Slacking to stand still

Our favourite passage of Janet Yellen’s speech at Jackson Hole this year wasn’t actually in the text. It was in a footnote.

Specifically, footnote 7: “For convenience, the analysis here is presented as if cyclical factors and structural factors can be neatly delineated. In reality, the line between the two may be indistinct.”

Our initial reaction to the footnote was that it’s a banal but important point about economics in general. Even the biggest topics remain open to debate. Simplification is sometimes necessary to provide an organisational framework and a common jargon for discussing the relevant issues.

But the footnote was obviously there for a more specific reason, which was made clear in the rest of the speech: its relevance to the ongoing discussion within the FOMC and among economic commentators everywhere for the last couple of years. Read more

Further reading

Elsewhere on Thursday,

- What will bring down US equity prices?

- “This study ought to be the final nail in the coffin of techno-libertarianism. “

- Lifting the oil export ban is really about Downstream Medium Oil vs. Upstream Medium Oil.

- The euro crash?  Read more

The 6am London Cut

Markets: Asian bourses were mixed after China reported weaker than anticipated inflation figures for August. Sydney’s S&P/ASX 200 was down 0.2 per cent, following the release of jobs data. Australia’s headline unemployment rate fell from the 12-year high it reached in July, mainly due to an increase in the number of part-time positions. (FT’s Global Markets OverviewRead more

Is this really the way to choose the chair of a systemically important bank?

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Beware the Yieldco

Hedgeye’s Kevin Kaiser is an independent analyst on a lone crusade against the shoddy valuation of capital intensive corporations with limited earnings but with strong dividend payout track records. His question: where exactly is the money coming from?

His biggest beef is with Kinder Morgan, the pipeline operator which recently transformed itself from a Master Limited Partnership into a corporation. But, as Kaiser observes in a new research note, “Yieldco” syndrome could be much more common than that. Read more

FX vol is back, say relieved FX analysts

FX vol is edging back and we have the notes to prove it.

The question is whether they are reflecting an overreaction to a small jump, after a period of slumped volumes and returns, or a real shift with further to go? Read more

Markets Live: Wednesday, 10th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Santander patriarch Emilio Botín dies || French woman to take over as Kingfisher chief executive || France misses its EU budget deficit target || Ferrari chairman quits after ‘misunderstandings’ with Fiat boss || Apple looks to swipe the payments market || AngloGold shares sink after restructuring plan announcement || Markets Read more

Scotland and Sterling — whose currency is it anyway?

This guest post is from Charles Proctor, a partner at lawyers Fladgate and an acknowledged expert on the legal aspects of money…


Who “owns” sterling?

With the date of Scotland’s independence referendum fast approaching, the debate over a currency for an independent Scotland has reached fever pitch. Read more

Scottish currency union, the unilateral Montenegro option

Here’s an interesting point from Capital Economics’ Roger Bootle on Tuesday regarding a potential Scottish currency union. They could go down the unilateral adoption route.

To recap, independent Scotland wants to keep the pound via some sort of currency union, ideally based on the BoE continuing to accept Scottish assets as collateral in exchange for sterling liquidity.

The UK, however, is not willing to accept this because it would mean unrestricted UK support for Scottish banks, which may or may not now be regulated to the same standards. Read more

Further reading

Elsewhere on Wednesday,

- Disseminating economic expertise: a Scottish case study.

- Unionising at McDonalds.

- Matchmaker, matchmaker, make me a spreadsheet.

- “To economic growth, the cause – and solution – to all of life’s problems”.  Read more

The 6am London Cut

Markets: “Asian stocks fell, with the regional index dropping the most in a month on concern that China’s growth is slowing and amid speculation that U.S. interest rates will rise sooner than estimated. The dollar traded near a six-year high to the yen and crude oil rose. The MSCI Asia Pacific Index dropped a fifth day, slipping 0.8 percent by 12:49 p.m. in Tokyo. Hong Kong’s Hang Seng Index retreated 1.9 percent as Chinese Premier Li Keqiang announced money-supply growth that was the slowest in five months. Standard & Poor’s 500 Index futures declined 0.2 percent after the U.S. gauge’s biggest retreat since Aug. 5.” (BloombergRead more

The Closer


- Martin Wolf suspects that ECB stimulus will not be enough to restore growth to the euro area Read more

Wealth effect may one day stop being so great for wealthy, says wealthy person

One private equity chief went so far as to publicly thank Ben S. Bernanke, the Federal Reserve chairman until last month, whose program of extraordinary economic stimulus has helped push stocks higher, feeding the private equity machine.

“Thank you, Ben Bernanke. I saw him last Thursday, and I thanked him,” Mr. Schwarzman of Blackstone said during a conference in December. “The opportunity for us to be able to attract funds is very, very high.” Read more

Closing our (virtual) short in Blinkx

We’re taking what we might term evasive investment action. If you have even the remotest interest in Blinkx, a London-listed internet advertising company (see Markets Live passim), consider this shareholding notification. Click to read…

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Cataclysmic hyperbole?

Back in the days of the Great Northern Rock bank run, a long conversation was had in the newsrooms of most media organisations.

Should we hold back from reporting on what are still smallish queues given the potential to exacerbate panic for no reason? Or do we consider this a legitimate story, that we didn’t cause, and cover the hell out of it? Read more

The dark side of data centres

Most technology users remain blissfully unaware of the internet’s carbon footprint because most “users” never have to come up close and personal with a data centre.

Yet, for all the energy efficiency that technology brings us, data centres remain the technology world’s dark little energy guzzling secret.

Data centres, it could be said, represent the unglamorous side of the technology business. They’re the plumbing that holds the whole thing together. They’re the secret sauce that gives one player an advantage over another. As a consequence, there’s zero advantage — either from a security or cosmetic point of view — of bringing attention to where your data centre is located, how it is run or how much energy it consumes. Read more

Markets Live: Tuesday, 9th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Investec sells Kensington || Dixons Carphone: iPhone 6 “to be a biggie” || ABB $4bn buyback || German 10-year coupon 1 per cent || Sterling under pressure Read more

How to spend it: ECB bond-buying edition

Securitisation has gotten a bad rap thanks to its association with dodgy underwriting during the bubble. Yet bundling loans originated by banks and selling them to investors in the capital markets could be just what is needed to boost the flagging euro area economy.

This helps explains the European Central Bank’s recent announcement that it will be shopping for asset-backed securities (including mortgage bonds) and covered bonds starting in October. Read more

Quindell says it has won a judgment against Gotham

Quindell has announced that the High Court of England and Wales ruled in its favour in a libel judgment against Daniel Yu’s US based short selling outfit, Gotham City Research.

The UK’s largest listed law firm filed suit in April after Gotham published a highly critical report on the group, a former country club transformed by a string of acquisitions. Following publication of the report Quindell’s share price collapsed.

The company said that it had received judgment in its favour after Gotham failed to provide either acknowledgment or a defence against the libel proceedings. Read more

Equities, ex-UK

After reading John McDermott (formerly of these pixels) on the latest independence vote poll numbers and why he reserves the right to panic…

Take a moment to reflect on this late (potential) addition to the No-vote campaign, via Citi’s Jonathan Stubbs:

The history of the union has been kind to UK equity investors. Since the Acts of Union were passed by the Parliament of England (1706) and Parliament of Scotland (1707), UK equities have returned c12,700,000,000% (Figure 1) with a slightly less impressive annualised return of 6.3%. Our back-test concludes that equity investors have been well served by the Union, to date.

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Further reading

Elsewhere on Tuesday,

- Wrestling with smoke and Scottish identity.

- “If you’re standing in line for this lunch, it’s probably because you’re not big enough to rate a one-on-one meeting with one of Alibaba’s two traveling color-coded management teams over the next 10 days.”

- Rawls, Bentham and the Laffer Curve.

- Cleaning up after the elephant parade at the Dodd, Frank & Gensler Circus.  Read more

The 6am London Cut

Markets: Japanese markets rose after the yen hit its lowest level in almost six years against the US dollar, buoying demand for stocks in export-focused shares. Currency moves were also afoot in China, where the central bank fixed the renminbi higher after the nation reported a record trade surplus. Unperturbed, the Shanghai Composite traded flat. Hong Kong markets were closed for a holiday. (FT’s Global Markets OverviewRead more

The wonky, absurd scales of (insider dealing) justice

On Monday…

Mathew Martoma, the former SAC Capital portfolio manager who refused to co-operate with authorities targeting his old boss Steve Cohen, was sentenced to nine years in prison for insider trading on Monday. Sentencing guidelines indicated Mr Martoma, 40, could serve between 15 and 20 years in prison because of the size of the illicit profits. Read more

The Closer


- Basic income, explained. Read more

Towards reaction point at Dow Chemical

Dow Chemical announced some management changes on Monday.

Chief Financial Officer William H. (Bill) Weideman has elected to retire from the Company, following 38 years of service with Dow. The Board of Directors has elected Howard I. Ungerleider to succeed him as chief financial officer, and his appointment will become effective October 1, 2014.

There was also a promotion for Jim Fitterling, former executive vice president who becomes vice chairman of the company, under longstanding chairman and chief executive Andrew Liveris.

Why now though? Allow us to speculate. Read more

The avoided energy factor

BoAML follow in the footsteps of UBS with a whopper report on the smartening up of the world’s energy markets.

It’s a mighty 256 pager.

We’re still going through it in detail, but couldn’t resist flagging up the following factoid about “avoided energy” before revisiting some of the larger themes (among them, the reduction of power consumed by data centres).

What the analysts mean by “avoided energy” is how much energy we’ve avoided using thanks to improved efficiency and know-how. Read more

Markets Live: Monday, 8th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,


Dan picks up on a UBS note on the chances and risks of a Québécois Scotland.

NEWS Read more