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).
ROBOTS! AUTOMATONS! CYBORGS! ARTIFICIAL INTELLIGENCE! ARGHH!!!
Last weekend I attended Robots on Tour, a robotics, humanoids and cyborg exhibition put together by the Zurich-based Artificial Intelligence Laboratory at the University of Zurich. Read more
The latest commodity advice from Goldman Sachs suggests the current sell-off may be overdone.
Here are the key points from Monday’s note:
Shifting to near-term overweight as commodity sell-off overdone
Commodity markets declined sharply in February along with emerging market (EM) equities due to renewed concerns over China, which we believe is overdone. Although our price targets other than gold remain unchanged, this pull back has pushed our near-term return forecast from 2.0% to 6.0%, making commodities the asset class within the ECS coverage universe with the most robust near-term outlook. However, our 12-month neutral recommendation remains unchanged as our returns forecast is still a more subdued 3.0%, as we continue to remain structurally neutral on long-dated oil and commodity prices due to the structural supply-side response to persistently high prices.
Almost a year ago the Telegraph’s Thomas Pascoe put out an interesting piece on gold. We’ve decided to reprise it this Friday because we think it offers an interesting and useful perspective on current developments in the gold market:
One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade. In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.
An interesting anomaly is popping up in the world of Eastern Europe, Middle East, and Africa (EEMEA) flows, note Bank of America Merrill Lynch on Friday:
Investors are puzzled by the lack of EEMEA FX appreciation in spite of G-10 central bank printing. Waiting for the flow may be like Waiting for Godot: you wait and wait, but he never comes. Global rebalancing, deleveraging and higher US rates are responsible for this, in our view. In sum, the flow trends are consistent with the poor performance of EEMEA FX—and insofar as they are unlikely to change, currencies are likely to remain weak. Read more
Anyone who bought gold in 2008 is probably more than tempted to cash in their profits right about now.
Reflecting the scale of the change in sentiment — and confirming that there was indeed something of a choke level for gold at around the $1,908 mark — is the following chart from Macro Risk Advisors which neatly sums up the degree to which investors have been liquidating gold ETF positions. Read more
… the Japanese seek inflation everywhere.
All this talk about Japan, JGB bond yields, QE, the yen… and hardly ever does anyone throw up the following chart.
So, without further ado, here is the most important Japanese chart of all courtesy of Capital Economics… the CPI: Read more
Elsewhere on Thursday,
- What happens if people live forever?
- Tracy Alloway gets some MS Paint competition. Or maybe not.
- There is no shortage of gold. Read more
Financial pundits, academics, fund managers and analysts all have an amazing tendency to over-complicate matters.
Sometimes, however, it takes just one person spelling out the obvious to really get to the root of the problem. Read more
An excellent observation from John Kemp over at Reuters on Tuesday regarding the spot/forward disconnect we’ve been talking about:
The increasingly close linkage between hedge funds and spot prices since 2010 has also coincided with a sharp reduction in the correlation between front-month and far-forward prices. Correlation between spot month and forward prices, generally above 90 percent until 2010, is now often less than 50 percent (Charts 5-6). Read more
On the day the Dow is expected to open at a record high, the hottest M&A story of the year — Glencore and Xstrata — brings us the following.
First the collective news (via the FT): Read more
HSBC lifts dividend 50% || Kuroda says ‘will do whatever we can’ at BoJ || Nikkei rises, yen little changed || New Chinese property tightening announced || New Look to open shops in China || Swiss vote for pay curbs || Steinmetz launches $2bn distressed European property fund || New homes bonus ‘a flop’ || No end in sight for Italian gridlock Read more
Elsewhere on Monday,
- Opaque finance, again, and solutions.
- Afghanistan’s mobile money revolution.
- Will biotechnology provide food security? Read more
Elsewhere on Thursday,
- It’s Frankfurt that should be your worry – not Rome.
- Ricardian equivalence and the case of the EU.
- Aeroflot’s prospective 1-year old board member. Read more
ROUND-UP
Stocks soar to five-year high. Wall Street’s S&P 500 had its biggest one-day gain, or 1.3 per cent, since the start of January, supported by a better than expected survey of durable goods orders (excluding transport). Now at 1,515 points, the New York benchmark was striving to recover last week’s five-year closing high of 1,530. The Dow jumped 175 points, or 1.3 per cent to 14,075, its highest level since Oct. 15, 2007. The FTSE All-World equity index added 0.9 per cent and the FTSE Eurofirst advanced 0.9 per cent. Milan’s FTSE MIB index recovered early losses to close higher on the day. Demand for the dollar fell, with the dollar index sliding 0.3 per cent. Copper declined 0.2 per cent to $3.57 a pound while Brent crude fell 0.7 per cent to $111.95 a barrel (Financial Times). Read more
Okay. Negative interest rates have now gone fully mainstream in the UK thanks to this week’s testimony by Bank of England deputy governor Paul Tucker.
Even the Daily Mail is writing about it.
But a number of major misunderstandings are popping up as a result. So let us try to clear some of them up. Read more
Before we comment about the strange behaviour of the Vix this week, we’d like to engage in a bit of a thought experiment.
There are two hypothetical scenarios that we’d like you to consider.
The first relates to the rampant nationalisation of everything:
What happens to market prices and volatility in an economy where government intervention becomes de rigeur every time prices misbehave?
The political picture in Italy is looking deeply uncertain. We all know that.
But what’s possibly more interesting is the scale of the market reaction to that uncertainty. Read more
Alternate working title: Opec-cartel style
We’ve already heard from Oleg Deripaska on the matter. And we’ve started to see the consequences hit Rio Tinto and BHP Billiton. But the latest “we must rein in supply” Opec-cartel style talk, actually emanates from Glencore CEO Ivan Glasenberg.
Bloomberg has the story ( hat tip to Reuters’ John Kemp) and it offers few cracking paragraphs to say the least: Read more
Elsewhere on Tuesday,
- A major lack of Vix convergence.
- Elon Musk mentions the hyperloop again.
- Gasoline’s danger zone. Read more
The disconnect we’ve noticed between commodity fundamentals and forward rates appears to be popping up in other asset classes as well.
Priya Misra, rates strategist at Bank of America Merrill Lynch, makes a very interesting point on Friday about what she sees in her sector. Read more
Elsewhere on Friday,
- How the eurozone crisis was about a buyer’s strike.
- Perhaps the singularity isn’t going to happen?
- European banks would be less scary if they were in the US. Read more
Nymex WTI futures trade experienced somewhat of a wobble on Wednesday.
As Stephen Schork highlights in his chart of the day: Read more
Ay ay ay! Gold is approaching a death cross and all sorts of other commodities are looking nasty too.
Kloppers to be replaced by inside geologist || €3.5bn buyout plan for France’s Elior || Italy’s centre-left woos Monti || Bulgaria’s government resigns || Dell shareholders maintain criticism of buyout after earnings fall || Isle of Man tax haven horizon || China FDI falls again || JGB dog that didn’t bark || Markets Read more
Love him or loathe him, Robert Skidelsky’s prose always makes for a good read.
His latest offering comes by way of Project Syndicate and relates to the issue of robots and the rise of automation. To what degree are we really approaching a leisure society and how best to respond to the changes afoot? Read more
In our previous post we explained why Jean-François Groff, CEO of Mobino, believes mobile payments systems could be a lot more honest and more money-like.
How does Groff’s company fit into it all? Well, his big idea really is to keep M0 (as economists like to call base money) exactly what it is, M0. Read more
The mobile money/virtual currency arena is getting more and more crowded. And the question remains: will the concept ever gain the critical mass needed to become the next big thing in finance?
From Bitcoin to M-pesa, Square, Paypal, Dwolla and Ven (to name just a few) … the number of new concepts is piling up. Read more
This is a follow up to Thursday’s post about Rosneft’s 500 million barrel collateralised financing (to raise money for its purchase of BNP-TNK) and how the market managed to absorb it almost without any price impact.
Most of the previous post was based on the observations of Philip. K. Verleger, who believed the latter point represented a triumph for the futures markets, which had reached a whole new level of maturity.
And yet, as we have been reporting, it’s always more important to look to the curve. Spot price, or “flat price” as traders like to call it, is almost irrelevant. What’s happening in so-called time-spreads is usually much more critical. (And yes, nobody usually takes unhedged positions on flat price.) Read more
Philip K. Verleger, veteran independent energy consultant, has been doing some sleuthing concerning some of the more opaque areas of the oil market.
What he’s unearthed is interesting, to say the least. Read more
Cars and motoring are not really FT Alphaville’s specialty. But we do love public spats.
The current one running between Tesla and SpaceX founder Elon Musk and John Broder of the New York Times is particularly engaging. It regards Broder’s test-drive of the Tesla Model S and his subsequent rubbishing of the experience in an article that claimed the electric car ran out of battery early and generally failed to perform in cold weather. Read more
