On the hypothetical eventuality of no more free internet

This is the first in an occasional series lamenting the hypothetical eventuality of a world without a free internet* and the extraordinary implications this could have for markets and companies. A tragedy of the web commons if you will.

It is inspired both by India’s ruling to bar Facebook from subsidising internet availability with Free Basics packages (see Kadhim’s series of posts for more on that) but also Balaji Srinivasan (he of 21 Inc toaster fame), and his attempts — including a Stanford Bitcoin course — to convince the world the web should in fact be a paid-for luxury product of scarcity.  Read more

FT Opening Quote

Chip designer Arm has etched out a 24 per cent rise in profits, Tullow Oil has shrunk losses, Janet Yellen is to testify to Congress. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Wednesday,

- Bonds on the run.

- Kocherlakota: “going negative is daring but appropriate monetary policy. But it is a sign of a terrible policy failure by fiscal policymakers.”

- Goldman’s top trades for 2016 aren’t looking great.

- “Bernie Sanders is seeing Kim Jong-un levels of support among millennials.” Read more

FirstFT – Trump and Sanders win primaries, a cure for jet lag and why contemplating death changes how you think

Mr Trump had secured 34.4 per cent, while Mr Sanders led Mrs Clinton by a commanding 59.5 per cent to 38.8 per cent in the New Hampshire primaries Read more

The CoCo that popped

Let’s go back in time — to May 2014. Deutsche Bank was in the market to raise capital, including at least €1.5bn of additional Tier 1 capital securities. Or CoCo (short for contingent convertible) bonds. Read more

Markets Live: Tuesday, 9th February, 2016

Live markets commentary from FT.com 

FT Opening Quote

Tokyo stocks fell more than 5 per cent after Japanese government bond yields hit zero, L&G has revealed its bond portfolio, Icap is upbeat on its deal with Tullett Prebon. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Tin hat time… everywhere?

So far in 2016, yes.

From Deutsche’s latest House View:

 Read more

Further reading

Elsewhere on Tuesday,

- At times like this I’m happy I’m poor.

- Chesapeake falling… Catharsis or beginning?

- Oil: “the supply pressures won’t stop until debt-financed production becomes equity-financed production. It really is that simple.”

- Why doesn’t the ECB just buy oil?

- What if you could know one asset price 20yrs out?

 Read more

FirstFT – Bank stock rout, US immigration and a Twitter backlash

Deutsche Bank led a rout in global bank stocks, with its shares sliding more than 10 per cent at one point, and closing down 9.5 per cent Read more

Tin hat time in Japan?

That’s the 10yr going negative for the first time, becoming the first G7 country to do so. Read more

The Bank of Canada admits easy money can inflate debt bubbles

We want to highlight a speech from the Bank of Canada’s Timothy Lane on Monday. Whilst the conclusions are not particularly new, Lane makes several points that can’t be repeated enough.

Start with his description of how changes in monetary policy affect the economy: Read more

Lay off Tim Geithner, yeah?

For a writer about skin in the game, here’s someone who seems not to like Tim Geithner putting more of his skin in the game of private equity investing.

— NassimNicholasTaleb (@nntaleb) February 8, 2016

 Read more

Foreign cbank drawdowns, int’l drawbridges and a Fed moat

Chinese FX reserves are down to a three-year low according to figures released this weekend.

But, if like us, you trace the current drawdowns to dynamics which first emerged at the end of December 2011… then you might find the following chart from Macquarie Bank’s global equities team of interest:

 Read more

Quoth the Zoman: Revenue

The co-founding Zoman* — Deepinder Goyal, that is — took time for a chat with us last week about the change going on in India’s start-up world, a change that has involved hyperbole by many and an utterance of mea culpa by a few. Online food portal Zomato is included in the latter category. Read more

Facebook loses battle over free internet initiative in India

All of Facebook’s huffing and puffing in India seems to have come to naught. Today the country’s telecommunications regulator banned “discriminatory tariffs for data services on the basis of content”, meaning that Facebook and its local partner will no longer be able to offer the social network for free to Indian consumers as part of its Free Basics product. Read more

Markets Live: Monday, 8th February, 2016

Live markets commentary from FT.com 

A note for your calendars: the end of the credit cycle

The credit cycle is long in the tooth by anyone’s reckoning — just how long in the tooth is a different question.

How about four-fifths of the way there? Read more

BIS to EM: worry

Borrowing isn’t necessarily bad, but you could be forgiven for thinking so, considering all the new research showing what tends to happen after big increases in indebtedness.

The latest comes from a speech by Jaime Caruana, the Bank for International Settlement’s general manager and the former boss of the Bank of Spain. We already discussed the first part of his speech, which explains the basic differences between his framework for economic analysis and the approach popular before the crisis, in a previous post. In this post we’re going to focus on the meat of his speech, which concerns the dangers facing many so-called “emerging market economies”. Read more

Further reading

Elsewhere on Monday,

- Hypothetical du jour: Is the computer running Bridgewater intentionally creating drama and distractions so the humans that think they are running Bridgewater will stay out of its way?

- No, sorry Eisman, breaking up big banks is easy.

- Tech giants “fight as though they are insurgents while they operate as though they are kings.”

- China reserves are down another $99.5bn, here’s why that’s maybe not so depressing.

- The Duke-Powell-Stein “Taper Caper”.  Read more

FirstFT — N Korea launches rocket in breach of UN sanctions, China’s forex reserves and Marco Rubio meltdown

Seoul and Washington to begin formal talks on an advanced missile defence system Read more

Alphachat: Michael Pettis on the Chinese economy, plus the US election and conservative talk radio

Alphachat is available on Acast, iTunes, and Stitcher. Read more

Thought for the weekend

Hard to accept that these imbeciles represent the people in our government.

Tweet, by Martin Shkreli, pharmaceutical entrepreneur

 Read more

“It’s the stocks, not the shocks”

Jaime Caruana, the general manager of the Bank for International Settlements, and the former boss of the Bank of Spain, gave an important speech Friday, which, among other things, highlights the radically different frameworks economists use to evaluate what’s going on.

In textbook macro models, economies grow at some “trend” rate based on productivity on population growth, except when occasionally buffeted by “shocks” in different directions such as an oil price spike or a tax cut — shocks that fade in importance over time as economies “naturally” return to their “trend”. In these models, policymakers should focus on boosting productivity, which improves the trend path, and establishing institutions that smooth out the impact of the shocks when they occur by temporarily shifting resources to those most affected. Little else matters. Read more

Digital money, negative rates as Gosplan 2.0

UBS’s Paul Donovan offered some thoughts earlier this week on the unintended consequences of negative rate regimes, which — whilst interesting — stimulated a different thought in us related to data.

Here’s the comment, see if you think you know what we’re getting at…

Moving rates negative for some depositors and to zero for other depositors may create some real world distortions. If there is a greater incentive to hold money in physical form rather than electronic form, then the composition of narrow money (i.e. cash and cash substitutes) may alter. Rather than relying on electronic money, physical money will be used for everyday transactions. This is not entirely costless, as there is a security risk in storing cash under the mattress (historically the security risk was one of the key reasons for the creation of bank accounts in the first place).

 Read more

Petrodollars as the new vendor-financing feedback loop of hell

FT Alphaville readers will not be strangers to the argument a ballooning petrodollar float over the last decade set alight an emerging market export feedback loop, one of dot comedy vendor-financing proportions. Or how encumbered petrodollars have played an important role in the counterintuitive side-effects of a drop in the price of oil.

The analysts at Citi are on the case as well, calling it “Oilmageddon — death by circular reference”.

Here’s the thrust of their argument set out in a note published Friday (our emphasis):

It appears that four inter-linked phenomena are driving a negative feedback loop in the global economy and across financial markets: 1) stronger USD, 2) weaker oil/commodity prices, 3) weaker world trade/capital flows, eg petrodollars, and 4) weaker EM growth. This cycle then repeats.

 Read more

Camp Alphaville: coming soon to New York?

The AV team is thinking about bringing a version of Camp Alphaville, the topsy-turvy finance and economics festival that we host every summer in London*, to New York City in the autumn.

For those who haven’t attended one of our events in London, Camp Alphaville is designed to be infused with a property that most finance conferences find anathema: fun. Read more

Markets Live: Friday, 5th February, 2016

Live markets commentary from FT.com 

Further reading

Elsewhere on Friday,

- Sewage spies.

- How super PAC donors hide behind shady LLCs.

- The feel-good female solidarity machine.

- GMO on animal spirits and venture capital.

- The NIRP quiz. Read more

In the absence of a press release, Keurig Green Mountain edition…

“Oh, didn’t you see it? I put it right on your desk, just inside the timeshare brochure, under that pile of papers.”

Click to enlarge
Keurig Green Mountain Coffee Roasters, manufacturer of single serve coffee pods, published quarterly results on Monday by filing form 10-Q in the normal manner. Breaking with tradition, however, there was no announcement or press release.

Who cares, you might ask, as Bart Becht’s JAB Capital and friends have agreed to buy the group in December. Which is probably the reason, not the 9 per cent drop in sales compared to the same period the year before. Read more