FINSUM

Financial News. Summarized.

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Activist Investing: Norway Keeps Investments in Coal

(Oslo) and several university endowments, have withdrawn their investments from the energy market, particularly in coal. In the same vein, Norway recently called a special counsel to meet to decide whether the country’s sovereign wealth fund—the largest in the world—should continue to invest

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Cheap Energy Bonds Fail to Spark Buying

(New York) Junk energy bonds now account for over 16% of the global market, and many have seen their yields rise to 9% versus just a little over 6% for an average junk bond. However, this steep fall in prices is not sparking the rebound in buying that many thought it would. Despite much exuberance

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Spinoffs vs. Mergers: Which Create more Value?

(New York) The New York Times has written an interesting piece comparing the value creation of mergers and spinoffs. The corporate deals market has been red hot of late, and both major mergers and large spinoffs have been common. However, many investors are unsure of which to bet on. This article i

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Equities: FX Rates Hurt American Corporate Profits

(Atlanta) Equity investors beware, the stronger Dollar is set to have a largely bearish effect of US corporate earnings. Many are unaware than American corporations earn much of their revenues outside of the US market, so the idea that a stronger Dollar might be bad for stocks could come as a surpr

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ECB’s Loan Auction Flops—QE to Come?

(Frankfurt) One of the ECB’s most important policy measures has just flopped. Yesterday, the European Central Bank attempted to auction up to €317 bn of cheap loans to the Eurozone’s banks, but in the end only €129 bn was taken up. Analysts say the reason for the failure is that banks do no

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How a Strong Dollar Hurts World Markets

(New York) The US Dollar has been consistently strengthening for some time, and such behaviour has a host of effects on world markets. While a strengthening Dollar may be good for Americans traveling overseas, it is broadly negative for financial markets. Firstly, the strengthening Dollar is alread

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ECB Breaks with Tradition, Publishes Minutes

(Frankfurt) After over a decade of silence and much indecision, the ECB has announced that in order to help fight inflation it is changing its long he...

OxWFD: Two issues here: firstly, the “public” is very unlikely to read the ECB’s policy minutes, so outside of the possibility of some niche publications covering them (like this one), word is not going to get dispersed enough to stoke inflation; secondly, this change puts in danger the independence of the bank itself, as committee members will now be accountable to their home country, meaning pressure could be applied in ways that did not exist before.

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“Financializing” Farmland: Bankers and Strawberries

(New York) This article chronicles the new rise of investor interest in farmland and crops. Focusing on a handful of young REITS, often started and ru...

OxWFD: This is a very interesting asset class for investors as it not only works as a value store but also produces income along the way. Seems it would also be possible to securitise the cash flows from crops into asset-backed securities.

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China’s Debt Level hits 250% of GDP, Growing Rapidly

(Beijing) New data compiled by Standard Chartered bank, and agreed by a large group of economists, now shows that China’s gross debt level has reached...

OxWFD: China is heading down a dangerous path as it continues to stoke credit consumption even in the face of a massive debt burden. The advantage the country has, and the likely reason it has not suffered a full scale crisis yet, is that the government still owns the majority of its financial sector and can simply order loans to be rolled over—something it could not do if more markets were more internationalised.

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Britain Backs Away from Weakening Emissions Targets

(London) British Chancellor of the Exchequer George Osborne has apparently been forced by political discord to abandon his plans to weaken Britain’s t...

OxWFD: Australia led the way in repealing its carbon policy and it remains to be seen whether other major countries follow suit. It appears Britain has avoided doing so, for now.

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Spain’s Export-Led Recovery Fades

(Madrid) Over the last several months Spain has been touted through the journalistic and financial worlds as having “turned the corner”, and has earne...

OxWFD: Despite all the positivity, the element of Spain’s economy that was actually doing well has now gone into retreat for six months. It could be a bellwether of more bad times to come.

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Busy Doctors Waste $750 bn per year in US

(Washington) This astute article analyses some of the deep dysfunction in the healthcare sector which has led to the US having one of the most ineffic...

OxWFD: This is a good piece for understanding some of the fatal flaws, and emerging trends in the healthcare space. It seems the policy of underpaying doctors needs a rethink.

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Alibaba’s IPO Set to be Windfall for China’s Crony Capitalism

(Shanghai) Receiving enormous press coverage is the IPO of Alibaba, China’s largest ecommerce business. The forthcoming offering of the Chinese giant,...

OxWFD: In addition to the governance risk associated with the Alibaba IPO, there is also the reputational risk involved. With such an opaque list of government-connected shareholders coming at a time of high Chinese aggression throughout Asia, the risks of a controversy are considerable.

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Why Geopolitics Aren’t Fazing Markets

(London) This Financial Times article analyses the puzzling path markets have taken this year. Particularly, it investigates why markets have been so...

OxWFD: This is a very good piece for conceptualising the disconcertingly calm state of markets in 2014. According to this article, until credit conditions tighten somewhat, market movements are likely to surprise to the upside.

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China Reenters MBS Market

(Beijing) Seven years after shutting down its loan securitisation market in its entirety, the Chinese government has announced that it is restarting i...

OxWFD: Firstly, it is not lack of credit, but rather over supply and lack of demand which seems to have brought down Chinese real estate prices, so increased lending may not solve the problem. Secondly, given China’s already opaque credit markets, is this really the best solution given the position of the economy? The government seems desperate to boost the property sector, likely because many of the firms linked to it are over-leveraged.

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America’s Imaginary Fiscal Crisis

(Washington) In his column in the New York Times, one of America’s preeminent economists, Paul Krugman, has published an article which asserts that th...

OxWFD: This piece puts into perspective just how manageable the US’ debt is compared to both its own history and the current state of other sovereign budgets globally.

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Funds: Study Says 99.9% of Funds Fail to Achieve Long-term Performance

(New York) A new study by the S&P Dow Jones Indices into funds and market performance has confirmed what many have argued and shown—that actively...

OxWFD: The principle behind this study is not new, but the thoroughness and extent to which it shows funds fail is. Yet, despite all this evidence, capital continues to flow heavily into the hedge fund sector.