Biography
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(Spending some time as FTAV’s Bombay wallah. Noticeably sweatier but not much else has changed.)

David studied economics, politics and journalism before joining the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

In between his degree and masters he wandered into the real world of business where he learnt how to manipulate a spreadsheet and organise meetings where nothing gets decided.

He has spent time in France, learning French, and India, learning how to cross roads, and enjoys nothing less than writing about himself in the third person.

His hobbies include reaching things on top shelves, running long distances at slow speeds, growing beards and trying to live up to a rash claim he made as a twelve-year old that “he had read all of the books”.

If you wish to know more about David please do pick up the phone and call him for a chat in the first person. Be warned though: he tends to talk at pace and in an Irish accent.

Contact David Keohane

Regressing to the mean in China or why if something cannot go on forever, it will stop

With a h/t to Marginal Revolution, here’s Larry Summers and Lant Pritchett on why — for the same reason the USSR didn’t overtake the US, and Shinzo Abe has a tough job on his hands — “excessive extrapolation of performance in the recent past and treating a country’s growth rate as a permanent characteristic rather than a transient condition” is a bad idea.

Most particularly where China is concerned. Read more

Further reading

Elsewhere on Monday,

- Davies: What is global market turbulence telling us?

- Credit kleptocracy and China’s bezzle.

- European banking stress tests — pour encourager les autres?

- What has happened before will happen again. And we’ll have forgotten. Read more

The 6am London Cut

Markets: Asian markets started the week on a buoyant note following a last-minute rally in US equities on Friday. “Markets ended last week on a more positive note with equities recovering some ground, but it is probably too early to conclude that we are back into the time of steady and healthy risk appetite,” analysts at Crédit Agricole said. “As such, high volatility will likely remain the story for now especially as expectation on monetary policies shift back and forth.” (FT’s Global Markets OverviewRead more

Familiarity breeds what again?

A chart from Citi on the occasionally epic length of some auditing relationships on the back of the Tesco messiness:

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Further reading

Elsewhere on Friday,

- It’s a mirage, not an oasis.

- “There are manipulative strategies, and there are good strategies, and it is not easy to tell them apart.”

- The four Italians sketch.

- Monetary policy with interest on reserves.

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The 6am London Cut

Markets: Asian equities were mixed following another choppy day on US markets, with the price of oil rebounding and a flight into the safety of US government debt also easing. The US dollar was largely steady against major rivals and Asian currencies were mixed. In the New York session the S&P 500 fell as much as 1.5 per cent before closing virtually unchanged at 1,862, regaining some poise in the wake of this week’s asset sell-off. That left it 7.4 per cent beneath a record closing high struck four weeks ago but well clear of Wednesday’s six-month low of 1,820. Encouragement for US equity bulls also came from a further retreat for the CBOE Vix volatility index from a three-year intraday high struck on Wednesday. (FT’s Global Markets OverviewRead more

QE4? Nah, time to look elsewhere.

Deutsche’s George Saravelos isn’t entirely convinced by the calls for QE4/QEmore rattling through our inbox from those on the receiving end of this correction.

Those looking to the Fed to save the day are looking at the wrong place. First, unlike the September 2013 non-taper, US rates have rallied and American data surprises are close to their highs. Second, this is not about the US but the rest of the world. Bunds and gilts have rallied 9-10% this year compared to a 6% rally in USTs. This is about global, not American fears. It is about how the world transitions away from Fed-driven liquidity (QE winds down this month) to the rest of the world.

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That was nuts. Is this the crash?

Eight minutes of wonder for the S&P 500.

Let’s call it the Alibaba indicator, with thanks to BofAML’s Thundering Word:

The S&P500 index peaked at 2019 roughly 8 minutes after the Sept 19th launch of the Alibaba IPO.

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QE4?

Or QEinfinity continued we suppose.

From Deutsche’s Jim Reid the morning after the liquidity crisis before:

With all this going on one wonders what probabilities you’d get that the Fed actually does QE again before it raises rates. I’m sure if you’d have suggested this a month ago many would have thought that there was more chance of Elvis being found living a relaxing retirement on the moon.

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Further reading

Elsewhere on Thursday,

- “Because banks are magic, and if you look too hard at how the magic happens, you might stop believing in it…”

- The risk that will bite you next is NOT the one that bit you last.

- A market postmortem and a view of the afterlife.

- Gates on Piketty. Read more

The 6am London Cut

Markets: The global equity market rout spread to Asia, driving Japanese stocks to their lowest level in six months, although declines elsewhere in the region were more muted. The Nikkei 225 sank 2.3 per cent, dropping below the 15,000-mark to hit 14,724 before coming back a touch. The yen was steady at Y106 against the US dollar. Concerns about the global economy sparked a “flash crash” in New York trading, driving US 10-year Treasury yields below 2 per cent for the first time since May 2013 as trading volumes soared — a record $924bn in US government debt changing hands throughout the session, according to ICAP data.. The S&P 500 lost as much as 3 per cent before closing the session down 0.8 per cent. “The liquidity crisis many had waited for is unfolding. Theoretically it is an absence of speculators willing to absorb risk,” wrote Soc Gen’s Sebastian Galy. (FT’s Global Markets OverviewRead more

Drawdown to what?

Oh look, vol…

Here’s Nomura’s Jens Nordvig charting the drawdown in risk assets since early September with the Vix up to 24.6 late on Monday, its highest since June 2012:

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Further reading

Elsewhere on Wednesday,

- The risks of cheap water.

- In defence of Cosplay and in search of lost satire.

- Why are economists in denial about the eurozone?

- The mythical Phillips curve? Read more

The 6am London Cut

Markets: Asian equities drifted up as investors opted for the safety of US government debt following disappointing European economic data. China-sensitive markets clocked up minor gains as weak inflation data spurred predictions that Beijing would step up monetary stimulus efforts. In the New York session a solid early rebound for the S&P 500 largely evaporated with energy stocks under pressure as concerns about the global growth outlook helped underpin a renewed slide for oil prices. The S&P 500 closed less than 0.2 per cent higher at 1,877. The CBOE Vix index fell 6.9 per cent from a 28-month high but remained well above its long-term average. (FT’s Global Markets OverviewRead more

Vol and the perma-damned market-makers

From the Reserve Bank of Australia’s assistant governor, and eminent CampAV robot attendee, Guy Debelle in a speech on Tuesday:

When volatility returns, for a number of reasons, including those I have already mentioned, it may well rise quite rapidly. One thing I am sure of is that the spike in volatility will be blamed, rightly or wrongly, on regulation-induced reductions in market-making.

But if we look back at previous market sell-offs, when market-making capacity was larger, we see that they were often quite violent too. Market-makers can pull back in an environment of rapidly falling prices, either directly, or indirectly by significantly widening bid-offer spreads. Market makers generally have just as much reluctance to catch a falling knife as any other market participant. They are after all intermediators of risk, looking to lay it off quickly, rather than being a warehouser of risk.

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Further reading

Elsewhere on Tuesday,

- The Gandhi now embraced by Mr. Modi is an edited version.

- The genetics epidemic.

- The representative agent does not know what he is doing. Read more

Further reading

Elsewhere on Monday,

- It’s the “new mediocre”, not a global recession.

- Sorry, “Amazon being a shitty, vicious competitor and Amazon being a monopoly are hardly the same thing.”

- Greenberg, Spitzer and the Fed’s “Doomsday book”. Read more

Coal India, winning by default

The Coalgate cancellation verdict is in.

India’s Supreme Court has decided to go ahead and annul all of the 218 coal licences handed out to businesses over the last two decades, bar a few belonging to state-backed companies.

Sucks for the private players on the receiving end (Jindal is off some 11 per cent at pixel) but apparently a win for Coal India:

It couldn’t have happened to a nicer behemoth. Read more

Further reading

Elsewhere on Wednesday,

- Larry Ellison bought an Hawaiian island for “the satisfaction one day of having made the place work.”

- Handwriting, it seems, is the next Turing Test.

- The rule of law is vastly underpriced by those who benefit most. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: Asia-Pacific equities outside of China were subdued following a third day of losses in the US, while Hong Kong and Shanghai stocks rose modestly. The MSCI Asia Pacific index lost 0.2 per cent, placing the regional barometer on track to close at its lowest since June. In Greater China equities were up, a day after state media reported that The People’s Bank of China planned to widen the definition of “first-time mortgage”, enabling borrowers with no outstanding home loans to qualify for interest rate discounts. (FT’s Global Markets OverviewRead more

India: A finite balance

For those who don’t know, India is a big, extremely uneven, place. From HSBC (with our emphasis):

India is a federation, with the central and state governments having both separate and shared responsibilities. While central government policies and transfers shape state policy agendas, states still have a relatively high degree of autonomy. As a result, state policies vary greatly.

The rise of India can be seen in each state, but in some more than others. Between the 1990s and 2000s a handful saw average growth rates jump significantly – Uttarakhand in the north (8.5ppts) and Bihar (5.1ppts), Sikkim (8.4ppts) and Nagaland (4.7ppts) in the east.

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Further reading

Elsewhere on Tuesday,

- ‘They don’t want moderate Uighurs’.

- Alibaba could buy Yahoo for free.

- Entrepreneurs not having nearly as much fun, or making nearly as much money, as you might think. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: A first look at China manufacturing conditions in September suggested some expansion, bringing relief to markets in China and Australia. HSBC’s “flash” purchasing managers index gave a reading of 50.5, up from 50.2 in August. Economists were on average anticipating a figure of 50.0, with several expecting contraction. Australia’s mining sector halved a 1.5 per cent loss to 0.7 per cent, but it remains in decline after iron ore, a key export, extended its year-to-date price decline overnight to more than 40 per cent. Japanese markets were closed for a public holiday. (FT’s Global Markets OverviewRead more

Further reading

Elsewhere on Monday,

- The political economy of a universal basic income.

- What if counterfactuals never existed?

- That referendum was fun. Shall we do it again?

- Xi who must be obeyed. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: Asia-Pacific equities began the new week on a sour note, with all major indices in the red after key commodity prices fell and momentum in US markets stalled on Friday. (FT’s Global Markets OverviewRead more

You call that a balance sheet expansion?

“Too Low To Resuscitate Optimism” indeed…

From BofAML on the definitely underwhelming, potentially stigmafied TLTRO pickup (our emphasis):

When gathering all the comments made by banks on their participation at today’s operation, we find that the major banks in Spain, Italy and Greece have requested a total of €40bn, i.e., 40% of their Sep+Dec available allowance (Exhibit 1, page 4). After extrapolating this to the whole banking system in each of the three countries and including estimates for Portugal and Ireland, we find that the periphery could have accounted for as much as €61bn, out of the €82.6bn borrowed yesterday.

This leaves an estimate of €21.7bn for the take-up by core banks, representing as little as 9% of their available allowance (Table 1). To derive a more precise estimate of the country breakdown, we have to wait for each national central bank to release the details of their end-of-Sep balance sheet. This should happen starting from early-October (with Italy, Finland and Belgium the first to report).

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The (early) Lunch Wrap

Good morning New York,

FT ALPHAVILLE Read more

Further reading

Elsewhere on Friday,

- We are a camera, the rise of GoPro.

- “Obama’s neglect of Federal Reserve appointments is, in some ways, mysterious.”

- From the lips of Michael Woodford. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Looks like a No in Scotland. The FT Live blog here, but at pixel with most of the counting done, this is how it stood:

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Slowly, very slowly, getting China’s house in order?

Oh look, China’s property market has worsened again:

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