Posts from Wednesday Apr 11 2012

The Closer


Alcoa rose more than six per cent the day after its earnings and US stock indices edged higher following Tuesday’s sharp sell-off. The Dow Jones Industrial Average rose by 0.7 per cent to 12,805 while the S&P 500 closed at 1,385 (Reuters). Read more

The IMF on the bleak near-future of the safe asset shortage

It’s chapter three of the latest Global Financial Stability Report, and it is especially good on the varying roles of safe assets in global financial stability, mispricing before the crisis and the decline in quantity since, and the tricky path ahead for reform.

— From the introduction, how’s this for a strong declarative opening… Read more

Floating Treasuries. Levitating Fed.

Let’s start with “Federal Reserve Independence Day” — March 4, 1951.

Nowadays… when financial repression is all the rage, people seem more interested in what caused the Fed-Treasury Accord of that year, rather than what happened after. Read more

‘Don’t lose respect for the trees…’

From, via the WSJ, an extract from a ranking of 200 jobs, from best to worst:

 Read more

The latest in regulation-induced innovation – Part 2

In Part 1, we discussed the interest Spanish banks, and the likes of JP Morgan, have shown in securitisations that may lower their regulatory capital burdens by bundling up assets and selling the riskiest pieces of the resulting structures to investors.

Here, we look at another worrisome and expensive exposure on bank balance sheets, and discuss how the treatment of these deals has varied from regulator to regulator — something the Basel Committee has recently started to cast a critical eye on. Read more

The latest in regulation-induced innovation – Part 1

Regulations set forth by the Basel Committee that govern the amount of capital that banks have to hold are meant to set a level playing field round the world.

Or at least, we thought harmonisation was the point. Read more

Maxim Barsky: from TNK-BP to…Matra Petroleum (!)

He’s an expensive piece of kit is Maxim Barsky, but you don’t get the man once described as “TNK-BP’s chief executive-in-waiting” on the cheap.

Yet we might have expected a more positive reaction to news that this investment banker-cum-senior-oil-company-exec is buying his way into Matra Petroleum, an Aim-list minnow, with a view to using Matra as a deal vehicle, post TNK-BP. Read more

DoJ to Apple, publishers: E-Crooks!

The WSJ had it first, we think:

The U.S. filed an antitrust lawsuit Wednesday against Apple Inc and five of the nation’s largest publishers, alleging they conspired to limit competition for the pricing of e-books.

 Read more

The inevitability of shadowy banking (and how to regulate for it)

FT Alphaville decided earlier this week that we are sick of the term “shadow banking”. We’ve failed to come up with an alternative, however, and in the meantime Edward Kane, a professor at Boston College, has presented a paper entitled “The inevitability of shadowy banking” at the Atlanta Fed-hosted financial markets conference.

Kane’s paper says shadowy banking is basically safety-net arbitrage. He defines it thus: Read more

Money as maturity and asset transformation

Just when you thought no more could be written about collateral, shadow banking and repo, Manmohan Singh and Peter Stella come together to bring us a new paper on the core essence of money and collateral.

The story so far: the world has been plagued by a shortage of safe collateral and an over-dependence on shadow-bank funding, all of which has led to a breakdown in repo markets and secured funding, which is having more of an effect on financial markets than many first anticipated. Read more

Markets Live transcript 11 Apr 2012

Live markets commentary from 

A tragedy the monolines hath wrought

Yesterday we saw how bank credit risk management imposed credit valuation adjustments (CVA) on over-the-counter derivatives trading to charge for the credit risk being taken. CVA is biggest where the counterparty does not post collateral, is not a good credit, and owes a lot of money under the derivative contract in question.

Act 1 Read more

The (early) Lunch Wrap

Good morning, New York


When the tail-event becomes the standard risk

If anyone can bring metaphor and illustration to the market in volatility,  it’s Chris Cole at Artemis Captial Management, a volatility-focused investment firm.

Take the intro of his latest note as an example: Read more

The Chinese data choose-your-own-adventure

The great thing about Chinese economic data is that you can read whatever you like into it.

Official PMIs not supporting your bearish call? No worries, because that stuff suffers from seasonality and is *obviously* fudged, anyway. HSBC PMIs harshing your bullish mellow? Meh, well their sample is too small and overly coastal. (The truly hip just dismiss all China PMIs.) Read more

Further reading

Elsewhere on Wednesday,

– Look who’s turning Japanese now. Read more

Overnight markets: Down

Asian stocks fell for a sixth day, the longest stretch of losses since August, and bond yields in the region rose after Sony posted a record loss and concern grew that Europe’s debt crisis is worsening, says Bloomberg. However US equity futures climbed and Treasury yields rose 2bp as Alcoa reported an unexpected profit.

Asian markets
Nikkei 225 down -146.80 (-1.54%) at 9,391
Topix down -11.09 (-1.36%) at 802.34
Hang Seng down -263.58 (-1.29%) at 20,093 Read more

The 6am Cut London

Asian markets continued the sell-off on Wednesday as worries grew about Spain. (Wall Street Journal) The Asian falls followed a torrid US session, and were further pushed down by Sony’s historic loss and Tuesday’s China trade data. (Financial Times) More on Spain-related nerves. (Financial Times)

Santorum has quit the Republican primaries race without endorsing Romney. (Bloomberg) Obama camp doubles down on Buffett rule; leads Romney 51-44 in new poll. (Financial TimesRead more