Biography
Latest posts

(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.

I see currency wars

The first rule of currency wars is: you always talk about currency wars.

The second rule is: you can always find one to talk about if you look hard enough.

This month’s FX war location of choice is Asia, and here with its proximate cause is BNP Paribas (our emphasis): Read more

Further reading

Elsewhere on Friday,

- Firestone, Charles Taylor and the tragedy of Liberia.

- Understanding anti-Keynesians.

- If you’re an economist, make sure you’re an Argentine economist. Read more

The graphic Juncker

That clickable to enlarge chart (which allowed us to experiment with our shiny new anti-clickbait header format) is from EC president Juncker’s investment plan for Europe and shows how leverage is going to be achieved as he aims to support investment projects totalling at least €315bn over the next three years.

That, according to RBS’s Gallo, is relative to the decline in Euro area investment of more than €330bn every year btw. Read more

Further reading

Elsewhere on Thursday,

- Keynes is slowly winning and losing.

- Understanding George Osborne.

- “For two days only, your new Buick comes with what is essentially a weather derivatives contract.”

- “Gross vs. Gundlach: Who has more skill?” Read more

ECB, QE and so long to that damn negativity

On the potential death of that long awaited negative deposit rate, interesting thoughts from HSBC’s Steven Major below if sovereign quantitative easing does eventually raise its head in Europe.

But first, a necessary nod to QE skepticism from Peter Stella:

Rather amazingly, a crude quantitative measure of ECB stimulus—the sum of refinancing operations and securities held for monetary policy purposes—peaked the very month of Dr. Draghi’s [whatever it takes] speech. Those who are now seeking QE apparently believe that, despite the inverse correlation between quantitative stimulus and actual results, an increase in the size of the ECB balance sheet will lead to an outcome superior to that associated with the increase in policy “size” evident above during the 14 months prior to the Draghi speech. During that time, the sum of ECB monetary operations instruments expanded by 168 percent without any discernible palliative impact on markets. So if the definition of insanity is repeatedly trying the same behavior and expecting different results, the market would appear slightly insane. Or perhaps it is simply guilty of failing to fully comprehend the complexity of monetary operations, and more specifically, which monetary medicines work and which do not.

 Read more

Further reading

Elsewhere on Wednesday,

- The story of the first painting to sell for over £1m. Simpler times.

- The day I lost a sh*t-ton of money.

- Economists aren’t in the prediction business.

- Is Uber really in a fight to the death? Read more

Wriggle room, the CNY, and the PBoC

More on that Friday PBoC rate cut — and just as China goes ahead and cuts its 14-day repo operation rate by another 20bp to 3.20 per cent too. That move on Tuesday, according to Nomura, suggests that the PBoC will continue to ease monetary policy… which would be true to form.

As Barc note, “the policy rate cut suggests that China is once again following the typical sequence in a monetary easing cycle – the pace of CNY appreciation is often slowed in advanced, followed later by the same directional moves in the policy rate and banks’ required reserve ratio.” Read more

Further reading

Elsewhere on Tuesday,

- Citi analysts thought everyone knew ‘Hold’ meant ‘Sell’.

- “Merkel is obsessed with demography and economic competitiveness. She loves reading charts.”

- In defense of John Hussman.

- Fatas on McCloskey on Piketty. Read more

Signal vs noise from the PBoC

Indeed, nobody expects the PBoC…

But, despite Friday’s surprise announcement, as SocGen’s Wei Yao says: “due to the further rate liberalisation announced at the same time, there is actually no de facto rate cut.”

She continues, (with our emphasis): Read more

Further reading

Elsewhere on Monday,

- Misunderstanding reserve currencies and the gold standard.

- The Streetwise Prof swats goldbugs.

- A defence of multi-billionaire hegde fund inflation truthers. Read more

Honour roll, Japan GDP edition

*cough*

 Read more

This too shall pass

Charts. Do stop us if you’ve heard this one before.

 Read more

Further reading

Elsewhere on Monday,

- “Japan’s present predicament is a more extreme version of the choice faced by the UK in 2011…”

- Japan through the looking glass.

- Can we have our instrument back? Read more

China’s still leaning towers

Rumours of stabilisation in China’s property sector abound…

From UBS’s Wang Tao (our emphasis):

New property starts leapt up by 43%y/y in October reversing September’s marginal 0.2%y/y decline, as sales narrowed their pace of contraction from 10.3%y/y previously to 1.6%y/y…

 Read more

Further reading

Elsewhere on Friday,

- “The use of a position of privileged information to make money used to be the definition of what it meant to be a trader.”

- Rage of the traders.

- The oil shock and why global GDP forecasts may be revised upwards in coming months.

- Secure Investments, the great disappearing FX shop. Read more

Can 1980s Europe really tell us anything about Chinese SOE reform?

State Owned Enterprise reform optimism in one chart, courtesy of Bernstein:

And here’s at least part of its foundation:

While investors can get impatient with the pace of change, it is worth pointing out that corporate China today looks similar to pre-privatized Europe of the 1980′s.

 Read more

Further reading

Elsewhere on Thursday,

- About those FX fines: “this isn’t Libor manipulation, where they just made stuff up. This is tinkering at the edges of real supply and demand.”

- And the annotated FCA order.

- Has the alpaca bubble burst? Following in the, er, footsteps of emus, Berkshire hogs, Boer goats, ostriches, and alpacas?

- Who exactly is buying these mini-bonds? Read more

Further reading

Elsewhere on Wednesday,

- Someone has to ultimately bear this risk of bank failures… without protection.

- The Geithner files: “he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.”

- Why Jeremy Grantham is right about corporate profit margins.

- Of Greenspan’s relatively tight prose. Read more

Xi who must keep you employed

This man is in charge of China. Like, really in charge:

And he wants to make sure everyone he’s in charge of remains nice and calm. So he’d like them kept busy. That, for the most part, means they should be working — call it a social compact or call it a security measure, it doesn’t really matter. Read more

This is Shingy. When’s the crash?

Performance art, the personification of a tech bubble or just a cry for help from an existentially challenged AOL? From the New Yorker on everybody’s favourite digital prophet:

Next, Shingy stopped by the office of Erika Nardini, the chief marketing officer of AOL Advertising, and handed her an iPad Mini. “Wanted to show you a little brain fart I had on the plane,” he said. It was a cartoon he had drawn of a bear wearing zebra-print pants and a shirt covered in ones and zeros.

“Love it, love it, love it,” Nardini said. “I’m thinking of the bears more as a metaphor.”

“A thousand per cent,” Shingy said.

 Read more

Further reading

Elsewhere on Tuesday,

- Getting the Germany argument right.

- “In sum, it is highly likely that the Saudis are not crazy, and aren’t acting crazy, but are instead responding rationally to existing market conditions.”

- Coal and the industrial revolution, retold. Read more

The shadow banking system, define it before you size it

This, from JP Morgan’s Flows & Liquidity team, gets to the heart of the difficulties (and irritations) involved with looking at the shadow banking system.

It’s based on the Financial Stability Board’s recently released annual Global Shadow Banking Monitoring Report. As they note, at first glance “the ratio of shadow bank assets, i.e. assets of Other Financial Intermediaries (OFIs), as a % of traditional bank assets, has been rising in recent years at a similar pace to the 2005-2007 period.”

Scary, but before ye crack each others’ heads open and feast on the goo inside it might be worth getting definitional. Read more

Further reading

Elsewhere on Monday,

- The very long run equity bull market.

- The IMF on the IMF’s 2010 austerity call.

- Keynes derangement syndrome.

- “Everything is PR” has become the favorite phrase of the new Russia… Read more

Further reading

Elsewhere on Friday,

- “With bank earnings it’s not only the earnings that are probabilistic. Time itself is blurry.”

- Taibbi’s back with “JPM’s worst nightmare”.

- Eleven years ago today, Alan Greenspan confused the hell out of journalists covering the Fed. Read more

Dear Ireland, take the bailout. Yours, Jean-Claude

With a large hat-tip to the Irish Times, here’s a friendly 2010 missive from former ECB president, Jean-Claude Trichet, to former Irish finance minister Brian Lenihan suggesting, secretly of course, that Ireland might just want to apply for that bailout if it wanted to continue to enjoy access to emergency liquidity assistance. As the Irish Times says, “around €50 billion [in ELA] had been extended to Irish banks at the time – with additional funds approved by the ECB the day before.”

More so, the letter “was sent the day after Central Bank governor Patrick Honohan appeared on Morning Ireland to say Ireland had no option but to apply for support. The ECB letter called for a “swift response” from the government. Two days later, on November 21st, the formal application for the bailout was made.”

You’ll find the letter itself below, but here are the key lines: Read more

Further reading

Elsewhere on Thursday,

- Tullock made “economics a discipline without frontiers.”

- China, Europe, and optimal currency zones.

- No, commodity traders cannot readily step into functions that banks exit or cut back.

- The internet of things that make your skin crawl. Read more

Sentences to surprise nobody: Revolving-door of sell-side analysts edition

From the abstract of a new paper by UCLA’s Ben Lourie (our emphasis):

The purpose of this study is to examine the extent to which analysts who go to work for firms they have been covering, henceforth referred to as “revolving-door analysts,” alter their behavior in favor of the covered firms during their last year of employment. Based on a sample of 299 revolving-door analysts collected over the period from 1999 to 2014, I find that in the year prior to their employment by covered firms, these analysts issued higher target prices and more optimistic recommendations for their would-be employing firms relative to other analysts covering these firms. This relative optimism is much higher in the year prior to their move than in previous years, indicating a marked change in the revolving-door analysts’ behavior just prior to being hired. During this same period, relative to other analysts, revolving-door analysts become more pessimistic about other firm’s prospects, underscoring just how positively they view the companies that eventually hire them.

 Read more

Further reading

Elsewhere on Wednesday,

- “A tender offer is still how you signal that you’re serious about your hostile bid. Even though doing a hostile tender offer is impossible, and has been for 30 years.”

- Japan might have to choose which “credibility” it’s willing to lose.

- Reality might topple a beloved economic theory.

- The overeager adoption of big data is likely to result in catastrophes of analysis… Read more

“You have euros in Ireland? Why do you have euros in Ireland?”

Arguably a decent question. But that aside, here’s a demonstration of… something… from CNBC’s Joe Kernen of Squawk Box fame. We’re not totally sure what.

(Do skip to the 7min mark and yes, glass house awareness activated) Read more

Further reading

Elsewhere on Tuesday,

- All in all, another brick in the motte.

- This Jefferies sex & drugs story has everything but a winner.

- A plutocratic proposal.

- Paul Singer vs the “Krugmanization” of a large portion of the economics profession. Read more