Today's parliamentary sketch:
MPs always like to take their medicine with a dollop of sugar, ideally well-mixed with a slather of school-boy sneers and jeers. The public, on the other hand, won’t swallow anything but the bitterest pill when it comes to bad news.
So after a casual slap-around at PMQs, only an avalanche of the worst possible tidings would settle the bullies’ playground that is parliament.
“It is unavoidable,” Osborne thundered – or would have, if he had the voice for it. Time to take an ice pick to “the interest on the interest on the interest of the debts”, he declared: honourable gentlemen, think of the children!
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EXPECTATIONS about quantitative easing (QE) have now been driven so high – with the market anticipating between $500bn and $1 trillion of extra liquidity – that someone was soon bound to call a halt to the party. That killjoy has arrived, in the form of US broker BTIG’s Mike O’Rourke.
“There are many who have QE trades on and we believe there is high risk that they will be disappointed if the Federal Open Markets Committee (FOMC) walks the way it has been talking the talk,” he wrote in a note to investors last week.
O’Rourke suggests that Ben Bernanke has completely lost control of the QE narrative, leading to expectations massively out of line with his original intentions. The Fed is therefore in a bind: disappoint and cause a correction or pander to the markets. Either way, O’Rourke points to the influence of St Louis Fed chairman Jim Bullard as evidence that Bernanke will let the extra cash dribble out of the Fed only gradually and in response to economic data. If he is correct, the FOMC’s next meeting on 2-3 November will be a nasty shock for markets that have grown increasingly reliant on a tidal wave of QE.
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Posted On 11:26 AM by emily | | 6 comments
PLAMEN Monovski doesn’t immediately come across as an aggressive investor in some of the world’s least explored markets. He sits almost demurely at a table overlooking a sunny, 12th-floor view of the City, sipping a cappuccino and speaking in genteel, accented tones, often punctuated by a mild smile.But don’t be fooled. Monovski has been working as chief investment officer (CIO) at Renaissance Asset Managers – the wealth management arm of the Moscow-based Renaissance Group – only since February and has already overseen a bold raft of fund launches. October’s lineup includes two African equity funds and at least two more to come in Eastern European stocks and Russian debt.
“I was saying in 2004 that emerging markets will be a better place to invest – that they will be less risky,” he says. “I saw that in emerging markets, people wanted to live better and were prepared to do anything to get there,” he says, a note of intensity entering his voice. “Here, there is a sense of entitlement, that simply because you’re born here, you’re better – you’re more educated, you’re better dressed, you deserve a living.
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"I WANTED it to be like that Quentin Tarantino movie: every person should come away with a different picture. I wanted to almost do it with no judgment.”
Andrew Ross Sorkin is in London for the Samuel L Johnson literary awards after Too Big To Fail, his best-selling account of the financial crisis, was short-listed for the prize. But before heading off to a string of other engagements, he finds time for a leisurely iced tea with City A.M., to talk all things Wall Street.
His desire to write the book “without judgment” is hardly surprising coming from the star finance reporter of the New York Times, a paper that regards itself as a keeper of historical records.
But Sorkin has a further reason to write this particular story “without judgment”: his aim was to complicate the conventional narrative about “greedy bankers” bringing down the economy. “Part of the goal of the project was to put the reader in the room with them. When you get inside the room, your field of vision changes,” he says. His tactic is to take readers so close to the main characters of his story – characters that include former US Treasury secretary Hank Paulson and former Lehman Brothers CEO Dick Fuld – that we can see the dandruff on their collars.
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“What about $1 trillion?” Kashkari said.
“We'll get killed,” Paulson said grimly.
“No way,” Fromer said, incredulous at the sum. “Not going to happen. Impossbile.”
“Okay,” Kashkari said. “How about $700 billion?”
“I don't know,” Fromer said. “That's better than $1 trillion.”
The numbers were at best, guestimates, and all three men knew it. The relevant figure would ultimately be the one that represented the most they could possibly ask from Congress without raising too many questions. Whatever the sum turned out to be, they knew they could count on Kashkari to perform some sort of mathematical voodoo to justify it. “There's about $11 trillion of residential mortgages, there's about $3 trilion of commerical mortgages, that leads to $14 trillion, roughly five per cent of that is $700 bilion.” As he plucked numbers from thin air even Kashkari laughed at the absurdity of it all.
