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).

Is the DKK the new CHF?

It’s been a long time since so many developed central banks were tested by free market forces. And free market forces aren’t finished yet.

Hot on the heels of the SNB giving up on its euro ceiling policy, the market is zoning in on the Danish central bank and its ability to maintain its euro-peg.

As Dan already pointed out, the Danes have had to cut rates three times in in the last two weeks: January 19, January 22 and January 29.

If that looks and feels desperate, perhaps that’s because it is? Read more

Nigeria on the brink

You can’t find a blunter assessment of the underlying problems facing Nigeria and the naira than that from BCA Research this week:

Nigeria has basically squandered away its oil bonanza of the past decade. It has failed to channel its oil windfall into infrastructure and productive capacities. As a result, the economy remains extremely dependent on swings in global oil markets.

On the surface, Nigeria’s oil sector has dropped in significance to a mere 13% of real GDP, while the services sector has climbed to 40% in real terms. Yet, the reality is that it is the country’s oil revenues that have supported growth and, to a large extent, maintained social order. Without oil, both would fall apart; government spending would be much smaller, interest rates much higher, and the currency’s valuation much lower.

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Reservations as reserve assets

Reserve” is the new app that Silicon Valley — specifically Uber’s Garrett Camp and Foursquare’s Naveen Selvadurai — insists we will all be going mad about this year.

What is it? Another crypto-currency system? A payments ledger to rival the mighty Special Drawing Right? Perhaps it’s an app that allows you to re-serve your uneaten food?

You know… like a Grindr for leftovers? Read more

Petrodollars, Adam Curtis edition

Adam Curtis, the controversial end of the BBC documentary making department, is back with a straight-to-iPlayer special, called Bitter Lake. His topic du jour: Saudi Arabia, Afghanistan and the petrodollars that turned financiers dizzy.

For those unfamiliar with Curtis’ work, think archive footage, mood music, dramatic pauses, voiceovers of the “…but it was all a fantasy” variety and grand themes linking multiple strands into a single overarching narrative.

Love him or loathe him, a particularly cool piece of stock footage unearthed in his latest offering comes about 45 minutes into the documentary, and it is definitely worth your attention: Read more

Roubini Vs the so-called “art” industry

Not to be missed in the ECB news fog: John Gapper’s account of an FT Davos lunch with Nouriel Roubini in which the formerly doom-saying NY Stern economist spelled out what polite and civilised society has always known but been keen to turn a blind eye to: the art market is actually a bit of a money laundering scam.

The key quotes not to be missed:

“Whether we like it or not, art is used for tax avoidance and evasion,” said Prof Roubini, himself an art collector. “It can be used for money laundering. You can buy something for half a million, not show a passport, and ship it. Plenty of people are using it for laundering.”

Prof Roubini argued that the art market had a series of characteristics that needed regulation. “While art looks as if it is all about beauty, as a business it is full of shady stuff,” he said. “We should correct it or it will be undermined over time.”

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A right oil hotchpotch

Just a few developments to update oil watchers on. Plus one conspiracy theory.

First, John Kemp of Reuters observes on Thursday that gasoline demand is now at multi-year seasonal highs:

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Draghi and the risk-sharers

The ECB just announced it will increase monthly buying of assets by €60 bn which will continue until September 2016, and will do so on a risk-sharing basis on 20 per cent of the assets purchased rather than on an entirely pooled based. More details: Everywhere.

For now, here’s the first comment in our inbox from Marc Ostwald at ADM Investor Services, who says the risk sharing component is limited: Read more

Just how big a day was Jan 15 for FX markets?

The first numbers by way of CLS, the continuous link settlement system used by the vast majority of the FX market to settle transactions, are in.

As Nick Murray-Leslie tells FT Alphaville on Wednesday:

CLS settled a record number of transactions following the decision by the Swiss National Bank to remove a currency ceiling against the euro.

CLS settled 2.26 million transactions on 20 January, totalling USD 9.2 trillion with 99.5% of these transactions were settled within 45 minutes.”

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Reining in the tech gods

The FT’s Gillian Tett reports from Davos that the Powers that Be may finally have noticed how — while they were busy regulating the banks — the technology companies quietly moved into what was once their unregulated turf.

Via Wednesday’s Davos dispatch:

Large technology companies will experience the same collapse in reputation as banks have endured in recent years unless they rapidly change their policy approach, business leaders cautioned in Davos. Their warning was directed at the influential heads of technology companies, such as the Silicon Valley giants, who were told they needed to recognise that self-regulation will not be sufficient to stave off mounting public alarm about issues such as privacy.

“Self-regulation, no matter what you do, is just not going to be good enough [for tech companies],” said Paul Achleitner, chairman of the supervisory board of Deutsche Bank. He pointed out that a self-regulatory approach had been previously employed by banks — but notably failed to quell a political backlash against their over-reach.

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Not your usual oil-price decline effect

Yup. Analysts and economists still can’t decide whether the fall in oil prices is net positive or net negative for the global economy.

Unfortunately for the net positive camp, it looks increasingly like global demand and growth figures are beginning to side with the negativity team.

Indeed, the longer the oil price stays low, the more it looks like global stimulus hopes were overdone due to poor understanding of financial feedback loops in the commodity space.

So what’s behind the anomaly? How did a whole school of economists get this potentially so wrong? Read more

How to corner markets, Bitcoin style

If you think retail FX and spread-betting shops have a problem with one-way client risk, then don’t even dare to look into the Wild West stuff going on in crypto land. It’s the Bank to the Future Biff Tannen version of 1985 in Technicolor (Oculus Rift form naturally).

As we’ve noted before, Bitcoin markets are a hotbed for unscrupulous market practices. Everything from HFT, front-running, rebating, preferential order flow, poor margining, naked shorting, and now the truly popular one — active “collusion” by big players. It’s all there.

What’s really cute is that a lot of the time the cowboys think they’re being truly innovative with these strategies. (Michael Lewis obviously hasn’t penetrated their radar.)

On which note, unconfirmed reports come our way of the latest bearwhale scheme being hatched — this time being organised by a particular bearwhale called Benji — to corner the market with the cunning use of the “shake out the weak shorts and cause a short-squeeze” strategy. Read more

It’s raining euros in Geneva

Sources on the ground tell us that queues have been forming outside money changers in Geneva since at least last night.

Here’s the latest scene of Swiss folk eager to cash in their money’s worth by way of Twitter user @Halders1:

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The liquidity monster and FXCM

As we have already pointed out about Thursday’s unprecedented Swiss franc move following the SNB’s announcement about removing its 1.20 euro level floor and introducing a -0.75 per cent interest rate regime, the real story to pay attention to is what exactly motivated a price surge to that level.

Was it a), that the SNB simply under appreciated the scale of the undervaluation it had been engineering in the franc? Or was it b) that the SNB under appreciated just how thin FX market liquidity is in the market these days?

So as to not sit on the fence, we’re going to take a view and speculate that it’s actually all down to option two. Read more

The SNB and the Russia/oil connection

A quick post to collate a few side theories on the reasons, justifications and consequences of the SNB move.

Simon Derrick at BNY Mellon is first to point out that the euro floor/chf celing was leaving an open door to safe haven flows from Russia by way of an open bid for euros. As he notes:

Compounding this was Switzerland’s role as a safe haven as the Russian crisis intensified. It was, therefore, not entirely surprising when the SNB decided a few weeks ago to impose an interest rate of -0.25% on sight deposit account balances at the bank and expand the target range for three-month LIBOR to -0.75%/+0.25%.

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Was the 2008 oil price an anomaly?

The parallels between the oil markets and bitcoin continue to astound.

Over in the bitcoin universe, for example, questions over the legitimacy of the $1,200 level achieved in November 2013 have begun to circle. The running theory is that the ridiculously high price was only achieved because Mt.Gox — Bitcoin’s premier exchange until it collapsed in February 2014 — was in league with manipulative HFT traders who, with the help of a proprietary algorithm nicknamed the “Willy Bot,” pumped the price as far as it could go, and then cashed out.

Over in the oil world, meanwhile, a similar dialogue is coming forth with regards to the record prices achieved in 2008. Read more

Do you have a finance degree from the university of Bitcoin?

As the Bitcoin price crumbles….


… and the capital hole (economic flaw) at the heart of all cryptocurrency schemes is exposed, we thought we’d uncharacteristically look at what was actually good about the phenomenon of Bitcoin. Read more

A capital contango, and why oil storage economics may be dead

$80 oil, $70 oil, $60 oil, $50 oil and counting… If you suspect the structure of the oil market has fundamentally changed, you may be on to something.

There was a time when all you needed to balance oversupply in the oil market was the ability, and the will, to store oil when no-one else wanted to.

That ability, undoubtedly, was linked to capital access. For a bank, it meant being able to pass the cost of storing surplus stock over to commodity-oriented passive investors and institutions happy to fund the exposure. For a trading intermediary, that generally meant having good relations with a bank which could provide the capital and financing to store oil, something the bank would do (for a fee) because of its ability to access institutional capital markets and its reluctance to physically store oil itself. Read more

Bitcoin’s upcoming capital crisis

A quick update on the scam-ridden world of Bitcoin — not to be confused, of course, with the (sacrosanct) technology of THE BLOCKCHAIN, still dubbed “promising” and “respectable” by VCs in the know — which seems to be fast descending into a blazing fireball of financial chaos, bankruptcy and despair.

On Monday, we had the suspension of Bitstamp, one of Bitcoin’s most reputable and liquid exchanges, founded and operated by two Slovenian kids in their 20s and funded to the tune of $10m by US-based hedge fund Pantera Capital (an arm of Fortress Investments) despite the youngsters’ lack of discernible financial credentials.

As of pixel time, the official line by way of CEO Nejc Kodric was still that a hack had pilfered $5m worth of Bitcoin from the company accounts but that Bitstamp would be back up and running within 24hrs, 48hrs, “soon”, and that customers should not worry because the company had more than enough reserves to cover their customer liabilities.*

*Update: Bitstamp is back up and trading as of Friday evening. No change to the official narrative and no real explanation of who is covering the loss. Read more

The return of floating storage – a.k.a the sharks are back

Good news for those looking out for crude bottoms!

JBC Energy reports on Friday that the economics that make storing surplus oil in floating tankers profitable are finally in play. Contango, in other words, has returned sufficiently enough to the market to incentivize those intermediaries who have the physical means to store oil, to purchase it for storage purposes and delayed sales, thus helping to balance the surplus in the market. Read more

European banks and oil price exposure

Fascinating what a few months of sub $90 per barrel oil prices can do to the dialogue about the respective merits of cheap energy.

So, whilst three months ago it was all about “trillions in stimulus from cheap oil!!“, today it’s “$50 oil changes everything!” and ARGHH “energy defaults may be the new subprime!”.

As FT Alphaville warned at the start of December:

If it is true that the commodity ecosystem is collapsing, then it is also true that all dependent industries are at risk. On that basis, those analysts who say that low prices will be a boon for many western economies that depend on oil imports, all miss that none of this necessarily guarantees increased demand.

Margins may be temporarily improved for intermediaries, manufacturers and retailers, but if we end up heading towards a price war on all fronts, all we get is a deflationary spiral that threatens contracts, salaries and debt.

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Ghosts of BoE liquidity crises 2007

We’re trawling through the BoE’s 2007-2009 disclosures in search of geeky insights into what actually goes through the minds of central bankers on an operational level during a liquidity/banking crisis.

First up, from the 2007 batch, the BoE’s dilemma about how best to compensate for the liquidity it was dishing out to Northern Rock, when it didn’t have too much in the form of a gilt stash for use in wider open market operations.

This from the committee of non-executive directors meeting on November 15, 2007, (our emphasis): Read more

Of crude bottoms and Rins

While WTI crude prices fell through $50 per barrel levels on Monday, and still remain there on Tuesday… (chart via LiveCharts):

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Who needs caveat emptor when you’ve got Bitcoin?

What did you miss while you were away eating turkey and whatnot?

Well, there was that one thing about China’s State Administration of Foreign Exchange relaxing the rules on Chinese banks’ foreign-exchange holdings, allowing them to hold fewer dollars — a pretty useful ruling during a dollar shortage issue. Read more

What does online shopping have to do with hyperinflation?

As the WSJ reported on Tuesday, the Russian rouble’s collapse is taking a particularly heavy toll on Belarus, Europe’s last standing autocratic economy, which remains hugely dependent on Russia to this day.

According to the report, the regime of Alexander Lukashenko has started to block independent news sites and several online-shopping outlets in an apparent attempt to prevent a bank run.

This follows an emergency rate hike by 2,6000 basis points last week.

The trouble relates to the fact that the Belarusian rouble is supposed to be pegged to the US dollar, the euro and the Russian rouble, which has understandably put pressure on its valuation. As analyst at Danske Bank explained this week: Read more

Further reading

Elsewhere on Wednesday,

- Malthusian Economics of Christmas Trees circa 1907.

- Will Abe’s Womenomics lead to anti-Westernism?

- Why JP Morgan’s hack could have been prevented with double authentication.

- The emerging personal hotspot war. Read more

Further reading

Elsewhere on Tuesday,

- Pimco gets impaled on a volatility spike.

- The Krugman/Cochrane feud is getting out of hand.

- Madonna handles security breach by getting physical with digital files.

- The secret history of filing cabinets. Read more

The upcoming petrodollar bifurcation risk?

One of the still to be appreciated side-effects of falling oil prices is a reduction in so-called petrodollar recycling by oil producers.

As we’ve already noted, there are analysts who believe petro-induced liquidity shortages may already be impacting certain eurodollar markets. Furthermore, there’s also the fact that as liquidity shortfalls manifest in external markets, the opposite could become true for internal US markets. So, just as the dollar liquidity tap gets switched off externally, it gets turned on with gusto back at home.

But Bank of America Merrill Lynch’s Jean-Michel Saliba gets to the same point somewhat differently.

As Saliba noted last week (our emphasis):

Lower oil for longer could imply material shifts in petrodollar recycling flows. Petrodollar recycling through the absorption channel has generally been USD negative, helping an orderly reduction of global imbalances though greater domestic investment. Although recycling through the financial account is less well understood, the bulk has likely, directly or indirectly, ended up in US financial markets and has thus been USD-positive. A prolonged period of low oil prices is thus likely to lead to lower petrodollar liquidity with, in time, an allocation shift towards more inward-looking repatriation and financing flows, in our view.

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Not everyone “deserves” oil market share according to Naimi

For seasoned oil watchers the latest spew of “informed commentary” hitting the media waves is probably becoming nauseating.

That’s because everyone from Robert Peston and Peter Hitchens to Vitol’s Ian Taylor seem to have a view on the oil price decline, some making claims that “the market may have hit bottom”, others hinting that the fall was too “mysterious” to be market led and the latter even admitting that even oil traders can’t predict what’s going to happen next.

But it’s the words of Saudi Oil Minister Ali Naimi that matters most. And as he explained to Mees Energy on December 21 — echoing what FT Alphaville has been saying for a long time now — in a price war, everything turns into a market-share-based game of chicken, meaning there’s no incentive for the world’s most efficient and financially buffered producer to cut at all. (H/T Neil Hume for the Mees report.) Read more

Further reading

Elsewhere on Monday,

- No snow and no roubles makes the Alps a dull place.

- If Scotland had gone it alone with these oil prices?

- And Canada’s, yes Canada’s, economy may be in trouble due to oil as well.

- Creative accounting is nothing new for the Eurozone. Read more

Further reading

Elsewhere on Friday,

- The rise of micro tipping.

- How the over valued rouble disguised Russia’s debt problem.

- A history of unprecedented Federal Reserve actions.

- The commoditisation of sandwiches and the rise of Sandwich Inc.

- A complete history of Reddit. Read more