Weekend 17/18 July (and week in review)

Revolut

Revolut is the highest value private company in the UK at £33B. It shows all the signs of being prepared for an IPO, through one of the many routes (SPAC, probably). The mainstream press is carrying lots of stories about how innovative it is, and rather less about how it has never managed to make a profit, nor how it spends a fortune on referral fees to boost its user numbers, nor how it doesn’t even have a banking licence in the UK, or how if it would have to be much better capitalized, nor how it’s trading on 75 times revenues.

But my best guess is that the IPO will be hailed as a huge success, especially by the City firms that bring it to market.

Cameron

David Cameron has been revealed to have been paid insane amounts of money for a very part time job as “advisor” to Greensill. The work seemed to consist of bombarding his former colleagues with pleas to give loans to the “Gupta Family Group” which could be used to let Greensill off the hook. The full extent of the lobbying scandal is yet to emerge, but this is sleaze on an industrial scale, certainly in comparison to the so-called sleaze under John Major. That episode gave the country ten years of Blairite government. It may yet happen that Cameron’s actions delivers several Labour governments.

Freedom Day

Supposedly, most Covid-19 restrictions are to be lifted on 19th July. There are plausible arguments on both sides. Because whatever is decided, we all have to abide by the same rules, it’s not really feasible to let everyone decide for himself.

Football

I don’t think that politicians should make a big fuss about being interested in football. I’m pretty sure most of them have been to the opera more often than they’ve gone to a football match. I know that some have a deep and abiding love for the game, but as far as most of the cabinet are concerned, I’m fairly sceptical. At least Euro 2020 is over for another three years, so we’ll see less of this faux enthusiasm.

Most-shorted index

This has spent the last quarter going skywards. It has started coming down to earth, violently, recently. Whether this has any implications for other classes of assets is anyone’s guess, but surely it indicates a declining appetite for riskier assets. The index is called Refinitiv United States Most Shorted and has the snappy ticker $TRXUSPMSHRT. I’d share a chart, but trading view doesn’t seem to cover it.

Financial Repression

Alex Manzara talks about interest rates and inflation rates. He points out that they can become uncorrelated if a government is determined enough. Normally, interest rates rise in tandem with inflation rates. Savers want a real return, not a nominal return. As inflation erodes their real return on a fixed rate investment, they demand a higher rate, so the rates move together. But if a government or central bank regulates saving institutions and savers so they are obliged to keep their money in fixed income, long-dated securities, that’s what they’ll do. To an extend this has happened already, but Alex suspects it’s going to happen more, so that selling govt. bonds on the expectation inflation taking off may be an error.

Will this happen outside of the USA? I think it might. Especially in the UK, which is historically more prone to inflation than Germany, which sets the tone for the rest of the EU.

—