The Closer


- Short video of Piketty explaining “Capital”. Diane Coyle and Noah Smith on the book. Read more

Buffett derivatives, just ignore the volatility

There’s an old Russian proverb, popularised by Ronald Reagan, which comes up among due diligence types: trust, but verify.

It seems appropriate to keep it in mind when thinking about Berkshire Hathaway, which is a sprawling insurance company and conglomerate indulged by the market largely on the understanding that its charismatic, cunning and greedy-in-a-good-way leader will do the right thing.

Hence our interest in a series of very large derivative contracts written by Warren Buffett between 2004 and 2008, which reveal a willingness to at least work creatively within the confines of fair accounting disclosure. Read more

SOE this is what passes for reform?

When is reform of a Chinese state-owned enterprise not reform at all?

When it’s not going to create value.

Arguably, for example — when it’s really a reverse merger that allows a parent to tap international capital markets and bail out a struggling subsidiary that lost heavy in Australian iron ore mines. Arguably, we said.

Or — an oil major selling a third of its enormous marketing segment to state-backed pension funds, in order to access private capital and boost its already dominant position. Again, arguablyRead more

Markets Live: Monday, 14th April, 2014

Live markets commentary from 

The (early) Lunch Wrap

Ukraine government may be open to referendum || Peugeot sets out recovery plan || Temasek targets middle class growth || London house prices go a bit more mental || Relativity Media takes on Disney for Maker Studios || Stocks down Read more

Rotate, reflate, reflect, placate

Tech is down, Treasuries are up, stocks are flattish: whatever happened to asset rotation, great or otherwise?

For an answer, we turn to the flows as interpreted by Nikolaos Panigirtzoglou and team at JP Morgan, who have found that the bond selling of late last year has reversed:

non-bank investors appear to be responsible for most of this year’s bond rally of which retail investors were one. Neither speculative investors, who appeared to have increased their US rate shorts by $110bn duration-weighted YTD, nor banks who, driven by FX managers, sold USTs this year, appear to have caused this year’s bond rally.

 Read more

The Lok Sabha of dreams

If we come, will they build it? Here’s the Indian economy charted, by Citi:

 Read more

Further reading

Elsewhere on Monday,

-The r’s of Piketty and Summers.

- R vs. g, robots versus globalisation.

- TED congratulating the SEC for finally seeing the light of intelligent market regulation in the M&A world.

- The problem with profitless start-upsRead more

The 6am London Cut

Markets: Asian markets were under pressure in the face of fresh tension in Ukraine and after the S&P 500 dropped to a two-month low on Friday. However, action was muted as investors waited for key Asian data later in the week, including China GDP figures on Wednesday. The US earnings season also ramps up, with about 10 per cent of S&P 500 companies set to report this week. (FT’s Global Markets OverviewRead more

Leaving Las Bambas

We take an unseemly level of interest in Peruvian copper mine projects on FT Alphaville. It’s a side-effect of writing for Lex.

But then so too has a consortium of highly strategic Chinese resources investors (Minmetals, Guoxin International Investment, Citic)…

They’ve bought Glencore Xstrata’s stake in Las Bambas, a very big Peruvian copper asset, for $5.8bn cash, according to a release from Baar, Switzerland on Sunday: Read more


We referenced the obvious similarities between the oil market and the Bitcoin market — specifically with regards to cost of production and capital intensity preventing a competitive threat to Opec — in our previous post.

In a fortunate coincidence, John Kemp at Reuters today directs his readers to the myth-busting 2004 work of former MIT professor Morris Adelman, who compellingly argued against the “oil is running out, prices can only go up” thesis. Read more

Let them eat Bitcoin mining rigs

Bitcoin prices are in retreat, seeming to suffer from the triple whammy of a Chinese crackdown, ongoing repercussions of the MT.Gox implosion as well as the IRS deciding that miners will not be immune to tax in the US.

If you view Bitcoin as a high-risk tech investment, the price might also be reflecting wider tech rot as well. Read more

Markets Live: Friday, 11th April, 2014

Live markets commentary from 

The (early) Lunch Wrap

Europe’s top central banks push for high-risk loan return || IMF ‘proved wrong’ by UK recovery, says George Osborne || Finland risks losing triple A rating || China court rejects appeal by anti-corruption activist Xu Zhiyong || Business leaders hit back at London airport closure proposal || General Motors recall crisis widens with second faulty part || Europe supply in jeopardy as Putin warns of Ukraine gas cut || Markets Read more

Of things and thingamies, connected [Update]

Yes, the Nasdaq has fallen out of bed and is rolling towards the window, off 7 per cent from its March high. Crash or correction, watch this space.

But, in a bid to remember why everyone is so excited about tech, a reminder of the potential for the internet of things. First, some Cisco numbers delivered via Citi:

Soon there will be more than 6 devices leaking information connected for every man, woman and child on the planet.
 Read more

Further reading

Elsewhere on Friday,

- Teaching Rawls after Piketty.

- How does Paul Ryan balance the budget?

- How western is Germany?

- The school of hard knocksRead more

The 6am London Cut

Markets: Japanese stocks were on pace for their worst week of declines since 2011, leading a broader Asia-Pacific sell-off. A 6 per cent drop in US biotech shares spooked markets, sending the S&P 500 down by 2.1 per cent in its worst session since early February. The tech-heavy Nasdaq Composite tumbled 3.1 per cent for its worst day since November 2011. The negative tone spread across Asia, with Japanese stocks under added pressure following the release of minutes from the Bank of Japan’s March 10-11 meeting, which depicted a central bank that sees little reason to unleash further stimulus. (FT’s Global Markets OverviewRead more

The Closer


- Krugman goes long-form on Piketty. Read more

“It’s not all love and kisses and cheesecake dessert”

Bloomberg Businessweek has the latest big interview with the king of Pimco. Click for the low down on special-K served Mercedes-style, the big man’s seven screens, and expansion as a dairy-based process:

 Read more

What’s the Chinese for Streisand effect?

From the PBoC (dodgy translation courtesy of Google):

April 10, the British Financial Times (Chinese network) published “The central bank and the CBRC differences threaten market confidence” and “regulatory agencies friction hinder China’s financial reform,” two articles, article seriously inconsistent with the facts and distorted the facts, the people the reputation of the bank and the CBRC adverse effects.

 Read more

Markets Live: Thursday, 10th April, 2014

Live markets commentary from 

The (early) Lunch Wrap

Greek bond sale a success || Hong Kong and Shanghai unveil cross trading plan || China trade data weak || US banks attempt to preempt GAO report on TBTF funding advantage || Bankia sells Iberdrola stake || Markets mixed Read more

Doozer finance

UK chancellor George Osborne announced on Monday that the Bank of England will initiate a scheme to help support export finance for UK exporters.

This, as the BoE explains on its website, will see the Bank accept UK Export Finance-guaranteed debt capital market notes as collateral for liquidity operations, encouraging (it is hoped) banks to make export-finance related loans to industry. So, similar to funding for lending, but on this occasion specifically lending to export businesses. Read more

Further reading

Elsewhere on Thursday,

- PIK toggle notes aren’t really PIK toggle notes at all — they are YOLO notes.

- Krugman on Piketty.

- Your *ahem* upbeat Ambrose Evans-Pritchard on the march of solar.

- New leverage rules find banks some more assetsRead more

The 6am London Cut

Markets: A dovish outlook from the US Federal Reserve and a solid Australian jobs report overshadowed weak trade and business spending numbers from China and Japan. (FT’s Global Markets OverviewRead more

Further further reading

- The output gap is a flawed and potentially dangerous concept.

- Who bears “Federal Reserve risk“? Read more

Takeaways from the minutes to the March 18-19 FOMC meeting

Our brief thoughts on the FOMC minutes:

1) When Janet Yellen said at the FOMC presser that the public, in thinking about the future path of short rates, should mind the FOMC statement rather than the dots in the Summary of Economic Projections, she was simply reaffirming what had already been discussed during the meeting. What the minutes don’t explain very well is just why “the increase in the median projection overstated the shift in the projections”. In any case, the point remains that Yellen would rather the dots be considered a secondary communications tool. Read more

Taking the red pill, Greece edition

Here’s where another €2bn or so of freshly-issued Greek bonds would go. Chart via Citi:

And that’s after the largest sovereign debt restructuring in history. Bracing isn’t it?

And yet maybe Greece is better off paying up to issue a bond to private bondholders on Thursday. In the long run, it could well beat taking ‘free’ money from the Troika.
 Read more

That new Greek bond — the terms

Coupon not fixed yet. But note a) that they’ve hired lots of banks to sell this and b) the law… Read more

Markets Live: Wednesday, 9th April, 2014

Live markets commentary from