Biography
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Izabella Kaminska joined FT Alphaville in October 2008, which was of course the best time in the world to become a financial blogger. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP’s internal magazine. She has also worked as a reporter on English language business papers in Poland and Azerbaijan and was a Reuters graduate trainee in 2004.

For one week in 2003, and one week only, she traveled on her own initiative to Kabul to report on Afghanistan’s emerging business and banking industry. She stayed with mercenaries, which was cool. She later sold the piece to a business magazine, which was also cool.

The experience, however, taught her the valuable lesson of risk/return trade-offs.

Today she prefers to report from the mean streets of Geneva, Switzerland — a notorious European risk-aversion zone.

Everything she knows about economics stems from a childhood fascination with ancient economies, specifically the agrarian land reforms of the early Roman republic and the coinage and price stability reforms of late Roman emperors. Her favourite emperor is one Gaius Aurelius Valerius Diocletian.

She studied Ancient History at UCL, and has a masters in Journalism from what was then the London College of Printing.

And yes, she is also a second-generation West London Pole (who likes mushroom picking, bigos and pierogi).

Contact Izabella Kaminska

Tesco sees you coming

For those who thought Tesco was just an ordinary grocer….

In reality, thanks to the data-gathering power of the clubcard, big data analytics, and an expanding global footprint that provides major leverage with suppliers, Tesco has become a financial trading/commodities behemoth with an edge over any banking commodity trading division thanks to the data it gleans from its customers.

Let’s just say, if the average commodity trading desk had the consumption info and warehouses of Tesco at its disposal it too would be keen to give away points to even out mismatches in supply and demand. Read more

Of Tesco value points and returns

As already noted, the sharp plunge in Tesco’s share price on Monday following news of its profit overstatement comes with just a hint of accounting irregularity at the UK’s largest supermarket chain.

What we couldn’t help but notice, however, is the interesting array of warning signals that have been gathering at the grocer for years, and their similarity to the sort of concerns that today are being readily dismissed by investors when it comes to value debates elsewhere.

In other words, to what degree has Tesco, an omnipresent retail brand in Britain, been overly dependent on the sort of strategy typically deployed by so-called yieldcos? A.k.a the tendency to dazzle shareholders with earnings per share, while hoping to divert investors’ eyes from a diminishing overall return on capital employed. Something that tends, by the way, to be forgiven or ignored, so long as the stock price itself keeps going up. Read more

The (early) Lunch Wrap

Tesco reveals it overstated first-half results by £250m || British Land’s ‘super-prime’ penthouse breaks sales record || Aldermore Bank plans October London offering || China’s war on graft leads to drop in outbound investment || Siemens buys US oil services group Dresser-Rand for $7.6bn || Scots to get more powers regardless of English devolution talks || Blackstone to pull out of Russia || Alibaba boosts IPO size to world record $25bn || Markets Read more

It wasn’t QE that caused a collateral scarcity this summer

The Liberty Street Economics blog of the Federal Reserve Bank of New York provided a good analysis this week of the summer’s UST settlement fails spike.

For those unfamiliar, settlement fails in US Treasury securities rose to their highest level in more than five years in June, with DTCC figures reaching more than $1.2 trillion in gross fails for the month:

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When break-even inflation expectations are falling…

George Saravelos at Deutsche Bank has looked at Eurozone inflation break-even rates and worries that the ECB may be losing control:

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Cult Markets: When the bubble bursts

This is Jean-Paul Rodrigue’s stages of a bubble chart:

This is a chart of the price of Bitcoin from the BoE: Read more

Chicken Kiev

After Russia instituted its ban on western food imports in August, we noted there was a risk the measures could end up hurting average Russians just as much, if not more, than European farmers.

We also noted that propaganda dynamics could make it hard for westerners to discern the truth with regards to what was really going on. Read more

Cybersecurity dispatches: Managing the IoT poltergeist threat

Imagine the scene in the not too distant future.

An Uber self-driving electric car has just dropped you off home. Your front door has recognised your face, and your fingerprint has authenticated that it’s definitely you. You get into your house, not a key in sight, kick off your shoes, and happily discover that the 3D printing feature in your fridge has already printed the food you plan to consume for dinner. All the appliances you need are on. And everything you don’t need is off, nice and efficiently saving power.

You decide to treat yourself to a quick 30-minute Netflix holographic update, only to get a nudge from your wearable tech that you’ve still got a 10 minute exercise deficit to meet your daily activity quota. It’s a problem because you happen to have signed up to the extreme health management option which shuts down your ApplePay access — without which Netflix won’t work — if you fail to meet your objectives. You quickly get busy on your smart-grid connected treadmill (which conveniently sells off the energy produced by your system back into the grid) and focus on the prospect of an autonomously prepared calorie efficient meal.

When all of a sudden… your utility door flings open and your iRobot Roomba begins singing Daisy, Daisy. Read more

Brent weakness is now a thing

This little chart is becoming a major headache for the world’s biggest oil producers:

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Dispatches from the cyberwar frontline with a horrified Vince Cable

Speaking on the sidelines of the SINET cybersecurity conference being held in London on Tuesday, UK Business Secretary Vince Cable expressed concern over the average age and quality of some of the IT systems of British banks.

As Cable commented to FT Alphaville:

“I’m always horrified when I discover just how ancient the technological infrastructure of the banking system is, a lot of it comes from the 60s and banks are still operating this. One of the reasons why it hasn’t been possible to get proper competition — for example when breaking up RBS –is because the banking infrastructure is just so ancient that they can’t spin it off. And it’s a massively costly business. The financial sector, although in some ways it’s one of the most advanced parts of the economy, it’s often decades not just years behind.”

The comments followed the announcement of a £4m competition for UK cyber businesses to develop ideas to tackle cyber security threats, and initiatives aimed at raising corporate and public awareness of cyber-security risk. It is hoped, in particular, that other mission-critical businesses such as utilities will come together in a collaborative process to spearhead fresh approaches to the problem of cyber crime and resilience. Read more

The (early) Lunch Wrap

Tech chiefs in plea over privacy damage || Bill Ackman plans $2bn Pershing fund IPO in Amsterdam || Phones 4U administration boosts Dixons || SABMiller rebuffed by Heineken || Former BP chief warns on Russia sanctions || Chinese ETFs shut to new investment || Amazon hits India tax snag || Markets Read more

The corporate M&A genotype theory

Merger and acquisition activity, as we all know, comes in waves. There are M&A frenzies and then there are M&A lulls.

But a new study by a group of complexity and evolutionary scientists looks deeper into the social drivers of corporate M&A activity and suggests there may be more intrinsic forces, such as ancestry, at work.

The authors define ancestry as the cumulative number of mergers from all acquired entities — an idea that puts the corporation in the category of an organism which pursues M&A for mainly for survival reasons. The more pronounced a corporation’s ancestry on the M&A front, they say, the more likely it is to survive in the long term. Read more

The (early) Lunch Wrap

EU adds Rostec head to latest Russian sanctions list || Barclays appoints Aviva’s John McFarlane as chairman || Support for No campaign in Scots poll holds up || Virgin Money boosts board amid IPO preparation || Amazon to join rush for Silicon Roundabout || IMF warns of market fallout from a Scottish split || Yahoo faced fines over NSA compliance || Mario Draghi hits back at critics of asset-backed securities plan || Markets Read more

BoE on the potential of the blockchain

The key finding of the BoE’s report on cryptocurrencies is that the technology which supports digital currencies, the distributed open ledger — also known as the blockchain — may have a potential and positive use in the wider banking and asset business.

This is contrary, however, to its position on the Bitcoin currency which it says in its current fixed supply form would expose the economy to significant deflationary risk if it was ever to be widely adopted by the public. Or as they put it:

…the inability of the money supply to vary in response to demand would likely cause welfare-destroying volatility in prices and real activity.

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BoE on the Bitcoin tech arms race

Okay, we know, this is now our fourth post on the BoE’s foray into the world of cryptocurrencies. But we think it may be the most interesting, given that it focuses on the economics at the heart of Bitcoin mining.

For example, who can resist this log scale chart of the computational power per address in the Bitcoin network?:

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BoE on the non-cost advantage of digital currencies

The latest edition of the BoE’s quarterly bulletin looks at the rise of cryptocurrencies and, as we’ve already discussed, expresses a cautiously optimistic attitude towards the technology that drives the system. Less so, however, about the potential of “bitcoin the currency” itself.

In this post, we’d like to look closer at the issue of cost and digital currencies.

You see, monitoring and supervising the global claims system is expensive business, since it takes a lot energy and resources to make sure wealth is allocated fairly to those who supposedly deserve it.

Those who are trusted to do this job tend to be compensated for that burden. Those who do that job really well, meanwhile, are usually paid a bonus by the economy to keep them involved. Historically, that job has tended to be given to a sovereign or to gold. Read more

BoE on the moneyness of modern payment innovation

The BoE’s latest quarterly bulletin delves into the choppy waters of cryptocurrency innovation, providing some useful historical context into what’s going on. As we’ve already noted, the house view on Bitcoin “the currency” is sceptical due to its ultimate inflexibility relative to demand. But the BoE is much more open-minded about the potential of the distributed ledger that drives the Bitcoin system, and sees it a true innovation.

Before we get to the latter point, however, it’s worth presenting the Bulletin’s view on how all these new technologies fit into the monetary hierarchy picture.

As the Bulletin makes clear, while new payments “technologies” do have the potential to expand that unsupervised money base and add risk, they don’t always have to. Read more

The BoE opens Pandora’s Bitcoin box

The Bank of England is daring to open Pandora’s Bitcoin box with two major articles on the rise of cryptocurrencies in its latest Quarterly Bulletin, released on Thursday.

The two-minute take-away is that the report’s authors remain sceptical about Bitcoin’s potential as a currency (due to its inability to respond to aggregate demand), but are open minded about the potential of the technology of the distributed open ledger. As we’ll explain later, a lot of that open mindedness is related to the distributed ledger’s potential to bringing transparency to financial transactions outright, and also its potential to limit the system’s dependence on centralised clearers and counterparties.

The best thing about the report, however, is that it brings much needed clarity on the issue (and hierarchy) of the modern money system. Read more

Beware the Yieldco

Hedgeye’s Kevin Kaiser is an independent analyst on a lone crusade against the shoddy valuation of capital intensive corporations with limited earnings but with strong dividend payout track records. His question: where exactly is the money coming from?

His biggest beef is with Kinder Morgan, the pipeline operator which recently transformed itself from a Master Limited Partnership into a corporation. But, as Kaiser observes in a new research note, “Yieldco” syndrome could be much more common than that. Read more

The (early) Lunch Wrap

Santander patriarch Emilio Botín dies || French woman to take over as Kingfisher chief executive || France misses its EU budget deficit target || Ferrari chairman quits after ‘misunderstandings’ with Fiat boss || Apple looks to swipe the payments market || AngloGold shares sink after restructuring plan announcement || Markets Read more

Scottish currency union, the unilateral Montenegro option

Here’s an interesting point from Capital Economics’ Roger Bootle on Tuesday regarding a potential Scottish currency union. They could go down the unilateral adoption route.

To recap, independent Scotland wants to keep the pound via some sort of currency union, ideally based on the BoE continuing to accept Scottish assets as collateral in exchange for sterling liquidity.

The UK, however, is not willing to accept this because it would mean unrestricted UK support for Scottish banks, which may or may not now be regulated to the same standards. Read more

Cataclysmic hyperbole?

Back in the days of the Great Northern Rock bank run, a long conversation was had in the newsrooms of most media organisations.

Should we hold back from reporting on what are still smallish queues given the potential to exacerbate panic for no reason? Or do we consider this a legitimate story, that we didn’t cause, and cover the hell out of it? Read more

The dark side of data centres

Most technology users remain blissfully unaware of the internet’s carbon footprint because most “users” never have to come up close and personal with a data centre.

Yet, for all the energy efficiency that technology brings us, data centres remain the technology world’s dark little energy guzzling secret.

Data centres, it could be said, represent the unglamorous side of the technology business. They’re the plumbing that holds the whole thing together. They’re the secret sauce that gives one player an advantage over another. As a consequence, there’s zero advantage — either from a security or cosmetic point of view — of bringing attention to where your data centre is located, how it is run or how much energy it consumes. Read more

The avoided energy factor

BoAML follow in the footsteps of UBS with a whopper report on the smartening up of the world’s energy markets.

It’s a mighty 256 pager.

We’re still going through it in detail, but couldn’t resist flagging up the following factoid about “avoided energy” before revisiting some of the larger themes (among them, the reduction of power consumed by data centres).

What the analysts mean by “avoided energy” is how much energy we’ve avoided using thanks to improved efficiency and know-how. Read more

All about the eurodollars, China edition

There’s an abundance of dollars in the Eurosystem with nowhere useful to go.

We think, as we argued earlier, this is down, at least in part, to the Fed busting apart the money-market arbitrage for non-FDIC insured foreign entities.

In any case, note the following chart (via the Bank of England) of the euro/dollar cross-currency swap, which shows how much cheaper dollars in Europe got since reverse repos kicked into action in September 2013 (the nearer zero the cheaper dollars are):

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All about the eurodollars

Whilst everyone was focused on the ECB on Thursday…

… the Fed pulled this little snippet out of its bag:

As part of the continuing program of operational testing of its policy tools, the Federal Reserve plans to conduct a series of eight consecutive seven-day term deposit operations through its Term Deposit Facility (TDF) beginning in October.

Okay, the Fed has tested term deposits before, so it’s not that mind blowing an announcement in and of itself. The significance, if any, is that it’s subtle confirmation that both reverse repos and TDs will be used in the Fed’s unwind process. The maximum award has also been increased to $20bn. Read more

The (early) Lunch Wrap

Ukraine battles rage despite ceasefire talks || Atlas Mara raises stake in Union Bank of Nigeria || Chinese property developers borrow at record pace || Barclays to launch finger vein scanners || Apple to warn users of iCloud hack attempts || Markets Read more

Disrupting the nation state

Float the idea that borders could soon be a thing of the past and that markets under price this risk, and you may find yourself being laughed out of the room.

But seriously. We do think this is a thing now. More so, it’s a thing that needs the attention of markets.

We’re not alluding to the idealistic visions of hippies, John Lennon or Henry Kissinger. What we’re on about is the potentially disruptive effect of technology (here today) on the relevance of nation states, especially when those states are defined by borders more than they are by cohesive cultural ties. Read more

The (early) Lunch Wrap

Nuclear outage heightens UK energy supply fears || Eurozone repo market grows in first half || Economic optimism buoys China’s renminbi || Bloomberg to take helm at data group || Lloyd’s head backs No camp as Scottish poll gap narrows || France halts delivery of warship to Russia || Tesla Motors is expected to announce batter plant || Markets Read more

Banking will never know a more disruptive force than Excel, say bankers

We think Deutsche Bank’s IB analysis team may be demonstrating some wishful thinking when it comes to their industry’s exposure to tech disruption in the next 10 years:

Tech disrupts, absolute tech disrupts absolutely. FX has been the laboratory for tech disruption. The early 2000s saw the advent of electronic trading to the largest market in the world for clients. Since then spreads have collapsed by 85%. Volumes have risen to make up for some of the spread compression, but the tale is cautionary. Rates, and to some extent credit, will likely get jolted by technology and will see a structural fall in revenues. On the other hand, advisory services such as M&A would be unaffected. The last tech disruption was the use of the spreadsheet in the 1970s/80s, it is difficult to see what new technology will affect an advisor’s job as much as that.

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