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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.

We are the ECB. You will be assimilated

Or moved into riskier assets by the ECB’s corporate bond buying machine (CSPP to its friends).

Resistance may be futile but we’ll have to wait to make sure.

To move into those riskier assets you’d like to think that eventually the search for yield will become a real, worthwhile thing in Europe again. And not everyone buys that – Credit Suisse for example point out that over the last 2.5yrs in particular government bonds (bunds) have outperformed both high and low yielding credit assets. Their point is that “the time to hunt for yield as a dominant strategy (rather than as a short-term trade) might actually be when yields start to rise.”

But BofAML’s European credit team think it’ll maybe happen a bit sooner: Read more

Further reading

Elsewhere on Friday,

- An auction house learns the art of shadow banking.

- “If the adults in the room remain unwilling to take macroeconomic challenges seriously, Mr Trump’s debts will be the least of our worries.”

- Benoît Cœuré: Assessing the implications of negative interest rate.

- Ben Inker: “But the trouble with returns that come from falling discount rates is that they represent an increase in the present value of the asset without any increase to the cash flows to the asset class. The future expected return to the asset has fallen, and in a way that more or less precisely counteracts the increase in current value. In other words, the present value of the assets has risen but the future value of the assets has not. “ Read more

This is nuts. But cheer up?

Andrew Garthwaite and team at Credit Suisse will not let their recent client tour get them down.

No matter how bearish they get… Read more

Of elections and inflation in India

Here’s something to consider while we wait (and wait) for India to announce who is going to replace the outgoing, inflation fighting, Raghuram Rajan at the Reserve Bank.

And perhaps something for whoever does that replacing (in September) to keep in mind too, particularly if he or she is met at their desk by a clamour for rate cuts. Read more

Further reading

Elsewhere on Thursday,

- The Trump-Putin fallacy.

- A case for the Fed to sell some bonds.

- “The fact that people are once again discussing helicopter money — and indeed negative rates — represents a huge failure of fiscal policy.”

- We should ask of economic theories not: “are they true?” but rather “how true are they?” Read more

Today in circularity and potential leading indicators

From SocGen, with the suggestion that the recent shoddy PMI numbers might get worse before they get better:

 Read more

The BoJ’s delivery problem

Expectations can be tricky things to manage, as in life so in central banking.

The Bank of Japan has everyone ramped up for its decision on the 29th. Although not many actually expect helicopter money (for a variety of reasons, including legal and excluding the fact that it’s not clear it would actually work) there is a belief in the market that some extra bit of stimulus is en route — which will be backed up by some fiscal goodness too.

Here’s a Barclays summary of those expectations: Read more

Further reading

Elsewhere on Wednesday,

- Andrew Ross Sorkin on the (potential, and most probably just partial) return of Glass-Steagall.

- How does this hedge fund manager make so much money? He haz spreasheetz. Obviously.

- Also… Bridgewater, sex, fear, and video surveillance.

- Musings on the implications of a higher dollar Libor. Read more

A friendly reminder that return is “not really a function of yield”

When x happens, yields fall — Rule 1?

It’s not a search for yield, it’s a search for safety — Potential Rule 2?

Two charts to make the point for us once again from the good folks at BofAML’s relative value department: Read more

Further reading

Elsewhere on Tuesday,

- Says the BoE: “CB digital currency… issuance could have far-reaching consequences for commercial and central banking – divorcing payments from private bank deposits and even putting an end to banks’ ability to create money.”

- Seeing China through its economic history. And how the west was won.

- Banks giving up on their dreams of global empire…

- More on Larry Ball’s contention that Lehman could have been saved by the Fed.

- “Justin Zhen was in his WeWork [ the world’s ninth-richest startup, valued at $16 billion] office in midtown Manhattan on July 19 when he published the blog post that would result in his startup, Thinknum, being removed from the co-working space three days later.” Read more

How to trade President Trump/ Clinton

Below the break is just one of what we are sure will be many US election guesswork charts.

It’s from HSBC this time and includes solid ‘buy gold’ and ‘currency war’ moments.

The shorthand at the top of each column could be expanded thusly:

Status quo/gridlock (Democratic president, Republican or divided Congress): Limited impact on current economic outlook

Bigger government (Democratic president, Democratic Congress): Modestly higher growth, higher budget deficits

Mainstream conservative (Republican president and Congress): Short-term growth boost, higher deficits and inflation

Populist overhaul (Republican president and Congress): Spike in economic uncertainty; after short boost to GDP growth from tax cuts, stagflation could set in; inflation could rise to 4-5% by 2018

 Read more

Further reading

Elsewhere on Monday,

- Gavyn Davies: Regime change in the financial markets.

- Bill McBride: The future is still bright!

- You break it, you pay for it, Brexit edition.

- John Lanchester on Brexit: “One of the things you notice, travelling around the country talking to people about economics, is that young people in particular feel they are living in an economic system rather than a political one.”

- Er, and Trump and Putin is maybe, actually, possibly, a real thing? Read more

It’s a negative yielding world, we just get to scramble in it

Here’s a rough piece of calculation based on the last few years of news: When x happens, yields fall. An example of this post-GFC rule-of-thumb was Brexit and its fallout.

The potential lesson from said rule is that yield hunting isn’t fun anymore, say Credit Suisse’s William Porter and team, with our emphasis: Read more

Further reading

Elsewhere on Friday,

- Musk just threw down the gauntlet to Uber, public transport and logistics.

- The Brexit campaign that was, from a PR/ marketing perspective.

- The meritocracy is just another way to put you down.

- Eggertsson and Summers on secular stagnation, how it spreads and how it can be cured.

- “The case for cash is not proven, but it needs to be heard.” Read more

Further reading

Elsewhere on Thursday,

- Levine 1: Insider trading is sometimes a family affair.

- Levine 2: HSBC currency traders got greedy on Christmas.

- Emad Mostaque: Putting Turkey’s purge in perspective.

- George Magnus: No RMB crisis like last year, but it could be a false sense of security. Read more

War and Peace in our time

Or, the sharing economy, Marx and you, from Macquarie’s equities team (with our emphasis):

Louis-Napoleon Bonaparte had the unique distinction of being the last French emperor and the first democratically elected French president. His sweep to power by a popular vote in 1848 was achieved by relying on what Karl Marx described as ‘lumpenproletariat’ vote. What is ‘lumpenproletariat’? In Marxist theory these are sections of society that slipped below conventional occupations, and hence no longer belong to either proletariat or capital and financial classes. As described in greater detail in the note, according to Marx it includes various groups, ranging from “discharged jailbirds and vagabonds to pickpockets, tricksters, pimps, porters, tinkers….disintegrated mass, thrown hither and thither.’ It was the same group that concurrently fuelled the rise of the powerful ‘anarchist’ movement, dedicated to ‘blowing up the system’, heightening social and geopolitical tensions led mostly by well-to-do and educated elite.

 Read more

It feels good to be CSPP’d

That’s the ECB’s corporate sector purchase programme (CSPP), of course, which is having what looks to be an easy-to-spot effect on the cost of borrowing for those lucky enough to be inside the fold.

From Citi:

 Read more

Further reading

Elsewhere on Wednesday,

- The great pensions cock-up.

- German macroeconomics revisited.

- Jonathan Freedland: “… at the Republican convention in Cleveland, Trump has taken this defiance to a new level. Not content with demonstrating that he is unbound by the strictures of ‘political correctness,’ he has seemed determined to show that he is unbound by the standards of basic political competence.”

- Everything you need to know about the Ethereum “hard fork”.

- And, from the BoE: The macroeconomics of central bank issued digital currencies, aka ‘print bitcoins’. Read more

Your post-Brexit asset performance update

From Deutsche’s House View:

 Read more

Further reading

Elsewhere on Tuesday,

- China slowdown story has moved into a new phase as government props up ailing private sector?

- QE metaphor du jour: “So could it really be that, all along, central bankers have been treating us like slime mould?”

- The man who ghostwrote The Art of the Deal is having some regrets: “I put lipstick on a pig,” he said. “I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is.” He went on, “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

- The diary of a desperate mother trying to put food on a Venezuelan kitchen table. Read more

I will build a great, great (note about Trump’s) wall

ICYMI, this might be the greatest note of the year so far*:

 Read more

Ten per cent of respondents throw the word ‘never’ around quite casually…

 Read more

Further reading

Elsewhere on Monday,

- Gavyn Davies on Japan’s flirtation with helicopter money.

- The Herbalife Rorschach Test.

- McKay Coppins on how the world taunted Donald Trump into running.

- A critique of Jeremy Corbyn by his former shadow minister Thangam Debbonaire which is… not great tbh. Read more

Further reading

Elsewhere on Friday,

- Aswath Damodaran: Tesla is a story stock, it’s just not clear what the story is.

- Cameron’s failure was austerity.

- Everything you need to know about Theresa May’s Brexit nightmare in five ten or so minutes. Read more

The perpetual JGB cometh

And you may be able to blame Ben Bernanke for it (via Bloomberg): Read more

Brexit upsides, RMB devaluation edition

Upsides for whom, you ask?

For Chinese policymakers, we respond.

As do Deutsche Bank:

More subtly, Brexit indirectly helped reduce concerns of a ‘risk off’ shock from China thanks to the stealthy RMB devaluation around the UK vote. This has confirmed a new-found market tolerance of China currency slippage, at least when it looks controlled by policymakers.

 Read more

Further reading

Elsewhere on Thursday,

- Nicholas Shaxson: The great Trump tax mysteries.

- Facebook Live vs/ as journalism, a technical glitch.

- A referendum on taxes would have been just as sensible.

- Sometimes it’s hard for owners to talk to companies. Read more

This is nuts. When’s the crash?

For bonds, at least, that question seems to become ever more rhetorical as things get further from what used to be considered normal.

But we’ll push on.

ICYMI, from Deutsche’s Jim Reid and with our emphasis:

On this theme, both Bloomberg and Reuters reported yesterday that Deutsche Bahn has become the first non-financial company to issue debt with a negative yield. The railway operator sold €350m of five-year bonds with a zero coupon which were priced to yield -0.006% according to Bloomberg.

 Read more

Imagine there’s no HFT…

“So – what is the value of a liquidity provider?”

A question asked by Credit Suisse’s Ana Avramovic and another judgement call on high frequency trading’s most often cited benefit — namely, do HFT’s actually provide a benefit in the form of liquidity/market making? Or is all the volume they create just noise, signifying nothing of real use.

From Avramovic, relying on a counterfactual argument and with our emphasis: Read more

Further reading

Elsewhere on Wednesday,

- Dani Rodrik: The abdication of the Left.

- Creating a virtual economy, Pokémon Go trading edition.

- Xinhua takes high-road over South China Sea/ Philippines dispute.

- The Italian bank crisis – the one graph (nominal GDP drop) version. Read more