Further reading

Elsewhere on Wednesday,

- Musk v Bezos, Twitter edition.

- Just guess who makes those Donald Trump “Make America Great Again Hats” trucker hats.

- Does financial inclusion exclude?

- Time to hit the books: Most of what you learned in Econ 101 is wrongRead more

FirstFT – Putin lashes out, a uniquely Italian answer to terrorism and how Einstein changed everything

Putin accused the Turkish government of providing financial and military support to Isis Read more

Shkreli’s new target market: 1100 Americans-a-year

The name should ring a bell — Martin Shkreli — that smirking chap at Turing Pharmaceuticals who jacked the price of anti-parasite drug Daraprim 50-fold, and in the process brought the widespread practice of pharma profit gouging into the public eye.

Now he’s gone and done this:

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Dreams and growth; risky, also interesting

Via Chinese research shop Red Pulse on Tuesday:

Ant Financial announced the beta version of an online private equity trading platform, Antsdaq, on November 23. Antsdaq supports four different types of products, aiming at fundraising between RMB2m and RMB10m. Trial fundraising will start on November 30, through to the end of December. However, investors need to prove net assets above RMB1m in order to be qualified; this can be illustrated by balances on Yu E Bao and other investment tools from Ant Financial, or tied to a credit card with an RMB50,000 limit.

For those who don’t know, Ant Financial is Alibaba’s financial services affiliate which (among other things) manages Alipay’s Yu E Bao money market product offerings. Alipay is Alibaba’s answer to PayPal, albeit a much more shadow banking-esque incarnation of the latter. Read more

Pettis on the tragedy of China’s common private central banks

“Hold on, did we mean to create all of these quasi central banks?”

“Errr, I suppose? We certainly decided to lay out that moral hazard blanket, remember? And we must have kn…”

“Yeah. Yeah. You’re right. We planned this. Must have done”

- China’s policy makers, probably never.

And from Michael Pettis’s latest note, with our emphasis:

Almost all credit was being treated, it seemed, as if it were sovereign credit. This mattered for a lot of obvious reasons, but Rodney Jones, who runs Wigram Capital and helped organize the seminars, made what I thought was a very interesting point. At the extreme, he pointed out, much of the short-term paper issued in China was, in the eyes of investors, a lot like PBoC bills. They were liquid, short-term money substitutes with little to no credit risk. Did it make sense, he wondered, to think of China as an economy with potentially thousands of mini-central banks, all issuing nearmoney instruments, and if so, how might we model the monetary and economic impact?

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Saudi Arabia and the curious case of Gorbachev anxiety

The tentative steps Saudi Arabia is taking towards economic liberalisation are, it seems, unleashing a strong case of Soviet-era glasnost and perestroika anxiety among Saudi upper echelons.

The kingdom’s first flirtation with market liberalisation came in June with the opening up of the Tadawul, the biggest stock market in the Middle East.

But with oil prices collapsing from a June 2014 high of $115 a barrel to below $50, coupled with the theocracy’s political and cultural fears connected with liberalising too fast, Citi’s chief political analyst Tina Fordham and chief economist Willem Buiter say Saudi Arabia will be mindful of not repeating the mistakes of the Soviet Union in that regard by letting go of too much control.

One case in point: A Palestinian poet was sentenced to death last week for renouncing Islam.

The collapse of the Soviet Union in the wake of Gorbachev’s reforms is a true Saudi obsession at the moment, Buiter and Fordham told FT Alphaville at a sit-down last week. As Buiter added, “when the Soviet Union tried it, it all went oink.” Read more

Markets Live: Tuesday, 24th November, 2015

Live markets commentary from FT.com 

A Glencore-o-meter, courtesy of Liberum

Online interactive models offered up by brokers are usually rubbish. This one, from Liberum, isn’t. Click to play.

Spoiler: at spot prices it’s a *fail*. Read more

Wait, China’s employment counting problem … solved?

So maybe China doesn’t need to hire a battery of statisticians to ironically count its unemployed?

You know, as a ward against a sudden spike sneaking up on the Chinese government, a government that prizes stability and its own continued rule above much else?

We’d suggested previously that China’s powers-that-be might have just as useless an insight into the true nature of China’s employment as the rest of us. Or at least, that was the fear. It wasn’t that anybody thought there was an immediate problem in the Chinese labour market — it was the not knowing, and the potential for a surprise, that got people ruffled.

That and China’s preternaturally still unemployment rate, of course, which (say those who just want to lash out at the world) has the dubious distinction of being considered the least informative among all key Chinese stats. Read more

FT Opening Quote – Rolls-Royce restructures

Warren East is trying to prevent Rolls-Royce going west with his restructuring plan, Pfizer is under fire for its tax inversion deal with Allergan. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Elsewhere on Tuesday,

- One big influence on interest rates is about to reverse.

- Is there a method to ISIS’s madness?

- The lingering effects of the financial crisis.

- Why millennials still live with their parents.

 Read more

FirstFT – France seeks to monitor bank accounts, the year of debt defaults and China’s copycat cows

France’s finance ministry is seeking new authority to combat terror financing Read more

How oil can get back to triple digits by 2017

With Goldman raising the spectre of a $20 crude price, here’s an alternative scenario from Ecstrat strategist Emad Mostaque…


After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher. Read more

What mobile money giveth, it also taketh away

Mpesa, the digital money system rolled out in Kenya by Vodafone-owned Safaricom, is frequently cited by mobile money advocators as an excellent example of what can be achieved when you give emerging markets access to mobile money services.

But, as we’ve previously written, some unique and hard-to-replicate drivers were responsible for Mpesa’s success in Kenya — not all of them good.

Notably, in its early days, Mpesa drew major benefits from its extremely monopolistic market positioning, at one point even threatening the seigniorage power of the central bank and that of the regulated banking system. Read more

Plus ça change at Plus500

Today’s update from Plus500, the Israel-based Contracts for Difference broker whose takeover by Playtech collapsed on unspecified regulatory hurdles, appears to contain one bit of very good news.

The Group is not subject to restrictions imposed by any of its regulators.

But what does it mean? Read more

Pfizer, having its drug-laced cake and eating it

The formal announcement is out on Pfizer’s planned takeover of Allergan. It’s an all paper deal which values the Dublin-based target at $160bn.

The guff starts right up there in paragraph one, referencing…

a leader in a new industry model – Growth Pharma

 Read more

Markets Live: Monday, 23rd November, 2015

Live markets commentary from FT.com 

No, very kind offer, but we think we’ll keep our gold for now. Yours, India

Compare, contrast and then draw your own conclusions about India’s newly born Gold Deposit scheme, its plan to lure gold out of temples, vaults and jewellery boxes with the promise of (hopefully but not apparently yet) lovely enough interest rates.

First… from Reuters last last week on its rather stuttering start:

A gold deposit scheme launched amid fanfare by Indian Prime Minister Narendra Modi two weeks ago has so far attracted only 400 grammes, an industry official said on Thursday, out of a national hoard estimated at 20,000 tonnes…

 Read more

FT Opening Quote – Playtech pulls out of £460m Plus500 deal

Playtech has called off its deal to buy Plus500, fearing FCA disapproval, while Pfizer is expected to announce it is buying Allergan today, despite the Obama administration’s disapproval of tax inversion deals. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

That was nuts. What about next year?

The year that was, in bullet points, from Michael Hartnett and team at BofAML:

1. 2015 ends with the market cap of Amazon & Google exceeding that of every single Chinese company in the MSCI China index…

2. …the US stock market a mere 107 trading days away from becoming the 2nd longest bull market of all-time, with equity leadership driven by “growth” (longest duration of outperformance ever) & “quality” (at all-time relative high)…

3. …and $6trn of negatively-yielding government bonds, $17trn of bonds yielding <1%, and the Fed expected to raise the Fed funds rates for the 1st time since 2006.

 Read more

Further reading

Elsewhere on Monday,

- The Fed pushes back as Congress eyes its billions.

- The challenge of trade adjustment in Greece.

- Are banks Europe’s problem?

- In defence of higher pensionsRead more

FirstFT – Brussels on lockdown, Argentina’s new president and the benefits of feeling useless

Belgium’s prime minister says that the risk of a Paris-style attack remains ‘serious and imminent’ Read more

Maybe the euro area’s bad banks didn’t matter?

One common explanation why Europe had a worse crisis and weaker recovery than America: its companies depend far more on banks for financing than the capital markets.

Those banks have been in perpetually worse shape than US lenders, mostly because of bad decisions from officials in national governments and the European Central Bank.

The critics point hammer home their point with charts like this:

 Read more

Buiter on transferring robot incomes to the people

So the robots are coming for our jobs.

But what’s a government to do to fend off such an economic threat to its populace? Read more

Alphachat: Robots, artificial intelligence and a sluggish shopping season

Alphachat is available on Acast, iTunes, and Stitcher.

 Read more

Just you wait till the second half, says Slater & Gordon

Quindell was an assortment of legal businesses collected into a basket of troubles. In the year before almost all of the UK-listed group was sold to Slater & Gordon, an Australian rival, it made promises to stop burning cash by a series of deadlines, all broken.

The A$1.2bn deal closed in May. Slater & Gordon said at its annual meeting on Friday the UK business wasn’t doing so well and the group as a whole will burn through A$30m to A$40m in the first half of its financial year. It still expects to make it up in the second half, however.

Have we seen this script before?

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When unsecured is cheaper than secured borrowing

A strange thing is happening in money markets: the cost of borrowing unsecured wholesale funds is now below the cost of borrowing secured funds.

The problem, according to repo dealers, is that new leverage ratio rules are set to make it far too costly for repo market participants to transact.

Meanwhile in the world of swap spreads, as Bloomberg’s Tracy Alloway has been noting, rates have plummeted to historic negative lows which defy market logic. Read more

Markets Live: Friday, 20th November, 2015

Live markets commentary from FT.com 

JCap on Wirecard: a search for the Asian business

Wirecard is the German-listed payment processor valued by the market at almost €6bn. It’s a market darling, a fast growing tech stock with a share price which has quadrupled in the last five years, raising €0.5bn from shareholders along the way.

Much of the growth has come from Asia, where the group has bought up a string of local payments business. However J Capital Research, a US and Hong Kong registered independent research group, went looking for Wirecard in the region and reports finding thinly staffed offices, and in two places no office at all.

The report, which is undermined in part by some faulty assumptions about Wirecard’s accounting, contrasts starkly with opinions from the 23 bank analysts covering the stock, of whom 17 are buyers and just one is a seller. The company has rubbished JCap’s work, saying it “fundamentally misunderstands the Wirecard business model”, while also disclosing it does not have a physical presence in some of the countries where it claims leading market positions in payment services. Read more

Here’s that Imperial Tobacco RAW in full

Frankly, we’re sick of this. You are too, most likely. None of us wants to spend another day being strafed by rumour, counter rumour and unguided speculation about tobacco M&A. We’ve slogged through too many balance-of-probabilities analyses. We’ve had more than our fill of noncommittal steers during conversations with unattributable people familiar with things. It’s been going on for three solid months, and that’s enough. Consider this an intervention.

The Imperial Tobacco bid theory will follow after the RAW disclaimer. Read the disclaimer.

 Read more