Why deflation is not a girl’s best friend

The biggest news in diamond land is still April’s audacious heist of a Hatton Garden safety deposit company and the theft of up to 70 boxes worth of diamonds.

Police by now have a suspect, and parallels between the robbery and the plot of a novel by Michael Connelly are even being noted.

What we’d like to draw attention to is something the criminals may not have considered when planning the heist — something that could seriously impede their ability to monetise the loot.

Deflation. Read more

Hanging some of India’s public banks out to dry?

Evidence of a potentially large change in India’s banking system from Credit Suisse and Neelkanth Mishra’s India markets team:

Even within bank loans, which are losing share to bonds in corporate borrowing, [public sector, or PSU, banks] are losing share to private banks, being short of capital. In this environment, by allocating just Rs80 bn for PSU bank recapitalisation in the FY16E budget (half that of the previous year, and the lowest after FY10), the government has shown willingness to let PSU banks fall in relevance, and not perpetuate moral hazard by bailing out weak banks. This is a remarkable and unexpected change in stance, given the potential advantages in micro-managing three-fourths of the bank lending space in India.

And lo did the wails of certain politicians rent the sky. Read more

BNY Mellon and an expensive case of spooky commingling action at a distance

The FCA on Wednesday slammed custodian Bank of New York Mellon with an unprecedented £126m fine for failing to comply with its Client Assets Sourcebook rules (the CASS rules) throughout the period of 2007-2013.

It’s not the biggest FCA fine ever, but it is the largest issued for a breach of this kind, and is levied against the world’s largest custody bank by assets. The previous largest fine for a CASS failing, for example, was £38m for Barclays.

The failings in hand relate to the systemic commingling (a.k.a pooling) of assets at the bank, that should really have been kept segregated. Read more

Markets Live: Wednesday, 15th April, 2015

Live markets commentary from FT.com 

What is Camp Alphaville?

Ideas, like jokes, are found at the edge of things. They come with perspective, a moment to relax, or rubbing up against something new.

With Camp Alphaville the inspiration was the classic British music festival with an array of stages, activity and distractions. We want to give you hard choices, between listening to the rock stars on the main platform and the chance to talk to the heavy hitters in a side tent. You should be able to stumble on conversations about how restaurant economics really work or what happens to finance as the machines get smarter, and sample some of the latest technology first hand.

We also want it to be democratic, with strategists, academics, punters, robots and more rubbing shoulders. July 1 at the Royal Artillery Company grounds in London. Sign up here to soak it all in, there’s a sample of what we’ll be discussing below the fold. Read more

Pouring money into the Weald

Solo Oil plc today announces that it has raised £2,000,000 gross proceeds through the issue of 363,636,364 new ordinary shares of 0.01 pence each in the Company (“Placing Shares”) at a price of 0.55 pence per share (the “Placing”). The Placing Shares which were issued at a discount of approximately 8% to yesterday’s closing bid market price represent approximately 6.59% of the Company’s enlarged issued share capital.

Solo Oil will be using the money to fund working capital as it works with partners on such projects as Horse Hill in the Weald Basin.

One partner is David Lenigas, director at Solo as well as UK Oil & Gas Investments PLC, the company which prompted some rather fevered press coverage about Gatwick’s potential as the new Saudi Arabia. Do note the clarification which followed a week later: Read more

Further reading

Elsewhere on Wednesday,

- Jamie Dimon, Dan Davies and the “Digital Nonlocability” test —  if you can’t put your finger on something in a 50 year chart, it’s probably not important.

- Of life, death and pirates.

- “Citi still has a role to play even in Lending Club lending: That lending requires money, and Citi is a bank, and banks are — still — where the money is.”

- Bernanke on the term premium.  Read more

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The EU will launch one of the defining antitrust cases of the internet era today, formally charging Google with abusing its dominance of the internet search market in Europe. (FT)

The European competition commissioner will accuse the US group of breaching antitrust rules by diverting traffic from rivals to favour its own services. Brussels will also launch a formal investigation into Google’s Android platform, focused on its distribution terms and compatibility tests for apps. Read more

Quobs and Robert, the new Terry venture

Wondering what the mastermind behind Quindell plans next? Watch this space:

A quick trip to QuobPark.com tells us “The Quob Park Estate Strategy Evolution Team are working with and investing in companies that are focused on the benefits of Digital Disruption”. Read more

Camp Alphaville – Last chance for early birds

From Sunday, tickets to the UK’s premier tent based celebration of ideas, finance, robots and economics will be a still cheap £199.

In the meantime, the final few early bird tickets can be stolen for £99. Get them while they last.

Camp Alphaville 2015, at the Honourable Artillery Company on July 1, will be like last year only more so. Big thinkers, bigger igloos, more space, FinTech, finance, fun and possibly even some sun.

Not to mention scores of speakers and panelists, strategists, investors, academics, analysts, robots, drones, smartarses, dancers, corporate financiers, magicians, convicts… Read more

Guest post: IMF Spring hubbub

Thousands of officials, journalists, academics and market professionals will soon be in Washington DC for the spring meetings of the International Monetary Fund and World Bank, from April 17 to 19. Former IMF staffer Peter Doyle advises attendees on what to really ask the IMF.


Another spring, another IMF Spring Meeting, another set of IMF platitudes—a two-, three- (or is it four?)-speed, variably geometric, or airline metaphoric world economy, making progress, more to do, notably for the poor, sundry complacencies and risks to beware. Even Occupy has been put to sleep by these rituals.

But much goes on behind this veil of blur. Here are five steps to get to what matters. Read more

Markets Live: Tuesday, 14th April, 2015

Live markets commentary from FT.com 

Outsource your dating to India

Deutsche are back with their cheap date index. And some other price comparisons, of course:

We recomputed our three indices: “The Weekend Getaway Index”, “The Cheap Date Index” and the “Graduate Recruitment Index”. India and Mexico were found to be the cheapest places to recruit and deploy a fresh MBA, but Singapore and Hong Kong were found to be surprisingly reasonable. The US is now the most expensive place in the world to hire from a top school.

For a quick weekend getaway, Sydney, Paris and London remain the most expensive due to high hotel room rates. Mumbai and Delhi are the cheapest but Tokyo, Ottawa and Toronto were found to be surprisingly attractive. Indian cities are also the cheapest places to go out on a date. Mexico City and Rio de Janeiro were also found to be reasonably priced. Despite Yen depreciation, Tokyo is still an expensive place for a date. So are Wellington and San Francisco.

 Read more

China and a short nuttiness debate

We assume we’ve made our position on this pretty clear… but apparently Citi remain unconvinced.

To wit: “If the Chinese market were to double from here it would indeed be in bubble. The same is true for Asia, a doubling would put us back at 3x book which over the last 40 years has been the peak – four times. When we get close to those levels we will be in a bubble, till then it’s a bull market.”

From their GEMs team, which has been preaching China equities for quite a while (with our emphasis): Read more

Further reading

Elsewhere on Tuesday,

- “As with sex in Victorian Britain, there is a double standard with capitalism in North Korea: everybody does it, but few publicly admit to its existence.”

- A $70,000 min wage?

- “Bonds are like houses” says metaphor trashing man in piece about bond market liquidity fears.

- Your Russian rebound.  Read more

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Russia lifted its self-imposed ban on selling an advanced air-defence systems to Iran, irking world powers thrashing out ways to limit the nuclear programme in the country. The decree, banning delivery of the S-300 system to the Islamic Republic in September 2009, had been imposed under intense diplomatic pressure from the US and Israel. (FT)

The move comes at a sensitive point in the negotiations over the nuclear programme, with the White House attempting to sell a framework agreement with Tehran to a highly sceptical US Congress.

Secretary of State John Kerry raised the matter in a phone call with the Russian foreign minister, Sergey Lavrov, the White House said. (BBC) Read more

No super-contango this time around

Oil prices, both Brent and WTI, remain depressed:

 Read more

Deutsche Bank and a rocky path to GoldmanSachsism

Deutsche Bank has long been an unloved stock.

Not only does it trade stubbornly below book-value, a bleak revenue outlook in January led to the promise of a major strategy rethink for the group, including the prospect of job cuts, asset sales and the streamlining of investment banking divisions.

Among options on the table is a sale of the group’s Postbank retail business — a division it acquired in 2008 in the hope of bringing deposit funding to the aid of its investment banking arm. Read more

This is nuts. When’s the crash?

From Blackrock on Monday:

BlackRock launches its first China A share ETF for international investors London, 13 April 2015 – BlackRock has today listed the iShares MSCI China A UCITS ETF on the London Stock Exchange, giving its international institutional and retail clients direct access to China’s A share equity market. A shares are mainland China incorporated companies listed on the Shanghai and Shenzhen Stock Exchanges and represent the largest single segment of the Chinese equity market.

They were amongst the best performing equities in the world in 2014, when the Shanghai Composite Index rose 58%. However the direct purchase of A shares is open only to Chinese nationals plus foreign investors able to access a limited number of tightly controlled and regulated channels, restricting access to the market for many.

The iShares MSCI China A UCITS ETF provides investors with exposure to China A shares through BlackRock’s own Renminbi Qualified Foreign Institutional Investor (RQFII) quota. The ETF is the only UCITS fund to track the MSCI China A International Index. This index represents a broad and diversified basket of over 300 large and mid cap stocks.

But you know what they say about ETFs… Read more

Markets Live: Monday, 13th April, 2015

Live markets commentary from FT.com 

Markets Live returns at 11am

The Markets Live server hamster is back from Spring Break, refreshed and ready to roll.

ML server

Join Bryce and Murphy at 11am BST for a stroll around Chinese trade data, big oil, phantom Irish corrugated packaging M&A and all the usual nonsense. For newcomers, here’s the explainerRead more

Further reading

Elsewhere on Monday,

- The Federal Reserve on avalanche patrol.

- “Couldn’t we say that a tie is really a symbolic displacement of the penis, only an intellectualized penis, dangling not from one’s crotch but from one’s head, chosen from among an almost infinite variety of other ties by an act of mental will?”

- GE and the not so attractive SIFI label.

- The declining demand for skill, or why income inequality isn’t all about education.

- There is no sticky wage puzzle. Read more

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Who saw that coming? Hillary Clinton on Sunday fired the starting gun on her second bid for the US presidency, ending two years of speculation and opening another chapter in a rich political life that has already spanned more than two decades. In a low-key video message posted on her new campaign website, Mrs Clinton set her stall as a champion for everyday Americans, who would put tackling inequality and boosting opportunity for middle and low-income families at the heart of her agenda. (FT and BBC)

The New York times has deconstructed the announcement video. (NYT$)

Political strategists rate her chances highly given the absence of any strong Democratic rival – unlike 2008, where Mrs Clinton’s candidacy was swept aside by the phenomenal rise of Barack Obama. If she can win the female vote, as her campaign aims to do, the White House is hers to lose argues the FT’s Ed Luce – he notes that women vote in higher numbers than men. (FT)

 Read more

Tiger Index: A stop and go recovery is in danger of another stall

The latest release of the TIGER (Brookings-FT Tracking Indices for the Global Economic Recovery) index suggests stunted growth prospects for both advanced and emerging market economies, write Eswar Prasad, Karim Foda, and Arnav Sahu in this guest post.

A stop and go global recovery seems at risk of stalling again, with only isolated pockets of strength evident in the world economy.

A modest reversal of fortunes between the advanced and emerging market economies belies the fact that both groups still face stunted growth prospects.

The latest update of TIGER (Brookings-FT Tracking Indexes for the Global Economic Recovery) reveals a somber picture characterized by stagnant low growth, risks of deflation, and weak consumer and business confidence. Read more

The financial sector’s diamond age

In Neal Stephenson’s 1995 sci-fi novel Diamond Age — a story that explores how the world might be set up if nanotechnology and replicators make everything abundant — there is still room for commercial banking.

But banks don’t operate as they do now.

Take as an example Stephenson’s imagineered Peacock bank.

This is an institution where a line of credit can be secured only if a credit card is implanted directly into the borrower’s body directly. Different banks in Stephenson’s book vary on what part of the body they use, but embedded somewhere it must be. Once in place the borrower can “buy” anything he wishes just by asking it because the bank can monitor them diligently and share that information. Read more

This is *really* nuts. When’s the crash?

The China stock bubble is getting more and more bonkers. This from Deutsche Bank:

Bubble watchers point out median earnings multiples for Chinese technology stocks are twice US peer valuations at their dot.com peak. More worrying perhaps is a health-goods-from-deer-antlers producer on 70 times, the seamless underwear manufacturer on 90 times or those school uniform and ketchup makers on 330 times!

It seems everyone in the country is racing to open a brokerage account – 1.67m new accounts in the latest week, according to the China Securities Depository and Clearing Co. That sounds a lot, although it is growth of only about 1 per cent a week in the total of new accounts: China, remember is big.

But a quick bit of Excel work shows just how silly the bubble in Chinese domestic stocks, known as A shares, has become. Read more

Don’t blame the locals too much for the Danish krone

You may remember that the smaller corners of the European currency markets were unexpectedly interesting at the beginning of the year.

For those who don’t, the fun started in January, when the Swiss National Bank announced that it would stop suppressing the value of the franc against the euro. That quickly led to big flows of money into Denmark as traders bet that its peg might also break:

 Read more

Guest post: Getting Ukraine’s bondholders from B to A

The English-law bonds in Ukraine’s debt restructuring are a bit more local-law than bondholders might realise. How can Ukraine use that to get a deal? Here’s an interesting idea… Read more

European stocks and not-so-record highs

European stocks as measured by the Stoxx 600 index finally passed their March 2000 high this week. As measured by the FTSE Eurofirst 300 they are set to pass their 2007 closing high if they can hold on to today’s gains.

Great news for investors in Europe, right? Well, sort of.

First off, record highs for shares are only good news if you are selling: investors should care about the future, and the higher the price, the lower the future returns, so record high prices are not obviously good news for buyers.

Second, these are capital only measures, which exclude dividends and take no account of purchasing power. Third, share prices are not a great guide to economic performance for all sorts of reasons, but most obviously because multinationals garner much of their income from outside their listing location.

 Read more

A little Ukrainian bond list

There have been a few doubts lately about whether Ukraine was going to include that $3bn Russian bond, issued in 2013 and maturing this year, in its debt renegotiation with private creditors.

Well, over to a resolution by the embattled country’s Cabinet of Ministers… Read more