Posts from Monday Feb 3 2014

The Closer


- How economics PhDs took over the Federal Reserve. Read more

No bad apples on the Herbalife tree

Pershing Square has launched a new line of attack on Herbalife with a study of Shawn Dahl, until last year one of the top businessmen in the California based multi-level nutritional shake marketing scheme.

We won’t comment either way on Pershing’s allegations — Mr Dahl and the company he represented, Online Business Systems, have never taken up our invitations to discuss their operations, and any allegations should be treated as such. Instead, let’s have a quick look at the idea of whether it is possible to have a bad apple within an otherwise kosher marketing scheme. Read more

A gentle tug on the purse strings

It may be something in the wind, but is it becoming acceptable for companies to spend again?

Exhibit A: Morgan Stanley politely suggests that, even though companies which actually increase investment in their business with capital expenditure have tended to trail the scrimpers, it might be time to look at the capital intensive types again. Read more

Piketty and the case for land capital

I hesitate – to say the least – to critique the central argument in French economist’s Thomas Piketty’s new book Capital in the 21st Century. The author, an inequality expert, is distinguished. The work is acclaimed. The book’s empirical detail is already the stuff of legend. And, most damningly, I have not read the text and do not expect to until it is released in English, sometime in March. Read more

To be, or not to be sterilised in the Eurozone?

Citi’s research team highlights the important point that Germany’s Bundesbank has signalled that it is open to an end to ECB sterilisation operations.

The move follows consecutive failures by the ECB to sterilise its bond purchases in the last month.

As the Citi analysts note, the failures potentially indicate funding pressures in the Eurozone, following the removal of a lot of excess liquidity from the system:

with the ECB failing to attract sufficient bids for its liquidity absorbing 7-day fixed-term deposit, sterilisation is not functioning as well as intended, with investors preferring to keep hold of some funds as the excess liquidity position dwindles. We suspect that the ECB could soon announce that it will suspend sterilisation at least until July 2015, during which period the ECB has committed to full allocation fixed rates for the 7-day MRO. Alternatively, the Governing Council could decide to lower/abolish minimum reserve requirements (last change from 2% to 1% in Dec-11) in order to tackle the recent increase in overnight interest rates that runs counter to its very accommodative monetary policy stance.

 Read more

Markets Live: Monday, 3rd February, 2014

Live markets commentary from 

The (early) Lunch Wrap

Lloyds £10bn PPI bill || Denmark reshuffles, again || Ryanair losses || Smith & Nephew buys ArthroCare || Julius Baer to cut costs || Sandvik profit slumps || Eithad to decide on Alitalia this month || Stocks flirt with lows  Read more

In defence of China’s shadow banks

A sanguine note on China’s shadow banks from JPMorgan’s Flows & Liquidity team to cheer those spooked by Credit Equals Gold No. 1….

How big is the Chinese shadow banking system relative to other countries?

 Read more

Further reading

Elsewhere on Monday,

- Why emerging markets are unlikely to sway the Fed.

- The Epicurean Dealmaker expertly beats a dead horse.

- Russia’s economic microcosm — Sochi.

- Although, tbf, contractors on the Pyramids almost certainly padded the bills, too. Read more

The 6am London Cut

Markets: “Markets flicked the switch back to “risk off” after data released over the weekend showed further weakness in China, pushing Japanese equities to a two and a half month low. The Japanese stock market, which surged 57 per cent in 2013 on the back of the weak yen that defined the first phase of the country’s Abenomics growth policies, is now the world’s worst performing mainstream market in the year to date.” (FT’s Global Markets OverviewRead more