Dear SRA: will you be ready if a large law firm fails?

Much of our coverage of the controversial Quindell has focused on its transformation into one of the UK’s largest law firms. This rise has not received the wider attention it might, perhaps because Quindell was listed on Aim, London’s junior market, and until recently described itself in the garbled jargon of a technology company.

We suspect that could change. A stock market valuation of more than £2.7bn earlier this year has collapsed to less than a tenth of that total, posing a problem for a group that has funded both breakneck expansion and day-to-day expenses by issuing shares. Robert Terry, the company’s founder, recently sold stock during a period that he had promised would show Quindell’s ability to stop burning through cash, and has resigned as chairman.

Which prompts a question for the legal industry in general and the Solicitors Regulation Authority in particular: what would happen if a law firm managing 100,000-plus claims were to fail? Read more

Further Reading

Elsewhere on Tuesday:

- Uber as the lion and the wolf

- What if China entered the currency wars?

- Yay, mega mergersRead more

Japan’s “debt problem” in perspective

The best way to get less of something is to tax it, so nobody should have been surprised when Japanese GDP cratered after the sales tax was raised from 5 per cent to 8 per cent in April.

What the government didn’t expect, and what is encouraging Prime Minister Abe to delay (if not renege on) the plan to raise the tax rate to 10 per cent, was the economy’s failure to snap back. For example, the latest data show that real household consumption, excluding imputed rent, plunged by 3.5 per cent over the past 12 months to its lowest level since the Tohoku earthquake hit in 2011:

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Object 2014-28E — the possible Russian killersat — track it here, NOW!

Dunno what we’re talking about?

Read the otherworldly (and exclusive) story from Sam Jones: Object 2014-28E – Space junk or satellite killer? Russian ‘UFO’ intrigues astronomersRead more

Ever naira a fuel scarcity issue for Nigeria

Nigeria’s fiscal exposure to falling oil prices is amongst the most acute within the Opec group.

But as Standard Bank analysts note on Monday, whilst the country’s central bank has shown it is prepared to defend the currency ahead of all-important national elections in February, its ability to do so diminishes with every dollar that the Brent crude price loses:

The CBN is clearly struggling to balance constraining upside USD/NGN pressure with limiting the depletion of FX reserves. At present, the CBN is intervening in the interbank market just below the prevailing rate rather than protecting a line in the sand.

The CBN has also recently shifted the RDAS rate higher and we suspect may move it to the upper end of 155 +3% band in coming weeks.

Our core scenario remains that there will not be an official shift in the RDAS central rate until after the elections in Feb 15. The ability of the CBN to achieve such an outcome clearly diminishes, the lower the oil price goes.

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MoneySupply: Why the BoE is talking nonsense

Nonsense is a rude word. But there isn’t a milder way of describing the Bank of England’s estimates of UK labour market slack.

For three inflation reports in a row, the BoE has published a chart (below) showing its model of labour market slack with accompanying text highlighting its great importance in the monetary policy decision. “One of the key determinants of inflationary pressures in the economy is spare capacity or slack – that is the balance between demand and supply,” the November inflation report states. Read more

From Russia with bonds

Ukraine will probably end this year with public debts over two-thirds the size of its economy. We won’t know the exact figure until March when official statistics come out, nor if those statistics will be able to count the GDP of the separatist east.

But it is not looking good. We thought this rated a reminder.

Because the President of Russia certainly hasn’t forgotten about it — or the unusual clause inserted into the language of a $3bn bond Ukraine owes to his government: Read more

Markets Live: Monday, 17th November, 2014

Live markets commentary from 

Announced today: Quindell’s broker resigned a month ago

Here is a selected chronology of recent events at Quindell, one of the UK’s largest law firms, whose share price has collapsed in the last month.

October 13 – A third-quarter trading statement says the company’s preferred measure of cash flow is ahead of expectations. (Share price 143p).

October 21 – Quindell announces what it calls a major contract win. Also, Canaccord Genuity gives notice of resignation as joint broker and financial advisor, which is not announced. (Share price 161p). Read more

Honour roll, Japan GDP edition


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This too shall pass

Charts. Do stop us if you’ve heard this one before.

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Further reading

Elsewhere on Monday,

- “Japan’s present predicament is a more extreme version of the choice faced by the UK in 2011…”

- Japan through the looking glass.

- Can we have our instrument back?  Read more

FirstFT, the emailing briefing formerly known as the 6am Cut

This is FirstFT, the FT’s new email briefing written by Amie Tsang in Hong Kong which is replacing the Lunch Wrap and the Cut. All Cut subscribers should now be receiving it in their inboxes. If that isn’t happening do please email or

If anyone reading this is not yet subscribed do please click here.  Read more

Why Shinzo Abe could nix tax hike two

For clues as to why Japan’s prime minister seems very keen to avoid another consumption tax increase so soon after the last, you could look at a whole host of economic indicators – third-quarter GDP, consumer confidence surveys, industrial production or housing starts.

Or you could just examine charts put together by Tsutomu Watanabe, a Tokyo University professor who has spent much of the past six years poring over point-of-sales data from supermarkets.

A glance at his UTokyo Daily Price Indices suggests that the April 2014 tax hike – from 5 per cent to 8 per cent – has had just as chilling an effect on consumer demand as the last one, in April 1997. Read more

Russia’s import-substitution problem

What’s an oil power to do when the commodity it owes its power to is on the wane?

One strategy, of course, is to devalue your currency so as to help the competitiveness of whatever exports you have left, and focus on the so-called strategy of import substitution – buying more of your own stuff and pretending that, heh, you just don’t care. As Deutsche Bank’s Yaroslav Lissovolik notes on Friday it is a strategy that has worked for Russia in the past, namely in 1998 and 2008. Read more

FirstFT, the email briefing formerly known as The (early) Lunch Wrap

There is bad news ahead for oil producers, with the International Energy Agency predicting prices are set to slip further in the first half of next year, after dropping 30 per cent to below $78 a barrel since June. Sluggish demand in Asia and Europe, as well as surpluses in the Atlantic Basin and the North Sea, will more than offset problems among Middle Eastern exporters. Russia’s President Vladimir Putin said ahead of this weekend’s Brisbane G20 summit he was bracing for a “catastrophic” slump in production. Opec nations will meet at the end of November to discuss any cutbacks to support prices. (FT) Read more

Markets Live: Friday, 14th November, 2014

Live markets commentary from 

China’s still leaning towers

Rumours of stabilisation in China’s property sector abound…

From UBS’s Wang Tao (our emphasis):

New property starts leapt up by 43%y/y in October reversing September’s marginal 0.2%y/y decline, as sales narrowed their pace of contraction from 10.3%y/y previously to 1.6%y/y…

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Herbalife board member’s undisclosed involvement in Brazilian criminal case – Update

Reuters reports the involvement of a Herbalife director in a long running corruption case in Brazil, something that has not been disclosed in company filings since Pedro Cardoso joined the board in 2009.

Prosecutors in Brazil charged current Herbalife board member Pedro Cardoso with money laundering in 2008 for allegedly participating in an embezzlement scheme a decade earlier that siphoned 26.7 million Brazilian reais ($10.4 million) from the state government in Espirito Santo.

The 8th Criminal Court of Vitoria ordered bailiffs to serve him with a subpoena in 2010, but they did not locate him and the case remains open, according to court filings and a court source.

According to the U.S. Securities and Exchange Commission’s rules on disclosure, companies must report legal proceedings that are material to evaluating the integrity of a director.

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Inequality and the portfolio flux

Split in half the six years from the start of the US recession at the end of 2007 through the end of last year, and consider them as a pair of three-year periods.

In the first period — from 2007 through 2010, and which we’ll refer to as the crisis years — wealth inequality in the US spiked while income inequality actually contracted quite aggressively, the latter a reversal of the pre-recession trend. “Crisis years” isn’t a perfect label, as the recession actually ended in mid-2009, but it’s good enough for our purposes here. Read more

America’s finest news source is for sale. When’s the crash?

As the longtime publisher of this news-paper, it is my duty and unrestrained pleasure to inform you spittle-soaked readers that I have sold The Onion and all of its various holdings to a syndicate of industrious China-men from the deepest heart of the Orient. One of their representatives oozed and crawled from his dank hut to visit me in person at my bedside last week, and make known his superiors’ desire to expand their clammy clutch into the Western world…

Oh, how heavenly it shall be to never again hear the ungodly shriek of a printing press, or breathe the insufferable stench of a news-room full of unwashed scribes churning out mindless pap on the subject of photo-play actresses and their adopted African brood. And as far as the whimpering clods who have the temerity to call themselves “readers” are concerned, I do not suppose I shall miss their ilk in the slightest. Why, just imagining their pallid, toothless faces fills me with such colossal rage that at this very moment my nurse-maid is administering to me a near-lethal dose of laudanum just so I may find the composure to reach the end of this missive.

– “Well, I’ve Sold The Paper To The Chinese,” The Onion, July 20, 2009 Read more

Further reading

Elsewhere on Friday,

- “The use of a position of privileged information to make money used to be the definition of what it meant to be a trader.”

- Rage of the traders.

- The oil shock and why global GDP forecasts may be revised upwards in coming months.

- Secure Investments, the great disappearing FX shop. Read more

FirstFT, the emailing briefing formerly known as the 6am Cut

This is FirstFT, the FT’s new email briefing written by Amie Tsang in Hong Kong which is replacing the Lunch Wrap and the Cut. All Cut subscribers should now be receiving it in their inboxes. If that isn’t happening do please email or

If anyone reading this is not yet subscribed do please click here.  Read more

Looks like duration is back on the menu, boys

People have several ways to bet that interest rates might rise. One method has been falling out of favour for most of this year.

The obvious approaches are 1) selling interest rate futures or 2) borrowing bonds in the repo market to sell them for cash. The main advantage of these techniques is that they let you pick which specific interest rates you want to bet on while leaving the others alone. For example, you might think that the one-year sovereign interest rate three years from now implied by the prices of three-year and four-year notes is unreasonably low but every other interest rate on the curve seems about right. You should short the four-year note and buy the three-year note. Read more

O’Sullivan: US wage income is accelerating

FT Alphaville presents a guest post by Jim O’Sullivan, chief US economist at High Frequency Economics.

The last US employment report featured the usual pattern recently: another decline in the unemployment rate and another month without any acceleration in wages. The bond market rallied. After all, inflation is unlikely to pick up and the Fed is unlikely to start the tightening process if wages are stagnant. If wages are stagnant, there must still be lots of slack. Read more


For a scene-setter, take a glance at the intro to Thursday’s Markets Live transcript.

Basically, Spruce Point, a shorting specialist run by a former Barclays trader, Ben Axler, pre-announced in hyperbolic fashion that it was issuing a bearish report on a big unnamed US firm. The news now is that the firm in question is Ametek, an 84 year-old electronic device maker with a deeply ingrained acquisition habit.

True to its word, Spruce has now published a suitably hammy “sell” note, the full text of which is reproduced below.

You can make your own mind up on the investment case here, but be aware that Ametek stock was off an unshattering 2.3 per cent at pixel.

We sense that the investment world is fast becoming like those clone city restaurants, with no tablecloths and too many diners, all talking increasingly loudly to each other in an attempt to be heard. Volume control someone? Read more

Obese metropolitan oenophile punters

We have featured the Burrito Bond and some Kentish crowfunding before, focusing mainly on the terms offered at the buzzy modern end of finance. The implicit question has been who (on earth) is buying this stuff?

It has nagged at James Tomlins of M&G Investments as well so, in an attempt to suggest an answer, he has built a profile of the quintessential “mini-bond” investor.

Location – London – the food selection on offer (Taylor St Baristas, Chilango and Leon) is only of any practical use to someone who lives and works in London and can access the relevant branches on a regular basis. Until such time as these chains expand outside the capital, our quintessential mini bond buyer is almost certainly a Londoner.

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Putting the FX rigging fines in perspective

It takes a bold and courageous man to go against the consensus, especially when the consensus view equals “evil manipulative trader types got what they deserved with that $4.3bn fine for fx rigging!”

In this case that bold man is Matt Levine, columnist at Bloomberg and long-time communicator of logic and sense, who made the brave assertion on Wednesday that commentary surrounding this entire rigging episode may be losing sight of the core fundamentals of the case. Namely, that in terms of money made, there’s no escaping the fact that this was possibly the least successful manipulation attempt of recent times. Read more

FirstFT, the email briefing formerly known as The (early) Lunch Wrap

This is FirstFT, the FT’s new email briefing written by Amie Tsang in Hong Kong which is replacing the Lunch Wrap and the Cut. All Cut subscribers should now be receiving it in their inboxes. If that isn’t happening do please email or

If anyone reading this is not yet subscribed do please click here.  Read more

Markets Live: Thursday, 13th November, 2014

Live markets commentary from