October, 2011
FTfm on AV
Some highlights from Monday’s FTfm.
EU creates loophole on kickbacks to financial advisers
The European Commission’s Mifid II directive proposes a commission ban for IFAs, leaving a loophole for
[Something for the weekend] It’s not the banks, it’s the bankers, cont’d
Good news: pay to bankers is falling. Bad news: having wiped out the shareholders, they’re still eating all the pies. Morgan Stanley and Citigroup reported tolerable figures only thanks to FVOOD, a piece of accounting nonsense which turns the bank’s deteriorating credit quality into earnings because the market value of its debt has fallen.
The Weekender
This week on FT Alphaville…
- We announced the iAlphaville plan to save the Eurozone.
- We continued following the mystery of US banks’ European exposure.
- Larry Fink blamed us for everything.
Further further reading
For the commute home, have a lovely weekend everyone,
- Paul Mason has been tweeting details of the Troika report on Greece. (The FT has seen the report, too.)
- How to target nominal GDP.
- CJR lauds ProPublica’s coverage of Citi’s CDO settlement.
Greek haircuts and Greek myths — the details
European leaders on Friday received some interesting weekend reading.
FT Alphaville has also taken a look at “Greece: Debt Sustainability Analysis”, an assessment prepared by European Commission economists for discussion on Friday among European finance ministers.
More on that looming crunch de crédit
The looming European credit crunch may not be the first thing on European leaders’ minds this weekend, but it’s coming, at least according to Citigroup.
Three of the bank’s European economists, Jürgen Michels,
A Russian solution to EU problems
Here’s an idea for EU summit-goers this weekend: if no progress is made to boost the lending capacity of the EFSF…
… ask Russia for a loan.
Sound mad? It is a little, but hear us out.
Cyprus secured emergency funds from Moscow earlier this month to help it avoid becoming the latest eurozone country to request an international bail-out.
Fedwire reports… the return of MBS purchases?
Fresh intel stolen from inside the halls of the Eccles Building (not really, but you get the point):
Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy,
US Markets Live transcript 21 Oct 2011
Markets Live chat transcript for the chat ending at 15:08 on 21 Oct 2011. Participants in this chat were: Cardiff Garcia Izabella Kaminska John McDermott, FT CGGood morning! CGA bunch of absentees at the FT’s NY headquarters means my partner-in-crime JM has been roped into doing the Wall St report.
The power of the dark inventory
FT Alphaville is reading Robert Harris’ The Fear Index at the moment, and would like to take this opportunity to recommend it as required reading for anyone who enjoys a good Jason Bourne style adventure,
EFSF to write CDS (with a two-way CSA and ISDA master)?
Or, how many acronyms does it take to make an FT Alphaville headline?
On Thursday, the FT reported on BNP Paribas’ proposal to have the EFSF write CDS on sovereign bonds.
This may of course smack straight into Article 125 of the Treaty on the Functioning of the European Union and die on impact.
Reminder: US Markets Live at 10am New York, 3pm London
On the agenda today, unless we change our minds and do something completely different:
- Fedwire’s latest.
- US earnings season (banks, GE, and any other company about which we can feign expertise in real-time using Google Finance).
The looming crunch de crédit
Whatever happens in the eurozone this week, banks will have new capital ratio targets. They are not going to raise enough actual new capital to meet them.
Ergo they flip the ratio and start burning off risk-weighted assets.
Expectations and the EU
Apologies for being a downer on a Friday, but the upcoming EU summitS (yes, there will now be two) are unlikely to produce a bazooka-style solution.
Sure, you already know this, but Citi (the same bank who predicted the bazooka would turn out to be a peashooter) has captured the gloomy sentiment rather succinctly.
Won’t somebody think of the emerging sovereigns?
We’ve been hearing a lot about major banks’ exposure to various European countries, via the banks’ holdings of sovereign and corporate bonds. Perhaps not in quite enough detail, but the subject is certainly getting attention.
The trouble with central bankers…
Central banking and central bankers as we know them are out of touch with the modern world and ill-equipped to deal with the challenges set before them.
That is the view of Morgan Stanley’s Manoj Pradhan who argued that the current ‘DDD regime’,
Markets Live transcript 21 Oct 2011
Markets Live chat transcript for the chat ending at 11:03 on 21 Oct 2011. Participants in this chat were: Bryce Elder/FT Paul Murphy Lisa Pollack, FT Joseph Cotterill, FT Izabella Kaminska BEGood morning
Time to revisit/rethink EM equities?
Investors are making tentative steps back to emerging market equities.
Last week EM equity funds reported positive flows, on aggregate, for the first time in three months — fund flow data from EPFR Global showed a net inflow of $667m for the week to Wednesday October 19.
Further reading
Elsewhere on Friday,
- Don’t blame Germany.
- Actually, do blame Germany.
- BofA, Merrill, and that derivatives move — explained.
- Why Italy also has a sovereign asset crisis.
- “Growth stocks have stories.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Roula Khalaf: Towards a new order in the Arab world
An email from a Tunisian organisation I’ve never heard of landed in my inbox this week,
Snap news
Breaking pre-market news on Friday,
- Latest Europe bailout plan: merge EFSF with the ESM — Bloomberg.
- Fed contemplating new round of MBS purchases — Fedwire.
- Statoil doubles estimate of Aldous field size in North Sea — statement.
Further further reading
For the commute home,
- Ebert awards 3.5 stars to Margin Call, which we’ll get around to seeing once we’ve fully recovered from Wall Street 2.
- The wage statistics for 2010 are out, and they’re awful.
Free at last in Belarus
Belarus has finally unified the two remaining segments of the FX market, after months of dragging its feet. In other words, the Belarusian rouble is now “properly devalued” to quote Nomura analyst Tatiana Orlova.
Throwing the book at mutant euro bailouts
Or, Article 125… strikes back!
That would be Article 125 of the Treaty on the Functioning of the European Union. In a week when the role of Europe’s bailout fund seemingly changes by the minute — the EFSF has played at being a monoline,
Albert Edwards: Hold on for a hard landing in China
What are chances of a soft landing for the Chinese economy? Pretty slim if you ask über bear Albert Edwards.
The Société Générale strategist reckons “blind faith” in the competence of the Chinese authorities to guide the economy to a soft landing is misguided.
Banning naked sovereign CDS, gently
On Wednesday, the European Parliament gave us an idea of what the regulations on short selling and ban on shorting sovereigns via credit default swaps will look like.
Here, FT Alphaville will focus on the regulations concerning CDS.
[Explaining backwardation] The WTI-Brent anomaly
… continued.
How do you actually profit from a contango trade?
To understand the WTI-Brent deviations of the last year, understanding the formation of the industry’s contango trades is essential.