The many faces of Jeroen Dijsselbloem

It’s Friday. You probably can’t wait for the weekend after a tough week.

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FirstFT (the new Lunch Wrap)

In Friday’s US update of the FirstFT newsletter: King Salman , Saudi Arabia’s new ruler, is stamping his authority on the kingdom with an overhaul of key security, political and economic officials. He also revealed big investments in projects and populist cash handouts, with state employees granted a two-months’ salary bonus. (FT)In corporate news, Qatar Airways has taken a 10 per cent stake in the British Airways-Iberia combo IAG, as European airlines consider cosying up to Arab world rivals that have provided keen competition in recent years. (By the way, the new Air Force One could be the last jumbo jet)(FT)

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Is the DKK the new CHF?

It’s been a long time since so many developed central banks were tested by free market forces. And free market forces aren’t finished yet.

Hot on the heels of the SNB giving up on its euro ceiling policy, the market is zoning in on the Danish central bank and its ability to maintain its euro-peg.

As Dan already pointed out, the Danes have had to cut rates three times in in the last two weeks: January 19, January 22 and January 29.

If that looks and feels desperate, perhaps that’s because it is? Read more

Markets Live: Friday, 30th January, 2015

Live markets commentary from 

China’s new normal, cut out and keep edition

Here’s 28 of China’s 31 provincial and municipal governments adjusting to reality:

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Further reading

Elsewhere on Friday,

- I do not think that number means what you think it means, unit labour costs edition.

- How wonks become oracles.

- “Microfoundations” ain’t so microfoundedRead more

FirstFT (the new 6am Cut)

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Asian markets were buoyed by a late rally on Wall Street, which came after upbeat corporate earnings. Australia’s S&P/ASX 200 was the top performer, rising 0.9 per cent – investors are betting on a rate cut from the Reserve Bank of Australia when it meets next Tuesday. Read more

Missing: one Blackberry. Please return to TPG

You’ve read about TPG, the $65bn buyout firm, suing its former spokesman to get back his company Blackberry after he allegedly threatened to “take down” the firm with press leaks…

…Now read the lawsuit: Read more

Band on the run

The Danish central bank cut rates on January 19. Also on January 22. And again, today, January 29.

Here’s a quick reaction from Capital Economics: Read more


Always intrigued by spreadsheets and bankers who type into them, this story from the Wall Street Journal dated January 15th caught our attention [emphasis ours]:

Freeport confirmed in a court filing Thursday that it would pay $137.5 million to resolve allegations that conflicts of interest marred its 2013 acquisitions of McMoRan Exploration Co. and Plains Exploration & Production Co. for a combined $9 billion. The settlement, one of the largest ever in such a case, explicitly allows shareholders to pursue claims against Credit Suisse, which the plaintiffs say made a mathematical error that inflated the value of McMoRanRead more

Nigeria on the brink

You can’t find a blunter assessment of the underlying problems facing Nigeria and the naira than that from BCA Research this week:

Nigeria has basically squandered away its oil bonanza of the past decade. It has failed to channel its oil windfall into infrastructure and productive capacities. As a result, the economy remains extremely dependent on swings in global oil markets.

On the surface, Nigeria’s oil sector has dropped in significance to a mere 13% of real GDP, while the services sector has climbed to 40% in real terms. Yet, the reality is that it is the country’s oil revenues that have supported growth and, to a large extent, maintained social order. Without oil, both would fall apart; government spending would be much smaller, interest rates much higher, and the currency’s valuation much lower.

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About that UK economic track record

Always something of a subjective question, Simon Wren-Lewis, economics professor at Oxford, has had a go at putting the recent performance for the UK in context. It is, after all, a mere 98 days to the UK election, and economic managment may feature in the pre-poll debates.

Here is a very simple fact. [3] GDP per head (a much better guide to average prosperity than GDP itself) grew at an average rate of less than 1% in the four years from 2010 to 2014. [1] In the previous 13 years (1997 to 2010), growth averaged over 1.5%. So growth in GDP per head was more than 50% higher under Labour than under the Conservatives, even though the biggest recession since the 1930s is included in the Labour period!

Which, given that anti-austerity politicking is all the rage now that Syriza has taken power in Greece, is in large part an attempt to reopen questions about the broad effect of reductions in government spending at a time of weak aggregate demand. (Or, so far as Simon is concerned, persuade journalists to challenge Conservative claims about a successful track-record of economic management). Read more

Reservations as reserve assets

Reserve” is the new app that Silicon Valley — specifically Uber’s Garrett Camp and Foursquare’s Naveen Selvadurai — insists we will all be going mad about this year.

What is it? Another crypto-currency system? A payments ledger to rival the mighty Special Drawing Right? Perhaps it’s an app that allows you to re-serve your uneaten food?

You know… like a Grindr for leftovers? Read more

China Vs the so-called “art” industry

Remember Roubini going off about the art market in Davos? About how “Whether we like it or not, art is used for tax avoidance and evasion” and “While art looks as if it is all about beauty, as a business it is full of shady stuff”?

Well here are two bits of related Chinese art market shenanigans for you.

The first, from the Epoch Times, is about corrupt officials who peddle their works of calligraphy to disguise bribes (via Climateer and The Art Market Monitor): Read more

Markets Live: Thursday, 29th January, 2015

Live markets commentary from 

If we hit that bullseye, the rest of the dominoes should fall like a house of cards, China’s implicit state guarantee edition

The thing about a “pervasive implicit state guarantee” is that it’s pretty pervasive. It gets everywhere. Well, just about everywhere. Everywhere that an implicit state guarantee can get.

Futhermore, it’s hard to get rid of once it spreads. (We’ll spare you an analogy) Read more

Further reading

Elsewhere on Thursday,

- Thinking about the new Greek crisis.

- There “should be no significant increase in unemployment above its natural rate… as a direct result of having to pay interest on any government debt.”

- Saxo to clients who had their CHF trades repriced: “come at us”.

- The London property ladder now misses several rungs. Read more

FirstFT (the new 6am Cut)

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An equity sell-off swept across Asia after the S&P 500 index fell overnight on indications the US Federal Reserve is on course to raise short-term interest rates this year. Sam Fleming parsed the Fed statement to see what to expect out of the next meetings. (FT) Read more

If Apple were a country…

Apple just reported the biggest quarter of net income earned by any public company ever, at least in nominal terms. It remains the world’s most valuable publicly traded company by a large margin. So naturally there are people who want to put these statistics into perspective by comparing a corporation to a country. Unfortunately, most of those efforts miss the mark because they generally don’t compare apples to apples.

The most common way to measure the size of an economy is to look at how much stuff is produced in it each year. (This is GDP.) You might think that is equivalent to corporate revenues, except that a lot of those inflows are offset by outflows to suppliers. In other words, you’d be looking at a company’s GDP without subtracting the imports that represent foreign production. That’s double counting. Read more

“Bloomberg Launches Its Flagship Digital Destination”

Click the image for the full out-of-this-Bloomberg experience…

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Markets Live: Wednesday, 28th January, 2015

Live markets commentary from 

China’s currency war problem won’t just go away

Pretty obviously — with ECB QE, a presumed resultant euro funded carry trade, and all sorts of central banks rushing to cut rates — there’s some sort of renewed currency war movement going on.

And while we’re all ears for arguments about positive-sum outcomes (in a deflationary world), it’s worth remembering those who might struggle to get involved. Read more

The Fed, the statement and the Nairu

Today’s FOMC statement should be about as shocking as the ending of The Sixth Sense.

Wait, you were genuinely surprised that Bruce Willis was dead the whole time? Fine, about as shocking as the final scene of The Usual Suspects then. Read more

Why did the Swiss franc spike? Blame the locals

There is a straightforward answer to the question in the headline: more money has been trying to get into Switzerland than get out, which didn’t affect the exchange rate as long as the Swiss National Bank bought foreign currency. As soon as they stopped, the exchange rate adjusted to balance the new set of flows. But a detailed look at the gross flows in and out of the country provides a more nuanced and interesting picture.

In the heady days of 2010-2012, when it seemed as if the European Project was always one secret weekend meeting away from exploding in a fireball of poisonous politics and innumerate economics, Switzerland looked like a nice place to put your money. It was especially attractive if you were a resident of a stressed euro area country worried about wealth taxes, bank failures, currency re-denomination, or all of the above. Read more

Further reading

Elsewhere on Wednesday,

- Yahoo would rather not pay taxes on its Alibaba shares.

- “You have to get Weidmann, Draghi and and Tsipras across a river. You are the only one who can row the small boat with room only for you and one other. How would you do it?”

- Post recession lessons.

- “Pretense of knowledge + Math = Economics”  Read more

FirstFT (the new 6am Cut)

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Apple sold 74.5m iPhones to report the largest profit in history in the three months to December. Its net profit grew 37 per cent to $18bn and beat ExxonMobil’s previous quarterly record of $15.9bn in 2012. (FT) Read more

Bank of Canada rate cut necessary as pre-emptive strike

In this guest post, Alex Bellefleur, global macro strategist at Pavilion Global Markets, writes that the Bank of Canada was prudent to loosen monetary policy in response to the decline in oil prices.

Last week the Bank of Canada (BOC) surprised markets by cutting interest rates 25 basis points, leaving them at 0.75%. While some argue this move was unnecessary, we are of the view that the cut is needed as a pre-emptive manoeuvre to counter private sector deleveraging. Read more

Petrodollars, Adam Curtis edition

Adam Curtis, the controversial end of the BBC documentary making department, is back with a straight-to-iPlayer special, called Bitter Lake. His topic du jour: Saudi Arabia, Afghanistan and the petrodollars that turned financiers dizzy.

For those unfamiliar with Curtis’ work, think archive footage, mood music, dramatic pauses, voiceovers of the “…but it was all a fantasy” variety and grand themes linking multiple strands into a single overarching narrative.

Love him or loathe him, a particularly cool piece of stock footage unearthed in his latest offering comes about 45 minutes into the documentary, and it is definitely worth your attention: Read more

This is nuts. (But maybe someone’s noticed)

Box Inc, just another cloud storage company out of Silicon Valley, looked to be just another SV mania company hitting Wall St when it priced it’s IPO last week. Against an allegedly cautious pricing at $14 a share (one dollar above the indicative range, natch) the market price surged to a day one high of $24.73. But look at the price chart since then…

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Igor, how do these ETFs work?

On May 21 2013, an unnamed “Russian state-owned news organization” wanted to question more about the NYSE.

Where to get some good questions from, though?

Well local Russian economic spies Evgeny and Igor, obviously. Read more