October, 2010
FTfm on AV
Some highlights from Monday’s FTfm.
Bank-owned funds used as props
Bank-owned asset managers systematically use investors’ money to prop up the share price of their parent company in the wake of significant falls in the stock price of the bank,
Further reading, special Halloween meets finance edition
Some financial ghoul links for Halloween:
- 13 money-themed costumes for Halloween.
- Living in a ghost town.
- Six nightmares for Wall Street.
- The average US credit score is 666.
- Ireland’s unfinished developments are ‘ghost towns’.
Guest post: Why the Bush tax cuts are likely to expire
FT Alphaville presents a guest post by Sean West and Helen Fessenden, US political risk analysts at Eurasia Group, a political risk research and consulting firm. The views expressed are strictly their own.
Elections and the markets: a primer
We’ll have more next week on the elections and their potential impact on the markets, but for now we’ll pass along some thoughts from the strategy team at RBS — thankfully free of the silliness that often accompanies analyses of this kind.
Carpetbagger bagged
British readers of a certain age will remember the practice of carpet-bagging building societies — open a series of savings accounts in societies that were likely to demutualise, and then scoop up free stock when the institution converted.
Stay classy, Columbia i-banking club
We’d have loved to have been a fly on the wall in the Columbia Business School Investment Banking Club meeting where someone decided (and convinced everyone else!) that sending this email was a good idea — via Brainiacs:
Cash-hoarding corps
You already know that US corporates have been saving their retained earnings as cash this year, while the IG-bond rally has been driven increasingly by companies taking advantage of the debt-equity arb.
Clutching at the Chinese… baby-boomers
They are the ultimate consensus trade inside the ultimate consensus trade.
They are consumers in China.
Some charts from a big old jargony Morgan Stanley note on how European corporates can play the Chinese ‘megatransition’,
Deutsche Bank on the perfect mortgage company
Foreclosure fraud! Robosigning! Repurchases!
How, as Mike Konczal noted a couple weeks ago, did mortgage servicers get it so wrong?
To answer the question it’s worth taking a look at a certain mortgage firm that may have got it right.
The Worst Columnist in the World
When does robust punditry cross over into downright rudeness?
Answer: when the New York Times’s Paul Krugman starts picking on some poor analyst from the International Energy Agency.
Consider this outburst:
The ‘pre-emptive’ Greek default
Barclays Capital economists Pietro Ghezzi and Antonio Garcia Pascual have moved peripheral bond markets once before.
They pointed out in September that Ireland was in danger of falling behind on making its fiscal cuts work,
US inventory drama
Something of a scrap has broken out between Nouriel Roubini and Clusterstock’s Joe Weisenthal on the back of Friday’s bang-on-expectation Q3 US GDP release.
Actually, it seems more of a defensive back-peddling strop on Roubini’s part.
The insecure unsecured switch
This is a chart from the latest edition of the European Mortgage Federation’s monthly newsletter showing the yield differential between unsecured senior bank debt and covered bonds:
The following chart highlights what’s going on a little better.
Mortgage lending… falters
More UK double-dip food for thought, this time courtesy of the Bank of England.
The Bank’s lending data for September show net mortgage lending stalling (click to enlarge the chart):
Whilst total net lending to individuals increased by £0.4bn,
US Q3 GDP results are in, bang on forecast [updated]
The US economy grew exactly as analysts predicted in the third quarter. Though likely not as much as the Federal Reserve wanted.
GDP expanded 2 per cent on an annualised basis, according to flashes via Reuters:
MBS trade settlement failures hit record
Something’s afoot in the Mortgage-Backed Securities (MBS) market.
After this week’s drop-off in secondary market trading for private-label residential MBS, comes Friday’s news that MBS trade settlement failures reached a record:
Godzilla QE
Either Willem Buiter is setting out to shock, or he really is worried about Japanese deflation this time.
Because Citi’s chief economist really is thinking BIG on what to do about it:
The 5trn yen ($60bn) additional QE announced recently by the BoJ is far too small to achieve anything,
Burning through the yuan and asking for more
If you’re a China-based bank you might have received this in your inbox on Thursday — from the Hong Kong Monetary Authority (HKMA):
——–
(i) “Until further notice, Participating Authorized Institutions
Markets Live transcript 29 Oct 2010
Markets Live chat transcript for the chat ending at 11:22 on 29 Oct 2010. Participants in this chat were: Neil Hume, FT bryce.elder NHMorning rable NHit’s 11.03am NHand you should all be ready for ML
Abbey Alliance & Bungle Bank Plc
Why is Banco Santander looking to float 20 per cent of its UK business at a much reduced valuation of £16bn?
The answer is because it needs to, reckons Andrew Lim of Matrix:
Our own view is that Santander needs to do this deal to improve Basel III capital ratios relative to European peers.
Global imbalances? Blame the west
Independent Strategy have never been ones to mince words.
On Friday they’ve tackled the thorny issue of currency wars and global imbalances. It’s a topical debate given that US Treasury secretary Tim Geithner suggested earlier this week that G20 members (ahem,
Prepare for the blockbuster mega week
A hectic seven days for global markets just got even busier.
Via Reuters:
Bank of Japan Governor Masaaki Shirakawa said on Thursday the timing of the Federal Reserve’s policy meeting was not behind the BOJ’s decision to bring forward its own meeting to Nov.
Bonfire of the Hugh Hendry
Why was Hugh Hendry trending on Twitter Thursday night?
Because the outspoken hedge fund manager made something of a splash on Question Time — the BBC’s townhall-style debate show. Hendry’s thoughts on finance and the global economy turned out to be his least controversial statements of the night.
Further reading
Elsewhere on Friday,
- What if Lehman Brothers had been Lehman sisters?
- Who’s in charge here? Not the G20.
- Chinese rare earths: Less muscle, more growth.
- The ‘best’ business book of 2010:
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: Obama speaks truth about power
Barack Obama’s crime has been to see the world as it is rather than as many Americans would like it to be,
Snap news
Breaking pre-market news on Friday,
- British Airways returns to profit — statement.
- WPP says like for like revenue growth will not improve in 2011 — statement.
– Piraeus Bank planning €800m rights issue — report.
Further, further reading
For the commute home,
- In praise of irrational exuberance.
- Some CEOs defend the stimulus.
- Epic schmoozing at the Buttonwood Conference.
- Dow Jones launches a US venture capital index.
Here comes the sun-bleached stimulus
We’re not exactly sure where this falls on the spectrum of serious solution to wishful thinking, so we’ll just pass it along without commenting further.
From The Economist:
Japan stands virtually alone among rich countries in not using daylight-saving time (DST),
Hal gets whacked
Last seen trading around $34 per share.
Like a goodfella who broke omerta, Halliburton shares are now plunging to the bottom of the river, weighted down by the company’s own version of cement cinderblocks:
It’s stock lending, Jim, but not as you know it
Risk’s Life & Pension edition draws attention to an interesting development occurring in the pensions and insurance arena.
Banks have supposedly been touting insurance and pensions funds for their liquidity.