FirstFT: Britain’s year-long recession, spacing out in Seoul and what a ‘CV of failures’ really reveals

A Treasury report suggests that growth could be 3.6 per cent lower after two years with a vote to leave the EU Read more

Podcast: our long chat with Paul Volcker (plus transcript and highlights)

This episode is a two-part chat with Paul Volcker.

In the first part we discuss his intellectual influences and early career, during which he shuffled between the New York Fed, Chase Manhattan, and the US Treasury department. We end with his under-appreciated role in the conclusion of the Bretton Woods monetary system during his time as Treasury undersecretary for monetary affairs in the early 1970s. Read more

Thought for the weekend

“It didn’t take long for the BitShares community to realize that funding projects today would cause a short-term fall in the value of BitShares. Unable to bear the short-term paper-loss and psychological impact of a lower market cap, people started electing proxies that would vote against all spending proposals.”

– Lessons in decentralised autonomous organisations from Dan Larimer.

BHS has only itself to blame for its pension troubles

Here’s an odd argument the Bank of England is somehow to blame for BHS’s massive pension hole. This is the key bit:

The investment environment fundamentally changed post-2008. To keep the UK economy liquid in the crisis, between August 2008 and March 2009, the Bank of England cut the base interest rate from 5% to a record low of 0.5%, where it has stayed ever since…The problem arises in the difference between the amount of money set aside to cover eventual pensions and the obligations. The entire DB scheme is a bet that today’s investments will always come good, forever, and cover tomorrow’s guaranteed payments.

Schemes had been banking on annual returns from their investments of at least 5%. Suddenly, with low interest rates, and stocks going through the post-crisis trough, it’s down to 0.5% as a base. That means they have to put up a lot more new money to get the returns they need.

Contrary to what’s implied in the piece, it’s quite simple to manage a defined-benefit pension properly — especially if most of the beneficiaries are already retired. The level of interest rates only matters if you’re doing it wrong. Read more

Friday RAW: are bidders circling Sobi again?

Lately, M&A reporting has been going a bit gonzo. This week alone we’ve had a recruitment website claim that Occidental Petroleum was about to buy Apache (denied) and reports on a Spanish-language site that Reckitt Benckiser had outbid P&G in an auction to buy Church & Dwight (also denied). Meanwhile, the more reputed media were running with stories about Bayer bidding for Monsanto (first denied, then confirmed).

This upsurge in bum steers, bogus denials and half-baked tales in obscure places makes FT Alphaville’s RAW warning ever more essential. Please, read the damn warning.

 Read more

Hey, look! Gate Ventures is trying to sneak back onto the London market

It’s a persistent corporate comedy, this one.

While clicking around the entertaining (and alleged) Chinese bid for Aston Villa FC, we thought we’d revisit Johnny Hon, the enthusiastic chap fronting Gate Ventures, that bizarre “theatre investment” company that was thrown off the AIM market last summer. Read more

Markets Live: Friday, 20th May, 2016

Live markets commentary from 

Mt. Gox and the mother of all short squeezes

When Mt. Gox, the Japan-based bitcoin exchange run by Mark Karpeles, stopped honouring redemptions on February 7, 2014, the company initially blamed the affair on an obscure tech fail known as a malleability issue. Many, however, were unconvinced by the explanation, suspecting foul play, a hack or an inside job.

When Mt. Gox filed for bankruptcy on February 28 it emerged 750,000 of customers’ bitcoins had been lost, plus 100,000 of Mt. Gox’s own stash — a sum collectively worth $473m at prevailing exchange rates. Karpeles himself, however, insisted the exchange had been the victim of external sabotage or fraud.

Time went by. Customers put their complaints to the authorities. Alas, not much in the way of information came their way. At some point, rumours began to emerge that much of the run-up in bitcoin’s price to a record $1216.73 in November, 2013, had been driven by a bespoke algorithmic programme known as the Willy Bot, developed by Mt. Gox for its own profit, and that this punting bot may have been the cause of many of the losses. Without concrete evidence, however, this too remained a theory. The mystery prevailed. Customers began to accept the reality: the money was gone and they’d never get it back because that’s what happens when you punt on an unregulated exchange. Read more

Alphachat: private equity’s mark-to-fantasy problem, and the political economy of gangster states

Alphachat is available on Acast, iTunes and Stitcher. Read more

Further reading

Elsewhere on Friday

- You’ll be surprised to hear that UK central bank speeches are too complex and inaccessible to the man on the street.

- The best diss of the quantity theory of money comes from Keynes.

- Brad Setser is back!

- The US mortgage lending market: what happens when bank loan officers change standards.

- Uncovering the winners and losers from the TPP. Read more

FirstFT – Terrorism possible in EgyptAir crash, New York’s mass graves and an unconventional way to control your spending

Egypt’s aviation minister said the possibility of a terrorist attack was higher than technical failure, but ‘it is still speculations and assumptions’ Read more

A chance for some real world virtual reality

How about this for a wheeze?

Tell your boss that on July 1 you are going to some boring conference called the FT’s Festival of Finance in the City, where you’ll be able to focus on some potentially market-moving remarks from the ECB’s chief economist, Peter Praet, and also catch a discussion with one of the sharpest financial brains on the planet, Hyun Song Shin.

But really it’s Camp Alphaville, so you can also grab a VR headset and play this as well! Read more

A brief Wirecard update

Wirecard has issued it’s Q1 results. Turnover at the German payments group jumped from €160m in the first quarter last year to €210m in the first three months of 2016.

The results follow a well attended investor day this month, more on which below. While down 2 per cent on Thursday morning, the share price is back above the €40 level it traded at before Zatarra Research & Investigations began publishing on the subject of the company in February.

Note too the proportion of shares sold short remains close to a quarter of the market capitalisation, with 12 declared short positions of more than 0.5 per cent even after the annual cost of borrowing stock has touched 20 per cent in recent weeks. The sceptics appear committed to their positions. Read more

Markets Live: Thursday, 19th May, 2016

Live markets commentary from 

Venezuela’s reserve liquidation in one chart

Venezuela is in dire straits. Once one of the richest countries in the western hemisphere, the average wage is now estimated to be less than half what it is in Cuba using market exchange rates.

There are many ways to measure how much money is currently fleeing the clutches of Bolivarian socialism, either to repay debts contracted when the oil price was far higher, or simply to shield the wealth of apparatchiks worried by the prospect of state collapse. (Miami condo developers send their regards.) Read more

FT Opening Quote

A Rolls-Royce bribery probe has spread to Nigeria, Royal Mail has posted in-line profits, Aston Villa has been sold. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Thursday

- Germany’s problems can’t be fixed with government spending.

- Who sold their shares before the crisis? Executives at banks most exposed to the real estate bubble.

- Companies pay up to $20,000 per hour for advice on how to manage Millennials.

- In an age when Trump is a presidential nominee, what does “serious” even mean anymore?

- Since when is a cartoon frog racist? Read more

FirstFT – EgyptAir flight vanishes, the spread of superbugs and the myth of the British stiff upper lip

The flight, which left Paris’s Charles de Gaulle Airport at 23.09 on Wednesday evening local time, had 56 passengers and 10 crew and security personnel on board Read more

Saudi Arabia’s IOUs

Something of significant note just occurred in the global oil hierarchy.

According to a Bloomberg report filed on Wednesday afternoon (UK time), Saudi Arabia may be considering paying some outstanding bills to contractors using government-issued bonds.

Contractors, they added, would be able to hold bond-like instruments until maturity.

This is quite something, not least because paying your contractors with short-term bonds is not entirely dissimilar to paying them with IOUs. Read more

Markets Live: Wednesday, 18th May, 2016

Live markets commentary from 

Further reading

Elsewhere on Wednesday

- Nine days to go until Bank of England’s self-imposed purdah. Mark Carney is to stop talking about Breixt. Read more

FT Opening Quote

Burberry has been checked by weakening Chinese demand, Arm has bought Apical for $350m, Playtech is struggling to find a deal. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

FirstFT – Trump open to talks with N Korea, the next big quake and how to manage your millennials

Mr Trump said he was willing to talk to Kim Jong Un as part of a push to rid the Korean peninsula of nuclear weapons Read more

It’s not a game of thrones, it’s a game of monopoly

Last week Donald Trump, in his usual provocative manner, called out for having “a huge antitrust problem”.

Leaving aside Trump’s tendency for headline-grabbing theatrics, the real question is: does he have a point?

We think yes. In fact, we think he probably didn’t go far enough. After all, it’s not just an Amazon issue. It’s a FANG complex and beyond issue.

And we’re not the only ones. In the last week Joseph Stiglitz has knocked it out of the park in terms of articles lamenting the scale of monopolism today. On Friday in the Guardian, Stiglitz noted for example: Read more

Who knew what at Lending Club?

People are usually told that knowledge equals power, but in business, knowledge — and a failure to disclose that knowledge — can be a dangerous thing that leaves you unemployed.

That seems to be the story of what went wrong for Renaud Laplanche, the former chief executive of Lending Club, America’s largest online lender. He was reportedly not as forthcoming as the board would have liked on what he knew about the missold loans to Jefferies. Combined with his failure to properly disclose an interest in a fund which the company decided to invest in, it made his position untenable.

Lending Club’s 10-Q filing on Monday now blames the “tone at the top” for the missold loans, which is also what Valeant’s board said after Mike Pearson was ousted. It also says that the board “did not have the information required to review and approve or disapprove investments” made by Laplanche and a board member — John Mack — in Cirrix Capital, a holding company for funds that invest in Lending Club loans. Read more

Markets Live: Tuesday, 17th May, 2016

Live markets commentary from 

More decentralised autonomous organisation (DAO) mysticism

We’ve flagged cryptocurrency enthusiasts’ distinctly mystic beliefs in spontaneously emergent headless organisms before.

Now something called the “Decentralised Autonomous Organisation” — The DAO, not to be mistaken with Tao — project has begun to attract actual column inches in mainstream publications, albeit in keeping with the new style of journalism… i.e. devoid of critical evaluation and taking all claims at face value.

The DAO is currently raising Ether tokens (the pre-mined currency of the Ethereum blockchain, itself funded via a bitcoin capital raising) — $110m at mark-to-market rates today — in exchange for DAO, a token which “grants its holder voting and ownership rights.” As Techcrunch put it, holders of DAO “can use their tokens to vote on big governance issues (akin to traditional shareholders) but also on minute details of how The DAO spends its resources. In this way, token holders have total control over The DAO’s assets and its actions.” Read more

FT Opening Quote

LandSec is cautious ahead of the Brexit vote, Vodafone expects earnings to blossom from Project Spring, Premier Foods is back in the black. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Tuesday

- Do interest rates matter to bank profitability?

- If you’re a startup, profitable can mean whatever you want it to mean.

- Homer Jones shared his first financial report 55 years ago.

- Trump’s profit-motivated supporters cash in on his political success.

- North Korea’s one-percenters savor life in cosmopolitan ‘Pyonghattan’Read more

FirstFT – Buffett takes a bite out of Apple, the battle to beat the bugs and the allure of the strongman leader

The renowned value investor has taken a $1bn-plus stake in the technology company Read more