Shane's Feed
Sep 2, 2014
via Counterparties

What’s in a word?

It’s time to talk about financial jargon. The pseudonymous blogger Lady FOHF was not happy about the BBC Newsnight piece on the subject last week (content is here, but geo-restricted to the UK, and I can’t find it anywhere else, so I’ll take Lady’s word for it). She writes that like other specialized professions (law, medicine, etc.), “financial services has evolved an internal language. The Newsnight item saw fit to present this as a deliberate effort by the industry to obfuscate its activity and make it ‘impenetrable’ to the lay person.”

The Newsnight piece was related to the upcoming release of John Lanchester’s new book, How to Speak Money, on the same subject (excerpted recently in the New Yorker). The book is, by at least one account, quite good. John Gapper, writes that “its brief explanation of the bond repo market is the only intelligible account I have read.” The book is, however, intentionally pretty basic. Lanchester tells Gapper, “I think FT readers should explicitly be forbidden to read this book because they know it already. One of my ambitions is that, after you’ve read it, you can read the FT. I’m the training wheels.”

Aug 29, 2014
via Counterparties

The cost of not laboring for a day

Not signed up for the Counterparties newsletter yet? Click here.

It’s Labor Day weekend in the US. We assume you have already left the office and are on your way to wherever it is that you have chosen to soak up the last rays of the summer sun. As such, we decided to look into what the holiday weekend will cost you. This is what FRED tells us (for comparison, the latest Consumer Price Index shows a 2% increase compared to last year):

Gas prices have been falling — although they haven’t fallen by as much as they did at this time of year last year.

Aug 29, 2014
via Equals

How letting women fail can help them succeed

In life, and especially at work, women often are afraid to break the rules. They are also afraid to fail in ways that can differ from men. Often, this holds them back in their careers. It isn’t an irrational position. Instead, it’s more likely a reaction to social pressures that tell them they will be more harshly judged than their male peers on their perceived missteps.

Over at the Harvard Business Review blog this week, Tara Sophia Mohr writes that she is skeptical of the “confidence gap” as a reason that women aren’t getting as far up on the career ladder as their male peers. She did a survey of professionals and asked them: if they looked at a job, but decided not to apply, why not? It usually wasn’t because they didn’t think they could do the job well, she says.

Aug 27, 2014
via Counterparties

Tax King

Burger King is moving to Canada. The American fast food chain is buying Tim Horton’s in an $11 billion cash-and-stock deal and will incorporate over the border. It’s an obvious tax inversion move. Or is it? According to Burger King’s CEO Daniel Schwartz, “We don’t expect there to be meaningful tax savings or a meaningful change in our tax rate.”

Or not. Matt Zeitlin reports that while that’s technically true today, “the company could reap significant tax savings if it continues to grow overseas.” The consensus is that this is definitely a tax inversion deal. Matt Levine says it’s an “immaculate inversion,” and writes, “the result is that Burger King will do an inversion where a majority of its U.S. shareholders won’t owe taxes.”

Aug 26, 2014
via Counterparties

More sensible homes

U.S. housing prices fell 0.2% in June from May, the latest data from the Case Shiller index shows. Compared to June last year, prices were up 8.1%, but the pace of the increase is still slowing down. May’s numbers showed a year-over-year change of positive 9.4%.

Cullen Roche noted that the yearly growth in housing prices was nearly 15% earlier in 2014. Calculated Risk’s Bill McBride says he’s “been expecting a slowdown in year-over-year prices as ‘For Sale’ inventory increases, and the slowdown is here!” June’s yearly increase was the smallest since December 2012 and June was the third-straight month of inflation-adjusted declines in housing prices.

Aug 26, 2014
via Data Dive

The expense of sprawl

It’s expensive to live in a big city. But what if it’s more expensive to live in a small city? The Citizen’s Budget Commission, a non-profit financial watchdog organization in New York, took a look at housing costs in US metro areas recently, then added in transportation costs. By these two metrics, New York City (and most dense metro areas with good public transportation) is one of the cheaper urban options.

This is what housing and transportation costs look like for a typical household in various urban areas around the country (New York is highlighted because that’s  the CBC’s focus)*:

Aug 25, 2014
via Counterparties

Austerity bites (again)

Europe is in trouble. “The combination of zombie banks, a rapidly aging population and, most importantly, too-tight money have pushed it into a ‘lowflationary’ trap that makes it hard to grow, and is even harder to escape from,” wrote Matt O’Brien, analyzing some of the most recent eurozone economic data earlier this month. The situation in Europe, he says, is worse than during the Great Depression. At Bruegel, Jérémie Cohen-Settonsays that “Europe appears stuck in a never-ending slump.”

This was the backdrop for Mario Draghi’s Jackson Hole speech on Friday on the state of unemployment in Europe. The ECB president urged a move away from austerity. “This could be done by a greater use of aggregate fiscal policy (having a common eurozone budget), and by looking at opportunities to substitute spending for tax cuts…” says Joe Weisenthal.

Aug 22, 2014
via Data Dive

Bank of America’s big fine

Photo

You’d be forgiven for thinking that Bank of America settles crisis-era mortgage cases with the U.S. government once a week or so. But the one this week, at $16.65 billion, is the big one. That is, it’s the biggest settlement to date, eclipsing not only previous settlements by the bank (which now come to a total of about $65 billion), but also all of the similar settlements reached by other banks. JP Morgan paid $13 billion and Citigroup $7 billion recently for similar reasons. The bank will pay “$9.65 billion in cash to resolve more than a dozen federal and state investigations, and provide $7 billion in help to struggling homeowners and communities,” according to Reuters.

Here’s our updated chart of the biggest bank settlements in history:

 

No individuals were charged, but Bank of America has admitted to some of its terrible pre- and post-crisis behavior. There are, as usual, some embarrassing emails involved. Here are some details from the Reuters story:

Aug 21, 2014
via Counterparties

A Dollar here, a Dollar there

Things are a little crazy in the dollar store M&A world. Back in June, Dollar General (from here, General) thought about trying to buy its rival, Family Dollar (from here, Family). For various reasons, this didn’t happen. Instead, Dollar General’s other rival, Dollar Tree (from here, Tree), submitted a bid to buy Family for $8.5 billion several days after the meetings with General. Family accepted this, even though General came back with a $9.7 billion cash offer.

“Aside from offering all cash and a bigger, 29 percent premium to Family’s undisturbed share price, General may be a better fit with Family as both companies offer goods at various prices whereas Tree sticks with items that actually sell for $1 or less,” writes Kevin Allison. And yet.

Aug 20, 2014
via Data Dive

Years of living dangerously

Yesterday, the Islamic State released footage of the beheading of American journalist James Foley, who was captured in Syria two years ago. The group also says it may execute another American journalist depending on the next moves of President Obama.

Reuters reports that the gruesome decapitation video seemed to suggest that the Islamic State was opening a new anti-U.S. front that could result in attacks on U.S. interests or even American soil. “The stronger the war against the States gets, the better this will help hesitant brothers to join us,” said one Islamic militant.