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

Patent trolls as the new rentier class

According to the Merriam-Webster dictionary, a rentier is a person who lives on income from property or securities.

From the point of view of Marxist rentier capitalist theory, a rentier is also a parasite who adds no value to society, but instead survives solely due to his ability to extract rents (tribute) from productive people. A rentier achieves this through muscle or social norms which defend his exclusive rights over property in such a way that he must be compensated for their use by others.

Today, patent trolls are emerging as the world’s most nefarious rentier types.

The reason they’re so particularly nefarious, we’d argue, is directly linked to the type of property that they’re trying to monopolise. Intellectual property. Read more

Kinder Morgan, the actual tax cost

Matt Levine at Bloomberg has already explained how the $12bn surge in the value of Kinder Morgan Inc. following its self-acquisition is mostly due to the tax savings brought about by the deal:

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The (early) Lunch Wrap

Inflation fall reduces chance of rate rise || Kurdish forces wrested control of Iraq’s Mosul dam from jihadis || Maersk targets first share buyback as it upgrades profit forecast || China’s property slump worsened in July || Chinese President Xi Jinping plans to regulate income distribution in state-owned companies || RBA warns over significant uncertainties on growth || Obama sends attorney-general to Ferguson, Missouri || Rabobank trader pleads guilty to conspiring to manipulate benchmark rates || Rosneft is about to start drilling its first oil well in Norway || Dollar General bids $9.7bn to buy Family Dollar || Appnexus cracks a valuation of over $1bn || Markets  Read more

Kinder Morgan, MLPs and the sell case

The $44bn self-acquisition of Kinder Morgan has been heralded by some as a great deal for shareholders.

But is it? Is it really? At least for the ordinary investors?

We’ve already wondered about the motivation for the deal.

Among our initial thoughts: Kinder Morgan MLP units trading under the KMP ticker had got expensive due to the heavy promotion of MLP structures as a safe-ish and yieldy investment at a time of low interest rates.

But we now think there may be more to it than that. Read more

A Bitcoin flash crash

Bitcoin has been on a sharp course downwards for a few weeks now (chart courtesy of Bitstamp).

But on Monday, the unthinkable happened.

Bitcoin prices on the BTC-e exchange suffered a flash crash that took the price as low as $309 per bitcoin from a day high of $497.79.

Here’s the damage:

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The (early) Lunch Wrap

Fed blow to banks over ‘living wills’ || Smartphone owners’ appetite for new apps wanes || Bovis pre-tax profit surges on robust property market || Chinese banks step up lending to housing || US banks plan ahead for UK exit from EU || Markets Read more

Oil and the prospect of a Chinese shale boom

Russia geopolitical risk? Check. Middle East geopolitical risk? Check.

But commodity prices, and in particular oil prices, are doing nothing: Read more

The (early) Lunch Wrap

US rows back on need for international rescue mission in Iraq || German benchmark bond yield slips below 1% || Bill Ackman plans to raise $4bn by listing new investment vehicle || || Gold loses its shine as Chinese curb jewellery purchases || European companies slam Chinese antitrust probes || Eurozone economy fails to grow in second quarter  Read more

On the art of creating value from nothing

Bitcoin does it. Dogecoin does it. Gold miners do it. And now Kinder Morgan does it too.

What we’re talking about is the amazing ability to create value out of nothing.

The Kinder Morgan self-acquisition deal, which effectively found $12bn of shareholder value from a paperwork reshuffle, is probably the most high-profile example of mining shareholder value from good old fashioned financial ingenuity, even when it involves some finance reverse-engineering. Read more

Welcome to Russia’s Hunger Games

Given that modern-day warfare must at some point involve drones or autonomous vehicles, it makes sense that modern-day propaganda wars should involve Twitter and social media.

The battle for cyber hearts and minds in that regard is now getting really interesting.

One need only do a casual Twitter search for “пустые полки“, the Russian for empty shelves, to see what we mean.

The backstory here is that in retaliation for US and EU sanctions, Russia has decided to ban the importation of large categories of food products from each. Read more

The (early) Lunch Wrap

Russia sends own aid convoy to Ukraine || Sanctions have low impact on Russian oil || UK evolving into self-employment capital of western Europe || Serco pays price for outsourcing scandals as profits tumble || London house prices to slow to 3% next year, says Hamptons || UK retail sales weaken as supermarket price war hits food trade ||Markets Read more

A little case of Russian crude stigma

Russia’s ESPO crude blend determines the key compensation rate for Russian oil production.

As analysts at JBC Energy note on Monday, however, the crude now trades at its weakest differential to Dubai crude — the benchmark it is most commonly compared to — since it became an established blend on the market in 2010.

Whilst the analysts are quick to point out that there are legitimate fundamental reasons for the weakness, it should not go unnoticed that some regular ESPO customers seem to be missing from the market. Read more

Piketty and the randomness of wealth

Gary Jenkins of LNG Capital confesses in a note on Friday that reading Piketty’s Capital in the 21st century was not an easy affair. Here’s the strategy he resorted to in order to get through the 577 pages of the book:

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The (early) Lunch Wrap

Obama authorises Iraq air strikes || Cyber Snake plagues Ukraine networks || Malaysia Airlines to be nationalised || Hampton leads race to be GlaxoSmithKline chairman || Brent crude approaches $107 a barrel || Wanda’s $1.2bn Hollywood dream becomes reality || Co-op unveils corporate governance overhaul || Markets Read more

Osborne deals with the pirate threat

Pirates. Can’t live with them. Can’t get rid of them.

And… it has always been so. Read more

The euro flows of Kilimanjaro

A tale of missed opportunity. Denial. Oh, and possibly even certain death?

George Saravelos at Deutsche Bank looks at what are fast becoming intensifying euro outflows and wonders if it could amount to an important idiosyncratic driver for global markets. Yesterday, for example, the market witnessed a record euro liquidation day.

As Saravelos writes:

The drivers behind this are likely diverse – profit taking after an extended streak of inflows; geopolitical worries concentrated on Russia; contagion from broader risk-aversion. Cause notwithstanding, the concentrated nature of euro weakness and the breakdown in correlation with US yields strongly points to these “capital-flight” flows being an important idiosyncratic driver. The outflows have been larger than I would have expected, but until they stabilize, they will likely serve as an ongoing source of pressure on the euro and European currencies more broadly.

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The (early) Lunch Wrap

Standard Chartered in talks with NY regulator over transactions || Skills gap leaves UK vulnerable to cyber attack, says business || Apple dominates mobile app economies that create 1m European jobs || Markets Read more

The euro as a precursor to Bitcoin

The deadline for European institutions to be compliant with the Single European Payment Area (SEPA) standard came and went on August 1.

In theory, that means anyone in Europe should from now on be able to make and receive payments across the union on an entirely frictionless basis. For the euro project it’s the realisation of one of the system’s key objectives.

As the ECB noted:

It allows businesses to grow and to broaden their reach within Europe, and reduces costs by providing a standardised framework for all their payments. Businesses can now use a single system and set of accounts for all their euro trade in Europe.

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The (early) Lunch Wrap

Standard Life warns Scottish vote concerns ‘not addressed’ || BMW profit beats forecasts on SUV sales and China demand || InterContinental plumps up its dividend as activists bite || Crédit Agricole profit nearly wiped out by BES charge || Aggreko first half hit by strength of sterling || HP accuses Autonomy founder of fraud || Oil trader Arcadia Petroleum settles with CFTC || Urban Exposure becomes latest property company to pull IPO plans || Luck runs out for Macau gaming stocks || Markets Read more

All aboard the US$ flow merry-go-round!

Money managers have been stung hard this year due to US government bonds not performing the way their traditional mean-reverting strategies suggested they would. Taper was supposed to imply sell-off. That didn’t happen. And now everyone is trying to understand why not.

At FT Alphaville we’ve presented the flow explanation on a number of occasions. The theory is that taper talk prompts dumb money to sell safety, and the smart money — which knows there’s no such thing as underpriced principal safety these days and that taper implies risk-off — to pile into safety at an even faster rate.

In this theory the whole process is then exacerbated by a feedback loop. Sellers of safety buy risky assets, like emerging market debt, instead. But the sellers/issuers of that debt then recycle that cash back into safe US dollar securities, rather than goods or services in the emerging market. So every risk-on signal from the Fed only ends up creating more buyers for dollar denominated bonds. Read more

The $10bn birth of the trusted deletion industry

Nobody has been more annoyed by Alibaba’s potential upcoming valuation of Snapchat at $10bn than the Bitcoin community, since its own “world changing” technology currently has a market value of no more than $7bn.

Here’s a flavour of the outrage on the Bitcoin subReddit: Read more

The curious case of capital gain-like profit

Iren Levina, economics lecturer at Kingston University, brings to our attention a fascinating, if under-appreciated, phenomenon in finance.

She describes this as the “puzzling rise in financial profits and the role of capital gain-like revenues” throughout most of the 2000s, which were totally delinked from real economic growth during the period.

Okay. Why so puzzling you ask? Don’t we know these profits were the result of too much risk taking? And haven’t there been hundreds of papers about this sort of thing?

Well, yes. But this isn’t quite Levina’s argument.

In a paper published in April this year she instead argues that the reason financial profits became disassociated from real economic growth was because of the way they were formed and the way they were transferred through the financial system consequently.

More to the point, because they were enabled by the very phenomenon of “capital gain-like revenues’.

Unfortunately, the monetary assets which facilitated these revenues have been incorrectly understood by the financial system. In Levina’s eyes they are not, as many believe, borrower liabilities matched by real assets at financial institutions, but rather borrower liabilities matched by something altogether different. Read more

The (early) Lunch Wrap

Markets || Argentina defaults as last-minute talks fail || Sierra Leone declares Ebola virus public health emergency || SFO pays £1.5m to Robert Tchenguiz || Lloyds takes fresh £600m PPI hit || House price growth slows in July || Former Banco Espírito Santo board face legal action after losses || Balfour Beatty ends merger talks with Carillion: Read more

The (early) Lunch Wrap

Power companies face tougher-than-expected price controls || Barclays takes £900m PPI charge as investment bank profits halve || Ukraine tensions prompt Total to suspend Novatek share buys || Airbus eyes Dassault stake sale as profits rise || Rightmove’s profit rise underscores recovery in UK property || Markets Read more

The (early) Lunch Wrap

Former Yukos shareholders awarded $50bn damages against Russia || GSK opens issue of spinning off consumer division || Reckitt pushes ahead with spin-off of pharmaceuticals arm || Argentina braces for sovereign debt default || Aberdeen falls on £4bn mandate withdrawal || Markets Read more

How not to introduce official e-money?

We’ve argued enthusiastically for the introduction of state e-money before.

But we overlooked the likelihood that it might first be adopted by countries like Ecuador as a means of getting out of their dollar bind (via Bloomberg):

Ecuador’s congress approved a new law today that allows the government to create its own parallel currency for use in local transactions as the government struggles to meet spending commitments.

Congress voted 91-22 to approve President Rafael Correa’s proposal to change the South American nation’s monetary and financial laws, allowing payments in “electronic money” and giving presidential appointees the power to decide who gets loans and how lenders invest their reserves.

The bill now goes to Correa for his signature or veto. As a current-account deficit drains dollars from the economy, making it harder for Correa to fund a burgeoning budget gap, a new currency could be used to meet government payments, said Jaime Carrera, a former deputy finance minister and director of the Quito-based Fiscal Policy Observatory. It could also lose its value quickly if not backed by the central bank, he said.

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The (early) Lunch Wrap

RBS shares jump on better-than-expected trading update || BSkyB to pay up to £7.4bn to acquire European sister companies || Pearson sticks to profit targets || Lloyds to pay up to £300m Libor fines || Air Algerie airliner wreckage found in Mali || Heathrow records growth and looks for more via a third runway || Goldman bankers to Babble on their own chatroom || Amazon dives after losses blow out || Markets Read more

The importance of patience and the danger of information overload

That Andrew Haldane, chief economist of the Bank of England, believes that short-termism is a bad thing for markets is hardly news.

He’s published numerous papers on the subject of patience in markets and the danger of short-sightedness, speaking frequently about the need to encourage long-term thinking in finance.

But what was fascinating about his speech at the mission-oriented finance launch party this week – where he once again outlined this argument — was not only the breadth and range of the colourful anecdotes he provided to make the case for long-termism, but also the concerns he raised about information overload. Read more

When are monopolies a good thing?

Here’s the proposition. Rule by committee isn’t a good thing.

In the worst-case scenario it leads to the “Lawrence of Arabia” problem, wherein you spend so much time trying to figure out how to rule well, you fail to notice when your sovereignty is being stripped away from you under your nose. Alternatively, it leads to the phenomenon of “settling”, wherein the pressure of arriving at a consensus allows all sorts of sub-optimal scenarios to creep in.

It’s probably not a coincidence, consequently, that great leaps forward tend to be associated with charismatic visionaries who, thanks to a near hypnotic effect on colleagues and associates, end up attracting the sort of approval and following that allows them to sculpt the future as they, not others, see fit.

Once in charge these guys tend to rule absolutely, deploying their wealth and power – often generated by early career triumphs – to implement the change they believe in. A lot of time, their greatest directional successes come as a result of forming monopolies or near monopolies in the areas they operate in. Read more

The (early) Lunch Wrap

Apple eyes return to glory days of $100 share price || US Senate alleges hedge fund and banks avoided $6bn tax bill || Royal Mail struggles to deliver as competition for parcels grows || Credit Suisse quits commodities trading and trims investment bank || Saudi stock market to open to foreigners || Barclays ‘dark pool’ trades dry up after high-frequency suit in US || Markets Read more