K Street to boutique

Group LP has agreed to pay Mr. Cantor an annual base salary of $400,000. Group LP has also agreed to pay Mr. Cantor an initial cash amount of $400,000 and grant Mr. Cantor $1,000,000 in initial restricted stock units (“RSUs”), based on the average closing price of the Company’s common stock on the five trading days prior to his start date. The initial RSUs will generally vest in equal installments on each of the third, fourth and fifth anniversaries of his start date.

For calendar year 2015, Group LP has agreed to pay Mr. Cantor minimum incentive compensation of $1,200,000 in cash and $400,000 in incentive RSUs, payable in equal quarterly installments. The incentive RSUs will generally have the same vesting schedule as incentive RSUs granted to Group LP’s other Managing Directors.

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Markets Live: Tuesday, 2nd September, 2014

Live markets commentary from FT.com 

The (early) Lunch Wrap

Ukraine wars of escalation || UK construction activity up || Germany bans Uber || BMW unveils bulletproof car || Great Barrier Reef dump plan canned || Japan wage growth boosts stocks Read more

Quindell confirms RAC JV is dead

The plan to revolutionise the car insurance industry has crashed. Quindell has announced that what it claimed in April was the world’s largest ever deal to put monitoring devices in cars, is dead.

As the FT reported in August, a joint venture with the RAC to put so-called telematics devices in cars of RAC members failed to get going and talks to restructure the entity, called Connected Car Solutions, fell apart.

Quindell said that it is paying a net £3.5m to buy out its joint venture partner, and has abandoned plans to invest in CCS. Read more

Nixon, back from dead, helping Nu Skin

John Hempton has written a quite remarkable post on Nu Skin, the multi-level marketing company that he has decided to short.

The hedge fund manager was browsing through the company’s debt covenants, when he spotted something odd: the signature of a dead president.

Not only resurrected, but now working at JP Morgan… Read more

Further reading

Elsewhere on Tuesday,

- Are unions dead? “No”.

- Hard money is not a mistake.

- What does a “good” Chinese adjustment look like?

- China mixed marriage markets in everything. Read more

The 6am London Cut

Markets: Asian bourses were broadly positive after shrugging off weaker-than-expected manufacturing data from Europe and receiving a boost from rising wages in Japan. Japan’s Nikkei 225 gained 1.3 per cent after wages in July rose 2.6 per cent compared with a year ago, according to the Ministry of Health, Labour and Welfare. The monthly rise was the biggest since 1997. (FT’s Global Markets OverviewRead more

Always turn to note 10

On August 28 Afren, the Nigerian oil and gas company listed in London, announced that it has temporarily suspended Iain Wright and Galib Virani, associate directors of the company.

The move followed the suspension of the chief executive and chief operating officer the previous month. The company said that it has continued an independent investigation “in relation to the receipt of unauthorised payments potentially for the benefit of the CEO and COO” by the UK arm of Willkie Farr & Gallagher, law firm.

The press release said:

The Board remains of the view that this will not negatively affect the Company’s stated financial and operational position.

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Cash, but encumbered cash

A note arrives from house broker Canaccord Genuity which appears to resolve our conundrum about how Quindell spent £335m in the first six months of this year.

The short answer: it didn’t.

The longer answer is largely, as we speculated, that “cash collected” did not mean what we understood it to mean. While the UK’s largest listed law firm said that it collected £220m in the period, it turns out that only £177m of that total was cash available to be used as it sees fit. Read more

King of good times a wilful defaulter, according to sources in the know

And if you don’t believe United Bank of India about the first bit, just browse through F1-owning drink mogul Vijay Mallya’s Twitter feed. Then remember he’s the pioneer of the in-no-way tasteless Kingfisher calendar.

(Do make your own here, if you must.)

Of course, being declared a wilful defaulter due to a failure to pay back loans associated with the grounded Kingfisher Airlines might crimp Mr Mallya’s style somewhat.

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Markets Live: Monday, 1st September, 2014

Live markets commentary from FT.com 

The (early) Lunch Wrap

UK manufacturing activity at 14-month low || Factory slowdown heightens concern over China’s economy || Eurozone industrial recovery slows to a standstill || Burgers and BMWs highlight the rise of North Korea’s private economy || Cameron looks to reap dividend from backing Tusk for top EU job || Hong Kong democracy activists vent their anger against Beijing || Citi pays allowances to avoid bonus cap || Markets Read more

Further reading

Elsewhere on Monday,

- “If Blair was Teflon man, Brown was Bostik man.”

- The ECB and the Bundesbank.

- An Olivier Blanchard mea culpa.

- How should future Argentinas treat future vultures?  Read more

The 6am London Cut

Markets: Bourses across Asia began the new month on an upbeat note, despite weak manufacturing data in China where the official PMI fell to a reading of 51.1 for August, from 51.7 in July, while HSBC’s private measure was revised down to 50.2 from a preliminary August reading of 50.3. The upward moves also came after the S&P 500 notched yet another record high close on Friday, rising 0.3 per cent to 2,003. US markets will be shut on Monday for Labor Day. (FT’s Global Markets OverviewRead more

In Putin’s Russia, financial plumbing blocks you

Sam Jones (formerly of this parish) writes in the FT about how the conflict in Ukraine has revealed the capacity for a new type of warfare.

This is one that has “exploded the notion that expansive communications technologies and economic interdependence were fostering a kind of grand bargain.” Against it, the great power arrayed on the other side can do little, despite its considerable conventional might.

Quite so. Take, for example, this story from Bloomberg on Friday… Read more

More on the US-China bilateral trade balance

As a brief follow-up to yesterday’s post on the impact of US trade with China on US employment and incomes, we thought it would be useful to visualize a few interesting facts about the evolution of the bilateral trade balance over time.

First, look at how the deficit in the trade of goods swamps the modest surplus in the trade of services. Whilst the data on services are annual and stop in 2012, the general picture would probably not look much different even if it were more up to date: Read more

Electric cars as a medium for electricity storage and discharge

We promised some more insights from the UBS report on solar, batteries and electric vehicles. So here goes.

First, a chart showing just how quickly solar costs have been falling since 2007:

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Shale is not a ponzi, Part 2

In our last post, we referred to John Kemp’s argument that cash-flows in the shale drilling sector are not a good indicator of shale’s long-term commercial sustainability.

This, he argued, was due to the regular conflation of gas and oil in the metrics, justified by the fact that most companies produce some variety of both. In the last few years, however, producers have shifted their efforts increasingly towards oil production — due to the better margins — improving cash-flows as a result.

And that, in some way, is the great thing about the technology. Switching between carbon fuels is much easier than with conventional upstream projects. (Not to put everything in bitcoin terms, but it’s a bit like switching processing power to mine dogecoin instead of bitcoin whenever the margins are more cost effective.)

Nevertheless, peak oilers still contend shale isn’t long-term sustainable because of the rapid decline rates for wells. These, they claim, are being depleted much more quickly than conventional wells, speaking of the problem in hand. Read more

Collateralising your FDI

We might just strip out one more thing from Deutsche’s recent report on Bretton Woods 2.o, namely the bit about how the growth of Chinese “reserve holdings associated with export-led growth provided de facto protection for foreign private investors in emerging markets and thereby caused the gross flows” needed for China’s growth strategy.

The point being that private capital flows generate political risk — “haha, all your FDI are belong to us” — and, without some sort of collateral, flows from rich countries to poor countries will be held back. Think of China’s reserves as a $4tn hostage which stops China from throwing its weight around and stands in the way of a geopolitical breakdown. With it in place, foreign capital becomes more comfortable heading into China. The idea from Deutsche is that this was the only way to get China’s development model to work on the scale it has. Read more

Shale is not a ponzi

The FT’s Ed Crooks reported this week that fears over the long-term health of America’s shale industry could be put to rest thanks to news that independent oil and gas companies have now substantially improved their financial positions.

From the story:

Cash earned from operations by 25 leading North American exploration and production companies is expected in aggregate to exceed their capital spending next year for the first time since 2008, according to an analysis by Factset for the Financial Times.

As Crooks recounts, the longstanding fear was that the industry was shaping up to be a Ponzi scheme, relying on nothing more than excitement over shale to continuously attract new investment, with every likelihood that things would cave in on themselves once the financing for more drilling ran out.

Thanks to a shift to more profitable oil extraction over less profitable gas, however, it now looks like shale companies’ finances have improved enough to make the business sustainable. Read more

Markets Live: Friday, 29th August, 2014

Live markets commentary from FT.com 

Putting Draghi in his box, and getting him back out again

A week ago, Mario Draghi set euro policy-watchers all a-flutter, departing from his prepared remarks at Jackson Hole to issue a kind of blunt confession that he and his colleagues had run out of excuses for the ongoing depressed level of inflation across the eurozone, and that maybe some sort of reaction was required. Cue a quall of ECB QE speculation.

Then, on Wednesday this week, a story appeared on Reuters stating that, according to “ECB sources,” there was unlikely to be any new policy action from the ECB at its September meeting next week unless August inflation figures (published on Friday) showed the eurozone sinking significantly towards deflation.

The story remained exclusive to Reuters. But the message was clear: ECB officials are worried that market participants were reading too-much-too-soon into Draghi ad-libbing. Read more

The (early) Lunch Wrap

Nato to hold emergency Ukraine summit || Tesco issues profit warning and slashes dividend by 75% || Japanese economy flounders after sales tax rise || Baidu and Tencent join Dalian Wanda in $814m China ecommerce deal || Eurozone inflation hits fresh five-year low at 0.3% || Markets Read more

Following the activists wherever that might lead

In which Citi look for the next Apple, our emphasis:

Apple’s valuation has been through a spectacular round-trip over the past couple of years (Figure 2). Its total market cap first broke through $600bn in August 2012, but then collapsed to $341bn in April 2013. Since then, the recovery has been equally remarkable, moving back above $600bn in the past month. In the process, it has regained the title of the world’s most valuable company ($187bn ahead of Exxon at number 2). To put this in context, Apple has lost and then regained the value of the Russian stock market in just two years.

The narrative associated with this spectacular journey often focuses on the never- ending pressure for Apple management to maintain the company’s product pipeline. A lower share price reflected concerns that Steve Jobs’ midas touch had been lost. The subsequent rebound was associated with increasing conviction that it had not.

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Further reading

Elsewhere on Friday,

- If Reddit was a bank…

- What happened to Motorola?

- Lessons of the Great Depression for the Eurozone.

- Postcards from BelarusRead more

The 6am London Cut

Markets: Japanese stocks posted their sharpest declines in three weeks after a barrage of data called into question the prospects for a summer economic recovery. Trading in other markets was subdued – Hong Kong’s Hang Seng and Sydney’s S&P/ASX 200 were both flat – with the worsening situation in Ukraine giving a boost to havens and causing a small retreat from riskier assets. The S&P 500 fell 0.2 per cent from a record high in New York and the CBOE Vix index was up 3.3 per cent late in US trade. (FT’s Global Markets OverviewRead more

The Closer


- John Cochrane on IOR, Fedwire, and the size of the balance sheet Read more

Yes, trade with poor countries has cost US jobs

Polled in March 2012, top academic economists overwhelmingly agreed that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”

This academic consensus has penetrated popular opinion to the extent that some people believe increasing cross-border trade flows is unambiguously good for everyone. Likewise, there is a relatively commonand wrong — belief that the Hawley-Smoot tariffs were a significant factor in the severity of the Great Depression.

We don’t want to suggest that trade is bad, but it is worth highlighting that the actual views of the experts who study these issues are much more nuanced than what the “pop internationalists” often spew out.

For example, a new paper by Daron Acemoglu, David Autor, David Dorn, Gordon H Hanson, and Brendan Price estimates that the sharp increase in bilateral trade between China and the US cost somewhere between 2 and 2.4 million jobs between 1999 and 2011 — about 1 percent of the entire civilian population in 2011. Less than half of those jobs were in manufacturing sectors that directly competed with Chinese businesses. Read more

David Autor’s guide to labour and the machine

David Autor chooses a surprising quote for the start of his latest paper on automation and jobs:

In 1966, the philosopher Michael Polanyi observed, “We can know more than we can tell… The skill of a driver cannot be replaced by a thorough schooling in the theory of the motorcar; the knowledge I have of my own body differs altogether from the knowledge of its physiology.” Polanyi’s observation largely predates the computer era, but the paradox he identified—that our tacit knowledge of how the world works often exceeds our explicit understanding—foretells much of the history of computerization over the past five decades. Read more

The great London horse carriage war of 2014

The following arrived in our inbox this Tuesday from Hailo, the cabby app which allows you to hail a cab using a mobile:

As of 5pm today you’ll find a free £10 credit applied to your Hailo account which expires at midnight tonight.* Make the most of your evening, stay out late or swap your normal commute with a safe, comfortable and cool cab home. Or why not try our new luxury HailoExec service? Just hit Pick Me Up Here and swipe across to select it. It’s a little post Bank Holiday gift from us to help you enjoy a hassle-free summer with Hailo.

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