Changes in the US regional income distribution

The US Census Bureau has just released its latest data on median incomes by state, which can be found here in table H-8. We looked at these data and would like to share a few interesting charts.

First, look at the gap between the states with the highest and lowest median incomes. Read more

Money Supply: A “considerable” challenge

Since I wrote about the Fed debate ten days ago, the market consensus has moved rapidly towards a change in the Fed’s “considerable time” language this Wednesday. I was cautious about the timing, however, because this is not straightforward – coming up with new language is quite a challenge.

This is a (very long) attempt to think through the Fed’s options. The bottom line is that “considerable time” may survive in some form on Wednesday, but if so, I’ll be surprised if there is not a significant change to the statement that sets up its eventual departure. Read more

An oligarch arrest in Russia…

And so to the website of the Investigative Committee of the Russian Federation:

 Read more

Upon failing to read the F1, Alibaba edition (tweaked)

Back in 2007, during the early months of that year, before the financial crisis broke, there was a particularly comic rush-to-market amongst the alleged new breed of financial firm, eager to IPO before reality dawned.

It was a time when Fortress Investments floated — at circa 40 times prospective earnings, four times Goldman Sachs’ valuation multiple. Blackstone joined the market as a “limited partnership,” offering ‘units’ rather than stock. And a Wall Street old-timer called Thomas Peterffy took Interactive Brokers public with a calculated snub to the industry that had made him risk: sure, investors could put a value on his business, but a dual-class share structure would leave outsiders with just 5 per cent of the voting power. Read more

Cybersecurity dispatches: Managing the IoT poltergeist threat

Imagine the scene in the not too distant future.

An Uber self-driving electric car has just dropped you off home. Your front door has recognised your face, and your fingerprint has authenticated that it’s definitely you. You get into your house, not a key in sight, kick off your shoes, and happily discover that the 3D printing feature in your fridge has already printed the food you plan to consume for dinner. All the appliances you need are on. And everything you don’t need is off, nice and efficiently saving power.

You decide to treat yourself to a quick 30-minute Netflix holographic update, only to get a nudge from your wearable tech that you’ve still got a 10 minute exercise deficit to meet your daily activity quota. It’s a problem because you happen to have signed up to the extreme health management option which shuts down your ApplePay access — without which Netflix won’t work — if you fail to meet your objectives. You quickly get busy on your smart-grid connected treadmill (which conveniently sells off the energy produced by your system back into the grid) and focus on the prospect of an autonomously prepared calorie efficient meal.

When all of a sudden… your utility door flings open and your iRobot Roomba begins singing Daisy, Daisy. Read more

Brent weakness is now a thing

This little chart is becoming a major headache for the world’s biggest oil producers:

 Read more

No, Betfair has not just called the Scottish Referendum

Doing the rounds on Twitter this afternoon ….

Betfair advert

The important word there is “sportsbook”.

Betfair’s exchange has become a much-watched sentiment indicator for the Scottish vote. This is where gamblers bet against each other directly and the house extracts a rake for providing the market. At pixel time, £8.8m has been matched on the punter-to-punter exchange. Read more

SOE you think you can reform, the optimists’ roster

Evidence of something — even if it’s not necessarily reform — from Deutsche:

Noteworthy announcements about SOE reform and deregulation have appeared about every two days since the Third Party Plenum in November 2013…

 Read more

Dispatches from the cyberwar frontline with a horrified Vince Cable

Speaking on the sidelines of the SINET cybersecurity conference being held in London on Tuesday, UK Business Secretary Vince Cable expressed concern over the average age and quality of some of the IT systems of British banks.

As Cable commented to FT Alphaville:

“I’m always horrified when I discover just how ancient the technological infrastructure of the banking system is, a lot of it comes from the 60s and banks are still operating this. One of the reasons why it hasn’t been possible to get proper competition — for example when breaking up RBS –is because the banking infrastructure is just so ancient that they can’t spin it off. And it’s a massively costly business. The financial sector, although in some ways it’s one of the most advanced parts of the economy, it’s often decades not just years behind.”

The comments followed the announcement of a £4m competition for UK cyber businesses to develop ideas to tackle cyber security threats, and initiatives aimed at raising corporate and public awareness of cyber-security risk. It is hoped, in particular, that other mission-critical businesses such as utilities will come together in a collaborative process to spearhead fresh approaches to the problem of cyber crime and resilience. Read more

Markets Live: Tuesday, 16th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York,


Markets Live Special — Donovan of UBS joins to discuss the Scottish vote

Tuesday at 11am.

Click here.

Paul Donovan, global economist at UBS, will join Bryce and Murphy for our regular Markets Live session. Extracts from his latest note on the Scottish independence vote below… Read more

Structured Scottish independence

There is a paper to be written on how UK structured finance nomenclature borrows from the topography of a Britain which is sort of (but not quite) familiar, and which feels reassuringly permanent. We suppose it’s like the Shipping Forecast.

Aire Valley, Arkle, Arran, Brass (that one’s from Yorkshire), Darrowby, Granite (famously), Lanark, Leofric… Read more

Calpers ditches hedge funds [Update]

The message is starting to get through. Calpers, the largest US public pension fund, has said that it will stop investing in hedge funds.

It took a while. The $300bn California Public Employees’ Retirement System rejigged its portfolio of hedge funds at least three times since it became one of the first pension funds to embrace the fee structure in 2002. The previous decision had been to halve exposure, rather than elimininate it entirely.

Still, public pension fund trustees now have a very visible example to follow. If the largest and best resourced US pension system found the cost and complexity of investing in hedge funds too much to make it worth while, why should they think they can do better? Read more

Further reading

Elsewhere on Tuesday,

- The case for open borders with Bryan Caplan.

- Replaying the 30s in slow motion.

- Why the economic gender gap will eventually close.

- David Cameron (from Wikipedia 2100). Read more

The 6am London Cut

The Cut, The Survey: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: Asia-Pacific trading was downbeat as investors awaited key events later this week, including a monetary policy update from the US Federal Reserve. In Hong Kong, the morning session was cancelled due to Typhoon Kalmaegi, but trading is to resume in the afternoon following the lowering of the No. 8 storm signal. Futures indicate a slight uptick in the Hang Seng Index, after it slipped 1 per cent to a five-week low on Monday. (FT’s Global Markets OverviewRead more

This is BABA. When’s the crash?

This of course is Alibaba, the Cayman e-commerce site. Click the image above for the SEC filing; click the image below for the corporate structure. Read more

The Closer


- What the Chinese Communist Party and top academic economists think about Scottish independence Read more

Building bank liquidity buffers, the FHLB, TBTF, WTF way

Hey did you hear the Fed finalised its liquidity coverage ratio rules for large US banks?

Yep, you can read the announcement hereRead more

Business News Site Publishes Dizzying 294-Slide Presentation Exposing….what exactly?

For Henry’s sake, just click the image.

 Read more

Why frustated second sons and medieval Anglo-Scottish border violence (partly) explain US healthcare costs

Everyone knows that Americans spend more on healthcare than many other rich nations yet often end up with worse outcomes. The interesting question is why.

There are certainly big inefficiencies in the way health care is provided and how it is paid for. Consider the following chart (via Harvard’s Amitabh Chandra):

 Read more

Markets Live: Monday, 15th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Tech chiefs in plea over privacy damage || Bill Ackman plans $2bn Pershing fund IPO in Amsterdam || Phones 4U administration boosts Dixons || SABMiller rebuffed by Heineken || Former BP chief warns on Russia sanctions || Chinese ETFs shut to new investment || Amazon hits India tax snag || Markets Read more

The Fed can take its time, if it wants to

By most accounts — the musings of Wall Street strategists and media Fed watchers, speeches by FOMC members, countless online FOMC previews — momentum is building for the Fed to soon change its “considerable time” language, and to give clearer guidance on when and why it will start raising rates.

Will such changes be included in the FOMC statement that will be released on Wednesday? Read more

Further reading

Elsewhere on Monday,

- Silicon Valley has officially run out of ideas.

- How to get it wrong.

- Bitcoin and the Greater Fools theory.

- Felix Salmon on why Scotland is voting Yes. Read more

The 6am London Cut

Survey bleg: The 6am Cut, Lunch Wrap and Closer emails will soon be relaunched in enhanced form. We want to ensure we’re providing only the most useful data, news and views — taking this short 2 minute survey would help us do that.

Markets: “Asian stocks stumbled to their lowest in five weeks on Monday after a batch of weak data out of China raised the spectre of a sharp slowdown in the world’s second-biggest economy. The Australian dollar, considered a liquid proxy for China plays, also took a hammering and slumped to a six-month low… Data released on Saturday showed China’s factory output grew at the weakest pace in nearly six years in August, while growth in other key sectors also cooled. “This confirms a slowdown in growth momentum in Q3 following the Q2 rebound,” analysts at Barclays wrote in a note to clients, adding they have cut their 2014 growth forecast for China to 7.2 percent from 7.4 percent.” (ReutersRead more

The corporate M&A genotype theory

Merger and acquisition activity, as we all know, comes in waves. There are M&A frenzies and then there are M&A lulls.

But a new study by a group of complexity and evolutionary scientists looks deeper into the social drivers of corporate M&A activity and suggests there may be more intrinsic forces, such as ancestry, at work.

The authors define ancestry as the cumulative number of mergers from all acquired entities — an idea that puts the corporation in the category of an organism which pursues M&A for mainly for survival reasons. The more pronounced a corporation’s ancestry on the M&A front, they say, the more likely it is to survive in the long term. Read more

Markets Live: Friday, 12th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

EU adds Rostec head to latest Russian sanctions list || Barclays appoints Aviva’s John McFarlane as chairman || Support for No campaign in Scots poll holds up || Virgin Money boosts board amid IPO preparation || Amazon to join rush for Silicon Roundabout || IMF warns of market fallout from a Scottish split || Yahoo faced fines over NSA compliance || Mario Draghi hits back at critics of asset-backed securities plan || Markets Read more

Further reading

Elsewhere on Friday,

- Scotland and the SNP: Fooling yourselves and deceiving others.

- Their own imaginary Keynes.

- The death of adulthood in American culture.

- The fading dream of EM convergence. Read more