Posts from Tuesday Mar 5 2013

The Closer

Dow 14253.77, it’s a record. The DJIA closed up 0.9 per cent, beating its previous all-time high in October 2007 of 14,164.53. The price-weighted index had risen as much as 1.1 per cent to 14,286.37 intraday (Wall Street Journal, Bloomberg, Reuters).

A retail investor milestone? With its new high, the Dow is now trading at 12.7 times earnings, below 17.1 times in 2007. While few funds directly track the Dow’s performance – $27.5bn compared to the $1.3tn tracing the S&P 500 – the index retains symbolic power for retail investors (Financial Times, Reuters). Record highs for the Dow have led to jumps in stock mutual fund investments in all but one of the last six bull markets – though record highs also usually portended that bull markets were about to finish. The rally’s foundation on easy policy by the Federal Reserve will test that truism (Wall Street Journal). Read more

The wealth (declining?) effect

How much do we care about the Dow’s crossing into record territory?

Enough to mention it in this post, but not so much that we’re going to strain our brain for anything original rather than just reproducing this par from last year, when the Dow crossed 13,000 (but which applies just as well today): Read more

Buybacks, M&A, and de-equitisation

The chart above from Credit Suisse Trading Strategy (pdf) shows the dollar value of quarterly net share changes in the S&P 500 index.

In simpler terms, this is a measure of corporate net buying, which is roughly: Read more

A wholly unregulated Libor, FSA edition

Yes yes, the FSA had trouble passing the Wall Street Journal around the office in mid-2008.

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More on the spot and forward price commodity disconnect

An excellent observation from John Kemp over at Reuters on Tuesday regarding the spot/forward disconnect we’ve been talking about:

The increasingly close linkage between hedge funds and spot prices since 2010 has also coincided with a sharp reduction in the correlation between front-month and far-forward prices. Correlation between spot month and forward prices, generally above 90 percent until 2010, is now often less than 50 percent (Charts 5-6). Read more

The Prince and the Paper

It’s the end of an affair. From the FT:

Prince Alwaleed bin Talal, the Saudi investor whose interests range from the Hotel George V in Paris to a stake in Twitter, announced on Monday that he had “severed ties” with the Forbes billionaires list, accusing it of a “flawed” valuation method that displayed a bias against middle eastern investors.

Now we know why. Kudos to Forbes for a riveting write-up of Prince Alwaleed’s dealings with the magazine, including its attempts to figure out how Kingdom Holdings (the prince’s publicly-traded investment vehicle) contributes to the wealth of the Arab world’s richest man.

Some extracts… Read more

Fantasy central banking

Like Top Trumps, just not as much fun…

 Read more

Markets Live: Tuesday, 5th March, 2013

Live markets commentary from 

Record highs and commodity writedowns

On the day the Dow is expected to open at a record high, the hottest M&A story of the year — Glencore and Xstrata — brings us the following.

First the collective news (via the FT): Read more

The (early) Lunch Wrap

China is retaining its GDP growth target of 7.5 per cent for 2013 || The Pari Passu Saga continues || Yellen on asset purchases || Talk of a bubble in student loans || The FSA cracks down on payment for access to chief executives || London banks consider suing EU over bonus caps || Heinz chief could be entitled to $56m deal || Profits fall at Glencore and Xstrata || Chavez’s breathing problems worsen || Swiss bank Wegelin to pay US $74m over tax violation || StanChart expected to report record earnings || Anadarko and Videocon eye $4.5bn sale || Alwaleed challenges Forbes over billions || China said to back new sanctions against North Korea || Gas resumes flowing from ENI’s Libya plant || Cyprus has agreed to submit to review || Apple’s market cap fell below $400bn || SEC allowed to pursue Deloitte China subpoena || France eyes tougher merger rules || Australian rates on hold || Semark in line to run UBS dark pool Read more

A triple-dip avoided?

In the UK, that is. Perhaps. Just.

The Markit UK services PMI is out and the headline seasonally adjusted Business Activity index posted 51.8 in February, slightly above January’s 51.5. Read more

China’s 2013 targets, and what they (probably) mean

China’s National People’s Congress annual plenary began today, with soon-to-be-former premier Wen Jiabao outlining the official economic targets for 2013. We’ve written a few posts lately about how China’s growth has become increasingly driven linked to credit and, particularly, fast-growing shadow finance. More recently, there are signs the authorities are feeling less comfortable with letting shadow finance run riot — but at the same time, its role in fuelling growth makes a big or sudden curtailment look unlikely.

The targets announced today added to signs of discomfort with unchecked credit growth, according to various China watchers. Read more

Further reading

Elsewhere on Tuesday,

– A big moment for monetarists.

– NYT story on comment trolls confirms every blogger’s observations.

– Don’t count on rapid progress for the SEC investigating Chinese audits. Read more

The 6am Cut London

Asian markets mostly up || China maintains 7.5% GDP target, raises deficit || FSA to crack down on CEO access fees || London banks consider suing EU over bonuses || StanChart record profit expected || Complaints about Lloyds and PPI rise sharply || France eyes tougher merger rules || Alwaleed challenges Forbes over rich list || Cyprus agrees to money laundering review Read more