Posts from Monday May 21 2012

The Closer


The S&P 500 went into rebound mode, closing up 1.6 per cent at 1,315.99, its largest one-day gain in two months (Bloomberg). Shares in Apple rose 5.8 per cent, helping the Nasdaq along to its biggest rise in one day since December (Reuters). Read more

US-China: through a Treasury bond, darkly

With a hat tip to Blood and Treasure, the Committee of 100 (how mysterious does this lede sound already?) has released a big survey of how the US and China see each other. Previous one was in 2007.

There are some fun financial/economic sidelights… and some confused elites: Read more

Stock splits and the volume-price correlations

We ran a couple of posts last week about the declining daily trading volume in US equities the last few years (during a time in which share prices have climbed).

The first asked what could explain the trend —  and the second wondered aloud if perhaps this isn’t as mysterious as it seemed. Read more

Greek funny money, redux

First it was John Dizard arguing that Greece could issue scrip and have this circulate as “money” during a funding stand-off with the Troika — without getting chucked out of the eurozone.

There are precedents that vaguely resemble this kind of stopgap approach: remember patacónes?… Read more

Book excerpt: “Abnormal Returns”, by Tadas Viskanta

FT Alphaville doesn’t know if Tadas Viskanta, proprietor of Abnormal Returns, was the first curator in finance blogland — but we do know that he is still very much the best. And as Tadas was certainly among the first to start linking to us frequently back in our early days, we’re delighted to host an excerpt of his new book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere.

The following passage is from Chapter 10: Behaviors and Biases. Read more

The ultimate Bank audit(s)

A fresh talking point for Monday after noon in London…

The Court of the Bank of England has today commissioned a set of three reviews into areas of the Bank’s performance and current capabilities in order to learn lessons and to ensure the Bank is best equipped to carry out its responsibilities in the future. All three reviews will be led by independent, internationally respected, experts. Read more

A new step for Man (and sector valuations generally?)

Man Group caught the hedgie sector off-guard on Monday with an intriguing deal to buy institutional fund-of-funds specialist FRM Holdings.

It’s intriguing because Man seems to have acquired an extra $8bn of assets under management for the princely sum of nothing. Here are the terms, with this nugget: Read more

MOST, averaging down

Looks like Morgan Stanley are trying to support the Facebook price at $35, a short 8 per cent below the issue price. Read more

Oh, so now it’s a $5bn loss?

Morgan Stanley’s research team came out with a note on Friday, guesstimating that JPMorgan’s losses on the synthetic credit portfolio held by its Chief Investment Office will come to $5bn by the end of the year, which is $2bn more than CEO Jamie Dimon seemed to think they’d come to when the announcement of the losses was first made on May 10.

Here are the analysts on why they don’t believe Dimon’s estimate (emphasis ours): Read more

Markets Live transcript 21 May 2012

Live markets commentary from 

Wen to the rescue

Asian markets were mostly in positive territory early on Monday, which was widely attributed to comments by Chinese premier Wen Jiabao on Sunday, emphasising the need for more support amid signs that growth is sputtering.

From BloombergRead more

China’s mega dash for the dollar

We noted last week that there was a rising tussle over dollars in China, spurred by capital outflows and RMB-denominated selling on signs that the world’s key economic powerhouse may be slowing. A situation which was arguably thrusting China into a dollar short position.

While that might seem counterintuitive given China’s substantial longer-duration dollar assets, it is possible because of China’s substantial short-term dollar liabilities. Essentially, we’re talking about a dollar-denominated duration mismatch on the mainland at a time when China is running one of its largest outstanding external debt positions for 27 years. Read more

This is why Grexit fears might be overdone

We pointed out on Friday that a poll suggested Greeks were far from wanting out of the eurozone and would actually return to New Democracy in adequate numbers for a pro-bailout coalition to be formed. From Reuters:

The poll, the first conducted since talks to form a government collapsed and a new election was called for June 17, showed the conservative New Democracy party in first place, several points ahead of the radical leftist SYRIZA which has pledged to tear up the bailout. Read more

Greece – don’t call it a backtrack…

Real games of chicken are about fundamentally misaligned incentives.

So, at the weekend’s G8, Europe’s voice was heard, and it muttered something under its breath about Greece ‘respecting the commitments that were made’ to its second bailout’s terms. No renegotiation. We also all know what Alexis Tsipras thinks of pretty much any terms applying to a bailout. Cue the Grexit fear cycle, terror of a retaliatory funding shock, etc. Read more

Further reading

Elsewhere on Monday,

– Yes the run on Spanish banks is real. Read more

The 6am Cut London

German and French leaders meet this week to map out a revised plan for the euro as the G8 exposed disagreement on a rescue strategy, reports Bloomberg.  The May 23 EU leaders’ summit will see proposals previously rejected by Germany being raised again, reports the FT, which could include empowering the eurozone’s €500bn rescue fund to directly recapitalise faltering European banks and commonly backed eurozone bonds.

Some EU officials have been considering the introduction of a pan-EU plan to guarantee bank customers’ deposits, the WSJ says, citing people familiar with the matter. Such a plan would complement national guarantees already in place and it was unclear how developed the plans were. The high proportion of deposits in Spain, Italy and Portugal that could be withdrawn on demand are feeding concerns of investors and analysts, the report says. Read more

Overnight markets: Up

Asian markets moderated gains after an early bounce in early trading Monday as investors digested comments by leaders of the G8 major economies affirming they want Greece to remain in the euro and Chinese Premier Wen Jiabao raising hopes of further policy easing, says the WSJ.

Asian markets
Nikkei 225 up +58.66 (+0.68%) at 8,670
Topix up +2.14 (+0.29%) at 727.68
Hang Seng down -19.26 (-0.10%) at 18,933 Read more

Weekend news catch-up

Weekend headlines from the FT and other UK media:*

From The FT,
–       Shell said it expects US natural gas prices, which have been pushed to 10-year lows by the shale gas boom, to double by 2015
–       Vale has hired advisers to negotiate the possible sale of its Brazilian oil and natural gas assets worth more than $1bn
–       Repsol of Spain has cancelled nine outstanding LNG shipments to Argentina worth about $360m, alleging “repeated contract violations, including a failure to pay” in the wake of the expropriation of YPF
–       General Motors will not advertise in the Super Bowl next year, in an unexpected move that follows a significant revamping of its media strategy
–       Dutch chemical and nutrition group DSM is to acquire Ocean Nutrition Canada, a producer of fatty acids derived from fish oil, in a deal giving the company an enterprise value of C$540m ($530m)
–       Vivendi and its former CEO Jean-Marie Messier are being sued for €644.5m in Paris, part of a long-running legal battle over claims that they misled investors between 2000 and 2002
From The Sunday Times,
–       HSBC and Shell are expected to feel the heat of the “shareholder spring” this week after an influential adviser urged investors to vote down their pay plans
–      A consortium comprising one of the best-known property men of the 1980s, a super-rich South African family and the billionaire Reuben brothers, is bidding for Battersea power station
–       Credit Suisse has quietly hung a ‘for sale’ sign over JO Hambro Investment Management, the upmarket wealth manager it bought in 2001
–       JP Morgan’s CIO has propped up all its new British mortgages over the past four years
–       Paul Manduca, the City fund management veteran, is in line to become Prudential’s new Chairman, replacing Harvey McGrath
–       The three companies that own Britain’s trains have paid their offshore owners almost £700 million in dividends since 2008
–       Canon is to enter the ailing British high street with a deal to prop up Jessops
–       WPP’s Sir Martin Sorrell faces another pay row, with investor unrest over his £13m package
–       A former star trader at Goldman Sachs nicknamed ‘Goldfinger’ is poised to become a big investor in the hotel chain Jurys Inn
–       Britain’s top jeweller, Graff Diamonds, relies on only 20 high-rollers for almost half of its $755 million annual sales Read more