Is Ukraine’s Russian bond ‘official’ debt or not?

Still in any doubt that Ukraine — and specifically, the bond which Ukraine owes to Russia — will be a very tricky sovereign debt restructuring?

And so to the regular IMF press briefing in Washington DC, conducted earlier on Thursday by William Murray, fund deputy spokesman… Read more

Rocket from the shelf

One of the useful aspects of German corporate filings lodged at the Federal Gazette (Bundesanzeiger) each year is a list of subsidiaries, along with an equity and net profit number.

Click for a Google translated version of the 2013 report for Rocket Internet, the recently listed and super-hyped e-commerce conglomerate, valued by the stock market at more than €7bn.

The list of shareholdings starts on page 14. Note first the proliferation of negative profit numbers. Second: Bambinos, Jades, Jewels and Platinums? Read more

Markets Live: Thursday, 26th March, 2015

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Ukraine’s bonds: a little local leverage

The Russia problem aside, Ukraine’s other big task in its $15bn debt restructuring will simply be to convince private bondholders that it’s a deal worth taking.

One way to do that is for bondholders to realise they are dealing with a government burdened with the costs of war and as it happens, increasingly absorbed in an intense lustration campaign.

But some of them (quite possibly one that lives in San Mateo, CA) could have holdings large enough to block a bondholder vote. So, even if Natalie Jaresko, the Ukrainian finance minister, does like to quote Margaret Thatcher about there being no alternative… the new bond terms will need to justify taking a massive haircut compared to holding out for full payment.

Another way to do it? Note how ripe for abuse the old bond terms are.


When Lee Buchheit, Ignacio Tirado and Mitu Gulati were looking deep within the innards of Cypriot government bonds just over two years ago — shortly before the climax of the island’s debt crisis — they found something exciting. Read more

Of Chinese exceptionalism and price-to-whatever ratios

A Chinese rendering of jusqu’ici tout va bien courtesy of Bloomberg:

The chief China strategist at Bocom International Holdings Co. points to soaring price-to-earnings ratios, the shrinking yield advantage that stocks offer over bonds and the fact that mainland-listed equities now trade at a 34 percent premium over nearly identical shares in Hong Kong.

So what’s Hong’s advice to investors?

Keep buying, of course.

 Read more

Further reading

Elsewhere on Thursday,

- Silicon Valley’s bullshit empire is impervious to critique.

- “Maybe the deal is a money saver, maybe it isn’t, but in the 27 minutes since it was announced, I simply don’t know.”

- Keeping Indonesia supplied with cash isn’t easy.

- The changing politics of China’s smog.  Read more

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Saudi Arabia and its Gulf Arab allies launched air strikes againstHouthi fighters in Yemen. The 10-country coalition started its campaign in an effort to loosen the Houthis’ grip on Aden, the southern port city where President Abd Rabbuh Hadi had taken refuge. (FT)

The move sets up a confrontation between Sunni-majority Arab countries and Shia Iran, which they accuse of interfering in the Arab world through its support of groups such as the Houthi, followers of the Zaydi Shia sect. Brent crude prices rose by more than a dollar in early Asian trading but any concerns about supply disruptions seem muted. (Reuters) Read more

The new old thing, investment management edition

Hey you, everyday rich person. Like many normal people in the top tenth of society, you probably think a few hedge funds sure would be interesting. If only there was a really great website…

No? How about a “Google of investment”, or something more conscionable? Read on for the new face of asset management. Read more

When markets become self aware

What are the chances that if and when an eccentric computer scientist with a psychology and neuroscience background does invent a workable and autonomous artificial intelligence model, he deploys said model on the financial markets to make himself a cool $1 trillion?

It’s not that untoward an idea. In fact, it’s a key plot in most “AI-goes nuts and causes havoc” Hollywood offerings, Transcendence amongst the most recent.

The usual storyline involves the AI realising — as soon as it goes sentient — that the acquisition of capital will be necessary to achieve its dastardly objective of obliterating humankind. Read more

Don’t panic about Cushing yet

An inundated inbox means we’re slightly late to this, but it’s worth flagging up two days on regardless.

It’s the EIA’s take on the US crude system’s “l’embarass de richesses” problem.

Inventory levels at Cushing may be at a record high, they note, but not as a percentage of total working storage capacity.

The great thing about the Cushing storage system is that it’s a private market. That means whenever storage gets tight the incentive to build new capacity increases for commercial operators. Read more

Tomato ketchup, mac n’ cheese, kool-aid, private equity existential doubt and anomie

Well, shouldn’t buyout firms be a little perturbed by things like this?

PITTSBURGH and NORTHFIELD, Ill., March 25, 2015 /PRNewswire/ — H.J. Heinz Company and Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced that they have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America with an unparalleled portfolio of iconic brands… Read more

Customer cash at Plus500

Plus500, the London listed Israeli contract for difference provider, has been growing at a breakneck pace. Last year trading revenues and net profits both doubled, to $229m, and $103m respectively, supporting an £800m ($1.2bn) market capitalisation.

We have pondered the sustainability of the business model before, but we were surprised by a line in the recently published annual report. Amid all the growth, the total for customer deposits held in segregated accounts at year end was just $35m, only $2m more than reported for the end of 2013.

Perhaps Plus500 customers withdraw all their funds at Christmas, then return in the New Year. Read more

Markets Live: Wednesday, 25th March, 2015

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This is still nuts, Chinese equities edition

Sentences to remind us of the nuttiness of Chinese equities over the past few months from BNP Paribas’ Richard Iley (and yeah, the Shanghai Comp fell 0.8 per cent today we have to admit, but that just broke “a 10-session winning streak — the longest in 23 years, according to Bloomberg data — that had taken the index to its highest since May 2008″):

Against all odds, the best performing asset class on the planet over the last nine months or so has been Chinese equities. After languishing for the first seven months of 2014, Chinese stocks have since been on an incredible tear, ending 2014 up a remarkable 49% in USD terms, even outstripping the c.28% annual return posted by Bunds (Chart1). And the strong gains have continued so far in early 2015. Up almost 12% in USD year-to-date at time of writing, Chinese equities continue to sit atop the heap of global asset returns. All told, the Shanghai and Shenzhen markets have surged almost 80% in local currency terms since mid-2014 (Chart 2).

Yes, yes… “必有牛市” – “There must be a (dynastic) bull market”Read more

China short goes long

By Jennifer Hughes in Hong Kong

Watchers of the Hong Kong market might have classified a China short seller going long as a pigs-might-fly situation. But Shenguan Holdings, a maker of sausage casings, is flying (well, up 7 per cent at pixel) after Anonymous Analytics published a positive report on the stock on Wednesday.

Anonymous, which claims links to the shadowy hacker collective, says it is not actually a short seller. True enough. But it is still the first time a group best-known for putting out damning reports has published detailed research praising a company that has already come under attack from other short sellers.

 Read more

Further reading

Elsewhere on Wednesday,

- Banning cash — an idea so impractical that ideology must be to blame?

- Where are they now? Wall St execs from 2008 edition.

- Don’t throw the word “bubble” about so casually, redux.

- Yellen isn’t Yellin’ anymore. Embrace it. Read more

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Philadelphia cream cheese and Cadbury chocolate is on the menu for 3G. The Brazilian private equity group controls Burger King and Heinz, and is in advanced talks to buy Kraft Foods Group – a deal that could be worth as much as $40bn. At that size, a partner could be brought on board; another possibility is a merger with Heinz. (FT)

3G is headed by Jorge Paulo Lemann, a former tennis champion known as something of a Brazilian Warren Buffett for his skill in pulling off grand M&A deals. 3G has already teamed up with Berkshire Hathaway to help underwrite Burger King’s $11.4bn acquisition of Canadian coffee chain Tim Hortons. The two also joined forces to buy ketchup-maker Heinz for $23.2bn. (FT)

 Read more

Guess the chart, Japanese inflation edition

Rightly or wrongly, falling consumer prices — or even plain old price stability — is often treated with alarm by monetary economists and policymakers alike. The common view is that deflation, in addition to exacerbating economic weakness, is an indicator of the economy’s failing vigour.

As Ben Bernanke put it back in 2002Read more

The Herbalife rebound

Just over a year since we learned the Federal Trade Commission was investigating the multi-level marketing company and Herbalife shares have rebounded by a third in heavy trading this month.

What’s up? Lets consider a few of the candidate theories.

 Read more

Bitcoin’s lien problem

At cryptocurrency and fintech conferences, FT Alphaville often hears Bitcoin enthusiasts make the assertion that Bitcoin is superior to fiat currency because it eliminates debt from the monetary system.

But this, of course, is a fallacy.

Bitcoin may have the potential to create a fully-funded reserve system, but it certainly doesn’t eliminate debt from any system.

At best, Bitcoin’s public ledger records a transfer of digital access rights in the eyes of the clearing network. It does not, however, record or see the terms and conditions of that transfer. Read more

Stopping a Russian bond invasion

All it took was 11 days — and one schtum Kremlin spokesman — to make people wonder recently just how strong and secure a ruler Vladimir Putin really is.

They might want to look inside his Ukrainian bonds next. Read more

Markets Live: Tuesday, 24th March, 2015

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Er, what exactly was the ‘UK plan’?

From the British prime minister’s official Twitter feed on Tuesday…

  Read more

Yup, do blame the locals for that Swiss franc spike

Always nice when data confirms a thesis. Especially when that thesis is the Swiss shouldn’t look far from home in search of someone to blame for the removal of their Swiss franc floor.

 Read more

Further reading

Elsewhere on Tuesday,

- How secular stagnation came to Smurf Village.

- A policy-driven bond bubble?

- Air conditioning never gets the credit it deserves, economic growth edition.

- Of restaurant trickery.

- Britain, where “all around the hollowing centre are multiple populisms, rubbing their hands.”  Read more

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Unemployment is here to stay in Europe, where it now stands at 11.2 per cent. The ECB projects that one in 10 workers in the eurozone will be unemployed even after the ECB’s quantitative easing programme has taken effect. (FT)

Yet Mario Draghi hit back at QE critics, rebuffing accusations that the programme will result in governments jettisoning economic reforms, instead insisting “growth is gaining momentum”. It seems even the US stands to gain from European QE – Stanley Fischer, a leading Federal Reserve policy maker, foresees a boost to US exports as a result, even if the strong dollar offsets some of those gains. (FT) Read more

An Argentine bond reprieve — or is it?

Could there finally be a limit to just how far around the world the pari passu saga goes?


But for a longer answer, read on. Read more

Protecting the message on petroleum

Fresh out of Riyadh…

Saudi Oil Minister Ali Al-Nuaimi Sunday proposed establishment of an association dedicated for petroleum media, which comprised of Gulf and Arab journalists covering energy affairs. Saudi Arabia is ready to support the establishment of this association with the objective of boosting transparency among GCC countries and prepare oil strategies of the Arab Gulf countries… Read more

Is the Fed bluffing on rate hikes?

It might not be polite to say it overtly, but concerns are growing that the Fed’s rate hiking promises may be nothing more than a big bluff.

The vogue for doubting Fed rhetoric started in earnest on March 11, when Ray Dalio, founder of hedge fund firm Bridgewater Associates, wrote to investors that there was a risk if the Fed raised rates too fast it could create a market rout similar to that of 1937. Read more

Markets Live: Monday, 23rd March, 2015

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