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 FT.com 

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 FT.com 

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 FT.com 

The (early) Lunch Wrap

Toyota suffers fresh reputational blow with 6.4m vehicle recall || Biggest US banks forced to hold $68bn in extra capital || Walmart plans big wholesale store push into India || Facebook passes 100m users in India || Copper output surge adds to price pressure || WH Group eyes IPO valuation of up to $21bn || Markets Read more

This is nuts. When’s the crash?

Okay, maybe it’s because this particular FT Alphaville blogger has been safely quarantined in Geneva, Switzerland for the last two years where everything is frozen in time, and it’s all down to “London shock”, but it really does feel like you can’t walk three foot in the capital these days without bumping into a crane panorama that would make the Doozers of Fraggle Rock proud.

Case in point, the current view from outside FT Towers at One Southwark Bridge:

 Read more

Shorting rates for fun and profit

So, dear sceptic, you think that interest rates will go higher. Prices for debt will fall, meaning a wonderful opportunity to bet on what must occur. Easy.

Except it turns out that trading a bear market in bonds is hard. By way of example, BofA Merrill Lynch offer up the last rate tightening cycle that began on June 30, 2004. Imagine you decided to go short exactly a year beforehand.

During that period, 10y Treasury yields rose 117 basis points. However, once adjusted for negative carry and roll-down, an investor would have made only about 70bp, assuming a short position in 10y Treasuries was established on June 30, 2003 and held it for the next year.

 Read more

Further reading

Elsewhere on Wednesday,

- The real problem with HFT.

- Summers’ inverse Say’s Law.

- The impolitic wisdom of Simon Kuznets.

- Buying the futureRead more

The 6am London Cut

Markets: Japanese stocks suffered as hopes for monetary stimulus faded, but the rest of Asia-Pacific was upbeat after Wall Street staged a rally. Japan’s losses were driven by comments from central bank governor Haruhiko Kuroda. On Tuesday he acknowledged that last week’s increase in the national sales tax was likely to push the economy into a decline this quarter, but said he foresees the economy rebounding by summer. In other words, no need for further stimulus. (FT’s Global Markets OverviewRead more

Who really benefits from EM export feedback loops?

We all know the role played by the vendor financing feedback loop of hell in dotcom bubble mark 1.

Quickly summarised, tech equipment suppliers became overly dependent on sales to internet startups funded through vendor financing, a situation which saw them lending money to companies with dubious track-records for the purpose of buying equipment directly back from them. It didn’t end well.

Nevertheless, it’s still a model replicated on a consumer level in the west, whether it’s through car company lending money to customers so that they can buy their cars or sofa company loans for purchases of sofas. Read more

“7. Friday 28 March… f) Whether a false or disorderly market was present during this period”

Do click for other Terms of Reference of the FCA independent directors’ inquiry into the FCA’s role in the implosion of life-insurance shares last month…

 Read more

The good, the bad and the ugly of India’s election: cut out and keep edition

If you’re short the rupee* the past few months have been uncomfortable.

Not only have (somewhat dodgy) Indian polling data pointed consistently to a stable BJP government being formed after elections which started this week, but India has also managed to get its macro house into some sort of order.

From Goldman, for example: Read more

That was nuts. Is this the crash?

Tech stocks have become a little bit more modestly priced.

 Read more

Markets Live: Tuesday, 8th April, 2014

Live markets commentary from FT.com