Markets Live: Friday, 26th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Hungary halts flow of gas to Ukraine || Gunvor nearly doubles cash reserves || Bankers’ pay withheld from Lord Hill’s Brussels remit || FBI claims to have identified Isis militant Jihadi John || Apple hits back over ‘bendgate’ furore || De La Rue shares tumble on profit warning || India’s Modi Aims to Rekindle U.S. Investment || Alibaba bears emerge to short 8.9m shares || Markets  Read more

Further Reading

Elsewhere on Friday,

- Falling commodity prices flash warning on widening global divergences

- Samsung has more employees than Google, Apple, and Microsoft combined.

- Asymmetric monetary risks.

- Patience is a virtue when normalizing monetary policy. Read more

The Closer


- Bringing back US productivity growthRead more

Subprime lending + cars + robotic repo men = financial journalism gold

Here is a cartoon of a GPS unit, represented by a robot, repossessing a car bought on credit by a McDonald’s employee on minimum wage. The robot is repossessing the car, using new technology, to pay off some greedy bankers who have been bundling subprime auto loans into subprime auto asset-backed securities and then selling them to equally greedy investors.

Are you outraged yet?

No? Then stay with us.

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Crowdfunded, fruity and English

Spotted on the tube:

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Markets Live: Thursday, 25th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Sports Direct’s Mike Ashley takes bet on Tesco with options deal || GlaxoSmithKline poised to appoint Sir Philip Hampton as chairman || Ex-Barclays bankers to give evidence to fraud agency || Apple apologises for bungling iPhone software update || KPMG helps staff up property ladder with mortgage move || Euro weakness strengthens hand of policy makers || Markets Read more

Ukraine — call the sovereign debt cops

. . .Which is an announcement by the Ukrainian Security Service on Thursday that it has opened an criminal investigation into just how Ukraine managed to sell $3bn of some curious bonds to Russia in the last months of Viktor Yanukovych’s government. Read more

Keeping it real at Olive Garden

The many, many slides that Starboard Value has devoted to analyzing Olive Garden’s breadstick distribution and pasta boiling techniques are just misdirection, writes Salon’s David Dayen.

In an article published last week entitled, “The real Olive Garden scandal: Why greedy hedge funders suddenly care so much about breadsticks”, Mr Dayen says Starboard’s interest in Olive Garden originates in the chain’s owned real estate, which it wants to plunder. And while he is obviously free to condemn whatever he finds objectionable, many of his claims about Starboard’s real estate strategy deserve more attention. Read more

Further reading

Elsewhere on Thursday,

- Did you notice? The world economy is losing momentum. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: In New York, the S&P 500 rose 0.8 per cent, snapping a three-day run of losses that saw the US equity benchmark retreat 1.4 per cent from a record closing high. The improved mood was attributed by some to data showing that US new home sales leapt 18 per cent in August, far more than expected – although housebuilding stocks were mostly lower. (Financial Times)

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The Closer


- How China’s central bank worksRead more

Skids under Zhou Xiaochuan?

Sometime tennis partner of Larry Summers and People’s Bank of China governor Zhou Xiaochuan looks to be on the way out, according to a detailed WSJ report.  Read more

This is nuts. When’s the crash?

Some clown’s made up a spoof investment pitch for Rocket Internet, the German e-incubator planning to float in Frankfurt next month at a valuation of something north of €6bn.

Secret papers: How the Samwers woo investors - Manager Magazin Read more

Markets Live: Wednesday, 24th September, 2014

Live markets commentary from 

Tech bubble or no tech bubble?

Last Thursday the below snapshot of techies panhandling for funding on the side of the street hit Valley Wag:

This came a few days after the WSJ reported that Bill Gurley, the Benchmark Capital investor who backed Snapchat and Uber warned that in Silicon Valley these days “no one’s fearful, everyone’s greedy, and it will eventually end.” Read more

The (early) Lunch Wrap

Vodafone to invest for growth || German confidence drops || Fonterra flags slowing milk demand || Global repository a dream, says Isda || MPS recalled to debate bombs in Iraq || Samsung shifts software engineers || Stocks down Read more

Coal India, winning by default

The Coalgate cancellation verdict is in.

India’s Supreme Court has decided to go ahead and annul all of the 218 coal licences handed out to businesses over the last two decades, bar a few belonging to state-backed companies.

Sucks for the private players on the receiving end (Jindal is off some 11 per cent at pixel) but apparently a win for Coal India:

It couldn’t have happened to a nicer behemoth.  Read more

The consensus as contrarian

Here’s a neat idea from the Morgan Stanley equity strategy team.

The consensus of fund managers is normally right, in that when most people want to own something it is probably worth owning. Normally being the operative word here, as when markets turn from boom to bust, or vice versa, that consensus becomes very wrong. Hence the common desire to make a reputation as the heroic contrarian who gets it right.

What Krupa Patel and co have done is to look at the performance of european equity funds over time to see if that might help identify the all important turning points. Unfortunately, it turns out not to be much use for market direction, but it may be useful in spotting more subtle changes in the popularity of investment styles, collectives shift from value to growth, for instance. Read more

Further reading

Elsewhere on Wednesday,

- Larry Ellison bought an Hawaiian island for “the satisfaction one day of having made the place work.”

- Handwriting, it seems, is the next Turing Test.

- The rule of law is vastly underpriced by those who benefit most. Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: Asia-Pacific equities outside of China were subdued following a third day of losses in the US, while Hong Kong and Shanghai stocks rose modestly. The MSCI Asia Pacific index lost 0.2 per cent, placing the regional barometer on track to close at its lowest since June. In Greater China equities were up, a day after state media reported that The People’s Bank of China planned to widen the definition of “first-time mortgage”, enabling borrowers with no outstanding home loans to qualify for interest rate discounts. (FT’s Global Markets OverviewRead more

The Closer


- Brad Delong grapples with the puzzle of how to measure potential output Read more

Fix housing finance, fix the economy?

The vast majority of US mortgages made since the crisis have been guaranteed and securitised by government agencies, while many of the resulting bonds have been purchased by the Federal Reserve and will probably be held to maturity. For better or worse, the US residential lending market has effectively been socialised.

That’s the context for an important piece in today’ FT from former Alphavillain Tracy Alloway on the US government’s attempts to revivify private-label mortgage securitisation. Apparently the Treasury department is unhappy with the current situation:

Authorities are having to walk a fine line between encouraging private capital back into the mortgage market while ensuring availability of credit to less-than-pristine borrowers and simultaneously avoiding a repeat of the subprime bubble that brought the financial system to its knees in 2008…Sales of private-label MBS total just $4.5bn so far this year, compared with $17bn sold last year. Some $726bn worth of private-label MBS was sold in 2007, at the height of the subprime mortgage bubble.

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Anticipating the quantum computing risk

Last week we attended the SINET conference on cyber-security innovation.

One discussion we didn’t get the chance to follow up on at the time, but which we think is worth coming back to, related to the speed of technological development, and how the invention of quantum computing systems and artificial intelligence could soon pose a serious risk to global cyber defences.

James Mawson, editor-in-chief of Global Government Venturing, wrapped up the key points nicely in an editorial (our emphasis):

The speed of technology change makes the challenge of security an issue. Michael Trevett, senior information risk owner at the UK government’s Cabinet Office, in a networking lunch on risk management in a world of fast-paced technological change, posed a series of questions about how organisations could cope with the speed of change. If technology improves so rapidly, identifying what is important and protecting that rather than everything might be helpful, he said.

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Peace at last for Prot?

The reference is to Baudouin Prot, who is clearly departing BNP Paribas, where he stepped up from chief executive to chairman three years ago. It gives us a chance to re-share this…

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Bitcoin business model too good to be true…proves to be too good to be true

After days of speculation, Ars Technica has finally provided confirmation that the business model everyone in the finance world (not suffering from the Dunning Kruger effect) knew to be fantastical was in fact…fantastical.

For more on the greed dynamics that drive perfectly reasonable people to hand over hard-earned fiat cash to strange unregulated companies (with no track record) which promise to use that cash to handcraft depreciating money-printing machines, see our previous post here.

Safe to say, however, that if your business depends on collecting other people’s money to build money-printing devices that depreciate over time, the temptation to use those machines for yourself, rather than to deliver them to customers, may prove rather hard to resist. Read more

Let there be bubbles!

Citi’s Matt King has jumped on the secular stagnation bandwagon with a really nifty collection of charts that ties the whole story of how we got to this point together.

He starts off with the capex issue, noting that despite the cyclical recovery corporates don’t seem to be investing all that much. In fact, according to King, declining capex may be a key aspect of secular decline, which he suggests began in advanced economies and is now spreading to emerging markets as well.

 Read more

Markets Live: Tuesday, 23rd September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,