FURTHER FURTHER READING
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Enthusiasm for online journalism and/or blogging is essential – as is an ability to get up in the morning. (We start early.) Read more
Glance at a Citi Prime Finance report that fees are starting to crumble, and a casual reader might conclude that something is wrong in the house of hedge funds. Perhaps investors have begun to notice well documented problems with performance?
Pressure to offer founders’ share classes or accept seed capital to launch with sufficient amounts of Assets Under Management have pressured management fees down from the industry’s standard benchmark of 2.0%. Our analysis shows average fees for managers with less than $1.0 billion AUM ranging from 1.58% to 1.63%. Read more
From Credit Suisse, do breathe in the romance:
The impact of the easing of the one child policy on birth rates may be overstated based on the experience of easing restrictions on parents who are both single children in their families (as shown in Exhibit 3). Guangzhou, a southern China city, had more than 14,000 couples, who were both single children in their families, hence eligible to have the second child, but only 360 couples had the second child in 2009.
Live markets commentary from FT.com
The generally excellent Spencer Jakab leaves his zombie repellent behind on Monday, when he speculates in the Wall Street Journal that the formerly decent returns of the hedge fund industry will return once central banks begin to retreat from markets.
The problem is mean reversion. It may be one of the most powerful forces in the investment universe but, as we have said before, it doesn’t apply when you try to compare the zombies of the 1990s and early 2000s to the lumbering, fee eating, industry as it exists today. Read more
Venezuela poll cements ruling of Hugo Chávez successor || Japanese Q3 growth revised down || Chinese inflation slowed in November due mainly to a drop in food prices || HSBC sounds out spin-off of UK unit || Kazakhmys sells $1.3bn power station stake || India markets hit new high after state elections || Markets Read more
Starting today we get what is basically the first formal step to a fully fledged market based deposit rate system from China (honourable mention of course to those more informal weapons of mass ponzi). It’s been coming and the move doesn’t effect corporates or individuals, but in the context of the Shibor spike, deposit pressure and the post-plenum reform blush it’s very worth noting.
From UBS’s Wang Tao:
[The PBOC] took the long-expected step toward liberalizing deposit rate on December 8, announcing that effective from December 9, depository financial institutions (banks) are allowed to issue large-denomination negotiable certificates of deposit, i.e., the so-called interbank CDs.
Markets: Markets across the Asia Pacific region are mixed as investors weigh a series of data releases against the implications of a stellar US jobs report. In Japan, Friday’s news that the US economy added 203,000 jobs in November outweighed disappointing gross domestic product revisions. Tokyo’s Nikkei 225 index is up 1.9 per cent, on pace for its best session in more than two weeks. (Financial Times) Read more
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
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
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
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
Consider this chart from Morgan Stanley:
And then this from Barc: Read more
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
Live markets commentary from FT.com
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
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
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 Times) Read more
The market vogue is to obsess about how the Fed is suppressing long-term rates.
But for years now, FT Alphaville has been trying to explain why, in reality, Fed intervention is as much focused on propping up short-term rates (preventing them from falling through zero) as it is about keeping longer-term rate expectations anchored. Read more
Some are betting that Beijing will eventually endorse Bitcoin. This week Lightspeed Venture Partners of San Francisco and a China-based sister fund announced a $5m investment in BTCChina…
– Financial Times, November 22
Courtesy of the Bundesbank (h/t Dario Perkins):
In a nutshell, the paper concludes that current account adjustment is significantly hampered in countries that are members of a monetary union. This holds particularly in comparison with floating exchange rate regimes owing to the lower level of exchange rate flexibility. Furthermore, the persistence of current account balances in member countries of a monetary union is also more pronounced than in fixed-rate regimes due to less flexible interest rates as a result of the single monetary policy.
Live markets commentary from FT.com
Beijing has banned banks from Bitcoin transactions || Australia’s Qantas Airways on Thursday forecast steep first-half losses while announcing a further 1,000 job cuts and possible asset sales || German drugs and chemicals group Merck acquires Apple supplier AZ Electronic Materials || Siemens announced a plan for higher profits at its infrastructure unit at an analyst day on Thursday || BNP will buy Bank Gospodarki Zywnosciowej from Dutch lender Rabobank to boost its presence in Poland || A suicide bomber has attacked Yemen’s defense ministry || Markets update Read more