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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.

China’s new normal, cut out and keep edition

Here’s 28 of China’s 31 provincial and municipal governments adjusting to reality:

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Further reading

Elsewhere on Friday,

- I do not think that number means what you think it means, unit labour costs edition.

- How wonks become oracles.

- “Microfoundations” ain’t so microfoundedRead more

China Vs the so-called “art” industry

Remember Roubini going off about the art market in Davos? About how “Whether we like it or not, art is used for tax avoidance and evasion” and “While art looks as if it is all about beauty, as a business it is full of shady stuff”?

Well here are two bits of related Chinese art market shenanigans for you.

The first, from the Epoch Times, is about corrupt officials who peddle their works of calligraphy to disguise bribes (via Climateer and The Art Market Monitor): Read more

If we hit that bullseye, the rest of the dominoes should fall like a house of cards, China’s implicit state guarantee edition

The thing about a “pervasive implicit state guarantee” is that it’s pretty pervasive. It gets everywhere. Well, just about everywhere. Everywhere that an implicit state guarantee can get.

Futhermore, it’s hard to get rid of once it spreads. (We’ll spare you an analogy) Read more

Further reading

Elsewhere on Thursday,

- Thinking about the new Greek crisis.

- There “should be no significant increase in unemployment above its natural rate… as a direct result of having to pay interest on any government debt.”

- Saxo to clients who had their CHF trades repriced: “come at us”.

- The London property ladder now misses several rungs. Read more

China’s currency war problem won’t just go away

Pretty obviously — with ECB QE, a presumed resultant euro funded carry trade, and all sorts of central banks rushing to cut rates — there’s some sort of renewed currency war movement going on.

And while we’re all ears for arguments about positive-sum outcomes (in a deflationary world), it’s worth remembering those who might struggle to get involved. Read more

Further reading

Elsewhere on Wednesday,

- Yahoo would rather not pay taxes on its Alibaba shares.

- “You have to get Weidmann, Draghi and and Tsipras across a river. You are the only one who can row the small boat with room only for you and one other. How would you do it?”

- Post recession lessons.

- “Pretense of knowledge + Math = Economics” Read more

Contrarian gauntlet thrown

From BofAML’s Hartnett:

Nothing is more contrarian than long Russian ruble, short Swiss franc right now…

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Further reading

Elsewhere on Tuesday,

- “Internal devaluation” via falling wages is incredibly costly — but Greece has been paying incredible costs.

- In Greece, think flows, not stocks.

- Did credit really replace wage growth in the mid-2000s?

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ICYMI, China’s credit buildup was pretty damn fast

Like 97th percentile fast.

From Goldman, do click to enlarge: Read more

Further reading

Elsewhere on Monday,

- Greek games and scenarios.

- Greece’s fragile primary budget surplus is not much of a bargaining chip.

- The Swiss franc appreciation and the sorry saga of FX lending.

- An ECB QEsplainer. Read more

Shenzhen and the art of balance sheet maintenance

Chinese real estate companies raised $5.3bn in dollar bond markets during the first three weeks of 2013 and $4.9bn over the same period in 2014.

This year, not a single deal has been completed…

“You don’t want to go hat in hand to investors when they feel they’re catching a falling knife,” said the head of debt capital markets at one investment bank.

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Further reading

Elsewhere on Friday,

- “Draghi’s big announcement seems to have raised expected European inflation by one-fifth of a percentage point.”

- But be very careful about extrapolating from past failures of European monetary policy to the near future.

- Of course, the real question is what’s happening with the 5y5y5y5y5y.

- Well, that and whether ECB QE is going to cause the implosion of the European banking system, Read more

ECB QE guesswork, cut out and keep edition

Guesswork from Deutsche (click to enlarge):

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Further reading

Elsewhere on Thursday,

- In which Matt Levine takes swipes at S&P parties. Also, some stuff about blended constants and Herodotus.

- Euroblunders.

- Structuring ECB QE to keep the German taxpayers (and their economists) happy. Read more

Re-re-visiting the 1986 oil crash

As already mentioned, this may not be your usual oil-price decline. But it’s also not crude’s first appearance in the 50 per cent club:

Now, in absolute terms the falls aren’t comparable ($100 to $50 versus $30 to $15) but there are similarities. Read more


With apologies for the angelic imagery, here’s BNP Paribas on Wednesday (our emphasis):

In our analysis, six EM sovereigns are at risk of becoming fallen angels this year or next. Three of these we consider ‘high risk’. As much as USD 259bn of sovereign and corporate bonds is at high risk of being cast down into speculative grade perdition. This accounts for 9% of all EM bonds outstanding (USD 2.87trn).


… it is little surprise that the peak of credit quality for EM appears to be over. After having hit the BBBthreshold in 2013 and improving another 1/6th of a notch over2013 (Figure 2), the credit quality of the EM benchmark has begun to slide downward. Already it has lost 1/6th of a notch and we forecast the index to slide another half notch by the year end.

 Read more

Further reading

Elsewhere on Wednesday,

- Will Should the ECB load up on euro denominated equities?

- When central bank losses matter.

- QE and central bank insolvency.

- Shane Ferro vs. Diane Coyle… mediated by Brad DeLongRead more

The Great China FX Outflow

As Goldman flagged this morning, December has brought with it $19bn of FX outflows from China. That’s the biggest move since 2007 (with our emphasis):

The position of FX purchases for the entire banking system (the PBOC plus commercial banks) decreased by about $19bn in December (vs. essentially flat in November)…

The FX outflow in December underlined the weakness in demand for the CNY, despite a strong trade balance of close to $50bn. The FX outflow size is the largest since December 2007 (and this earlier data point was skewed by the MOF’s FX injection in China’s sovereign wealth fund). The PBOC has been setting the daily USDCNY fix on the strong side of the spot rate since late November to counteract depreciation expectations. Today’s data suggest that besides displaying such a bias in fix setting, the central bank might have gone further in supporting the currency by buying CNY in the market. But we await PBOC balance sheet data, due out in the coming weeks, to confirm if it is indeed the case. The FX outflow also partly explains the slow M2 growth in December.

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Further reading

Elsewhere on Tuesday,

- Cass Sunstein versus the libertarians.

- The retail FX market is a joke, redux.

- The (worrying) European scene.

- “If your lot in life is to supply the internationally desirable currency of a small open economy… it is the height of folly to believe that you can place some arbitrary limit on the size of your balance sheet.” Read more

Buiter, the SNB and the effective lower bound

From an “indefinitely sustainable” regime to a” dirty/ managed float”… Citi’s Buiter is not a fan of the Swiss National Bank’s quashing of its own floor last week.

We know what the immediate consequences looked like and it’d be no surprise if there are more aggressive swings in the franc over the next while, even if the SNB will be in the mix trying to keep things somewhat orderly.

We also know, after a weekend of reading everything SNB, that the reason for the move (coming ECB QE and the prospect of increased speculative inflows are still top of the pile) is asked only slightly less than the question in first place: was this a mistake? Read more

Further reading

Elsewhere on Monday,

- Experience is simply the name we give our mistakes.

- Of Roman QE.

- There are no Friedmans today, except maybe Friedman himself.

- At this point “it’s hard to think of a major policy dispute where facts actually do matter…” Read more

Saxo would like a do-over

FT Alphaville’s Retail FX correspondent explains the move:

The raw from Saxo is here for those who want it, via Reuters by way of Hempton:

Due to today’s exceptional market movement in CHF crosses, we have been filling client orders and positions in an extremely illiquid market. Once we are better able to establish true market liquidity, all executed fills will be revisited, and will be revised and amended to more accurate levels. This may result in a worse execution rate than the originally filled level.

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Further reading

Elsewhere on Friday,

- The myth of the special German saver.

- “SNB have effectively done for central banking what the Ferguson Police Department have done for community policing.”

- And, how the SNB’s “wimp-out” will make life harder for monetary policy in other countries.

- Saxo mightn’t like where you traded yesterday. So it’s going to “revisit”, “revise” and amend “to more accurate levels”.

- Why below target inflation is a big problem. Read more

The risks of deflation in China

Or the risk of “lethal damage” if you’re into that sort of thing.

As said before, we’ve had 34 months and counting of negative PPI inflation in China with CPI at best lacklustre — coming in at 1.5 per cent in December. The risk is that, in a country charmingly wrapped in debt based uncertainty, we get outright deflation. Read more

Sack Thomas Jordan?

I mean really…

This from JPM asks the right questions: Read more

Goodbye Swiss franc floor (UPDATED)

Click through for the readable version:

For those who can’t click, that’s the SNB abandoning the 1.20 floor, cutting the deposit rate to -75bp and moving the target range for three-month Libor further to -125bp/-0.25bp.

Yeah… Read more

Further reading

Elsewhere on Thursday,

- Hoping for a Syriza victory?

- Osborne’s “commitment to policy inflexibility in order to achieve policy flexibility.”

- Convergence in two global economics.

- How the Fed might stop worrying and learn to love moderate inflation. Read more

ECJ: OMT OK (ish)

UPDATE: The full, 263 point, opinion is out and here.

Do click through for the full statement on OMT (and QE by extension) from Pedro Cruz Villalon, one of the European Court of Justice advocates generalsRead more