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My investment theme is seeking deeply under-valued opportunities and shorting financial instruments or stocks that appear deeply over-valued.
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  • CLEARING HOUSE BUBBLE: Who is watching it?
     

    LCH.Clearnet is one of the leading global clearing houses worldwide.

    A brief description from their website explains the role of LCH.Clearnet and the function of a clearing house more specifically:

    ‘LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, credit default swaps and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

    A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in. By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

    Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times.’

    LCH.Clearnet is 83% owned essentially by the investment banks and 17% by the exchanges. The company’s website states that their ‘market leading interest rate swap clearing service, SwapClear, has cleared over 1.5 million OTC IRS trades since launch in 1999. It currently has 49 clearing members and its portfolio contains 850,000 trades with a notional value in excess of $266 trillion.’ The $266 trillion is the net notional and it is important to highlight that this is not the exchanged principals.

    Continue reading 

    Jun 04 6:02 PM | Link | Comment!
  • YESTERDAY’S CHART OF THE DAY: Sino-Forest Corporation – TIMMMMBER!
     
    Jun 04 6:01 PM | Link | Comment!
  • WHAT THEY DON’T TEACH YOU AT BUSINESS SCHOOL: Companies will manipulate to boost sales

    Robinsons are part of the Britvic Group plc and are one of Europe’s largest soft drinks and juice companies. They sell 1.9 bn litres of soft drinks each year. If you look at the below bottle the juice contains ‘no artificial colours or flavours, making it the perfect choice for your family.’ However, as pointed out below the juice contains artificial sweeteners. Robinsons highlight that the juice contains no artificial colours or flavours thereby inferring that it contains no nasties and is a healthy choice for families. 

    The juice contains artificial sweeteners which are unhealthy. So what’s the story with that? Artificial sweeteners are cheap and inexpensive. Aspartame is 200 times sweeter than sugar so less of it is required. Therefore, this is purely capitalising on a cheap substitute for sugar. Robinsons are concerned with making profits not consumer health or welfare. I don’t have a problem with Robinsons seeking to maximise profits, but I have a problem with them pretending to be concerned about consumer welfare. 

    Jun 04 6:01 PM | Link | Comment!
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