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.

It’s an extreme world. We just get to react to it

This might get zeitgeist-y, but stay with us.

It’s basically the idea that extreme events and outcomes are getting more common, in part because systems are getting more complex — it’s played out through inequality stats and in the polarisation of politics, geography, the economy and markets.

It’s also charted by Citi’s Matt King in his latest note: Read more

Further reading

Elsewhere on Wednesday

- Get ready for high-frequency lawyers.

- Worth remembering that “conventional economics undermines the self-regard of the financial sector.”

- China’s middle-class anxieties.

- “Long ago, Schloss Hachenburg was a palace for local counts. Now it is home to an elite academy for about 350 young men and women. The castle offers only one degree: central banking. The typical student? “Risk-averse,” says the school’s rector, Erich Keller.”

- Gavyn Davies with an update on the Fed’s thinking. Read more

Further reading

Elsewhere on Tuesday,

- The repudiation phase of the bubble.

- Mehrling: Shadow banking’s enduring perils.

- Banking’s new (regulatory) normal.

- Economists vs bankers, redux.

- Today in tech land: a 5 foot tall panda statue made of chrome that (supposedly) cost about $100k for Dropbox, and Evan Spiegel has a painting of Jobs hanging in his office. Read more

Authoritative person authoritatively admits China can’t keep going this way

From Nomura, with our emphasis:

According to today’s official People’s Daily [link here and Bloomberg writeup here], an “authoritative” person who was not identified indicated that China should not support growth by adding leverage. “High leverage will lead to high risk; if not well controlled, it will lead to systemic financial crisis and negative growth”. Considering China’s severe structural problems, this “authoritative” person believes that “China’s economic growth trend in future should be ‘L-shaped’, rather than ‘U-shaped’, not to mention ‘V-shaped’”, which suggests that growth will trend lower. This individual believes China should avoid using strong stimulus to raise investment growth in the short term, as it would create larger problems later. For now, the most important thing, in this person’s view, is to push forward supply-side reforms (i.e., cutting over-capacity, reducing property inventory etc.) and actively but steadily reduce leverage.

 Read more

Further reading

Elsewhere on Monday,

- Don’t panic, it’s just a tech bust.

- Gavyn Davies: When secular stagnation meets protection.

- Scott Sumner against Brexit and the reversion to nationalism.

- Advice for the media on how to cover Trump vs Clinton, from Krugman. Read more

So you want to map India?

Well things just got (more) interesting.

This is only a draft bill — to “regulate the acquisition, dissemination, publication and distribution of geospatial information of India which is likely to affect the security, sovereignty and integrity of India” — and it’s mostly aimed at licensing internet companies like Google, but check out this bit:

15. Penalty for wrong depiction of map of India etc.-Whoever depicts, disseminates, publishes or distributes any wrong or false topographic information of India including international boundaries in contravention of section 6, shall be punished with a fine ranging from Rupees ten lac to Rupees one hundred crore and/or imprisonment for a period up to seven years.

 Read more

Further reading

Elsewhere on Friday,

- Michael Lewis on Mervyn King’s book, which will save banking from itself apparently.

- At conference of elites, the distress of others is an investment opportunity.

- Pity the hated hedge fund managers.

- Tom Hayes is crowdfunding his Libor rigging fight.

- The new reality of small debt collection. Read more

The biggest problem with China’s latest credit boom, charted

By Deutsche’s Zhiwei Zhang — you can link these charts to asset bubbles and booming egg futures pretty easily btw:

As he says:

Bank credit growth and M2 growth used to track each other quite well in China. It is intuitive. In a simple world where banks’ main business is to channel deposits into loans, the two should correlate well. But this is no longer the case.

 Read more

China’s A-Shares, MSCI, understatement and egg futures

If you look closely at this chart you may be able to spot the moment that MSCI realised how lucky they were that they hadn’t yet included China’s A-shares in their EM pot…

Obviously it’s now time to try adding them again.  Read more

Further reading

Elsewhere on Thursday,

- There are water migrants coming into Mumbai.

- “The new rules are a way of saying: That’s not the deal. Your repo claims and derivatives assets are not safe… They force counterparties to examine the trick more closely, and to confront the fact that it covers up but doesn’t quite eliminate risk.”

- Leicester’s win showed us that nobody knows anything.

- Bill Gross confronts the only constant: “Yet, if I (you) understood that to be somewhat true, what should I (you) do differently? How to live a life – this Shakespearian brief candle? Should I listen to the beat of a bass drum instead of an ancient tom-tom? Would I dare dance to strange new music with a different step?” Read more

Is QE4 (still) coming?

From Citi’s global head of G10 strategy, Steven Englander, who wonders if markets have begun pricing another round in:

US economic data have been soggy, other than labor market data, which means that we get one positive data release a month followed by a series of disappointments. This is reflected in the Citi’s economic surprise index (Figure 1), which has been dropping since mid‐April and where a 0 level would be considered strong outperformance.

My conjecture is that investors have begun to price out June/July hiking risk they are beginning to reject the view that there is a high‐probability fed funds path that is as shallow as the market is pricing in. If you really think that a full hike is not likely until May 2017 (as is now priced in), you have to think there is a non‐negligible probability that the economy is so bad that you would want to cut.

 Read more

Further reading

Elsewhere on Wednesday,

- The mythology of Trump’s ‘working class’ support.

- China would really like its economists, analysts and business reporters to cheer up. And Balding comments.

- New Gorton paper on the economics of safe assets.

- Leicester were preseason 5000-1 shouts to win the Premiership. USD/JPY is 2500-1 to hit 325 within 5 years. Read more

This re-correlated world

ICYMI, RoRo — or risk on/ risk off — is apparently back.

It’s not quite at peak levels but that bane of interesting narrative, that supporter of the yen, that acronym of dubious origin is getting back up there:

 Read more

Financial backer of wannabe terminal disrupter says terminals will be disrupted

Morgan Stanley is a backer of the bank-led chat project, Symphony, crafted to woo trader talk back to a channel the banks can control.

And here’s a Morgan Stanley built theory of the terminal business:

We view the evolution of the industry in three stages:

Phase 1 (now to 2018): High-Cost, Bundled Products Prevalent: Historically, the network effect has been a gating factor that led participants in the market data terminals industry to keep their existing high-cost terminals. Legacy terminals have comprehensive functionality, so customers only need to purchase one main product. Counterparties purchase the same product, so that business can transact through the terminals (i.e. through chat). Learning of specific shortcuts enhances stickiness. Changes to workflow is typically disruptive, which leads to high retention rates. Examples include Bloomberg and TRI’s Eikon product.

Some current products in the market contain full-functionality, but do not have the network effect (FDS, CapIQ). Customers requiring less frequent interaction with outside parties (i.e. trading) may choose to use these products. The cost of the products is often lower than the premium legacy products with network effects, but remains high given switching costs and bundling of the underlying products.

Phase 2 (2017 – 2019): Facilitating Escape:

 Read more

Further reading

Elsewhere on Tuesday,

- “’It’s the Burning Man 1%,‘ said Charles, a documentary filmmaker with spikes pierced through his ears and a brainwave meditation startup. ‘It’s curated.’ Eric Schmidt was backstage leaning against a tower of palettes and wearing an ornate top hat and a vest made of mirrors. He said he was at Further Future mostly because these were his friends.”

- Theranos: blame the (Silicon Valley tech) press?

- Preet Bharara, scourge of Wall St, hero of Turkey, lover of PR.

- Oliver Shah’s sweary battle with Philip Green. Read more

Explaining the BoJ’s reticence

You’ll have noticed that the yen and Nikkei were displeased yesterday. Like throw your toys out of the pram because you didn’t get what you wanted displeased. Like one of the worst one day JPY moves in the past decade displeased.

What they didn’t get, and what prompted that tantrum, was any auld bit of easing from the Bank of Japan.

And here are eight potential reasons why the BoJ disappointed, from SocGen: Read more

Further reading

Elsewhere on Friday,

- Zuckerberg gets to control Facebook a while longer.

- ‘Normal America’ is not a small town of white people.

- “Surely no campaign has ever before had a divisive internal fight over whether the candidate should be presidential or not…”

- When Ted Cruz signed a copy of The Communist Manifesto. Read more

Today in disappointed markets…

UPDATE: JPY through Y108 as Kuroda says helicopter money is illegal. Of course, definitions matter where that is concerned.

 Read more

Further reading

Elsewhere on Thursday,

- “Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.”

- Meanwhile in Israel: “If someone is over 18 and wants alcohol, cigarettes, a knife, a binary option account, it’s his own responsibility.”

- Your annotated Fed statement.

- Ant Financial, now valued at $60bn apparently, is confusing. As is its relationship to Alibaba. Sorry, we mean its relationship to the Cayman registered derivative contract vaguely related to ecommerce in China known as Alibaba. Read more

“What if China lands hard?” they asked in 2013

What is a hard landing? Can you re-land hard if you’ve already landed hard? What about just landing harder? Or what about a long hard landing?

The phrasing here is getting awkward, as is the real point, which is the concern that the hardest Chinese landing is yet to come.

You can see why it’s on people’s minds: Chinese reforms have been less than impressive, there’s a general consensus that its record breaking debt load is bad (for a given definition of bad that normally doesn’t include an immediate crisis), and credit growth is still heading up. Take this from Bernstein’s metals and mining team on Monday for example:

The response to the crisis of 2014/2015 appears to be greater than the response to the financial crisis of 2008/9. Between November 2008 and November 2009 total domestic credit expanded from 36.3Trn RMB to 48.4Trn RMB, a change of 12.1Trn or ~34.4% of 2009 GDP. Between February 2015 and February 2016 domestic credit has grown from 111.2Trn RMB to 139.2Trn, a swing of 27.9Trn, or ~40.4% of GDP.

 Read more

Further reading

Elsewhere on Wednesday,

- The “areas hardest hit by trade shocks were much more likely to move to the far right or the far left politically.”

- “No matter how high the tariffs Mr. Trump wants to raise to encircle the American economy, he will not be able to produce a manufacturing renaissance at home.”

- Debt-equity conversion and NPL securitization in China, some advice from the IMF.

- The resilient Chinese consumer is still resilient.

- Nestlé’s Maggi health scare in India was not handled… perfectly. Read more

Further reading

Elsewhere on Tuesday,

- Paul Singer on the lessons from his bond (pari passu) war.

- Rogue bonds — from CS which would insure it against its own operation/ fraud/ regulatory/ etc risk — how would they work exactly?

- China, Venezuela and how winning friends can get expensive.

- “The chairman of a Chinese e-financing firm suspected of having fled with 1 billion yuan (HK$1.19 billion) of investors’ money has emerged to say he has not absconded but was merely meditating in the Gobi Desert over the firm’s direction.” Read more

Shockingly, loose credit and moral hazard are to blame for something in China

Right, so we’re going to… grudgingly… allow this Game of Thrones reference from David Cui at BofAML.

We will not be this forgiving again.

In the Game of Thrones, before someone declares interest of entering the game, he or she needs to think carefully because the consequences of losing can be extreme. The same could be said about the latest “game” of trading commodity futures on China’s three commodity exchanges, in our view. We believe that loose monetary/credit policies and moral hazards are the main drivers behind the latest sharp rally, rather than improving fundamentals.

 Read more

Further reading

Elsewhere on Monday,

- This is nuts: The BoJ’s ETF “purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average.”

- Davies: Is there a new Plaza Accord?

- Thieves want liquid assets, stealing soap edition.

- The new gilded age, first class markets in everything. Read more

SOE you think you can default?

Well, maybe some of you can. More than that and it could get tricky for China.

Here’s BofAML’s David Cui:

Since 2015, eight SOE bond issuers have run into repayment problems; four since February.

 Read more

Further reading

Elsewhere on Friday,

- Why haven’t bankers been punished? Just read these insider – Goldman and Abacus related – SEC emails.

- Regulators don’t want bankers to be paid for taking risk.

- How the unicorn financing market just… got… dangerous. Read more

Imagining life/ the RBI after Raghuram Rajan

Once you’ve had a luddite at the Reserve Bank of India it’s hard to go back…

Amongst other things Rajan stabilised the rupee, brought inflation under some sort of control (with some outside help) which has allowed him to cut rates, overseen institutional changes at the RBI, has started to get a grip on India’s problem loans, and was a big part of convincing Delhi to crack down on willful defaulters and others who used to have avenues of political appeal when their loans were being questioned.

He also managed to thoroughly woo much of Mumbai’s financial community while doing so.

And now he might be off. As in, when his current term ends. Read more

The apparently unstoppable Chinese search for yield

This is what you get when you try to sidle up to some market pricing alongside a giant ball of money.

It’s to be read while keeping an eye on the property market — What’s that? Property prices for Tier 1 and 2 cities are still rocketing and mortgages are up 75 per cent year on year in q1, you say? — and the rise of defaults in the corporate bond market.

 Read more

Further reading

Elsewhere on Thursday,

- Why the big banks can’t imagine their own deaths.

- Chris Arnade on Brady Bonds, Elon Musk and trading. Read the whole thread.

- “No statues in Silicon Valley salute Bill Campbell. But the story of his life, and of his values, should be widely shared.”

- Sanders, Trump and when discredited policies make sense.

- Trading aphorisms. Read more

Strikes don’t have to be impolite, Kuwaiti oil workers edition

Take the end to the protest by oil workers in Kuwait:

 Read more