Brian Bollen's Blog

Cultivating One's Own Garden

It's been suggested to me that I put a link to photos of my tomatoes and other vegetables on this site, so here one is, at least for those of you can access Facebook:

http://www.facebook.com/photo.php?fbid=299269166767828&set=a.299268873434524.88025.100000542404850&type=1

Brian

China And Algorithmic Trading: Celent

Boston-based research specialist Celent estimates that algorithmic trading will account for about 0.6% of securities trading in China in 2011, and this figure is expected to reach 2.5% in 2013. The use of algorithmic trading is still minimal in the A-share market; the situation is slightly more optimistic in the B-share market. On the other hand, algorithmic trading is actively used in the stock index futures market, according to a new report, Algorithmic Trading in China: Advanced Execution Trends, Traders, and Technology. Key findings of the report include:

The results of using algorithmic trading are more prominent when it is applied in futures trading. Its strengths are not as easily displayed in the equities market. As a result, the development pace and scale of algorithmic trading in the futures market, especially in equities index futures, will far exceed that of the equities market. A relatively mature program is used by securities firms and other mainstream institutions in China in the trading of ETF, futures, and warrants.

ICMA Offers SLB Course

The International Capital Market Association (ICMA) is holding a Securities lending and borrowing course in London on November 14-15.

It says the Securities Lending and Borrowing course introduces the main types of securities financing, reviews the mechanics of securities lending and looks at how different players are motivated in the market.

Equally relevant to both the buy-side and sell-side of the business, it discusses the choices of a route to market and the issues surrounding collateral management. The main operational aspects of securities lending are covered in this two day course, as well as alternatives to this method of funding.

US Growth Recovers

Now available is the latest AllianceBernstein economic weekly report:

US Perspective by Joseph G Carson, US economist and director, global economic research: US Growth Recovers After Slow First Half.

 

It being Hallowe'en, start the day by Zombie Stomping across the trading floor to Michael Jackson's Thriller...

Newedge – Blain’s Morning Porridge – October 31 2011

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

Despite last week’s 'agreements' Europe's zombie banks, undead economies and terrified electorates still scare the be’Jesus out of me. I reckon the pitchfork and torches moment for the euro is still to come. George Soros apparently agrees – giving this 'agreement' three months max before markets see through it all and the euro gets a stake through its heart.

Predictably the froth is blowing off last week's compromises. Friday's 10-year Italy auction hardly sounds like the war is won (set at 6.06% it was 6.09% by this morning). Portuguese yields are on the march higher! This morning equities are off, Tier 1 is opening ½ point lower. We still have to wait for the detail on form and substance, so I wouldn't be the least bit surprised to see the risk-on relief rally stumble and fall more. On the other hand...Europe's leaders pulled a proverbial rabbit from the hat last week...so everything is fixable? Smoke and mirrors, smoke and mirrors.

What are the prospects for the coming months? The risk rally is unlikely to peter out completely - the EU has liberally peppered the calendar with dates, meetings and events that will keep investors scanning the runes for signs of positive uptick potential and details. But - with year-end approaching fast, and December typically a dead month…you have to be nervous.

It being Hallowe'en, start the day by Zombie Stomping across the trading floor to Michael Jackson's Thriller...

Newedge – Blain’s Morning Porridge – October 31 2011

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

Despite last week’s 'agreements' Europe's zombie banks, undead economies and terrified electorates still scare the be’Jesus out of me. I reckon the pitchfork and torches moment for the euro is still to come. George Soros apparently agrees – giving this 'agreement' three months max before markets see through it all and the euro gets a stake through its heart.

Predictably the froth is blowing off last week's compromises. Friday's 6.10% Italy auction hardly sounds like the war is won. Portuguese yields are on the march higher! This morning equities are off, Tier 1 is opening ½ point lower. We still have to wait for the detail on form and substance, so I wouldn't be the least bit surprised to see the risk-on relief rally stumble and fall more. On the other hand...Europe's leaders pulled a proverbial rabbit from the hat last week...so everything is fixable? Smoke and mirrors, smoke and mirrors.

What are the prospects for the coming months? The risk rally is unlikely to peter out completely - the EU has liberally peppered the calendar with dates, meetings and events that will keep investors scanning the runes for signs of positive uptick potential and details. But - with year-end approaching fast, and December typically a dead month…you have to be nervous.

EU Policy Measures: Mixed Implications

The policy measures that came out of the European Summit on October 27 have mixed credit implications for the various EU member countries and their banks, Moody's Investors Service concludes in a new report (Euro Area Summit - Summary of Key Credit Implications is available to Moody's subscribers on moodys.com).

While Ireland and Portugal will benefit from the increased resources of the European Financial Stability Facility (EFSF), Moody's says that the announcements also highlighted the conditionality of existing support programmes. The effect of capital strengthening and funding guarantees on European banks is also likely to be marginally positive.

Can anyone advise me on how to create a mailing list, easily and quickly, from the contacts in my Mac Mail address book, and use that list to send occasional mass emails to targetted potential readers of my blog?

Berlusconi, Tiberius, Caligula

The similarities between the behaviour of Italian prime minister Silvio Berlusconi and the debauched, corrupt Julian Emperors Tiberius and Caligula. Discuss.

Whatever Will The Chinese Ask For?

Some time in the late 1980s, when I specialised in writing about Latin American debt rescheduling (and inadvertently helped invent the Brady Bond that would rescue the continent) I came across a document prepared by Shearson Lehman, owned by American Express Bank at that time.

In this paper, Shearson Lehman proposed a novel form of solution for the crisis. This would involve offering financial support, on strongly conditional terms. Those terms would have transformed the region into a series of mini-me USAs. So right-wing were the terms and conditions that my editor, Michael Duggan, and I, got slightly carried away in the rewriting of my story.

What had started out life as a sober piece of reportage ended up being arguably the most outrageously worded piece ever to to appear in a Financial Times Group newsletter which ended with my being threatened with a lawsuit by American Express.

The exact details escape me, though I do have an original of the newsletter in my garage. Suffice it to say that the story mentioned American Express Bank and the Ku Klux Klan in the same breath, as we sought to find a way to benchmark the right-wingness of the proposals. This is what prompted the threat of the lawsuit from American Express. Although the KKK were none too happy about the association either.

This story springs to mind this afternoon now that I have had a leisurely trawl this morning's Financial Times (praise be upon it) about the possible role of China in rescuing the euro.

A Communist version of the Shearson Lehman manifesto immediately sprang to mind, and let's face it, with France we're already halfway there. Even with a supposedly reforming right-wing president it seems more like a neo-soviet socialist republic whose alpha males seem to live their sex lives according to a knuckle-dragging neanderthal workshop manual than a bastion of free marketeering and 21st century liberal thinking.

What on earth is China going to ask for in return for its money? Mao Tse-Tung caps and dungaree overalls on the Paris catwalks next spring? If the UK were a member of the euro, we'd be able to do our bit by offering to open a branch of William Hill in every primary school, but for now we're going to have to sit on the sidelines and watch.

May the eurozone live in interesting times...

 

Three Cheers For Ashridge

Ashridge Business School reports that it has gained the highest possible level of approval following an audit by the UK's Quality Assurance Agency for Higher Education (QAA).  One of only five organisations outside the public sector with UK degree-awarding powers, Ashridge says it has been given ‘confidence’ judgements for its academic standards and quality. 

Ashridge reminds readers that it was the first independent business school to be granted degree-awarding powers three years ago and says this ‘confidence’ judgment is the most important step in renewing its degree-awarding powers for another six years.  

Opportunities Exist, But Vigilance Needed

Schroders’ head of multi-asset investments, Johanna Kyrklund, examines the recent volatility in the markets and highlights the asset allocation changes in the Schroder Diversified Growth Fund (watch full video here)

In summary: “The fundamental problem faced today is a chronic lack of growth caused by deleveraging after the financial crisis.  This lack of growth makes us reliant on fiscal stimulus at the same time as it exposes unsustainable government debt dynamics.  The eurozone provides an extreme example of this, where the severity of the problem is compounded by the need to co-ordinate policy among seventeen member states.

Europe FoFs To Grow 7.5% A Year: Cerulli

The European fund-of-funds (FoFs) sector is big and mature, and expected to rise almost 7.5% per year to €673.3bn by 2015, according to another report from Boston, the Cerulli Report European Funds of Funds 2011. Regulatory change and greater outsourcing to discretionary managers will continue to drive growth across all major markets. The UK's Retail Distribution Review is already providing sales momentum in the independent financial advice market, concludes the report.

"Whilst assets are in recovery mode, sales are not," says Yoon Ng, the report's lead analyst. There are marked differences across the European Union. Distribution is to blame for weak sales in France, Germany, and Spain. Where banks are the key distribution channel, their focus on gathering deposits to shore up their own capital, or offering guaranteed funds to ultra conservative investors, is hurting FoF sales.

Risk-Free Notion Debunked

The dramatic rise in geopolitical risk has shaped the investment landscape this year and will continue to do so well into 2012, according to the latest issue of The Cerulli Edge: Global Edition. Until confidence in politicians is restored and markets reach a sustainable low, managers will be judged on their ability to protect clients’ money from market oscillations. Cerulli says it expects that many firms may have to review their strategies.

The notion of a risk-free asset class, nebulous at the best of times, has been debunked, and managers are taking a hard look at investment benchmarks and the models being employed to calculate risk. Some observers believe that asset management models are outdated, and that risk strategies are built on flawed assumptions, because managers typically place more emphasis on the analysis of economic issues while excluding political risk from their calculations. In other words, many managers think they are more diversified from a risk perspective than is actually the case.

Income In Asia: Invesco Perpetual

Invesco Perpetual Asian equities fund manager, Tim Dickson, outlines his approach to investing for income in Asia

Can you outline your investment strategy for the fund?

“The strategy of the fund is to invest in companies with a high quality and surety of earnings that enables them to generate and increase their dividend payments. More often than not, we find these qualities in companies exposed to the growth of domestic demand in Asia – a fundamentally strong trend that gives us great conviction in the long-term outlook for our strategy. Ultimately though, every decision is based on valuation. In adopting a strict approach to fundamental analysis, we hope to identify opportunities that the market has overlooked, while limiting our downside risk through a disciplined approach.”

Is income the sole focus of the fund?

“We take a total return approach, looking for companies that can grow their dividends as well as provide capital growth. We consider the dividend yield of the portfolio more important than that of specific stocks, which allows us to include attractive companies that may not be paying dividends now but have strong growth potential and/or may start to return profits to shareholders in the future. This allows us to offer our clients exposure to growth in Asia whilst aiming to provide an income for our investors.”

Greece Out Of Market For 10 Years

Darren Williams, European Economist, Global Economic Research at AllianceBernstein, on the Eurozone agreement

"The agreement reached by euro area governments last night provides for a 50% discount on the nominal value of Greek government debt held by private investors (with a view to reducing the Greek government debt to 120% of GDP by the end of the decade).

The EU/IMF will contribute an additional €130bn, of which €100bn will be a new loan programme that should be in place by the end of the year. There are no details on any of this but it looks very much like an extension of the July 21 agreement - in other words it is more about taking Greece out of the market for the remainder of the decade than restoring debt sustainability.

Overnight, the IMF also approved the next tranche of funding under the existing Greek loan programme.

Eurozone Crisis Update: Done Deal

By Azad Zangana, European Economist, Schroder Investments

These are very positive steps in the right direction which reinforces our view that European politicians are willing to take unprecedented action to keep the European Monetary Union together.

Overall, there are a lot of details still missing from the plan, though we are encouraged that European politicians are moving in the right direction. The deal should help reduce the volatility in financial markets, though the damage may have already been done to the real economy.

We expect the eurozone economy to slow significantly by the end of the year, though the deal done may have helped avoid a second global credit crunch and a very deep recession.

Few Companies Use 'Big Data' To Guide Strategic Decisions: EIU

Best practices found among manufacturing, technology and financial services firms

Part of what makes big data so compelling to companies large and small is the competitive gap between those that manage data effectively and those that do not. In June 2011 the Economist Intelligence Unit conducted a global survey of 586 senior executives, sponsored by SAS, to assess big data strategies, as well as to explore the organisational characteristics of companies that are adept at extracting value from data.

According to Big data: harnessing a game-changing asset, companies fall into four loosely defined categories of big data management: (The Economist Intelligence Unit assessed these characteristics by cross-referencing the responses of each against the rest of the survey respondents.)  

Data wasters. These companies underperform financially, and their business and IT functions are not aligned. They collect data, but severely underuse them. Found in every industry, these companies are most likely to put a mid-level manager in charge of their data strategy.

Do You Believe In Horror Stories? Well Look Around Because You’re In One…

Newedge – Blain’s Morning NY Bagel – October 26 2011

By Bill Blain, senior director, special situations, Newedge (as seen on TV)

T: +44 207 676 8615; Mobile: +44 777 088 1033; E: [email protected]

 Only a few days till Hallowe'en, and there’s a scary calm across markets. No prizes for guessing European shenanigans will colour the day. Will they? Won’t they? Can they? Despite that European Uncertainty Engine humming at top revs in the background, (picture mad professors, lightning and mwhah hah crazed laughter), we’re actually seeing firmer buying interest across many asset classes as investors seek to position ahead of whatever happens later this evening.

The news flow is fervid with European speculation – but does it matter? Merkel says a lot, including regulate hedge funds, recap banks, no increase in German guarantees for EFSF, backs the stupid Financial Transaction Tax idea, and 'solutions can’t be created overnight' (NSS – but they’ve had two years to solve this already!!).

The IMF agrees with me when it says it doesn’t think a 60% Greek haircut will be enough. I’m thinking 90% would be a decent start – but that would throw all the calculations into the air about the size of bank rescues and increase the chance of a disorderly market rout.

Riverside Exits EM Test

Private equity house Riverside Company reports from Munich that it has exited its investment in EM Test Group (EM Test). It has sold the Swiss manufacturer and supplier of electromagnetic compatibility (EMC) testing equipment to AMETEK, Inc. for SwFr83m after almost four years of growing the company.

During the period of Riverside’s ownership, EM Test achieved double-digit growth. The company says the sale generated a 3,4x gross cash-on-cash return and a 38% gross IRR for Riverside and its investors.

Clients in the automotive, industrial, telecom and other industries use EM Test’s EMC test and measurement instrumentation. It is based in Reinach, Switzerland, and has sales and service centers in Germany, China and the U.S. Its products are available in more than 40 countries around the world.