August, 2010
A grim outlook for small business lending
FT Alphaville has been focusing a lot on US economic issues this week as we count down to the big FOMC statement, and in that spirit we draw your attention to the new release of this month’s index of small business optimism from the National Federation of Independent Business.
What’s in this Beveridge?
Something strange is happening in the US labour market, and although a lot of people have noticed, it seems nobody can explain why.
Since the first quarter of the year, the unemployment rate has remained much higher than would be predicted given the pace of job openings.
Zero support
Popular belief has it that the Fed is intervening in the market to keep rates suppressed at the zero bound.
But in reality cutting Fed Funds rates is actually all about driving short-term rates in risk-free assets below where they would otherwise trade via market forces,
The end of Chimerica, the shortening of the cycles
Ahead of the Fed’s meeting to consider a flagging US outlook on Tuesday — and perhaps slip in some QE — here’s an interesting helping of US macro-doom from Lombard Street Research.
Basically, it’s less what monetary policy can or can’t do to fix the lack of a cyclical upturn,
Blame it on George
As profit warnings excuses go, TUI Travel seems to have sought safety in numbers on Tuesday. Consider the RNS released by the travel group (emphasis ours):
Whilst our bookings to date are up 2% in the UK,
The Great Mortgage Refinancing, by the numbers
Deutsche Bank have returned with some numbers to back up their cost claims when it comes to the Great Mortgage ReFi Rumour of August 2010.
Analyst Steven Abrahams noted last week that “hitting that reset button”
Moody’s on ‘breaking the buck’ – and 208 near misses
Some 13 months and seven days ago, we were struck with a certain catastrophe.
Reserve Primary Fund — a money market mutual worth about $64.8bn in September 2008 — broke the buck. In other words, its net asset value fell below $1 a share — something which was never supposed to happen.
Digging into Goldman’s trading losses
Goldman Sachs’ 10-Q filing revealed a much less glittering trading performance in the second quarter versus the first of this year. In fact, the bank registered trading losses on 10 individual days in Q2 2010 versus none in Q1:
Credit Suisse’s Garthwaite does QEII
Credit Suisse equity strategist Andrew Garthwaite is on hand to answer all your questions about a possible second round of unconventional measures in the US — the possibility of which has provoked a fire-storm of speculation ahead of the Federal Open Market Committee meeting later this Tuesday.
Inflation indices – and bond markets – wheat themselves
It seems like the grain puns — and Russian export ban — only started yesterday, but the world’s month-long wheat price crisis is already starting to affect inflation indices.
And that means an impact on bond markets everywhere from European linkers to foreign holdings of emerging-market debt.
Further reading
Elsewhere on Tuesady,
- Could the Sky fall on Skype?
- Some adaptive trading.
- More algo crop circles; not to be confused with these crop circles.
- Of classic cars, fine wines and vintage infrastructure funds.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Analysis: Corporate earnings – revival of the fittest
As large western groups reap the benefit of costs cut when the crisis hit, the worry is that the sources of this season’s buoyant results may be only fleeting,
Snap news
Breaking pre-market news on Tuesday,
- International Power agrees 92p-per-share GDF Suez reverse takeover — statement.
- GDF and International Power announce half-year results — statement and statement.
Is Skype the one?
It’s been a year marked by inconsistency for initial public offerings, and the tech sector has been no exception. There was a long period of drought until three companies — RealD, Qlik Technologies, and Smart Technologies — filed in quick succession last month.
Bank lending to small businesses: supply vs demand
Has lending to small business declined so sharply in the US because banks are unwilling or unable to make loans, or do businesses simply have less need for them in an economy with a shortage of demand?
This is a surprisingly difficult question to answer,
Insider trading: go for it, Senator
A hat tip to Pragmatic Capitalism for posting an intriguing paper about the ability of US congressmen to trade on non-public information — and get away with it.
Under current law, the paper says, “it is unlikely that Members of Congress can be held liable for insider trading.”
Gaming Volcker is a work in progress
FT Alphaville noted last week that despite all the reports of spinning off units in response to the Volcker Rule, banks weren’t finished looking for creative ways to continue doing business as usual — especially for their more profitable activities. The banks don’t pay lawyers and lobbyists for nothing.
Scenes from an asset-liability mismatch
It’s three years to the day since the UK retail bank Northern Rock suddenly found its access to short-term funding markets frozen — setting the Rock up for collapse one month later, amid a depositor run.
Who’s capturing yield?
Are passive bond funds set to become the oil index funds of tomorrow?
Oil funds, of course, made sense when inflation was the worrying factor for investors. But with deflation quickly becoming a more prominent fear,
The newsflow is failing! The newsflow is failing!
August tends to be quite dull on the market newsflow front. But here’s an arresting news-related chart — from Société Générale’s asset allocation team on Monday:
In short, SocGen’s Global Economic Newsflow Indicator is going a bit off-colour with regard to ‘good’ economic news.
Would the last person to leave the FSA please turn out the lights?
The chart below, from law firm Reynolds Porter Chamberlain, doesn’t reflect flows into safe haven assets.
Nope.
It reflects outflows out of the UK financial services regulator, the FSA:
As the FT reported,
Markets Live summer hours
Markets Live is going on its summer holiday!
For the next two weeks you will have to survive without your daily fix of market banter, RAW and informed (ahem) comment. But don’t worry, should the markets tank (heaven forbid) then we shall take a break from our beach frolicking and Markets Live will be fired up for ad-hoc sessions.
Chorus of QE calls is deafening
After the US payrolls come the QE-cries.
Analysts and economists seemed to be falling over themselves over the weekend in their haste to call for more unconventional monetary policy ahead of the Federal Reserve’s meeting on Tuesday.
Coup de coverage ratio
Banks’ coverage ratios are a favourite topic here on FT Alphaville.
They’re often one of the prime drivers of European and US bank profit — witness those recent second-quarter earnings — and at the same time are dictated by the banks’ own discretion and prudence.
There’s hope for US payrolls yet, says RBC
US non-farm payrolls came in at a dismal -131,000 in July.
Even worse, the original June figure of -125,000 was revised downwards to -221,000. Meanwhile private nonfarm payrolls came in at +71,000 — weaker than the +90,000 that been expected.
Further reading
Elsewhere on Monday,
- “QE isn’t money printing, it’s an asset swap.”
- One chart to rule them all.
- America goes dark.
- The correlation factor.
- Moving away from conspicuous consumption.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Clive Crook: Obama has to cut – and raise taxes
Last week I argued that sooner or later Barack Obama will have to break his election promise and raise taxes on the US middle class,
Snap news
Breaking pre-market news on Monday,
- AstraZeneca strikes $198m deal on Seroquel liability claims — statement.
- BP says relief well will intercept Macondo well on August 15 — statement.
- Gulf Keystone Petroleum finishes reorganising Kurdistan interests — statement.
Issuers object (again) to proposed RegAB changes
The SEC’s proposed overhaul of RegAB is intended to bring added transparency to securitisations, but right now one of the proposals is just bringing confusion.
Or so market players would have you believe,