Apr 30 FT US recovery & Biden, CN E-Commerce clampdown, cybercrime, China in space with Auditors

30 Apr

MARKETs @ 2 pm Hong Kong time
ASX opened lower and drift lower through the day, currently -63pts (-0.9%) @ 7,020 the day low.
PPI Q1 +0.4% QoQ vs +0.5% Q4 (F/cast was +0.7%)
PPI Q1 +0.2% YoY vs -0.1% Q4 (F/cast was +0.4%)
Private Sector Credit Mar +1% YoY vs +1.6% Feb (F/cast was +1.8%)
Private Sector Credit Mar +0.4% MoM vs +0.2% Feb (F/cast was +0.4%)
JAPAN I said Japan was closed apologies my mistake it will be closed Mon - Wed (Consitution Memorial Day, Greenery Day and Children’s Day) and re-open Thursday
Nikkei opened lower on mixed data CPI missed but Industrial Production beat, and then Manufacturing PMI came out better saw a small rebound but then trended lower; currently -282pts (-1%) @ 28,770
Topix opened flat and traded sideways for the first two hours but dipped into lunch. PM the downward trend continued; currently -9pts (-0.5%) @ 1,900
Unemployment Rate Mar 2.6% vs +2.9% Feb (F/cast was +2.9%)
Tokyo Core CPI Apr -0.2% vs -0.1% Mar (F/cast was zero %)
Tokyo CPI Apr -0.6% vs -0.2% Mar (F/cast was -0.1%)
Jobs/Application Ratio Mar 1.1 vs 1.09 Feb (F/cast was 1.05)
Industrial Production Prelim Mar +2.2% MoM vs -1.3% Feb (F/cast was -1.5%)
Industrial Production Prelim Mar +4% YoY vs -2% Feb (F/cast was -1%)
Foreign Stock Investment ¥492.2B vs ¥286.3B prior
Foreign Bond Investment ¥132.8B vs ¥906.5B prior
Manufacturing PMI Apr 53.6 vs 52.7 Mar (F/cast was 53.3)
Consumer Confidence Apr 34.7 vs 36.1 Mar (F/cast was 35.5)
Housing Starts Mar +1.5% YoY vs -3.7% Feb (F/cast was -7%)
Construction Orders Mar 12.5% vs +2.5% Feb (F/cast was +3.7%)
Kospi A choppy start after mixed data dipped to 3,160 in the opening minutes then back to trading around flat before a sell off to 3,145 level. Bounced to 3,165 but then sold down to test 3,145, currently seeing a small bounce -19pts (-0.6%) @ 3,155
Kosdaq Similar pattern currently -8pts (-0.8%) @ 983
Data Pre market
Construction Output Mar -5.7% YoY vs -8.7% Feb (F/cast was -3.5%)
Industrial Production Mar +4.7% YoY vs +0.9% Feb (F/cast was +2.5%)
Industrial Production Mar -0.8% MoM vs +4.3% Feb (F/cast was +0.9%)
Manufacturing Production Mar vs +1% Feb (F/cast was +3.5%)
Retail Sales Mar +2.3% MoM vs -0.8% Feb (F/cast was +1.1%)
Retail Sales Mar +10.9% YoY vs +8.4% Feb (F/cast was +10%)
Opened flat initially rose to 17,676 then down to 17,590 before working higher to 17,710 and then sold down over the next 2 hours to 17,550 before a small bounce and traded sideways around flat to close -1pts (unch) @ 17,567
Data due after market GDP Growth Rate for Q1Adv
CSI300 opened lower on weak PMI data and drifted lower in the first hour to 5,133 level before a rally on the Caixin PMI data, failed to regain yesterday’s close and eaedlower into lunch. PM saw an initial sell off to 5,095 level which was tested for about 20 minutes before a bounce. Currently -46pts (-0.9%) @ 5,119
Markets closed Monday and Tuesday for Labour Day holidays
Manufacturing PMI Apr 51.1 vs 51.9 (F/cast was 52.1)
Non Manufacturing PMI Apr 54.9 vs 56.3 (F/Cast was 56.5)
Caixin Manufacturing PMI Apr 51.9 vs 50.6 Mar (F/cast was 50.9)
Manufacturing weak as Output, NewOrders and Exports were at slower rates.  Employment fell but input costs and output charges grew and sentiment weakened.
Non Manufacturing New Orders and Exports fell Employment shrank at a faster rate. Input costs rose for the twelfth month and selling charges increased less.
Caixin Output, New orders and Exports rose along with employment. Suppliers’ delivery times fell deeper into negative territory, amid logistical delays. Prices data showed that higher raw material costs led to a steeper increase in input prices, which were generally passed on to clients in the form of higher charges. Sentiment remained upbeat.
Pre market opened @ 29,143 -160 vs +174pts ADR’s
Market sold down to 28,890 level and then traded sideways into lunch. PM eased lower to 28,800 level and trading sideways currently -477pts (-1.6%) @ 28,823
Chinese Financials weak after the bank results along with E-Commence (Tencent due to meet the regulator) but most stocks weak. Shippers Pharma and Petrochina (post Q1 swing into profit) firm.
Expect a lower open following Asia although good French GDP growth and UK house prices should limit the downside. Also Barclays announced Q1 beat forecasts but largely due to provision write backs.
EUROZONE Flash Core Inflation Rate, GDP Growth Rate, Inflation Rate. Unemployment Rate
GDP Growth Rate Prelim Q1 +0.4% QoQ vs -1.4% Q4 (F/cast was -0.3%) Household Consumption Mar -1.1% MoM vs +0.3% Feb revised (F/cast was +0.3%)
Due Inflation Rate, PPI
Nationwide Housing Prices Apr +7.1% YoY vs +5.7% Mar (F/cast was +4.9%)
Nationwide Housing Prices Apr +2.1% MoM vs -0.3% Mar (F/cast was +0.7%)
US Futures 
Opened in Asian time lower Dow -20pts, S&P -0.1% and NDX slight -VE despite good result from Amazon
Personal Income and Spending, Employment Cost data (Index, Benefits and Wages) PCE Price Index, Core PCE Price Index, Chicago PMI, Michigan Data Final (Consumer Expectations, Current Conditions, 5 year Inflation Expectations, Consumer Sentiment) Baker Hughes Rig Count.
Earnings: ExxonMobil, Chevron, Colgate-Palmolive, AstraZeneca, Clorox, Barclays, AbbVie, BNP Paribas, Weyerhaeuser, Illinois Tool Works, CBOE Global Markets, Lazard, Newell Brands, Aon, LyondellBasell, Pitney Bowes, Phillips 66, Charter Communications

US economy powers back close to pre-pandemic output levels
• GDP expands 6.4% • Stimulus and jab rollout fuel rebound • Biden pushes new $2.3tn bill
Looks at yesterday’s data and Biden’s speech. Interestingly the consumer spending seems to have already started which draws into question whether it will continue through the year.
Notes what I thought was a key line in Biden’s speech '“It’s time for corporate America and the wealthiest 1 per cent of Americans to pay their fair share. Just pay their fair share,” he said. “Look, I’m not out to punish anyone, but I will not add to the tax burden of the middle class of this country.”
Appealing to the ordinary middle class, people to whom he is demonstrating that he is on their side. They will benefit and not be burdened; that is a powerful lobby.If the legislation is passed quickly that will provide a further significant boost to the US economy. For investors it means that America remains a market of choice.
See also Stress on ‘we’ rather than ‘I’ signals Biden focus on middle classA good read he concludes 'Biden’s speech displayed US politics at a surreal juncture. As a veteran centrist, Biden is surprising the country and the world with the multitrillion dollar scale of his ambitions. But he lays his plans out in the folksy tones of a grandparental homily. On the other side of the aisle is a Republican party scanning everything he does for signs of senility and cultural radicalism. He betrays no traces of the former and is offering little on the latter. Contrary to recent viral rumours, Americans will still be able to eat hamburgers on July 4. Biden will doubtless be munching his in full view.'

Tencent and ByteDance among techs in the crosshairs of Chinese regulators
Chinese officials have called in 13 tech companies to “rectify prominent problems” on their platforms, in a sign that the regulatory pressure on the fintech sector has extended beyond Jack Ma’s Ant Group. The pressure remains on the E-commerce companies to change quickly and adopt the new rules bring laid down.
Key is the increased capital required 'The new rules mean that the platforms will have to increase their capital to cover 30 per cent of the loans they offer jointly with banks.’
Also Beijing/PBoC is pushing the sharing of data and I think Tencent in particular will come under pressure in the near future.
For investors it does mean to an extent the returns are going to be smaller but the sector still has growth potential. Tencent’s model of taking stakes in users of its platform is likely to take on more significance going forward as the previously lucrative financial services arena becomes both more restricted and less profitable.

Page 2
Navalny’s network forced underground
Offices across Russia supporting Putin critic closed amid crackdown. Having been labeled ‘extremists’ by prosecutors.
Russia news site feels impact of Kremlin curbs
Independent outlet Meduza is designated a foreign agent as pressure on journalists grows
France vows to reform way of life to protect environmentCountries that signed the 2015 Paris climate accord must do more than cut carbon dioxide emissions and develop new technologies to combat global warming. They must also accept the need to change their way of life, France’s environment minister has said.
German court orders climate law changes in victory for green activists
Germany’s top court has demanded changes to the country’s climate law, saying it places too much of a burden on future generations to reduce carbon emissions, in a key victory for young climate campaigners.
Page 3
France to punish generals over anti-immigrant call to arms
Far-right leader Le Pen backs signatories of declaration, urging ‘patriots to rise up’
EU pledges to be tough on crisis funding
Brussels has insisted it is putting in place tough new processes to ensure the EU’s unprecedented recovery fund is not frittered away, amid mounting concerns about the potential for fraud and waste in the €750bn programme.
Page 4
Moderna lifts supply target to 3bn shots
US company chief makes global pledge and voices fears over variant in India
Moderna says it will increase its global supply of Covid-19 vaccines to up to 3bn next year as the company expands its manufacturing capacity to tackle new and existing strains of the virus.

Call to treat ransomware as national security threat
Big US tech companies and officials are urging governments to designate ransomware as a national security threat in a push to combat a hacking epidemic that has cost businesses tens of millions of dollars.'It called on governments to create international coalitions to tackle the problem and to “exert pressure on nations that are complicit or refuse to take action”, for example, through sanctions or by withholding aid or visas.’'Last week, the US justice department set up its own initiative for tackling ransomware.’
For investors this is a significant threat because of the cost and damage to a company’s business and the fact that to date so few cases have ever come to court. Russia, N Korea and China seem to be where most of these cases originate and so more accountability is required.

Fears grow for Thai hunger strike protesters
Two of the leaders of the Thai democracy protests that raised explosive criticisms of the ruling monarchy last year are on a hunger strike and in worsening health, according to their lawyers and relatives.

High note China launches 10-year space station
China has launched the first part of a space station that will remain in orbit for at least 10 years, as Beijing forges ahead in its quest to become a leader in exploring the cosmos.An interesting read and notes that this could become the only permanent station in orbit, after the decommissioning of the ISS, which is currently planned for 2024. It notes that NASA was barred from working with China in 2011 over national security and technology theft concerns; seems little has changed in 10 years. But it does give China the opportunity to dominate in the short term as it co-operates with Russia with whom it has agreed to build a Moon station.
It will be interesting to see how China deals with the costs involved especially with it’s domestic finances under pressure. Know how from Russia will be useful but Russia was heavily reliant on NASA’s ability to pay for seats into space ands struggled to find enough domestic financing. Furthermore the early benefits of discovering new tech have largely been exploited by NASA, finding new money spinners is likely to be more difficult and probably less useful or applicable.

New Zealand rugby deal moves nearer the line
Stakeholders in the body that runs New Zealand’s legendary All Blacks have voted to sell a 12.5 per cent stake in its commercial rights to US private equity firm Silver Lake despite opposition from the rugby players’ association.'The deal values the commercial interests of New Zealand Rugby at more than NZ$3bn and enables it to funnel NZ$39m to stakeholders, including the provincial unions that voted for the deal. The body said the deal would transform the game and provide investment for grassroots rugby, technology and other initiatives to grow the sport.’
An interesting read more because it doesn’t say how Silver Lake intends to influence the sport.

Quantum computing just 5 years away, says Goldman
• Technology could price derivatives
• Cost advantage for financial markets
Key is the the proponents have switched 'their attention to trying to get practical results using the imperfect quantum computers that are expected to be in use in the next few years, rather than wait for the much more powerful systems expected to one day bring a revolution in computing.’
So initially they will look at pricing complex derivatives; currently computer intensive and costly for banks; the 'Monte Carlo simulations’ 'which involve making a lot of projections about future random market movements to calculate the probability of a particular outcome.’
'The research pointed to near-term breakthroughs that will make it possible to quote prices over the phone to customers looking to trade complex derivatives, rather than wait the hours it can sometimes take to run calculations using today’s computers, said Paul Bur-chard, head of research in Goldman’s R&D. “There’s a very large computing bill we pay each year to price those derivatives and run risk on them.”’
But there are still issues 'However, they use qubits that only maintain their quantum state for brief periods, making the systems rife with errors. Research into the techniques needed to overcome this problem is still in its early stages, meaning the full benefits of quantum machines could be many years away.
The bank’s latest research, with QC Ware, looked into how to run a less exhaustive simulation that could be completed in the brief period of time available before errors creep in. The work was presented at the Q2B 2020 conference and is undergoing peer review ahead of publication.
Rather than a 1,000-fold improvement expected of a fully error-corrected quantum computer, running such a calculation using today’s imperfect quantum hardware could yield a 10-fold gain within five years, according to the researchers — still enough to justify putting the computers to use on practical problems.’

Interesting the focus on computers which, at the end of the day, are just going to give you effectively a very good guess. Last year showed how algo and computer driven models failed to be able to deal with the turmoil of events linked to covid. Yet here again we have a belief that technology will solve the problem. It will give no doubt quicker and better results but it cannot guarantee results. Monte Carlo is after all a home to chance.
With my new ERIC hat on; I would say that a company called Quant Insight has a very good programme for looking at what really drive stocks. It creates trading signals by looking at how about 30 different macro drivers impact on either an Asset class, a sector or individual stock or EFT. If you want to know more just reply to this email.

Star signs Space funding rockets as Musk success spurs investors to get on board
Commercial space ventures are drawing record levels of funding as investors rush to tap into the market unleashed by Elon Musk’s SpaceX, whose reusable rockets have slashed the costs of reaching beyond Earth’s atmosphere.

Credit Suisse board looks at removing risk panel overseer
The board of Credit Suisse was last night considering removing the head of its risk committee ahead of a potential revolt at the Swiss bank’s annual meeting today, according to people familiar with the situation.An interesting read; notes that some feel Gottschling is being made a scapegoat and that in venting their anger shareholders are focusing on the wrong person. But having removed Lara Warner, chief risk and compliance officer, Brian Chin, head of its investment bank, and several mid-level risk managers and traders it does suggest that the board member responsible should also go as obviously the approach to risk was approved by Gottschling and if it was not then he should be removed for not changing it.

GB News bets on a Fox Nation model in search for audience'GB News, in one important respect, will never be a British Fox News. When it debuts this summer, the channel will have plenty of liberal-baiting straight talk, but none of the cable TV subscription fees that make Fox News immensely profitable for Rupert Murdoch.  The comparison makes plain the most precarious part of the GB News experiment: its business plan. What really distinguishes this new channel, led by the veteran broadcaster Andrew Neil, is not just its programming but how it hopes to pay its way.’

Ares raises €11bn for private debt vehicle
US group targets midsized businesses with Europe’s biggest fund of its typeThe lightly regulated alternative lender and othersstep up their attempt to supplant traditional banks and bond markets after the pandemic.

Meituan earns disfavour after state official’s $6 undercover delivery shift
China’s food delivery apps have come under fire for their treatment of employees after a television exposé featured an undercover government official posing as a rider for Meituan.
An interesting read, as I have been saying for a while these delivery apps struggle to make money and are reliant on cheap labour. It's been written up elsewhere how the time for deliveries is based on routes from the delivery app which are often impossible to achieve and promote breaking traffic rules.
I would guess that the apps don’t take into account actually traffic, time for traffic lights and general hold ups. Whilst heralded as tech companies the tech is really quite minimal.
Now China looks to be homing in on the treatment of delivery riders and there is a good chance that Meituan could see a fine and having to pay riders more.
The article points out 'Chinese platforms claim that they have no formal employment relationship with riders, who sign contracts with intermediary agencies. This leads to little compensation for road accidents and limited legal recourse for riders.’ That could change.
Key is whether these companies can pass that cost on to the users or restaurants or if it reduces its margin’s further.
Comes as President Xi was touring southern Guangxi province this week, 'the president proposed job policies for those who had travelled from poorer regions to work in cities and emphasised “the protection of the legitimate interests of truck drivers, couriers and food delivery riders”.’
Previously the government has been against delivery riders organising themselves into unions;  'On April 2, Chen Guojiang, a rider who alleged that Ele.me mistreated workers, was charged with “spreading quarrels”, an accusation often brought against civil society activists.’
Which in itself is strange but underlines that the Chinese Communist Party isn’t really communist …..in the dictionary sense.

EU industries urge carbon border tax as prices soar
Record levy risks putting the bloc’s production and exports at a competitive disadvantage.This is always going to be a problem until there is an international agreement on the pricing. But it also highlights that green policies are more expensive.An interesting read. Impacts Steel and others from cement to petrochemicals. Another likely source of inflationary pressure.
Vulture’ fund specialist in £5bn tobacco play
Kenneth Dart, the investor known for “vulture” trades in government debt, has built stakes worth nearly £5bn in British American Tobacco and Imperial Brands.In part this could be an example of an investor taking advantage of the ESG’s dislike of some sectors and stocks which was mentioned in the FT article earlier this week (26 April) by Robin Wigglesworth ESG rush opens opportunities for betting against the angels

WPP cancels Sorrell share awards over leaks
WPP has withdrawn share awards due to Sir Martin Sorrell after finding the advertising group’s former chief executive repeatedly leaked sensitive client information to a journalist.No doubt the lawyers will do well.

Sino-US tensions put auditors in a tight spot
Wrangle over access to records leaves Big Four trapped between alienating Beijing and incurring penalties elsewhere.
A very good read. High lights the fact that China does not want to play by the international standard rules. It may be opening up more sectors for international players but it has no intention of opening up Chinese company books to international inspection and one wonders why?
But that leaves big auditors with a problem. Antagonise Beijing and lose mandates; stay in with Beijing and lose US mandates. Comes as Chinese mandates are becoming more financially important in terms of fees.
They also face an increasing chanced of enforcement actions from both the US and China.
Interesting to note that 'In 2012, the watchdog took aim at the firms’ China practices over accounting scandals at nine companies that led to billions of dollars of shareholder losses.
Those lawsuits changed the landscape of the profession. Some second-tier firms pulled out of auditing US-listed Chinese companies after their insurance providers stopped underwriting such work.’
Notes that currently the big four set up their China and other country practices as separate entities although they market themselves as 'global entities with a shared culture and consistent standards,’
That is in part to satisfy China’s particular requirements but it also protect the group from liability for risks happening outside their home country’. Basically US and UK partners don’t want to be on the hook for the liabilities; especially after the run of frauds in China.
Even with that set up judges have challenged the structure:'In the case brought against KPMG over its audits of China Medical Technologies, a Hong Kong judge ruled that all partners of the firm had a “personal obligation to take steps to facilitate compliance” whether they are based in China or not.
A similar ruling was made by a UK court against EY Global over its Dubai audit of gold refinery Kaloti last year.’
It concludes 'Meanwhile, the Big Four have pledged to try to improve global audit quality standards across their networks, after former SEC chair Jay Clayton last year urged them to raise the quality of the audits carried out in China of US-listed companies.
“Based on the current trajectory of relations between the US and China, it seems likely that the impasse will continue and Chinese companies will move their listings elsewhere,” said Leder.
“The Chinese arms of the international audit firms will become less connected to the overall entity as yet one more link will be broken between the US and China.”’
Audit is so important to investment and China will need increasing amounts of foreign capital. Trump started the process of weaponising both the USD and investment choices for US Government funds. The US has the scope to take it much further and that ought to be a warning to China. The audit standards are not US ones but internationally agreed ones. If China wants to play on the international stage it will need to adhere to the rules.

StanChart set to close half its branches and cut office space
Quite dramatic announcement although it had already announced a tie up with IWG for shared office space. Goes on to look at yesterday’s results, helped by writing back provisions as operating income dropped 9% YoY.
Executives confirmed they were looking at buying parts of Citigroup’s Asian consumer operations.
Income at StanChart’s wealth management business increased 21 per cent due to strong sales on foreign exchange and equities products. Trading revenue at the investment bank rose 28 per cent.
It is still a tough operating world out there and keeping up with the new Fintechs will be tough.

Shell and Total earnings leap on return of energy demand
Total and Royal Dutch Shell reported jumps in first-quarter earnings as a recovery in energy consumption and prices gave two of Europe’s biggest oil companies a boost after a brutal pandemic-hit year.Shares opened higher on the results but sold down over the day. Total summed it up saying the outlook was volatile and I suspect not just on oil price.
Unilever plans €3bn share buyback after strong quarter
Shares rallied on the news and the good results.
Notes 'China and India led the growth thanks to recoveries from last year’s lock-downs, though India has subsequently experienced a huge spike in infections.

Global IPO boom sees 2021 emerge as star performer
Dealmaking reaching record levels in first four months of year, beating dotcom era peak
Part of the reason being Spacs which has accounted for around 50%.'Globally, proceeds from IPOs in 2021 have already surpassed the full-year totals for 21 of the past 26 years.’
Which raises the question of why. On one side there has been excess cash available, which is part not doubt came from stimulus. The other is companies that have seen increased demand due to lock downs have needed cash to expand and capitalise on the opportune moment.
The article says “The numbers are encouraging because they’re evidence that people have renewed confidence that public markets are a good way to exit their business,” said Carlton Nelson, co-head of corporate broking at Investec. “It shows that they don’t have to tap into private capital despite it being easier and more efficient than it has been for a long time.”
The US seems to be the preferred country of choice to list in, I would think because of the huge amounts of stimulus.
Whilst the article notes that many believe the pipe line remains good there are questions over Spacs as the SFC said it would take a closer look.

Amsterdam’s Spac hopes take wing with Pegasus float
The special purpose acquisition vehicle created by LVMH chief executive Bernard Arnault and former UniCredit chief Jean Pierre Mustier to invest in European financial companies has listed in one of the largest European Spacs placements on record.

Copper dubbed the new oil as it coasts above $10,000 for first time in a decade
Demand from China and others outstrips supply. With many expecting it to go higher as demand increases. Post pandemic and with the move to sustainable energy.
A Goldman reports dubbed it the new oil. It notes that the supply side has been impacted by covid with mines being disrupted. With regards to new supply it notes 'It took about 10 years to bring a copper mine into production and two to three years to expand an existing mine, according to analysts.’
So with inventories being drawn down the potential for more upside in the near future looks assured.

Euronext to move trading servers from UK to Bergamo after Borsa Italiana deal
Exchange group Euronext has completed its €4.4bn purchase of Borsa Italiana and will concentrate its operations in the EU by moving its computer servers out of the UK.
Also notes 'that banks and high-speed traders to also move their IT equipment to Italy — to be as close to the Euronext servers as possible.’

Wall Street’s new sheriff must level the playing field By Dennis Kelleher president of Better Markets and was a member of the Biden administration’s team guiding its transition into office
Another view on what the new SFC chair Gary Gensler needs to do.Focuses on the need to tackle '“Regulation Best Interest”, a standard introduced in 2019 for brokers. It claims to require them to act in their clients’ interests when recommending a transaction or strategy.’ Which he says is so flawed that it is doing more harm than good. I would tend to agree with him there.
Also suggests 'shareholders, who are supposed to be owners of public corporations, must have their full rights to submit resolutions for voting at company meetings restored.’ Comes after Trump raised the thresholds for “proxy access”,
Third he suggests reversing the deregulation that weakened the SEC’s successful whistleblower programme.
He lists number of other longer standing issues to be completed too.
He concludes 'As he proved at the CFTC, Gensler is experienced in moving multiple issues through the policymaking process simultaneously. He needs to do the same at the SEC.’
Sounds like Mr Gensler has a lot to do, other articles have also mentioned that he will be on the prowl for wrong doing too. The key will be having good staff, properly focused and empower with a desire to do the right thing.
It would be equally good if the business itself reviewed its operations and did the right thing too.
Personally I believe a more open door approach to dealing with the practices would be good too. Allowing people to discuss on a no names no foul basis is to be preferred to whistle blowing. It usually prevents people getting hurt rather than compensating them afterwards.

FT BIG READ. US POLITICS. Just how radical is Biden?
FT series Some supporters already compare him to Franklin D Roosevelt. But the better historical parallel might be Dwight Eisenhower, who sought to modernise the country at the start of the cold war.Worth a read, for some good insights; concludes 'What will Biden’s presidency look like 100 days from now? The answer is likely to be the same twice over; an America closer to herd immunity; an accelerating recovery; a revitalisation of US alliances; and a looming electoral showdown with an ever more Trumpian Republican party. Against that prospect almost anything Biden wants to do looks far-reaching.
“The Republicans are increasingly becoming the party of the old Confederacy — they no longer even pretend to believe in the principles that underpin our democracy,” says Fukuyama. “Biden’s ambitions will largely hinge on whether he can defy history and retain control of Washington next year.”’

EdItorial A new deal for the young: saving the environment
Today’s youth will pay for inaction on climate and ecological damage
Concludes 'Young people deserve a new deal for the environment, delivered at a pace never attempted before. If that seems unimaginable, so does their future without it.’
Gupta and Greensill inquiries are not enough
The FT has reported evidence meriting an SFO investigation
'The British love an inquiry. Consider the number launched into the Gupta-Greensill farrago and the related lobbying fallout that has tainted the heart of the British establishment. So it is all the more puzzling that there is no actual investigation by UK authorities into this very British of scandals.’
Concludes 'If the UK is to tackle the mountain of fraud forecast as a result of the pandemic and government support, the SFO needs to raise its game and the government should give it the legal tools it needs to get past the foothills.'
A good read.

Johnson’s Tories have given up on saving the Union By Philip Stephens

Margin debt levels flash red yet again. By Gillian Tett
Archegos was not the only one with large margin leverage; although I am hearing that leverage has now come down significantly from about 1:5 to at most 1:3.
'Is all this dangerous for markets? The answer depends on what you think will happen to asset prices. If you believe they will keep rising while the cost of borrowing remains so low, the answer is “No”. Indeed, many investors and investment banks appear confident that is the case.’
Plus with the Fed committed to low rates for the foreseeable future again the risk seems controllable.
Evidence by the US T10 yield steadying; although on that is says 'However, there is another reason why bond yields may have remained relatively unmoved. It may be due to an unusual change in the way liquidity flows around the US financial system.Matt King at Citi, for example, recently told clients that one reason why bond yields have stayed low — and equity markets soared — is that the Fed has been quietly releasing funds into the market, via banks, from the so-called US Treasury General Account.’That has swamped fundamentals but will reverse 'later this year as the account balance falls to pre-pandemic levels, causing asset prices to fall.I
f so, that might create more unease about the risk of high levels of margin debt. And that unease would only rise if, say, the Biden administration’s bold tax plans are implemented in a way that crimped corporate earnings and thus undercut equity prices.
After all, the Archegos episode was a repeat lesson in how nobody usually worries about excess leverage while asset prices are rising. It is only when they suddenly tumble, for idiosyncratic or system-wide reasons, that nasty surprises emerge.’
Says 'Savvy financiers are of course keenly aware of this and the smartest prime brokers are undoubtedly already trimming back their margin lending’. As mentioned above they already have .
Concludes 'For most of the rest of us, it is a useful reminder that fundamentals such as profits and low interest rates can explain some of today’s rise in asset prices. But they are only part of the tale. As was true in 2007, just before the financial crisis exploded, liquidity and leverage can matter just as much — even if they are harder to observe and thus often ignored.’
A good read.

Post Office scandal exposes the risk of automated injustice. By John Thornhill
Worth a read Starts 'When the Post Office and the Japanese computer company Fujitsu launched the Horizon project in 1999, they boasted it was “the largest non-military IT system in Europe”. But the rollout of that system across the Post Office network proved disastrous and resulted in one of the most grotesque miscarriages of justice in British history.’
Does not reflect well on either.
Says 'From a technological viewpoint, the Horizon project is a case study in how not to deliver a software service. Fujitsu’s design was largely retrofitted from a previous (flawed) system. Built from the top down, it took little account of user need. The Post Office outsourced its technological expertise to Fujitsu and provided inadequate training to the sub-postmasters who used Horizon. It then failed to enforce a rigorous data auditing regime. One technology consultant familiar with the Horizon system told me: “I am sickened by what went wrong. The Post Office knew very little about their own systems.”’
'Worse was how the Post Office responded to the deluge of users’ complaints. Under intense financial pressure, Post Office managers found it easier to scapegoat sub-postmasters than to fix the bugs in the Horizon system. The most blindingly obvious lesson to draw from the scandal is to confront concerns when they arise, says James Hartley, a lawyer at Freeths, who represented the sub-postmasters. “The Horizon system was a big problem, but it was not the main problem. That was the management’s approach.”’
'From a legal perspective, the affair highlights the dangers of humans blindly accepting the output of automated systems as reliable evidence, the “computer never lies” mentality.’
Concludes 'Concern remains over departments that have handed over whole services to big IT companies and consultancies and measure performance on outcomes rather than on an understanding of how those services are delivered, says Mike Bracken, the former head of the Government Digital Service. “There remains a degree of risk that these things will happen again.”
We owe it to the wrongly convicted sub-postmasters, and all those who may suffer in the future from automated injustice, to minimise those risks.’
Key Tech is fallible and deserves to be questioned along with those responsible for it; what is true for the Post Office is true of every system; algos were thought to be always right until they went wrong. No doubt there will be the same belief in quantum computers when we get them … but it might not be justified.

Covid wards in India are like scenes from Dante’s ‘Inferno’
Zarir Udwadia a consultant physician and researcher in MumbaiFor investors whist noting the sadness of it, it could be that India increases its public healthcare budget and we see an increase in demand for both equipment and supplies.

LEX Samsung/inheritance tax: painted into a cornerHanding over the art helps but increased dividends will help more; agrees with what I have been writing.
LEX  Binance/BaFin: token interestDemocratising value transfer is anything but seamless. Binance boss Changpeng Zhao makes it sound peachy but his foray into trading stock tokens has attracted the attentions of European regulators concerned that it breaches securities rules.  Makes some good points;1.Clashes were a long time coming. Tech moves at warp speed, regulators limp.
2. With no official headquarters and trades in coins and tokens, Binance believes itself outside the remit of securities watchdogs and the concomitant need to issue lengthy new prospectuses.BaFin and the UK’s FCA are now taking more interest
Concludes 'Zhao is doing what any under-fire boss does: painting his company as a social good and adding illustrious names and one-time politicians to its ranks. As crypto exchanges and products grow in popularity, regulators are being forced into swift catch-up. Levels of understanding fall far short. But the battle lines are being drawn.’
LEX Apple: $3tn, here we come
Worth a read as to why the prospects remain good .
Concludes 'Cash is rolling in — an astonishing $22bn of free cash flow in the past quarter, using S&P Global data. Apple has promised to add another $80bn to its US investment commitments over the next five years.It is a shame that this is dwarfed by the additional $90bn share buyback programme. But buybacks should enable Apple to support its share price, currently near record highs.
Given that, a $3tn equity valuation may soon be in reach.'

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