June, 2010
Washington’s hedge fund tax
Precise details on the nature of the Volcker rule – or Dodd-Frank Act, as it is now known – are still thin on the ground.
Some hedge funds have reason to be thankful for the 3 per cent concession contained in the latest draft (meaning banks will be allowed to invest an amount equivalent to 3 per cent of their tier-1 capital in alternative investments,
On clearing house concentration risk
Financial blogger Alea points to this paper on clearing houses ahead of OTC derivatives reform:
Are we building the foundations for the next crisis already? The case of central clearing
It came out about a month ago,
The other liquidity strain — in China
A strain in Chinese bank liquidity, visualised. The one-month China repo rate below:
And in historical context:
There seems to be a myriad of possible reasons for this. We’ve heard of a liquidity squeeze caused by AgBank’s IPO,
Markets Live transcript 25 Jun 2010
Markets Live chat transcript for the chat ending at 11:15 on 25 Jun 2010. Participants in this chat were: Bryce Elder Izabella Kaminska, FT BEGood morning. BEAnd welcome, as ever, to Markets Live.
BP Turtle-gate
As if the bad press surrounding BP could get any worse.
On Tuesday MyFoxTampaBay.com reported that a boat captain working to rescue sea turtles in the Gulf of Mexico saw BP ships burning the loveable marine critters alive.
The BoE turns its attention to ETFs (updated)
The Bank of England’s latest financial stability report has turned its attention to the increasingly cumbersome issue of Exchange-Traded Funds (ETFs), which have recently come in for some criticism over their growing complexity and lack of transparency.
Adventures in falling knives
Attention knife-catchers: BP stock hit its lowest levels since August 1996 on Friday — that’s before it merged with Amoco in 1998, and picked a whole bunch of US assets.
Building a better Gaussian copula
It’s ba-ack. The formula that famously felled Wall Street.
The Gaussian copula — with which banks famously evaluated correlation risk for things like CDOs — did not quite live up to its hype. A normal distribution bell curve turned out not to be able to sufficiently take into account correlated default risk for things like subprime mortgages.
Financial stability is getting difficult
The first of the Bank of England’s 2010 Financial Stability reports is out.
In it, the BoE is rather more sanguine on the need for banks to quickly transition to a new (although now watered down) regulatory regime,
Further reading
Elsewhere on Friday,
- Greece, it’s different this time.
- ‘The residential real estate market is about to experience price discovery.’
- Mortgages in the state of nature.
- The Ten Commandments of fiscal adjustment.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Mohamed El-Erian: Beyond the false growth vs austerity debate
There are two camps in current economic debates, El-Erian, chief executive of Pimco,
Snap news
Breaking pre-market news on Friday,
- BP says cost of spill response hits $2.35bn – statement.
- Northern Petroleum to make disposals, placing – statement.
- Sudzucker profit rises to 149m, confirms full-year guidance – Reuters.
Hugh Hendry: Soros has embraced socialism
On Thursday, George Soros penned an op-ed in the FT arguing that Germany needs to engage in a thought experiment, one involving withdrawing from the European single currency:
The restored Deutschemark would soar,
US CRE prices rise, but fundamentals weak
US commercial real estate prices increased 1.7 per cent in April, according to Moody’s’ proprietary benchmark. That represented the first monthly increase since January — good news, right?
Not quite.
Party like it’s 1999 (updated)
Here they are: the details of what will probably be the most hyped and overvalued IPO since the mad days of dot.comedy bubble.
Presenting Ocado, an online shop that delivers Waitrose groceries from a state-of-the-art warehouse in Hertfordshire.
Notes from the deflationary quicksand
Deflationary quicksand… We will all end up Japanese… Collapsing houses of cards…
Yes, it’s another missive from SocGen’s perma-bear Albert Edwards, who on Thursday developed some recent riffs on deflation a tad further:
Canadian ABCP saga lives on
Here’s something you don’t see every day; a possible ratings upgrade for Asset-Backed Commercial Paper (ABCP), the short-term borrowings upon which SIVs, conduits and the like, once thrived.
And not just any ABCP either,
Fun with Greece CDS ahead of index reshuffles
Greek five-year CDS were trading at 972 basis points on Thursday. That’s a new record high according to CMA Datavision.
Here’s the accompanying chart:
Which, given a lack of any Greek-specific tape bombs on Thursday,
Markets Live transcript 24 Jun 2010
Markets Live chat transcript for the chat ending at 11:21 on 24 Jun 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHgood morning NHand welcome to Markets Live
A €2,000bn EuroTARP needed
Time to wrap a cold towel round the head.
Willem Buiter has been looking at the €860bn war chest the EU and the IMF have amassed to tackle the sovereign debt crisis in the eurozone and the unresolved question of what the cash might actually be used for.
G’day, Gillard — not
London’s miners were in a fug on the FTSE 100 on Thursday:
And it’s because Australia’s proposed mining super-tax — unlike the prime minister who launched it — appears to be sticking round.
Kevin Rudd resigned on Thursday — but his successor,
Join the euro? The Danes say nej tak…
A datapoint on the perception of the eurozone — courtesy of Danish bank, Danske:
Statistics Denmark regularly surveys the attitude of the Danes to the euro on behalf of Danske Bank. The June poll shows that the No side has caught up with – and overtaken – the Yes camp,
BIStoric
The Bank for International Settlements — the central banks’ bank — has done something great.
BIS has scanned and stuck all its historic annual reports online, in one easy-to-access place. The reports,
Further reading
Elsewhere on Thursday,
- Sticking it to the strategic defaulters.
- The redacted FOMC statement.
- Britain’s austerity Budget, house music makes it better.
- Chinese derivatives are a-comin’.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
Wolfgang Schäuble: Maligned Germany is right to cut spending
To the question of what caused the recent turmoil in the eurozone, there is one simple answer:
Snap news
Breaking pre-market news on Thursday,
- Resolution agrees to buy Axa’s UK life business for up to £2.25bn; to launch £2bn rights issue – statement.
- BP says cap containment system successfully reinstalled on failed blow-out preventer in Gulf of Mexico – statement.
Fed holds rates; says recovery proceeding at a ‘moderate pace’
Statement out from the Federal Open Market Committee on Wednesday, emphasis FT Alphaville’s:
Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually.
Wall Street’s illustrious PCF club (Updated)
(Takes out reference to Direxion’s ETF’s holding of Procter & Gamble, which it does not own.)
It used to be that only warm and fuzzy things were said about ETFs.
But ever since the ‘flash crash’,
A US new home sales no-brainer
So much for a pick-up in the US housing market.
The latest figures from the US Commerce Department on Wednesday showed sales of new homes plunging by 33 per cent in May, to a record low.
As MarketWatch noted,
Political risk, Aussie rules
Those are the London shares of Rio Tinto, BHP Billiton and Xstrata.
They all shot up despite a negative FTSE 100 at about 1300 UK BST on Wednesday — probably as this flash broke via Reuters:
RTRS-AUSTRALIA PM FACES LEADERSHIP VOTE ON THURSDAY MORNING – SKY TV
The link being: