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.

Honour roll, Japan GDP edition


 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

The 6am London Cut

Markets: Japanese stocks rallied to their highest point since 2007 after a three-day weekend, as investors put faith in the power of policy makers to revive the Japanese economy. The Nikkei 225 crossed 17,000 for the first time since 2007, peaking at 17,127, before euphoria calmed somewhat and the gain moderated to 4 per cent. Elsewhere in Asia, markets were fairly subdued. Sydney’s S&P/ASX 200 was up 0.1 per cent, while Hong Kong’s Hang Seng added 0.3 per cent and the Shanghai Composite edged up 0.1 per cent. (FT’s Global Markets OverviewRead more

Further reading

Elsewhere on Monday,

- Fighting the last war.

- Of Moby Ben, the Washington Whale.

- Why a QE-only approach to demand stimulus embeds a troubling political economy, or, how the poor become human shields for the rich.

- Gold: the fear of bubbles created its own bubble, trapping the bubblers. Read more

The 6am London Cut

Markets: Asian markets began November on a subdued note after weak data in both China and Australia took the wind out of their sails. Markets in Japan were closed for a public holiday but futures suggested traders were champing at the bit for Tuesday’s open, indicating the Nikkei 225 is set to jump 3.3 per cent on the back of Friday’s demonstration of the Abe put when the Bank of Japan unexpectedly ramped up its monetary stimulus programme and the $1.2tn Government Pension Investment Fund more than doubled its allocation target for Japanese equities. The Japanese yen, which fell 2.9 per cent against the US dollar on Friday, slid another 0.3 per cent on Monday morning to Y112.7. (FT’s Global Markets OverviewRead more

QE, who needs ya? No, don’t answer that

A farewell to QE (of sorts) from Michael Hartnett et al at BofAML:

A recent US Treasury paper calculated that between Jan’09 and Apr’13 the S&P500 index rose 570 points in the weeks the Fed bought $5bn or more securities, 141 points in the weeks it bought up to $5bn, and fell 51 points in the weeks the Fed sold securities.

 Read more

Further reading

Elsewhere on Friday,

- In Kobani, for the first time, Isis was fighting an enemy that in important respects resembled itself.

- The next financial crisis will be different.

- Give me some crowding-out. Read more

Your Abe put [updated]

Since we can’t put charts in the Cut without borking format for a bunch of readers, here’s what a surprise commitment from the Bank of Japan to raising the monetary base by around Y80tn a year from Y60-70tn, a tripling of annual purchases of ETFs and REITS, and a certain (probably coordinated) GPIF rumour doing the rounds will do to Japanese equities and the yen.

More on the GPIF rumour and the positive and negatives of this latest Kuroda splurge near the bottom.

 Read more

The 6am London Cut

Markets: “Japanese stocks jumped and the yen skidded to six-year lows against the dollar on Friday after the Bank of Japan surprised markets with fresh easing steps – a move aimed at stoking inflation and recharging a fragile economic recovery. The Nikkei stock average rallied [4.5 per cent at pixel with the yen threatening 110 against the dollar] after Japan’s central bank said it would purchase more shares of exchange-traded funds and real estate investment trusts, and extend the duration of its portfolio of Japanese government bonds, to “pre-empt manifestation” of risks.” (ReutersRead more

Further reading

Elsewhere on Thursday,

- There will never be a time when you – the retail investor – are the first to read, understand and react to a news story. Redux.

- AND high-speed traders avoid low-speed website.

- Remembering the suits vs geeks divide.

- “Three recent breakthroughs have unleashed the long-awaited arrival of artificial intelligence…” Read more

The 6am London Cut

Markets: Asian equities were mixed after the Federal Reserve confirmed it would end the asset purchases that have supported economies across the region for half a decade. The moves came ahead of gross domestic product data due out later on Thursday that are expected to show the US economy grew 3 per cent in the July-September period from the second quarter, according to a Bloomberg survey. But concerns about capital outflows from emerging economies now that the Fed has stopped pumping liquidity into the global financial system weighed on some Asian markets. The US dollar staged its third day of gains against the yen, rising as much as 0.3 per cent to Y109.1. (FT’s Global Markets OverviewRead more

This is BABA, what’s your target price? [updated]

First on Alibaba, the FT reports that the Cayman registered derivative contract vaguely related to ecommerce in China — and which floated on Sept 19 the same day the S&P 500 peaked — has almost broken into the list of the world’s 10 most valuable companies:

Shares of Jack Ma’s Hangzhou-based group climbed as much as 2.8 per cent to touch a new record high of $100.50, lifting its market capitalisation above $247bn. Read more