few minutes to discuss the statement before the presser starts at 2:30pm.

Join us at the usual placeRead more

At a loss

Bloomberg Businessweek already wrote the definitive profile of OnDeck Capital, the latest hot initial public offering for a business with some boiler room characteristics. Check it out to see the company Peter Thiel is keeping these days.

From our perspective, the market valuation of about $1.3bn seems nuts for a far simpler reason, which requires reading 15 words in the prospectus:

We have a history of losses and may not achieve consistent profitability in the future.

Never mind the business partners with colourful backgrounds, hope and fairy dust is what you, dear investor, were invited to buy. Read more

FirstFT (the new Lunch Wrap)

The Russian finance ministry has started to sell its remaining foreign currency – roughly $7bn – to defend the rouble, restoring some of its value this morning - to about 66 to the dollar from Tuesday’s low of 80. Russia lurched towards afinancial crisis yesterday as its currency continued to plunge, despite the central bank’s dramatic rate rise. (FT)

Russians rushed to buy goods before the currency lost more value and some banks ran short of cash as people stocked up on dollars and euros. The turmoil showed signs of spreading to global markets as investors piled into haven assets. Apple shut down its Russian online store because the rouble was falling so fast. (The Verge) Read more

Markets Live: Wednesday, 17th December, 2014

Live markets commentary from FT.com 

Dilbert, and paying for complexity

Tuesday’s Dilbert skewered financial advise:

These are things you can never hope to understand. So trust me and try to forget that my only career ambition is to drain your account like a giant mosquito.

Which we mention because Scott Adams has form. In his 2002 treatise, Dilbert and the Way of the Weasle, he laid out one of the most sensible and succinct approaches to financial planning: Read more

Further reading

Elsewhere on Wednesday,

- Russia isn’t that unusual a story, except for the nukes.

- An open letter to Russell Brand.

- Beijing “is engaged in a mass city-wide rehearsal for life on an inhospitable planet.”

- The limits of purely monetary policies.  Read more

FirstFT (the new 6am Cut)

Russia lurched towards a financial crisis yesterday as its currency continued to plunge after the central bank’s dramatic rate rise. The rouble slid another 6.3 per cent today to 72.2 per dollar. (FT)

Russian shoppers rushed to buy goods before the currency lost more value and some banks ran short of cash as people stocked up on dollars and euros. The turmoil showed signs of spreading to global markets as investors piled into haven assets. Apple shut down its Russian online store because the rouble was falling so fast. (The Verge) Read more

Russian foreign liabilities in perspective

Once upon a time there was a magical land called Ru, where the roads were paved with oil and the houses were built from kitsch gold blocks. Because its capital glistened with a red petroleum hue, it became known to all around as the wonderful Crimson City of Ru.

There, all the residents rejoiced night and day safe in the knowledge their needs would forever be catered to. Why? Because the Wonderful Wizard of Ru, known by some as “Ru the great and the terrible”, would see to it that the kingdom was always defended from its greatest enemy: the Wicked Witch of the West.

Ru was the most wondrous place in the world. Read more

Goodbye, Rouble Tuesday – Update

At pixel time, 73 and counting…

Update: 20 minutes later and it bounces off 80…

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This is nuts. When’s the crash?

A news story lands, from Bloomberg, entitled “Goldman Sachs outdoes itself…”

Like Meryl Streep at the Oscars, Goldman Sachs Group Inc. isn’t lacking acclaim for its merger and acquisition advisory business. It’s finished first in deal volume for five consecutive years and in nine of the last 10.

Even so, Goldman Sachs outdid itself this year. No top firm has had a larger market-share spread over its nearest competitor since 1998

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Markets Live: Tuesday, 16th December, 2014

Live markets commentary from FT.com 

London Prime Rub

It’s a good job the London housing market is indestructible, otherwise the collapse of the Russian currency might be cause for concern in Belgravia. After all, Russians were buying one in every five “super-prime” properties this year.

That stat comes via Knight Frank, who consider £10m-plus pied-à-terres to be super prime. In the six months to October, 21 per cent of the high end sales closed by the estate agent went to Russians.

Infographic of the golden postcodes after the jump. Read more

That was then this is now, Rub edition

Your debounced rouble — 65 65.9 66.2 [just publish the damn thing - ed] against the USD erasing the gains from that 650bp hike from last night:

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How to regulate banks: crazy like a fox

People don’t like it when banks default on their obligations, because lots of people use those obligations as money. Think of deposits, or commercial paper sold to money-market mutual funds. The problem is that, absent offsetting regulations, government guarantees preserve the value of these forms of money at the cost of transferring wealth to bankers and — to a much lesser extent — bank shareholders, while also encouraging excessive lending.

The $50 trillion question is: how can governments protect the savings of their citizens without creating new problems?

We want to revisit this question because of two events from last week. The big US banks managed to roll back a provision of the Dodd-Frank financial reforms by entangling their policy change in a government funding bill. (Citi lobbyists literally wrote the key passage of the law.) And we got to attend a fascinating discussion on the regulatory value of stress tests. Read more

How cheaper oil changes the calculus for Keystone XL

By James Benton

With oil hovering around $57/barrel (for WTI) as of late Monday afternoon, now might be a good time for a quick look at the state of Canada’s enormous and expensive tar sands projects, and at the Keystone XL pipeline intended to help move what they produce. Read more

The UK banking system, stressed

Do click through for the full thing — the Co-Op is the loser of the bunch and was told to hand in a new capital plan that “envisages a reduction in its risk-weighted assets of £5.5bn by the end of 2018, notably by selling some subprime mortgages.”. RBS and Lloyds were near misses:

From the report:

The stress scenario featured an initial shock to productivity, which led to an abrupt reassessment of the prospects for the UK economy.

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The research after the Russian hike before [updated]

For those of you who, like me, slept through the CBR’s attempt to sledgehammer the cumbling rouble back into some sort of shape by hiking 10.5 per cent to 17 per cent

Remember when breaking 60 was a thing? (Update at 0700ish: The rouble is up 6.2 per cent in early Tuesday trading to 60.27 per dollar) Read more

Further reading

Elsewhere on Tuesday,

- Michael Lewis wants all under 35 males with egos off Wall St. The value of personal experience…

- Russia and the Fed.

- Remember that highschool kid who supposedly made $72m in the stockmarket? Yeah? Well forget him.  Read more

FirstFT (the new 6am Cut)

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In today’s FirstFT: Rouble trouble, the end of the Sydney siege and the growth of gourmet pet food Read more

CBR rate hike in keeping with orthodox policy… for now

The reactions from research shops and sell-side analysts to the Russian rate hike will soon be flooding your inbox, but one of the first to land in ours comes from Alex Kliment, FT Tilt alum and director of emerging markets strategy at the Eurasia Group:

What happened: At an emergency midnight meeting, the Central Bank of Russia (CBR) has raised the benchmark interest rate by 650bp to 17%, tightened ruble liquidity provisions, and increased allotments of USD to the Russian market, effective 16 December. Read more

Russian rate hikes, then and now

Click to enlarge — from an old St Louis Fed paper

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The kitchen sinksky*

**10.5 per cent to 17 per cent**

Click to enlarge for the Central Bank of Russia’s emergency rate hike at 1am Moscow time — surpassing both the Turkish central bank’s hike in January this year and the Bank of England’s 500bps of moves on one day in 1992. Lamontsky.* Read more