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FT Alphaville

FT Alphaville is a free daily news and commentary service giving finance professionals the information they need, when they need it. In a world where market professionals are inundated with information there is a pressing need to edit and filter, and hopefully sow a few ideas along the way. That’s where the FT Alphaville team comes in.

Articles by FT Alphaville

When coins outperform Verbier

2 days ago

© CORBIS FT Alphaville was perusing Knight Frank’s annual Prime Ski Property report and couldn’t help but look twice at the following infographic: That’s the Knight Frank Prime Ski Property Index, up 1.4 per cent on the year, in the middle there. But way ahead of it on the left there come “coins” – up …

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Are banks really magic money trees?

2 days ago

In a wide-ranging attack on the economics profession published in the New York Review of Books, David Graeber, the anthropologist, paid particularly close attention to the concept of money.He pointed to Theresa May’s claim, during the UK general election in 2017, that “there is no magic money tree,” which was part of the debate on austerity and government spending:The truly extraordinary thing about May’s phrase is that it isn’t true. There are plenty of magic money trees in Britain, as there are in any developed economy. They are called “banks.” Since modern money is simply credit, banks can and do create money literally out of nothing, simply by making loans. Almost all of the money circulating in Britain at the moment is bank-created in this way.Graeber, reviewing a new book from Robert

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Stablecoins as a euphemism for full-reserve banking

3 days ago

© Getty Images Everyone has a personal theory of money.And by and large everyone’s theory differs to everyone else’s. Because money is in part philosophical as well as technical, and hence hugely subjective.Major arguments often result from one person’s view of money being different to somebody else’s. But to be fair, it’s probably right that …

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Offsetting Flugscham. EasyJet edition

3 days ago

© PA We are, it is fair to say, cynical about airlines’ attempts to offset their environmental footprints by funding projects that reduce carbon dioxide emissions.But we like elements of today’s claim from easyJet that it will become the first airline to wholly offset its carbon footprint. Specifically, the part where the airline admits the …

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Tesla’s mysterious income

3 days ago

© Christophe Gateau/dpa Tesla’s third-quarter results blew away expectations. The house of Elon, despite a 12 per cent year-on-year slowdown in revenue growth, reported a net profit of $143m and free cash flow of $371m, smashing through the estimates of Wall Street’s finest.For the Tesla bears forecasting another loss-making quarter, the results were a headscratcher. …

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Further reading

3 days ago

Elsewhere on Tuesday…– Warren is in a knot over healthcare– The ties between inequality and low rates– Trump’s terrible trade war tactics– The ordinary brilliance of Big Thief– For those ardent defenders of China– The paradox of Uber– All aboard, the night train– How the Mustang Mach-E came to be– Wokeness loses its edge– A winning fish– Bitcoin’s fatal flaw– Italy’s 1 euro homes– New York without the New Yorkers– Iran’s strangehold on Iraq– Zurich is…cool?– Song of the day: Emmylou Harris – Michelangelo

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The Italian house price conundrum

4 days ago

In Europe, there is one dominant explanation for why house prices are rising sharply. Low interest rates and cheap ECB money, the story goes, is propping up the prices of assets even as inflation remains low. If that’s what’s going on, someone forgot to tell Italy. From a Bank of America Merrill Lynch report today:Italian house prices continue to lag behind other European RMBS jurisdictions. The house price index dropped 1.2% in 2017 and 0.6% in 2018. The pace of decline has slowed a bit further in 1H19, with prices down 0.4% yoy in 2Q19. Although the new dwellings index improved in 2017, 2018 saw no change and it fell 0.3% yoy in 2Q19.The FT’s Valentina Romei pointed out, at the start of the year, that Italy was dragging down the sector’s overall performance on the continent. In Spain,

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The real story behind push payments fraud

4 days ago

© PA In the UK, we probably all know someone who has been affected by push payments fraud. Someone, dare we say it, who isn’t in other circumstances considered naive, gullible or lacking street smarts.That’s largely down to the fact that the sophistication of those perpetuating push payments scams is growing at an alarming rate …

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Further reading

4 days ago

Elsewhere on Monday,– The dark side of techno-utopianism.– Millennials had no boom.– And now don’t want to leave their flats.– How the iPhone widens the US trade deficit with China.– A GPS mystery in Shanghai.– Why the points guy now avoids ride-hailing.– A long interview with Cambridge Analytica’s Julian Wheatland.– Google’s totally creepy, totally legal health-data harvesting.– How to conduct business with Chinese companies that see a dark future.– Why the super rich love South Dakota.– Child labour forces as the new school?

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Thought for the weekend

7 days ago

© Getty Images/iStockphoto Alphaville gets subtweeted: Likely to beat the market: And if you can’t see the screenshots, a taster: Holy gender balance Batman: Thought for the weekend  Thought for the weekend Thought for the weekend Thought for the weekend Thoughts for the weekend Thoughts for the weekend Thought for the weekend Thoughts for the weekend …

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Shut down the internet, student housing edition

7 days ago

In June, we provided details of a £100m student housing scheme that went badly wrong. Based at 19 buildings around the country, the company behind the scheme had collapsed into administration.The rent coming in from students was not enough to meet costs, let alone provide a return to more than one thousand investors, who had paid up to £75,000 each to own the rooms. Enticed by a slick marketing campaign, they had expected guaranteed returns of 8-12 per cent annually, but were left to shoulder the costs of ground rent and service charges on the buildings, despite earning no income.One element missing from our original story were the students. In the case of one building in Stoke, there were no students at all, because it wasn’t complete. But many of the scheme’s other sites do have paying

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Spotted in NYC: a very bad Twitter ad

8 days ago

What feelings does this image engender in you? Anti-capitalist rage? A sickening sense of doom and foreboding? The heebie-jeebies? Um, warm and fuzzies? For us, when we came across the billboard in Williamsburg, Brooklyn, our reaction swung from confusion to knowing cynicism (a rather discordant combo, we acknowledge). But Williamsburg being Williamsburg, we assumed it was some sort of postmodern street art; some kind of bleak hat-tip to the dystopia that we find ourselves in on Twitter, where humans get a chance to play out the most loathsome, boorish, puerile, and plain dumb parts of themselves. (We did also wonder whether the artist should have replaced the word “beings” with “waste”, but reckoned that the former was perhaps more nuanced.)Having looked into the matter, we discovered

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The private education risk premium

8 days ago

At the start of the year, we had a look at the Alpha Plus Group, a lossmaking educational organisation with close ties to some of the biggest players in London property. The company was bought from a private equity firm by clients of Delancy Real Estate Management in 2007. That firm is run by Jamie Ritblat, the son of Sir John Ritblat, former chief executive of British Land.Alpha Plus controls 19 schools, colleges and nurseries, including the prestigious Wetherby School in West London, which counts Princes William and Harry among its alumni.One of the clearest examples of for-profit education in the UK, Alpha has also borrowed nearly £130m in retail bonds — an approach to financing that has also been used by other organisations with prestige attached to their names, such as by Wasps Rugby

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Tesla/ Germany: ’glorious success’ or Schnapsidee?

8 days ago

German politicians are very excited right now about Elon Musk’s announcement that he will open one of Tesla’s Gigafactories close to Berlin. (A quick primer on what a Gigafactory is: it’s a normal factory where widgets are manufactured like in any other, the only difference is this factory is blessed by Saint Elon of Musk.)AP quoted economy minister Peter Altmaier as saying the mooted opening, announced Tuesday evening local time, was a "glorious success" for Germany’s attractiveness as an auto industry location. Perhaps. But, judging by Mr Musk’s previous, it might not be such a success for German workers, the locals, or ultimately Tesla itself. It’s easy to see why the likes of Altmaier are so thrilled by a Tesla decision — its pay-off for their recently unveiled environmental strategy.

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JP Morgan goes bear hunting

9 days ago

In the summer of 2018, Alphaville observed that there seemed to be a paradoxical bull market in being bearish.Since the financial crisis and the ensuing rise to fame of the investors who called — and profited significantly from — it (Bass, Burry, Eisman, Paulson, Gross et al.) there have been almost constant calls for a repeat of Armageddon. As you may have observed reading the fine, dusty pink pixels of this blog and paper, and the white sheets of others, the media loves a negative headline. So these calls tend to get a rather asymmetric amount of airtime versus, say, a an equity strategist who thinks the S&P 500 may end the year up 5 per cent.We’re not the only ones to spot this trend. JP Morgan’s Michael Cembalest, chairman of market and investment strategy at the firm’s Asset

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Further reading

9 days ago

Elsewhere on Wednesday…– Big tech still reigns on the continent– The wrong goodbye– Computer says no on Crossrail– The man who fell from the sky– Facebook exec runs own media shop– America’s socialist generation is also its most misanthropic– Does nationality matter at the ECB?– Tesla goes Teutonic– Severe housing shortage blights England’s most deprived area– Fortnite star falls from grace– Song of the day: Richard Dawson — Jogging

Copyright The Financial Times Limited 2019. All rights reserved. You may

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Private equity run amok

10 days ago

This is a guest post by Daniel Rasmussen and Brian Chingono, partners of Verdad Advisers, a hedge fund focused on leveraged small value public equities, arguing private equity no longer offers investors a good deal.  Private equity’s historical success in the 1980s and 1990s came from using debt to buy small companies in a private market at valuations that were significantly discounted relative to public equity markets. That is no longer the case.Today, the average private equity company is bought at a 12x multiple of earnings before interest, taxes, depreciation, and amortisation (Ebitda). Rather than being undervalued, this is in line with the S&P 500.

Private equity valuations/ S&P 500 valuations © S&P Capital IQ and Pitchbook (June 2019)
While private equity is no longer

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Deliveroo and the profitability problem

10 days ago

Deliveroo, the lossmaking food delivery company which once briefly employed Alphaville’s editor, announced a new product line on Sunday.From the Telegraph’s James Cook:DELIVEROO is introducing food collection services at 10,000 UK restaurants in a move that risks inflaming tensions with its delivery riders.The online food delivery group plans to roll out a new "Pickup" service, where customers save money by collecting food themselves, at half of its UK restaurants within six months.It hopes the scheme will help it win new customers and sign up extra restaurants as it wages a battle with rivals. Uber Eats launched a similar service in May.Alphaville commented on the speculation around this service back in February, and it seems it is now becoming a reality.As the Telegraph points out, the

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Further reading

10 days ago

Elsewhere on Tuesday…– December’s repo markets could get dicey– How the Democrats became the party of monopoly and corruption– Three signals that the new music industry has arrived– Is the ECB pricing investors out of the primary market?– Where the recession never ended– Experimental music and the end of the world– Young Africa on its way to the old continent– Making bank from subprime– China’s nurses become capital allocators — Land law and British investment– Monitoring the monitors– The impact of the printing press on growth– Big tech’s Yes Men soothe each other’s nerves– Donald Trump Jr gets heckled on campus…by the right– Limewire: an oral history– Labour share and US inequality– Song of the day: Gillian Welch — Everything Is Free

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Local councils of England, meet negative yields

11 days ago

A world of record-low rates has created an entire club of governments and public sector bodies currently being paid to borrow from the bond market, from Germany to the European Investment Bank.Late last week, that club got an inconspicuous new member — none other than Redbridge Council, one of the 24 councils in Greater London, which has just borrowed £75m at a negative real yield.Despite the heavy focus on negative yields, there has been less scrutiny of what the proceeds are spent on — the amounts are usually lost in the vast expenditure across national accounts.Redbridge’s borrowed money is expected to be spent on “capital expenditure” — more granular details were not provided in the announcement. However, the council just last month unveiled plans to spend £45m on buying housing

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Sark’s electricity crisis is brewing again

11 days ago

We know our readers like to be kept informed about all the latest developments on Sark — the tiny island in the English Channel where funerals are led by tractor-hearses and residents are carted around on tractor-buses — as well as Brecquou, the neighbouring private island owned by the billionaire Barclay brothers. Or we hope you do, anyway. You might remember that last winter, Sark — which has neither cars nor streetlights and is officially designated a “dark-sky island” — was threatened with a total blackout. (Brecquou, incidentally, was and is not affected by this, as the island generates its own electricity.)It came after the island’s monopolistic energy provider Sark Electricity Limited threatened to turn off the electricity supply after an independent price commissioner

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BIS: Moving fast and stablising things

11 days ago

Deep in the underbelly of the looming tower that the Bank for International Settlements calls home in neutrality-loving Switzerland, the bankers who supposedly rule the world queue up to pay for their lunch like everyone else.Here in Basel — like in many other workplaces — physical cash is no longer accepted; workers instead flash their pre-paid cards, stocked with digital currency unique to themselves. The tech is on the dated side of payments innovation, but it still equates — at least in theory — to the current vogue for stablecoins.For that’s really all a stablecoin system is: any digital unit, issued to a specific network, backed by an underlying pool of high-quality collateral — in this case, Swiss francs.The functional, albeit slightly aged, luncheon system is an apt metaphor for

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Thought for the weekend 

14 days ago

Very concerning and sad: 
Living legend:
Homonyms; cinnanyms: 
Things that were apparently forgotten:
Money and confidence:
Forecasts:

Thought for the weekend
Thought for the weekend
Thought for the weekend
Thoughts for the weekend
Thoughts for the weekend
Thought for the weekend

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How not to understand money 

14 days ago

One of the first things to know about equity investing is that stocks go up as well as down, and that even the most successful ones never go up in a straight skyward trajectory. That’s why investment firms that cater to inexperienced retail investors are mandated to ask their customers a series of questions in order to assess their suitability and risk tolerance before they invest, in order to make sure that stock investing is a good idea for them. If a Nutmeg customer, for example, says they want to access their money within three years, they’re advised not to invest in stocks at all. Because, when you’re considering putting your precious life savings into the stock market, it’s important that you don’t imagine the returns will look like this: 
That’s from an article

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History rhymes

14 days ago

As I write this note, the US and China are apparently about to ink a trade deal. The financial markets are, predictably, rising off the back of hopes for such a deal (or should I say, the algorithmic trading programs designed to look for good news about China are pushing the markets up). That has buoyed the spirits of our president, who tweeted yesterday: “Stock Market Up Big Today. A New Record. Enjoy!” At least he didn’t say bigly . . .While I’m the first one to hope that such a deal is for real, even if it is, it doesn’t solve the US-China trade/tech conflict, which as I’ve written too many times, is existential.It also doesn’t solve the bigger issue in the market today, which is that the corporate debt bubble is starting to burst. SoftBank, the oversized Japanese venture fund that

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Is it time for a shift in fiscal rules? 

14 days ago

In this guest post, Toby Nangle, global head of asset allocation at Columbia Threadneedle Investments, and Neville Hill, chief European economist at Credit Suisse, propose a shift in fiscal rules from the current procyclical set to one that is counter-cyclical and, they argue, more forward-looking. The question of when the next UK budget will take place, and who will be in government to announce it, remains very much open. But one thing that looks likely is a change to the UK’s fiscal rules. Fiscal rules that constrain central budgets remain fashionable. Many countries have them. They generally target government debt — both its stock (debt as a percentage of GDP) and its flow (the size of the deficit). For example, today the United Kingdom targets a falling debt stock as a percentage of

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Scholz gives ground on banking union, but will Rome cede too? 

15 days ago

© Michael Kappeler/dpa The lack of a common eurozone-wide fund to dole out deposits when a bank fails is one of the biggest stumbling blocks to a regional banking union. It impedes not only public trust in the euro, but also — if you ask most bankers in the region — cross-border mergers too. The …

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Turns out WeWork’s future is bright

15 days ago

Investor in WeWork? Feeling anxious? Don’t be. We all know the events of the past few months have been tough. 
However, according to SoftBank Group’s latest earnings results, this is just a temporary setback. (Hat tip to @zebulgar for alerting us to this.)
Glorious. Though the more risk averse among you might want to pay attention to the disclaimer below the chart, which we have printed here in a font that has about the same growth rate from the original small print as SoftBank expect WeWork to achieve: The information presented herein is provided for purely hypothetical, illustrative purposes only. Information herein reflect current beliefs of SBG as of the date hereof and is based on a variety of assumptions and estimates that are subject to various risks. The metrics regarding

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When fast fashion jumps on the eco-wagon

15 days ago

H&M says it wants to help make the fashion industry more “sustainable”. In a FT piece published on Wednesday, the Swedish fashion giant’s chief executive, Karl-Johan Persson, talked about some of the investments the company had made in pursuit of this “sustainability”. For example, H&M has invested in a Swedish start-up called Renewcell, which produces clothes from recycled textiles.Persson told the FT:It will not change us now, but in the future I think it will do a great amount of good for the world, and hopefully also for the company. I believe many of the conventional materials today will be replaced by these sustainable materials with quality and prices that are as good or better.The company has said it wants to use only “recycled or other sustainably sourced materials” by 2030, as a

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Further reading

15 days ago

Elsewhere on Thursday:– The wreckage of WeWork.– A banking union thread.– Novogratz tempers expectations.– Slow-wave deep sleep.– Synthetic MMT.– Interest rates and social insurance.– A family who fled the Nazis.– Trump’s faith advisor.– The best albums of the 2010s. 

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