Posts from Thursday Oct 10 2013

The Closer


– Did the US government shutdown save the world? Read more

The shadow banking system, crunched one way or another

Here’s a useful assessment of both shadow banking’s relationship to the real economy and how it will be affected by forthcoming regulatory reforms, by strategists at Barclays.

A few thoughts of our own follow the excerpt: Read more

Rally Monkey thanks House Republicans for temporarily unlocking his cage, ponders his own qualifications to enter politics

 Read more

The Terpins brothers, previously unknown insiders

Those seemingly clairvoyant speculators who hoovered up Heinz stock options just before Warren Buffett and 3G Capital of Brazil launched their joint $28bn bid were always going to get nabbed.

And now they have been. Rodrigo and Michel Terpins, Brazilian brothers, have agreed to pay a fine of $3m and forfeit the $1.8m they made cashing in their Heinz options — funds that were frozen in a Swiss brokerage account by the SEC immediately after the trades were noticed, even though the American regulator didn’t then know who was behind the trades. Read more

Schrodinger’s T-bill

The FT’s Tracy Alloway and Michael Mackenzie report on Thursday that banks are making contingency plans to deal with the potential impact on the $5tn “repo market” of the US government missing a payment on its debt.

Which basically means determining when we should start treating a US Treasury Bill as a potentially defaulted security. Currently, you could say, the T-bill’s status exists in a quantum state. It could be the best collateral in the world, but then again it might not be. Which one it is depends entirely on an externality, and to some degree how we choose to observe it.

This is probably welcome news given that the role played by distressed collateral and repo markets back in 2008 is still poorly understood. Read more

Markets Live: Thursday, 10th October, 2013

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,


Imagine the Fed bought defaulted Treasuries

Every Federal reserve bank shall have power…

…To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.

Section 14.2(b)2, Federal Reserve Act

Now, reading that carefully

Does that mean the Fed can’t buy defaulted US government debt? Read more

Dark inventory, death of a city edition

So, everyone has their knickers in a twist about the UK’s ‘Help to Buy’ scheme. Is it overall good? Is it bad? Does it make sense? Are there risks? Will it help anyone in the south? Anyone in London?

All this in the context of cries of “it’s only perpetuating the global property ponzi game!!” Read more

Treeing the full faith and credit

That’s from Nomura, do click to enlarge. They remain optimists even if they do think a solution will only come in the 11th hour: Read more

The future of retail, Debenhams edition

Debenhams, a UK department store chain that was once the plaything of private equity, has been back in the market buying up its own stock.

Debenhams plc (the “Company”) announces that on 9 October 2013 it purchased 375,000 of its ordinary shares of 0.01p each through Citigroup Global Markets Limited at an average price of 102.56 pence per share. The highest and lowest prices paid for these shares were 104.00 pence per share and 101.20 pence per share respectively. The purchased shares will all be held as treasury shares.

 Read more

Further reading

Elsewhere on Thursday,

– Draghi: why change in the eurozone is “analogous” to the creation of the Fed and FDIC.

Across the Curve is back.

– “Even in the short run QE has no significant impact on inequality.” Read more

The 6am London Cut

Markets: The continued government shutdown in Washington remained the overarching story, with Asia Pacific markets generally lower despite some small momentum from Wall Street, where equities broke a two-day losing streak. (Financial TimesRead more