Posts from Thursday May 8 2014

The Closer


– Gary Becker and toothbrushing economicsRead more

Everything is rigged, art edition

John Gapper has an excellent column on Thursday about art auctions, focusing on the degree to which they are fixed or obfuscated by insiders and long-standing established practices.

As he notes, the auction market is a duopoly geared towards protecting and serving vested interests through a system of guaranteed bids and sales incentives, which to some degree obscure public price discovery.

Herein lies the similarity with modern market structure more generally. By providing the means to disguise the hands of “informed” players, the duopoly of Sotheby’s and Christie’s behaves like a dark pool system within a wider market which has no public alternative to cross check prices against. Read more

The currency question Alex Salmond cannot answer

This guest post on the issue of Scottish independence is from Paul Donovan, Global Economist at UBS in London…


As the referendum on Scottish independence approaches, the rhetoric around the currency arrangements for an independent Scotland has escalated. An unnamed British cabinet minister has been cited as suggesting that currency union could be used as a bargaining chip (specifically in exchange for Trident bases). The casual assumption that a fundamental economic structure can be bargained for political capital is deeply troubling; it is just such approach that created the Euro with the flawed architecture that it has today. Read more

Markets Live: Thursday, 8th May, 2014

Live markets commentary from 

Hedge funds, fortunes and merit

Institutional Investor’s Alpha published its rich list for 2013 this week which, as Matt Levine has described with flair and some made-up maths, is only tangentially related to how well the hedge fund managers in question performed last year:

If you start with a ton of money, and/or your hedge fund has really good returns, you will make a lot of money. Notions of fair compensation for your labor, or appropriate pay for performance, just don’t enter into it. Money begets money, lots of money begets lots of money, and skill in the begetting is a nice bonus.

That post is also his contribution to the burgeoning mountain of Piketty-related comment, and without tossing another pebble onto the pile, it is worth digging a little more into the reasons for those vast fortunes to exist, and why that matters. Read more

The (early) Lunch Wrap

Barclays cuts 7,000 investment bank jobs || Glencore Xstrata confirms Tony Hayward as chairman || Standard Chartered hit by emerging markets weakness || Wm Morrison sales fall as it takes on discount chains || Former chancellors warn of housing bubble danger || Markets Read more

Easing with Chinese characteristics

Even when a western government eases policy, the methods and transmission mechanisms involved aren’t that well understood. We’ll grant that things are even fiddlier in China.

A timely note from Goldman’s China economist Yu Song then, just as expectations of more easing build in response to fears of a systemic property market problem:

When China is loosening these questions are much more complex and less transparent, for several reasons:

 Read more

Not so nuts. Is this the crash?

Works by Degas, Renoir and Picasso failed to sell at a Sotheby’s auction in New York on Wednesday, in what the local paper called “another bumpy night at the spring auctions”…

According to officials there, Asian bidders managed to snap up $63.9 million worth of art, or roughly one-third of the evening’s $219 million total. Sotheby’s had estimated the sale would bring in $218.1 million to $317.9 million. The auction house offered 71 works, and of those, 21 failed to sell.

The mediocre results followed an unexciting night at Christie’s on Tuesday. That auction house managed to sell $285.9 million, above its low estimate of $244.5 million but not close to its high of $360.4 million.

 Read more

The China over-invoicing export distortion is back (sort of)

Let’s face it. Chinese national statistics are to some degree always treated with a pinch of salt by analysts and economists alike.

That said, there’a s big difference between massaging subjective inputs in statistical methodologies and failing to adjust for misleading economic activity driven by actual economic behaviour.

Case in point, Chinese export figures, which according to Capital Economics are now suffering the consequences of a bad comparative due to last year’s carry-trade inspired over-invoicing fad (since cracked down on by the state). Read more

Further reading

Elsewhere on Thursday,

– Was Mike Milken history’s greatest feminist?

– When ideologies change.

– Reliance, Modi and a gravity defying stock price.

Yield compression European style. Read more

The 6am London Cut

Markets: Appetite for stocks has returned to Asia-Pacific following a more encouraging development in Ukraine, and after the US central bank chief pledged to continue supporting markets with easy money policies. Markets were rallying after Putin indicated that he was ready to discuss a way out of the Ukraine crisis. He called on pro-Moscow groups in eastern Ukraine to postpone a referendum on independence that was planned for Sunday. (FT’s Global Markets Overview) Read more

The Closer


– Martin Wolf hosts a BBC4 show on the future of workRead more