A little more on China’s rumoured plan to one-up the only somewhat dystopian plans of Peeple by putting in place an invasive credit rating system.
Yelp for people, meet Yelp for citizens — may you both choke on the outrage you generate. Assuming the outrage is well founded, of course.
And we wonder if, where China is concerned, the outrage is accurately targeted. And whether this says more about where the world is heading generally, and less about China’s nefariousness in particular (this time around).
From the FT’s Lucy Hornby: Read more
Elsewhere on Friday,
- “There are Wall Street winners and Wall Street losers to all sorts of Wall Street regulation, and a pure quantity theory of toughness elides those differences.”
- The case against the Galactic Senate.
- Fanya Metal Exchange, it promised so much….
- Pay attention to China’s bond markets.
- Peeple, but for Chinese citizens. Read more
Go up, down, or stay flat. Dunno
What we do know is that China’s markets opened again today. Which is nice.
As FastFT said: “Trading for the first time in a week, China’s Shanghai Composite closed 3 per cent higher, while the Shenzhen Composite gained 4 per cent —the best one-day performance for both indices since September 16 …”
And it may be that there is a legitimate reason to suspect that a real floor of sorts is now in place under China’s A-shares. Or at least, that’s the tale is Goldman is telling. Read more
Noted China bear Zhiwei Zhang, once of Nomura and now at Deutsche, is talking up China’s near-term economic prospects.
The reason? He thinks its fiscal slide — predicated on falling land sales which accounted for 22 per cent of general government revenues in 2014 — has come to an end.
You may remember this, from Zhang, in January:
This year, China will likely face the worst fiscal challenge since 1981. We believe this is the most important risk to the economy and one that is not well recognized in the market…
Right, so Glencore most probably isn’t the next Lehman.
But that doesn’t mean it can’t also herald a rather large change. Take this from BofAML:
With increased regulatory scrutiny on bank commodity exposure, we think that “business as usual” won’t be an option. While we don’t see an imminent liquidity crisis, we note that bank credit may inevitably tighten, albeit over time. Also, business models may need to be reengineered to be less dependent on cheap and easy access to financial leverage.
Not so bad this month, particularly when you take into account expectations and the headline $94bn fall we saw in August.
Elsewhere on Wednesday,
- A Chinese town being buried under the coal that made it.
- “I’ve come to their tax-haven sex mansion to hear their improbable story—how two sons of an ultrareligious Jewish neighborhood in Brooklyn witnessed the birth of a new kind of lending, made a fortune, and then saw it all come to an end.”
- Data as a waste product.
- The NY Fed is still talking about bond market liquidity. No. Really. Read more
So charted by Citi.
As they say, the coolness of global inflation is not just an energy price story:
Elsewhere on Tuesday,
- The pre-requisites for the next default cycle are now in place.
- Disrupting disruption.
- Praet charts the eurozone’s shabby recovery.
- Dan Davies on political protest and journalism.
- “On Monday, the two major fantasy [sport] companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading…”
- Pain in the hedge, Read more
Elsewhere on Monday,
- In which the IMF worries about EM corporate leverage.
- Uncle Sam spam.
- People. Get. A. Grip: Glencore is not the next Lehman.
- “Streetlamp corruption” in China.
- China’s middle-class dream is in peril.
- “The Turing scandal has shown just how vulnerable drug pricing is to exploitative, rent-seeking behavior.” Read more
A brief history of Japan’s stock market, charted by Nomura. Do click to enlarge/ to spot the bubbles:
From Credit Suisse’s James Sweeney and team: Read more
Elsewhere on Friday,
- Prisoners of derp.
- Going long Sun Edison.
- The “temptation to teach products to lie strategically will be as impossible to resist for companies in the near future.”
- Lagarde-ian of the galaxy. Read more
Elsewhere on Thursday,
- Why it’s better to ask for forgiveness than permission.
- We are living in a robot moment — rejoice, cower, and copulate?
- Children of the yuan percent.
- Unsure of what to do, Chavez retreated to a monastery in northern New Mexico to clear his head. In the midst of cleaning toilets, he had an epiphany: “God told me to go to Goldman Sachs.”
- Yelp for people. Read more
Currency wars are either everywhere or nowhere. We know that much.
What we also probably know is that currency devaluations in today’s environment are indeed approaching beggar thy neighbour policy without commitments to be irresponsible and/ or supportive fiscal action. Read more
I don’t know what you want to call me. Santa Claus is what, eh, [journalist x] called me earlier. You want to call me a hawk.. I don’t know. I don’t go by these things. My name is Raghuram Rajan and I do what I do.
- The RBI governor, 29 September
And yes, that’s certainly A reason for why he cut the policy rate 50bps to 6.75 per cent on Tuesday, twice what had been expected.
Here’s another one, via Credit Suisse’s Neelkanth Mishra: Read more
According to Nomura’s Nordvig and team “the EM [FX] debt bonanza is over”.
Which is nice if you thought it was a measure of building risk…
After three years (2012-2014) of very strong net issuance in emerging markets (around $250bn per year), issuance has dropped to much lower levels during 2015. Chinese entities managed to issue around $50bn in debt, mostly in the early part of the year, but net issuance in other emerging markets has essentially ground to a halt.
From Goldman’s latest Top of Mind report:
Do click to enlarge but note that not (fully) pictured are the massed elites that make reform a less than linear process, particularly when objective number one is almost certainly the continuing control of the CCP. Read more
Elsewhere on Tuesday,
- Levine on materiality and how you maybe don’t actually know it when you see it.
- Predictions for the year 2045.
- Bard Finance, LLC: Dirty deeds in the wool trade.
- Carl Icahn eyeing Sundance with 2min trailer for 15min movie. Read more
The tale of Chinese State Owned Enterprise reform is long and ongoing. So we’re going to break it down via an individual “reform” effort that has more than a passing resemblance to the Sinopec Conjecture…
It also reminds us that however you cut it China isn’t about to let go of control. Bit beyond us why anyone was shocked by this kind of thing:
China’s Communist party must tighten its grip on state-owned enterprises in order to maintain the “socialist direction of their development”, the country’s leadership said, an edict which chafes with reforms aimed at improving efficiency and profitability in the lumbering sector…
This particular tale though, whence wider lessons can be drawn, concerns Jiangxi Salt and comes via Gavekal’s Chen Long (bit chunky but very worthwhile, our emphasis): Read more
Off some 19 per cent at 78.62 at one stage this morning. UPDATE: Make that 27 per cent, 72p and counting. Now… Read more
We don’t mean to keep banging on about it. But the bad loans in India’s banking system are both a significant barrier to a new, and badly needed, investment cycle getting properly underway — and a source of some hilarious numbers.
From Credit Suisse’s Ashish Gupta on the Reserve Bank of India (the regulator here): Read more
Elsewhere on Monday,
- Tomorrow’s dystopia comes ever closer.
- The Economist: “it makes sense to look beyond inflation—and to consider targeting nominal GDP (NGDP) instead.”
- Why has deflation returned to Japan?
- What if the Fed is wrong?
- 1099 as antitrust.
- Things I totally agree with: “there’s an internal VW story – or perhaps industry-wide story – here that I’d love to hear.” Read more
So, hypothetically, the world has reached its current credit limit. Which, again hypothetically, explains this kind of thing. From Citi’s credit maven, Matt King:
Elsewhere on Thursday,
- There will be unicorn tears.
- Krugman, cautiously: “China still seems to me not big enough to bring down the rest of the world.”
- Balding looks again at the Chinese service sector.
- Kadyrov “is vulgar, venal, vicious, venerated and very rich: somewhere between Uday Hussein and the Notorious B.I.G.”
- Comparing VW to the finance industry. Read more
In the event of a new downturn please press the giant red button. To do so please break through the glass emblazoned with the words “political reality”.
What to do if the world turns sour is, of course, a fair question. And one that Andy Haldane recently tackled while discussing 5000 years of dread, the record low interest rates and stretched central bank balance sheets, we are currently seeing.
Citi are starting to point to a new global recession too, triggered by EM and a stumbling China. We’re not sure we buy that just yet but here’s Citi’s Englander with what he think is coming down the policy path in response, with our emphasis:
We now think that the move to central banks endorsing fiscal policy and essentially monetizing the added spending will be relatively quick and direct, in the event of a sudden slump in the global activity.