Posts from Friday Dec 6 2013

The Hubble bubble theory of the continuous expansion of the financial universe

Or something like it. We’re not, after all, physicists. Though, feel free to read about the Hubble Bubble theory here. What we probably should be referring to is Hubble’s flow, the rate at which expansion of the universe occurs.

All of which is a whimsical way of suggesting that perhaps Larry Summers has a point. Perhaps bubbles are part of our collective universal nature? A phenomenon that should be embraced as an unstoppable physical force, one that will find a way no matter what.

The proof is out there if we look hard enough. Latest manifestation: Bitcoin.

If we go with that notion, then perhaps inflating asset bubbles one after the other isn’t such a bad idea. Perhaps it’s even necessary? Read more

Spain’s IBEX – “The World’s Most Overvalued Benchmark”

Interesting little exercise from Andrew Wilkinson at Miller Tabak & Co. Having seemingly generated a lot of client interest with some earlier research looking at valuations of key US indices, he’s now extended the methodology to bourses around the world.

For each index Wilkinson has compared a blended forward 12 month PE ratio with two standard deviations of the five-year average PE. Here’s his resulting table: Read more

Smart beta-blocking

We are big fans of index tracking, particularly for those cash strapped and socially sensitive large pension funds, and we are far from alone: passive is massive for a reason.

But where there’s a fee there’s a way. As alternative investments suffer the slow zombification of poor performance, active managers have been trying to find a way into this passive game, prompting some elegant demolition. Read more

November payrolls: +203,000, and unemployment rate at 7.0%

A good report, not much in the way of revisions, and a healthy fall in the unemployment rate accompanied by a climb in the labour force participation rate.

Here are the main bits: Read more

Stressed out about deflation

Consider this chart from Morgan Stanley:

And then this from Barc: Read more

Banking with the windows down and the music on, floor it

Car sales are related to economic growth and consumer confidence, says Citi. But wait! The bank’s analysts, Philip Watkins makes the journey to that humdrum conclusion interesting — with a detour through the banks, psuedo-banks, and financing operations of the European car companies.

Even if sales are tied more to GDP than to interest rates — seven in every ten new cars are sold on credit these days. Plus, the financial companies hiding within the automakers have around €400bn of assets and produce a sixth of of pre-tax profits (click chart to enlarge). Read more

Markets Live: Friday, 6th December, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

Nelson Mandela dies || US Volcker rule leaves grey area for regulators || Gazprom denies it will cut prices for Ukraine || WTO deal stalls as India holds firm || Shell ditches plans for US gas-to-liquids plant || The SEC is looking into JC Penney’s controversial offering || Palantir Technologies has been valued at $9bn || Citigroup and Wells Fargo accused of discriminatory mortgage lending || GM to pull out of vehicle production in Australia || Berkeley concerned about tax plans for overseas home buyers || Markets Read more

Off-market aluminium storage is in full carry

Bored with zero interest in the bank? Why don’t you check out the latest in aluminium-backed deposit accounts? You take the excess aluminium off our hands, we sell it forward, and hey presto you get interest rates conventional banks just can’t beat!

(It’s the way the gold market has been compensating for its oversupply for generations.) (Terms and conditions apply.)

All of which is another way of saying the world’s aluminium oversupply burden has created some excellent carry opportunities in the off-market storage space over the last few years. Read more

Further reading

Elsewhere on Friday,

- It’s time for liberals to start taking their own side in this argument.

- Bullied by RBS.

- “This is why helicopter drops by themselves are not a fix.” Read more

The 6am London Cut

Markets: Asian equities and currencies were mostly on hold as markets looked to Friday’s looming release of US jobs data. Economists expect the US unemployment rate to have fallen from 7.3 per cent in October to 7.2 per cent for November. Non-farm payrolls data are forecast to show the world’s biggest economy added 185,000 jobs in November. (Financial TimesRead more