Posts from Monday Jan 7 2013

The Closer


FT markets round-up: “Growth-focused assets headed lower, pulling major “risk” barometers back from multi-month highs, as the new year rally lost impetus and investors turned their attention to the start of the US earnings season this week. The FTSE All-World equity index slipped 0.2 per cent after the Asia-Pacific region lost 0.2 per cent. The FTSE Eurofirst 300 ended the session 0.5 per cent lower on the day despite strength in banks following an easing of mooted regulation. In New York, the S&P 500 fell 0.3 per cent to 1,461.89. However, that left Wall Street’s broad measure of stocks only slightly below Friday’s five-year high after the strong start to 2013. The S&P 500 rose 4.6 per cent last week as investors cheered a compromise in Washington on the fiscal cliff, which averted a series of tax-hikes and spending cuts. Further evidence of improving economic conditions in the US and China, also gave stocks a lift.” (Financial TimesRead more

Letting the payroll tax cut expire was a terrible idea; extent of terribleness unclear

From the abstract of a new paper by New York Fed staff economists:

This paper presents new survey evidence on workers’ response to the 2011 payroll tax cuts. While workers intended to spend 10 to 18 percent of their tax-cut income, they reported actually spending 28 to 43 percent of the funds. This is higher than estimates from studies of recent tax cuts, and arguably a consequence of the design of the 2011 tax cuts. The shift to greater consumption than intended is largely unexplained by present-bias or unanticipated shocks, and is likely a consequence of mental accounting.

 Read more

Peripheral returns to the bond market are a bit like pornography

You know them when you see them, obvs.

Applying that rule of thumb… Read more

Before you write off Chavez…

It’s an expected slap in the face: the worse the reports about Hugo Chavez’ health, the more his country’s debt rallies.

The latest information from the Venezuelan government is that three weeks after his December operation Chavez remains in a Cuban hospital, suffering from a “severe” respiratory infection. Yet, as the FT reports, some think that the government is not disclosing the full details: Read more

Thank you America, and thank you settled tax law

It is beyond ironic that the same [NYT editorial] page would contort settled tax law to assert that special tax treatment was part of the company’s rescue…

 Read more

The art of email when big brother is watching

One of the things the Libor scandal has taught us is that there actually is a big contingent of people working in banks who don’t understand that emails, like puppies for Christmas, are forever. Strange, isn’t it?

To emphasize the point, Ernst and Young reported the results of an investigation, co-developed by the FBI, on language that tends to be present in electronic communications when cases of fraud are uncovered. Read more

The end of RoRo, or is it?

Last week, Kit Juckes at SocGen was one of many analysts who, after looking at the latest FOMC minutes, found fit to arrive at one overriding conclusion: the era of Risk-on, Risk-off (RoRo) investing is arguably coming to an end.

As he explained… Read more

Markets Live: Monday, 7th January, 2013

Live markets commentary from 

The (early) Lunch Wrap

Banks win more flexible Basel rules || Berlusconi in pact with rightwing League || Japan stimulus plans include $4.9 billion business support || $10bn US bank mortgage settlement nears || Citi wants approval for ‘minimal’ buyback || Sony rejoins BMG for Parlophone bid || Cutifani leading candidate for Anglo American || Terra Firma eyes Odeon sale revival || M&A optimism… || UK companies’ respond to pay pressure || Shell’s Alaska oil rig rescue attempt hampered by bad weather || CIC said to be in talks on Daimler stake || HTC profit slumps as competition intensifies || Markets || Alphaville Read more

The zombie credit mispricing

Take note of the following story from IFR. It could turn out to be very important:

Jan 4 (IFR) – The yield-to-worst in the high-yield market dipped to its lowest level ever this week, as risk markets rallied on the fiscal cliff agreement. Dropping below 6% for the first time in history, the yield to worst on the Barclays high-yield index fell to 5.96% on Wednesday and pushed even lower to 5.90% on Thursday. This compares to 6.13% on Monday and 8.14% at the start of 2012. Read more

A future scenario with oil prices dominated by ‘above-ground’ factors

Veteran economist and oil analyst Phil Verleger in his latest note has roundly criticised everyone who forecast in recent years that oil prices would keep rising forever; which he says includes just about everyone who has an opinion about oil prices.

He highlights the work of Morris Adelman, an MIT economist who’s little known these days — unjustly, according to Verleger: Read more

Banks, Here’s your new liquidity regime. Now stop blaming us. Love, Basel

The Basel Committee on Banking Supervision has finalised rules for bank liquidity. Some of the changes had been anticipated in recent weeks, particularly after the US banks ramped up their lobbying efforts. That said, they’re still quite a big departure from the 2010 draft rules, especially on what qualifies as a high quality liquid asset.

The complete set of changes is on the BIS website, but here are some highlights. Read more

Further reading

Elsewhere on Monday,

– The louder you scream, the more irrelevant you are.

– Defaulting vs. deploying a silly accounting trick = no brainer.

– More barriers faced by natural gas as a transport fuelRead more

The 6am Cut London

Basel liquidity requirements loosened || $10bn bank mortgage settlement nears || Sony rejoins BMG for Parlophone bid || Citi to submit plan for share buyback || Terra Firma eyes Odeon sale revival || Shell oil rig still stranded in Alaska || UK companies respond to executive pay pressure || Modern economists don’t understand finance Read more

FTfm on AV

Some highlights from Monday’s FTfm.

Vanguard wins big in price war
Vanguard smashed the asset management industry’s record for net cash inflows last year with a growing audience drawn to its commitment to lower costs for investors. Read more