Posts from Tuesday Jan 22 2013

The Closer

ROUND-UP

The S&P 500 and Dow Jones Industrial Average closed at five-year highs, up 0.44 per cent at 1,492.56 and 0.46 per cent at 13,712.21 (Reuters). Read more

SEC bars Egan-Jones

From the SEC order…

B. Respondent EJR’s NRSRO registrations for the classes of (a) issuers of asset backed securities and (b) issuers of government, municipal and foreign government securities be, and hereby are, revoked. EJR shall have the right to apply to the Commission for registration in those classes after eighteen (18) months from the date of this Order. Read more

The practicalities of the currency wars

We have Weidmann worrying the currency wars are kicking off again with Japan leading the way and a whole host of others either joining in and/ or complaining hypocritically. Read more

Positioning for credit losses, the JPMorgan way

If it’s alright by you, FT Alphaville has a confession to make. This whole London Whale thing, the billions that JPMorgan lost as a result of the actions of its Chief Investment Office primarily in the first quarter of 2012… we kinda made a cottage industry of trying to figure out what the trades were. Not that it was just us, mind you.

Naturally, we had been hoping that we’d finally get some answers when the Task Force Report came out last week. The report has revealed in painful detail how a large, well-respected bank can get so much wrong. There were bad risk management practices, model deficiencies, spreadsheet errors, complacent management and more. But trade details? That’s left for us to piece together from various scraps. Read more

Whatever happened to the double-digit sovereign yield?

According to the list of emerging and frontier sovereign debt covered by the specialists at Exotix (and Exotix cover a lot) the 10 per cent foreign-currency yield might be dying out (click to enlarge):

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Long-term pessimism, short-term frothiness, and the recovery in world wealth

It’s no secret that FT Alphaville pays attention to the periodic papers released by the team of Jonathan Wilmot, James Sweeney & Co. Their earlier work on shadow banking and collateral was thoughtful and ahead of its time, and we also agreed with Sweeney’s generally optimistic view of an accelerating US economic rebound led by the knock-on effects of a recovery in household formation, a favourite subject of ours.

Their latest is an extension of a prior piece that looked at the state of global investor risk appetite — and which concluded that although there remain obvious problems in parts of the developed world, overall the global recovery from the trough in early 2009 has actually outpaced previous recoveries, exactly as would be expected given the fall in the output gap this time round. Read more

Markets Live: Tuesday, 22nd January, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

BoJ adopts 2% inflation target and unlimited asset purchases || House Republicans introduce bill to temporarily extend debt limit || Rules to ease office-to-flat conversions || Jens Weidmann warns of currency wars || Deutsche to face US energy trading fine || European (lack of) writedowns questioned || China says top 10 steel mills to control 60 percent of capacity by 2015 || Rio rethinks Mozambique business || Markets Read more

The Rio Tinto domino

John Kemp at Thomson Reuters has pointed us in the direction of colleague Clara Ferreira-Marques’ piece on the likely repercussions of Rio Tinto’s $14bn revaluation of aluminium and coal assets last week. As she notes, it’s almost certain that Rio Tinto’s hit will now set the stage for a wave of writedowns across the industry. Read more

Japan 2.0 (and that’s a target, mind)

Remember how Richard Koo was saying last week that inflationary expectations are actually far more widespread in Japan these days than deflationary expectations? And people fear inflation more than deflation?

We found that idea a bit surprising (and we recommend Krugman for more on the issue) but HSBC made a good argument as to why the concentration on inflation is itself a very legitimate concern. And the idea that recent weakness in the yen might in fact reflect a fear that the BoJ/ MoF will fail to control inflation once it has been loosed (our emphasis): Read more

Has BoJ policy changed THAT much?

Are the BoJ’s newly-announced measures really that dramatic?

For all Shinzo Abe’s talk of urgency in meeting the new 2 per cent inflation target, the BoJ itself doesn’t actually expect it to happen that quickly. In the forecasts accompanying today’s statement, the BoJ has maintained the 2013 CPI forecast of 0.4 per cent made back in October — which is probably fair enough as the open-ended programme doesn’t actually start until next year — and only moved its 2014 up to 0.9 per cent from 0.8 per cent. Read more

Bumi, unsubtantiated

Updated with some context: Bumi, the London-listed Indonesia-focused coal miner set up in 2010 by Nat Rothschild when he convinced Indonesia’s influential Bakrie family to reverse their coal assets into his cash shell Vallar, has been, well, rollicked as the share price plunged because of sliding coal prices, concerns about Bumi’s corporate governance, high debt levels and the out-break of investor warfare. Shocking. And Bumi is under particular stress right now because of allegations of financial irregularities at two of its subsidiaries.

The release below concerns the long awaited report into that mire by law-firm Macfarlanes. Well, we don’t actually get the report itself, but we do get some details… Read more

Wild swings and roundabouts courtesy of the BoJ

The Nikkei rose as much as 1 per cent after the BoJ announcement, and then fell nearly as much before recovering somewhat: Read more

Further reading

Elsewhere on Tuesday,

- A brief history of macroeconomics.

- Childhood experiences and financial short-termism.

- New secular bull: yes or noRead more

The 6am Cut London

BoJ adopts 2% inflation target and unlimited asset purchases: The Bank of Japan has moved to open-ended monetary easing, while yielding to the government’s call for a higher, harder target for inflation, in its strongest show of commitment to ending years of corrosive deflation. The bank is adopting a 2% inflation ‘target’, in contrast to the previous 1% price ‘goal’, and from January 2014, when its current Y101tn round of asset-purchases had been set to expire, it will begin buying Y13tn ($146bn) of mostly short-term government debt each month until that inflation target is met. (Financial Times)(Wall Street Journal)

Asian stocks swung between gains and losses after the BoJ announcement. The MSCI Asia Pacific Index was little changed in the early afternoon Tokyo time, with about five stocks falling for every three that rose. The Nikkei declined as much as 0.9% after initially jumping 1% on the BoJ news. The Hang Seng was up 0.3% and the Kospi up 0.2%, while the ASX was little changed. (BloombergRead more