Posts from Wednesday Jul 9 2014

The Fed as universal banker

The Federal Reserve’s June minutes are out and as usual offer good insight into the FOMC’s thinking when it comes economic confidence and recovery (more positive) as well as its opinion on rates (still dovish).

But they also reveal a new preoccupation with matters related to exit strategy and financial plumbing.

Here’s the section we’re referring to (H/T David Beckworth)

While generally agreeing that an ON RRP facility could play an important role in the policy normalization process, participants discussed several potential unintended consequences of using such a facility and design features that could help to mitigate these consequences. Most participants expressed concerns that in times of financial stress, the facility’s counterparties could shift investments toward the facility and away from financial and nonfinancial corporations, possibly causing disruptions in funding that could magnify the stress.

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Disrupting the rating agencies

Is this an S&P/Moody’s/Fitch killer? Maybe, in time.

Credit Benchmark, a London-based start-up, on Wednesday completed a $7m venture capital financing round, led by Index Ventures, to fund its initial expansion into the $6bn credit risk information market. Read more

The cronut-ification of banking

Tracy Alloway hosted a session on the “death of a financial intermediary” at last week’s Camp Alphaville.

The discussion featured Renaud Laplanche, CEO of Lending Club, Cormac Leech, bank analyst at Liberum Capital, Krishan Rattan, founder of Voltaire Capital and Matt Levine, Bloomberg View columnist.

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Don’t freak out about UST fails (yet)

Everyone in the market is suddenly talking about the spike in repo fails.

But here’s the thing. Repo fails need to be seen in context.

Yes, this chart from BoAML makes the recent June spike look significant:

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MoneySupply: Those innovative Scandinavians

A warm welcome to our colleagues from the FT’s Money Supply blog, who are now sharing their thoughts on FT Alphaville. First up, Chris Giles, the FT’s economics editor…

As far as “just fancy that stories” go, huge revisions to the national accounts of all EU countries have to be completed by the end of this year.

The US, Canada and Australia have already implemented changes to the way they measure GDP to conform to new international standards (the UN Systems of National Accounts 2008) and EU nations are in the process of implementing the European System of Accounts 2010, which is an EU-wide rulebook to implement SNA08. There are many changes, but the big ones that raise the level of GDP in most countries is to count research and development, as well as weapons systems, as final output (which contributes to GDP) rather than an intermediate part of the production process (which does not count). Read more

Markets Live: Wednesday, 9th July, 2014

Live markets commentary from 

The (early) Lunch Wrap

Widodo declares victory in Indonesia || Security theatre spreads to more airports || UK retailers say prices falling || House prices stabilise || Attacks on Gaza intensify || AbbVie forced to retract claims of support || Portugal bonds drop || Selling momentum for stocks fades Read more

Pre-zombie update: slow, steady and hungry they march

First-half performance numbers for the hedge fund industry as collated by HFR have arrived. Three up months and three down months leave the industry delivering after-fee gains to investors of 3.2 per cent, on average.

This first half performance is in line with 1H13 gain of +3.2 per cent, though hedge funds posted gains in only three of six months in 2014 in contrast to gains in five months in 1H13. The HFRI Fund of Funds Composite Index was up +0.9 per cent in June, concluding 1H14 with a gain of +2.0 percent but trailing the gain of +3.4 percent for the same period in 2013.

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Quindell and legal profitability

At the heart of the debate around Quindell, since it came under attack from Gotham Research, are a few simple questions. How was the Aim listed business built; are there inconsistencies in the accounts; and where does the group really make its money?

In pursuit of answers there are the accounts and presentations the company has published. There is the dossier from Daniel Yu’s short selling outfit Gotham Research. And there is the company’s long rebuttal.

We’re going to have a look at them and, in an attempt to work out what is going on, pick out some of the details where further clarity and context might be helpful.

First up: Legal ServicesRead more

Further reading

Elsewhere on Wednesday,

Ferociously curious, mathematician, billionaire

– Through here is our show family, they don’t come with the house.

– ADHD does not an entrepreneur makeRead more

The 6am London Cut

Markets: Asia-Pacific equities were on a downward path after a sell-off on Wall Street, where the S&P 500 notched its sharpest fall in nearly a month. Regional data were no help in Asia, with Chinese inflation more subdued than anticipated and Australian consumer confidence failing to rebound much. (FT’s Global Markets Overview)

Citigroup is set to pay more than $7bn to resolve a long-running US government investigation into the bank’s sale of mortgage-backed securities, people familiar with the matter said on Tuesday night. The bank will pay roughly $4bn in cash to the Department of Justice and $3bn will be paid in mortgage relief to homeowners – such as principle reduction – as well as other payments to nearly half a dozen state attorneys-general, one person familiar with the matter said. Negotiations are continuing but if they stay on track a deal could be announced as early as next week, the people said. (Financial Times) (WSJRead more