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Izabella Kaminska joined FT Alphaville in October 2008, which was of course the best time in the world to become a financial blogger. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP’s internal magazine. She has also worked as a reporter on English language business papers in Poland and Azerbaijan and was a Reuters graduate trainee in 2004.

For one week in 2003, and one week only, she traveled on her own initiative to Kabul to report on Afghanistan’s emerging business and banking industry. She stayed with mercenaries, which was cool. She later sold the piece to a business magazine, which was also cool.

The experience, however, taught her the valuable lesson of risk/return trade-offs.

Today she prefers to report from the mean streets of Geneva, Switzerland — a notorious European risk-aversion zone.

Everything she knows about economics stems from a childhood fascination with ancient economies, specifically the agrarian land reforms of the early Roman republic and the coinage and price stability reforms of late Roman emperors. Her favourite emperor is one Gaius Aurelius Valerius Diocletian.

She studied Ancient History at UCL, and has a masters in Journalism from what was then the London College of Printing.

And yes, she is also a second-generation West London Pole (who likes mushroom picking, bigos and pierogi).

Contact Izabella Kaminska

The wonders of the FX universe

Dark matter may more commonly be associated with physics, space exploration and Professor Brian Cox, but, according to Deutsche Bank’s FX strategist George Saravelos, there’s a good chance that it’s becoming a recognisable force in the world of foreign exchange too.

Of course, whilst you need complex structural analysis of the universe to detect the real dark stuff, in FX its presence is arguably more easily sniffed out. Mostly, says Saravelos, via the closer inspection of short-term derivative flows and the murky parts of balance of payment statistics. Read more

Is Saudi Arabia starting to panic?

Some excellent market commentary from Olivier Jakob at Petromatrix on Friday morning regarding the current state of oil market (dis)equilibrium and the potentially precarious position of Saudi Arabia. Read more

The negative rate bluff

Negative rates, as we’ve discussed before, are a funny thing.

On the one hand they can send an immensely powerful message. On the other hand they have the power to seriously and dangerously disrupt core economic mechanisms by magnifying the physical hoarding incentive — this helps to create a negative feedback loop that ultimately crowds out capital and leads to voluntary capital destruction. Read more

Further reading

Elsewhere on Friday,

- The trouble with the coin is that it might work too well.

- Is China manipulating the cotton market?

- If the only constraint on growth in an IP economy is brain capacity…. Read more

On diminishing capital intensity

An interesting debate is popping up regarding the topic of capital expenditure.

Take the latest from Societe Generale’s Andrew Lapthorne and team. They argued on Thursday that the commonly held belief that companies’ capital investing ratios have been falling, whilst hoarded cash pools have been going up, is inaccurate. Read more

On the transient necessity of central bank independence

Nowadays, the idea of not having an independent central bank is seen as being a bit backward. One could even say that central bank independence is widely accepted as the optimum set-up for any country’s monetary system, a reflection of its developmental status.

“Independent central bank? Check.”

“This country must be civilised. ”

Yet, can we really be so absolute about the matter? Read more

The end of RoRo, or is it?

Last week, Kit Juckes at SocGen was one of many analysts who, after looking at the latest FOMC minutes, found fit to arrive at one overriding conclusion: the era of Risk-on, Risk-off (RoRo) investing is arguably coming to an end.

As he explained… Read more

The zombie credit mispricing

Take note of the following story from IFR. It could turn out to be very important:

Jan 4 (IFR) – The yield-to-worst in the high-yield market dipped to its lowest level ever this week, as risk markets rallied on the fiscal cliff agreement. Dropping below 6% for the first time in history, the yield to worst on the Barclays high-yield index fell to 5.96% on Wednesday and pushed even lower to 5.90% on Thursday. This compares to 6.13% on Monday and 8.14% at the start of 2012. Read more

When stimulus becomes stealth nationalisation

A big hat tip to Climateer Investing for helping us catch up on a Telegraph story from Ambrose Evans-Pritchard on Japan’s latest plan to stimulate itself out of trouble.

It, by the way, neatly sums up the problem associated with taking QE to the next level which, of course, for the Japanese authorities might have been buying equities outright rather than buying in ETF index form, which they’ve already been doing for a couple of years or so…

Think about it — a central bank en route to becoming a majority holder in a country’s primary equity ETF, is nothing more than a central bank en route to becoming the market. Read more

The (early) Lunch Wrap

US budget confrontations loom || US banks seek $10bn foreclosure settlement || Buffett gives solar a boost || BofA to raise lending this year || Goldman pays out stock awards before vote || Avis Budget buys Zipcar || CVC buys Cerved || From Wall St to teaching || Markets Read more

On the new purpose of government debt

Frances Coppola has whipped up an absolutely fabulous commentary on the BIS paper on safe assets, which cuts straight to the point.

As she neatly expresses, in our new looking glass world… Read more

Why a “free” market changes everything

Something very significant may be happening to labour and the capital reallocation process.

And arguably it’s down to technology and crowd-sourcing.

But before you shout: “this is what Marx always said, Ricardo and the Luddites were well ahead of you on that one”, we would propose what we’re talking about is a complementary trend not one that necessarily validates or duplicates what the above have said perfectly. Read more

Holiday illiquidity in one chart

Eric Hunsader at Nanex presents us with a nice start to 2013 markets — a no less than an 8 per cent drop and subsequent clawback in natgas futures during early Wednesday trade:

Read more

And from the fiscal fudge-osphere

You’ve heard what the early (and slim) analyst reaction has been, now for what the blogosphere has had to say about the fiscal deal achieved.

A good rundown comes courtesy of Pragmatic Capitalism’s Cullen Roche:

  • A deal was actually finalized. That’s good news. It looked like we might actually go into January without a deal and that the odds of no deal at all were rising.
  • No one really won here. Congress is totally dysfunctional.
  • There’s still a lot unanswered.

Read more

The (early) Lunch Wrap

Fiscal Cliff ‘Plan B’ collapses || ICE to buy NYSE Euronext || Bolder UK bank reforms encouraged || Ex-banker arrested in US over Olympus fraud || US planning Whale sanctions || US banks may face rise in bad loan provisions || Khuzami to leave SEC || Research in Motion shares slump Read more

Further reading

Elsewhere on the end of the world,

- Flash, aha, we’ve only got 14 hours to save the S&P 500.

- A definition of full employment.

- Playing Taxes Hold ‘Em. Read more

What’s bugging gold?

We made the case a few weeks ago that the gold price may have reached its choke level and that it was arguably capped from that point on. One good indicator of this, we noted, was the divergence between the gold price — which had been flat-lining for some time — and real interest rates.

It’s also hard to ignore gold’s reaction to the latest Fed announcement, which has been intriguingly bearish to say the least Read more

What China really wants

China announced last week that its State Administration of Foreign Exchange would remove the $1bn limit for foreign sovereign wealth funds, central banks and monetary authorities buying Chinese assets through the Qualified Institutional Investor Programme (QFII).

David referenced that this might turn out to be pretty significant as reserve managers are currently desperate to diversify their holdings out of euro and dollar.

But there’s another important factor to consider too. China is not a benevolent agent which just does things for the sake of pleasing other people. If it chooses to act you can bet your bottom yuan that it’s because it suits its own interests to do so. Read more

Why negative interest rates are a bad idea, by Capital Economics

Dear central bank of Santa,

We, the banks, think we have been really good this year. We didn’t pick on retail customers. We didn’t tell on our Libor manipulating friends. We respected our regulator parents. And most importantly we didn’t have a hissy fit that nearly brought down the global monetary system. Read more

What have the Romans ever done for us?

So, apart from the roads — which go without saying — the aqueduct, sanitation, irrigation, medicine, education, wine, public baths and public order — what have the Romans ever done for us?

Well, as we pointed out on Wednesday, there is a growing view among some ancient scholars that the Monty Python boys could and should have included credit in that list. And in in a big way, since the Roman economy likely featured a lot more paper money assets than most ancient historians care to admit. (Something a lot of modern-day economists and strategists who like throwing Roman coinage supply charts into their research don’t often explain.) Read more

Further reading

Elsewhere on Thursday,

- The latest technical ingenuity for smuggling drugs across the border.

- Explaining the post-Fed bond sell-off.

- Krugman admits something really crucial is going on when it comes to robots. Read more

Defending the Romans

It’s Christmas. A time of year intrinsically linked to baby Jesus, a manger, some ancient wise men, choirs of angels and what is mostly an unflattering representation of the Roman Empire.

Roman PR has been faltering on other fronts as well, as this segment demonstrates… Read more

The (early) Lunch Wrap

North Korea launches missile || Libor probe continues || Mexican president pushes for energy reform || US chief execs urge for higher tax rates || US Department of Justice challenges Stagecoach bus market || British Airways faces stronger competition || Sweden to join Britain outside Europe’s banking union || Saudi Arabia cuts oil output to lowest level for a year || Apple tests designs for TV || Rosneft finalizes deal to buy TNK-BP stake from AAR Read more

The (early) Lunch Wrap

HSBC to pay $1.9bn over money laundering accusations || Asian shares mixed ahead of Fed meeting || Monti in talks to run for PM || StanChart settlements to reach $667m || Optimism over fiscal cliff talks || Treasury to sell final AIG holdings || Little urgency ahead of next EU meeting || China November new loans below forecasts || Mervyn King warns of currency wars Read more

The robot economy and the new rentier class

It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.

But first a quick backgrounder on the debate so far (as tracked by us). Read more

Capping the gold price

The following chart, we propose, has the potential to inspire a whole new way of looking at the gold and Treasury market:

Read more

The (early) Lunch Wrap

Goodmorning New York,

FT ALPHAVILLE Read more

Le cliff Polonaise

Need some help from the ghost of Fiscal Cliff future with regards to what happens if current unsustainable trajectories are unchanged?

It’s possible you need look no further than Europe. While the causes of the cliff are different, it’s still the sort of drop off that can teach a valuable lesson or two. Read more

BoE on HFT: “A large absolute noise contribution”

Not since Andy Haldane noted that an impatient market was not a happy market, has the BoE looked at the issue of high frequency trading and its effects on market quality – and particularly price discovery – in such depth.

From the abstract of the Bank’s latest working paper, by Evangelos Benos and Satchit Sagade, on Monday (our emphasis): Read more

A negative euro lending rate and year-end funding pressure

If you have euros and want to borrow dollars against them… at the moment, it’s going to cost you.

But… if you happen to have dollars and want to borrow euros against them… you will be paid to do the deal instead. Read more

scepticus - How about perpetual govvies? (A.k.a govt equity ;-)

Comment on: The negative rate bluff

Sorry guys notes unavailable in usual place.

Comment on: On diminishing capital intensity

Actually Tim, I think we would like to believe we have arm's length institutions but ultimately everything is an agency of the state. This is what history tells us. This is what Game of Thrones tells us. We just think we have transcended this because we are now oh so civilised. But the nature of state and power never really changes. All institutions can be abolished, all property can be seized, and all laws can be overturned by the person or people in charge of the guns and the army. An "illegal" system may be presented with international threats to disarm or else, but until that action is actually followed up it's just rhetoric. And what is illegal is relative. For example, if you had a marxist revolution by the people... In the name of the people... With democratic elections that then ensured central bank consolidation into government, you can't really say the cbank would not be an agent of the govt. thus, If the central bank is ever independent it is because it is allowed to be by the government. But what the government can give it can easily take away.

And ultimately that is the problem with many mainstream economists. They forget about the real nature of state, power and collaborative economy.

Yet human nature is human nature, and once again -- as a historian -- I believe it's important to look at the real nature of the state. The state is either a collaborative system or a tyrannical system. Either way, the state decides what is good for it. And it can have legal precedent on its side to do what it feels it wants to or not. If it doesn't you get revolution and new statutes altogether.

Comment on: On the transient necessity of central bank independence

It is always an agent because independence is bestowed upon it be the benevolence of the state.

Comment on: On the transient necessity of central bank independence

@scepticus i think it's not the end of RoRo. I think the fed bluff will fizzle eventually. And if it does fizzle, we need to start thinking about this crisis in a totally different way. Because then it's clearly nothing to do with confidence.

Comment on: The end of RoRo, or is it?

@wraithlin - i don't think i am because we spoke for about an hour. And it's about implicit support. The credits aren't defaulting because of the liquidity support. So yes, there's no likely chance of default because the support won't let it happen. Hence my concluding point, we are all government enterprises now.
But the same appleid for GSEs... which bolstered a housing market that might have collapsed sooner if not for the all the cheap credit that was flowing in, because of underpricing due to too much demand for that sort of credit.

If and when the fed changes its low interest rate support, it's not clear if there won't be a flood of defaults.. just like there was when the fed started raising rates back in 2006.

Comment on: The zombie credit mispricing

@scepticus - that is definitely another way of looking at it. And I happen to agree with you, because I believe Fed is supporting short term yields.

Comment on: The zombie credit mispricing

@london banker - thanks. Changed.

Comment on: In defence of Latvia

@scepticus - i don't ignore the energy and cost side of it. That's for another post really, and I've addressed it plenty on my personal tumblr. Yes, you cannot encourage waste. And i see resource costs (hence my utility point above) as the ultimate constraint. There is still "profit" out there, but only if it comes as a result of bringing to market a technology that makes more with less.
We are at the choke point resource wise. But there is no such constraint on IP... apart from the capacity of the human brain, and even that can be smashed if we create AI or external harddrive brains.

Point is we can always be smarter about how we use and allocate finite resources. And technology helps take out the need for surpluses which are wasteful.

None of that however changes the fact that "profit" as it is conventionally understood gets warped in this environment.. and negative rate are a reflection of that, because they incentivise people and corporates to contract supply and/or monopolise and hoard.

Thus the ideal solution is to keep rates at zero (as Keynes enivisaged at this stage) and basically ration commodities.

The free threat is mostly to "value added" -- but that's also why you can't measure wealth in the old was. Even services, which become free as people seek purpose from all that spare leisure time. Think volunteer police force, army, nurses, volunteer guides, and even volunteer waitresses and chefs.. some people love to throw and host a party?

It's all about which work is desirable to you and which isn't.

Comment on: Why a "free" market changes everything

@alasdair - quite agree. And yes that is kind of what i mean. You could also achieve the same effect with vouchers. I think it's no coincidence that Food Stamps are on the rise. And yes, it would be real money printing in this case.. since the distribution would not necessarily have to come at the cost of an asset. It's more like a reverse asset swap. The government printing money, dishing out to citizens who asset swap it (redeem it) for the economy's available output.

The CAP more is about reducing oversupply and surplus... you have to incentivise people not to work in many industries which are already suffering from oversupply and over capacity. More productivity here just leads to further oversupply. And without alternative jobs being formed to soak up that work force a CAP style "please stay out of work" policy could work. But none of my suggestions are anything but very whimsical ideas at this stage.

This is more about creating a debate and what may or may not work.

Comment on: Why a "free" market changes everything