Saturday, 31 March 2012

Last piece of entertainment: 100 year gilts

The UK announcement that it would start offering sovereign bonds with a maturity of 100 years was greeted with a lukewarm reception by investors. It reminds some of us of the perpetuities issued in 1752 by the Chancellor of the Exchequer Sir Henry Pelham which started as 3.5% annuities and, after a series of "consolidations", ended up with coupons of 2.50%. Truth be told, now with the inflation monster surfacing more and more, issuing 100 year debt without inflation links is nothing more than a bad joke.

Monday, 26 March 2012

Gold surges as chairman Bernanke signals more QE

To QE or not to QE? This is the question. No definite answer is still firmly enunciated, but all odds are in favor of another round of CTRL+ Print. Why? Too put it quite simply, because the massive US debt needs to be financed in some manner, and the easiest way to get away from this Damocles` sword is through a combination of inflationary devaluation and exchange rate manipulation. All under the noble banner of stimulating the economy. Now, why is this even important? It`s probably related to the narrow-minded "traders`" obsession with the term quantitative easing. Upon hearing mere hints or allusions towards more printing, the market turns haywire: launching in 5...4...3...2...1. The side-effects of such a policy of wealth redistribution are inflated asset prices and accumulated cash piles at the corporate level (which incidentally are usually left to "compound" in this negative rate environment).

Wednesday, 21 March 2012

A Facebook credit for your thoughts

Mr. Friedrich Hayek, one of the most proponent theorists of the Austrian school would be terribly happy to find out that competition is creeping up on the government monetary monopoly. This is because companies like Facebook or PocketChange, offering virtual credits for their users to use in games such as Farmville, or Mafia Wars, are gaining more and more popularity: revenue generated by the Facebook credits system sky-rocketed to $557 million in 2011, from only $106 million the previous year, according to its most filing prospectus. They are counting more and more on the virtual credits to generate income streams and this could generate a positive effect, depending on the popularity of their currency, of competition on government controlled market. 

Friday, 16 March 2012

Brazil joins the currency world war

Brazil has been no stranger to monetary intervention and currency devaluation, but, until now the political rhetoric has been rather passive on this subject. The tone changed a bit after Brazil`s finance minister Guido Mantega declared this week that his country will no longer "play the fool" and let its currency appreciate while richer nations gain economic advantage by devaluing theirs. As a result the government extended this Monday a tax on foreign loans to 6% (similar to the Robin-Hood tax that the European Union is planning to implement). Will this coll down the hot money inflows ?

Monday, 12 March 2012

Monetary policy case study: South Korea vs Japan

The picture may be four years old, but it does a great job of showing the South-Korean eagerness to take Japan`s place as high-end apparel exporter. While most of the eyes focus on the miraculous growth story of China, the economic power of South Korean business conglomerates (formally called chaebols) is ever-increasing at the expense of their Japanese counterparts (named keiretsu). This is because South Korean companies have a fortunate advantage in the relative weakness of their national currency.

Saturday, 10 March 2012

February Chinese trade deficit at record $31.5 billion

The Chinese establishment is not shy to show us that after a long period of hoarding cash in the negative yielding "safe haven" of US Treasury bills, they are prepared to initiate the world`s biggest corporate shopping spree. Data released by the Chinese Customs Office present the biggest monthly trade deficit since 1989 as the industrial mammoth is seeking to employ its cash reserves by purchasing industrial commodities like copper and oil. Whereas the deficit may well be seasonal due to the timing of the Lunar New Year, the figure does show the spending appetite of China.

Friday, 9 March 2012

Greek debt deal 95% agreed

A major breakthrough in Greek debt talks was reached today as investors representing 95.7% of Greece`s privately held bonds agreed to restructure their bond holdings without being classified as a credit event and thereby not triggering the underlying credit default swaps. Out of these 95.7% of bond, investors holding 85.8% of bonds have voluntarily agreed to swap their current depressed bonds with new, lower yielding, higher maturity bonds, and the rest will be forced to accept the restructuring under invoking collective action. Where to now ?

Tuesday, 6 March 2012

Watson: the future of algo trading ?

News emerged today that the IBM supercomputer which defeated the champions of "Jeopardy!" almost a year ago was hired by City Group to analyse financial, economic and client data. Its main capabilities include translating natural human language into quantifiable objective data, an extremely refined form of what some algorithmic trading bots can accomplish at the moment. It will most likely be used to read and analyse SEC reports and market developments and issue prompt trading suggestions. Ladies and gentlemen welcome to the future!

Monday, 5 March 2012

Rusia is 140% Putin

It came to no-one as a surprise that Vladimir Putin won six more years in Kremlin, according to exit polls and preliminary results. He has been someway or another in power ever since he received his divine blessing from Boris Yeltsin at the beginning of 2000. According to an exit poll by the Public Opinion Foundation he got 59.3% of the votes and taking into account the Central Electoral Commission he won 62.81% of the votes, after counting almost 20% of the entire votes. 

Saturday, 3 March 2012

Are icy times over in Iceland ?

The financial meltdown of leveraged icebergs started in 2007 a global economic ice-age. While credit has been, in all purposes, frozen for the last four years, the growth prospects have been ice-cold, and while governments in the western part of the world have applied massive stimulus to what is essentially a severely frost-bitten part of the economy, the financial waters are starting to become fine for a tiny European country: Iceland.