Markets Live: Wednesday, 13th April, 2016

Live markets commentary from 

What might Trump’s remittances plan do to the trade balance?

Donald Trump — one of the few remaining American presidential candidates who failed to attend Camp Alphaville last summer — has repeatedly promised he will build a wall along the southern border, with construction costs to be covered by the Mexican government. Since last August, Trump has asserted he can extract this concession by threatening to close America’s trade deficit with Mexico and by threatening to confiscate southbound remittances.

Despite being one of Trump’s signature policies for more than six months, the release of a memo fleshing out a few additional details has led to a flurry of additional coverage, much of it concerned with the possible humanitarian consequences.

We don’t want to focus on whether the idea is actually sound, but on what the proposal can teach us about the balance of payments. It’s possible Trump’s plan, if enacted, could actually cause America’s trade deficit to widen. Read more

FT Opening Quote

Every little sales increase helps Tesco, which is back in the black; McCormick has dropped its bid for Premier Foods; the FCA wants to shake up the IPO process. 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

Central bank tightening risk, charted

From BofAML’s FX strategist Athanasios Vamvakidis, do click to enlarge:

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Further reading

Elsewhere on Wednesday,

- There’s an election to the British parliament that only three people can vote in.

- How Boots went rogue.

- “Some men shoot tigers. Some men love bears. Walter Rothschild, 2nd Baron Rothschild, Major in the Yeomanry, Conservative MP for Aylesbury in Buckinghamshire, heir to one of the greatest banking fortunes in history, and collector of the largest zoological collection ever amassed in private hands, had a specific and incurable addiction to cassowaries.”

- Donald Trump, American preacher.  Read more

FirstFT – Oil price optimism grows, the man who thinks like Sherlock and why humans became monogamous

The world’s largest oil trading houses were all but unanimous in telling that oil prices were unlikely to revisit the sub-$30 lows they hit in early January Read more

Project Atlas (in Italian)

The presentation deck for the €5bn plan to prop up Italy’s weaker lenders has leaked to Economia Il Messaggero. Click to read:

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Did the G20 agree a currency accord and does it matter?

The first question is whether there was a lovely new, but secret, currency accord agreed at the G20 in Shanghai in February.

The answer is: Probably not. Read more

Markets Live: Tuesday, 12th April, 2016

Live markets commentary from 

FT Opening Quote

PageGroup sees temp hiring on the rise, Asos profits are up 18 per cent, Costa has a new barista-in-chief. 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,

- The sugar conspiracy.

- The tyranny of the non-compete clause.

- Economics as similar to “ancient Chinese attitudes towards the astral sciences.” And Noahpinion responds.

- Streetwise Prof: “the very absence of Putin’s name in the Panama Papers is exactly what is informative.” Read more

FirstFT – US seeks more aggressive IMF policing, how not to deal with a PR crisis and the books worth rereading

US Treasury Secretary Jack Lew called on the IMF and its members’ failures to live up to commitments to boost ailing global demand Read more

Mavrodi’s MMM Global pyramid scheme collapses, unsurprisingly

Sergey Mavrodi, architect of the MMM Global pyramid scheme, has a habit of closing off his web-based addresses and messages with the assertion that he believes the “financial apocalypse is inevitable” and that “together we change the world!”

On Monday, that prediction was seemingly coming true, albeit not for the financial system as much as for Mavrodi’s own investors. Read more

Liquidity v. Solvency: Caesars edition

During the financial crisis, the real-time, practical manifestation of the liquidity v. solvency debate was about what financial institutions were worth saving. It went something like, if a bank was merely short of funding needed to meet near-term obligations but otherwise had assets worth more than its liabilities, then it was worth rescuing. Matt Klein discussed this here in 2014.

The liquidity/solvency debate also has an important implication for corporate governance. Read more

Welcome back, Helicopter Ben

Ben Bernanke first gained the catchy but unfortunate nickname “Helicopter Ben” when he gave a speech in 2002 endorsing Milton Friedman’s idea of a metaphorical helicopter drop of money as an extreme but effective way of combating deflation – a moniker that haunted him when he introduced a $4tn quantitative easing programme at the Federal Reserve.

But in his latest blogpost at Brookings he has cautiously endorsed the concept again. While careful not to step on current Fed chair Janet Yellen’s toes by suggesting at all that this is a likely course of action – and the US economy is doing fairly well, if unspectacularly – he now writes that it shouldn’t be ignored as a policy tool: Read more

The case for more capital

Back when the Basel III regulations were being debated in the wake of the crisis, it was common to hear dire warnings that rules limiting how much banks can borrow would constrict lending and lower real output. Even some who ostensibly support higher equity capital requirements think there are “trade-offs” between a safer financial system and economic growth.

New research from Leonardo Gambacorta and Hyun Song Shin of the Bank for International Settlements suggests this thinking is backwards: “both the macro objective of unlocking bank lending and the supervisory objective of sound banks are better served when bank equity is high.” Read more

Markets Live: Monday, 11th April, 2016

Live markets commentary from 

Longform podcast: Emily Oster on conventional wisdom

Alphachatterbox is available on Acast, iTunes, and Stitcher.

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Irony and that JPY-equity correlation

Or, pictorially, what’s up with this?

And we mean apart from the whole “hey, we gave you negative rates why aren’t you giving us weaker yen?” thing as we’ve already spread plenty of pixels on a webpage about that.

It’s more about they strong negative correlation between the yen and equities on show in that chart. Read more

FT Opening Quote

The UK competition watchdog has put the squeeze on the Three-O2 deal, Vedanta has persuaded lenders to amend debt covenants, Tata Steel is beginning the formal sale process for its UK assets. 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 Monday,

- Capitalism excels at innovation but is failing at maintenance, and for most lives it is maintenance that matters more.

- Dan Davies with “an alternative monetary history of the second half of the twentieth century.”

- Toby Nangle has ruined his daughter’s future political career.

- Gavyn Davies: Lessons from the recent market turbulence.  Read more

FirstFT – Cameron pledges new tax law, the ghosts of Chicago and how the mind can harm the body

The UK prime minister pushes for criminal sanctions over tax evasion Read more

The eurodollar as an economic no-man’s land

What’s the euro really? The collective currency of sovereigns subscribed to the European monetary system? Or an international bridging platform — a no man’s land if you will — for laissez-faire market experimentation intended to prove a fundamental point about the capacity of free markets to organise the economy without the necessary subjugation of free will?

The euro-zone, we propose, is not what it seems.

And if we see it as something it’s not, it’s mainly because we’ve forgotten the history which made it the thing it is today. That though is the story of the rise and dominance of European-brokered international capital markets from the 1960s onwards, a system itself predicated on the rise of the no-man’s land neutral security:

Eurodollars. Euromoney. Eurocurrency. Eurobonds. Eurosecurities. Read more

Bearer securities and eurosystems

So you thought bearer securities weren’t a thing any more. And that jurisdictions left, right and centre were banning the bearer structure (much depended on in the past by the eurobond markets) precisely because of its association with tax-efficient offshore dealings.

Except, as we outlined on Monday, one of the things revealed by the Panama Paper leaks is the extent to which bearer securities were depended upon by the offshore finance network.

And yet, as we also noted, it’s not like bearer securities have entirely gone away either. We referenced as an example the Bank of England’s series of $2bn dollar-denominated bearer bonds paying a coupon of 1.25 per cent, which take the form of the so-called “New Global Note (NGN)” structureRead more

Investors don’t like your company? Try crowdfunding

Investors who had been swindled out of their money by some dodgy financial advisor used to be able to call up Rebus Group, a claims management company established in 2010 and led by Adrian Cox, the former European CEO of Ask Jeeves. Read more

Markets Live: Friday, 8th April, 2016

Live markets commentary from 

Alphachat: the psychology and study of expertise; and the future for Disney

Introduction — preview of longform interview with Emily Oster
[00:00 - 8:18]
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JP(wh)Y? revisited. And a break in the currency wars?

This post will be made up of two pieces. The first will try to explain why JPY continues to defy Japan’s negative rate-led demand for currency weakness. The second will add words to this picture from HSBC which proclaims a break in the (so-called, he adds hastily) currency wars, predicated mostly on said JPY strength:

At last sighting JPY was hovering at about Y108. That’s not good if you are the BoJ’s Kuroda or the overarching Abe, particularly because FX strength can beget more FX strength. The question is why did the yen start this slide: Read more

Further reading

Elsewhere on Friday,

- Goldihawks and the three doves.

- Helicopter bonds as qualitative easing.

- A short history of tax evasion.

- The inevitable Panama Papers art connections. To repeat: “Since art is easily transportable, expensive and poorly regulated, authorities fear that it is often used for money laundering.”

- To really go after tax havens, the world would have to really go after the US.  Read more

FirstFT – Cameron’s Panama profits, the downfall of a Wall Street scion and why English wins the battle of global tongues

David Cameron admits that he and his wife sold shares for more than £30,000 in a fund set up in Panama by his father, who died in 2010 Read more