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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.

Good idea, bad idea: Yield targeting edition

Good idea: More reactive than a quantitative target; can signal long-term commitment to policy; potentially reduces purchases required if market believes your yield target is credible; potentially good for effectiveness of fiscal policy; potentially good for banks as it can imply a steeper yield curve; and allows for an “automatic exit” from the policy if everything goes to plan.

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Further reading


– John Hempton with comments on investment philosophy.

– Gavyn Davies on the global pivot towards fiscal policy.

– George Magnus on the City and passporting.

– How some “six in ten rupees deployed by Tata are in businesses yielding returns below its cost of funding…”

– And Macro Man on the student loan debacle. Read more

Brexit, then and now

One of the challenges of understanding the consequences of Brexit is the apparent lack of precedent for such an event. But this pre-supposes that only the recent past is relevant. If instead we use the full sweep of history, then we can find the obvious precedent of the English Reformation that started in 1534.

… the “Brexit” of 1534 was far from straightforward, and nor did it stop conflict within the country. As for the economic consequences, GDP per capita barely changed for one hundred years after before falling sharply during the Civil War. It took colonial expansion, notably to India, and later in the industrial revolution in the 1700s for growth to really pick up in England.

– That’s from Nomura’s Bilal Hafeez, with a bonus chart too. Read more

Hanjin could be “the 100­year flood in the container industry”

Admiralty law is old, fun and messy.

From CreditSights:

The order of claim seniority is cargo, crew, supplier, mortgage holder. What is unique is a claim against a company or vessel can be enforced against a different asset or bank account. This allows creditors greater scope but also can generate a blizzard of litigation.

In a typical but very simplified case: 1) a mortgage holder receives a judgment in local court for non payment; 2) checks to see where any debtor vessels are steaming; 3) goes to that port with a lawyer and replacement crew; 4) court accepts the judgment; 5) port sheriff, lawyer, and replacement crew “physically” arrest the vessel, pay off the existing crew, cover supplier claims, and deliver the cargo if the vessel is not empty. Problem is the mortgage holder now owns a ship, and that costs cash money every day. If the vessel is not marketable, there usually is an “as is” auction under port sheriff supervision.

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Further reading

Elsewhere on Friday,

– How Hampton Creek sold Silicon Valley on a fake-mayo miracle.

– Boy meets girl, boy gives girl inside information, SEC says.

Of Leon Cooperman: “The question is not only whether he can prevail against the SEC but also whether he can calm anxious investors.”

Today in disruption and cow dung economics: “In the past, people only used urine and dung, and you needed to know somebody in a gaushaala (cow shelter), to get them. But who has the time these days, especially in the cities? So what we have done is just made it more accessible, in a more variety of products, in these busy cities.” Read more

Has the BoJ signalled the end of QE as we know it?

That is, by diluting if not outright abandoning the quantitative/ balance sheet expansion aspect of its policy with a move to QQE with yield control has the BoJ admitted that the current stage of central bank action is nearing its limits?

Citi’s Buiter et al seem to think so: Read more

Further reading


– Bernanke and Beckworth on the BoJ’s new yield control policy.

– Branko Milanovic on how income inequality is cyclical.

– Lorcan on Target2, redux.

– Tony Yates burning through RSI to Tweet-critique Romer.

– How to hide it, back inside the offshore wealth management world.

– And persuasion in a post truth world. Read more

Japanese banks apparently like a policy aimed at helping them out

Shocking, we know.

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Further reading


– Kuroda’s conundrum

– The BoE on the unintended consequences of higher capital requirements

– Tyler Cowen on Dodd-Frank

– And Tim Duy on how the dots outlived their usefulness when they signaled a pace of policy tightening that never happened  Read more

Inquiring minds want to know: Can the BoJ control the yield curve?

It’s almost BoJ comprehensive assessment time with Kuroda’s massive JGB purchases and NIRP policy standing naked beneath the spotlights awaiting judgement from their own creators.

Part of that judgment involves the pain that a NIRP and QQE induced flattening of the yield curve has wrought on financials. Thus, as we’ve talked about already, part of the recommended remedy might involve some sort of Japanese Operation Twist to steepen said yield curve and help out said financials.

Of course, the range of things the BoJ can actually do is large and the subject of predicable disagreement. So before we get to the yield curve question, here’s some summary for those who want it. Those who don’t can skip down to below the breaks. Read more

Further reading

“To say that most of the jobs we expect people to do today make full use of their potential is a vile slander, even if we are only measuring potential by the narrow standards of GDP” … Overcapacity, productivity and central bank largesse … Any paper that can say things like “our findings contradict the factional purge view” is ok by us … Love, friendship and public accounting don’t mix … Of Nordvig’s new shop … “‘Big Short’ guru tells whiny bankers to shut up” …  Read more

One of these is not like the others, the BIS on China edition

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Further reading

Elsewhere on Monday,

The BIS quarterly review is out.

Gavyn Davies: Will the BoJ cause a global bond tantrum?

– On the “just deserts” theory of justice and humanity as a gift-exchange web.

– The downside of upward mobility.

– The impact of NIRP on inflation, some empirical evidence.  Read more

Bank account fiddling as cultural bridge

What does this remind you of?

And by “this” we mean the sudden appearance of millions of Indian bank accounts which only boast balances of one-rupee each.

Any confusion as to why that would happen might be tempered by knowing that those accounts were opened as part of a massive financial inclusion plan undertaken by Modi’s government for which non-operational accounts weren’t a good look… and they were mostly opened at state owned banks.

Incentives are fun. Read more

It’s all about macro, charted

In case anyone was in any doubt…

From Citi:

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Further reading

Elsewhere on Friday,

Your market summary: “it’s been a nice respite from the cesspit of ultra low vol, and if Macro Man’s wrong and it kicks off properly, so much the better- that’s a proper trader’s environment!”

Aswath Damodaran on fairness options: Fix them or flush them.

– The cat ‘scam’ and the domination of the middleman.

Meanwhile in an India where “zero-balance” accounts, amidst a financial inclusion push, were proving politically embarrassing: “So far, over 10m one-rupee accounts have been found at 34 banks, out of 240m accounts opened since 2014.”

Peter Praet on Target2. Read more

Further reading

Elsewhere on Thursday,

Another rout.

– Wells Fargo’s week just went from bad To Preet. And how regulation failed with Wells Fargo.

– Not exactly ‘elsewhere’ but if you haven’t read Martin Sandbu on the elephant chart… do.

– Relatedly, when exactly did charts become so popular?  Read more

Confusion and the BoE’s corporate bond buying scheme

This is on the back of the Bank of England’s release of some more info on its Corporate Bond Purchase Scheme (CBPS) on the 12th. From that:

We will look to purchase, via the CBPS, a portfolio of up to £10bn of sterling investment grade bonds representative of issuance by firms making a material contribution to the UK economy, in order to impart broad economic stimulus. Our operations will be designed to purchase a balanced portfolio of bonds across eligible issuers and sectors, so that we purchase a representative portion of the market and do not influence the allocation of credit to particular companies or sectors of the economy. The private market will continue to decide which companies can issue in the primary market. Corporate bonds issued by firms we regulate – such as banks, building societies, and insurance companies – will not be eligible.

This notice outlines in more detail how we decide what constitutes a material contribution to the UK economy, and how our operations have been designed to ensure our purchases are representative across the eligible set of bonds. Operational details are included in the Market Notice.

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Further reading

Elsewhere on Wednesday,

– To reiterate, the elephant chart is an amazing chart.

– “It’s not a cult. It’s America. A family man returns to his hometown to discover he’s the last person in town who’s not part of a massive pyramid scheme. And everyone– EVERYONE – wants him in”

– When VCs meet a mortgage market.

Bernanke on modifying the Fed’s policy framework: Does a higher inflation target beat negative interest rates? Read more

What’s a chengyu for ‘forever blowing bubbles’?

It has been called China’s Great Ball of Money, the vector through which bubbles come and pass.

Of course any particular bubble is not the beginning. There is no beginning in a China which is more and more interconnected, meaning its risks and excesses flow as easily as that giant ball of money.

But just as property turns to stocks turns to bonds turns to property once more… this bubble is a beginning*. From SocGen’s Wei Yao, with our emphasis:

… asset price appreciation seems to be worryingly unstoppable. Especially, housing market indicators continued to show a brisk momentum in sales and prices, but a muted construction recovery. Even the officials at the central bank admitted that there is a bubble.

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Further reading

Elsewhere on Tuesday,

“The sugar industry paid scientists in the 1960s to play down the link between sugar and heart disease and promote saturated fat as the culprit instead, newly released historical documents show,”

– Prop trading, evidence from the crisis.

– The newer, hotter, communism. Click through the pic (which is really begging for a caption comp) for more:

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This is nuts. Get used to it

This will be a mostly charted recap of where exactly in the rabbit hole of negative yielding corp bonds we are following last week’s knee-shaking sale of some brand new negative yielders by non-state owned Henkel and Sanofi.

It was a first. It was exciting. Read more

Vol is low, not cheap

We’ve talked about how quiet the market is already.

Complacency is becoming an ever more common hit in our inboxes, and we assume not just because of herding instinct.

It’s also because, as we already quoted Citi: “Current vols are a strong outlier, not just compared to 2016, but against the average for all Augusts since 2000 (see charts 2, 3 below). That should give any trader pause.” Read more

Further reading

Elsewhere on Monday,

Gavyn Davies: What investors should know about R*

– Today’s angsty market wrap is brought you by Polemic’s Pains.

– Also, from Macro Man, “we shall have an important litmus test today, when dove ne plus ultra Lael Brainerd gives a speech on the US economy in Chicago. If the Fed still wants to keep September alive, this is the last chance saloon to give the market a nod and a wink.”

– “I welcome Liam Fox’s claim that many British bosses are too “fat and lazy” to increase exports.”  Read more

Further reading

Elsewhere on Friday,

– Chinese billionaire linked to giant aluminum stockpile in Mexican desert.

Aswath Damodaran’s first reaction as he read “through the descriptions of how the bankers in this deal (Evercore for Tesla and Lazard for Solar City) valued the two companies was ‘You must be kidding me!’.”

Stephen Williamson on negative rates and the death of cash.

A new (old) argument against a guaranteed basic income. Read more

Further reading

Elsewhere on Thursday,

– Reading and the demand for books (as gifts)

Mr Bond, they have a saying in Chicago.

– Carl Icahn finds 307,000 more ways to tell Bill Ackman “I will haunt your dreams”.

– Pity the tin whale.  Read more

Regulating those Chinese Weapons of Mass Ponzi

Remember WMPs? The touchstones of China’s shadow market? The shadow market that China might actually be cracking down on … like for real this time …

According to Credit Suisse, new regulatory guidelines or consultation papers about new regulations have been announced on almost a bi-weekly basis since May: Read more

Further reading

Elsewhere on Wednesday,

– Ever more on the downfall of Theranos and Elizabeth Holmes, or Eagle 1 to her security detail.

Bario at the BIS: “helicopter money is just fiscal policy dressed up.” Prompts the question: And?

The BoE on robot macroeconomics: What can theory and several centuries of economic history teach us?

Taibbi on how Trump lost his mojo. Read more

Remember this day

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Kuroda on the adverse effects of NIRP and a ‘quiet riot’ in JGBs

The “quiet riot” thing is from the title of a Jefferies note on Tuesday.

Here’s what they see: Read more