Is Lex a lawyer?

Expressing an opinion can be risky, events may prove you wrong.  However. this can be avoided if you include most of the available opinion options in a commentary.

Welcome to the “no comment” commentary or:  “We might not always be right, but we are never wrong”

Here is my commentary on today’s Lex piece on Baidu. I have italicised the tentative interpretation of events, the sum of which is zero.

 “In the wake of the storm over “trading huddles”, there are new mutterings of investment bank tip-offs to preferred research clients. Consider Baidu, the $14bn Chinese search specialist listed on NASDAQ. The stock had an uneventful summer, beginning July at $301 and ending August at $330. At about 10am on Friday September 4, it suddenly surged against a flattish benchmark. By 1pm, the stock was up 5 per cent. Over the next three trading days, it continued to rise. On September 11, Goldman Sachs upgraded earnings estimates, with a higher target price – $475 – than any of the 23 brokers on the street. On Wednesday, Baidu broke through $400.

Other factors than a trading huddle might explain Baidu’s ascent. After the market close on September 3, Dow Jones Indexes announced that, as of September 18, Baidu would be one of three stocks promoted to its Bric 50 Index. On the morning of September 4, Google – Baidu’s big rival – also said its president of Chinese operations was stepping down.

Neither event provides wholly satisfactory explanations. The two other stocks attracting new demand from tracker funds, Brazil’s OGX and India’s Jindal Steel & Power, jumped less on September 4, and have since risen half as much. And while investors may be extrapolating gains for competitors at Google’s expense, China’s other leading US-listed portals, such as Sohu and Sina, have been left in Baidu’s dust.

Stock price moves, alone, are inconclusive. More decisively, Goldman says it had no “huddle” on September 4, when Baidu began to rise. Still, as the least blemished institution throughout the crisis, it remains an obvious target for grievances over some of the shady practices that fomented it. The vampire squid will be harpooned for a good while yet.”

 Bun rating – 98% dough, 1% meat, 1% grease.

The inflated elephant in Lex’s room

I do not believe there is an active conspiracy, but I do think that the collective power of the large and amorphous city establishment (this includes the Financial Times), consciously and unconsciously limits the agenda for discussion, to one which is survival friendly for the tribe.

The FT depends upon financial advertising and as a consequence, must align itself with the culture and interests of its City-centric readers otherwise they would stop buying it. You are no more likely to find a serious analysis of the disaster caused by the shadow banking system, together with an argument for its dissolution in the FT, than an article in the Meat Trades Journal promoting vegetarianism.

This year Britain’s central bank has set UK’s lowest central bank interest rate for 315 years. As a consequence, since March, asset prices have commenced a new spectacular inflation.  This phenomenon and the tsunami of central bank created credit accompanying it, has rendered any conventional analysis of variable such as earnings per share and profit ratios (see Lex most days), irrelevant.

That is the news Lex!

No bun rating today, the elephant ate it.

Lex – more bun than burger again this morning

Financial Times  subscribers deserve more analysis and reflection from the paper’s lead commentator than another sterile discussion about the level of the S&P .  Today Lex states that the S&P is too high. “valuations look toppy indeed”.  

The column supports this view with references to the current S&P constituents average percentage profit levels, which at about 35% are high compared with the 29% historic average since 1947.

But it is glaringly obvious that as all the major stock markets have moved up and down in unison, an analysis of the ‘value’ level of a particular market by reference to its domestic history is inadequate

Whatever is driving the S&P is the same as that driving the SMI, FTSE, DAX etc – see the chart below.


The markets cannot be explained in terms value variables because the world markets are driven by something else.

What drives all markets together? Try, credit, price of credit, availability of credit, liquidity.

 Capital asset market prices are driven by liquidity, its pointless in pretending any longer that their prices are determined by value.

I award Lex, 70% bun rating for this piece, and 30% meat.

Lex – What Happened?

The Financial Times Lex column was once thought provoking, informative, and occasionally witty.  Now it is lazy warmed-over,  regurgitant, boring, with a narcissistic emphasis on style wrapped around flabby content –  or am I just having a bad day?

The writers increasingly seem focused upon delivering punning displays of familiarity with popular culture, in vacuous and woolly pieces that even a teenage scribbler would be ashamed of.

Recently an anaemic story about Gazprom began with a sentence containing the phrase “playing chicken with Kiev”  (geddit!),  and another deeply un-insightful piece about WPP (the advertising company) was headlined “’Ad enough” (hysterical or what!)).

In the same WPP story, Lex includes  a quote from a fictional character (Don Draper of the Mad Men TV series). “asked how he could sleep at night after spending his days on Madison Avenue dreaming up ways to sell housewives soap flakes and cigarettes, Don Draper replied “On a bed made of money”   If only adand’s mattresses were as comfy today”,  Lex goes on to conclude, though it escapes me as to why. 

Where’s the meat? We should be told.  

The Financial Times is a serious newspaper, wasn’t it?

90% bun!