Posts from February 2014

GT Pellizzi, Financial Times, Mary Boone Gallery, NY

Something to catch in New York before it closes this weekend – a view of the times will live in by Mexican artist GT Pellizzi, exhibiting at the Mary Boone Gallery, close by Bergdorf Goodman on 5th Ave…

David Adler, a New York-based economic analyst and artist in his own right, offers a last minute review and discusses the belated rise of a movement focused on finance as an artistic inspiration and subject of critical commentary. Read more

How do you stop a shrinking bank?

After a day of digestion, the new RBS strategic plan still leaves a lot of questions unanswered. Indeed, the most pressing one we have heard from investors is whether the bank is an outright short or simply one to avoid, given the limited free float.

A lot of focus, also on whether the management of the bank — which soon won’t include departing chief financial officer Nathan Bostock — will be able to see through the strategic plan they have sketched out on the back of an envelope in the few months since Ross McEwan took over.

But another leaps to mind. The plan is to shrink the international, cross border, bit of the business to end up as a sort of UK-focused Lloyds Plus. But once you start letting the air out, how do you stop the balloon becoming a whoopee cushion? Read more

Markets Live: Friday, 28th February, 2014

Live markets commentary from 

Do we even need a Fed balance-sheet reduction?

It was referenced in the 2008 Fed transcripts, and now it’s becoming a reality.

Either via IOER or fixed rate full allotment reverse repos (what we like to call Farps) the Fed can, if it wishes, steer interest rate policy with a floor system rather than Fed funds per se.

In other words, if it needs to raise rates, it can do so not by lending at a certain rate, but by borrowing from the market at the rate it needs to absorb liquidity instead. As noted before, the only possible risk for the Fed is that it ends up paying out more than it receives from its balance sheet instead.

It’s a different type of central bank force, and one which ultimately reflects the fact that there is greater demand for safe assets in the system than funds to borrow. Read more

The (early) Lunch Wrap

Crimea’s parliament calls for referendum on region’s future || BofA fights attempt to raise ‘hustle’ fine || Standard Life warns on Scots ‘Yes’ vote || Pearson profits set to miss forecasts as US enrolments fall || AO buyers disappointed || Norway’s oil fund to debate fossil fuel investments || Renminbi caps biggest weekly fall in years || RWE expected to declare €3bn net loss || Tesla Motors raised $2bn from the largest US convertible bond sale in more than two years || Dan Loeb will try to force his way on to the board of Sotheby’s || The Spanish government is selling 7.5 per cent of Banki || Ireland’s unemployment rate fell to 12.1 per cent || Markets Read more

Yuan do we go from here?

Nine days in and it’s still falling

Some analysts had thought Beijing was ready to let the renminbi stabilise, but a sharp sell-off on Friday – at one point it declined 0.9 per cent, its biggest daily fall since the new currency system was introduced in 2005 – showed that the central bank was still determined to push it further.

“We’re still seeing PBoC intervention”, said a trader with a bank in Beijing. “This is beyond our expectations.”


Argue about more sweeping policy changes as you will (the bet is still basically on a PBoC attempt to deter speculative inflows) but maybe keep an eye on the 6.20 level as you do. Read more

Guest post: In defence of FX traders

From Joy Rajiv, who formerly worked in the Foreign Exchange trading divisions at both Morgan Stanley and Deutsche Bank. He left the industry in early 2013 for personal reasons unrelated to the current regulatory probe into the FX industry, and writes in a private capacity here drawing on his experience in the industry.

As someone who has worked in FX trading for three years at Morgan Stanley and Deutsche Bank from 2010 to 2013, I have been dismayed and discouraged by the recent coverage of alleged manipulation by FX traders at major banks. Traders have been fired, lawsuits have been filed and comparisons to Libor have been thrown around without much concern for detail. Media reports have focused their attention on abuse of a daily benchmark, called the WM/R (World Markets/Reuters) fix. Read more

UK rates: this time will be different, for a while

The transition to a new normal monetary policy, by David Miles, Monetary Policy Committee member, click to read in full

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Part-time problems

Anyone who has tried to work out the extent of US labour market slack has risked getting lost in a thicket of detailed research.

The most obvious question, and easily the most debated, is whether discouraged workers who have dropped out of the labour force will return in an accelerating recovery — keeping a lid on wage growth and core inflation. James Bullard included a useful summary of the literature on this debate in his speech last week. Read more

Further reading

Elsewhere on Friday,

– The SEC should really start a hedge fund.

Ambedkar, Gandhi and the battle against caste.

– “It’s far from clear that the T.P.P. is a good idea.”

– Why are Japanese homes disposableRead more

The 6am London Cut

Markets: Disappointing economic data from Japan and a further decline in China’s currency had Asian equities falling out of favour on Friday. The renminbi, which is tightly guided by the Chinese central bank, has fallen as much as 0.83 per cent against the US dollar. This is the currency’s ninth day of declines. (FT’s Global Markets Overview and FastFTRead more

The Closer


– What PayPal’s past means for Bitcoin’s futureRead more

The Bitcoin personality cult lives on

How to handle bad news, by public relations guru and propaganda expert Edward Bernays from his book Propaganda (1928):

The counsel on public relations must be in a position to deal effectively with rumours and suspicions, attempting to stop them at their source, counteracting them promptly with correct or more complete information through channels which will be most effective, or best of all establish such relationships of confidence in the concern’s integrity that rumours and suspicions will have no opportunity to take root.


A single factory, potentially capable of supplying a whole continent with its particular product, cannot afford to wait until the public asks for its product; it must maintain constant touch, through advertising and propaganda, with the vast public in order to assure itself the continuous demand which alone will make its costly plant profitable.

 Read more

Markets Live: Thursday, 27th February, 2014

Live markets commentary from 

Sticking a finger into the ECB’s air

To QE or not to QE remains the question. Comfortingly, just about everybody is united in uncertainty.

Here’s JP Morgan (our emphasis throughout):

Our own expectation is that the ECB will simply stay on hold for a very long time (at least until late 2016). If correct, it would make the coming months and quarters very uncomfortable for the central bank and it may not take much more of a disappointment in the data to trigger a small policy change. We are open-minded about this. But, unless the outlook changes very significantly, we think that any policy change will be a token gesture, rather than something substantive.

BNP Paribas: Read more

The (early) Lunch Wrap

Crimea parliament stormed || RBS lost £8.2bn last year || Alliance results hit by Pimco outflows || RSA Rights issue || Lego ahead of peers as toy market shrinks || Blackstone takes Versace stake || Markets: Europe soft Read more

Oh look, another RBS risk factor

Spotted deep in the bank’s 2013 results. “We will be a more UK focused bank…” — you can say that again. Read more

Caption competition! A new direction

After six years in the red (the latest an £8.2bn loss for 2013) the only way is up and this bank is on it:

Today RBS is announcing a new plan with the ambition of building a bank that earns its customers’ trust by serving them better than any other bank.

And here is Ross McEwan rallying clearly delighted staff with that message.

 Read more

Further reading

Elsewhere on Thursday,

– Now, we enter the world of Bitcoin 2.0.

– Momentum as the only reliable market anomaly.

Bringing back subprime. Read more

The 6am London Cut

Markets: Stocks in Greater China climbed as China’s central bank allowed the country’s currency to rise slightly, ending a seven-day losing streak. (FT’s Global Markets OverviewRead more

The Closer


-“Keynes’ theory, in other words, is just as compatible with small, lean governments as it is with large, powerful ones.” Read more


How exactly do you sell a fridge retailer at ~100 times EBITDA? Click below to find out.

Changes to search engines’ algorithms or terms of services could cause the Group’s websites to be excluded from or ranked lower in natural search results. If the Group is unable to recognise and adapt quickly to such changes, the Group could suffer a significant decrease in traffic to its websites and, in turn, conversion rates and revenue.

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Fed, chucklehead

A hat tip to rock-star Alphaville alum Tracy Alloway for passing along this chart from The Socionomics Institute, now updated to include last week’s release of the 2008 transcripts (click to enlarge):

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The moderately bearish Cape Crusade, revisited

Bears, look to your Capes! GMO’s James Montier is staging a fightback.

In the debate around using the popular long term measure of earnings to value the stock market, one fact was taken for granted: that for all its intellectual rationale, the Cyclically Adjusted Price Earnings ratio was useless when it comes to predicting movements in the market on any sort of useful basis. Read more

AO here we go, either a little too high or a little too low

The UK online white goods retail sensation,, is the latest hot stock market floatation. Early trading puts its valuation in the region of £1.6bn, so we thought we better try and work out what exactly it does. After all, no one would pay six times sales for a washing machine shop, would they?

From the about us section:

We operate a sleek and well-refined process via our three strands. With over 4.5 million customers, we live and breathe excellence from the very first phone call, to the moment we power up a customer’s brand new appliance in their own home.

Not delivering your brand new appliance to someone else’s home is a start, we guess. But about those strands, the notice of intention to float provides a bit more clarity:

In 2012, AO had a 24 per cent share of the online market for major domestic appliances in the United Kingdom, of which 19 per cent represented AO website sales, and 5 per cent represented third-party branded website sales according to the OC&C Report.

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Raghuram ‘Volcker’ Rajan… good luck with that

“If you do a Volcker, you kill the supply side, and then you are in a bad situation,” Mr Rajan said during an interview in November. Erm…

If inflation truly is public enemy number one, then Indians at last have someone who may be up to the task. Step forward Raghuram Rajan, a few months into the role of central bank governor and India’s could-be Paul Volcker.

Awkward. But it’s his own fault. Read more

Markets Live: Wednesday, 26th February, 2014

Live markets commentary from 

The (early) Lunch Wrap

Dougan defends Credit Suisse against tax evasion claims || China dismisses concern over sudden renminbi fall || George Osborne under pressure to cut UK taxes as rate rise looms || Japan watchdog tightens scrutiny of Mt Gox || Moody’s warns on specialised mortgage servicers || iPhone software security flaws exposed || Tesla’s sudden acceleration recalls dotcom rush || Markets  Read more

This is nuts. When’s the crash?

That uber-growth business, washing machines…

 Read more

The foie gras bubble

James Montier of GMO is the subject of the latest Welling on Wall Street newsletter, a weekly long-form interview conducted by Kate Welling.

Montier, ever the bear, doesn’t like the negative expected return environment we’re in. He thinks we’ve learnt little from the crisis and that one the biggest risks is that the market isn’t being adequately compensated for the risk it’s being forced to take.

We can’t duplicate too much of the interview here, but consider the following something of a teaser. The questions (in bold) are being posed by Welling: Read more