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.

UK banks and their own decaying NIMs

This is a prophecy brought to you by Citi:

Over the past five years the incumbent UK domestic banks have managed to maintain and improve net interest margins. As asset yields have declined the banks have been able to respond via careful liability management, lowering savings rates and retiring expensive legacy wholesale funding issued during the financial crisis.

We believe this positive trend is now set to stall and reverse. While banks will probably be able to mitigate the impact of lower rates over the next 6 months, we fear that beyond this net interest margins [NIMs] could fall sharply.

 Read more

Further reading

Elsewhere on Wednesday,

- Reverse Voxsplaining the EpiPen issue: Drugs vs chairs.

- Buzzfeed on ISDS, part two: The billion-dollar ultimatum.

- The economics and politics of manufacturing fetishism. Read more

Further reading

Elsewhere on Tuesday,

- The Fed has yet to take monetary reform seriously.

- Gavyn Davies: Sims highlights fiscal dominance at Jackson Hole.

- Krugman: Monetary vs fiscal policy, revisited.

- How should we read investor letters?

- SEC and revolving doors: Q&A with Eric Ben-Artzi, the Deutsche whistleblower who rejected a multimillion dollar award. Read more

The RBI wants to disintermediate you!

The Reserve Bank of India announced some fun stuff last night, which you can read about here and here.

The short story is that the central bank (with shiny new governor about to take control) seem to be trying to push large corporate borrowers away from banks — for lots of occasionally crony capitalist reasons — and towards a growing corporate bond market. Read more

It really is very quiet

We mean, for poor Macro Man “there have been only five prior days in his lifetime where the 30 day historical volatility of the SPX has been lower” — January 3-6, 1994 and September 12, 1995.

And consider this series of charts from Citi. Read more

Further reading

Elsewhere on Friday,

- ‘It took on a life of its own’: how one rogue tweet led Syrians to Germany.

- Teenage hedge fund manager Jacob Wohl — nicknamed “Wohl of Wall Street” — had his first run-in with a regulator.

- Why do we talk about helicopter money?

- The US Treasury just declared tax war on Europe. Read more

Further reading

Elsewhere on Thursday,

- Superman and stocks: It’s not the Cape (CAPE), it’s the Kryptonite (cash flow)!

- China’s ever more mysterious tourism numbers: “China’s increased [and still pretty inexplicable] spending on tourism is getting close to equaling its decreased spending on commodities.”

- How much control does the central government really have in China?.

- Whom do the Fed bank boards serve? Also, the Fed welcomes protestors.

- Levine takes on the Bernstein ‘passive investing may be worse than communism’ thing. Read more

As an investment strategy grows more popular, the probability of a comparison involving Marxism apparently approaches 1

Is there a Godwin’s Law equivalent for Marxism? Do we need one since the Law basically means that the longer an argument goes on the more likely we are to reach for extreme examples while in attack or in defence? So, you know, this kind of thing is already covered?

 Read more

Further reading

Elsewhere on Wednesday,

- Apollo paid itself some fees and gave itself some loans.

- Bernstein: “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism.”

- DeLong vs Matt King on safe assets and the search for yield.

- DeLong vs Stan Fischer on inflation targets and the Fed.

- The folly of prudence, IMF edition. Read more

Further reading

Elsewhere on Tuesday,

- DeLong with a tentative macroeconomic reform agenda.

- Down the (Jackson) hole.

- Stanley Fischer rewrites Fed inflation target, prepares to throw people out of work.

- Gawker.com bows out/ it was murdered.

- Taleb on employment as a risk management strategy (also autocrats): “In short, every organization wants a certain number of people associated with it to be deprived of a certain share of their freedom. How do you own these people?” Read more

Continuity at the RBI

You know, we may be wrong, but there seems to be a consensus building around the appointment of Urjit Patel to replace (the potentially ousted) Raghuram Rajan at the head of the Reserve Bank of India in September…

See if you can spot it.

Spoiler: it’s in bold. Read more

Of Chinese bank bailouts, SOE pay scales and credit cycles

First, have a look at these from UBS’s Asia team earlier in the month:

 Read more

Further reading

Elsewhere on Monday,

- Is it too hard for cities to get denser? Featuring Walt Disney and the holdout problem.

- The Japanese zoning system.

- Brexit, economists and journalists, oh my.

- Virtu profiled. Hasenstab profiled.

- Hedge fund manager profited from death arb. Read more

Further reading

Elsewhere on Friday,

- The Economist does the Keynesian multiplier.

- What is the opportunity cost of additional government borrowing?

- “Contrary to market perception, bank recapitalisation and bailouts [in China] have begun,” said UBS’s Jason Bedford.

- Central bank deposits for you and me.

- Brexit harm denial and the exchange rate. Read more

Pax Global and the occasional woes of a negative sell-side analyst…

Pax, Origin Latin, literally ‘peace’.

Er, yeah.

From Macquarie’s Timothy Lam:

PAX Global held an analyst briefing on Aug 10. Before the meeting started, we were asked by the company’s CFO to leave the meeting room. We believe all analysts should be able to attend analyst briefing, regardless of their view on the company.

 Read more

Further reading

Elsewhere on Thursday,

- “Trite phrases like ‘move on’, ‘be positive’, ‘just do it’ and ‘we are where we are’ reflect a failure to understand the magnitude of the Brexit task.”

- Krugman on the revealed murkiness of zero-bound economics.

- Adair Turner: The question isn’t whether helicopter money would work, it’s “can we design rules and institutional responsibilities that ensure that monetary finance is used prudently?”

- And Peter Stella on heli money: “I not believe the permanent fiscal expansion must be financed with a permanent increase in bank reserves.” Read more

Further reading

Elsewhere on Wednesday,

- Taibbi: A Republican Workers’ Party?

- Yes Minister Brexit special – Sir Humphrey explains all.

- Transmitting liquidity shocks across borders: evidence from UK banks, from the BoE.

- Soaring CEO pay is also the right’s problem.

- Icahn: “Trump is right on about our economy. A capitalistic system cannot exist if government is at war with business.” Read more

Finger still in air, GBP forecasting edition

Right, with the warning that we are back in The Forex and nothing is certain, this from HSBC is an unpleasant paragraph for those long the Great British Krona*:

In our view, GBP is the main part of the adjustment mechanism but the adjustment is not over yet. We still see GBP-USD at 1.25 by end of Q3 and 1.20 by year-end. However, we now see GBP weakness extending into 2017 and we now forecast GBP-USD at 1.10 by end-2017. This aligns with our economist’s view that the Bank of England will ease even further, cutting rates by 15bp in November and expanding QE in February next year.

 Read more

Further reading

Elsewhere on Tuesday,

- Fannie and Freddie will be profitable after their next bailouts, too.

- Are European stress tests stressful enough?

- “Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”

- Dean Baker and John Cassidy on Trump’s economic speech: “The Detroit Economic Club was the final destination, and it marks the resting place of Donald Trump the economic populist.”

- Bernanke on why the Fed is rethinking everything. Read more

Of $40 oil and forced SWF selling

You know who doesn’t like a falling oil price? Sovereign wealth funds for countries dependent on high oil prices and in love with their (endangered) petrodollars.

And a risk based on that dislike is a presumption of forced selling and equity market weakness becoming self-fulfilling as/ if oil prices slide. Stable oil prices means SWFs don’t have to suddenly liquidate but the opposite would also seem to be true…

The last time JPM’s Flows & Liquidity team looked at this risk they based it on a fall in Brent to an average price of $45 per barrel.

They now assume an average oil price of $40 for 2016 and also note that the “YTD average has already fallen to $42.” Read more

Further reading

Elsewhere on Monday,

- The Stolper-Samuelson theorem… an inconvenient iota of truth.

- Defining and embracing neoliberalism.

- Tales from Chinese factory floors.

- A portrait of the hedge fudge manager as an obsessed China short. Read more

The greatest trick central banks ever pulled…

666: BoE & RBA easing this week…global central banks have now cut rates 666 times since Lehman; extreme monetary policy more positive for bonds ($1.0tn inflows since LEH) than stocks ($375bn inflows).

That’s from Michael Hartnett and team at BoFAML. Read more

Further reading

Elsewhere on Friday,

- Er… Hampton Creek ran as “undercover project to buy up its own vegan mayo“?

- Will low rates kill independent central banks?

- Minsky’s moment.

- Related: Kocherlakota on infra spending, tax cuts and basic income.

- Also related: If only someone had warned us, Brexit edition. Read more

Back to a low vol FX world?

This is from HSBC’s FX team, they of most fervent RORO use, who basically think that if Brexit, the Turkish coup attempt and the BoJ’s not pulling the trigger as expected didn’t rattle the markets properly then something must be up.

To demonstrate this, they take us back to 2014 when things were in proper (and the fear was indefinite) low vol mode: Read more

Further reading

Elsewhere on Thursday,

- “Sex is a three-letter word that has rarely appeared in an Investment Outlook until now” – Bill Gross, August 3

- Goldman regulatory advisers were too friendly with regulators.

- Zeitgeist-y IMF working paper du jour: “Thomas Piketty’s Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. “ Read more

This is nuts, ‘US30Yr Bond Yield to Evaporate’ edition

You’ll have already seen Nomura’s Toshihiro Uomoto attempt to explain the state of the world through chart, here.

But we thought we’d also share his suggestion that “30yr Treasury yield should near 0% within two years” as the “scarcity of products with a positive yield should continue facilitating the inflow of funds into the credit market.” Read more

When modern art meets global financial markets and monetary malaise

We were going to write about JGB yields jumping after the BoJ disappointed the market and made some (Nomura) think that even if the BOJ hasn’t reached the point where it can no longer deepen its use of current policy tools, “continued use of those tools could hasten the point at which it becomes difficult for the BOJ to act, with the exception of foul play*”

We were then going to compare that jump in yields to a similar jump in May 2013, when 10-year yields spiking “above 1% for the first time in 14 months… fed into an astonishing 7.3% slide in the Nikkei 225″, according to BoNYMellon’s Simon Derrick, and note that all we can really learn from that move is that it led to market turmoil.

But then we saw this work of chart, from Nomura’s credit team, and all of that good work was undone: Read more

Further reading

Elsewhere on Wednesday,

- We, the people, as banks: “We like the elasticity of credit, that allows us to spend today and put off payment to the future. But we don’t like the discipline of money, which is to say ultimate payment.”

- The value of settlement finality.

- A very good Guardian longread on the 1MDB scandal.

- The relative performance of high yield and crude oil, charted.

- “QE does have some economic effects; it’s just (I’m not ashamed to say) still difficult to discern just what these are.” Read more

Some pre-IPO questions for Postal Savings Bank of China

This state-owned thing is massive. China massive.

Fifth largest bank in China by assets and largest by number of branches massive — 40,000 branches nationwide and “about 500 million clients or nearly half of China’s population” massive at that.

Its plan is to IPO in September in Hong Kong… Read more

Further reading

Elsewhere on Tuesday,

- Secrets and agents.

- Ten fun facts about the European stress tests.

- Why again is the IMF pushing fiscal consolidation in the eurozone?

- “Finally, households with the most negative wealth are characterized by their relatively large shares of student debt, 47 percent, and mortgage debt, 22 percent”

- “The @theranos presentation feels like a bait-and-switch. New product minilab what? I thought it was results of the Edison machine?” Read more