Posts from April 2012

The Closer

ROUND-UP

The S&P 500 has posted its first monthly decline since November, closing down 0.8 per cent for April (Bloomberg). Chicago PMI data and small business hiring both showed signs of an economic slowdown in the last month (Reuters). Read more

The remarkable resurgence in synthetic credit tranches

On a scale of meh (0) to tin hats at the ready! (10), FT Alphaville is thinking that the bank-led synthetic securitisation market is currently at about a 3. While worth keeping an eye on, these bespoke deals are still relatively small beans compared to what the market was just before the crisis struck.

Meanwhile, the more standardised side of the corporate credit market, involving trades on credit indices, has seen an impressive growth in risk-taking and activity since the beginning of the year. Read more

Where have all the oil hedgers gone?

An interesting chart from John Kemp at Reuters on Monday (click to enlarge):

 Read more

Solvency II securitisation slapdown!, from Fitch

Should insurers use the history of Greek bond prices as a benchmark for holding capital against holdings of sovereign debt?

You might well ask. Read more

Kicking a central bank when it’s down

Japan eased… the yen appreciated. The Bank of Japan may be a bit sad. Is now really the time to rub salt into wounds by reminding the BoJ of the futility of its easing actions – at least where the yen is concerned?

Nomura’s Yujiro Goto certainly thinks so (click charts to enlarge): Read more

Lloyds receives ‘multi-billion’ bid for publicity – report

According to the Evening Standard:

Lloyds Banking Group is understood to have received a multi-billion-pound takeover approach for Scottish Widows, its life assurance, pensions and savings business. Read more

What are the odds of a former Goldmanite getting the BofE governor job?

The race for Mervyn King’s job is hotting up — months before it’s even officially advertised — as rumours circulate that a second Goldmanite could be in the running.

The focus on Monday was on Jim O’Neill, chairman of Goldman Sachs’ asset management division, after a piece in The Sunday Times lauded his “unique qualifications” for the job. The paper added that the UK Treasury had approached O’Neill about the job several months ago, but did not cite sources. O’Neill has neither denied or commented on the story. Read more

‘It still has real value’

Thankyou, Bloomberg reporter, for picking up the phone to bring us this:

China Forestry Holdings Co. (930), the logging company that last week said its only able to account for 1 percent of its historical sales, still has value in its assets, according to its third-largest holder, Carlyle Group. Read more

Markets Live transcript 30 Apr 2012

Live markets commentary from FT.com 

Black Scholes and the formula of doom

It has been argued that one formula known as Black-Scholes, along with its descendants, helped to blow up the financial world.

Well, that got FT Alphaville’s attention this weekend! For a good part of Saturday, the article with the above sentence was among the Most Read on the BBC News website. Not bad for an article about option pricing. Read more

The (early) Lunch Wrap

Good morning, New York…

FT ALPHAVILLE Read more

This is your divergent recovery, charted

As part of our “questions that are asked an awful lot” series (not really) we have decided to revisit the comparison between the current economic slump and previous depressions/recessions.

In a recent report a trio of IMF researchers (messrs Kose, Loungani and Terrones) argue that the ongoing recovery has been quite similar to previous ones and that, for advanced economies at least, we are essentially back in 1991. Read more

A palm oil storm in the making

Looking for supply headwinds in obscure commodity markets?

Then look no further than the global palm oil market. Read more

More on secret liquidity inside eurozone secret liquidity

For every 10 euros of the European Central Bank’s now almost €1,200bn of ‘normal’ liquidity supplied to banks, picture one euro of Emergency Liquidity Assistance from national central banks.

Now imagine there’s just under 10 cents within the ‘ELA’ euro which are even shadowier. (It’s a conceit, we know – just bear with us.) Read more

This Australian mining magnate wants to build Titanic II

Clive Palmer - source: Getty Images

Source: Getty Images

This is Clive Palmer, who plans to launch a new cruise liner that is a near-replication of the Titanic. Read more

Further reading

Elsewhere on Monday,

- Paul Krugman on the dangers of a lost generationRead more

The 6am Cut London

Spain’s government and its banks are discussing a ‘bad bank’ scheme, says the FT, citing officials and bankers. However officials said the scheme would not be a bank, and would require participating lenders to set aside sufficient provisions.

Fears of runaway global food inflation are being raised by surging soya prices, which are approaching the all-time highs reached in 2007 – 2008, says the FT.  As one of China’s biggest agricultural imports, the crop is also closely linked to inflation rates there. Read more

Overnight markets: Up

Asian stocks gained ground as investors focused on a string of strong corporate results in the US, while higher commodity prices boosted Australian resources shares.

Trading was subdued with markets in Japan and China closed for public holidays. Read more

Weekend news catch-up

Weekend headlines from the FT and other UK media:*

From The FT,
-       The pound has become an unlikely haven in Europe. It is so popular among foreign exchange analysts that it is drawing comparisons with the Swiss franc.
-       Hedge fund managers make for unlikely supporters of François Hollande, the French socialist presidential candidate.
-       Maple offer for TMX on knife edge: Another potential big stock exchange deal could soon be history.
-       As Wall Street makes final preparations for the largest technology debut by value in history, it has also faced what some bankers and investors have come to see as a series of snubs from Facebook
-       Wealthy foreigners own a larger portion of the world’s most expensive homes than at the peak of the housing boom, as they increasingly look to park their wealth in perceived havens Read more

FTfm on AV

Some highlights from Monday’s FTfm.

Funds gear up to build bridges
European pension funds are preparing to unleash a wave of investment into infrastructure. But governments’ hopes that this will spur economic growth could face disappointment as most pension funds are looking for global and not domestic investments. Read more

You will buy more Govvies, or else

It’s been puzzling me since the start of the financial crisis: why can incontinent governments like, say, the UK’s, borrow almost unlimited amounts at interest rates far below inflation? Stephen King at HSBC has been thinking about this, and has come up with a suitably apocalyptic (he has a reputation to defend, after all) explanation for the silly prices of government debt.

Rather than addressing the problem of too much of it, he points out that governments across the West are instead finding ways to force it down the buyers’ throats regardless of the price. Sadly for the struggling members of the eurozone, they can’t pull off this trick because they don’t control their domestic currency, but the proud printers of other major currencies are pulling it off like mad. Read more

Weekender

Further weekend reading,

- Kai Ryssdal’s interview with Tim GeithnerRead more

Finland’s got a [redacted]

‘Greece Pays Finland Collateral Money,’ goes the Bloomberg headline.

Well, that’s broadly true we suppose. Technically, Greek banks which cannot be named have transferred €311m of Greek government bonds which then moved into the custody of an international investment bank which cannot be named which (at some point) will sell them, put the revenues in safe assets, and release the collateral to the Finnish government if Greece does things which cannot be named to its EFSF bailout loans of which Finland provides a portion. (Finland pays a fee as part of its end of an exchange of cash-flows.) Read more

The EU budget: no solidarity during austerity

Earlier this week the European Commission’s proposed a whooping 6.8 per cent increase for next year’s EU budget. Cue outrage and fury. Finance minsters around Europe stamped their feet while their assistants dialled journalists to explain just how outraged and furious they were.

This is how the FT reported it (emphasis ours): Read more

From more Russians, with longer life expectancy

In this quad of graphs, can you spot the odd one out?

 Read more

Markets Live transcript 27 Apr 2012

Live markets commentary from FT.com 

US Markets Live! 10am EST, 3pm London

Join us at the usual place for FT Alphaville’s US edition of Markets Live at 10am New York Time — we’ll be talking that disappointing(?) US GDP number, those Amazon earnings (and something on Exxon)… and reflecting on a confusing week for Fed-watching.

See you there!

US GDP: slacking off but let’s not get too dramatic

First quarter GDP in the US rose 2.2 per cent, coming in slightly under estimates for a 2.5 per cent increase and well below the 3 per cent recorded in the last quarter of 2011.

From Reuters: Read more

Finally, a truly Popular bailout!

Cyprus is apparently preparing a bailout for its second biggest bank which could come in at near 10 per cent of GDP.

This is from the Cypriot press (poorly Google-translated – sorry – and now apparently removed and replaced by a much blander article; although Reuters looks like it saw the same thing so we are not going mad): Read more

Three European equities trends to watch

Fund managers have been shunning European bank and retail stocks for quite some time now, but there are signs that things are beginning to change. At least that’s what the global equity strategy team at HSBC found when they looked at the latest (March 2012) data on international fund holdings. Three European trends stood out.

Amazingly, European banks are coming back into favour. Well… more like slightly less out of favour (emphasis ours): Read more