August, 2010
Two years and a Volcker Rule later
It seems JP Morgan is closing all proprietary trading desks, according to Bloomberg, starting with its commodities unit. Equities and fixed income desks will come later.
From the report:
Closing the prop trading desk for commodities affects fewer than 20 traders,
Bickering at the FOMC?
You already knew this if you read the Wall Street Journal’s impressively detailed article last week, but the just-released minutes of the FOMC’s meeting on August 10 seem to reinforce the notion that there is significant disagreement within the Fed behind closed doors.
The Jackson Hole papers (finally)
As Mark Thoma notes, the Kansas City Fed has an inexplicable (and seemingly indefensible) policy of withholding from the public the research papers that are presented at Jackson Hole until after the conference is over.
The Comex gold inventory jigsaw
Here’s a fun game for a (relatively quiet) Tuesday.
Take the latest general gold inventory figures from the Comex exchange — these have been falling since around the beginning of August:
Then the exchange’s registered gold holdings — the portion of inventory that’s actually available for delivery against futures:
US Q2 house warming (or should that be warning)
Yes, house prices in the US climbed in the second quarter of the year. No, that’s not cause for optimism or even relief.
First the announcement from S&P (emphasis ours):
Data through June 2010,
James Montier on the bond bubble
GMO’s James Montier has added his two-penneth to the bond bubble debate.
He reckons it is a largely sterile conversation because what investors should be asking themselves is whether bonds are a good investment at their current low levels.
50:1 leverage lives!
A big H/T to Alea for this story, plus the title.
Late on Monday, the US Commodity Futures Trading Commission released its final foreign exchange market rule. The centrepiece is the limit on leverage for firms dealing in retail forex — the decision itself,
Mike Mayo’s Citi DTAaaaaaaattaaaaack!
Where oh where, did the Mike Mayo vs Citigroup dispute begin?
The CLSA bank analyst hit headlines last week after Fox Business News revealed Mayo had been “frozen out” by Citi. The reason? None other than Citi’s infamous deferred tax assets (DTAs) :
Too bullish, too bearish, whatever…
We have previously written about the optimism bias of equities analysts, illustrated nicely by this chart:
But the McKinsey study that provides the graph also notes two instances in the last twenty-five years when the situation changed and analysts actually became too bearish:
A central banker’s parable: the boy who cried ‘tekisetsu’
Here’s some suggested bedtime reading for Japanese officials, who might be wondering why the more vociferously they threaten action to curb the yen’s growing strength, the more underwhelming are the results.
Markets Live transcript 31 Aug 2010
Markets Live chat transcript for the chat ending at 11:26 on 31 Aug 2010. Participants in this chat were: Neil Hume, FT Tony Tassell NHGood morning NHand welcome to Markets Live
Proof of cashflow, please
Jules Kroll — the man behind one of the best-known security and industrial espionage investigation firms Kroll — is taking to the ratings business, reports the WSJ.
And if Kroll’s other line of work is anything to go by,
Spot the difference – Ocado edition
Compare and contrast.
On Tuesday morning, Goldman Sachs initiated coverage of Ocado with a “buy” rating and a 200p target price:
We initiate on Ocado with a Buy rating and a 6-month price target of 200p,
Where’s Zhou Xiaochuan?
It’s not often that central bankers go missing.
Zhou Xiachuan, governor of the People’s Bank of China, was rumoured to have done so at the end of last week.
Rumours of Zhou’s disappearance were catapulted into internet infamy after Stratfor,
An illustrated history of yen intervention
As you can see from that RBS chart, since the Bank of Japan’s last big splurge of intervention in 2003/04 the yen has appreciated by 20 per cent against the US dollar.
And that makes us one wonder if the BoJ’s decision to increase its fixed rate money market operations by 10,000bn yen ($116bn) to 30,000bn and push out the loan period to six months will have any effect.
The (near) cash! The (near) cash!
A lack of market opportunities, the increasingly desperate search for yield.
Short-selling info firm, DataExplorers, reports on Tuesday that the amount of commercial paper (CP) and certificates of deposit (CDs) — otherwise known as ‘near cash’ instruments — held by custodians has tripled over the past six months:
Further reading
Elsewhere on Tuesday,
- Pop quiz: terms of trade.
- September, a merciless month for Mr Market.
- China’s rare earth element big squeeze.
- The Barro controversy.
- The club no one wanted to join.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Reinhart & Reinhart: Beware those who think the worst is past
The landscape of Jackson Hole, Wyoming, where central bankers gathered at their annual conference last week,
Snap news
Breaking pre-market news on Tuesday,
- Santander agrees to buy $4.3bn auto loan portfolio from HSBC – statement.
- FSU offer for SDI extended to September 10 – statement.
- Aegon repays €500m of government support – statement.
Monetizing Emma: a review
Hannah Kuchler, a reporter for the FT, reviews a play about the perils of turning people into financial assets.
_________
The premise: geeky Austen-obsessed teenage girl gets other people to fund her education by guaranteeing them a portion of her future earnings.
FT Alphaville’s Bank Holiday break
FT Alphaville, including our Markets Live team, is taking a break on Monday’s UK bank holiday. However, our Cut email letters will be delivered as usual.
Full service will resume on Tuesday. Don’t miss us too much.
Further reading
Elsewhere on Monday:
- How complexity affects trading behaviour
- SEC wants securitisation made easy
- Should we listen to El-Erian?
- Justin Fox talks efficient market theory, flash crash
- Lies,
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Germany’s rebound is no cause for cheer
The price and labour market realignments that one would expect within the eurozone have not happened,
BoJ, the yen, and much hype for little impact
So much for all the grand expectations that this time – just maybe this time – the Japanese meant it when they talked of “appropriate action”.
We’re really not sure “appropriate” is the – er, appropriate word.
Weekend catch-up: Headlines
Just to recap events from late last week, here are weekend headlines from the FT and other UK press:*
From The FT,
- Shortage of first-time home-buyers threatens housebuilders
- Southern
ProPublica on the CDO daisy chain
Having told the tale of hedge fund Magnetar in April, Propublica and Planet Money have gone after even bigger game in their latest investigative piece.
The new article by Jake Bernstein and Jesse Eisinger describes,
The Fed’s balance sheet and an ABS update
Courtesy of the Atlanta Fed, below you can see what both sides of the Fed’s balance sheet currently look like. In light of Bernanke’s noncommittal speech, for now you can probably expect only gradual changes — not in size,
El-Erian: How to read Bernanke’s Jackson Hole Speech
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, reacts to Fed chairman Ben Bernanke’s Jackson Hole speech.
________
In his eagerly anticipated speech at Jackson Hole,
ETFs and HFT (redux)
We don’t like to gloat, but err, in this case we can’t help ourselves.
That’s because from the moment commodity ETFs like the USO and the UNG began acting weirdly in 2009, FT Alphaville speculated they were probably being arbitraged in some fancy fashion by a new breed of index arbitrageur,