Joseph CotterillRead Biography
Short everything — everything — east of the Oder until the Russian border, go long whatever the Russian elite will buy when sanctions end, don’t buy Cemex (too easy) — buy European defence contractors — and get out of the Korean won, Saudi riyal and Philippine peso before those countries start being charged for US protection. What else?
Labour got one back at capital on Friday, after an employment tribunal in London found that Uber’s circa 30,000 drivers in the city are actually its workers after all, and accordingly deserve employment protection. With potentially epic consequences for its costs, its tax bill, and the entire gig economy, that would mean Uber is no longer a mere intermediary platform.
Compare: Business leaders are failing to recognize that the new prime minister has a different view of the City of London from Cameron, the people said. May does not simply accept what the City says in the way that Cameron and his former chancellor, George Osborne, tended to do, according to one person. That realization will be a shock to some in the City, the person said.
It’s 1998 again in emerging markets, and it’s good: The best parallel with recent events – major shock (this time, the UK vote), DM central bank liquidity reassurance and market surge – is, in our view, the collapse of Long-Term Capital Management (LTCM) in September 1998. In addition to a bailout for LTCM, the Fed ‘turned on a dime’ then and cut rates by 75bp in two months; risk markets took off. While MSCI GEMs fell much more before Sept. 1998 (Asia and Russian crises) than recently, EM rose by 31% in two months after LTCM and by 120% by March 2000. As usual, the USD played a role; after a four-year 34% rally to August 1998, the $ TWI fell by 11% after LTCM. The extremes will be hard to repeat, but the earlier episode confirms how liquidity is a ‘great healer’…
This crisis originated in North America. Many of our financial sector were contaminated by… how can I put it… unorthodox practice from some sectors of the financial market. But we are not putting the blame on our partners… Frankly, we are not coming here to receive lessons in terms of democracy… we are certainly not coming here to receive lessons from nobody. – José Manuel Barroso, then President of the European Commission, speaking at the G20 summit in Los Cabos, Mexico in 2012, at the height of the eurozone debt crisis.
Looking beyond the Article 50 kabuki, beyond the evaporation of British bank and homebuilder equity, beyond the fantasy diplomacy by one country about which shade of EEA it might decide to accept from 27 others… A bracing thought for the broader backdrop, which you might have missed from Credit Suisse’s European credit team on Monday (emphasis ours):
Mr. Musk said it is “important that there not be some sort of house of cards that crumbles if one element of the pyramid of Tesla, SolarCity and SpaceX falters.” He said his loans [backed by Tesla and SolarCity stock] aren’t risky to shareholders because they add up to less than 5% of his total net worth, which exceeds $10 billion. That figure doesn’t include Mr. Musk’s large stake in SpaceX, which is private. He said he could easily put up more SpaceX or Tesla shares as collateral if needed. “The odds that a margin call cannot be addressed are almost zero,” Mr. Musk said in the interview. Elon Musk, the corporate financier, to the WSJ in April.
When sovereign debtors issue bonds, the “use of proceeds” clause tends to be mere boilerplate. “General budgetary purposes” usually covers it — although bondholders (those who bother to read the contract) will sometimes just have to hope that means something like servicing existing debts, rather than servicing the president’s daughter’s limo. Similarly, the “general corporate purposes” line in a state enterprise’s government-guaranteed debt will usually be taken to mean just that, and not something worryingly niche, like arming a small navy. (It happens.) They’re sovereigns. You’re not supposed to be too insistent about what they do with the money. Times have changed though. Or at least they have for Russia.
Because if his Royal Highness the prince wants the world’s largest sovereign wealth fund — then who’s to say no? As for the Arab and Islamic depth, we have the Qiblah of Muslims. We have Medina. We have a very rich Islamic heritage. We have great Arab depth. The Arabian Peninsula forms the basis of Arabism. The kingdom constitutes a large part of it. That issue has not been exploited in full. We have a pioneer investment power at the level of the world. Today, you see that many statements are being made, including statements indicating that the Saudi Sovereign Fund will be the largest fund in the world by far, compared to the other funds.
You won’t find a certain Latin phrase anywhere on it. Still, just for the record, here’s evidence that Argentina did learn at least one thing from the pari passu saga. Presenting the new pari passu clause, from the prospectus for the gargantuan $16.5bn bond which Argentina is issuing to pay off holdouts and place that saga behind it:
What’s the biggest coupon you can get lending US dollars to an African government south of the Sahara these days? Ghana’s bond due 2030 of course. It will pay 10.75 per cent starting from its first coupon date next month. And what will investors get for agreeing to swap Mozambique’s government-guaranteed tuna debt for its own sovereign paper?
It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul E. Singer, is now well on its way to being resolved… – Daniel Pollack, Special Master in the pari passu deal negotiations Could it be? Is it over?
That, at right, is a slice of Saudi Aramco history that you probably won’t be seeing in an IPO prospectus any time soon — a story on the strikes that once wracked the Saudi Arabian state oil company’s eastern oil fields (in 1945, 1947, 1953 and 1956)… A little bit of political risk on the way from the first Saudi oil concession to foreigners in 1933 and Aramco’s modern role as the might behind Saudi Arabia’s swing producer status in the oil market.
All those San Francisco meetings paid off. Franklin Templeton and other private creditors will agree to swallow a writedown on their Ukrainian bonds. Cutting a fifth off bond principal, it’s much less than many expected. Bond prices were rallying hard at pixel time. Then there is the issue of Moscow. Since Russia’s said no about restructuring its own Ukrainian bond.
Or, a coda to our recent post on hacking the world’s most expensive asset class. If investors locking up their money in leveraged buyout funds really could have gotten the same aggregate return all along simply by buying the right, leveraged stocks in the public market — then there’s an interesting implication. Why isn’t everyone already doing it?
That would be the Santiago Principles signed up to by sovereign wealth funds in 2008, regarding good governance — including via-a-vis the custodians of SWFs’ often-plentiful assets. While it was BNY Mellon who paid nearly $15m on Tuesday to settle SEC charges that it handed out internships to the family of a SWF client’s official, in order to retain the fund’s business…
Following the results of the Asset Quality Review and Stress Tests before the end of the year, the bail in instrument will apply for senior debt bondholders whereas bail in of depositors is excluded. – Eurogroup statement on Greece, August 14th Which ‘instrument’ might that be for wiping the senior bonds of under-capitalised Greek banks?
Another sovereign issuer started defaulting on its debt on Monday — treading a path well-worn by governments who run out of money. This is Puerto Rico and the US muni market however, so the actual statement from its Government Development Bank, on missing a Public Finance Corporation bond payment, might make it appear as if things are different this time: