The FT on George Saravelos on NIRP

"Second, the effect on FX once the zero bound is crossed will likely be non-linear. On the one hand, it will be the first time a major central bank “pays” investors to short the currency. Swiss money market rates briefly turned negative in the crisis but the SNB never charged banks for deposits. Denmark also has negative rates but this is to defend a fixed exchange rate. If the euro becomes the first major funder with NIRP (negative rate policy) rather than ZIRP status, portfolio shifts are likely to be larger than usual.

"Third, negative rates will open up market pricing for QE. The ECB can’t take rates too negative, because at some point the opportunity cost of depositing at the ECB will be high enough to encourage physical cash hoarding and financial disintermediation. Once rates go negative, the next step is for the market to start pricing quantitative easing, and rightly so in our opinion – real rates in Europe remain higher than in the US.

James Meet on the Right To Buy

To understand how it came to this, you have to go back to 1979, when Margaret Thatcher began forcing local authorities to sell council houses to any sitting tenant able and eager to buy, at discounts of up to 50 per cent. It was one of those rare policies that still seems to contain in its very name the entire explanation of what it means: ‘Right to Buy’. Cherished by Tories and New Labour alike as an electoral masterstroke, it offered a life-changing fortune to a relatively small group of people, a group that, not by coincidence, contained a large number of swing voters.

Right to Buy differed from the period’s other privatisations in many ways. It was tightly linked to the buyer’s personal use of the asset being privatised. If the Royal Mail had been sold on the same principle buyers would have got a discount on the share price based on the number of letters they’d posted over their lifetime. According to Hugo Young, Thatcher had to be talked into Right to Buy by a desperate Edward Heath, then her leader, who’d been persuaded by his friend Pierre Trudeau after his electoral defeat in February 1974 that he needed a fistful of populist policies. No wonder Thatcher baulked. Right to Buy violated basic Thatcherite values: that self-reliance was good, state handouts bad. Right to Buy was a massive handout to people who weren’t supposed to need handouts. In fact, that was why they got the handout – because they were the kind of people who didn’t need handouts.​1

It was Britain’s biggest privatisation by far, worth some £40 billion in its first 25 years. But the money earned from selling Britain’s vast national investment in housing – an investment made at the expense of other pressing needs by a poor country recovering from war – was sucked out of housing for ever. Councils weren’t allowed to spend the money they earned to replace the homes they sold, and central government funding for housing was slashed. Of all the spending cuts made by the Thatcher government in its first, notoriously axe-swinging term, three-quarters came from the housing budget.

On private equity

Most big companies naturally belong in liquid public markets. This is because investors value shares they can sell easily more highly than shares they cannot freely trade. It should not be easy for private equity firms to find big, undervalued targets. If investors think listed shares are cheap, they can buy them without paying a private equity firm to do the job for them. Alternatively, undervalued companies can be taken over by other listed companies able to extract synergies from merging their operations. Private equity firms have no synergies to offer. Small companies may not be valued correctly because there is not enough public information about their prospects. The same could be true of emerging markets. The problem here is that in markets with weak regulation and corporate governance, private equity firms may not enjoy full information either. They tend to go for bigger, not smaller, companies

The FT on why Buffett was successful

One of the reasons why the bets have worked, and why Berkshire has since stopped making them, is that it was able to agree very large derivative contracts where it received all the premium up-front, and then did not have to post collateral. Any payment only comes due when the contracts are unwound or expire.

Simply stated, Berkshire appears to have enjoyed tremendous, and perhaps unique, advantages when it came to selling the derivatives from which the float (and thus the edge’s foundation) comes. Without those advantages in place, the whole thing may not have been possible to begin with. And the true key is that those advantages may be reserved for Buffett and, maybe, just a handful of other people. Enjoying those advantages , in other words, can lead to vast competitive benefits.

Those three key factors that may not have been available to all market players are:

(1) very soft collateral requirements,

(2) utter disregard for quarterly earnings volatility, and

(3) the ability to find buyers of sizable and often heterodox contracts.

Other players may have faced much more stringent collateral requirements. Other players may care much more about cont inuous earnings turbulence. Other players may not be able to sell such contracts. Buffett is very clear about it: If he had to face “normal” collateral rules, he would not have entered into the trades.

Kingsley Amis

Elizabeth Jane Howard: Bunny, do you have to have a drink?

Kingsley Amis: Look, I'm Kingsley Amis, you see, and I can drink whenever I want."

Flaubert on art

The more words there are on a gallery wall next to a picture, the worse the picture.

Robert Buckland says equities are the new bonds

Buckland has a suspicion that QE is doing the exact opposite of what polcymakers intended. It’s destroying jobs, rather than creating them. Theory: QE is forcing bond investors out of fixed income into equities, where they are demanding income rather than capital growth. This, in turn, is pressing corporates into boosting dividends and share buybacks. Example: Pfizer closed its Viagra lab in the UK, sacked more than 2000 white-coat workers, announced a buyback and watched its share price spike 7 per cent.