What will P2P lending look like 5 years from now?

One of the silver linings of the financial crisis has been the growth in alternative ways for people to raise money: the crowd-funders, the individuals who sell equity stakes in their future earnings, the private equity firms lending to small and medium businesses shut out by the big banks, and of course the peer-to-peer (P2P) lending platforms, among others.

It isn’t yet clear how much of this boomlet in financial creativity is a structural change or a temporary response to the combination of chastened banks and ultra-low real rates. Either way, the big banks have left many profitable niches open to smaller competitors that focus on origination and then distribute loans directly to investors. Read more

Want your own marquee at Camp Alphaville?

Serious opportunity this.

If you attended Camp Alphaville at the Honourable Artillery Company grounds last summer, you’ll know we had a lovely outside area with food vans, beer, frozen yoghurt, dancers, comedians and drones….

Well this year — on July 1, again at the HAC — we have lots more space. In fact we have up to half a cricket pitch of extra space. Read more

Do you like your payments subsidised with ads?

Over the course of February UK Gmail users may have stumbled across this message:

Yup, it’s Google’s attempt to break into the e-money transfer business, and its methodology is focused very specifically on linking banking and money to your email. Read more

Coming to terms with bond prices

Finance, particularly the fixed income variety, lends itself to maths which suggest neatness — messy human hopes and satisfactions captured in a price, shifting but true for any particular moment in time.

There tends to be a number in any financial calculation, however, where neatness is that of a carpet under which dust and junk has been swept. In corporate valuation models it might be the discount rate used to put imagined future cash in present day terms. For stock markets it is the equity risk premium, and for bonds it is something called the term premium.

We’ll lift the carpet below, but the reason for doing so is HSBC, which thinks there isn’t enough term premia in bond prices (they are too high and so must fall). Read more

Markets Live: Thursday, 19th February, 2015

Live markets commentary from FT.com 

Yes, yes, we know. It’s time to talk about capital controls again

So on Wednesday, we got this from the ECB as the Battle of the Drafts between the Eurogroup and Greece rumbles on — it’s in the FT’s words (we still can’t find a press release):

On Wednesday evening ECB policy makers approved a €3.3bn increase in ELA to the Greek banking system. Lenders will now have access to up to €68.3bn of emergency loans from the Bank of Greece, after members of the ECB’s governing council sanctioned the increase, from €65bn, at its regular fortnightly meeting.

The Bank of Greece had asked for more emergency funding, according to a person familiar with the matter. The approval is for a two-week period.

And this… Read more

Understanding Chinese accounting — from the 18th century

The invention of modern accounting in Renaissance Venice was arguably one of the prerequisites to the development of capitalism, so it’s interesting to discover that Chinese merchants developed methods distinct from those employed by their European counterparts that nevertheless made it possible to run successful and growing businesses.

That knowledge comes to us from scholars at the Chinese Academy of Social Sciences and the London School of Economics, who recently found and dug into a remarkably complete archive of business records going back to the late 1700s. This is far from the first study of Chinese accounting but it is the first comprehensive look at a firm that was run by people who probably never encountered European bookkeeping techniques. Read more

Further reading

Elsewhere on Thursday,

- On the binariness of the euro, or lack of it.

- “Maybe the magic of derivatives was actually a dark necromancy. Maybe it was used to animate a horrible zombie that then roamed the countryside laying waste to assets that properly belonged to RadioShack’s unsecured creditors.”

- Why is “human capital” such a disastrous turn of phrase?

- Greece and the battle of the drafts.  Read more

First FT – Bush attacks Obama, England’s rich pastures, Mars’ giant blob

Jeb Bush, the frontrunner for the Republican nomination in the next US presidential election, has attacked Barack Obama and talked about a world spinning out of control, in his first major foreign policy speech. The former Florida governor said President Obama had not done enough to stand up to Iran, Russia and Cuba, while accusing him of snubbing Israel.

 Read more

Negative rates as global cash burn

As Paul Krugman always likes to recount, strange things happen at the zero bound. Macroeconomics gets weird. Liquidity traps prevail. And a whole slew of paradoxes come into being.

And that’s largely because below the zero bound things get even stranger still.

What you think should happen, doesn’t, and what you think definitely won’t happen, does. Furthermore, negative interest rates don’t just kill off the traditional point of banking, they encourage bad incentives and dubious market practices for all purveyors of capital. Read more

The unwitting euro enforcer…

Peter Doyle, an economist and former IMF staffer, argues that for Greece continued emergency lending assistance is a necessity.

_________ Read more

Greek games in theory and practice

You may have heard Yanis Varafoukis, Greek finance minister, is also a professor of game theory.

However you’ve also probably heard negotiations over Greek debt are like a game of chicken, where both players try to convince the other they really will go ahead and crash the car.

This is the wrong analogy. It looks more like a bargaining game where two players have to find agreement to avoid an unpleasant outcome where neither side gets what they want. In practical terms, an agreement over an extension loan for Greece can be reached, it just depends on whether it benefits the troika or the Greek government more, while no agreement is bad for all concerned.

 Read more

The mutating nature of trust in China

China’s richest man has been loading up on high interest shadow banking loans — and selling off a private jet — to fuel the rapid growth of the most valuable solar company in the world.

A Financial Times investigation has found that Hanergy Group, run by founder Li Hejun, has borrowed billions of renminbi from high-interest Chinese “trust products” marketed to wealthy individuals, and loans secured through pledging shares in its Hong Kong-listed subsidiary.

Yup, you’re never short of a lede when your subject is China. A little more, still courtesy of the FT:  Read more

Markets Live: Wednesday, 18th February, 2015

Live markets commentary from FT.com 

Camp Alphaville 2015 — URGENT

This is not just a save-the-date. It’s a save-the-date-and-grab-a-bargain.

Camp Alphaville at the Honourable Artillery Company, EC1 — July 1, 11 till 8.

ULTRA EARLY BIRD SPECIAL – 50 QUID A TICKET FOR THE FIRST 50 SIGN UPS USING THIS SECRET CODE…

 Read more

Further reading

Elsewhere on Wednesday,

- Haldane: Growing, fast and slow.

- Spain’s “good” deflation?

- BI’s most important charts in the world fest.

- Snapchat in more of a race against the clock than people think. Read more

FirstFT – Greece seeks bailout, underpaid bankers, Martin Wolf on the dollar

Greece is seeking a bailout extension along the lines proposed by Pierre Moscovici, the European Commission’s economic chief. It wants to extend its €172bn programme by four months, but with leeway over which economic reforms it would implement . Eurozone officials rejected the idea on Monday and have given Athens till the end of this week to concede.

 Read more

How will the oil crash affect Norway?

The shift to an oil-driven economy with a high wage capacity has been a comfortable journey. The journey forward, where the oil service industry must downscale and other trade-exposed industries must grow, will be more challenging.

That’s the short answer, from a recent speech by Øystein Olsen, the governor of Norway’s central bank. Oil has been a windfall that pushed Norwegian living standards far above that of its neighbors. If the windfall has ended, living standards will probably converge through a combination of currency depreciation and wage cuts. So far, that hasn’t happened. Read more

Auto-finance, an update

We’ve been reading through the exhaustive new report from Citi on the noticeable impact of automation on the labour markets of several industries, and we came across a finance-related section that’s worth passing along.

It offers an update on the relative progress within the industry of moving various products to electronic trading platforms (emphasis ours, and click to enlarge the chart): Read more

No one needs to buy Tesla

Apple is recruiting experts in automotive technology and vehicle design to work at a new top-secret research lab, said several people familiar with the company, pointing to ambitions that go beyond the dashboard.

Friday’s news of a secret research lab in the FT there, which stirred the froth around Tesla, the electric car company run by Elon Musk. A $75bn takeover target for Apple, anyone?

The problem with the theory, aside from Tesla’s mere $25bn market capitalisation, is that nobody really needs to buy Tesla. Might someone? Sure, but a glance at the company’s history shows just how little cash it took to build. Read more

FirstFT – Collapsed Greek talks, a crumbling Ukraine ceasefire and Apple’s Star Wars lightsabre link

Eurozone countries have given Athens a final deadline of Wednesday to extend its EUR172bn rescue programme, after talks in Brussels broke down in acrimonylast night. The Greek finance minister said he was confident an agreement could be reached based on earlier proposals for a four-month extension. Without a backstop, officials fear renewed market turmoil and a bank run in Greece.  Read more

Markets Live: Tuesday, 17th February, 2015

Live markets commentary from FT.com 

Your updated Greek calendar

From Deutsche (click to enlarge):

As Deutsche say, beyond the preferences of the Eurogroup and how/ whether Greece chooses to extend the current program or apply for a new one, the binding dates for Greece have become more apparent: Read more

So you still yuan out?

Charts from Nomura showing, on the left, China’s largest cumulative two-month decline in FX purchase positions on record occurring despite a record trade surplus over the same period and, on the right, the probable hoarding of foreign currency as reflected in a sharp monthly rise in foreign-currency deposits in January.

Or to paraphrase a bit further: more signs of capital flight and depreciation pressure in China. Read more

Further reading

Elsewhere on Tuesday,

- A Dan Davies duo on Greece: “What to look out for on the downside would be if Syriza actually starts creating facts on the ground” and how “focusing the language on debt sustainability… is the graceful way for the hardliners on the Eurogroup to climb down.”

- Either way, let’s all just keep nice and calm.

- And why game theory means Varoufakis can’t act like a game theorist.

- Jesse Livermore: The greatest trader who ever lived.

- What ISIS really wants.  Read more

FirstFT (the 6am Cut)

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A crucial meeting over the future of Greece’s bailout broke down in acrimony after Athens angrily rejected the idea of prolonging its bailout and implementing the reforms required as part of it. Read more

Debt, Kant, and cant

One may think that this retreat from game theory is motivated by some radical-left agenda. Not so. The major influence here is Immanuel Kant, the German philosopher who taught us that the rational and the free escape the empire of expediency by doing what is right.

– Yanis Varoufakis, ‘No Time for Games in Europe’, NY Times Read more

FirstFT – Europe’s negative rates risk, $1bn cyber bank hack and the dangers of global extinction

Negative interest rates in Europe bring pressure of risk-taking, large capital flows and “currency wars”, top investment managers have warned. Quantitative easing by the European Central Bank has led to historically low borrowing costs and eased deflationary dangers but analysts are divided on whether it will boost economic growth. Danish and Swedish five-year bond yields turned negative last week. (FT) Read more

Markets Live: Monday, 16th February, 2015

Live markets commentary from FT.com 

Time to start treating commodities as currencies?

A few weeks ago, Michael Masters, of the eponymous US investment firm, made the point to FT Alphaville that bad things can happen whenever investors mistake the fruits of production for the means of production, and apply long-standing “long only” strategies (more suited to equity index markets) to assets like commodities.

Earlier this month, Nomura put out a note that observed much the same point.

Specifically, they argued that commodities should be treated like currencies and valued with macro-trading tools that incorporate the concepts of carry, value and momentum. Read more