Elsewhere on Friday,
- Turkish economic myths.
- Even in Holland prostitution and central bank work don’t go together very well.
- Buying Virtu and existential angst.
(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.
Elsewhere on Thursday,
- The asymmetric-information problem doesn’t disappear; it merely regresses.
- “Reading Wilhelm II on every conceivable subject for more than 1200 pages… is like listening for days on end to a dog barking inside a locked car.”
- Your ECB protest retold in three pictures.
- Fighting the bubble in bubbles.
Evidence of a potentially large change in India’s banking system from Credit Suisse and Neelkanth Mishra’s India markets team:
Even within bank loans, which are losing share to bonds in corporate borrowing, [public sector, or PSU, banks] are losing share to private banks, being short of capital. In this environment, by allocating just Rs80 bn for PSU bank recapitalisation in the FY16E budget (half that of the previous year, and the lowest after FY10), the government has shown willingness to let PSU banks fall in relevance, and not perpetuate moral hazard by bailing out weak banks. This is a remarkable and unexpected change in stance, given the potential advantages in micro-managing three-fourths of the bank lending space in India.
And lo did the wails of certain politicians rent the sky. Read more
Elsewhere on Wednesday,
- Jamie Dimon, Dan Davies and the “Digital Nonlocability” test — if you can’t put your finger on something in a 50 year chart, it’s probably not important.
- Of life, death and pirates.
- “Citi still has a role to play even in Lending Club lending: That lending requires money, and Citi is a bank, and banks are — still — where the money is.”
Deutsche are back with their cheap date index. And some other price comparisons, of course:
We recomputed our three indices: “The Weekend Getaway Index”, “The Cheap Date Index” and the “Graduate Recruitment Index”. India and Mexico were found to be the cheapest places to recruit and deploy a fresh MBA, but Singapore and Hong Kong were found to be surprisingly reasonable. The US is now the most expensive place in the world to hire from a top school.
For a quick weekend getaway, Sydney, Paris and London remain the most expensive due to high hotel room rates. Mumbai and Delhi are the cheapest but Tokyo, Ottawa and Toronto were found to be surprisingly attractive. Indian cities are also the cheapest places to go out on a date. Mexico City and Rio de Janeiro were also found to be reasonably priced. Despite Yen depreciation, Tokyo is still an expensive place for a date. So are Wellington and San Francisco.
We assume we’ve made our position on this pretty clear… but apparently Citi remain unconvinced.
To wit: “If the Chinese market were to double from here it would indeed be in bubble. The same is true for Asia, a doubling would put us back at 3x book which over the last 40 years has been the peak – four times. When we get close to those levels we will be in a bubble, till then it’s a bull market.”
From their GEMs team, which has been preaching China equities for quite a while (with our emphasis): Read more
Elsewhere on Tuesday,
- “As with sex in Victorian Britain, there is a double standard with capitalism in North Korea: everybody does it, but few publicly admit to its existence.”
- “Bonds are like houses” says metaphor trashing man in piece about bond market liquidity fears.
Elsewhere on Monday,
- The Federal Reserve on avalanche patrol.
- “Couldn’t we say that a tie is really a symbolic displacement of the penis, only an intellectualized penis, dangling not from one’s crotch but from one’s head, chosen from among an almost infinite variety of other ties by an act of mental will?”
- GE and the not so attractive SIFI label.
- The declining demand for skill, or why income inequality isn’t all about education.
Answer below the break, courtesy of BofAML’s Michael Hartnett: Read more
We’ve spilt a fair few pixels on the potential limits of negative rates and proposals to get around the pesky zero lower bound. Citi’s Buiter has weighed in on this for some time and has done so again on Thursday.
We present three practical ways to eliminate the ELB: i) abolish currency, ii) tax currency or iii) remove the fixed exchange rate between zero-interest cash currency and central bank reserves/deposits denominated in a virtual currency.
Yes, dot-com comparisons are flung about all too easily. But it’s quite hard to argue with the fairness of this one from Bloomberg:
The world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look tame by comparison.
The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156…
Valuations in China are now higher than those in the U.S. at the height of the dot-com bubble just about any way you slice them.
It’s apparently sorely needed, if this from Nomura’s Jens Nordvig on EM FX pessimism is anything to go by:
During my presentation [at Nomura's annual central bank conference], I asked a number of simple questions about currencies. One of them was on the 2015 outlook for EM currencies – 67% of the audience was bearish, with the rest evenly split between bullish and neutral, a pretty extreme result, as these polls usually have a lot of neutral answers.
Nasdaq in the 1990s, Dow in the 1920s, silver and gold in the late 1970s, USDRUB, Bitcoin and oil more recently…
An example of spurious pattern searching or prescient warnings of a dollar bubble?
*shrug* We dunno.
But here’s HSBC’s position, via charts first and then words: Read more
Elsewhere on Thursday,
- The rise and fall of Drexel in quotes: “The blanket term greed has no meaning… That’s just an adjective for people who write about this who don’t understand what it was like.”
- The world will only get weirder.
- Summers responds to Bernanke on sec stag.
We’ve already had some of the IMF Cofer story spelt out, namely that “foreign currency reserves in emerging markets fell last year for the first time in two decades”. At the least, there’s a hint of a new divergent pattern between EM and DM central banks going on there.
But we wonder if we mightn’t squeeze a bit more out of it. Particularly where the euro is concerned. The IMF data showed that the share of euro in global central bank reserve assets kept falling last year — to a new cycle low of 22 per cent. However, as Deutsche’s George Saravelos says, almost all of that drop is down to valuation effects, rather than active selling.
Of course, he also says that’s not the full picture. With our emphasis:
The IMF data excludes two of the world’s largest holders of FX reserves, holding as many assets as the rest of the world’s central banks combined. It is precisely these holders that have the largest ongoing potential to sell euros:
… By the notorious PBoC?
To be clear, the issue here is falling M0 in China.
SocGen’s China watcher in chief Wei Yao suggests that this is perhaps more important to real growth than the normally fixated-upon M2. Read more
What death of blogging?
Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog.
- Ben S. Bernanke | March 30, 2015
Elsewhere on Monday,
- Your Shanghai equity frenzy continues.
- In 2014 Apple spent more on repurchasing stock than the top 500 Asian firms combined.
- Three inequality tales.
Elsewhere on Friday,
- So you wanna be a professional Russian troll? Well, the quota is 135 comments per 12-hour shift.
- Munilass on how Chicago has used financial engineering to paper over its massive budget gap.
- How poor are the poor?
- Bitcoin might be an idiotic investment, but it’s not as bad as penny stocks.
A Chinese rendering of jusqu’ici tout va bien courtesy of Bloomberg:
The chief China strategist at Bocom International Holdings Co. points to soaring price-to-earnings ratios, the shrinking yield advantage that stocks offer over bonds and the fact that mainland-listed equities now trade at a 34 percent premium over nearly identical shares in Hong Kong.
So what’s Hong’s advice to investors?
Keep buying, of course.
Elsewhere on Thursday,
- Silicon Valley’s bullshit empire is impervious to critique.
- “Maybe the deal is a money saver, maybe it isn’t, but in the 27 minutes since it was announced, I simply don’t know.”
- Keeping Indonesia supplied with cash isn’t easy.
Sentences to remind us of the nuttiness of Chinese equities over the past few months from BNP Paribas’ Richard Iley (and yeah, the Shanghai Comp fell 0.8 per cent today we have to admit, but that just broke “a 10-session winning streak — the longest in 23 years, according to Bloomberg data — that had taken the index to its highest since May 2008″):
Against all odds, the best performing asset class on the planet over the last nine months or so has been Chinese equities. After languishing for the first seven months of 2014, Chinese stocks have since been on an incredible tear, ending 2014 up a remarkable 49% in USD terms, even outstripping the c.28% annual return posted by Bunds (Chart1). And the strong gains have continued so far in early 2015. Up almost 12% in USD year-to-date at time of writing, Chinese equities continue to sit atop the heap of global asset returns. All told, the Shanghai and Shenzhen markets have surged almost 80% in local currency terms since mid-2014 (Chart 2).