So, writing up a little stock market piece. I noted that the US, OTC, price of a share was wildly out of line with hte London, AIM, price of that same stock.


Then on closer examination that OTC price was the grey market, which isn’t a market at all, it’s simply a record of the last recorded trade price, which might have been weeks, or months, ago. So, no arbitrage.

$100 bills on the floor do exist but not for long.

Which leads to a larger musing. Of course there is arbitrage between, say, ADRs and London stocks. That’s why the prices do move in very near lockstep. The people tasked with creating the ADR itself are asked to move either way, creating or unpicking them, buying or selling at either end, in order to make those prices move in very near lockstep. This happens in large amounts and at very fine margins.

So, what about less liquid stocks? AIM that’s on the Pink Sheets say? It’s possible to imagine – imagine – that the margins are wider here. That’s rather what less liquidity means.

It’s also true that the world is reducing trading margins. Using Transferwise the commission to move $10,000 to £ might be 0.1% with no spread. Robin Hood (and Schwab etc) now have commission free trading.

Which leads to, well, what actually is the price mismatch between such more thinly traded stocks? That will depend upon whether there’s anyone arbitraging institutionally of course. It will also depend upon the details of the nuts and bolts of buying on one exchange and selling upon another. The nitty gritty of proving ownership, of whether it’s actually an ADR and thus some formal change needs to be made to turn it into a London stock, or is it actually the same thing etc.

At which point, well, does anyone know. The real details of these markets?

Err, yes, suppose so

Scandal-hit private hospital firm NMC Health is planning to quit the London Stock Exchange following a two-month share suspension amid chaos over its finances.

Why pay the listing fees if you’re only going to come back to declare bankruptcy. And I don’t particularly see any other result here.

Not sure about this you know

Investing in steady dividend-paying companies has not been a brilliant strategy over the last 30 years. The so-called Dividend Aristocrats, a group of companies within the S&P 500 that have increased dividends without fail for at least 25 years, have underperformed the overall S&P 500 in that period, according to Bloomberg data.

Could be true for price only, doubt it is for total return. But does anyone actually know?

All gone

Several British banks, including Barclays and Standard Chartered, are owed hundreds of millions of pounds combined by NMC Health, which was placed into administration yesterday.

Travelex (err, Finabler?) soon to follow if it hasn’t already I assume.

Shows the value of short selling, doesn’t it?

Well, no, not really

The global bond markets, which handle hundreds of billions of trades every day,

Hundreds of billions in nominal value, yes, but not hundreds of billions of trades. Not even HFT is causing that….HFT not being as large a part of bond markets as it is in equities anyway.

But then The Guardian really falls off the edge:

At the outset of the Covid-19 outbreak, bond markets froze as investors panic bought highly rated government bonds and the number of sellers shrank.

The US Federal Reserve, the Bank of England, the Bank of Japan and the European Central bank, which oversee the largest debt markets, stepped in to expand the number of bonds on offer and promised to meet demand while the crisis continued.

Demand has been supported by the Bank of England’s pledge to “create” £200bn of electronic funds to purchase more bonds as part of its quantitative easing programme, adding to the £435bn of assets on its balance sheet.

Increasing the supply of bonds by offering more for sale is entirely sensible here. But it’s hardly “supporting” demand, is it? It’s meeting it.

This is weird

Two foreign exchange firms have been accused of turning the screw on struggling retailers by abruptly changing the terms of currency cover after dramatic fluctuations in sterling.

The Original Factory Shop, a discount chain with 168 stores and 2,450 employees, is complaining to the Financial Conduct Authority after Ebury Partners and Global Reach Group altered the terms of their currency hedging contracts.

The retailer, which sells toys, small electrical appliances and garden equipment, imports a significant amount of stock and had two forward currency contracts worth about $16.5 million with the two forex firms.

Such contracts are supposed to give businesses protection from currency movements, which can erode profit margins. The retailer said that its contracts, which were taken when sterling was worth $1.30, have been changed leaving it exposed to further sterling falls.

It is understood that in the middle of March, as sterling fell to $1.16, Global Reach demanded additional payments and threatened to cancel all forward contracts. Ebury sent a “blanket email” to terminate its currency contract.

How have those contracts changed? Assuming that the FX contracts were to protect them against a fall in sterling – and they’d not have been doing otherwise, would they? – then they’d be wildly in the money and therefore no further margin would be necessary.

And it boggles the mind to think that an FX firm is going to try to renege.

The only other thing I can think of is that the price to roll over into a future time period that protection has risen. Which seems fairly logical, as the position is now well in the money. Also, a pretty weird thing to complain about. Even, if they’re trying to protect at the current level the price will still have risen because volatility has.

That is, it’s very difficult to understand what is being complained about. Reneging seems so unlikely……

It’s an odd day when Soapy Joe is correct

Government minister Jacob Rees-Mogg’s investment firm has been criticised for exploiting the coronavirus crisis after telling clients it provided a chance to make “super normal returns”.

Somerset Capital Management (SCM), which manages investments in emerging markets, told clients that the dive in stock market valuations around the world since the pandemic took hold had made “excellent entry points for investors”.

Cue outrage, blah, blah.

Keir Starmer, the new leader of the Labour party, said: “Nobody should be seeking to take advantage of this crisis. We should all be asking ourselves what we can do for our country and each other.”

The shadow chancellor, John McDonnell, said: “This attitude is about as sick as it comes. Profit seeking from people’s suffering is nearly as low as you can get. When we come through this we need a windfall tax on the profiteers.”

Investors buying cheap stocks is a bad idea apparently. And what has the world come to?

However, Jolyon Maugham, the campaigning lawyer who backed legal action against Brexit, described the criticism as “a bit silly”.

“No fan of Rees-Mogg, and of course super-profits must be properly taxed, but this is a bit silly. SCM wants to invest in bombed out share prices. This is actually a good thing as higher share prices will make it easier for those businesses to attract fresh capital and survive,” Maugham said on Twitter.

When Soapy Joe’s the rational one in the room you know society has a significant problem.

What an odd idea

As small businesses complain that banks have been useless so far in the crisis, is the City missing its chance to atone?
Reluctance to comply with emergency loan package compounds unfavourable image

The oddity being this thought that the retail banks – which is who deals with small business – are part of The City. The City being the wholesale markets. Where the retail banks do gain their own financing, sure, but they really are retail, not wholesale, and thus part of the financial sector which is not The City.

Higher inflation, yes

But as Oliver Kamm refuses to recognise it’s possible to have too much of a good thing:

Higher inflation, of say 5 to 10 per cent, will also make it easier to deal with the (necessary) widening of the budget deficit. Gradually, nominal interest rates will rise.

10%? Man’s mad

Erm, ‘ang on

The Mail. It’s showing Shell’s dividend yield at 7.67%.

Which doesn’t quite sound right to be honest. More like 15% or so I think?

I think I can see what it is too. Look at the stock exchange page. ~Yield as at 31 Dec 2018 was 6.2% or so. Add in the wandering dollar, or maybe update to 31 Dec 2019. OK, 7.67%.

But the share price has laved since then. Therefore the yield has doubled. Their calculation of the yield, that is, is not at market price. It’s at market price on 31 Dec,


Anyone with Bloomberg?

Or the like. Would be interested to see the full text of this note referred to here:

The U.S. economy could shrink 4% this quarter and 14% next quarter, and for the year is likely to shrink 1.5%, a JP Morgan economist said on Wednesday, in one of the most dire forecasts yet issued for the potential hit from the coronavirus epidemic.

U.S. chief economist Michael Feroli al

There’s a hell of a difference between a 14% for a quarter decline and a 14% for a year. So, I’d like to see what he’s saying in detail.

Shell at 15% yield

My computer tells me that RDS.A is yielding 15% or so in euros. Alright, 14.17%. So:

The middle of a market correction produces bargains, of course it does. The middle of an oil price war might not indicate that oil majors are such.

But the yield on Shell PLC hit 9% overnight which is, in this low yield world, a very tempting purchase.

The question is, will it maintain the dividend? There’s a good argument that it will, yes.

That recommendation was perhaps a little premature. Ahem.

And so, the collective wisdom here is? Shell will cut the dividend or Shell is the bargain of the century?

Almost Spud-like

Looking at one of the share dealing/advice sites.

They say – correctly – that now might/could/should be a time to look at solid dividend stocks at decent prices and thus higher yields.

OK, still the problem of falling knife catching but still.

Then they recommend a stock on a 2.6% yield. A below FTSE100 yield is a yield stock? Well, hmm.

Oh, and it makes its money by organising trade exhibitions.


£3 is a fortune these days

According to the Daily Mail at least:

The 35 square mile island of Anguilla is making huge profits by selling its unique .ai domain name to tech companies thanks to be short for artificial intelligence. Last year, it made around £3 – we take a look at some of the other unusual places cashing in on the unusual trend.


The Bank of England has urged City firms to accelerate their efforts to abandon the scandal-ridden Libor financial benchmark and threatened to use its powers against them in an attempt to hasten the overhaul.

Companies have been given until the end of next year to stop using the rate and the Bank and the Financial Conduct Authority said yesterday that “the time to act is now”.

What in buggery’s it got to do with the FCA?

Sure, this other rate might be better, look at this one we’ve prepared for you over here. But legal insistence that it must not be used?

Sod off Matey, sod off.

That BoE audio feed

Well, now I’m not so sure. Because the reporting of how much money was being made etc:

On the foreign exchange blog, Forex Flow, a glowing endorsement of a trading news service claimed it had “direct access” to the bank’s press conferences that ran “five to eight seconds faster than any news service or video feed, which in this industry and trading, is a lifetime”.

The foreign exchange trader added that the founder Harry Daniels “and his team have not only made me (and others in our room) plenty of pips [percentage points] by being the fastest to a headline, they’ve saved me plenty of pips too in helping me being able to react to something that’s negative for a position I may have been in. That’s cost me a fair few lunches with Harry but that has been a grateful price to pay.”

That’s an advertisement for the system. Not an analysis of it.

Seriously, it’s like evaluating washing powders by believing the TV ads.

Another excellent hack

Hedge fund traders have been eavesdropping on the Bank of England’s press conferences before they have been officially broadcast, it has been reported.

One of the Bank’s suppliers has been leaking an audio feed of press conferences to high-speed traders, giving them the opportunity to act on Mark Carney’s comments before the rest of the world, The Times said.

Quite how high speed it was I’m not sure. Taking the audio feed directly might shave a second or two? Summat? Off the time it takes to get to the TV station, then be broadcast out, received? For I assume the press conferences are live and that live really is live. But then even live isn’t instant, is it?

Now, if someone wanted to be truly useful they’d hack into the bit where they draft the press releases…..