Apparently they really are called this within the employ of pharma companies.

Good news: GW Pharmaceuticals are hiring.

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Macro vs micro is often a conundrum.

Consider this report from Deutsche issued yesterday. Page 20 begins "How to position for a China rebound". Basically it is a call to long copper and maybe punt on domestic thermal coal investment.

Elsewhere an examination of Chinese companies being fed (largely) by this export demand is less encouraging. Vernimmen did a nice round-up in November of 2,457 Shanghai quoted companies (91.7% of the market's capitalisation). Snap-shot by sector:

These 2,457 have annual turnover equivalent to the 25 largest European companies but of course have grown much faster - even over the last two years when they 'slowed' to 7% to 9% per annum instead of the habitual 20%.

However, margins have contracted sharply in the last decade, investment is down, working capital growth outstrips turnover growth, debt levels are up and 67% of firms do not earn their cost of capital. Overall, on most headline accounting ratios these firms do worse than tired old Europe. Except when it comes to growth.

Course, Shanghai has been hammered and price earnings valuations are relatively low (~11). That headline number is usually what makes the financial press in tandem with a 'growth' reference. But eleven times earnings for a market struggling to cover its cost of capital (plus the rest) is not eleven times earnings elsewhere.

On past performance look for a melt-up nonetheless.

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Greek Credit Default Swaps restarted trade in May since when the country's risk profile has trended down versus competitors such as Argentina, Cyprus and Venezuela! But still some ground to make up to get down to...Iraq.

Visually this looks thus:
Argentina got left out on this one: bps range spoilt the Y axis scaling for the 9 trailing in the wake.

Full report here.

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Vernimmen produce sharp financial snippets in their newsletters. Regularly, however, they publish something that produces more questions than answers.

Take this chart/text of the financing choices made by firms with turnover greater than EUR 500m in various countries:

Messieurs, just what, in this financially globalized world, are the "spécificités nationales" behind these contrasting capital structures?

A piece of research from 2005 which looked at this from the US vs Euro Area (EA) perspective suggested it was nearly all about agency costs. Which might be also a comment by region about the reputations of independent 3rd party assessors like S&P, Moodys etc.

Nonetheless, financing has become a shade more complicated since 2005; and the differences between EA companies in that graph should also reflect (for example) relative risk/access to debt markets, perception of bond market vs bank stability and the demand for easy rollover. All in the context of investors searching for yield as central banks continue to provide generous liquidity to banking systems.

To some degree they do (Spain vs the rest) but others are less convincing (Italy vs UK, France vs Germany). The UK is especially interesting and some insight into the choice (and not obligation) of financing comes from this Reuters piece last May.

But banks, especially many Euro banks, now face rising funding costs of their own - unlike last year. Can hardly wait for next year's snapshot.

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"Cyborg Finance" paper

Sunday, May 05, 2013 | 0 comments »

Little pre-abstract primer for this paper:

Detective Del Spooner: Human beings have dreams. Even dogs have dreams, but not you, you are just a machine. An imitation of life. Can a robot write a symphony? Can a robot turn a canvas into a beautiful masterpiece?
Sonny: Can you?


A sea change is happening in finance. Machines appear to be on the rise and humans on the decline. Human endeavors have become unmanned endeavors. Human thought and human deliberation have been replaced by computerized analysis and mathematical models. Technological advances have made finance faster, larger, more global, more interconnected, and less human. Modern finance is becoming an industry in which the main players are no longer entirely human. Instead, the key players are now cyborgs: part machine, part human. Modern finance is transforming into what this Article calls cyborg finance.

Fortunately this did not adopt the premise Asimov's "I, Robot". Technology is (so far at least) man's proxy but not exactly harnessed for the goal of social harmony.

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Fascinating paper from Robert Treue III’s Barnegat Fund documenting what has been called in the popular press the largest arbitrage ever recorded. In the financial upheaval around the opening of this trade in late 2008 the fund was down 37%. But he had the room to absorb the vagaries of timing and come good.

A pic of the arb is below and some interesting background on Mr. Treue, in his own words, is here.

Most interesting, though, is that Barnegat do exactly what Long Term Capital Management did. Only with less leverage/more collateral.

(HT: ArbMaker)

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Original here.

Adulterated below.

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