August, 2010
Better Possibilities
Or, Credit Suisse soothes the knife-catchers.
It’s safe to say that BP hasn’t exactly outperformed since its July Q2 results release, ouster of a failing chief executive, and progress on capping the Gulf well:
Should Ben really print and be damned?
This is becoming something of a trend.
An ever-increasing number of strategists – George Magnus excepted – are taking the view that another dose of QE won’t work. In fact — it could make things worse.
Further reading
Elsewhere on Thursday,
- Dick Fuld in exile.
- There are bubbles and then there are bubbles.
- Convexity is propelling the Bond Bull.
- The myth of M&A: don’t be fooled by the surge.
- How do you say ‘potash’ anyway?
- The dangers of the Monte Carlo Simulation.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
George Magnus: Print and be damned
The US may be growing — but by barely more than 1 per cent per annum; and with Europe and Japan little better,
Snap news
Breaking pre-market news on Thursday:
- Petropavlovsk says production schedule for the rest of the year is very challenging – statement.
- Nestle completes sales of remaining shares in Alcon to Novartis for $28.3bn – statement.
James Montier on the value of dividends
FT Alphaville has been on a history kick lately, and thanks to James Montier — founder of the Behavioural Investing blog and a member of GMO’s asset allocation team — we can indulge it a bit longer.
Montier has just penned a new paper titled “A Man from a Different Time”,
The debate over US unemployment
Brad DeLong has waded into the debate over whether US unemployment is cyclical or structural. For structural unemployment, he says, you tend to see a mismatch: one sector can be “depressed with idle excess labour”
Ask Not Whether Governments Will Default, but How
That’s the rather worrying title of a fresh report, published on Wednesday by Morgan Stanley, that unsurprisingly raised a few eyebrows in City of London dealing rooms.
Its author Arnaud Marès says it is not a question of when governments renege on their promises,
US housing: bad to worse, then worse again
We said on Monday to expect more bad news from the US housing market, but we didn’t know it would get so bad so quickly.
Following Tuesday’s awful existing home sales numbers, the Census Bureau announced on Wednesday that new homes had sold at an annual rate of 276,000 in July,
Japan, the Big Pffft, and P/E ratios
The bond market seems more or less unassailable in its apparent fear of deflation at the moment. Which suggests rather nasty things are about to happen to the stock market.
So here’s a contrarian take on whether equities are indeed about to turn,
Lower — and flatter — for longer
And the bond band played on. Wednesday’s instalment — the US yield curve flattening below 200 bps between the 2-year and 10-year:
That’s for the first time since April 2009, as Reuters notes.
Perhaps outdone,
Mishkin’s very own Icelandic blow-up
A squirm-inducing video of former Federal Reserve governor Frederic Mishkin:
For those with an aversion to video-taped awkwardness, the clip shows Mishkin talking about his “Financial Stability in Iceland”
The ‘burgernomics’ of yen appreciation
Remember the Big Mac Index, created – half in jest – by the Economist back in 1986 to measure purchasing power parity between countries, and named after McDonald’s eponymous best-selling burger?
Since then,
Missing in action — 80% of SocGen trades [updated]
And we were wondering how Jerome Kerviel got away with it… Update: It’s a bit unfair to cite Kerviel on this one, actually — it just concerns misreported transactions in the UK branch, not fraud against the French parent.
Markets Live transcript 25 Aug 2010
Markets Live chat transcript for the chat ending at 11:26 on 25 Aug 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHHola markets fans NHit’s 11.03am NHand the whistle has just blown on another session of Markets Live
Intervention threats — the never-yending story
Will they, won’t they - and would it matter either way? These are the key (yen-related) questions of the day, or indeed, the month.
Japan’s signalled (with slightly more feeling this time around) that it might – really,
Hell hath no fury like a sovereign scorned
There’s really nothing quite like a punch-up between a downgraded sovereign and a rating agency.
And Ireland has come out swinging in the wake of S&P’s overnight downgrade.
From Reuters (emphasis ours):
Xchanging blame
Here’s a tricky corporate dilemma.
You’re an outsourcing company whose share price has fallen by almost 40 per cent in the wake of disappointing half-year results, plus news of blow-ups at a couple of smaller outsourcers — Connaught and ROK.
Mi casa es su casa – Spanish clearing and collateral
Has LCH.Clearnet single-handedly saved the Spanish financial system?
Early this month, and as the FT Trading Room reported, the Anglo-French clearing house announced a new service for Spanish government bonds and repos.
Uncooperative QE
Disappointed with the recent slump in equity markets?
Blame the Fed. For as Nomura’s rates team note on Wednesday — continuing an FT Alphaville theme — central banks just don’t seem to be getting the same,
Irish-German yield spread reaches record 329bps
The spread action post Standard & Poor’s Tuesday Ireland downgrade:
And just think — back in August 2007, German yields were higher than Ireland’s.
How times have changed.
Looking for Ursa Major
Time for some more flashing warning signs, just in case anyone was getting bullish and considering catching a falling knife.
This time the signals are in Europe, where debt market stress is rising again,
All junk, all the time
Earlier in August, we looked at various reasons for why this year’s junk bond rally had been surprisingly persistent.
But how does this relate to the market for junk loans, better known as speculative-grade or leveraged loans?
On Friday,
Further reading
Elsewhere on Wednesday,
- Goin’ double-dippin’.
- Wall Street as a leading indicator.
- The trigger point for a US debt crisis — where other academics fear to tread.
- The Bank of Canada congratulates itself.
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Alan Beattie: Brazilian fiscal lessons for Greece
For an object lesson in how a centre-left government can turn fiscal stringency into political gain,
Snap news
Breaking pre-market news on Wednesday,
- BHP Billiton posts full-year operating profit of $20.03bn — statement.
- Tullow Oil says 1bn barrels discovered in Uganda; deal for Heritage assets hinges on tax dispute — statement.
Beware Luxembourg (it’s contagious)
Let’s be honest — we can’t really explain most of this (HT @pkedrosky), emphasis ours:
We model the spreading of a crisis by constructing a global economic network and applying the Susceptible-Infected-Recovered (SIR) epidemic model with a variable probability of infection.
Size doesn’t matter, but age does
In addition to “widespread homeownership is awesome”, another long-standing popular myth of the American economy could turn out to be wrong.
Or at least, less right than was previously believed.
A new paper from three researchers,
Dear SNB LLC investor…
The euro plunged to an all-time low against the Swiss franc on Tuesday:
Which means analytical knives are out for the Swiss National Bank’s dear, departed policies of intervention in the FX market.