Money Supply: White House on Labour Participation

The White House has joined the debate about declining labour force participation with an excellent report from the Council of Economic Advisers. (The fingerprints of Harvard’s James Stock are in evidence in some punctilious time-series econometrics.)

The CEA reaches similar conclusions to a number of other studies. Most of the decline in labour force participation was demographic, due to an aging population; a modest proportion was due to the recession and its unusual severity. Read more

Because low vol just happens some times

On the search for lost vol, complex systems and the limits of analysis from HSBC:

A curious feature of current conditions is that the explanation for the phenomenon is often taken to be self-evident. It’s caused by QE and low interest rates. It’s caused by lower trading volumes from hedge funds. It’s caused by lower risk appetite (even though risk premia are highly compressed). It’s caused by crisis fatigue and complacency.

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MoneySupply: Jobs growth is not just a London thing

In an column today, I highlighted the surprising strength of the UK labour market outside London. This is important, for if London was dominant and overheating, monetary policy might have to tighten too late for London, but too early for the rest of the UK. Fortunately, this is not the case.

But one of the limitations of a column is that, short of boring people to death with written numbers, it is difficult to demonstrate the evidence fully. So here is a chart-based version of the same argument. Read more

Markets Live: Thursday, 17th July, 2014

Live markets commentary from 

The (early) Lunch Wrap

Liberty Global buys ITV stake || Carrefour sales rise || Russian stocks down on sanctions || ECB post-AQR cash raising window will be brief for banks || Sports Direct profits up || Stocks down, bonds up  Read more

On the subject of massive empire building, carmaker edition [Update]

Set the scepticism dial to 10 — on the basis that memories of German carmaker buying Chrysler is the sort of thing to make car executives wake up in a cold sweat. However Fiat shares were up more than 4 per cent at pixel time for a reason…

That reason is a story in the German manager magazin which reports major shareholders are in conversation about a potential takeover of Fiat by VW, with Chrysler the key to solving VW’s US problems.

Der Volkswagen-Konzern steht vor dem nächsten großen Coup. Auf Großaktionärsebene finden bereits Gespräche über eine Übernahme von Fiat statt. In einer Integration von Chrysler sieht Volkswagen einen möglichen Lösungsansatz für die eigenen US-Probleme.

 Read more

Further reading

Elsewhere on Thursday,

- Another possible ‘landmark’ bond default in China.

- Noah Smith vs Zero Hedge.

- The good Tsar bias.

- A rather profitable Time Warner betRead more

The 6am London Cut

Markets: Asia-Pacific stocks were on track for a fourth daily gain, after global stocks rose overnight as news of a mega-bid in the US media sector revived animal spirits. Improving global sentiment set the tone for greater risk appetite. The S&P 500 rose 0.4 per cent in New York, partly thanks to corporate earnings and economic data, but also after confirmation that Rupert Murdoch’s 21st Century Fox had proposed buying Time Warner last month in an $80bn deal. The cash and stock offer was rebuffed but Time Warner shares soared 17 per cent on Wednesday. (FT’s Global Markets OverviewRead more

Sell Rosneft, buy AK-47s

From the US Treasury’s Office of Foreign Assets Control on Wednesday:

The following transactions by U.S. persons or within the United States involving the persons listed below are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity of these persons (listed below), their property, or their interests in property…

Note that wording carefully. “US persons” could extend beyond the US. Meanwhile “new debt of longer than 90 days maturity” could extend beyond US dollar debt.

It does not, however, include US dollar clearing generally, the US Treasury says. Nor, it seems, CDS which references prohibited underlying debt.

Now note whose debt — not all transactions; debt — US banks, US clearing systems, and US investors may be prevented from dealing with accordingly: Read more

How to build an empire, the full Murdoch timeline

Step one, inherit.

Keith Rupert Murdoch, second of four children, was born in Melbourne, Australia on March 11, 1931. In 1953, after graduating from Worcester college, Oxford, he assumed control of News Ltd — left to him by his father. Adelaide News was the main asset, and he took control of the Sunday Times in Perth, developing the sensationalist style now seen in many Murdoch papers.

Step two, start hunting with ruthless and patience persistence.

The following is an updated version of a timeline the FT published back in 2007, and we’ll also put a helpful list of News Corp’s biggest deals at the bottom. Read more

Time Warner rejects

Statement here, and it is more than boilerplate.

The Board is confident that continuing to execute its strategic plan will create significantly more value for the Company and its stockholders and is superior to any proposal that Twenty-First Century Fox is in a position to offer.

Superior to a 25 per cent premium? Also note the reference to the Murdoch factor — control of the group by the closely-held voting shares of Fox (our emphasis): Read more

Fox confirms

21st Century Fox can confirm that we made a formal proposal to Time Warner last month to combine the two companies. The Time Warner Board of Directors declined to pursue our proposal. We are not currently in any discussions with Time Warner.

Statement here. It may be worth revisiting the implacable tactics used by Rupert Murdoch in the pursuit of his last big trophy, as described by that prizeRead more

Murdoch and Time Warner, one hundred years ago

1984, Fortune:

Warner would fit the scope of Murdoch’s ambition. It operates one of the most consistently profitable movie and TV studios in Hollywood, owns a vast film library worth more than $500 million, and has one of the largest record companies in the U.S. A battle for Warner would show off Murdoch’s defiantly competitive ways. His instincts are brute and he hardly ever bolts from a row. In late January, for instance, he had reporters at the New York Post searching for dirt about Steve Ross of Warner.

July 16 2014, NYTRead more

Meanwhile, at summer camp

If Google or 21st Century Fox is interested in buying Time Warner, it’s news to Jeff Bewkes.

“I know nothing about it,” the media conglomerate’s chairman and CEO told Variety at the Allen & Co. media conference in Sun Valley, Idaho, on Wednesday when queried about reports that the two companies were eying Time Warner… Read more

Rupert’s bear hug

An $80bn scoop on Dealbook…

Fox first approached Time Warner in early June, these people said. Chase Carey, the president of Fox and a longtime top lieutenant to Mr. Murdoch, met privately with Time Warner’s chief executive, Jeff Bewkes, these people said. Later that month, Fox delivered a formal takeover proposal worth $85 in stock and cash for each Time Warner share. Read more

Markets Live: Wednesday, 16 July, 2014

Live markets commentary from 

Almost normal service resumes, join us for Markets Live at 11

Paul is still ill, and Bryce is wreck diving at Bikini Atoll (possibly), but Joseph and Dan will be hosting Markets Live today at 11am, London time — so please do join them.

The (early) Lunch Wrap

Good morning New York,


Sharks off the British coast again?

The summer silly season is nearly upon us, so what chance a reprise of this Daily Mail classic?

From November 2009 when Britain’s tabloids met contango with predictable consequences: Read more

African Minerals: Dermot Coughlan resigns

African Minerals Limited (AIM: AMI) announces that Dermot Coughlan, one of its independent non-executive directors, has advised the Company of his resignation with immediate effect.

Dermot has been an independent director of the Company since 2010 and the Company notes his contribution during that time which saw the rapid progression of the Company’s Tonkolili project through exploration, development, construction and into operations.

The announcement follows our July 2 story, A related party at African Minerals, which reported that the miner had made large payments for warranty breaches to a company in which Hong Kong financial disclosures indicate non-executive director Dermot Coughlan and his son Craig Coughlan hold a financial interest. Read more

Further reading

Elsewhere on Wednesday,

- Who wouldn’t dislike the “Unaccountable Capital Markets Death Panel.”

- Oil futures trading in troubled waters.

- Congratulations to China where debt has finally reached 200 per cent of GDP.

- Hackathon accidentally picks perfect metaphor for own awfulnessRead more

The 6am London Cut

Markets: Asia-Pacific markets were barely moved by better-than-anticipated GDP numbers from China. Data out on Tuesday already showed that Chinese bank loans and other forms of credit grew at their fastest pace for three months in June. The Australian dollar, which usually reacts positively to better growth numbers in China, slipped 0.3 per cent to $0.9341. (FT’s Global Markets OverviewRead more

The data keiretsu, continued

Apple and IBM’s shared vision for this partnership is to put in the hands of business professionals everywhere the unique capabilities of iPads and iPhones with a company’s knowledge, data, analytics and workflows…

 Read more

Yellen Testimony

Ahead of her semi-annual testimony to Congress, Janet Yellen’s prepared remarks have been posted. Click for the full thoughts of the Chairman of the Federal Reserve board of Governors on the economy, monetary policy, and financial stability.

A bear retires, unbowed and growling

The final report from Smithers & Co has landed, as the septuagenarian scourge of “stockbroker economics” eases into retirement.

We are assured that he’ll still be blogging for the FT, but the regular research output will cease. The valedictory note is, as you might expect, on the bearish side of things:

The US equity market is overvalued to an extent only experienced five times before in the past 212 years. On two occasions, however, it has risen well above the current degree of overvaluation.

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That’s it, there is now an app for everything

Judging by the amount of time it took to register and start playing, downloads may be a counter-indicator of investment banker business. But in a world where everything is gameified

“Buy. Sell. Merge. Master…” Read more

Markets Live scratched – some alternative light reading

Paul is still ill, we’re afraid, and Bryce is on safari in Uzbekistan (we think), so no Markets Live again today. Sorry.

Instead, perhaps the FX Benchmark Consultative Document might be of interest. (Click for the full thing, with thanks to the RBA’s Guy Debelle who along with Paul Fisher of the BoE did much of the heavy lifting)

 Read more

Credit vs equity vs bonds vs history vs the unknown

If we told you that stocks were cheap relative to corporate bonds, would that make you think equities are attractive or that credit is really something to avoid?

We ask because Barclays provide a long term update to a well worn chart of the yield on stocks versus bonds, in this case the US version: Read more

The (early) Lunch Wrap

US defeat at WTO || UK cabinet shake up || Korean Won drops || Canaries drilling near approval || Microsoft to cut jobs || Markets calm ahead of Yellen testimony Read more

China and the cost of stimulus

Compare and contrast time. First Nomura, on China’s June credit and money growth data which grew at their fastest pace in three months in June:

M2 growth rose more than expected to 14.7% y-o-y from 13.4% on policy easing, and new total social financing also rose strongly to higher-than-expected RMB1.97trn in June from RMB1.40trn, largely led by off-balance sheet credit.

Stronger money and credit data are positive for short-term growth, but the renewed pick up in off-balance sheet credit raises a longer-term concern – if this is the start of another major upswing in TSF led by a less regulated shadow financing sector, it raises the risk of a sharper slowdown further out.

We continue to expect real GDP growth to stay at 7.4% y-o-y in Q2, unchanged from Q1, and also expect government to ease policies further in Q3, which should help growth to rebound slightly to 7.5% y-o-y in Q3 and 7.6% in Q4.

Then Peking University’s Michael Pettis, in his latest note: Read more