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C | Indonesia penalizes JPMorgan for underweight call officials | By Nilufar Rizki and Eveline Danubrata JAKARTA Reuters Indonesia will drop JPMorgan Chase Co from providing some services to the government after the bank s research arm said investors should reduce their exposure to the country senior finance ministry officials said on Tuesday After we did a comprehensive review we said no need to use JPMorgan s services as a primary bond dealer and a perception bank Suahasil Nazara the head of the ministry s fiscal policy office told Reuters A 2006 government decree says a perception bank is one appointed by the finance minister to receive transfers of state revenue not related to imports including tax onshore excise and non tax revenue Nazara said the penalty on JPMorgan N JPM was already in effect In an equities research note dated Nov 13 JPMorgan downgraded its investment recommendation on Indonesia to underweight from overweight citing higher risk premiums for emerging markets after Donald Trump won the U S presidential election Bond markets are starting to price in faster growth and higher deficit the bank wrote adding that the spike in volatility may stop or reverse flows into fixed income assets in emerging markets However the bank said in the note that the downgrade on Indonesia and Brazil was a tactical response to Trump s victory Both economies are improving with lower policy rates likely to support valuations for 2017 it added A JPMorgan spokeswoman said on Tuesday that it continued to operate its business in Indonesia as usual The impact on our clients is minimal and we continue to work with the Ministry of Finance to resolve the matter she said by email The finance ministry s Nazara said the bank s analysis did not make sense because it recommended a neutral position for Brazil which is better than for Indonesia despite what he said was a more stable political situation in the Southeast Asian nation We have asked them to clarify their assessment They ve explained to us but we found their argument not credible It s not that we think we re so great but we look at ourselves and we look at other countries economies Nazara said Our mindset is if you re doing business here in Indonesia the spirit is to maintain stability Don t create unnecessary volatility to create business he added Robert Pakpahan Indonesia s director general for budget financing and risk management told reporters on Tuesday that JPMorgan s research should not have a major impact on Indonesia s future bond issuance but the sanction on JPMorgan would remain in place until we say otherwise Primary dealers of Indonesian government bonds as of Nov 25 included Citibank N C Deutsche Bank AG DE DBKGn Hongkong and Shanghai Banking Corporation Limited L HSBA and local lender PT Bank Central Asia Tbk JK BBCA according to the finance ministry s website Indonesia s 10 year credit default swap a contract used to measure credit risk in fixed income products and the yield on its benchmark 10 year bonds ID10YT RR spiked after the U S election though they have since dipped Trump signaled more protective U S trade policies raising concerns about the impact on developing markets Analysts have said Indonesia s economy should be supported by domestic consumption which makes up more than half of gross domestic product But the relatively high foreign ownership of government bonds and Indonesia s lack of depth of financial markets make it vulnerable to capital reversals they say Indonesia s central bank said shortly after the Federal Reserve raised U S interest rates in December that it was on guard against reversals of capital flows into the country
However Fitch Ratings revised in December Indonesia s credit rating outlook to positive citing a relatively low government debt burden favorable growth outlook and an improving business environment |
C | Britain s EU envoy abruptly resigns just months before formal Brexit talks | By Guy Faulconbridge and Kylie MacLellan LONDON Reuters Britain s ambassador to the European Union who sometimes clashed with London over its approach to Europe abruptly resigned less than three months before Prime Minister Theresa May is due to trigger formal Brexit negotiations Ivan Rogers Britain s envoy to the EU told staff on Tuesday that he would step down from his post early but did not explain his reasons for resigning said the Financial Times which was first to report the resignation Britain said in a statement that Rogers who had been due to leave his post in October 2017 had stepped down to enable a successor to be appointed before May triggers formal Brexit talks by the end of March Rogers will leave within weeks Ivan Rogers has resigned a few months early a British government spokeswoman said We are grateful for his work and commitment over the last three years May now faces formal Brexit talks likely to be among the most complicated negotiations in post World War Two European history without one of Britain s most accomplished EU experts This weakens May s ability to get a good EU deal said Charles Grant Director of the Centre for European Reform think tank Ivan Rogers was one of the very few people at the top of the British government who understand the EU The resignation is the second by a senior British EU official in the wake of the referendum Jonathan Hill quit as Britain s European commissioner in June Rogers was known in London for sometimes blunt assessments of how far Britain could push EU allies often expressed in long emails that jarred with the expectations of some senior advisers around May and before her David Cameron In October Rogers warned British ministers that the consensus was that a trade deal with the EU might not be done until the early to mid 2020s and that national parliaments could ultimately reject it the BBC reported last month BREXIT TALKS Opponents of British membership applauded the loss of Rogers who they said was a Europhile and said Britain needed a new set of officials to negotiate a clear break with the club Britain joined in 1973 If Mrs May were serious about leaving the EU she would have removed him long before Gerard Batten United Kingdom Independence Party s Brexit spokesman said Rogers appointed by Cameron as Britain s permanent representative to the EU in November 2013 formerly worked in Downing Street the British Treasury the European Commission and at Citigroup NYSE C and Barclays LON BARC Capital After Cameron lost the June 23 Brexit vote and resigned Rogers drew criticism from some of Cameron s advisers in London for lacking ambition in the 2015 attempt to redefine Britain s relationship with the bloc Though Cameron eventually struck a deal with the EU in February 2016 campaigners on both sides of the referendum later admitted that it failed to enthuse voters and that it fell short of what Cameron had initially pitched Hilary Benn chairman of parliament s Brexit committee said a change in such a significant position was not a good thing This is a time for continuity and experience because this going to be a very complex a very challenging a very difficult negotiation Benn told BBC radio It s an absolutely vital job both conveying the British government s view to the other 27 members states but also honestly reporting back what he was picking up about the attitude of the other 27 toward the forthcoming negotiations
May has said she will trigger formal Brexit talks by the end of March ushering in two years of divorce talks |
C | U S manufacturing construction sectors shine as year ended | By Lucia Mutikani WASHINGTON Reuters U S factory activity accelerated to a two year high in December amid a surge in new orders and rapidly rising raw material prices indicating that some of the drag on manufacturing from prolonged dollar strength and a slump in oil prices was fading Other data on Tuesday showed U S construction spending hit a 10 1 2 year high in November providing a boost to a fourth quarter economic growth estimate The reports suggested President elect Donald Trump would inherit a strong economy with a labor market that is near full employment from the Obama administration The economy is ending the year on a high note with even the manufacturing sector showing signs of faster growth It appears that President Barack Obama will be leaving his successor with a pretty good economy said Joel Naroff chief economist at Naroff Economic Advisors in Holland Pennsylvania The Institute for Supply Management ISM said its index of national factory activity rose 1 5 percentage points to 54 7 last month the highest level since December 2014 A reading above 50 indicates an expansion in manufacturing which accounts for about 12 percent of the U S economy A gauge of new orders jumped 7 2 percentage points to its highest level since November 2014 Twelve industries including petroleum electrical equipment appliances and components and machinery reported growth in new orders last month Export orders also rose but order backlogs were unchanged A measure of factory employment hit its highest since June 2015 and the production sub index rose 4 3 percentage points Manufacturers reported paying more for raw materials which suggests producer inflation could push higher in coming months The ISM s prices index surged 11 percentage points to its highest level since 2011 It was the 10th straight month of increases in raw materials prices Last month 38 percent of supply executives in the ISM survey reported paying higher prices The sharp rise in the prices index plays into the global reflation theme with investors pointing to rising input prices in China and elsewhere as signaling a potential return to higher inflation rates said Andrew Hollenhorst an economist at Citigroup NYSE C in New York STRONG DOLLAR A THREAT A collapse in oil prices in 2015 and a surge in the dollar has hobbled manufacturing Much of the impact has been through weak business spending on equipment which has contracted for four straight quarters But with oil prices rising and touching 18 month highs on Tuesday manufacturing is perking up Gas and oil well drilling has risen over the last several months Renewed dollar strength following Trump s November election victory could however limit gains in factory activity Trump has pledged tax cuts and massive infrastructure spending an expansionary fiscal policy agenda that could fan inflation and spur a faster pace of interest rate increases by the Federal Reserve The dollar hit a fresh 14 year high against a basket of currencies on Tuesday s data while prices for U S government debt fell U S stocks traded higher In a separate report the Commerce Department said construction spending increased 0 9 percent to 1 18 trillion in November the highest level since April 2006 It was boosted by gains in both private and public sector investment The solid increase in construction spending prompted the Atlanta Fed to raise its fourth quarter GDP estimate by four tenths of a percentage point to a 2 9 percent annual rate The economy grew at a 3 4 percent pace in the third quarter Spending on private construction projects jumped 1 0 percent in November to the highest since July 2006 as single family home building as well as home renovations increased Investment in private nonresidential structures which include factories hospitals and roads rose 0 9 percent after tumbling 1 5 percent the prior month The outlook for nonresidential investment spending lies in the as yet unknown infrastructure plans of the new administration said John Ryding chief economist at RDQ Economics in New York
However in nominal dollar terms nonresidential construction spending is within one percent of the October 2008 high and this may be a further indication of the limited degree of slack in the construction sector that could be deployed on infrastructure projects Public construction spending rose 0 8 percent in November to the highest level since March It was the fourth straight month of increases |
C | Frontier Airlines hires banks to plan IPO New York Times | Reuters Low cost carrier Frontier Airlines is preparing for an initial public offering and has hired banks to plan the debut The New York Times reported citing people familiar with the matter Frontier Airlines has hired Deutsche Bank AG DE DBKGn JPMorgan Chase Co N JPM and Evercore to manage the debut the newspaper reported The Denver based airline is aiming to raise about 500 million valuing the company at about 2 billion NYT said citing sources A spokesman for Frontier Airlines which is owned by private equity firm Indigo Partners declined to comment Deutsche Bank JPMorgan Chase and Evercore were not immediately available for comment outside U S business hours Bloomberg had reported last year in March that the company had hired Barclays Plc L BARC Deutsche Bank JPMorgan Chase Citigroup Inc N C to work on its IPO |
C | U S to charge three traders in forex rigging probe source | By Nate Raymond NEW YORK Reuters The U S Justice Department was set to bring charges on Tuesday against three ex traders at JPMorgan Chase Co N JPM Citigroup Inc N C and Barclays Plc L BARC arising from a probe into the manipulation of foreign exchange prices at major banks a person familiar with the matter said Richard Usher formerly of JPMorgan Rohan Ramchandani formerly of Citigroup and Chris Ashton formerly of Barclays are expected to face criminal charges in a case filed in federal court in New York the person said The expected charges were first reported by Bloomberg News Lawyers for Usher Ramchandani and Ashton could not be immediately identified The case comes after JPMorgan Barclays the Royal Bank of Scotland L RBS and a Citigroup unit pleaded guilty in May 2015 to conspiring to manipulate currency prices agreeing at that time to pay more than 2 5 billion in criminal fines Prosecutors have said that from 2007 to 2013 euro dollar traders at the banks belonging to an electronic chat group called The Cartel manipulated benchmark exchange rates in an effort to increase their profits Last week a former trader at Barclays and BNP Paribas SA PA BNPP Jason Katz pleaded guilty to participating in a price fixing conspiracy becoming the first person to admit criminal wrongdoing in the probe He was the third person to date to face U S criminal charges in connection with the foreign exchange probe In July an HSBC Holdings Plc L HSBA executive Mark Johnson was arrested and charged along with a former executive for participating in a fraudulent scheme involving a 3 5 billion currency transaction Johnson has pleaded not guilty |
JPM | UBS Settles Precious Metal Price Rigging Case | UBS NYSE UBS will settle allegations of misconduct at its precious metals trading business alongside a planned agreement between UK and US authorities and seven banks over accusations of foreign exchange market rigging the Financial Times reported
The Swiss lender is one of a group of banks including Barclays NYSE BCS Citigroup Inc NYSE C HSBC NYSE HSBC JPMorgan Chase Co XETRA JPM and Royal Bank of Scotland Group PLC NYSE RBS that are set to announce an agreement of at least 1 5bn on Wednesday to settle forex rigging allegations with the UK s Financial Conduct Authority
Precious metals mostly declined this week under continued pressure from a strong US Dollar
The week s biggest mover on the weekly Global Precious Metals MMI was the price of US palladium bar which saw a 6 5 decline to 747 00 per ounce This comes on the heels of a 3 0 increase the week before Following a 1 8 increase in the week prior the price of Chinese palladium bar fell 2 3 last week to CNY 170 00 27 68 per gram Japanese palladium bar rose 2 0 over the past week to JPY 2 806 25 77 per gram
The price of US platinum bar decreased to 1 190 per ounce a 3 9 decline from the previous week After a 0 8 decline Chinese platinum bar closed out the week at CNY 256 00 41 68 per gram Closing out the third week of rising prices the price of Japanese platinum bar increased by 0 2 landing at JPY 4 417 40 57 per gram
US gold bullion prices were off slightly at 1 160 per ounce down from 1 169 a week ago The price of Chinese gold bullion rose 0 6 to CNY 230 86 37 59 per gram after falling 5 3 during the previous week For the third week in a row the price of Indian gold bullion dropped falling 0 5 to INR 26 200 427 37 per 10 grams Japanese gold bullion saw a 0 5 decline over the past week to JPY 4 205 38 62 per gram
The price of Indian silver fell 4 5 over the past week to INR 36 309 592 27 per kilogram This was the third week in a row of declining prices Japanese silver dropped 3 8 over the past week to JPY 564 00 5 18 per 10 grams At 15 68 per ounce the price of US silver finished the week down 2 5 Closing out the third week of declining prices the price of Chinese silver dropped by 2 1 finishing at CNY 3 445 560 91 per kilogram
Disclosure The Global Precious Metals MMI collects and weights 14 global precious metal price points to provide a unique view into precious metal price trends For more information on the Global Precious Metals MMI how it s calculated or how your company can use the index please drop us a note at info at agmetalminer dot com |
JPM | Gold Manipulation Afoot A Routine Practice | Gold manipulation is happening but who cares Precious metals manipulation is well known and it fits an agenda It is the equivalent of global central banks rigging the equity markets que the 1 100 point melt up in the Nikkei But as long as Wall Street paints a picture of rosy economic health nobody will dare to care Manipulation is prevalent is all markets forex LIBOR etc but precious metals are an area of importance Why Because traders and investors have a psychological relationship with gold and silver as a hedge against disaster When gold and Silver hit four year lows within a sketchy period of quasi monetary policy the agenda is to deem economic growth is on sound footing even as growth forecasts continue to decline Bullion banks run the show JPMorgan Chase Co NYSE JPM has manipulated nearly every market that can be manipulated and a 10 plus billion dollar legal bill to boot The bank has been a puppeteer pulling strings on the silver and gold market in what has been speculated as an attempt to prop the US dollar up In the third quarter of 2013 JP Morgan held over 60 percent of the entire US gold derivative market on their balance sheet In 2014 the bank has been linked to naked shorting shorting a product to which the seller does not own or in a proportionate amount worth billions to quell any sign of a gold rally Barclays Plc Ord OTC BCLYF a member of the doomed London gold fixing was fined 26 million by the Financial Conduct Authority FCA this year as a rouge trader was manipulating gold prices which adversely affected client portfolios What was amazing is that this took place a single day after the bank was fined for their role manipulating the London interbank offer rate LIBOR The Financial Times has previously brought to light the potential manipulation at UBS The bank has not admitted guilt Yet this week the bank will be monetarily settling with numerous regulator agencies over unsavory practices in the forex and precious metals markets which at UBS is closely integrated Andre Flotron former UBS head of their gold desk has been on leave since January Manipulation is big business and a large generator of revenue for these banks More times than not the reward far outpaces any risks Otherwise banks would not be keen to such practices One of these practices is short contract flooding during non peak hours were volatility is virtually non existent On November 4 over 13 000 gold short contracts were unloaded Dr Paul Craig Roberts former advisor to President Ronald Reagan and Asst Secretary of the US Treasury said this practice is almost routine Futures contacts are a cost effective way offer trading massive quantities of gold up to 40 tons at a time according to Roberts These short positions are executed over the electronic futures market in mere minutes Because this usually happens during low liquidity hours in or after the Asian trading session there is nobody to buy up these contracts In response gold prices tank Needless to say nobody particularly cares that paper prices are divergent of psychical sales of bullion The US Mint has had record sales since gold and silver s collapse in 2013 evens selling out of the 2014 American eagle Australia s Perth Mint second largest gold producer outside China had to add additional shifts in order to keep up with demand And the Royal Canadian Mint has put its maple leaf coin on dealer ration due to high demand Even the financial media is misleading the public with their own version of manipulation Former Fed Chair Alan Greenspan has been very vocal in recent months going against his former Fed cronies Greenspan has publicly said quantitative easing from Ben Bernanke to Janet Yellen following through Bernanke s plan has been a wash The economy is moderately OK he said on CNBC In late October Greenspan was a speaker during an event for the Council of Foreign Relations Greenspan said something I m sure was shocking to most Gillian Tett US managing editor of the Financial Times asked the former chair do you think gold is currently a good investment His response Yes remember what we re looking at Gold is a currency It is still by all evidence a premier currency No fiat currency including the dollar can match it What is also alarming is the video and official transcript was edited to leave out some interesting information and it was only added back in after it was brought to public attention Greenspan brought up a fascinating argument If gold is so useless why do central banks hold relatively large gold reserves What went missing GREENSPAN remember we had that first tapering discussion we got a very strong market response And then we reassured everybody to have no remember tapering is still audio gap of an agreement that the central banks have made European central banks I believe about allocating their gold sales which occurred when gold prices were falling down audio gap has been renewed this year with a statement that gold serves a very important place in monetary reserves And the question is why do central banks put money into an asset which has no rate of return but cost of storage and insurance and everything else like that why are they doing that If you look at the data with a very few exceptions all of the developed countries have gold reserves Why TETT I imagine right now it s because of a question mark hanging over the value of fiat currency the credibility going forward GREENSPAN Well that s what I m getting at Every time you get some really serious questions the 50 percent of the gold price determination begins to move TETT Right GREENSPAN And I think it is fascinating and I don t know is Benn Steil in the audience TETT Yes GREENSPAN There he is OK Before you read my book go read Benn s book The reason is you ll find it fascinating on exactly this issue because here you have the ultimate test at the Mount Washington Hotel in 1944 of the real intellectual debate between the those who wanted to an international fiat currency which was embodied in John Maynard Keynes construct of a banker and he was there in 1944 holding forth with all of his prestige but couldn t counter the fact that the United States dollar was convertible into gold and that was the major draw Everyone wanted America s gold And I think that Benn really described that in extraordinarily useful terms as far as I can see Anyway thank you TETT Right Well I m sure with comments like that that will be turning you into a rock star amongst the gold bug community Bernanke s answer to why the Fed holds gold tradition Wait what That s not even a serious answer and his put on the spot fumbling does not help to support it Main street and the financial elite are buying tangible assets with bullion being top of the list Heck 12 5 kilogram gold bar sales are up 250 percent this year As long as the S P 500 hits another daily new high precious metals or the manipulation behind its rut will not be reported upon History repeats itself and nobody including the Fed had any idea 2007 was on the precipitous of utter financial calamity |
JPM | USD JPY EUR USD On Hold Levels Targets | USD JPY is still the most bullish USD pair and doesn t offer any significant resistance up to the 2007 high at 124 16 notes JPMorgan Chase Co NYSE JPM
That said we can only recommend to stick to USD longs as long as the market hasn t displayed two consecutive lower hourly closes with the lagging line below the Ichimoku cloud currently at 114 56 JPM advises
Only such a break would open the door for a deeper setback to 111 93 minor 38 2 if not to 108 35 38 2 on higher scale in case the former fails to provide support JPM adds
In EUR USD JPM holds the same view warning of a near term rebound that still would need be validated vai a break above 1 2516
We definitely see an increased risk of having at least launched a broader 4th wave rebound to 1 2871 But as long as 1 2516 minor 38 2 has not been broken decisively on hourly close i e above 1 2535 the odds remain in favor of a straight extension to 1 2318 1 2260 and possibly 1 2221 Fib projections weekly trend JPM clarifies
Only above 1 2535 and 1 2614 pivot we d see 1 2871 38 2 on higher scale in focus JPM argues
In its technical portfolio JPM holds a long USD JPY position from 113 99 targeting 120 with a stop at 110 65 |
JPM | Capital Markets Derivatives And The Law | Early on in his new book Alan Rechtschaffen makes the standard observation that although the provision creation by a central bank of liquidity in times of crisis can get the system through the darkest days it does raise the issue of moral hazard
He then illustrates that point with a long quotation from Ben Bernanke delivered at a conference sponsored by the FRB of Atlanta in May 2008 just after the shotgun marriage of JPMorgan Chase Co NYSE JPM and Bear Stearns but well ahead of the even more dramatic episodes of that autumn
If Bernanke said market participants come to believe that the Federal Reserve or other central banks will take such measures whenever financial stress develops financial institutions and their creditors have less incentive to pursue suitable strategies for managing liquidity risk and more incentive to take such risks
Actually that and the rest of the Bernanke passage in which Rechtschaffen preserves it strikes me as a much understated way of expressing the hazard at issue Nor am I just saying this because the words came from Bernanke s mouth and we now view his tenure at the Fed with a certain inevitable hindsight
An Autobiographical Reflection
Rechtschaffen himself offers a better definition of moral hazard much later in the book near the end of his chapter 11 Here too he defines it not in his own voice but by a quotation He cites Zachary Gubler an associate professor at the Sandra Day O Connor College of Law at Arizona State University defining moral hazard as the risk observed when insurance coverage causes a party to engage in behavior that actually increases the likelihood of incurring losses Now that sounds like a really ubiquitous phenomenon
To be blunt there have been times in my life when due to my own cash flow difficulties I have driven an automobile on public roads without proper insurance for said vehicle or for my own liability Tsk tsk I know And frankly I do think I have driven more carefully during those periods than during others when I ve been properly and lawfully insured
You might well characterize my own impression of my level of care as subjective But if I am right on this then ordinary and state mandated auto insurance itself imposes a moral hazard in that I am not now exerting that extra level of care That is not by the way by itself an argument against owning auto insurance It isn t even an argument against mandating ownership of auto insurance It is simply an instance of the general fact that trade offs are ubiquitous in human existence
Bernanke s circumscribed definition of moral hard the banking world only definition that Rechtschaffen uses in his first chapter doesn t convey the ubiquity of the phenomenon and rather circumscribes its importance even where it can t be denied
Anyway Rechtschaffen s book gets a high prestige welcome to the marketplace by Jean Claude Trichet the former president of the European Central Bank In a preface Trichet describes this book as a remarkable and extremely useful instrument in the hands of professionals
Much of the book as a whole is an outstanding example of how the central bankers of the world the Bernankes and Trichets view their own recent past and of the lessons they want the rest of us to draw from it
Unobjectionable Stuff
There are other portions of the book that are in fact helpful and that without special pleading set forth the system in place in the U S as a consequence of the Dodd Frank Act and its slowly rolled out implementation
In one chapter Rechtschaffen goes into some detail in a lucid explanation of the end user exception that frees certain swaps from the clearing and exchange requirements of the Dodd Frank Act observing in the process that Congress was worried that American consumers would face higher prices if the cost of hedging for non financial firms increased
Related to this and possessing a similar rationale there is the physical settlement exclusion That is swaps based on wheat or coal and settled by actual delivery of the wheat or coal are generally not used for speculative purposes but as hedges for market risks and the legislators didn t want to punish that either This book s discussion of such points is unobjectionable |
MS | Saba Software to be taken private by Vector Capital | Reuters Enterprise software provider Saba Software Inc whose chief executive and other executives recently settled charges of accounting fraud said private equity firm Vector Capital would take it private for about 268 million in cash Vector offered 9 per share for the Pink Sheets listed company which delisted from the Nasdaq in 2013 The Securities and Exchange Commission said earlier on Tuesday that two former Saba chief financial officers agreed to repay nearly half a million dollars in combined bonuses and stock profits over the fraud which involved falsified time sheets by consultants at an Indian subsidiary Founder and former Chief Executive Babak Bobby Yazdani agreed in September to repay 2 57 million of bonuses incentive pay and profit from stock sales Yazdani who founded Redwood Shores California based Saba in 1997 resigned as CEO in March 2013 Saba shares closed at 8 80 just before the deal was announced Morgan Stanley Co LLC is financial adviser to Saba while Morrison Foerster is legal adviser Law firm Shearman Sterling is advising Vector |
MS | Morgan Stanley breach probe shifts to hacker from fired employee WSJ | Reuters U S authorities are investigating whether a hacker is behind the online publication of a cache of Morgan Stanley NYSE MS s client data and not the financial adviser who was fired in connection with the breach the Wall Street Journal reported citing people familiar with the matter Morgan Stanley last month fired financial adviser Galen Marsh for allegedly stealing account information from about 350 000 of its wealth management clients and posting some of it online Federal law enforcement officials are focusing their probe on the possibility that Marsh s computer was hacked the Journal said It is unclear who might have been responsible for the hack and officials haven t arrested anyone in connection with their ongoing investigation the newspaper said Morgan Stanley said that the leaked information included clients names and account numbers but not passwords or Social Security numbers The company said at that time it was investigating the breach and has referred the matter to regulators and law enforcement authorities who are conducting separate investigations The FBI and FINRA were among the enforcement agencies looking into the matter Representatives of Morgan Stanley FINRA and the FBI were not immediately available for comment outside regular U S business hours
The leadership team of Morgan Stanley s wealth management business has been visiting brokerage offices around the country to reassure advisers and clients in the wake of the data theft |
MS | Fed rate rise timing back in the spotlight | By Ross Finley
LONDON Reuters Greece s struggles with its euro zone creditors have grabbed much of the world s attention but U S Federal Reserve Chair Janet Yellen is likely to reclaim the spotlight as the week progresses with testimony on a long anticipated shift in policy
If the Fed sticks to mid year for its first interest rate rise in a decade it will be perceived as a reflection of the world economy s growing resilience
U S core CPI inflation data due next week will also give some idea of just how much the collapse in oil prices which has tamped down inflation globally will work as a counterweight to the Fed s apparent comfort so far with higher rates in June
But the fretting over Greece which makes up less than half of one percent of world GDP has underscored the impression that for all of the piles of monetary stimulus over the past few years many of the troubles remain the same
The Athens government was scrambling on Monday to present reform measures to secure a financial lifeline from the euro zone
While purchasing managers data for the euro zone in February are pointing in the right direction Europe is still struggling to create meaningful growth that would generate the kind of strong hiring that might in turn push up wage inflation
China is grappling with a property market and debt overhang as it tries to rebalance its slowing economy and a purchasing managers index due on Wednesday is expected to show persistent stagnation in its once booming manufacturing industry
Much of Latin America particularly Brazil has slipped back even further from a past position of strength and has very little to offer a world economy that the World Bank warns is now running on one engine made in America
Minutes to the Fed s latest policy setting meeting suggested to some analysts that policymakers might be backing off a June rate rise But the strongest set of jobs data in many years were published after that late January Fed meeting took place
If unemployment keeps falling the laws of supply and demand have not been repealed we will get inflation out of this said Jim O Sullivan chief U S economist at High Frequency Economics in Valhalla New York
In terms of going to the next step does that mean they re tightening in June Not necessarily he said
O Sullivan expects Yellen to sound optimistic on the full employment part of the Fed s dual mandate when she delivers her twice annual testimony to Congress on monetary policy starting with the Senate Banking Committee on Tuesday
The majority of forecasters still expect June for lift off on U S rates and the latest Reuters poll suggested that about two thirds of them had held to the same conviction over the timing over the course of the past month
What hasn t been working in the Fed s favor is evidence that inflation is picking up Core inflation which strips out food and energy prices is expected to hold steady at 1 6 percent when data are due Thursday according to a Reuters poll
With a few notable exceptions like Brazil inflation has been far too low for comfort and continues to fall triggering surprise central bank monetary easings from Canada to Sweden and Australia to Indonesia over the past several weeks
To many that makes the Fed s continued focus on soon doing the opposite seem out of step But perhaps not for long
The outlook for some large emerging market economies such as Brazil Mexico and Russia has deteriorated but the meaningful tailwinds of lower energy prices and global policy easing are likely to persist wrote Gustavo Reis global economist at BofA ML
Much will depend on whether the euro zone where some signs of economic revival have drawn stock markets to multi year peaks can sail through the latest bout of wrangling over its future without too much damage
The European Central Bank s bond purchase program announced at its January meeting worth 60 billion euros 68 billion a month will begin in March many years behind its peers But it may have arrived at a particularly good time
Any risk of investor flight over the outcome of heated negotiations over Greece s debt burden and the future of the euro now will at least have one of the world s largest central banks acting as a backstop scooping up sovereign debt
And the economic news is not all bad The German Ifo business climate index due at the start of the week is expected to rise for a fourth straight month in February
German gross domestic product GDP is also expected to be confirmed as growing a solid 0 7 percent quarter on quarter in the final months of last year
Europe s biggest economy is clearly entering 2015 with more momentum than we and the consensus had expected wrote analysts at Morgan Stanley NYSE MS who expect first quarter growth of 0 5 per cent
Europe s biggest economy is clearly entering 2015 with more momentum than we and the consensus had expected wrote analysts at Morgan Stanley who expect first quarter growth of 0 5 percent |
JPM | Portugal on cusp of promotion to multi trillion dollar bond leagues | By Dhara Ranasinghe LONDON Reuters Portugal could return within months to major government bond indexes after an absence of more than five years a stunning turnaround that could vastly increase potential investment in a country once ranked as one of the euro zone s weakest links After S P Global on Sept 15 lifted once bailed out Portugal s rating one notch to BBB out of junk and into investment grade territory investors are betting on further ratings upgrades that would allow Portugal to rejoin the big bond indexes This in turn would expose Portugal to a wider pool of investors who only buy the sovereign bonds of countries that have an investment grade rating from the main ratings agencies Most major indexes such as the Markit iBoxx euro benchmark index and the Bloomberg Barclays euro aggregate index which has a market value of over 10 trillion euros 11 8 trillion use the average ratings of Moody s S P and Fitch That means one more upgrade from either Moody s or Fitch would be enough Currently Portugal is included in the iBOXX EUR Sovereigns High Yield index which has a market value of about 155 billion euros An average rating of BBB or higher would push Portugal into the iBOXX EUR Eurozone index which has a market value of around 5 9 trillion euros Should it be upgraded Portugal would have a weighting of around 2 percent the same as Ireland Things get better once you get that stamp of approval with an investment grade rating it does open up a broader market and typically a more liquid market said David Tan head of global rates at JPMorgan NYSE JPM Asset Management Portugal is rated Ba1 by Moody s and BB by Fitch Both have a positive outlook for the rating making an upgrade likely Moody s reviewed Portugal on Sept 1 and has not yet released its sovereign ratings review calendar for 2018 Fitch however is scheduled to review Portugal s ratings on Dec 15 making that the next possible date for an upgrade Deputy finance minister Ricardo Mourinho Felix told Reuters this week that Portugal expects to be upgraded soon by both Moody s and Fitch Rebalancing of bond indexes to reflect ratings changes typically take place at month end meaning the index is adjusted as of the following month One exception is the Citi Euro Broad Investment Grade Bond Index for which S P s upgrade alone is enough for Portugal to re enter when it is rebalanced at the end of this month The index has a market value of around 9 78 trillion euros 11 52 trillion For Portugal to enter Citi s World Government Bond Index WGBI it would need a minimum credit rating of A from S P and A3 from Moody s Portugal was added to the WGBI which has a market value of around 21 38 trillion in July 1998 and removed in February 2012 BACK ON TRACK Portugal first lost an investment grade rating in July 2011 when Moody s downgraded it into junk territory as its debt crisis unfolded Portuguese bond yields which soared to over 17 percent in 2012 have since fallen back sharply helped by European Central Bank buying efforts to bring down the budget deficit and stronger than expected economic growth Regaining an investment grade rating is another step forward Mourinho Felix also told Reuters that investors had said they believed in Portugal s recovery story but that restrictions prevented them from investing in countries that did not have an investment grade rating from all three rating agencies At the same time Portugal offered comparatively low interest rates versus emerging markets We were in no man s land It was the worst place to be because we were not good enough to have access to the investment grade portfolio but we did not have enough risk to pay a return to those who wanted to invest in emerging debt markets he said The fact that we are now investment grade by one of the largest agencies allows a number of investors who do not invest in indices but have their own portfolios to buy Portuguese debt for their developed markets portfolios This did not exist before The gap between Portugal s 10 year bond yield and top rated German peers narrowed 39 basis points after S P s upgrade the second largest one day narrowing of the spread since Portugal exited its bailout in June 2014 Analysts expected that spread and Portuguese yields to fall further converging with Italy s as investors anticipate a move into investment grade bond indexes The notion here is that the regaining of at least one investment grade rating represents something of a Rubicon with this development being viewed as signaling the bailout era is over which in turn stands to herald a re convergence of Portugal with its peripheral peers said Richard McGuire head of rates strategy at Rabobank in London Portugal s 10 year yield stood at 2 43 percent on Thursday It has been one of euro zone s best performing bond markets in terms of returns this year Portugal has been a pretty decent story for much of this year but the move back to investment grade provides some political cover for investors to allocate more to the bond market there said Patrick O Donnell investment manager at Aberdeen Asset Management Additional Reporting by Sergio Goncalves in LISBON Reporting and graphics by Dhara Ranasinghe Editing by Nigel Stephenson and Catherine Evans OLUSECON Reuters US Online Report Economy 20170928T152335 0000 |
JPM | U S economy accelerates in second quarter hurricanes expected to slow growth | By Lucia Mutikani WASHINGTON Reuters The U S economy expanded a bit faster than previously estimated in the second quarter recording its quickest rate of growth in more than two years but the momentum likely slowed in the third quarter due to the impact of Hurricanes Harvey and Irma Gross domestic product increased at a 3 1 percent annual rate in the April June period the Commerce Department said in its third estimate on Thursday The upward revision from the 3 0 percent rate of growth reported last month reflected a rise in inventory investment The destruction caused by Hurricanes Harvey and Irma and the resulting disruption are expected to be a drag on third quarter growth said Jim Baird chief investment officer at Plante Moran Financial Advisors in Kalamazoo Michigan Nonetheless the economy remains on track Economic growth last quarter was the quickest since the first quarter of 2015 and followed a 1 2 percent pace in the January March period Economists estimate that Harvey and Irma which struck Texas and Florida could cut as much as six tenths of a percentage point from GDP growth in the third quarter Harvey was blamed for much of the decline in retail sales industrial production homebuilding and home sales in August Further weakness is anticipated in September because of Irma Rebuilding efforts are however expected to boost GDP growth in the fourth quarter and in early 2018 Signs of increasing inventory investment by businesses could soften the storms punch to the economy In a separate report on Thursday the Commerce Department said wholesale inventories jumped 1 0 percent in August after rising 0 6 percent in July Inventories at retailers shot up 0 7 percent after being unchanged in July The department also said the goods trade deficit fell 1 4 percent to 62 9 billion in August That leaves an upside risk to growth estimates for the July September quarter which are below 2 5 percent The data available so far suggest that the firming in real inventory accumulation between second quarter and third quarter could be significant and could add over a full percentage point to growth in the third quarter said Daniel Silver an economist at JPMorgan NYSE JPM in New York Harvey and Irma continue to impact the labor market and are expected to cut into job growth this month In a third report the Labor Department said initial claims for state unemployment benefits increased 12 000 to a seasonally adjusted 272 000 for the week ended Sept 23 Still the labor market remains strong Claims have now been below the 300 000 threshold which is associated with a robust labor market for 134 straight weeks That is the longest such stretch since 1970 when the labor market was smaller Economists had expected that the second quarter GDP growth rate would be unrevised at 3 0 percent Prices for longer dated U S Treasuries were trading lower and the dollar DXY slipped against a basket of currencies Stocks on Wall Street were mixed ROBUST CONSUMER SPENDING With GDP accelerating in the second quarter the economy grew 2 1 percent in the first half of 2017 Even so economists believe growth this year will fall short of President Donald Trump s ambitious 3 0 percent target Trump on Wednesday proposed the biggest U S tax overhaul in three decades including lowering the corporate income tax rate to 20 percent and implementing a new 25 percent tax rate for pass through businesses such as partnerships to boost the economy But the plan gave few details on how the tax cuts which could cost about 1 5 trillion over a decade would be paid for without increasing the budget deficit That sets up what is likely to be a bruising battle in the U S Congress The plan s price tag would also result in an increase in the national debt which could make it difficult to pass as is Odds are the proposal will be scaled back said Ryan Sweet senior economist at Moody s Analytics in Westchester Pennsylvania Growth in consumer spending which makes up more than two thirds of the U S economy was unrevised at a 3 3 percent rate in the second quarter as an increase in spending on services was offset by a downward revision to durable goods outlays Amid robust consumer spending businesses accumulated a bit more inventory than previously reported to meet the strong demand Inventory investment added just over one tenth of a percentage point to GDP growth in the second quarter It was previously reported to have been neutral Growth in business spending on equipment was unchanged at a rate of 8 8 percent the fastest pace in nearly two years Investment on nonresidential structures was revised to show it increasing at a 7 0 percent pace up from the previously reported 6 2 percent rate There were minor revisions to government spending exports and imports Investment in homebuilding was weaker than previously reported with outlays falling at a 7 3 percent rate rather than at a 6 5 percent pace
Graphic |
JPM | Former SEC chief says regulator not equipped to take on bitcoin | By John McCrank NEW YORK Reuters Arthur Levitt a former chairman of the U S Securities and Exchange Commission said on Thursday he believed the regulator was ill equipped to deal with bitcoin the digital currency that has seen a meteoric price rise prompting concerns of a bubble I think the tendency of the Commission has been to stay away from bitcoin Levitt said at The Economist s Finance Disrupted conference in New York They have too many other issues that they are dealing with now that they don t want to take on something as complex from a regulatory point of view as bitcoin is said the SEC s longest serving chairman who held the post from 1993 to 2001 Digital currencies can be used to move money around the world quickly and with relative anonymity without the need for a central authority such as a bank or government Levitt s comments came a day after Grayscale Investments LLC said Intercontinental Exchange Inc s NYSE Arca exchange withdrew a request with the SEC to list its Bitcoin Investment Trust Grayscale the fund s issuer noted that earlier this year the SEC rejected two similar applications for exchange listings of digital currency products Although digital currency market regulation continues to rapidly evolve at this time Grayscale does not believe there have been enough regulatory developments to prompt the SEC to approve the application Grayscale said in a statement The Bitcoin Investment Trust is currently traded over the counter in less formal more lightly regulated exchanges than those used for typical stock transactions Shares of the trust are trading up 508 percent this year The price of bitcoin itself has more than quadrupled in value since December to more than 4 100 prompting Jamie Dimon the head of JPMorgan Chase Co NYSE JPM to compare it to the famous tulip market bubble in the Netherlands in the early 1600s It could be at 20 000 before this happens but it will eventually blow up he said earlier this month There have also been a number of massive cybersecurity breaches affecting digital currency holders Levitt said the Commission which says its mission is to protect investors maintain fair orderly and efficient markets and facilitate capital formation clearly should be prepared to regulate bitcoin
Another factor is that the SEC does not want to get into a battle with state regulators which have taken the lead on regulating bitcoin said Levitt |
JPM | Stocks U S Futures Subdued Despite Positive September with No Volatility | Investing com Wall Street futures pointed to a subdued open with mixed signs on Friday though U S stocks were on track for monthly gains in what has been the least volatile September ever
The blue chip Dow futures edged down 13 points or 0 06 by 7 04AM ET 11 04GMT the S P 500 futures dropped 1 point or 0 05 while the tech heavy Nasdaq 100 futures advanced 8 points or 0 14
Despite the signal from futures for a tepid open on Friday Wall Street was on track for some solid monthly gains on the last trading day for September
As of Thursday s close the Dow had risen about 2 this month with the S P 500 up 1 6 and the Nasdaq as the laggard with gains of 0 4 for the month
LPL Financial analyst Ryan Detrick commented that the last month has been the least volatile September ever
This expert noted that the average intraday move in the S P 500 has been just 40 basis points and that the global benchmark is on track for 11 months without a 3 move in either direction tying for the record
However Detrick did warn in the interview with CNBC that October is historically the most volatile month of the year with more 1 daily moves than any other and reminded traders that earnings season was just a couple of weeks away
JP Morgan NYSE JPM will officially give off the reporting season when it reports numbers on October 12
For Friday s session investors will focus on personal income and spending data along with the core PCE deflator the Fed s preferred inflation gauge at 8 30AM ET 12 30GMT
In other data investors will digest the Chicago purchasing managers index for September along with the revised reading of the University of Michigan s consumer sentiment index for the same month
Meanwhile the dollar was also seeing volatile moves around the unchanged mark on Friday though it was on track for its biggest weekly rise against major currencies this year while also finishing off its first month of gains since February
While waiting for the data the dollar index which measures the greenback against a basket of six major currencies slipped 0 05 to 92 90 by 7 06AM ET 11 06GMT
Meanwhile crude oil prices registered mixed trade near multi month highs on Friday while the U S benchmark s weekly gains hovered close to 2
Market participants have taken heart in the fact that the market may be able to rebalance amid reports of high compliance in production cuts while hopes are that renewed demand from U S refiners that were resuming operations after shutdowns due to Hurricane Harvey would help support prices
U S crude futures was unchanged at 51 56 by 7 07AM ET 11 07GMT while Brent oil fell 0 23 to 57 03
Still ahead traders will keep an eye on the latest gauge for U S shale production when Baker Hughes releases its most recent weekly rig count data later on Friday |
JPM | Global funds raise equities to near two year highs | By Claire Milhench LONDON Reuters World stocks are set for the longest quarterly run of gains since 1997 and investors enthusiasm for shares appears undimmed with a Reuters poll showing average equity exposure in portfolios at the highest in almost two years The monthly asset allocation survey of 50 fund managers and chief investment officers in Europe the United States Britain and Japan was conducted between Sept 15 27 a month when MSCI s all country world index hit fresh record highs The Bank of England and the U S Federal Reserve also suggested rate rises were on the cards The index has enjoyed 11 straight months of gains its longest winning streak since 2003 4 It is up 15 percent year to date despite the rate rise talk and tensions between the United States and nuclear armed North Korea The poll showed investors raising their overall equity allocation to 47 9 percent a near two year high while cutting bond holdings to 39 8 percent the lowest level since April Since the start of the year investors have added 2 1 percentage points to their overall equity exposure preferring to focus on the recovering world economy Despite some signs of weakness in the global economy in recent weeks it still appears to be growing above market expectations said Peter Lowman chief investment officer at UK based wealth manager Investment Quorum Excluding any unforeseen geopolitical confrontations this should be a good environment for global equities given that we appear to be in a Goldilocks economy A number of investors did express concern about complacency especially as the Fed and the European Central Bank are seeking to wind down their asset buying programs Nadege Dufosse head of asset allocation at Candriam said this tightening bias would test the resilience of equity markets In particular the resilience of European equity markets in the context of a stronger euro will be tested she said EURO STRENGTH Investors remained bullish on European stocks having raised their euro zone equity holdings by almost 4 percentage points since the start of the year The exposure now stands at 20 6 percent of their global equity portfolios the highest in at least five years European stocks STOXX are up almost 7 percent year to date and look set to end the quarter up around 1 8 percent Some 77 percent of poll participants who answered a question on the euro said it was not overvalued at current levels although the currency has firmed around 1 percent over the month against the dollar Jean Medecin a member of the investment committee at Carmignac said receding political risks in Europe had unleashed a surge of optimism and spurred investment Euro strength since the beginning of 2017 is a reflection of the growth shock witnessed by the eurozone he said Some managers suggested the euro had further to go The euro zone has been treated as a basket case by the financial markets for a number of years leaving the euro unloved and under owned but the economy is consistently surprising on the upside said Rob Pemberton investment director at HFM Columbus Poll participants who answered a question on the Bank of England were evenly split on whether it would raise rates before the end of the year even though the bank s governor has said a near term move is likely And many of those who said it would raise rates stressed this was unlikely to be the start of a major tightening cycle but rather a reversal of the rate cut after the Brexit vote Very modest action in 2018 and 2019 remains the order of the day as the Bank balances a sluggish economy some inflation pressures the vagaries of sterling political developments from the Brexit negotiations and actions by other central banks said Andrew Milligan head of global strategy at Aberdeen Standard Investments CRYPTOCURRENCY There was more consensus on whether bitcoin or other cryptocurrencies fitted into a modern investment portfolio with an overwhelming 75 percent saying they did not Virtual currencies have undergone a volatile period with China cracking down on exchanges and digital coin based fundraising while the chief executive of JPMorgan NYSE JPM Jamie Dimon called the cryptocurrency a fraud Bitcoin prices tumbled 12 percent in September though they are up more than 300 percent this year Raphael Gallardo a strategist at Natixis Asset Management called bitcoin a highly speculative asset with an unreliable market infrastructure In an unstable world governments will not tolerate the further development of bitcoin as it is an unbreakable way of laundering money and financing illegal activities he said Instead governments and central banks would develop cryptocurrencies under their own control and oversight he predicted While cryptocurrencies are probably here to stay they are difficult to analyze wildly volatile and some may be prone to fraud added Trevor Greetham head of multi asset at Royal London Asset Management
The speculative surge in bitcoin looks like a side effect of excessive liquidity in markets like dotcoms in the 1990s |
C | HSBC launches special lending facility for start ups in China s Pearl River Delta | HONG KONG Reuters HSBC has launched a 290 million lending facility aimed at technology start ups and other new industries in China s Pearl River Delta region intensifying the battle for a slice of a business that is growing despite a slowing economy Showered with money from private investors over the last few years the promising technology start ups in China the world s second largest economy have shunned traditional lenders seeking to instead raise funds directly from equity investors But global banks no longer want to be left out mainly after the success of the likes of Alibaba NYSE BABA and Tencent that have seen their revenue doubling over the last couple of years shrugging off a broader economic slowdown that has hurt earnings for sectors from manufacturers to miners As a result banks such as HSBC and Citigroup NYSE C as well as a host of Chinese lenders are now courting the emerging Chinese firms by offering loans and other banking services With the launch of its 2 billion yuan 290 million innovation fund for small and medium sized companies in the Guangdong province of the Pearl River Delta region HSBC plans to target this promising segment and boost its client base The target customer will be those that are high end high tech start ups and enterprises those enterprises that are upgrading the use of technology and ability to innovate like for example using robotics to manufacture more efficiently said Montgomery Ho HSBC s chief executive for Guangdong The new loan facility will allow HSBC to offer other banking services such as cash management and hedging of interest rates and foreign exchange to these companies he said adding the selected companies would get preferential interest rates and service fee waivers as part of the new initiative The lending facility also underlines HSBC s commitment to the Pearl River Delta region that is at the heart of the bank s strategy to grow in the country The southern China region which counts Shenzhen and Guanzhou among its biggest cities is home to 11 industrial cities that are set to fuse into one megalopolis It has a GDP that is already bigger than Indonesia s and is transitioning from a traditional manufacturing base to a tech powerhouse HSBC s growth plan in Pearl River Delta envisages adding 4 000 employees in the region over the medium term on top of about 1 200 people it had at the end of 2015 and Ho said those plans were on track We are on track and the morale here in Pearl River Delta is very strong because we have seen some concrete progress in the last 12 months already he said adding its loan book in the Guangdong province rose 14 percent in the first half of this year over a year ago period
1 6 9020 Chinese yuan renminbi |
C | Mexican banks cut credit card exposure on Trump rate risks | By Natalie Schachar MEXICO CITY Reuters Some Mexican banks are lowering credit card spending limits and raising consumer lending standards in the face of an economic slowdown rising interest rates and the U S election victory of Donald Trump After a period of robust overall credit growth Mexican banks are cutting credit card exposure to counter a potential rise in consumer defaults and the risks of an economic shock should Trump restrict U S trade and business with Mexico The moves come on concerns Latin America s second largest economy could see more turbulence in 2017 after its peso currency lost 19 percent this year largely on fears of a Trump administration Lenders would see profits hit if Trump scraps the North American Free Trade Agreement or discourages U S companies from moving to Mexico as he vowed to do on the campaign trail some banks and analysts said That measurement of how much he is going to be able to do is what we have to analyze every day said Miguel Angel Laurencio de la Vega director of investor relations at Grupo Financiero Banorte MX GFNORTEO the country s fourth largest bank by assets referring to Trump Banorte in addition to banks such as BBVA Bancomer MC BBVA and Grupo Financiero Inbursa MX GFINBURO told Reuters they were moving to tamp down exposure to credit cards a profitable but risky area that tracks the broader economy Banorte the largest Mexican owned bank said it could reduce credit card limits for new customers if necessary We are planning on having to take some measures soon Laurencio de la Vega said BBVA Bancomer Mexico s largest bank said last week it had begun lowering card limits in the past four months and had started to more closely monitor certain existing credit card accounts Inbursa controlled by billionaire Carlos Slim told Reuters it has become more selective with borrowers with its card approval rating now hovering around 27 percent an 8 percentage point decline from June CLOSELY MONITORING Top credit card lender Santander MC SAN Mexico MX SANMEXB said it was watching its card portfolio for any behavior out of the ordinary although it did not provide detailed answers about its policies The banks that have the most headwinds are those that concentrate on consumer credit said Enrique Mendoza an analyst at brokerage Actinver Mexico s economy is expected to slow to 2 1 percent growth in 2016 from 2 5 percent last year and then ease to 1 8 percent expansion in 2017 according to the median result of the central bank s latest monthly survey of analysts In the past year Mexico s central bank has raised its key interest rate by two percentage points to 5 25 percent to ward off pressure on the peso and alleviate inflation It is expected to hike further on Thursday leading to near certain increases in variable rates on credit cards In the twelve months leading up to June 2016 such rates rose nearly 2 percentage points to 32 percent for consumers who only pay a portion of their monthly debt according to central bank data The increased cost of borrowing could further curb growth in card portfolios already one of the slower consumer credit segments in Mexico and trigger a rise in default rates which have yet to see an uptick Michael Yoshikami chief executive and founder of Destination Wealth Management an investment advisory firm which holds 178 000 shares of Citigroup Inc N C said he was closely monitoring credit default rates at the group s Mexican subsidiary Citibanamex Citibanamex for which credit cards account for about 16 percent of its consumer loan portfolio compared to 10 percent at BBVA Bancomer and 5 3 percent at Banorte did not say what if any measures it was taking to protect itself from potential credit losses Mexican banks have in the past year been boosting available credit at a pace more than five times the country s gross domestic product growth rate according to figures from Mexico s bank association Still most analysts believe they are fairly well prepared to ride out any pullback in consumer lending even if they are forced to focus only on their best customers as they pass off rate hikes Laurencio de la Vega said there was no indication credit card portfolios would be immediately impacted by a downturn but added the bank was closely monitoring the situation
We re attentive not worried he said |
C | Exclusive Commerzbank joins peers in paring back services to Gulf | By Tom Arnold and Stanley Carvalho DUBAI Reuters Commerzbank DE CBKG has told customers in the Gulf it will no longer process their transactions in euros four Gulf banking sources say joining other big banks that cut such services after being fined for dealings with Iran Major U S and European peers have been tightening risk controls in the region after U S regulators imposed billions of dollars of penalties on banks in recent years over lapses relating to money laundering and terror financing The Gulf as a close neighbor of Iran and Syria which are subject to U S sanctions has come under close scrutiny from regulators at the same time as an oil price slump has made doing business in the region less profitable While sanctions against Iran eased at the start of this year under a global nuclear deal U S President elect Donald Trump has warned he would scrap the agreement adding to banks worries about the region Commerzbank which is partly owned by the German government told clients in the region in recent weeks that it would no longer clear euro deals from Jan 1 2017 say sources citing concerns about compliance A spokesman for the bank said In individual countries we ceased to offer certain transaction banking services One of the bankers said he believed the German bank might allow exceptions for certain large low risk clients Commerzbank had been in the crosshairs of U S authorities In March 2015 it agreed to pay 1 45 billion after a probe of its dealings with Iran and other sanctioned countries as well as a separate investigation into money laundering controls It is one of several banks including Citigroup NYSE C JPMorgan Chase Co BNP Paribas PA BNPP and HSBC which have been fined in recent years by U S regulators partly as a result of business in the Middle East CONFIDENCE CRISIS The trend has left some Gulf banks and exchange houses struggling to get U S dollars and euros the top two world currencies Correspondent banks have been facing a confidence crisis when it comes to banks in the Middle East says Samer Tamimi chief executive of UAE based United Arab Bank UAB AD UAB We used to use around 12 banks for clearing euros and now only 1 to 2 banks said one of the sources a senior Gulf banker speaking on condition of anonymity Clearing which involves converting payments into dollars or euros is central to trade Commerzbank s move is significant because of its long established presence in the region Bankers said it is a key player in the financing of trade flowing between the European Union EU and the Gulf Cooperation Council the EU s fifth largest trading partner with 155 5 billion euros 162 billion of goods traded in 2015 In the Gulf very few banks are able to settle transactions in dollars directly Lawyers warn that the challenge could harden in coming months because of the U S Justice Against Sponsors of Terrorism Act which makes it easier to pursue civil claims against a foreign state for acts of terrorism Middle Eastern banks should expect increasingly close monitoring and scrutiny of their dollar clearing transactions said Alex Lakatos a partner in the Washington DC office of Mayer Brown At the end of 2013 JPMorgan Chase Co N JPM cut its correspondent banking relationship with 500 foreign lenders including Al Rajhi 11 20 SE Saudi Arabia s second largest bank according to three people familiar with the matter An Al Rajhi spokesman said The bank has not at any point been found guilty of any wrongdoing with regards to links to terrorism or fined by any regulatory body for improper conduct In the last few months Citigroup and JPMorgan have told its correspondent banks in the region to stop doing business with money exchange houses or lose access to dollar clearing according to sources Such moves mean few regional banks are willing to do business with exchange houses say sources That leaves some fighting to survive as they struggle to access dollars Exchange houses allow millions of expatriate workers to send money home From Saudi Arabia alone expatriates sent home 157 billion riyals 42 billion in 2015 We used to do 100 transactions a day and now that s come down to 30 or 20 as some of our dollar channels have closed said P M Umamaheshwaran who runs UAE based money exchange business Aziz Exchange Co
Our turnover was previously around 2 billion dirhams but now it s in the millions |
C | U S consumer spending slows business investment perking up | By Lucia Mutikani WASHINGTON Reuters U S consumer spending increased modestly in November as household income failed to rise for the first time in nine months suggesting the economy slowed in the fourth quarter after growing briskly in the prior period The economy however remains on solid footing as other data on Thursday showed new orders for capital goods rising last month amid demand for machinery indicating that some of the oil related drag on business spending was fading And while the number of Americans applying for unemployment aid hit a six month high last week it remained below a level that is associated with labor market strength The slowdown in growth is likely to be temporary given the strong economic foundation that could be bolstered by President elect Donald Trump s plan to slash taxes and boost infrastructure spending The fourth quarter is coming in soft The economy is going to end the year on a disappointing note but we should see growth accelerate in the first half of 2017 said Ryan Sweet a senior economist at Moody s Analytics in West Chester Pennsylvania The Commerce Department said consumer spending which accounts for more than two thirds of U S economic activity rose 0 2 percent after increasing 0 4 percent in October When adjusted for inflation consumer spending edged up 0 1 percent last month after a similar gain in October The moderation in consumer spending is however likely to be a blip The labor market is near full employment house prices are rising and the stock market has rallied close to record highs In addition consumer confidence is at the highest level since July 2007 In another report on Thursday the Commerce Department said the economy grew at a 3 5 percent clip in the third quarter instead of the previously reported 3 2 percent pace That was the strongest growth rate since the third quarter of 2014 and followed the second quarter s anemic 1 4 percent pace The upward revision reflected stronger growth in consumer spending business investment in structures and intellectual property products than previously estimated underscoring the economy s solid fundamentals which contributed to the Federal Reserve raising interest rates last week The U S central bank lifted its benchmark overnight interest rate by 25 basis points to a range of 0 50 percent to 0 75 percent also encouraged by a sturdy labor market The Fed anticipates three rate hikes in 2017 The Atlanta Fed is forecasting GDP rising at a 2 5 percent rate in the fourth quarter The dollar was flat against a basket of currencies as traders took profits from a recent rally that had hoisted the greenback to a 14 year high Prices for U S government bonds and stocks on Wall Street were trading lower in late trade INFLATION RETREATS While slower consumer spending last month held back inflation economists said that was unlikely to worry Fed officials as they expected the tightening labor market and the incoming Trump administration s fiscal policy proposals to drive up price pressures The personal consumption expenditures PCE price index excluding food and energy was unchanged after edging up 0 1 percent in October That lowered the year on year increase in the core PCE price index to 1 6 percent The core PCE index increased 1 8 percent in October which was the biggest gain since July 2014 The core PCE is the Federal Reserve s preferred inflation measure and is running below its 2 percent target We think that the trend will keep firming over time in part because we expect the labor market to continue to tighten said Daniel Silver an economist at JPMorgan NYSE JPM in New York Personal income was flat last month as wages and salaries fell 0 1 percent Income increased 0 5 percent in October With consumer spending outpacing incomes savings fell to their lowest level since May 2015 While consumer spending might be cooling business investment is perking up after a prolonged slump In a third report the Commerce Department said non defense capital goods orders excluding aircraft a closely watched proxy for business spending plans increased 0 9 percent after gaining 0 2 percent in October A collapse in oil prices last year together with a surge in the dollar weighed on business spending on equipment which has contracted for four consecutive quarters Oil prices now are hovering above 50 per barrel leading to gas and oil well drilling rising over the last several months Trump s perceived business friendly policies which also include removing some regulations are expected to boost investment next year But renewed dollar strength in the wake of the business mogul s Nov 8 election victory could limit gains Some businesses may have delayed investments as they awaited the outcome of the presidential election These factors argue for a pickup in business investment said Andrew Hollenhorst an economist at Citigroup NYSE C in New York On the other hand some businesses may now delay investments as they wait for further clarity regarding tax policy A fourth report from the Labor Department showed initial claims for state unemployment benefits increased 21 000 to a seasonally adjusted 275 000 for the week ended Dec 17 the highest since June
Despite the increase it was the 94th straight week that claims were below 300 000 a threshold associated with a healthy labor market That is the longest stretch since 1970 when the labor market was much smaller |
C | FTSE Breaking Out To New All Time Highs | In equity land the story of the night has been the FTSE 100 breaking out to new all time highs although the 0 4 gain was hardly spectacular and even less so when one thinks the total value traded was 41 below the 30 day average
US equities have barely moved across the major indices with volumes also non existent Even if we drill into the multiple sectors there have been limited ranges with utilities having the strongest upside move with a 0 2 gain while energy succumbed to modest profit taking with a loss of 0 4 So a 60 basis point variance between the various sectors tells you all you need to know and the S P 500 Dow and NASDAQ 100 look to be closing out 2017 with gains of 19 7 25 3 and 28 9 respectively and one suspects these percentages won t deviate too greatly in the two remaining trading sessions
Aussie SPI futures caught a bid just as US equity markets opened gaining 20 odd points into 6033 but the move has been faded and at the time of writing the futures index are up just one point Our ASX 200 opening call sits at 6060 so a modestly weaker open is expected but this reflects the 11 6 points coming out of the market with 21 stocks going ex dividend on open so there is a headwind from this factor Still it s hard to get too carried away with proceedings today and participation will be extremely poor and an extension of what we saw yesterday with a pathetic yet not unexpected 2 78 billion of value traded through the market which is just over half the value we d usually trade over an average of a 30 day period So slight tweaks to portfolios may eventuate today but that s about it
We can also turn to the US markets and look at the lead from various Aussie equity ADR s American Depository Receipt and see the flat lead from SPI futures are validated here too with BHP Billiton LON BLT Ltd ADR NYSE BHP Commonwealth Bank Of Australia AX CBA and Newcrest Mining Ltd AX NCM all basically unchanged in their respective ADR s
Materials and energy provided the support for the ASX 200 yesterday putting in 9 16 index points but the catalysts are lacking here today with copper down very modestly and looking ominously like it won t make it 15 consecutive days of gains Keep an eye on the monthly chart of copper see chart below where we can see a pronounced bullish outside month reversal in play where we need to see a monthly close above 3 19 p lb to complete One suspects there are risks in January given price is quite extended here and pricing in a lot of good news notably with China s biggest copper producer recently ordered to cut production so the bulls have to push for a move through 3 30 p lb or the risk of a reasonable pullback is elevated here US crude is lower by 0 7 while spot iron ore fell 4 5 although iron ore futures which are lower by 0 3 are probably the better lead
An unexciting day may be in store but it has to be said that the monthly chart of the ASX 200 looks outright bullish and highlights a solid platform to progress into 2018 This strong underlying trend paints a compelling picture although the valuation argument is one to debate Here we see the market expecting 12 month blended earnings per share EPS of 3 75 for the ASX 200 on aggregate which is the strongest earnings estimate seen since 2014 but the question for 2018 remains whether this is as good as it gets and if better times are ahead where we get earnings upgrades to boost EPS which in turn could lower the index forward price to earnings ratio from its current level of 16 18x 12 month blended Recall in the last decade the consensus forward P E multiple has rarely been higher and if we use a 16 5x multiple which is punchy we get 6187 as a potential target So in the absence of any earnings re ratings if we apply a decade high P E multiple then we have around 2 upside for the year
Another area of interest though has been in FX markets where the USD has been seen modest downside versus all G10 currencies The notable moves have been seen against the SEK and AUD but it s the AUD that interests most here with AUD USD hitting a session high of 0 7779 The bulls have been enthused not just be the near multi year lows in the JP Morgan FX volatility index which has helped the hunt for carry but this has been assisted by yield differentials working in favour of AUD appreciation Here the yield premium demanded to hold Aussie 10 year debt over US Treasuries has widened by 4bp on the day to 27bp and recall this yield spread got as low as 8bp in late November so moves here have helped AUD upside
Again we can put AUD USD on a monthly timeframe for the bigger picture and see a bullish reversal potentially in play with price trading below the November low and needing a close above the high of 0 7730 to complete The daily chart looks quite constructive here too and there is scope for a move into 0 7810 20 in the short term
Keep in mind we have seen a fairly uninspiring US December consumer confidence report with the index coming in below consensus at 122 1 One can also look at the Citigroup NYSE C US economic index which effectively measures US data relative to the consensus expectations This index currently sits up at the highest levels since 2011 and rarely has it been higher so in essence it shows that US assets have been partially buoyed by positive data shocks Again we ask the question is this as good as it gets Personally I don t see a collapse in US economics and the data flow should continue to be upbeat but in terms of positive shocks to support asset prices then it seems we may be hitting a turning point and puts upside risks in the likes of EUR USD into Q1 although it worries me that this is such as big consensus trade now |
JPM | Caution Correction May Not Be Over | Beginning in late 2012 as the Federal Reserve announced their latest innovation of quantitative easing the markets launched into an uninterrupted advance that lulled investors into a complacent slumber Well that is until a couple of weeks ago when volatility returned with a vengeance and reminded investors that markets can indeed go down
The markets were after a near 8 fall able to garner a bit of a rally from the intraday lows of last week that now has everyone asking whether the current correction is over For example Brett Arends recently asked
So how much further might the market fall
If this is merely a regular correction in the course of a regular economic expansion the answer may be Not much further
Corrections of 5 to 20 are a normal part of the stock market Legendary Wall Street mogul J P Morgan NYSE JPM 0 77 once asked for a stock market forecast confidently predicted that share prices would fluctuate And he s been right ever since
However could the current correction be the start of something bigger
First let s put the current massive market correction into perspective The chart below shows the S P 500 overlaid against the Volatility Index VIX While volatility did spike higher over the last couple of weeks it is well within the bounds of the excessive complacency that has been the hallmark of the recent bull market surge
In last week s newsletter I stated
The markets did rally to initial resistance but failed to climb above it at this point However the markets are oversold enough on a short term basis that we may see further rally attempts next week particularly if the Federal Reserve holds the line on their current tapering process
That rally has indeed occurred as expected as dove ish talk from the Federal Reserve along with an impotent ECB continues to make hope spring eternal for market bulls Here is the problem The Federal Reserve will end its current liquidity program next week and the ECB will likely be unable to expend enough firepower to pull the Eurozone out of its deflationary spiral
Furthermore for the first time since 2012 the markets have experienced real technical damage which will take some time and effort to repair As I touched on last week the S P 500 has now broken its bullish uptrend for the first time in 3 years as shown below
The break of the bullish trend line is important and suggests that a further corrective process is likely The last two times that the markets behaved in this way was in 2011 and 2012 Let s take a look at what happened to the markets in these two periods to see if we can derive an assumption about what may lay ahead currently
In 2010 the world was just rebounding off of the financial crisis lows as the Federal Reserve s first round of QE had injected over 1 2 Trillion into the financial system Inventories had rebounded and nascent signs of economic growth had taken hold remember green shoots However as the Federal Reserve brought their liquidity support to an end economic weakness resurfaced and markets began to slide
After an initial sharp break of the bullish trend markets rebounded sharply to the upside giving hope to market bulls that the selloff was over It wasn t
The ensuing months led to a further decline and a basing process that eventually ended as the Federal Reserve concerned about the prospects of a recessionary relapse stepped in with a second round of quantitative easing It was at this point that Ben Bernanke then Chairman of the Federal Reserve made asset prices an implicit target of Fed policy
With the support of the Fed s liquidity flows asset prices recovered and began to rise once again But it did not last long
In 2011 the world was saddled with a global deflationary pressure caused by a manufacturing shutdown as Japan was devastated by the tsunami tidal wave and a near nuclear disaster The only thing that was missing was Godzilla smashing up Tokyo
That summer the Fed s second round of QE had come to an end and the market once again began to slide breaking through the bullish trend at that time The resurgence of economic weakness combined with a debt ceiling debate and a threat of a government default sent stock prices plunging almost 20 in just over three weeks The markets initial rebound was short lived and the market found a lower low over the next two months
The Federal Reserve again worried about a potential relapse in the economy stepped up with Operation Twist that had a more muted impact on liquidity inflows However combined with the ECB s Long Term Refinancing Operations market participants once again found the liquidity support necessary to start the next leg of the bull market journey The market was then accelerated when the Federal Reserve threw gasoline on the fire with QE3 in late 2012
Importantly in both cases the initial plunge in the market that broke the bullish trend lines led to a basing process that lasted for a period of time before the bull market was able to resume IMPORTANTLY the initial rebound in the market was NOT A BUYING opportunity but rather an opportunity to reduce portfolio risk
With the Fed s liquidity support now ending the markets have once again plunged below the bullish trendline The current rally like every other time is most likely a short lived rebound from extremely oversold short term conditions
Importantly the deterioration in the internal dynamics of the market also suggest that the current rebound is not the resumption of the current bull market cycle but rather a bounce that will likely be used to liquidate holdings This will likely lead to a retest of lows or even perhaps the setting of a new low before a bullish trend can be re established
That is of course assuming that the current breakdown in the market is just a rest stop along the path of a continued bull market
With global deflationary pressures picking up steam high yield credit starting to signs of instability and the lack of liquidity support from the Federal Reserve a case can be made that the current rout is the start of potentially a larger intermediate term correction
While this is certainly the case we will have to wait to see how the markets develop over the next couple of weeks In the meantime history suggests that the current bounce is in line with what should be expected within the context of a more protracted corrective process As I
While I am not stating that the polar icecaps are melting and that we are about to experience tidal destruction I am suggesting that the potential for further declines in the market are a significant possibility Therefore reducing portfolio risk in the short term will provide capital to reinvest at a more favorable point in the future If the market surges back to new highs and re establishes the previous bull trend then the capital raised can be reinvested with greater confidence of a continued advance
There is little risk in practicing some form of portfolio risk management The real risk is doing nothing and then spending the next advance in the market making up previous losses That has been a successful investment strategy nowhere never |
JPM | Change In Q4 14 Expected Earnings Growth Since October 1 By Sector | Here is the change in Q4 14 s expected earnings growth by sector since October 1 14 Most of this was on the from this weekend but not all First column is expected growth as of 10 31 2nd column is expected growth as of 10 1
Cons Disc 10 1 13 9
Cons Spls 2 1 4 5
Energy 5 9 6 6 whopping change of 1 259 bp drop
Fincl s 8 7 10 4
Hlth Care 17 8 19 4
Industrials 11 3 12 4
Basic Mat 2 1 10 In q3 14 Basic Mat will be 20 so we are seeing a big drop in Q4 The commodity pain continues
Technology 9 2 10 5
Telco 18 4 23 8
Utilities 8 1 7 7
SP 500 8 11 2
Only Utilities has seen an increase in expected growth for Q4 14 since October 1 Two weeks ago we wrote that Technology was showing an improvement but that has evaporated With the criminal probe at J P Morgan Chase Co NYSE JPM announced last night Financials might get whacked again Ex Energy the 4th quarter would be looking pretty solid A 1 250 basis point drop in a sector that is 12 of the SP 500 s market cap implies a 1 5 reduction in the S P 500 which means that the S P 500 expected growth would be closer to 9 5 versus today s 8 |
JPM | JPMorgan Downplays Alarming Data Breach | Luck and perfect timing may have played a big role in unravelling one of the biggest security heists in the U S history The hacking of one of the largest Americans banks JPMorgan Chase Co NYSE JPM has raised concerns of how relatively strong companies are struggling to stay one step ahead of cyber criminals The bank is reportedly doubling its 250 million allocation for the fight against future data breaches in the wake of recent attacks Reports indicated that hackers who targeted JPMorgan Chase tried infiltrating a number of U S financial institutions before they were discovered The breach was one of the largest in U S history which affected 76 million households as well as 7 million small businesses Perhaps the main and most distressing concern is that it took JPMorgan two months to detect this attack Milwaukee security consulting firm Hold Security helped ascertain the extent of the attack and additionally provided vital information that helped JPMorgan Chase exponentially The firm uncovered a repository of a billion stolen passwords and usernames believed to be the work of Russian hackers who infiltrated over 420 000 websites The attack was first discovered on a Corporate Challenge website that houses a series of annual charitable races that J P Morgan sponsors JPMorgan discovered that its own system was compromised after analyzing a series of suspicious internet addresses on the Corporate Challenge Website Hackers may have gained access of up to 90 of the banks server s which are claims that the bank is refuting stating that the overall damage was in fact limited JPMorgan maintains that the hackers did not gain access to its client s social security numbers as well as account balances The only data that might have been breached include names addresses phone numbers and email addresses The FBI has additionally refuted claims that hackers may have been backed by the Russian government as was initially reported Technicals
J P Morgan Chase Co is in a strong upward trend with the stock making higher highs Going forward traders should watch the 59 level as any close below that willprobably cause it to tumble all the way down until the 55 51 levels Actionable Insight CallJP Morgan Chase Co NYSE JPM above 61 with a target of 61 7 63 and a stop loss at 60 8 |
JPM | JPMorgan Faces Probe Over FX Rigging Ups Legal Reserves | There seems to be no end to probes and litigations regarding the business conduct of large global banks In the latest quarterly regulatory filing J P Morgan Chase Co NYSE JPM revealed that regulators across the globe are conducting investigations into its foreign exchange FX trading related operations
The probes are mainly focused on JPMorgan s spot FX trading activities and the corresponding controls in place to offer these services The agencies involved in the probe include the U S banking regulators the Commodity Futures Trading Commission CFTC the U K Financial Conduct Authority FCA and other foreign government authorities JPMorgan while cooperating with the regulators regarding the investigation is also holding discussions to settle the FX probe However it is too early to speculate about the probability of any settlement The talks may not materialize into anything concrete Apart from JPMorgan several other major global banks under the scanner for alleged FX manipulation Last week Citigroup Inc NYSE C restated its third quarter 2014 earnings following the ongoing FX inquiries and investigations The company is considering additional legal charges worth 600 million with 300 to 400 million for settling FX manipulation probe Read More Further HSBC Holdings Plc NYSE HSBC Barclays NYSE BCS Royal Bank of Scotland Group PLC NYSE RBS and UBS N NYSE UBS among others disclosed additional legal reserves related to FX probes during their latest earnings releases Regulators across the globe are dealing seriously with the allegations of banks having manipulated WM Reuters rates used for determining foreign exchange prices WM Reuters rates are published hourly for 160 currencies and half hourly for the 21 most traded ones Hence it is a widely accepted standard the rigging of which will necessarily undermine the importance of the rates and give rise to negative financial consequences Concurrently JPMorgan raised its probable losses from legal matters to 5 9 billion a 1 3 billion increase from Jun 30 2014 level Notably in the third quarter 2014 earnings release JPMorgan s net income was hit by 1 0 billion of legal expenses with CFO Marianne Lake stating that this rise was mainly related to FX probes Currently JPMorgan carries a Zacks Rank 3 Hold |
JPM | Oil And Gold Into The Abyss | CHART OF THE WEEK
Charts created using Omega TradeStation 2000i Chart data supplied by Dial Data
Gold BUGS will be pardoned if they are having thoughts of hari kari Gold bugs woke up on November 5 2014 to another 25 plus drop in the price of Gold Seems that someone found it convenient to dump 1 5 billion of naked gold futures equivalent to roughly 1 3 million ounces of gold on the market at around 12 30 AM EST There are not too many market makers around at that time to absorb the sale Silver joined the party and at one time it was down over 80 cents to around 15 20 The dump on November 5 might not have been unusual except the pattern has been repeated on a number of occasions of late
Since 2011 there has been an ongoing series of gold futures dumps usually in the early hours of the morning when conditions on or around the open of the NY COMEX are thin The biggest dump was the mornings of April 12 and April 15 2013 when someone dumped 400 500 tonnes of gold estimated value at the time of 23 billion of gold futures paper at or near the open of trading in NY
Gold appears poised to fall into a black abyss Maybe the black abyss is made of oil as it too has collapsed under 80 and is threatening to fall further To counter the downward moves of gold and oil something must be going up and it is the USD Both gold and oil are priced in US see chart and note US is registering an extreme RSI and they do have an inverse relationship with the US The reasons given for the latest decline and US rise was the Republican win in the November 4 2014 s mid term elections It is well known that Wall Street is quite happy with political gridlock in the US
Charts created using Omega TradeStation 2000i Chart data supplied by Dial Data
Technically both gold and oil have broken down through what either appears as a descending triangle gold or a long symmetrical triangle oil Gold has potential technical objectives down to around 950 Oil has potential technical objectives down to around 55 and even down to 40 For gold this is the second breakdown since the market topped in September 2011 near 1 912 Gold broke down from a descending triangle that formed between September 2011 and April 2013 Potential objectives were down to the 1 180 area It appears that the objective was fulfilled The current wave down from 1 255 appears to unfolding as five waves Even if this wave is complete and a counter trend rally starts soon there may be more downside later before the 950 objective is fulfilled
There have been claims that the bullion banks primarily JPMorgan NYSE JPM HSBC NYSE HSBC BNS NYSE BNS Barclays LONDON BARC UBS NYSE UBS and Deutsche Bank NYSE DB have been behind the decline acting on behalf of the Federal Reserve If there was a purpose it was to protect the value of the US even as the Fed conducted three rounds of QE exploding their balance sheet from 800 billion to 4 trillion and the US debt exploded from under 10 trillion to 17 6 trillion in the space of six years since the 2008 financial crash
There is also a possibility that the bullion banks were spooked by central banks starting to ask for their leased gold back or for delivery of their gold that has been held in vaults in NY London and even in Ottawa During the 1990 s the central banks had leased out their gold to the bullion banks The bullion banks or their proxies later sold the gold into the market helping to keep a lid on gold prices through the 1990 s In order to cover short physical positions the bullion banks would need to repurchase the gold at much lower prices than were prevailing back in 2011 What they may not have counted on is the unprecedented demand for physical bullion that has materialized particularly from Asia China There has been over the past few years as many analysts have noted a massive transfer of wealth from the West to the East
The price of gold is not determined in the physical market The paper market derivatives determines the price of gold While the physical market is quite limited the paper market is in theory unlimited The falling price has not stopped the demand for physical gold or silver In a perverse way whenever these dumps take place in the paper market the demand seems to spike in the physical market For example it has been reported the US Mint has temporarily sold out of American Eagle silver bullion coins following huge demand over the past several weeks
The collapse in the price of gold is causing numerous junior mining exploration companies to curtail operations putting them on hold As prices continue to fall high cost producers could be next to curtail operations in order to protect their operations As gold prices fall below 1 200 many mines become uneconomical
The gold dump on the morning of November 5 2014 wasn t the first dump over the past week As was normally the case the gold dumps consistently took place in the early hours of the morning either before or after important announcements The Fed announcing the end of QE was one occasion The surprise announcement of the BOJ for a massive new QE program was another occasion The Fed ending QE and the BOJ starting QE had the dual effect of suppressing the Japanese Yen and boosting the value of the US If one checks the early morning trading of gold on October 29 and 30 2014 one would discover large dumps of gold estimated to have been between 25 and 50 tonnes of gold
The recent decline in oil prices has caught many by surprise Oil prices have fallen roughly 30 since WTI peaked at roughly 107 back in June 2014 Brent crude has fallen roughly the same Market analysts are blaming it on a glut of oil but oddly in the midst of a price decline Saudi Arabia increased production and then cut prices Saudi Arabia cutting oil prices even as oil prices fell has raised the ire of other OPEC members Oil is the most geopolitical commodity in the world and any major change in the oil markets can have percussions around the world Lower oil prices provides relief for consumer countries i e Japan China and the US as well as consumers at the gas pumps but causes a decline in revenue for major oil producing countries where oil often underpins their budgets
The US has played a role in increasing production going from 8 5 million barrels a day back in July to 9 million barrels a day more recently Libya has surprised observers by actually increasing production in the midst of a civil war going from 200 thousand barrels a day to 900 thousand barrels a day On the demand side the IEA was expecting only a 700 thousand barrel a day increase in 2014 The IEA is not expecting much more of an increase in 2015
Few countries have the capability to cut production The ones that could include the United Arab Emirates UAE Kuwait and Saudi Arabia Instead Saudi Arabia increased production to maintain revenues The Mid East remains the world s largest oil producer producing some 28 5 million barrels per day Where production cutbacks could occur is the curtailing of alternative energy sources that includes the Cdn oil sands fracking deep water and high Arctic oil The reality is that they need high oil prices in order to be profitable or to continue drilling
Low oil prices could destabilize countries The countries most vulnerable to destabilization are Iran Iraq as if the civil war wasn t enough and even Libya despite a civil war But there are a lot differing agendas here Saudi Arabia and Iran are enemies and from Saudi Arabia s viewpoint anything that might undermine Iran is good Iraq is closely aligned to Iran Shiite Muslims rule both Iraq and Iran Saudi Arabia is Sunni Muslim The two sides of the same religion have been at odds with each other for hundreds of years The religious war has it seems heated up once again Iran s budget priced oil at 100 a barrel Some adjustment may be needed if the low prices persist
Falling oil prices has a negative impact on Russia 80 of Russia s revenues come from oil Russia exports some 70 of their oil Russia had been counting on 100 oil but are now being forced to revise their budget calculations Given what appears to be a renewal of the Cold War over Russia s involvement in Ukraine the US would no doubt be happy to see financial pressure put on Russia Some have claimed that the price of oil was engineered lower to hurt Russia The Russian Ruble has also been under severe stress due to sanctions and Russia has used up reserves to support the Ruble as well they have seen some 70 to 80 billion of funds flee the country
Some other countries that could be destabilized by falling oil prices include Kazakhstan and Venezuela Like Russia 60 of Kazakhstan s budget is dependent on oil revenues Venezuela s situation could turn critical and face economic collapse and debt default While the US continues to import Venezuelan oil the two countries have been at odds for years and the US was allegedly behind a failed coup attempt several years ago against former President Hugo Chavez Nigeria is another country that could be destabilized by lower prices
While not in the same category Norway and to a lesser extent Great Britain are also dependent on oil revenues Canada could also be impacted Oil makes up 20 of Canada s exports and the exports largely go south to the US Lower oil prices could well have a negative impact on oil sands production and in turn negatively impact Canada s GDP Plans for Canada to become an energy superpower would be put on hold Tax revenues in Alberta and Ottawa would be negatively impacted On the other hand lower oil prices could benefit Ontario s manufacturing base
None of this suggests that oil prices could continue to fall Oil prices were boosted on November 5 2014 by an underwhelming EIA report that indicated the add to supplies was less than expected and that there were rumours of an oil pipeline in Saudi Arabia blowing up But the breakdown under 80 was compelling particularly in conjunction with the breakdown under 90 which was the trigger for the current decline The decline since the break under 90 has been swift
Oil and gold are they both falling into what appears as an abyss Do both keep falling or do they find support somewhere It is interesting to note that while gold has broken down in USD it has not broken down in the JPY or CAD nor for that matter the EUR The chart below shows that gold in Cdn is above what appears as a double bottom made in 2013 Gold in Japanese Yen bottomed last April and has been on an irregular rise ever since It has helped that the Cdn has fallen 11 since April 2013 and the Japanese Yen is down 13
Charts created using Omega TradeStation 2000i Chart data supplied by Dial Data
Maybe the last word on the collapse of gold should be made by the dreaded vomiting camel pattern see next page for chart No I do not make these things up nor have I ever seen this pattern Note it maybe satire unless you are gold bug It was presented by a Brian Kelly on CNBC on November 3 2014 Thanks Joe for the suggestion The pattern according to Kelly has a projected splat zone of gold down to 700 to 800 even as the upper end of the splat zone is around 900 That s not pretty and it is quite the hurl Kelly does point out that a collapse to that level could take several months so what the market is currently seeing might well just be the first splat In the interim the gold bugs are no doubt hoping that the camel experiences splat back That would certainly beat falling into the abyss
Source
Copyright 2014 All rights reserved David Chapman
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November 6 2014 Page 5 |
JPM | Silver and Powerful Forces | Example 1 When a golfer hits a shot to the green he often yells sit as he orders the ball to slow or stop near the flag Even professionals indulge in this bit of satisfying self delusion However the ball responds to powerful forces such as wind the undulations of the green its own momentum and gravity
Example 2 A mother demands that her teenage son clean his room Instead he responds to powerful forces such as testosterone surges cute girls and teenage rebellion
Example 3 Silver prices surged higher in early 2011 and have collapsed since then in spite of increasing investment demand The silver market was responding to powerful forces What forces
The COMEX is very important in setting global silver prices but the COMEX is almost entirely a paper market Relatively speaking very little physical silver changes hands compared to the number of speculative paper contracts Speculators and large firms such as JPMorgan NYSE JPM are powerful forces that can and do move the silver market
The Fed has created over 3 5 Trillion since 2008 which recapitalized banks and levitated the bond and stock markets It seems clear that this powerful force did not want the silver and Gold markets moving higher
It has been widely reported that the US President met with a group of bankers on April 11 2013 Shortly thereafter the silver and gold markets crashed apparently victims of massive paper short sales on the COMEX Large and powerful forces can indeed move markets
China and Russia are aggressively purchasing silver and gold including all their domestic production plus considerable quantities from the West It is in their best interest to purchase metal at lower prices Similarly the West does not want China or Russia dumping their hoard of T Bonds which would hurt the T Bond markets the dollar and would force interest rates higher Some powerful international forces are working to maintain silver and gold prices at lower levels
What seems strange
Demand for silver is strong and apparently increasing but the COMEX driven price for silver has been weak it just hit a four plus year low
The all in cost of silver production has been widely quoted at or considerably ABOVE current prices But how long can this continue
Consider this chart of the S P 500 Index and the Fed balance sheet It appears that the Trillions created by the Fed dramatically assisted the S P in its upward journey But what happens when the newly created dollars euros and yen are used to buy silver and gold instead of bonds or stocks
Consider this graph of silver investment demand which has increased substantially 2014 demand has been even stronger
Consider these graphs that show estimates for Chinese and Russian demand for gold From which vaults do you think all that gold was removed
Powerful forces can impact markets for considerable time Gold has broken its triple bottom at about 1 180 Silver has made a new four year low near 15 about a 70 loss from its 2011 high What happens next My guess is that the High Frequency Traders will attempt to squash all rallies until The Powers That Be are properly positioned to make a fortune on the inevitable rally
The longer a market is repressed or levitated the more violent the correction I suspect we will see violent corrections in the next six months in the silver gold and stock markets
For several years it seems that powerful forces have been aligned against gold and silver What will happen to prices when some or all of those powerful forces reverse and align in favor of precious metals for their own protection and profit
They Are Burning The Furniture Now
Gary Christenson
The Deviant Investor
GEChristenson com |
JPM | Is Now The Time To Own Gold And Silver | Gold prices began this week on a softer note after surging on Friday The price of the yellow metal snapped a seven day loss to end sharply higher on Friday as the price of spot gold rallied by 2 6 or 37 an ounce to close out the week at 1178 50 an ounce The yellow metal scored its biggest one day gain in nearly five months as a retreat in the U S dollar and heavy short covering lifted prices from a 4 1 2 year low However at the time of writing gold prices have given back about half of Friday s gains Last Friday a report from the Labour Department showed weaker than expected U S job growth in October although unemployment rate dropped to a new six year low The non farm payroll employment rose by 214 000 jobs in October and the unemployment rate was 5 9 The dollar slipped after the jobs report was released as investors took profits on the greenback s months long rally which has seen it reach multi year highs in anticipation of tighter U S monetary policy next year The report also boosted speculation that the Federal Reserve may hold interest rates low amid sluggish global economic growth Before the report gold fell to the lowest since 2010 and the dollar touched a five year high amid expectations for improvements in the labour market On Thursday gold prices ended lower for a seventh straight session on growing speculation about U S interest rate hikes on the back of some upbeat economic data including a report showing a more than expected drop in initial jobless claims Then on Friday prices surged On Thursday gold prices ended lower for a seventh straight session on growing speculation about U S interest rate hikes on the back of some upbeat economic data including a report showing a more than expected drop in initial jobless claims Then on Friday prices surged This on going volatility in prices shows the impact traders have on the gold market By using the paper contracts on Comex traders can buy and sell huge volumes of gold without ever having to deliver or take delivery The volumes that they trade do not represent the true quantity in the physical market place It is simply a speculative play on price and thus it is important for investors to ignore this volatility or noise because it has nothing to do with the real driving factors behind price Gold came under some selling pressure on Thursday as the dollar extended its gains after the European Central Bank ECB President Mario Draghi said the ECB policymakers might use outright quantitative easing if deemed necessary The ECB Chief offered a downbeat assessment of the Eurozone economy with risks to the outlook skewed to the downside He also highlighted geopolitical risks that could dampen confidence The euro plunged to its lowest in more than two years against the dollar on Thursday after Draghi affirmed his pledge to use unconventional measures to stimulate a sluggish Euro zone economy He added that the impact of the ECB s asset buying program on its balance sheet would be sizable His remarks which came after the ECB kept interest rates at a record low of 0 05 were a green light for investors to sell the euro When asked if the ECB had an official balance sheet target Draghi replied Together with a series of targeted longer term refinancing operations to be conducted until June 2016 these asset purchases will have a sizeable impact on our balance sheet which is expected to move toward the dimensions it had at the beginning of 2012 In the press briefing Draghi said ECB members are all prepared to take more policy action if necessary and the bank s staff will prepare the groundwork He reiterated that the risks to the Eurozone s recovery remained tilted to the downside JP Morgan Chase Co made the headlines once again The bank said it faces a U S criminal probe into foreign exchange dealings and boosted its maximum estimate for reasonably possible losses on legal cases to the highest in more than a year The largest U S bank reported that it might need as much as 5 9 billion to cover losses beyond reserves for legal matters up 1 3 billion from the end of June and the most since since mid 2013 Last year the bank spent some 23 billion in settlements yet no one banker was prosecuted Both Citigroup Inc NYSE C and Zurich based UBS NYSE UBS disclosed last week they also face criminal inquiries by the Justice Department into their foreign exchange dealings Citigroup cut third quarter results to include a 600 million legal charge Meanwhile Swiss bank giant UBS the world s largest private lender is about to reach a settlement in the year long global probe into allegations of misconduct at its precious metals trading business as well as supposed collusion and manipulation in the foreign exchange market A report by FT com revealed that the UBS is just one of the six financial institutions expected to announce an agreement of at least 2 37 billion 1 5bn in fines on Wednesday to settle accusations of foreign exchange market rigging with the U K s Financial Conduct Authority FCA The other five banks working on the settlement are U S banks JPMorgan Chase Co NYSE JPM Citigroup Britain s HSBC NYSE HSBC Barclays NYSE BCS and Royal Bank of Scotland Group NYSE RBS So far close to 35 traders have been suspended or fired by their banks No individual or institution has so far been accused of any wrongdoing The precious metals market has come under heavy regulatory scrutiny and allegations of price rigging BaFin Germany s financial regulator has launched a formal investigation into the gold market and is probing Deutsche Bank one of the former members of a tarnished gold fix panel that will soon be replaced by an electronic fixing hat I find astonishing is that while banks are fined for their criminal activities no one in top management has been prosecuted And if an individual wants to deposit cash he she is regarded as a criminal But even worse these banks are still obliged to conduct Know Your Customer KYC when it should be the other way around It should be customers demanding to know more about the banks activities But these banks are not alone Central bank manipulation of prices and risk taking has become the norm over the last six years And at the same time these polices have allowed governments to provide false financial stability and false economic growth Much of the economic and jobs growth in the United States is artificial growth with little chance of being sustainable It is based on the excess money printing of the US Fed which is used to buy assets at fake prices It will be interesting to see what happens when interest rates are normalized and QE stops The financial system is fragile heavily leveraged and reliant upon a continuation of low interest rates Thus the appearance of stability and low volatility is also illusory And the liars and deceit will continue until a politician or banker is prosecuted Thus while these banks continue with their criminal activities make sure you own physical gold and silver stored out of the financial system While it is impossible to function without a bank account it is imperative for individuals to do whatever it takes to preserve their wealth If there is a financial collapse coming your bank and your government are not going to do a darn thing to save you And instead they will destroy your wealth and leave you destitute This is why it is important to hold both physical gold and silver |
MS | Qatari led group wins 4 billion battle for London s Canary Wharf | By Paul Sandle LONDON Reuters A Qatari led consortium looked set to win its long running battle to buy Songbird Estates L SBDE on Wednesday after the owner of London s Canary Wharf business district dropped its opposition to the 4 billion offer Songbird said it still thought the price undervalued the estate but with no rival bid forthcoming and holders of 86 percent of the shares backing the deal it said its minority investors should accept Qatar Investment Authority QIA and partner launched a 350 pence a share offer direct to Songbird shareholders in December hoping to add a financial district rivaling the City of London to landmarks already in its portfolio such as the Shard skyscraper and Harrods department store Canary Wharf s steel and glass skyscrapers home to banks such as HSBC L HSBA Citi N C and JP Morgan N JPM embody the change in London s economy in the second half of the 20th century as industry dwindled and financial services grew The redevelopment of the former West India Docks which traded in everything from tobacco to bananas was championed by 1980s Prime Minister Margaret Thatcher who saw the need for more space for a financial sector booming after her big bang reforms The QIA already owned 29 percent of Songbird which in turn owns 70 percent of Canary Wharf Group Its partner in the deal U S investor Brookfield Property Partners has 22 percent of Canary Wharf Group The complicated structure featuring a layer of shareholders in Songbird and another in Canary Wharf tended to leave Songbird trading at a discount to the value of its property and helped make it a takeover target analysts say GROWTH POTENTIAL Songbird said earlier this month the 350p offer was an 8 percent discount to its net asset value of 381p at the end of November and put no value on its growth potential Shares in the group which had been trading about 10 percent below the offer price due to scepticism it would go through were up 6 5 percent at 342 5p by 1043 GMT Songbird had already said that if one or more of the other three large shareholders New York based investor Simon Glick China Investment Corp and Morgan Stanley Investment Management were to accept the offer would become unconditional Combined they own just over 50 percent Since the offer looked like a foregone conclusion after all three major investors indicated they would approve minority shareholders could be left holding stock in a group no longer listed and therefore difficult to value Songbird said Songbird backed by Morgan Stanley had won control of Canary Wharf in 2004 with a 1 7 billion pound cash offer Canary Wharf Group is led by 69 year old George Iacobescu who is in line for a 3 5 million pound windfall from the bid The company is preparing to start work on two major developments a 60 storey tower with the first residential property on the estate and a 20 acre waterside site with 3 100 homes and office buildings
Shareholders have until Thursday to accept the offer |
MS | Shake Shack now expects IPO to be priced higher at 17 19 a share | Reuters Burger chain Shake Shack Inc now expects its initial public offering to be priced at 17 19 per share up from 14 16 expected earlier valuing the company at up to 674 5 million
The offering of 5 million Class A shares is expected to raise about 95 million Shake Shack said in a regulatory filing on Wednesday
The company which grew out of a hot dog stand in New York s Madison Square Park is known for its Shackburgers flat top hot dogs and eponymous milkshakes and has developed a cult following since it was founded by restaurateur Daniel Meyer in 2001
Private equity firm Leonard Green Partners LP is Shake Shack s largest shareholder with 26 percent of its common stock
Meyer s Union Square Hospitality Group LLC owns 21 percent of Shake Shack while employee owned hedge fund sponsor Select Equity Group LP holds 12 3 percent
The New York based burger chain has 63 outlets including 36 in the United States The company s international outlets include those in Dubai Istanbul London and Kuwait
Shake Shack s offering follows a string of successful IPOs by casual dining chains last year including Habit Restaurants Inc O HABT El Pollo Loco Holdings Inc O LOCO and Zoe s Kitchen Inc N ZOES
U S IPOs which have been on a tear since 2013 raised more than 93 billion last year the most since 2000
Shake Shack s shares which are scheduled to be priced on Thursday after the market closes are expected to start trading on Friday on the New York Stock Exchange under the symbol SHAK
J P Morgan and Morgan Stanley are among the lead underwriters for the offering |
MS | Alcatel Lucent woos new kinds of customers in race to prove itself | By Leila Abboud and Gw na lle Barzic PARIS Reuters In the final year of his turnaround plan Alcatel Lucent s boss is pushing the telecom network gear maker to diversify its customer base by selling Internet equipment to large technology companies and multinational corporations Chief Executive Michel Combes plan to put more emphasis on so called edge and core routers that direct traffic on the Internet has allowed the company to set itself apart from traditional mobile rivals Ericsson and Nokia and leads it into competition with U S networking giant Cisco Financial analysts welcome the move into faster growing segments and new customer types but want more evidence that Alcatel can turn regular profits after years of losses They want Combes to deliver on the central pledge of his two year old Shift turnaround plan namely for the company to generate more cash from operations than it consumes Since it was formed in a merger 2006 Alcatel Lucent has never been free cash flow positive and has only posted a profit in one year When Combes took over two years ago the company was so fragile that some of its biggest customers were thinking about abandoning it over fears it would soon be bankrupt Alcatel Lucent has since been through 10 000 layoffs sold about 600 million euros in assets and done a 1 billion euro capital increase to shore up its finances Combes the former head of Vodafone s European businesses has also cut about 650 million euro in costs out of a billion promised by 2016 helping the previously battered shares triple since his arrival A key ratio of non production related costs to revenue fell to 12 4 percent in the first nine months of last year compared to 14 9 percent in 2012 and about 12 percent for Ericsson Further driving the share rally is the hope harbored by some investors that Alcatel Lucent could one day sell its wireless business which is strong in the key U S market but loss making to Nokia The success of the Internet equipment division that Combes prioritized when he took over in April 2013 has meant that even if Alcatel Lucent effectively exited mobile via such a deal it would still have an independent future albeit with a narrower focus What was missing from Alcatel Lucent was an industrial strategy that people could understand but now we have made some real choices Combes told Reuters in a recent interview In a sign that investors increasingly believe in what Combes is doing at Alcatel the level of short selling on the shares or hedge funds betting that shares will fall has steadily fallen over the past six months About 8 percent of Alcatel shares are currently out on loan to hedge funds that have shorted the stock according to data from Markit the lowest level in a year and a sharp drop from 13 6 percent in last July Francois Meunier an analyst at Morgan Stanley with a buy rating on the stock praised Combes for fixing the company s finances and seeking growth in Internet equipment But he warned that the company still needed to deliver on its financial targets before chasing too many new customers They have really good products but I d like them to take the new opportunities slowly to prevent a repeat of past mistakes when the company spread itself too thinly he said Alcatel is not alone in seeking to diversify Mobile market leader Ericsson hopes to generate 20 25 percent of sales from customers outside the telecom arena by 2020 from about 10 percent today NETWORKING The increasing importance of computing networks to multinational corporations from banks to retailers has opened up new opportunities for telecom gear makers and erased boundaries with Cisco and Juniper Networks which have long dominated enterprise networking Combes is also targeting big Internet companies like Google and Facebook which need to build and maintain vast computing networks and datacenters to keep their global services going Governments and fire and police departments are among potential niche customers but Alcatel Lucent will have to learn new skills in research and development and marketing executives admit Today it earns more than 90 percent of revenue from sales to global telecom operators in particular a small handful of customers led by Verizon and AT T Combes often meets their CEOs in person to seal long term contracts In Internet equipment where Alcatel Lucent is not a recognized name the number of potential customers may strain his travel schedule The company first began selling so called edge routers in 2004 that connect businesses governments universities and individuals to the networks run by phone and cable companies that then transport data traffic to and from the Internet Then in 2012 Alcatel Lucent launched its first core networking product Core networks refer to the ultra high speed networks that haul data over the Internet s backbone interconnecting cities and countries Last year it overtook Juniper in second place in routers sold to telecom operators To help reach new types of customers Combes signed partnerships with technology company Hewlett Packard in December and consulting firm Accenture in September Alcatel also hopes its major telecom customers like Orange and Vodafone can become an indirect sales channel through their businesses selling communications services to corporations It has signed as many as 15 non carrier customers since Combes joined the company including with satellite company Inmarsat to bring high speed Internet to airplanes and with Paris transport network RATP for Wifi in the metro Deborah Kish analyst at market research firm Gartner said Alcatel Lucent s focus on routers and optical products along with newer areas like cloud computing and mini mobile antennas known as small cells were the right choice Alcatel Lucent used to look like a mobile infrastructure company and now it s a routing company basically she said |
MS | BP deepens capex cuts surprises with Rosneft profit | By Dmitry Zhdannikov and Ron Bousso LONDON Reuters BP said it would deepen capital investment cuts this year to adapt to lower oil prices after a surprise contribution from its stake in Russia s firm Rosneft helped it to beat quarterly profit forecasts The plunge in oil prices was further reflected in a 3 6 billion impairment charge relating to assets in the North Sea and Angola Fellow British energy company BG Group Plc also wrote down the value of its business by almost 6 billion on Tuesday BP s shares were up 2 2 percent at 1240 GMT slightly underperforming the index and rising oil prices although investors praised the company for one of the most robust performances among its peers BP also surprised investors by reporting underlying replacement cost profit at 2 2 billion versus expectations of 1 5 billion for the last three months of 2014 The upbeat result was explained in large part by a profit of 470 million from Rosneft hard hit by Western sanctions over Moscow s role in Ukraine as well as the falling oil prices BP s profit from the 19 75 percent Rosneft stake was boosted by a change in the Russian firm s foreign exchange accounting system It was based on provisional numbers and could change Several analysts had expected BP to report a fourth quarter loss of up to 750 million from its stake in Rosneft Rosneft s contribution did not reflect FX losses on its borrowings and were hence higher than the headline consensus forecast said analysts at Morgan Stanley Rosneft accounts for around one third of BP s oil production at just above 1 million barrels of oil equivalent per day and around nine percent of its profits in 2014 BP s Chief Financial Officer Brian Gilvary said he expected Rosneft s dividend to halve from 693 million received by BP in 2014 The profit from Rosneft offset a 42 percent decline in BP s overall profits from oil production known as upstream Refining and trading also came to the rescue posting a 1 21 billion profit compared to 70 million a year earlier Analysts said they were pretty happy with the upstream numbers after rival Royal Dutch Shell reported poor earnings from its equivalent business According to analysts from Jefferies BP recorded after tax upstream margins around 8 per barrel towards the top end of the peer group this reporting period RESETTING BP BP followed its rivals with a string of budget cuts and asset writedowns as a result of the halving of oil prices since July to around 55 a barrel We have now entered a new and challenging phase of low oil prices through the near and medium term said chief executive Bob Dudley said Our focus must now be on resetting BP BP had already announced a 1 billion restructuring plan that will include thousands of lay offs on which it had already spent 433 million It has also imposed a company wide pay freeze While several peers slashed 2015 spending plans to tackle lower oil prices Royal Dutch Shell warned against overreacting to the declines BP said it would cut its investment budget to 20 billion in 2015 down 13 percent from the actual 22 9 billion in 2014 and further below initial guidance of 24 25 billion a year for 2013 2014 It maintained its quarterly dividend at 10 cents per ordinary share Compared to peers we believe BP has offered one of the most responsive outlooks to the lower near term crude environment Jefferies analyst Jason Gamel said |
MS | Oil snaps four day rally glut back in focus with U S crude builds | By Barani Krishnan NEW YORK Reuters Oil cut short a four day rally on Wednesday with investors and traders focusing again on a supply glut after U S crude stocks set record highs A rebound in the dollar also weighed on crude prices because it makes dollar denominated commodities pricier in other currencies cutting demand from overseas buyers who hold currencies like the euro U S crude broke below the key 50 a barrel mark losing almost a third of the near 20 percent gain it had made since Thursday s close It was down 3 65 or 7 percent at barrel to 49 40 by 12 45 p m EST Brent oil lost about 5 percent or 1 90 to 55 26 a barrel U S crude stocks jumped by 6 3 million barrels last week to 413 06 million their highest since records began in 1982 the government run Energy Information Administration reported Traders and investors had expected a build of just about 3 5 million barrels for the week ended Jan 30 EIA S The truth of the matter is that after this newest record high in crude inventories it s probably going to be outside forces like the dollar stock market and economic data which will determine if oil prices continue to go up or pull back said Phil Flynn analyst at the Price Futures Group in Chicago Oil s 9 climb since Thursday had raised speculation that the market s seven month rout might be near an end But the EIA data reignited worries about the global oil glut that sparked the selloff which erased about 60 percent off crude prices between June and January If the market was looking for something to try and extend the four day rally it was certainly not here in the EAI report said Sal Umek senior associate at the Energy Management Institute in New York The price rebound was sparked by data highlighting the dramatic drop in U S oil drilling rigs over the past few months and cutback in exploration budgets of energy firms that suggested to some that the crude glut may be overcome quicker than thought But research analysts at investment banks said the market will likely remain oversupplied through the first half at least In our experience oil markets rarely exhibit V shaped recoveries and we would be surprised if an oversupply situation as severe as the current one was resolved this soon Macquarie Research said in a report Too quick a price recovery will also reduce chances for a meaningful cut in U S shale oil supplies that bloated the market Analysts at Morgan Stanley said in a report that producers will feel no notable difference between 40 and 60 a barrel after prices had more than halved from June peaks of over 100
However if the rally goes well beyond this band we see risk of counterproductive behavior that would push off recovery and make us more bearish 2H15 and 2016 they said |
JPM | From Chinese giants to new frontiers emerging dollar bond sales boom | By Claire Milhench
LONDON Reuters Frontier economies including Tajikistan and Iraq along with credit hungry Asian firms led emerging market borrowing in the July September quarter as 2017 shapes up to be another record year for debt sales
Stronger economic growth in the developing world and sizeable inflows into bond funds have left asset managers eager for new high yielding paper encouraging less frequent issuers to test the market s appetite
It s a bit of a Goldilocks scenario for EM issuance said Regis Chatellier sovereign credit analyst at Societe Generale PA SOGN For a lot of countries they don t know what tomorrow will look like and they would rather issue now
The U S Federal Reserve has signaled one more rate rise by end 2017 but subdued inflation means it is likely to tighten gradually maintaining a benign backdrop for emerging market borrowers
Third quarter issuance was running at around 108 3 billion at Sept 20 according to Thomson Reuters data taking the year to date total to 471 9 billion
This was well up on the 370 7 billion raised in the first three quarters of 2016 with some issues still in the pipeline for the current month including a triple tranche dollar offering from Saudi Arabia that could top 10 billion
Governments from developing countries raised some 17 7 billion in debt between July and September TR data showed with Africa Middle East and Central Asia accounting for 40 percent
JPMorgan NYSE JPM analysts said they expected a record year for emerging sovereign issuance of around 142 5 billion
HAPPY TO LEND
Among unusual third quarter deals was a debut 500 million bond from Tajikistan the poorest country in the former Soviet Union which attracted bids of over 4 billion
Iraq issued a 1 billion bond for its first deal in more than a decade and Ukraine sold a 3 billion bond its first since a 2015 debt restructuring
Gabon also issued for the first time since 2015 following African peers Senegal and Ivory Coast to the market
The market is now happy to lend to any issuer pretty much Chatellier said
Many deals have enjoyed huge order books from fund managers flush with cash Year to date emerging market bond funds have attracted 64 6 billion according to EPFR Global data with hard currency funds accounting for 35 6 billion
Net inflows over the same 2016 period totaled 36 6 billion of which hard currency funds attracted 22 1 billion
Debt sales from emerging market companies totaled 92 billion so far in the third quarter taking the year to date total to 342 5 billion Asian corporates accounted for 44 percent of issuance and China alone 27 percent
Chinese state run oil company Sinopec this month sold a four tranche 3 25 billion bond following a 3 4 billion deal in April
It s all about China once again said Guy Stear co head of fixed income research at Societe Generale in Paris EM companies outside China have tried to stabilize or reduce their dependence on the dollar market and Chinese companies have happily wandered into the breach
JPMorgan said it had revised up its 2017 corporate supply forecast to 440 billion from 380 billion
Ranko Milic head of CEEMEA debt capital markets at UBS said companies were still keen to borrow while conditions were supportive
Base rates in dollars are slowly creeping up but are still very low so the yields on offer are still very attractive he said
But some new deals were pricing at very tight yields especially for those companies known to investors Milic said citing the examples of Russian steelmaker NLMK and KazTransGas which both came at around 4 percent
Given the search for yields when a Tajikistan comes at low 7s or Ukraine at 7 3 8 that s where the interest really comes in Milic said |
JPM | JPMorgan ordered to pay billions in estate case | A Dallas jury awarded a widow and family up to 8B in punitive damages over JPMorgan s NYSE JPM mishandling the estate of a former American Airlines executive
Actual damages awarded were less than 5M meaning the punitive damages are likely to be scaled back
At issue is Max Hopper who passed in 2010 with assets of more than 19M but no will JPMorgan was hired to administer the divvying of up of assets among family members Trouble ensued claims the family
The nation s largest bank horribly mistreated me and this verdict provides protection to others from being mistreated by banks that think they re too powerful to be held accountable says Jo Hopper
Now read |
JPM | JPMorgan downgrades Trivago | JPMorgan NYSE JPM downgrades Trivago NASDAQ TRVG from Overweight to Neutral and cuts the price target by 2 to 14 Analyst Doug Anmuth says the company carries risks and the planned turnaround will take time as the company works out bid process adjustments from large advertisers and reveals its new attribution model Trivago shares are down 3 21 premarket Previously Online travel sector in retreat after Trivago warning Sept 6 Now read |
C | Brazil regulator Cade fines foreign banks for currency manipulation | SAO PAULO Reuters Brazilian antitrust watchdog Cade said it reached an agreement with five large international banks fining them a combined 183 5 million reais 54 million for forming a cartel in offshore foreign exchange markets
The banks which were accused of manipulating exchange rates of the Brazilian real are Barclays Plc L BARC Citicorp N C Deutsche Bank SA DE DBKGn HSBC Bank Plc L HSBA and JPMorgan Chase Co N JPM Cade said late on Wednesday
The banks agreed to admit to anti competitive practices and cooperate with Cade in revealing how they manipulated exchange rates published by news agencies such as Reuters as well as the Central Bank of Europe |
C | Euro drops as ECB extends bond purchase timeline | By Karen Brettell NEW YORK Reuters The euro dropped over 1 percent on Thursday after the European Central Bank extended asset purchases until the end of next year and President Mario Draghi said cuts to the size of the program should not be viewed as tapering The ECB said it will reduce its asset buys to 60 billion euros from next April from the current 80 billion euros and extend purchase by an extra nine months from March It also reserved the right to increase the size of purchases once again The ECB is going to stay in the markets Draghi said in a press conference after the central bank s statement They are still going to buy a lot said Steven Englander global head of foreign exchange strategy at Citigroup NYSE C in New York The nine months is important because it pushes out the period over which you expect rates to be negative The euro had strengthened ahead of Thursday s decision It peaked at 1 0875 in the first minute after the statement before turning lower It last traded at 1 0617 down 1 26 percent on the day Make no mistake the ECB has eased monetary policy with this move said Mizuho strategist Peter Chatwell The Federal Reserve is widely expected to raise interest rates for the first time this year when it meets next week though it is also seen as likely to take a cautious tone on the economy Traders will be watching for any indications of how many rate increases Fed officials expect in 2017 after Donald Trump s surprise election as U S President on Nov 8 increased expectations of greater fiscal stimulus to boost economic growth Last meeting we had seven participants looking for three or more hikes next year and I think it ll be a big deal if that seven goes to 10 or 11 said Citi s Englander That said they are also aware that rates are backing up and it might do damage to the housing market and the car auto market before any of this comes about so I think they will be careful not to encourage it Englander said
The dollar index DXY against a basket of six major currencies gained 0 90 percent to 101 13 Against the yen the greenback increased 0 38 percent to 114 18 |
C | Oil rises above 50 on renewed hopes for output cuts | By Catherine Ngai NEW YORK Reuters Oil rebounded from the week s lows and hovered above 50 a barrel on Thursday as market watchers focused on an upcoming weekend meeting between OPEC and non OPEC producers that may result in an agreement to cut crude output further Brent and U S oil prices gained support early from a slightly weaker dollar but the U S currency turned positive as the euro fell on the European Central Bank s decision to extend but reduce its bond buying program Oil producers will meet in Vienna on Saturday to see whether those outside the Organization of the Petroleum Exporting Countries will cut production to help ease a global supply glut that has pressured prices for more than two years In the late morning Brent flipped into negative territory while U S prices pared gains briefly after reports that Russia sees a risk that the meeting could be moved due to questions that have come up A Russian energy ministry spokeswoman however said the meeting would continue as planned OPEC has agreed to slash production by 1 2 million barrels per day bpd in the first half of 2017 a deal that bolstered crude futures despite doubts over whether the amount was enough and whether the cuts would be effectively implemented Brent was up 35 cents or 0 66 percent to 53 35 a barrel by 11 36 a m EDT 1636 GMT U S light sweet crude was up 40 cents or 0 8 percent at 50 17 a barrel Both benchmarks have fallen more than 2 a barrel from highs reached Monday when investors bought heavily in the wake of the OPEC deal Given the rally to 50 a barrel non OPEC members may not be persuaded to cut output said Tim Evans energy futures specialist at Citigroup NYSE C Further effective cooperation between oil producers seems unlikely in our view as OPEC and Russia have already agreed on policy reducing the leverage they have with other countries in our view he said in a note
Non OPEC Russia has signaled it was ready to cut production by 300 000 bpd and on Thursday Azerbaijan said it would come to Vienna armed with proposals for its own reduction |
C | Flash crashes prod central banks towards algo arms race | By Patrick Graham LONDON Reuters Central banks investigating whether computer programs or an individual triggered October s sterling flash crash the latest to hit a major financial market may consider computerized stabilization programs as a possible response The Financial Times reported on Wednesday that officials were looking at flows through a Tokyo based trader at U S bank Citi N C as they search for what caused the brief but dramatic 10 percent crash in sterling Citi said in response that its trading operations had functioned appropriately in a thin and illiquid market The FT report said the trader is not believed to have started the slide that sent the pound to a 31 year low but might have exaggerated it by placing a number of sell orders after a sudden price shift at an hour when activity is typically quiet Whatever the extent of human decision making in the crash investigators are convinced algorithm driven machine trading was at least one major factor in what occurred Central bankers meeting at the Bank for International Settlements in Basel last month considered investigators preliminary report on the crash and attendees say there is a growing consensus something must be done in response Although concrete action is likely to come slowly there is some support for the idea of building trading tools that would allow central bank intervention to slow down such outsize moves in future The fact is the market is going more electronic and things happen faster and the ability to intervene as banks have in the past is taken away So you are going to see more of these said one of those present at the meeting asking not to be named We are not there yet but I think you need electronically to build flash crash algorithms It wouldn t be expensive And knowing that your central bank is looking at your currency constantly and would do something is a good thing It is their duty really Both he and other sources present at the meeting said there was a broad consensus that officials must do more to address the risk from market flash crashes The Bank of England and a spokesman for the Bank of International Settlements declined to comment HIGH FREQUENCY The sterling event followed sudden slides in U S Treasuries and stock markets in recent years that also prompted regulatory investigations and in some cases prosecutions for market manipulation In January South Africa s rand tumbled 9 percent against the dollar in illiquid Asian trade too Bankers and regulators all say the crashes are broadly the result of changes in the structure of markets These include less voice trading between human counterparties and a shift away from traditional market making where certain banks commit to hold large positions and absorb risk when trading is thin Without that backstop and with at least a third of trading now driven by computers programmed to react to moves in the market or signals from social media and news outlets the potential for a self reinforcing plunge is greater Whereas once bank trading desks held huge positions that could absorb large orders and work them off over periods of days or even weeks the new generation of market makers pride themselves on holding risk for a maximum of 10 or 15 minutes While aware of these issues central banks have generally tended to regard them as the price for making banks take on less risk overall with the only major fallout a slight rise in the tiny costs for transacting big currency orders Wading into markets to halt a flash crash especially one involving highly liquid assets such as U S Treasury bonds might also create its own problems two other sources familiar with discussions at BIS meetings said Central banks themselves have become steadily more sophisticated so that dealers are now unable for example to say when the Swiss National Bank is conducting its regular interventions against the franc But designing a system which guaranteed you would buy a currency or other asset in certain circumstances might encourage markets to test it It s not obvious what to do At the moment it is more about asking the question I don t think there is an obvious answer said a second source present at the meeting One question is how many markets would you set out to cover You can make a case for the FX market But would you say the same about Treasuries |
C | Investors in delisted oil ETNs sell but at a price | By Trevor Hunnicutt NEW YORK Reuters Investors are paying a price for not finding buyers for popular exchange traded notes ETN used to bet on oil prices that delisted from U S exchanges this week Credit Suisse s VelocityShares 3x Long Crude Oil ETN UWTI became the largest product of its kind delisted from U S exchanges after trading Thursday VelocityShares 3x Inverse Crude Oil ETN also delisted The notes promise to magnify or deliver the opposite of oil price gains allowing investors to book huge profits when oil prices rise or fall but also creating the potential for massive losses Despite their complexity the notes are widely used by individual retail investors But Credit Suisse SIX CSGN delisted the notes without offering a new redemption option for investors who retained them raising the prospect that investors who did not sell the notes could be stuck in the products which do not officially expire until 2032 Reuters reported this week It s ultimately buyer beware said ETF com Chief Executive Officer Dave Nadig who sold 10 UWTI notes Friday Investors end up in this weird information gap Now the products which have an outstanding value of 745 million live on in a netherworld of over the counter trading Some investors appear to be paying a steep price to exit with some UWTI notes selling for more than 10 percent of a discount to the note s estimated intraday value according to Thomson Reuters data Three million notes changed hands Friday Unless Credit Suisse offers a new redemption option investors need at least 25 000 ETNs to get their cash back from the issuer The speculators buying the notes are taking a risk that they will not get enough shares to redeem but the trades show they could turn a profit if the trade works out Nadig said Credit Suisse declined to comment VelocityShares a Janus Capital Group Inc unit that provides services for the notes could not immediately be reached for comment Credit Suisse said in a Nov 16 statement it would delist the ETN to better align its products with its broader strategic growth plans VelocityShares said late Thursday it was launching two new ETNs backed by Citigroup NYSE C as an alternative to the existing product Investors hold 22 billion of U S ETNs which constitute a pledge by an issuer Payouts are based on the performance of the underlying asset but the notes do not hold those assets unlike ETFs to which they are often compared |
C | Credit Suisse lowers hurdle to redeem delisted oil ETNs | By Trevor Hunnicutt NEW YORK Reuters Credit Suisse SIX CSGN on Friday said it would lower investors hurdle to redeeming two popular exchange traded notes used to bet on the price of oil after it delisted the products in a surprise move this week VelocityShares 3x Long Crude Oil ETN became the largest product of its kind delisted from U S exchanges after Thursday trading VelocityShares 3x Inverse Crude Oil ETN was also delisted The move comes as the bank s earlier decision not to offer a new option for investors to redeem the oil trading notes raised the prospect that some investors who failed to find buyers would not be able to trade the notes for what they are worth or at all Investors who managed to sell the notes in an over the counter netherworld on Friday after the delisting did so at discounts to their estimated value that in some cases exceeded 10 percent Thomson Reuters data showed Nearly 3 4 million notes changed hands Friday Credit Suisse AG in a statement said investors can now use an early redemption option if they have 500 of the notes down from the 25 000 previously required The company declined to comment further Investors with fewer than 500 of the notes will still ostensibly have to find a buyer elsewhere The notes are not set to officially expire until 2032 The ETNs promise to magnify or deliver the opposite of oil price gains allowing investors to book huge profits when oil prices rise or fall but also creating the potential for massive losses Despite their complexity the notes are widely used by individual retail investors Not withstanding the delisting there were 745 million of the notes still circulating on Thursday when they were pulled off the exchange Investors hold 22 billion of U S ETNs which constitute a pledge by an issuer Payouts are based on the performance of the underlying asset but the notes do not hold those assets unlike ETFs to which they are often compared
VelocityShares a service provider for the notes and unit of Janus Capital Group Inc said late Thursday it was launching two new ETNs as an alternative to the existing product The new notes are backed by Citigroup NYSE C VelocityShares declined to comment further |
C | 4 Trade Ideas For Citigroup Bonus Idea | Here is your Bonus Idea with links to the full Top Ten
Citigroup NYSE C C rose higher in April out of consolidation and stalled to digest the move in July It continued sideways until a push higher in September and then quickly settled into consolidation again this time in a descending triangle It broke that triangle to the upside establishing a target to 79 on the triangle break and 81 from the longer movement
The RSI is turning back higher in the bullish zone showing strength and the MACD is stalling in the bullish zone There is resistance at 77 25 and then 82 but from 2008 Support lower sit at 74 25 and 71 50 followed by 70 Short interest is low at 1 and the company is expected to report earnings next January 16th before the open
The December options chain shows biggest open interest at 72 50 on the put side and at 75 and 77 5 on the call side The January 12 Expiry options have biggest open interest at the 77 call strike The January options the first covering the earnings report have sizable open interest spread from 50 to 75 on the put side but focused from 70 to 80 on the call side
Citigroup Ticker C
Trade Idea 1 Buy the stock now with a stop at 73
Trade Idea 2 Buy the stock now and add a January 75 70 Put Spread 1 30 for protection through earnings Sell the February 80 Calls 1 07 to pay for most of the protection
Trade Idea 3 Buy a March 70 77 5 82 5 Call Spread Risk Reversal 30 cents selling the 70 Put and buying the 77 5 82 5 Call Spread
Trade Idea 4 Buy a January March 77 50 Call Calendar 1 20
After reviewing over 1 000 charts I have found some good setups for the week This week s list contains the first five below to get you started early These were selected and should be viewed in the context of the broad picture reviewed Friday which heading into the FOMC meeting and December options expiration week sees the equity markets showing some life Perhaps the Santa Claus Rally has begun
Elsewhere look for Gold to continue lower while Crude Oil stalls in its uptrend The US Dollar Index is biased higher in consolidation while US Treasuries mark time sideways The Shanghai Composite continues to retrench after a long run higher and Emerging Markets are seeking support as they retest breakout levels
Volatility looks to remain very low keeping the wind at the backs of the equity index ETF s SPY NYSE SPY iShares Russell 2000 NYSE IWM and PowerShares QQQ Trust Series 1 NASDAQ QQQ The SPY and QQQ remain strong on the weekly timeframe with the IWM showing some potential weakness The SPY is also strong on the daily timeframe while eh IWM and QQQ are turning up but still looking for new highs Use this information as you prepare for the coming week and trad em well
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer |
C | Correction Looming On Citigroup | I am now completely out of my Citigroup Inc NYSE C CALLS as of Friday
I ve decided to close it out because I see that Citi is now cultivating weekly bearish divergence formation chart above which means we may see some sort of correctional phase coming on this stock as the buyers are getting exhausted and sellers may take advantage of this situation
Citi had a phenemonal run about 35 run since late March of this year So definitely odds are stacking up here against the buyers in the minor to interemediate term If you are a long term investor nothing to worry about as the long term picture still looks bullish It might be a good idea to probably wait for a pullback and accumulate more SHARES on it
If we do see a correction in price and the price hits around 67 66ish at that time I may be preparing to re engage with CALLS on it but not until then I am happy with my gains and willing to seat out even if the price continues to rise
12 17 17 update to see how I traded Citigroup NYSE C timestamp since March |
C | Citigroup Double Tops At 8 Year Chanel Line | Citigroup NYSE C has maintained a nearly perfect two year ascension channel shown in red I m only showing the past seven years due to auto scaling issues from C s long term chart
While C also operates in a wider black line channel you can see that the upper line of the blue channel is key and it just double topped at that line in the past three months and posted a shooting star on the second peak of the double top This is not bullish |
JPM | When Will Gold Rally Watch The Yen | As we all know Gold and Silver have been viewed as a form of currency since the beginning of time Ancient civilizations used gold silver and other metals as currency because they didn t want a government to simply print an endless amount of paper money Many people in modern times think that the ancients just didn t realize paper money was easier to use but that s not the case The ancients were smart and understood mathematics better than any other subject
Many in the financial media are now quite bearish on gold silver and other precious metals After all gold topped out in September 2011 at 1923 70 an ounce which is when J P Morgan Chase NYSE JPM upgraded gold to 2500 an ounce Unfortunately a week after the upgrade gold began to decline and has been selling off ever since JPM s call
So when will it start to rally again
Watch The Yen
Well it seems that gold has been declining as the US Dollar Index has strengthened and the Japanese Yen has fallen And that tells us that traders should watch for gold to rally when the USD JPY starts to fall According to the Commitment of Traders Report over the past six months the commercial money has been increasing their net long position in the Yen Which tells us that they re betting the USD JPY will eventually fall
On the chart below you can easily see that the SPDR Gold Trust ARCA GLD is trading inversely to the USD JPY Note that GLD is the thick black line and the USD JPY is the green and red candlestick bars Should this chart correlation remain intact it is indicating that when the USD JPY declines gold will start to trade sharply higher Everyone is now watching the efforts of the Bank of Japan as they attempt to devalue the currency Unfortunately for the Japanese their economy is still struggling as debt mounts The Bank s goal is to try and create inflation while blocking deflation But once and if inflation ever starts it should only help to boost gold
And that s the first clue we should watch for as an indication as to when gold will start to turn sharply higher again |
JPM | Silver Why This Time Could Be Different | The Commitment of Traders Report for positions held at the close of Comex trading on Tuesday October 7th 2014 did not change much compared to a week earlier The reporting week included October 3d on which silver was trading at its absolute lows According to Ted Butler these lows didn t mean much as there was so little volume associated with them that they were more fishing expeditions by JPMorgan and their High Frequency Trading buddies than anything else The powerful rallies with high volume off those lows pretty much negated any improvements in the COT Report that would have shown up if those rallies hadn t occurred
Ed Steer analyzes in his daily gold and silver newsletter the COT report for the reporting week in which silver reached 16 70 and gold 1185
In silver the Commercial net short position actually increased by 1 479 contracts or 7 4 million ounces The Commercial net short position now stands at 81 2 million ounces Ted Butler says that JPMorgan s short side corner dropped by about 500 contracts during the reporting week and now stands at 10 500 contracts or 52 5 million ounces of the stuff which is a huge percentage of the total Commercial net short position Ted Butler also said that this is JPM s smallest short position in silver since they took over Bear Stearns back in mid 2008
Under the silver hood in the Disaggregated COT Report the Managed Money sold 1 200 long contracts and covered 835 short contracts so their net short position is a new record high albeit by a small amount 365 contracts
In gold the Commercial net short position also increased but it was only by 2 678 contacts or 267 800 troy ounces Their net short position now stands at 6 34 million troy ounces Ted Butler says that JPMorgan s long side corner in gold is now 2 1 million troy ounces
In the Managed Money category these traders sold 1 200 longs and covered 140 shorts so they increased their net short position in gold by the difference between those two numbers
What do we make out of the current gold and silver futures positions One thing is clear as both Butler and Steer have reiterated the rate of accumulation in short positions of commercial traders read J P Morgan Chase Co NYSE JPM during the next rally will determine to which extent the rally will run So far after the silver price peak in 2011 all rallies have been capped by aggressive shorting by commercials Is there a reason to believe this time will be different Although hesitant COT analyst Ted Butler believes there are reasons to believe that it could be different with the next precious metals rally
From Ted Butler s latest premium update on
I m thinking the commercials and JPMorgan will let it rip this time Why
For one reason the manipulation and commercial dominance has gotten out of control not just in silver and gold but in many other commodities as well In addition to COMEX copper and NYMEXplatinum and palladium the technical fund commercial price dominance has come to effect too many important commodities like Crude Oil and currencies Just this week crude oil accelerated its price decline to two year lows all based upon crooked NYMEX dealings In fact there are major commercial technical fund imbalances in more important markets than not The hard commodities are configured for major price advances as are the currencies lower on the US Dollar Index I don t recall an overall similar set up to this extreme
These paper market manipulations are causing severe dislocations in the real world and it is only a matter of time before someone notable not me makes the connection between the futures markets and prices of the actual commodities Countries are starting to notice that prices have become irrational and not in synch with real world supply and demand facts Russia and South Africa in platinum for example Sooner or later the actual functioning and legitimacy of the regulated futures markets will come under scrutiny When that occurs more will come to see what I and most of you know to be the case namely that the CME Group along with major banks are running the world s largest bucket shop where prices are what they alone decide them to be nothing more nothing less This should prove particularly advantageous to silver where I believe the whole sick scheme started more than 30 years ago
Lastly this spreading manipulative scheme can t continue indefinitely and will cause its own demise by how it distorts the real world of supply and demand The level of legitimate hedging in all markets is rapidly shrinking despite CME Group s non stop commercials to the contrary and has been replaced by unbridled speculation thus undermining the whole concept of why futures trading exists Thus the crooks at the CME have sowed the seeds of their own destruction Silver should prove to be the star performer as this process unwinds because it has the best set up of all The CME and the CFTC should have never allowed such a large technical fund short position to come into existence but now that it exists it has become the silver investor s best friend |
JPM | Fed Member Hints At Continued QE USD Hit Hard | Volatility is back in FX markets J P Morgan s NYSE JPM proprietary global index of volatility has risen to the highest level in eight months in the past 24 hours having fallen by 45 through the first six months of this year That was until GBP singlehandedly brought it higher through September as the market chewed through the effects ramifications and general bluster of the Scottish Independence Referendum I would surely not be bemoaning the lack of currency volatility had Salmond and the Yes campaign won
Even with the prospect of a break up of 308 years of currency union volatility levels only really returned to within half a standard deviation of the past ten year average and that was at the very short end of the curve If the collapse of a country not a bad payrolls report central banker language SNAFU or below par inflation report can only see a real shift in the short end of volatility curves then something was thought to be very wrong with our landscape
Now however we are back into a market where haven currencies are being fired higher at the expense of riskier assets Japanese yen has enjoyed its biggest fortnightly gain since June of last year Swiss franc is rolling stronger and the pound and the euro are excelling as well The one thing missing from this equation is the US dollar which had its knees taken from under it by a central banker s comment yesterday afternoon
As soon as we started to see these latest ructions we believed that it was only a matter of time until a research note or comment on additional monetary stimulus was published As we said on Wednesday with the Fed stepping off the bond buying stage by closing off its QE plan at the end of this month we have to wonder just how rates would go before intervention from the central bank Yesterday Federal Reserve member Bullard told Bloomberg that the Federal Reserve should consider a delay in ending quantitative easing
There are a lot of things that are surprising about that statement Possibly the most surprising is that it has taken only two days of volatility to take a member albeit not a voter this year or next of the most powerful central bank in the world to feel the need to raise the prospect of a reversal of 11 months of policy We have to remember that the tapering of asset purchases from the original level of 85bn a month is nearly complete the Fed is currently only spending 15bn a month on treasuries and mortgage backed securities at the moment
How much difference that would make is very marginal in my estimates What it has done is further kick interest rate expectations along the curve Traders now estimate a Fed interest rate increase in December 2015 at a 61 probability suggesting it s now the earliest date for a likely move They saw a 52 chance for the Fed to tighten in July next year as recently as October 3rd
Bank of England members are also joining the party although by simply emphasising that the Bank could keep rates at current levels without an associated risk of increased inflation Volatility in sterling crosses remains high at the moment even with the Scottish referendum in the books as we continue to weigh up 2015 s political risk and could damage prospects for the pound as a port in the current market storm for investors
The biggest mover overnight has been the NZD following another central bank snafu The Reserve Bank republished its statement from September 25 saying that the level of the NZD was unjustifiably high NZD recovered its losses once the statement had been retracted
Today s markets are once again rather data free but that is no guarantee of tranquility as we feel that this ongoing market situation definitely has the legs to continue |
MS | Oil Prices Slip On Record Iraq Output | By
Reuters Brent crude oil prices fell below 50 a barrel on Monday after Iraq announced record oil production and the global economic outlook darkened
Iraqi Oil Minister Adel Abdel Mehdi said on Sunday Iraq pumped 4 million barrels per day bpd of oil in December its highest ever thanks to higher output from its southern terminals and a surge in supply from the north
Abdel Mehdi said Iraq planned to a big increase in exports from the northern city of Kirkuk and the Kurdistan region which would increase production to 600 000 bpd from April
Brent crude traded around 49 40 a barrel by 1015 GMT down 77 cents U S crude was trading down 74 cents at 47 95 a barrel
There s still more supply than demand and that s a situation that will not change in just a few weeks said Hans van Cleef energy economist at ABN Amro
Oil prices have dropped by more than half since last June as output around the world has soared while demand growth has slowed Although the International Energy Agency IEA said last week a reversal in the trend was possible this year it added that prices may fall further before rising
Analysts said prices found some support from a drop in U S drilling rigs signifying a likely fall in production in the future But they said there was not much room for gains
Some positive data points helped to stabilize oil for now Upbeat IEA comments and a falling U S rig count were the latest positive news While the news was able to halt oil s price decline it is not enough to turn prices bullish Morgan Stanley said in a note to clients on Monday
China the world s biggest energy consumer is expected on Tuesday to report its weakest economic growth for more than two decades Data from China s National Bureau of Statistics showed on Sunday house prices fell for a fourth straight month
A meeting of the European Central Bank on Thursday will likely see the launch of a government bond buying campaign pointing to further euro falls against the dollar as well as to downward pressure on oil prices
It is not hard to find evidence of increasing concerns around global economic weakness Yield curves across the world have been flattening longer term yields falling relative to short ones a dynamic typically associated with expectations of weakening economic conditions Timera Energy said on Monday |
MS | Morgan Stanley falls 3 in pre market trade after Q4 earnings miss | Investing com Wall Street investment bank Morgan Stanley NYSE MS reported weaker than expected fourth quarter earnings ahead of Tuesday s opening bell sending its shares lower in pre market trade Morgan Stanley said adjusted earnings per share came in at 40 cents in the three months ended December below expectations for earnings of 50 cents per share For the current quarter income from continuing operations was 47 cents per diluted share The bank s fourth quarter adjusted revenue totaled 7 54 billion missing expectations for revenue of 8 08 billion James P Gorman Chairman and Chief Executive Officer said We finished 2014 in substantially better shape than we entered the year We delivered strong results across several of our businesses although overall performance was affected by the choppy market conditions of the fourth quarter Immediately after the earnings announcement Morgan Stanley shares declined 3 in trading prior to the opening bell Meanwhile the outlook for U S equity markets was upbeat The Dow futures pointed to a gain of 0 4 at the open the S P 500 indicated a rise of 0 45 while the Nasdaq 100 signaled an increase of 0 6 |
MS | Analyst turned fund manager basks in Xiaomi glow | By Denny Thomas HONG KONG Reuters Richard Ji whose little known fund was the biggest investor in leading Chinese smartphone maker Xiaomi Inc s XTC UL 1 1 billion fundraising last month is a numbers man looking to spot category killers start ups with the power to disrupt Ji a former Morgan Stanley technology industry analyst co founded All Stars Investment Ltd in Hong Kong last April with half a dozen colleagues from the Wall Street bank The fund swiftly raised about 750 million to target China s vast internet sector Ji told Reuters in an interview at his small office in Hong Kong s central business district A Xiaomi branded television hangs on the wall Ji declined to name investors in his fund but said half the money came from leading Asian corporations and the rest from business leaders in the IT consumer and financial industries As a fund we focus on late stage opportunities or companies that are 2 3 years away from potential IPO he said If you focus on growth stage companies chances are you ll pick the wrong horse Last year s record 25 billion IPO from Alibaba Group Holding Ltd injected new life into Chinese tech hopefuls Alibaba and other Chinese companies raised a combined 29 3 billion through U S listings last year alone minting millionaires and fuelling a rush to fund tech start ups Ji reckons only one in every 60 000 internet start ups in China makes it to a public listing WHO YOU KNOW Ji whose 11 years as an industry analyst helped him build close ties with Chinese tech entrepreneurs including Xiaomi founder and CEO Lei Jun says he targets what he calls category leaders and category killers These companies have a disruptive product or business model and they are the winners of tomorrow he said Xiaomi fits that bill Just three years after selling its first mobile phone Beijing based Xiaomi dubbed China s Apple is worth 45 billion making it the most valuable start up in the technology sector Already the world s No 3 smartphone maker Xiaomi has ambitious plans to take on Samsung Electronics as it expands into home appliances televisions and TV content Lei Jun placed extraordinary faith in Richard by handing him the mandate said one individual who knows both men and is familiar with the fundraising That trust was built over a period of time and Richard did not disappoint him Xiaomi s reliance on Ji 46 to drive the December fundraising underscores the importance of strong personal ties He s connected well regarded understands patterns and has learned that the odds are in his favor when he has the courage of his convictions all in all a powerful combination said Mary Meeker general partner at U S based venture capital firm Kleiner Perkins and Ji s mentor at Morgan Stanley He comes from an ordinary background The remarkable thing about Richard is that he s obsessed with analysis even with simple things in life said a former classmate of Ji s from Fudan University BUBBLE TROUBLE After a first degree from Fudan Ji went on to Harvard where he specialized in novel cancer therapy During a brief stint in the pharmaceuticals industry he dabbled in tech stocks and trebled his money in 1999 only to lose it all the following year as the dot com bubble burst I was a victim of the previous technology crash and so we re extremely cautious about the current bubble But there are key differences between the 2000 boom and now Ji said Ji notes that in early 2000 fewer than 5 percent of Chinese used the internet Today some 630 million people around half the population log on in some form making China the world s biggest internet market and internet companies don t just rely on advertising revenues Apart from Xiaomi Ji s fund has also invested in Tencent Holdings backed taxi hailing app Didi Dache online fashion retailer Meilishuo and Alibaba Ji declined to say how much more money he plans to raise but said there s no shortage of people looking to invest His real test will be to secure commitments from international funds giving him the profile and clout to take on global technology investors
That will likely depend on the returns his current fund can generate |
MS | Morgan Stanley CEO gets 4 4 million in restricted stock as 2014 bonus | Reuters Morgan Stanley N MS granted Chief Executive James Gorman about 4 4 million worth of restricted stock as part of his 2014 bonus
Each restricted stock unit is convertible into one common share the bank said in a filing on Friday |
JPM | Fed and North Korea put emerging markets on track for weekly loss | By Karin Strohecker LONDON Reuters A renewed flare up of tensions between Pyongyang and Washington put emerging markets on track for weekly losses adding to falls caused by a repricing of U S interest rate expectations and higher Treasury yields North Korea said it might test a hydrogen bomb over the Pacific Ocean with leader Kim Jong Un promising to make a mentally deranged U S President Donald Trump pay for his threats to destroy the country On Wednesday the U S Federal Reserve confirmed it would reverse its stimulus program from next month and stick to its plan to raise rates sending U S yields to five week highs around 20 basis points higher on the week South Korea s won weakened 0 2 percent and was heading for a third week of losses while China s yuan looked set to fall for a second week South Africa s rand and Turkey s lira both seen as vulnerable to U S interest rate rises due to current account deficits both benefited from the dollar s retreat but were still on track for a second week in the red Markets are still digesting Wednesday s Fed meeting which took knocked some steam out of emerging markets Cristian Maggio a strategist at TD Securities said that while emerging local currency debt would be competing with higher U S yields the sector would also benefit from falling inflation and rate cuts at home JPMorgan s GBI EM index of local debt recently saw yields fall below 6 percent to three year lows and they have risen only slightly this week despite the U S Treasury moves The Fed outlook is at the margin putting slight pressure but markets have taken the Fed reading in an extremely dovish way said Maggio The impact on emerging market yields should be negative but it s hard to say how much because in most countries you have low inflation so there are two opposite forces here However the average spreads of emerging market dollar bond yields over U S Treasuries on the JPMorgan NYSE JPM EMBI Global Diversified index rose and were up five basis points since touching three year lows on Monday Emerging stocks also suffered dragged down by Asian bourses TWII KS11 The MSCI index MSCIEF extended losses to fall 0 5 percent the steepest daily decline in nearly three weeks In Russia rouble stocks MCX were on track for weekly losses after four weeks of gains with financial stocks weighing heavily MICEXFNL Russia s financial sector is under pressure after authorities came to the aid of private lender B N Bank the second private bank rescue in less than a month The move has raised questions about the stability of a banking sector buffeted by an economic downturn and Western sanctions South Africa s local bond yields recovered slightly after hitting three week highs on Thursday when the central bank unexpectedly refrained from cutting interest rates For a GRAPHIC on emerging market FX performance 2017 see
For a GRAPHIC on MSCI emerging index performance 2017 see |
JPM | JPMorgan picks Warsaw for new operations center Polish deputy PM | WARSAW Reuters U S bank JPMorgan Chase N JPM has chosen Warsaw to host a new global operations center that will employ several thousand people over the next couple of years Polish Deputy Prime Minister Mateusz Morawiecki said on Friday Possible other contenders to host the center were Budapest and the Polish city of Wroclaw though Reuters reported in April that Warsaw was the front runner It will among others employ people with competences such as in data management risk management credit risk management supply chain management Morawiecki told Polish public radio JPMorgan was not immediately available for comment Poland the EU s largest eastern economy has already established itself as a major offshoring or near shoring site for banks
The estimates of financial services jobs moved from all Western countries to Poland range from 35 000 to 45 000 with Britain s decision to exit the EU seen accelerating the process This is a huge success because this JPMorgan is a sort of Mercedes in the financial services sector Morawiecki added |
JPM | Bitcoin Prices Rise 3 But Hold in Familiar Range as Traders Await China Clarity | Investing com Bitcoin prices pushed higher on Monday but held in a familiar trading range as traders awaited further clarity on what China s regulatory environment will look like going forward
Bitcoin was last up about 120 or around 3 at 3 773 50 by 10 10AM ET 1410GMT Prices have been stuck in a range between 3 500 and 4 000 over the past week
The digital currency is on track to end September with a loss of roughly 20 its worst monthly performance since Jan 2016
Bitcoin prices plunged by approximately 1 000 to below 3 000 per coin earlier this month with the sell off driven in large part by fears of China cracking down on the market as well as a warning from JPMorgan NYSE JPM CEO Jamie Dimon that bitcoin was a fraud
Despite the recent fall the digital currency is still enjoying a remarkable year with prices up almost 350 since the start of the year beating just about every other asset class
Ethereum Bitcoin s closest rival in terms of market cap gained 2 2 to 288 29
Other prominent cryptocurrencies such as Bitcoin Cash Ripple and Litecoin also traded higher |
JPM | JPMorgan to hire more than 3 000 people in new operations center in Poland | WARSAW Reuters U S bank JPMorgan Chase N JPM plans to hire more than 3 000 people in its new global operations center in the next three years Polish Development Ministry said on Tuesday Last week Polish Deputy Prime Minister Mateusz Morawiecki announced that JPMorgan Chase picked Warsaw for the new center Possible other contenders to host the center were Budapest and the Polish city of Wroclaw though Reuters reported in April that Warsaw was the front runner |
C | Oil hits 16 month high in buying rush after OPEC agreement | By Jessica Resnick Ault NEW YORK Reuters Crude rose above 55 a barrel to hit a 16 month high on Monday as rising prospects of a tightening market after last week s OPEC landmark deal to cut production has given speculators impetus to increase bets on higher prices Monday s gains take the rally since the Organization of the Petroleum Exporting Countries agreement was struck on Wednesday to 19 percent for Brent and 16 percent for U S crude Last week s 12 2 percent increase was the largest one week rise since February 2011 OPEC sentiment continues to support oil markets Speculative short positions are still at elevated levels and as more traders unwind these positions they could trigger more support for oil prices said Hans van Cleef senior energy economist at ABN Amro in Amsterdam By 11 15 a m Eastern 1615 GMT Brent crude LCOc1 rose 49 cents to 54 95 a barrel a 0 9 percent gain after hitting 55 33 its highest since July 2015 U S crude West Texas Intermediate WTI CLc1 futures rose 23 cents to 51 91 a barrel a 0 5 percent gain WTI traded at a peak point for the day of 52 42 also the highest since July 2015 About 380 483 lots of the front month contract were traded some 57 percent of the previous session s volume Weekly data from the InterContinental Exchange on Monday showed investors had raised net long positions on Brent to the highest level in four weeks O ICE After OPEC agreed to curb production by 1 2 million barrels per day bpd from January eyes have now turned to a meeting this weekend between OPEC and non OPEC producers to expand the deal Non OPEC producers are expected to agree to add an output cut of 600 000 bpd in Vienna on Dec 10 We remain skeptical that non OPEC producers will line up to pledge their own reductions when OPEC s announcement last week already largely took responsibility for rebalancing the market said Tim Evans energy futures specialist with Citigroup NYSE C in New York In our view the rally in prices represents an economic call for more production not more cuts Transneft Russia s pipeline monopoly suggested on Monday a cut to oil output could begin in March
Iran which was granted an output rise as part of the OPEC deal as it recovers production curbed by sanctions will also attend the meeting SHANA news agency said |
C | GoDaddy to buy Host Europe for 1 82 billion | By Narottam Medhora Reuters GoDaddy Inc N GDDY a U S based website domain name provider said on Tuesday it would buy peer Host Europe Group HEG for 1 69 billion euros 1 82 billion including debt as it seeks to expand beyond the initial set up of websites GoDaddy has branched into the more profitable business of hosting websites for small businesses and consumers and the HEG deal will help it accelerate this shift as well as broaden its customer base in Europe The deal gives the company a five year jump in Europe GoDaddy Chief Executive Blake Irving said in an interview Godaddy s share price rose 2 2 percent in early trading HEG is one of Europe s largest independent web hosting firms and operates brands such as 123Reg Domain Factory Heart Internet and Host Europe GoDaddy well known in the United States for its at times provocative TV marketing campaigns trumped bids from German Internet service provider United Internet AG DE UTDI and Deutsche Telekom AG DE DTEGn for the company Reuters had reported last month that GoDaddy was in exclusive talks to buy the company HEG is currently owned by European private equity firm Cinven Ltd CINV UL which acquired the business in August 2013 for 438 million pounds 560 million Irving said the company had considered buying HEG in 2013 but dropped the plan over integration concerns GoDaddy also said it would explore options for HEG s PlusServer managed hosting business including a possible sale HEG s chief executive Patrick Pulvermuller will lead European operations of the combined company The HEG platform will likely be used by Godaddy for follow on deals in Europe a person familiar with the deal said GoDaddy said HEG was on track to generate about 328 million in bookings and about 139 million in adjusted EBITDA in 2016 Cinven was advised by Deutsche Bank DE DBKGn on the deal while Godaddy was advised by Greenhill Banks including Barclays LON BARC Citigroup NYSE C Deutsche Bank and RBC are lining up the financing of the deal 1 0 9284 euros
1 0 7849 pounds |
C | Citi says behaved appropriately in sterling flash crash | By Patrick Graham LONDON Reuters Citi N C said on Wednesday that its trading operations functioned appropriately in a thin and illiquid market during October s flash crash in sterling responding to a Financial Times report that a trader at the U S bank exacerbated the pound s fall The FT cited unnamed bankers and officials as saying that Citi s traders were not believed to have started the slide in the currency but that its Tokyo desk played a key role in sending the pound to its lowest levels in 31 years Sterling fell sharply following a news event just after midnight UK time when the GBP spot foreign exchange market was extremely illiquid Citi the biggest player in the 5 trillion a day global currency market said Citi managed the situation appropriately and our systems and controls functioned throughout the period The Bank of England and the Bank of International Settlements whose markets committee is overseeing an investigation into the crash with input from the BoE had no immediate comment on the Financial Times report The pound dived and rebounded by about 10 percent in a few minutes at the start of Asian trading on Oct 7 an unprecedented swing for a major currency at an hour when the market is at its lowest ebb The moves added to the hefty losses the pound has suffered since June s British vote to leave the European Union There were also some sales of UK assets by investors worried over the stability of the currency and its impact on inflation Market participants generally agree the sell off was at least worsened by the algorithmic machine trading that makes up much of the global currency market while some have speculated the initial move may have come from electronic news gathering software or other parameters used in trading programs
The final report from BIS is due in January although officials say it will probably focus on how the market as a whole functioned and it is not clear if it will discuss the role of particular institutions and orders in the slide |
C | GoDaddy s HEG buyout backed with 1 91 billion of loans | By Claire Ruckin LONDON Reuters US based website domain name provider GoDaddy s 1 69bn 1 81 billion acquisition of peer Host Europe Group will be backed with 1 907bn of loans the company said The fully committed debt financing from existing lenders will include a US 1 377bn equivalent incremental term loan split into a dollar denominated tranche and a euro denominated tranche It is set to pay 275bp 300bp over Euribor Libor There is also a US 530m bridge loan which will pay 275bp over Euribor The bridge is expected to be repaid in order for the company to reduce debt in 2017 if it sells part of the business GoDaddy said it would explore options for HEG s PlusServer managed hosting business including a possible sale From the 1 69bn total purchase price 605m will go to the sellers and 1 08bn assumed net debt will be simultaneously refinanced at closing The transaction is expected to close in the second quarter of 2017 Barclays LON BARC is leading a leveraged loan financing to back the deal alongside a number of other banks expected to include Citigroup NYSE C Deutsche Bank DE DBKGn and RBC The loan is due to launch for syndication to investors in January banking sources said
GoDaddy owned by private equity firms KKR and Silver Lake will buy Host Europe from private equity firm Cinven which acquired the business in August 2013 for 438m |
JPM | Stuck Inside Of The CME With The COMEX Blues Again | Precious metals prices remain range bound over the short term after a devastating three year run From a technical standpoint it doesn t look great we are stuck in this limbo of tightly controlled price limbo while the world continues to melt apart for the 99 9 COMEX positioning for the big banks and speculators has not changed that much over the last few months J P Morgan Chase Co s NYSE JPM short remains at around 50 days of world production In fact these spec longs who have been hanging in throughout may be the reason we ve remained range bound over the last couple of options expirations like the one this week Prices are not going to move up from here until the paper pushers who control prices via the exchanges find a way to profit from it Regulatory capture happened long long ago The Painted TapeNow we even know that central banks intervene directly Yes most people get it Everything is manipulated But the precious metals are manipulated more so And the blind spot for most is that these metals still hold monetary status Let them trade freely and you will see what I mean immediately The problem is one that forms the foundation of this massive monetary debacle belief If the mainstream financially educated can t figure out that something like jobs or inflation data are nothing but figments from a mad professor s imagination how can we expect them to grapple with the concept that gold and silver are still basically money They choose to believe the madness and therefore the mechanism will go on until it breaks Any public push toward regulation taxation or confiscation would simply flame the fire faster than Walmart sells out of ammo each time gun control is mentioned by the authorities Take a 10 minute look the through the GATA archives if you want to understand how they get away with manipulating prices 24 7 Pull up any archive article from Ted Butler if you want to know fundamental mechanism for how they rig the game from the COMEX pits Check in with Nanex if you need to learn more about the HFT scourge that enables the powerful to pilfer the innocent on a daily basis Speaking of Nanex check out the latest revelation they uncovered Central banks are being incentivized by the CME to directly intervene Now they don t need the big bad bullion banks as their patsies They can just do it themselves This is a reflection of far detached we ve become Some say So what If it s so predictable it s game able The market is bigger than any of this ultimately so in the meantime make the best of it Most chose not to go there because it would be bad for the brand Enough money and time you can trade the illusion and call it the market if you want But the other side There is a dark shadow cast To get there requires intervention The highest form is interest rates which in effect supports the bond market Markets that have a physical asset one that is liquid and capable of widespread ownership and recognition Another day another conspiracy fact another nail in the coffin of faith in a broken monetary system where profits will disappear just as fast the 0 s and 1 s with which they are created can travel across the collocated internet connections We end up with this grand illusion of reality that does nothing except fuel an ultimately disastrous complacency Until this great vacuum of hope faith and belief is replaced with hard cold reality It will probably happen so fast that most people will not even notice that the metals have taken off for the stratosphere |
JPM | Is Citigroup The Dumbest Bank Ever | Back in 2006 when the housing bubble was entering its truly and obviously manic phase mega bank Citigroup Inc NYSE C was being pressured by Wall Street to grow faster And rather than pushing back against what were clearly ill timed demands from desperately short sighted analysts Citigroup CEO Chuck Prince uttered some words and adopted a strategy that live on in the annals of banker cluelessness
As long as the music is playing you ve got to get up and dance
Here s how covered the story at the time
The concerns are perfectly legitimate says CEO Charles Chuck Prince People are saying Do something They want to know how long is this guy going to take Not to worry Investors will be happy to hear that Prince is dropping hints that he s revving up the deal engine again He laments that for the past three years he had to stay out of the market and focus exclusively on making existing operations more profitable We re getting ourselves back on the playing field he said noting that most of the acquisitions will be in foreign markets There s already chatter in London that he s eyeing Lloyds Bank or BNP Paribas
Here in the U S consumers are Prince s target If we don t grow consumer the whole place has modest growth he says Prince is planning big branch expansions in locations where many customers of the company s Smith Barney brokerage business live hoping to sell them bank products In Boston for instance Citi is planning to build 30 branches next year as a service to 30 000 Smith Barney clients If it s successful Citi will roll out new branches in Philadelphia and a half dozen other cities
And some at least in the financial community think this is a good idea We are impressed by Citi s organic growth efforts including 785 new branches year to date said one analyst
This it should be noted was one short year before the US housing market and consumer spending in general imploded For more on Citi s housing bubble tragi comedy Banks and Bubbles III We re getting ourselves back on the playing field
Now fast forward to the present as an even bigger global financial bubble enters its terminal phase and Citigroup is back on the dance floor stomping around to even more dangerous music From today s Bloomberg
Embraces Derivatives as Deals Soar After Crisis
In the past five years the firm that took the largest U S bank bailout of the financial crisis increased the total amount of derivatives on its books by 69 percent surpassing most U S peers and closing the gap with the market leader JPMorgan Chase Co NYSE JPM At the end of June Citigroup Inc NYSE C had 62 trillion of open contracts up from 37 trillion in June 2009 company filings show JPMorgan trimmed its holdings 14 percent to 68 trillion
Citigroup is expanding as regulators try to rein in instruments that helped fuel the 2008 credit contraction The third largest U S lender has amassed the largest stockpile of interest rate swaps a type of derivative that can swing in value when central banks raise rates More than 92 percent of the bank s derivatives don t trade on exchanges making it harder for regulators to spot dangers in the market
Risk taking is in their DNA said Arthur Wilmarth a law professor at George Washington University who wrote a 2013 paper describing failures that led New York based Citigroup to seek a 45 billion bailout and more than 300 billion in asset guarantees during the crisis Even taking the winning side of a derivative carries a risk the other party can t pay he said It s basically a speculative trading business
Derivatives typically require parties to make payments to each other based on the value of underlying stocks bonds commodities or interest rates Airlines and farmers use the contracts to offset price swings for fuel vegetables and meat Bond buyers rely on them to insure against defaults and some investors use them to speculate
Client Demand Regulators are demanding banks keep more capital for derivatives after credit default swaps insuring mortgage bonds amplified losses from the U S housing bust The government bailed out American International Group Inc AIG which sold many of the contracts to prevent the system from collapsing
Citigroup led by Chief Executive Officer Michael Corbat 54 expanded the business from a low base to meet the needs of customers said Danielle Romero Apsilos a company spokeswoman
We have seen gradual risk managed increases in interest rate derivative activity over the last five years as a result of client demand which has brought us in line with our competitors she said in a statement
The increase in the value of Citigroup s derivatives restores the bank to a second place position it hasn t held since the first quarter of 2008
The bank doesn t disclose how much it earns from derivatives During the first half of the year it brought in 6 85 billion from fixed income markets including currencies and commodities and 1 54 billion from equities The figures include revenue from trading derivatives as well as cash instruments such as Treasuries and corporate bonds
Gross Notional Citigroup s 62 trillion of derivatives is what s known as a gross notional figure a raw tally of all contracts without adjusting for risk reduction efforts The amounts don t represent money that changed hands and are used to calculate payments between parties Banks prefer to focus on net figures which are much smaller in part because they can use offsetting positions to cancel each other
That math relies on every party paying something AIG couldn t do and on the trades moving in opposite directions a relationship that can break down In 2012 offsetting trades at a JPMorgan subsidiary in the U K led to more than 6 2 billion in losses when they moved in the same direction
Citigroup reported 44 5 billion of derivatives assets at the end of June after backing out netting arrangements and collateral according to filings with the Securities and Exchange Commission JPMorgan reported 49 1 billion
The tendency of banks to rely on each other to net positions means one firm s failure can cascade through the system The danger that one party can t hold up its end of the deal is known as counterparty risk It means even if positions are netted every trade adds risk unless it s fully backed by collateral said Marti Subrahmanyam a finance professor at New York University s Stern School of Business
Always the concern with gross numbers is that netting could break down Craig Pirrong a finance professor at the University of Houston said in an interview
Rising Rates About 55 percent of Citigroup s portfolio is interest rate swaps which typically involve exchanging a floating rate payment for one that s fixed Less than half of the bank s interest rate contracts are cleared and while those in which the firm receives a fixed payment look safe in a low rate environment they can lose value when rates rise
Some thoughts The Bloomberg article does a good job of pointing out the absurdity of reporting a net risk position of only 1 1 000th of gross derivatives exposure With this kind of leverage it will take just a few relatively minor hedge funds to fail to bring down the whole house of cards
And note that Citi s big recent bet is on interest rate derivatives which are as the name implies bets on the direction of interest rates For every up bet there s a corresponding down bet which means the only environment in which this market doesn t blow up is one characterized by extreme stability Let there be a rate spike in either direction and half the counterparties on tens of trillions of dollars of bets are under water The higher the volatility the deeper the losers are buried Let a few of them be unable to make good on their obligations and Citi s minimal net exposure becomes gross in both meanings of the word Since rising volatility is the only certainty in the decade ahead some form of derivatives crisis is highly probable leaving Citi in its accustomed spot at the center of the storm |
JPM | China Moves To Dominate Gold Market With Physical Exchange | Shanghai Gold Exchange International Board
China is slowly moving to dominate the global gold market and it is important to join the dots regarding a few key recent developments in China relating to gold
When the International Board of the Shanghai Gold Exchange SGE was launched last Thursday September 18 during an evening trading session it was notable that the first transactions were put through by a diverse group comprising HSBC MKS Switzerland and the Chinese banks ICBC Bank of China and Bank of Communications
MKS NASDAQ MKSI is the Geneva headquartered precious metals trading group that also owns the large PAMP refinery company in Switzerland
There are reportedly 40 international participants signed up to trade on the SGE International Board SGEI but the SGE hasn t specifically confirmed the identities of all participants
Like the domestic SGE which counts precious metals refineries as members the SGEI will have a diverse group of trading participants including a number of international refineries as well as bullion banks and trading houses
Precious metals refineries Metalor Technologies and Heraeus have confirmed that they will be participants and along with MKS this represents three of the largest gold refineries in the world
International bullion banks who have already announced their participation include ANZ ASX ANZ Standard Chartered LONDON STAN and HSBC NYSE HSBC and its also known that Standard J JO SBKJ J P Morgan Chase Co NYSE JPM and the Bank of Nova Scotia The NYSE BNS were said to be interested The Perth Mint was also said to be interested
The presence of international refineries and possibly international mints as possible direct participants within SGEI trading should improve liquidity and price discovery on the new international exchange and help it become a serious competitor to the existing duopoly of gold price discovery carried on in the London OTC market and the New York gold futures market
One encouraging factor about the SGE and the SGE international platform is that there is a lot of physical gold flowing through the Exchange Therefore price discovery is not just based on an inverted pyramid of mostly unallocated gold as in London or mostly cash traded futures paper gold as in New York
Like everything in China the SGE thinks big and it currently employs a network of 58 certified vaults 55 of which are for storing gold and 3 of which store silver These 58 vaults are located in 36 Chinese cities that are considered important for gold refining and gold consumption and physical delivery can actually occur between the vaults
With the launch of the SGEI the International Board has its own new vault in which international participants can load gold in and out of The is vault is being managed by Bank of Communications and is strategically located in the Zhabei district not too far from the Shanghai International Airport Brinks in Shanghai will be the official transporters of gold for the SGEI
Shanghai and Hong Kong Gold Markets To Connect
When the Hong Kong based Chinese Gold and Silver Society CGSE announced last week that they plan to build a massive new precious metals vault in Qianhai in Shenzhen the significance of this announcement was not really appreciated as of yet
The vault is not a stand alone project and its real purpose is to support a CGSE gold trading platform in Shenzhen and allow this new Shenzhen gold exchange to link up with the Shanghai Gold Exchange Shenzhen is less than one hour away from Hong Kong by rail or road
The CGSE has 171 members and between 50 and 60 of these will be registered to operate on the new Shenzhen gold exchange by as early as next month
At the CGSE announcement ceremony last week Dr Haywood Cheung the president of the CGSE confirmed that he has begun negotiations with the Shanghai Gold Exchange with the intention of forming a strategic alliance between the new CGSE exchange in Shenzhen and the Shanghai Gold Exchange
The main objective said Cheung was to enable a mutual access between CGSE and the Shanghai Gold Exchange for market participants in the form of a Shanghai Hong Kong Precious Metals Connect which could help the local gold and silver industry to gain access to the mainland market through the Qianhai project
The Chinese and Hong Kong Governments and financial authorities are going to model this Precious Metals Connect on the soon to be launched Shanghai Hong Kong Stock Connect which is an initiative between the Shanghai and Hong Kong stock markets to boost liquidity and access between the two stock markets and access between Chinese A and H shares
Chinese A shares are shares of mainland Chinese companies traded in yuan renminbi H shares are the Hong Kong listing of the dual listed mainland stocks training on HK dollars In the Stock Connect there will be northbound and southbound daily flows of liquidity within certain limits between the Hong Kong and Shanghai stock markets The Shanghai Hong Kong Stock Connect initiative starts next month on October 13
The CGSE therefore is planning that their Shenzhen gold platform will become China s second gold exchange and offer Hong Kong and the international market another route of access to the mainland Chinese gold market
This is important news and a very significant development and is worth watching over the coming months
PBOC and Gold China Using Gold To Position Yuan As Reserve Currency
Recent comments by David Marsh the co founder of the influential advisory and research group the Official Monetary and Financial Institutions Forum OMFIF illustrate that a paradigm shifts is also occurring within the official Chinese sector as regards gold and the renminbi currency
Interviewed at this month s Chinese gold conference in Beijing Marsh said that I don t know if China has been boosting their official gold reserves but he added that over the past six or seven years the Chinese authorities probably have been adding to their holdings in different ways
Marsh s most recent comments resonate with similar comments he made in January 2013 when he said that it is likely that the Chinese authorities will carry on purchasing gold in modest amounts and they will do it in a way calculated not to disturb the market
Commenting on reserve diversification at the time Marsh said that there s no reason why the Chinese central bank should hold a disproportionate amount of other countries reserve currencies such as the dollar
Just over a week ago the UK Treasury announced the issuance of its first ever renminbi sovereign bond in a move that is seen as a continued boost to the internationalisation of the Chinese currency The proceeds of HM Treasury s issue will become part of the UK s foreign reserves in the Exchange Equalisation Account EEA
Until now the EEA has only held gold euros dollars yen and Canadian dollars Some other central banks such as the Australian Reserve Bank already hold renminbi as part of their reserves and others such as the Swiss National Bank are considering adding renminbi as one of their reserve assets
Last week to coincide with the British government s renminbi announcement David Marsh penned a commentary for the OMFIF on reserve diversification and the Chinese currency titled A Big Chinese step for Britain UK moves to forefront of Renminbi internationalisation
Marsh highlights that in 2015 the IMF will review the composition of their Special Drawing Right SDR monetary unit and an important milestone for the Chinese currency will be the possible inclusion of the renminbi in the SDR According to Marsh there is a growing belief that the Chinese currency now conforms to a sufficient number of standards for convertibility that it will be become one of the constituent parts along with the dollar the euro yen and sterling
In all aspects of the Chinese gold market be it the commercial sector or the official sector the importance of gold as an investment and as a backing to a future currency is being explicitly signalled by the Chinese authorities
The rest of the world should take note that when the Chinese decide on a plan they almost invariably see it through For gold the Chinese are still planning big and the next phase of this plan is worth watching
These important developments in the Chinese gold market are bullish for gold in the long term and should reassure jittery investors after recent price falls
MARKET UPDATE Today s AM fix was USD 1 214 00 EUR 944 75 and GBP 743 51 per ounce Friday s AM fix was USD 1 222 50 EUR 949 22 and GBP 745 38 per ounce
Gold fell 7 30 or 0 6 to 1 217 60 per ounce and silver slid 0 61 or 3 3 to 17 90 per ounce Friday Gold and silver both declined for the week at 1 06 and 4 02 respectively
Silver in USD 5 Years Thomson Reuters
Spot gold in Singapore was trading at 1 217 60 an ounce Gold spiraled to its weakest level since January and silver hit a 4 year low today as investors speculate that the Fed will begin tightening interest rates sooner than expected
Spot gold fell 0 1 at 1 214 84 an ounce at 0916 GMT while earlier it saw a low of 1 208 36 U S gold futures for December delivery were down 1 20 an ounce at 1 215 40
Silver touched its lowest since June 2010 at 17 30 an ounce and was later down 0 6 at 17 71 an ounce
The gold silver ratio jumped to its highest since mid 2010 on Monday at 68 7 Silver is weaker despite robust physical demand globally
China s silver imports were up 5 6 in the first eight months of the year official customs figures showed today Palladium imports were up 30 9 and platinum imports were down 18 9 at 49 049 tonnes
Support for silver is now at 15 the 5 year low from February 2010 see chart |
JPM | GoPro In Focus | Shares of the wearable camera manufacturer GoPro NASDAQ GPRO were down Thursday trading almost 7 lower than on Wednesday GPRO s stock closed at 85 4599 share down 6 34 share from Wednesday Bu by mid day Friday GPRO spiked more than 3 to 88 08 There are many reasons being hypothesized as to why the stock has plummeted The consensus seems to agree that the chief reason was due to a sale of about 5 8 million shares belonging to the founders and head honchos of GPRO Nicholas Woodman and Jill Woodman They sold the aforementioned amount of shares to give the money to their own charity foundation The Jill Nicholas Woodman Foundation This was not nearly a surprise however it did cause the stock to tumble considerably J P Morgan Chase Co NYSE JPM was the lead book running managers of GPRO s public sale or IPO of about 20 47 million shares of Class A common stock and Thursday JPM agreed to release the charitable organization from a lockup restriction with respect to the 5 8 million shares gifted to it The lockup restriction date was supposed to expire on December 26 Many have predicted that the shares transfer to charity was being done for tax reasons and some have raised complaints over how this dodges the lockup period date They accuse JPM and GPRO s management of being secretive and that view it as a sign that they believe the stock will be lower once the lockup does expire Another reason as to why GPRO may be taking a severe pummeling is because legendary investor and owner of the Street com Jim Cramer has urged investors to sell their shares of GPRO GPRO shares were down 3 7 at 88 40 share during pre market trading hours Cramer has stated that sales of GPRO s newly launched HERO4 action camera will not fare well and it will fail to impress investors GPRO s shares were flying high and they look as if they were unstoppable as they soared to a year high of 96 45 share on Tuesday after the company s management had announced that two new action cameras would be available for sale from October 5 2014 GPRO was a Zacks Rank 1 Strong Buy until very recently and now it holds a Zacks Rank 3 Hold Shares of GPRO are slightly down in after hours trading on Thursday as investors continue selling off due to anxiety about further worries today Stock s Prospects It comes as no surprise that GPRO has taken a hit Since GPRO s IPO price of 24 share in June 2014 shares have skyrocketed and the stock has almost quadrupled in value If we look at the company s financials we will see how the stock is overvalued if we go by the forward P E ratio and how it ought to come down a bit After all shares were up by a whopping 50 in September alone Without a doubt GPRO has had a crazy volatile day and it is expected by many traders that GPRO has an 80 share support area and that is true when looking at the stock s history in the past few trading days We do not know which direction the stock will be going today but it is likely that it will face tough resistance to go back up to the 90 share when worried investors may seek to cash in GPRO s Financials The question that remains though is whether GPRO is a good investment Many bullish analysts think that GPRO is a solid pick because the company has a healthy cash reserve of 104 88 million a balance sheet with a current ratio of 1 41 a debt to equity ratio of 86 and a positive operating cash flow of 112 million annually Nonetheless let s look at how the Q2 results for GPRO compare from the previous quarter Q1 results
From the table above one can see that despite the pros of investing in GPRO the company is struggling with its finances and it seems like GPRO is almost something like TSLA Both stocks carry a lot of hype and they have both taken a beating in the past turbulent and eventful month Let s all examine a snapshot of important statistics and factoids regarding GPRO bearing in mind that the following figures are according to Yahoo Finance
Many bearish investors see the stock as very expensive and overvalued and it is true when we look its forward P E and PEG ratios and compare them to the industry s averages of 29 30 and 1 40 respectively The stock is trading at a sizeable multiple of about 90 times future earnings According to Yahoo Finance the stock is also suffering from a price to book ratio of 165 95 price to sales of 11 08 and a forward P E ratio 90 when compared to projected 2015 revenues and EPS growth of 25 The stock is also trading at about 261 8 the Fibonacci Resistance Sequence at 92 93 share Whether or not media advertisements 9videos from extreme sports enthusiasts using GPRO s gear can help save GPRO s overvaluation remains to be seen but it is worth noting that the digital media market is a deflationary market which could fail to justify GPRO s high valuation GPRO is likely to pull back and cash in on the huge gains it has made it is risky to jump in now even after Thursday s correction as the stock may have reached a price ceiling The company s market capitalization was also bigger than its enterprise value a few days ago a negative omen On the bright side bullish investors only have to thank their fortuitous attitude and look below at the comparison between GPRO s performance the S P 500 indexes performance It may be wise to cash in on gains Bottom Line It has now become a very risky game and traders ought to exercise caution if they plan on buying some GPRO shares as they may retract severely After all what goes up very quickly must also come down very quickly and GPRO s run may have very well come to a sweeping end The stock is currently a Zacks Rank 3 Hold and another stock to consider investing in from within the same industry is Skullcandy NASDAQ SKUL which has climbed up 2 80 Thursday which sports a Zacks Rank 1 Strong Buy |
MS | U S Treasury nominee Weiss withdraws from consideration White House | By Emily Stephenson WASHINGTON Reuters Antonio Weiss an investment banker who was a controversial nominee for a top post at the U S Treasury Department has decided to withdraw from consideration the White House said on Monday Liberal lawmakers led by Senator Elizabeth Warren of Massachusetts fiercely opposed Weiss s nomination to the top Treasury domestic finance job because of his work for investment bank Lazard which they viewed as proof of a revolving door between Wall Street and the U S government Weiss will instead become a senior adviser to U S Treasury Secretary Jack Lew a position that does not require Senate confirmation The White House said it would begin a new search for a candidate for the domestic finance job I am disappointed that Antonio will not have the opportunity to serve as under secretary but I understand his request not to be re nominated Lew said in a statement I continue to believe that the opposition to his nomination was not justified White House spokeswoman Jennifer Friedman said Weiss decided to withdraw to avoid the distraction of the confirmation process Weiss did not respond to requests for comment More than 60 business leaders including the chief executives of Morgan Stanley and BlackRock wrote to lawmakers in Weiss s defense after concerns about his nomination for the third ranking position at the Treasury Department arose in Congress Four former under secretaries for domestic finance including Mary Miller who left the job in September also said in a letter to lawmakers last month that Weiss had the skills and experience to succeed in the position Weiss s decision represents a considerable victory for Warren who has become a rising star of the Democratic Party and pushed her colleagues in a more populist direction In recent weeks she also pressured her party to fight Republican led efforts to scale back the 2010 Dodd Frank financial oversight law She has frequently questioned whether former bankers make tough regulators We ve already seen that the new Republican Congress is going to aggressively attack the Dodd Frank Act Warren said in a statement on Monday evening It is critical that the Treasury Department defend the act from those attacks and push for strong implementation and enforcement of the law Warren and other lawmakers also criticized Weiss s experience working for Lazard on high profile deals that involved tax inversions The Obama administration wants to prevent these deals which involve U S companies moving their tax domiciles abroad to get lower rates |
MS | European banks face 52 billion in litigation costs Morgan Stanley | LONDON Reuters Royal Bank of Scotland and Barclays may have to pay some of the biggest bills from an estimated 52 billion in fines and other litigation costs facing Europe s banks in the next two years Morgan Stanley analysts said U S and European banks have paid 230 billion in litigation costs since 2009 and could pay out another 70 billion by the end of 2016 mostly from the 20 largest European banks they said in a research note on Tuesday European banks have paid out about 104 billion so far and the 52 billion they still have to pay much of it related to foreign exchange trading and U S mortgage mis selling could restrain how much they pay in dividends the analysts said The fines and compensation in the last five years are related to practices that include alleged manipulation of benchmark interest rates and mis selling of mortgages in the United States and insurance in Britain Regulators fined six banks 4 3 billion in November after traders tried to manipulate foreign exchange markets FX settlements underscore the need to prove culture and business models are transformed before returns and payouts can rise analyst Huw van Steenis said in a note RBS majority owned by the UK government will have to pay another 10 6 billion on top of the 12 6 billion already paid or provisioned for Morgan Stanley estimated The analysts predicted Barclays could have to pay another 8 3 billion HSBC 7 7 billion Lloyds 6 1 billion and Germany s Deutsche Bank 5 1 billion They estimated that future litigation costs for European banks would include 7 5 billion related to alleged foreign exchange rigging 6 5 billion from interest rate benchmarks Libor and Euribor and 9 4 billion related to U S mortgages U S banks are more advanced in their litigation payouts the analysts said Five major U S banks have paid out 128 billion and are forecast to incur another 18 billion JPMorgan analysts this week also said British banks faced additional litigation provisions They forecast the big four banks faced 15 1 billion pounds 22 8 billion of extra provisions for litigation in the next two years to add to 11 6 billion pounds of reserves they already have set aside for such payouts
1 0 6615 pounds |
MS | Morgan Stanley promotes 151 to managing director | By Lauren Tara LaCapra NEW YORK Reuters Morgan Stanley said it has promoted 151 employees to managing director on Thursday more than half of them in the institutional securities business Senior Morgan Stanley executives in New York including Chief Executive Officer James Gorman had been calling staff members to congratulate them on their promotions Reuters reported earlier in the day The calls began with employees in Asia late Wednesday followed by other time zones into Thursday The new group of managing directors is 22 percent female a spokesman said A year ago 27 percent of those promoted to managing director were women Regionally 61 percent of those promoted were based in the U S with 26 percent in Europe the Middle East and Africa and 13 percent in Asia
The total number of new managing directors is down slightly from the 153 Morgan Stanley promoted last year but up from 144 promoted in 2013 The current group is much smaller than the more than 200 employees it promoted to managing director each year between 2009 through 2012 |
MS | Morgan Stanley executives visit brokerages to reassure after data theft | By Lauren Tara LaCapra NEW YORK Reuters The leadership team of Morgan Stanley s N MS wealth management business has been visiting brokerage offices around the country since last week to reassure advisers and clients in the wake of an alleged data theft by a former employee people familiar with the matter told Reuters Executives including Gregory Fleming president of the division Chris Randazzo chief information officer and Shelley O Connor who oversees the brokerage force have been fielding calls from concerned advisers since Morgan Stanley announced the data theft on Jan 5 They began visiting offices with big books of business last week to discuss what happened and the steps that have been taken to better protect client data said the people who requested anonymity because they were not authorized to discuss internal matters Morgan Stanley spokesman Jim Wiggins declined to comment The tour is part of a broader communications program Fleming and his deputies have embarked on to protect the bank s reputation in the aftermath of the breach the people said As part of that program Morgan Stanley officials have been downplaying the bank s responsibility for what happened For instance executives have been discouraging brokers from using the term hack which gives the impression that an outsider gained access to the bank s systems In this instance a former financial adviser named Galen Marsh allegedly stole personal information of 350 000 clients Morgan Stanley sources have said Some client information was later posted to the website Pastebin in an apparent advertisement to sell it Marsh s lawyer has said his client inappropriately took the data but that he did not post it to a website or try to sell it After the incident advisers got calls from worried clients and wanted more information about how extensive the data leaks were Senior management immediately went into damage control emphasizing that few of the clients were exposed online that no client lost money and that no sensitive information like Social Security numbers had been released For some brokers their efforts have been successful One adviser who has spoken to Randazzo was impressed by the way he isolated the problem alerted authorities within hours and tracked down the employee who took the data soon after The adviser said that while there were widespread initial concerns across the brokerage force Morgan Stanley effectively got in front of the problem by being open about what happened to its staff and the press
Morgan Stanley hired Randazzo in 2013 amid another major technology debacle related to a new internal software system whose installation ran amok The adviser said Randazzo s reputation for listening to adviser complaints and effectively resolving technology issues has helped reassure brokers that the issue has been contained |
JPM | U S home sales hit 12 month low Harvey weighs on Houston | By Lucia Mutikani WASHINGTON Reuters U S home resales fell to their lowest in a year in August as Hurricane Harvey depressed activity in Houston and a persistent shortage of properties on the market sidelined buyers The third straightly monthly decline in sales reported by the National Association of Realtors on Wednesday came on the heels of data on Tuesday showing a drop in homebuilding activity in August The reports suggest housing will probably weigh on economic growth again in the third quarter One of the risks out there for the broader economy is that this house of cards comes tumbling down said Chris Rupkey chief economist at MUFG in New York The housing sector is the one area of the economy that just never reached a full recovery from the recession Existing home sales decreased 1 7 percent to a seasonally adjusted annual rate of 5 35 million units last month That was the lowest level since August 2016 The NAR said Harvey which struck Texas in the last week of August had resulted in sales in the Houston area falling 25 percent on a year on year basis Stripping out Houston existing home sales would have been unchanged in August the Realtors group said Home resales in the South tumbled 5 7 percent last month Harvey and a second hurricane Irma which slammed Florida early this month could hurt September home sales Texas and Florida account for more than 18 percent of existing home sales Sales lost because of delays in closing contracts will be recouped in 2018 The dollar rose against a basket of currencies after the Federal Reserve signaled it still expected to raise interest rates for a third time this year despite low inflation Prices for U S Treasuries fell as did stocks on Wall Street Fed Chair Janet Yellen said though the hurricanes will hold back economic growth in the third quarter past experience suggested that the storms are unlikely to materially alter the course of the national economy over the medium term HOUSING STALLING Even before the hurricanes struck home sales had virtually stalled amid tight inventories that have resulted in home price increases outpacing wage gains Sales were up 0 2 percent from August 2016 A second report on Wednesday from the Mortgage Bankers Association showed mortgage applications fell last week As we continue to process the third quarter housing data we are gaining confidence in our view that real residential investment will fall during the quarter said Daniel Silver an economist at JPMorgan NYSE JPM in New York Housing subtracted 0 26 percentage point from gross domestic product growth in the second quarter Builders have blamed shortages of labor and land as well as higher costs of building materials for their inability to ramp up construction Economists and builders say Harvey and Irma could worsen the housing shortage as scarce labor is pulled toward the rebuilding effort and materials are bid higher A report on Tuesday showed housing completions tumbling to a 10 month low in August At the same time single family home permits fell to a three month low These developments suggest housing inventory will remain troublesome for a while The NAR said the number of homes on the market fell 2 1 percent to 1 88 million units in August Supply was down 6 5 percent from a year ago Housing inventory has dropped for 27 straight months on a year on year basis As a result the median house price increased 5 6 percent from a year ago to 253 500 in August That was the 66th consecutive month of year on year price gains Annual wage growth has not exceed 2 5 percent this year Underscoring the strong demand for houses homes sold in August typically stayed on the market for 30 days That compared to 36 days a year ago High house prices as a result of tight inventories are sidelining first time homebuyers In August first time buyers accounted for 31 percent of transactions well below the 40 percent share that economists and realtors say is needed for a robust housing market August s share of first time homebuyers was the smallest in a year and was down from 33 percent in July
For a graphic click |
JPM | Fed quietly opens the final chapter of its crisis era bonds policy | By Jonathan Spicer NEW YORK Reuters The Federal Reserve the world s largest holder of U S debt announced on Wednesday it was edging back from the market and investors barely budged There were no tectonic shifts in stock bond or currency markets after the U S central bank said not only that it would begin trimming its 4 5 trillion portfolio of assets next month but that it was sticking with plans to hike interest rates this year despite the markets skepticism Months of telegraphing by the central bank allowed for the muted market response seen on Wednesday Yet the Fed s decision to begin winding down one of its most controversial policies of the crisis era which attracted sharp criticism from congressional conservatives and economic purists over the last decade amounted to a bold bet on the U S economy s prospects The Fed under Chair Janet Yellen has set its own pace and agenda Under Yellen who took office in 2014 it has raised interest rates four times from near zero ended its bond buying program and now set a path to reducing its huge holdings The Fed s balance sheet will finally be turning a corner said Brian Jacobsen senior investment strategist at Wells Fargo NYSE WFC Asset Management in Menomonee Falls Wisconsin In New York JPMorgan NYSE JPM chief U S economist Michael Feroli called it an historic move For a full interactive graphic of the effects of Fed bond buying on the economy and markets see In late 2015 the central bank hiked rates for the first time since the 2007 2009 financial crisis and recession It has followed up with three more policy tightenings over the last 10 months Its cautious confidence reflected steady economic growth in the face of bouts of overseas weakness and a U S unemployment rate whose drop has been nearly uninterrupted over the last seven years to 4 4 percent last month Over the last decade the Fed headed into unknown policy terrain as it snapped up some 3 6 trillion in mortgage and Treasury bonds in an effort to spur riskier investing and economic growth In response financial markets sizzled with equities logging a string of records and bond yields dipping lower than ever before But as direct results of the bond buying were harder to find in the real economy critics grew louder They warned that the Fed in stimulating the housing sector had overstepped its remit and that it was inflating dangerous asset bubbles that could cause the next crisis Yet Yellen and her predecessor Ben Bernanke have largely brushed off those concerns with a gradual and sometimes halting march to a more normal policy stance Based on its Wednesday announcement the central bank expects to raise rates one more time this year three times in 2018 and a gradual reduction in bonds that shrinks its portfolio down to 3 trillion by 2021 In response futures traders raised the odds of a December rate hike to 72 percent from 52 percent earlier in the day while a Reuters poll found that Wall Street s top banks also backed that timeline U S stock market indexes meanwhile closed the day mostly flat Markets will have to get accustomed to the fact that the Fed actually sees through its rate hike plans in the face of market expectations which signaled otherwise Commerzbank DE CBKG economists wrote in a note Thus unless there is a new economic shock market expectations will have to adjust to the Fed s thinking
For a graphic on the legacy of the QE era click |
JPM | Boost for Hammond as UK posts smallest August budget deficit in 10 years | By Andy Bruce and William Schomberg LONDON Reuters Britain unexpectedly posted its smallest budget deficit for any August since 2007 helped by record sales tax revenues that could give finance minister Philip Hammond room to relax his grip on spending in an upcoming budget The deficit in August stood at 5 7 billion pounds 7 7 billion down 18 percent compared with the same month last year the Office for National Statistics said on Thursday citing figures that exclude state controlled banks The shortfall for August was smaller than all forecasts in a Reuters poll of economists that had pointed to a much larger deficit of 7 1 billion pounds August s strong performance followed an unexpected surplus in July a relief for Hammond who is under pressure to loosen spending constraints when he announces budget plans in November With almost half of the financial year complete Hammond looks on track to undershoot the 58 billion pound borrowing target for 2017 18 set by Britain s official budget forecaster All of this suggests that the chancellor should have room for some easing of austerity in his budget in November said John Hawksworth chief economist at PwC Last week Prime Minister Theresa May agreed to ease seven years of public sector pay caps but only modestly and only for police and prison guards The government also faces calls for more spending on the health service housing infrastructure and a further relaxation of the pay cap for public sector workers The finance ministry said it had made substantial progress in cutting the deficit but the national debt was still too high Analysts have said they expect 2017 18 to be a difficult financial year in part because of a slowing economy after last year s Brexit vote But value added tax receipts rose 5 6 percent to 11 6 billion pounds in August the highest for that month on record The VAT figures based on forecasts for the coming three months could be another sign that consumer spending is holding up despite rising inflation and weak wage growth Corporation tax revenues fell 4 percent compared with August 2016 however and were flat for the financial year so far While government debt interest payments dipped in August they were still up 17 percent in the year to date pushed up by the post Brexit vote rise in inflation Around a third of British government bonds are linked to inflation A move by the Bank of England to raise interest rates in November something it signaled was likely last week could increase debt payments further Britain has been struggling to fix its public finances since the deficit surged to around 10 percent of gross domestic product in 2010 after the financial crisis Since then it has been cut steadily to 2 3 percent of GDP in the 2016 17 financial year which ended in March its smallest since before the global financial crisis But the deficit is expected to widen again to 2 9 percent of GDP this year when Hammond will have fewer one off factors to help him than last year Hammond has not committed to balance the budget until the middle of the next decade giving him flexibility to slow the pace of deficit reduction if needed to support the economy through Britain s departure from the European Union But JPMorgan NYSE JPM economist Allan Monks warned that if the official budget forecaster strikes as gloomy a tone about Britain s economic prospects after Brexit as BoE Governor Mark Carney did last week this could limit Hammond s room for maneuver in coming years |
JPM | U S jobless claims fall hurricanes still affecting data | By Lucia Mutikani WASHINGTON Reuters The number of Americans filing for unemployment benefits unexpectedly fell last week but the near term outlook for the labor market was muddied by the continuing impact of Hurricanes Harvey and Irma Other data on Thursday showed manufacturing activity in the mid Atlantic region accelerated in September amid a surge in new orders But hiring by factories slowed and employees worked fewer hours this month compared to August Initial claims for state unemployment benefits declined 23 000 to a seasonally adjusted 259 000 for the week ended Sept 16 the Labor Department said A Labor Department official said Harvey and Irma affected claims for Texas and Florida With Hurricane Maria lashing Puerto Rico this week weather will likely continue to affect claims data and potentially hurt job growth in September Texas and Florida account for about 14 percent of U S employment The noise will overwhelm any signal in these data for several weeks said John Ryding chief economist at RDQ Economics in New York Federal Reserve Chair Janet Yellen told reporters on Wednesday that payroll employment may be substantially affected in September by the storms but she added that she expected labor market conditions would strengthen somewhat further Yellen made the comments after the U S central bank left interest rates unchanged but signaled it still anticipated one more rate increase by the end of the year Last week unadjusted jobless claims for Texas fell 23 549 the second straight weekly drop as the effects of Harvey faded Claims in Texas surged in the wake of storm which disrupted oil natural gas and petrochemicals production leaving some workers temporarily unemployed Unadjusted claims for Florida rose by only 5 133 last week FURTHER INCREASES POSSIBLE It is possible we will see further increases in Florida claims in the coming weeks if the storm hindered people s ability to file claims immediately said Jesse Edgerton an economist at JPMorgan NYSE JPM in New York Economists had forecast claims rising to 300 000 in the latest week It was the 133rd straight week that claims remained below the 300 000 threshold which is associated with a robust labor market That is the longest such stretch since 1970 when the labor market was smaller U S stocks were trading lower as investors continued to assess the Fed s policy statement Prices for longer dated U S government bonds rose while the dollar DXY slipped against a basket of currencies The four week moving average of claims considered a better measure of labor market trends as it irons out week to week volatility rose 6 000 to 268 750 last week the highest level since June 2016 The claims data covered the survey period for the nonfarm payrolls portion of September s employment report The four week moving average of claims rose by 28 250 between the August and September survey periods suggesting a further slowdown in job growth The economy added 156 000 jobs in August with the private services sector hiring the smallest number of workers in five months In a separate report on Thursday the Philadelphia Fed said its manufacturing activity index for the mid Atlantic region rose about 5 points to a reading of 23 8 in September It said almost 39 percent of the firms indicated increases in activity this month while 15 percent reported a decrease The survey s measure of new orders jumped to a reading of 29 5 this month from 20 4 in August The employment index fell to 6 6 from 10 1 in August but has now remained positive for 10 consecutive months A measure of the average workweek dropped to a reading of 11 9 from 18 8 last month
Firms were upbeat about the next six months with nearly 44 percent expecting to raise capital spending About 55 percent of companies said they expected to increase production in the fourth quarter The firms planned to boost output by either increasing hiring or the hours of current workers |
C | Consumers exports give U S economy muscle in the third quarter | By Lucia Mutikani WASHINGTON Reuters The U S economy grew faster than initially estimated in the third quarter notching its best performance in two years buoyed by strong consumer spending and a surge in soybean exports In a separate report U S home prices rose 5 5 percent in the year to September meaning house prices overall have now fully recovered from their plunge during the 2008 financial crisis A third report showed U S consumer confidence rebounded in November to its highest level in nine years despite uncertainty surrounding the policies of President elect Trump U S stock prices edged higher on Tuesday after the data with the benchmark S P 500 index SPX now up about 6 0 percent since the Nov 8 elections U S Treasury yields ended slightly lower on Tuesday but the benchmark ten year note US10YT RR yield has risen about 0 5 percent in the past two weeks helping to push the U S dollar up to its highest levels in more than a decade against major currencies DXY U S ECONOMIC GROWTH FASTEST SINCE 2014 U S gross domestic product increased at a 3 2 percent annual rate instead of the previously reported 2 9 percent pace the Commerce Department said in its second GDP estimate on Tuesday Economists had forecast third quarter GDP growth being revised up to a 3 0 percent rate Growth was the strongest since the third quarter of 2014 and followed the second quarter s anemic 1 4 percent pace Output was lifted by upward revisions to business investment and home building Exports grew at their quickest pace since the fourth quarter of 2013 driven by a surge in soybean exports after a poor soy harvest in Argentina and Brazil International trade contributed 0 87 percentage point to GDP growth and not 0 83 percentage point as reported last month Data ranging from housing to retail sales and manufacturing output also suggest the economy retained its momentum early in the fourth quarter even as exports appear to be faltering amid a reversal of the boost to growth provided by soybean exports in the third quarter The Atlanta Fed is currently forecasting GDP rising at a 3 6 percent rate in the fourth quarter supporting market expectations that the Federal Reserve will raise interest rates next month Economic growth could also be supported next year if President elect Donald Trump succeeds in pushing through Congress a fiscal stimulus plan that includes massive infrastructure spending and tax cuts analysts said Couple that with an increasingly enthusiastic consumer supported by stronger wage gains and the economy appears well positioned to remain on a growth path heading into 2017 said Jim Baird chief investment officer at Plante Moran Financial Advisors in Kalamazoo Michigan When measured from the income side GDI the economy grew at a 5 2 percent clip amid a rebound in corporate profits That was the fastest pace of increase in gross domestic income in nearly two years and followed a 0 7 percent rate of expansion in the second quarter The average of GDP and GDI which economists consider to be a more accurate measure of current economic growth and a better predictor of future output increased at a 4 2 percent rate in the third quarter the fastest pace in two years That followed a 1 1 percent rate of increase in the second quarter and likely exaggerates the economy s strength CONSUMER SPENDING AND CONFIDENCE UP The Commerce Department said consumer spending which accounts for more than two thirds of U S economic activity increased at a 2 8 percent rate in the third quarter and not the 2 1 percent pace reported last month That was still a slowdown from the second quarter s robust 4 3 percent pace With a tight labor market lifting wage growth and boosting household sentiment consumer spending is likely to gain further momentum for the rest of the year and in 2017 A separate report from the Conference Board showed its consumer confidence index surged in November climbing back to levels seen before the 2008 recession Consumers were upbeat about the labor market and current business conditions Rising house prices are also likely to keep consumption supported The Standard Poor s CoreLogic Case Shiller national home price index rose 5 5 percent in the year to September and is now just above the peak seen in July 2006 BUSINESS SPENDING MIXED Spending on non residential structures which include oil and gas wells was revised sharply higher to show it increasing at its fastest pace since the first quarter of 2014 Business spending on equipment however fell at a steeper rate than previously reported declining for a fourth straight quarter With after tax corporate profits rising at a 7 6 percent pace last quarter there is scope for business investment to rebound Corporate profits declined at a 1 9 percent rate in the second quarter The return to positive growth in corporate profits at least satisfies what is probably a necessary but not sufficient condition for a rebound in business fixed investment said Andrew Hollenhorst an economist at Citigroup NYSE C in New York Businesses increased spending to restock after running downinventories in the second quarter but just not as much as previously reported Businesses accumulated inventories at a 7 6 billion rate in the last quarter almost half of the 12 6 billion pace reported last month That means inventory accumulation contributed 0 49 percentage point to GDP growth and not the 0 61 percentage point reported last month The third quarter revision showed a much more favorable growth profile for the economy analysts said The boost from inventories was not as big as previously estimated which suggests that businesses are not sitting on piles of unwanted goods This means businesses will have more scope to place new orders which augurs well for economic growth in the coming quarters The sharp acceleration in GDP in the last quarter should quash any lingering fears that the economy was at risk of stalling after growth averaged just 1 1 percent in the first half That together with a labor market that is near full employment and slowly rising inflation could leave the Fed comfortable with raising hike interest rates at its Dec 13 14 policy meeting The U S central bank raised its overnight benchmark interest rate last December for the first time in nearly a decade U S GDP U S home prices Case Shiller interactive Consumer confidence interactive
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C | Saudi prince calls for ban on women drivers to be lifted | By Magdalena Mis LONDON Thomson Reuters Foundation Saudi billionaire Prince Alwaleed bin Talal has said it is time for Saudi women to get behind the wheel calling a ban on female drivers in the kingdom an infringement of women s rights Saudi Arabia is the only country to bar women from driving and requires them to have a male guardian who can stop them traveling marrying working or having some medical procedures nL8N13P2SI Preventing a woman from driving a car is today an issue of rights similar to the one that forbade her from receiving an education or having an independent identity said the business magnate in a statement They are all unjust acts by a traditional society far more restrictive than what is lawfully allowed by the precepts of religion Prince Alwaleed said The prince who is chairman of Kingdom Holdings and has holdings in a number of international companies including Twitter and Citigroup NYSE C said the driving ban was not just a rights issue but also an economic one In a country where more than 1 5 million women need a safe means of transport to get to work every day allowing them to drive would reduce costs like hiring taxis or foreign drivers which some see as a violation of Sharia he said Public transport is not at least at present a fully viable means for them for even Saudi men do not as a whole use it said Prince Alwaleed who is a nephew of Saudi Arabia s King Salman The proper solution is to allow them to drive To allow for an element of moderation certain restrictions for female drivers should be put in place such as requiring them to carry smartphones in case of an emergency and banning them from driving outside city limits the prince said |
C | RBS To Undertake Another Branch Closure Drive Next Year | The Royal Bank of Scotland LON RBS plc NYSE RBS recently announced plans to close about 259 branches in order to accommodate changing customer preferences to digitization The state owned lender s move has attracted opposition from Britain s labor union Unite The era of digitization has forced banks to shut down their branches in which people hardly turn up and thus utilize the costs saved in expansion of core businesses The bank will be closing 62 Royal Bank of Scotland branches and 197 NatWest branches by mid 2018 which would take away jobs of about 680 employees In March 2017 the bank had shut down 128 branches in NatWest and 30 units in the United Kingdom based on changes in customers choices and usage patterns throughout the bank s network The move had resulted in more than 1000 job cuts Reasons Behind Branch ClosurePer an RBS spokesperson customers are increasingly preferring to avail banking services either through net banking or mobiles According to their data since 2014 physical appearance of customers at branches has fallen 40 while mobile transactions have risen 73 The bank also said that more than five million customers are availing banking services through mobile apps Further since its bailout in 2008 the bank has been reporting losses Therefore with a view to improve its financials Royal Bank of Scotland considers this a justified move which would help reduce expenses Promises MadeAcknowledging its customers needs of digital banking Royal Bank of Scotland disclosed plans to strengthen its online offerings It stated some alternatives for traditional bricks and mortar branches Community Bankers Mobile Bank on Wheels and Post Offices The bank is also planning to invest in some of its popular branches Further taking into account the fact that not all people would be comfortable with digital banking the bank has introduced TechXperts It consists of specialists who would be providing training and support to customers regarding the use of digital services Already there is a minimum of one TechXpert in every branch across the United Kingdom Negative ReactionThe bank which is still 71 owned by the state government has received criticism from Unite which described the bank as morally bankrupt Rob MacGregor Unite s national officer showed concerns over thousands of staffs losing jobs He said Serious questions need to be asked about whether these closures mark the end of branch network banking Impact of Digitization on Other BanksLast week Lloyds Banking Group LON LLOY plc NYSE LYG revealed plans to close 49 branches in sync with the changing consumer preferences and as part of its efforts to move toward digitization The move will result in nearly 100 job cuts In August 2017 Barclays NYSE C disclosed plans to close around 54 branches by the end of 2017 in an effort to cut costs The bank cut back its network as more and more customers started turning toward mobile banking In order to focus on digital services Citigroup NYSE C shut down three of its four branches in London this year The bank mentioned that wealth management is best suited to its client base Thus it felt the need to close other branches as they do not match its strategy Our ViewpointThough Royal Bank of Scotland hopes to deliver profit in full year 2017 a lot depends on when it reaches a settlement with the regulators over misuse of toxic mortgage backed securities in the United States These restructuring moves might lend some support to the bank Last month the lender had launched robo advisory services through its NatWest Invest platform with a view to attract young investors This is a new digital and low cost option aimed at helping customers who prefer managing their investments themselves Such investments encourage us about the bank s prospects Shares of Royal Bank of Scotland have gained 34 3 year to date outperforming the s rally of 18 5 Currently the stock carries a Zacks Rank 3 Hold You can see Zacks Best Private Investment IdeasWhile we are happy to share many articles like this on the website our best recommendations and most in depth research are not available to the public Starting today for the next month you can follow all Zacks private buys and sells in real time Our experts cover all kinds of trades from value to momentum from stocks under 10 to ETF and option moves from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises You can even look inside exclusive portfolios that are normally closed to new investors |
C | This Time Is Different It Just Ends The Same | This past weekend I was in Florida with Chris Martenson and Nomi Prins discussing the current backdrop of the markets economic cycles and future outcomes A bulk of the conversations centered around the current everything bubble that currently exists globally Elevated valuations in stock prices extremely low yields between in junk bonds or intense speculation around cryptocurrencies all suggest we have entered once again into bubble territory
Let me state this
Market bubbles have NOTHING to do with valuations or fundamentals
Hold on don t start screaming heretic and building gallows just yet Let me explain
Stock market bubbles are driven by speculation greed and emotional biases therefore valuations and fundamentals are simply a reflection of those emotions
In other words bubbles can exist even at times when valuations and fundamentals might argue otherwise Let me show you a very basic example of what I mean The chart below is the long term valuation of the S P 500 going back to 1871
First it is important to notice that with the exception of only 1929 2000 and 2007 every other major market crash occurred with valuations at levels LOWER than they are currently Secondly all of these crashes have been the result of things unrelated to valuation levels such as liquidity issues government actions monetary policy mistakes recessions or inflationary spikes However those events were only a catalyst or trigger that started the panic for the exits by investors
Market crashes are an emotionally driven imbalance in supply and demand You will commonly hear that for every buyer there must be a seller This is absolutely true The issue becomes at what price What moves prices up and down in a normal market environment is the price level at which a buyer and seller complete a transaction
In a market crash however the number of people wanting to sell vastly overwhelms the number of people willing to buy It is at these moments that prices drop precipitously as sellers drop the levels at which they are willing to dump their shares in a desperate attempt to find a buyer This has nothing to do with fundamentals It is strictly an emotional panic which is ultimately reflected by a sharp devaluation in market fundamentals
Bob Bronson once penned
It can be most reasonably assumed that market are sufficient enough that every bubble is significantly different than the previous one and even all earlier bubbles In fact it s to be expected that a new bubble will always be different than the previous one s since investors will only bid up prices to extreme overvaluation levels if they are sure it is not repeating what led to the last or previous bubbles Comparing the current extreme overvaluation to the dotcom is intellectually silly
I would argue that when comparisons to previous bubbles become most popular like now it s a reliable timing marker of the top in a current bubble As an analogy no matter how thoroughly a fatal car crash is studied there will still be other fatal car crashes in the future even if the previous accident causing mistakes are avoided
He is absolutely right Comparing the current market bubble to any previous market bubble is rather pointless Financial markets have already studied and adapted to the causes of the previous fatal crashes but this won t prevent the next one
I previously discussed George Soros theory on bubbles which is worth reviewing at this juncture
First financial markets far from accurately reflecting all the available knowledge always provide a distorted view of reality The degree of distortion may vary from time to time Sometimes it s quite insignificant at other times it is quite pronounced When there is a significant divergence between market prices and the underlying reality the markets are far from equilibrium conditions
Every bubble has two components
An underlying trend that prevails in reality and
A misconception relating to that trend
When a positive feedback develops between the trend and the misconception a boom bust process is set in motion The process is liable to be tested by negative feedback along the way and if it is strong enough to survive these tests both the trend and the misconception will be reinforced Eventually market expectations become so far removed from reality that people are forced to recognize that a misconception is involved A twilight period ensues during which doubts grow and more people lose faith but the prevailing trend is sustained by inertia
As Chuck Prince former head of Citigroup NYSE C said As long as the music is playing you ve got to get up and dance We are still dancing Eventually a tipping point is reached when the trend is reversed it then becomes self reinforcing in the opposite direction
Typically bubbles have an asymmetric shape The boom is long and slow to start It accelerates gradually until it flattens out again during the twilight period The bust is short and steep because it involves the forced liquidation of unsound positions
The chart below is an example of asymmetric bubbles
The pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals
This pattern of bubbles can be clearly seen at every bull market peak in history The chart below utilizes Dr Robert Shiller s stock market data going back to 1900 on an inflation adjusted basis with an overlay of the asymmetrical bubble shape
There is currently a strong belief that the financial markets are not in a bubble The arguments supporting those beliefs are all based on comparisons to past market bubbles
The inherent problem with much of the mainstream analysis is that it assumes everything remains status quo However the question becomes what can go wrong for the market
In a word much
Economic growth remains very elusive corporate profits appear to have peaked and there is an overwhelming complacency with regards to risk Those ingredients combined with an extraction of liquidity by the Federal Reserve leaves the markets more vulnerable to an exogenous event than currently believed
It is likely that in a world where there is virtually no fear of a market correction an overwhelming sense of urgency to be invested and a continual drone of bullish chatter markets are poised for the unexpected unanticipated and inevitable reversion
As Chris Martenson recently noted
I hate to break it to you but chances are you re just not prepared for what s coming
These bubbles blown by central bankers serially addicted to creating them and then riding to the rescue to fix them are the largest in all of history That means they re going to be the most destructive in history when they finally let go
Millions of households will lose trillions of dollars in net worth Jobs will evaporate causing the tens of millions of families living paycheck to paycheck serious harm
These are the kind of painful consequences central bank follies result in They re particularly regrettable because they could have been completely avoided if only we d taken our medicine during the last crisis back in 2008 But we didn t We let the Federal Reserve the institution largely responsible for creating the Great Financial Crisis conspire with its brethren central banks to paper over our problems
So now we are at the apex of the most incredible nest of financial bubbles in all of human history
I am not trying to scare the bejeebers out of you but he is right
All financial assets are just claims on real wealth not actual wealth itself A pile of money has use and utility because you can buy stuff with it But real wealth is the stuff food clothes land oil and so forth If you couldn t buy anything with your money stocks bonds their worth would revert to the value of the paper they re printed on if you re lucky enough to hold an actual certificate It s that simple
But trouble begins when the system gets seriously out of whack
GDP is a measure of the number of goods and services available and financial asset prices represent the claims it s not a very accurate measure of real wealth but it s the best one we ve got so we ll use it Look at how divergent asset prices get from GDP as bubbles develop
What we see in the above chart is that the claims on the economy should quite intuitively track the economy itself Bubbles occurred whenever the claims on the economy the so called financial assets stocks bonds and derivatives get too far ahead of the economy itself
This is a very important point The claims on the economy are just that claims They are not the economy itself
Take a step back from the media and Wall Street commentary for a moment and make an honest assessment of the financial markets today If our job is to bet when the odds of winning are in our favor then exactly how strong is the fundamental hand you are currently betting on
This time IS different only from the standpoint that the variables are not exactly the same as they have been previously Of course they never are and the result will be the same as it ever was |
JPM | Downed Jets Ukraine Conflict And Gaza Battle JP Morgan Says So What | JP Morgan NYSE JPM reported earnings last week and the stock price made a big leap higher But since then nothing has really happened No impact from the Malaysian jet downing No impact from the Gaza Wouldn t you think that if there is one company that is exposed to risk in these areas it would be a major global bank like JP Morgan
But then I started looking more closely at the price action That big leap higher came on very large volume And the price has held over support at 58 since then This is very strong reaction in the stock As this is playing out the volume has been declining It is not making a really pretty picture and the gaps may fool you but the stock is building a classic bull flag pattern The Measured Move higher out of it would carry a target to 62 Time to but this bank on your trading agenda
Disclosure The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer |
JPM | Emerging Market Bonds What s Changed | The Hungarian central bank cut rates by a larger than expected 20 bp to 2 10 but then signaled that the easing cycle had ended
The Ukraine crisis has entered a dangerous new phase after the downing last week of the Malaysian Airlines passenger plane
Saudi Arabia announced plans to allow foreign investment in its stock market in 2015
JP Morgan will increase Colombia s weight in its EM bond indices
Over the last week China 3 7 Brazil 3 6 and India 2 8 have outperformed in the EM equity space in local currency terms while Argentina 2 4 Russia 2 4 and Chile 0 6 have underperformed To put this in better context MSCI EM was 1 6 over the past week
In the EM local currency bond space Sri Lanka 10 year yield 58 bp Brazil 24 bp and Hungary 16 bp have outperformed over the last week while Russia 10 year yield 13 bp China 8 bp and the Philippines 7 bp have underperformed To put this in better context the 10 year UST yield was 7 bp over the past week
In the EM FX space TRY 2 4 vs USD ZAR 2 4 COP and BRL both 1 8 have outperformed over the last week while ARS 0 2 vs USD CZK 0 2 vs EUR and EGP flat vs USD have underperformed
The Hungarian central bank cut rates by a larger than expected 20 bp to 2 10 but then signaled that the easing cycle had ended We would have preferred a 30 bp cut to 2 0 just to keep things nice and tidy Over this easing cycle we saw 24 straight months of rate cuts which must be some sort of record streak CPI inflation is likely to pick up in H2 due to low base effects in 2013 even as the economy is recovering nicely so the end of easing cycle makes sense to us
The Ukraine crisis has entered a dangerous new phase after the downing last week of the Malaysian Airlines passenger plane Tensions may subside a bit after Ukraine rebels began releasing the bodies of the victims as well as the plane s black box Still EU leaders are discussing further sanctions against Russia Perhaps the international reaction to the tragedy may finally get Putin to help put an end to the separatist rebellion in eastern Ukraine
Saudi Arabia announced plans to allow foreign investment in its stock market in 2015 MSCI said that potential inclusion of the Saudi market in its indices would depend on the details of the plan Saudi regulators will publish rules next month that will set the terms for participation by qualified foreign financial institutions
J P Morgan NYSE JPM will increase Colombia s weight in its EM bond indices The weight in GBI EM Global Diversified index has been climbing and is projected to rise to 8 8 by September 30 The increase started on May 30 Between higher interest rates and bigger index weights it looks like inflows into Colombia will continue
from my colleague Dr Win Thin |
MS | Burger chain Shake Shack files for IPO | Reuters Burger chain Shake Shack Inc which grew out of a hot dog stand in New York s Madison Square Park has filed for an initial public offering at a time when stock offerings by casual restaurants have proven to be a big hit with investors Shake Shack known for its Shackburgers flat top hot dogs and eponymous shakes has developed a cult following since it was founded by restaurateur Daniel Meyer in 2001 Meyer s Union Square Hospitality Group LLC USHG also runs other popular New York eateries including Blue Smoke Gramercy Tavern and Union Square Cafe which are not involved in the IPO The planned IPO follows a string of successful offerings by casual dining chains this year including El Pollo Loco Holdings Inc and Zoe s Kitchen Inc Despite a rocky year Zoe s shares are now at double their IPO price while El Pllo shares trade at about 38 percent above their IPO price Shares of burger chain Habit Restaurants Inc more than doubled in their trading debut last month Reuters reported exclusively in August that Shake Shack had hired lead managers for an IPO Apart from majority owner USHG investors include private equity firm Leonard Green Partners LP and Select Equity Group LP an employee owned hedge fund sponsor Shake Shack which has 63 restaurants operates mainly on the U S east coast but has opened outlets in several international locations including London Istanbul and Dubai The company said it would use net proceeds from the offering to buy common membership interests of SSE Holdings LLC which is the predecessor of Shake Shack for financial purposes J P Morgan Morgan Stanley and Goldman Sachs are among the major underwriters for the IPO according to Shake Shack s preliminary prospectus The filing did not reveal how many shares the company planned to sell or their expected price The IPO has nominal fundraising target of 100 million However the amount a company says will be raised in initial filings is used to calculate registration fees and the final size of the IPO could be different Shake Shack s net income fell 20 percent to 3 55 million in the 39 weeks ended Sept 24 from a year earlier Revenue rose 41 percent to 83 76 million
The company intends to list its common stock on the New York Stock Exchange under the symbol SHAK Reporting by Avik Das in Bengaluru Editing by Kirti Pandey and Ted Kerr |
MS | Analytics based U S tech firm Inovalon files for IPO | Reuters Inovalon Holdings Inc an analytics and data based technology service provider to the healthcare sector filed with U S regulators on Tuesday to raise up to 500 million in an initial public offering of Class A common stock Goldman Sachs Co Morgan Stanley Co LLC and Citigroup Global Markets Inc are the lead underwriters of the IPO the company told the U S Securities and Exchange Commission in a preliminary prospectus The filing did not reveal how many shares Inovalon planned to sell or their expected price The Bowie Maryland based company intends to list its common stock on the Nasdaq under the symbol INOV The company whose data drives health plans hospitals physicians patients pharmaceutical companies and researchers counts U S drugstore chain operator Walgreen as one of its clients Inovalon which combines advanced cloud based data analytics and data driven intervention platforms to provide insights to the healthcare industry served nearly 100 clients representing approximately 200 patient populations in 2014 A January 2013 McKinsey Company report estimates that utilizing data analytics could drive improvements in healthcare resulting in a beneficial economic impact of 300 billion to 450 billion annually Inovalon reported net income of 51 9 million for the nine months ended Sept 30 2014 up from 27 million a year earlier The company competes with IT solutions providers such as Oracle IBM IT consultants such as Accenture and Deloitte Consulting healthcare specific solutions providers such as McKesson OptumHealth Truven and point solution providers such as DST Health and Alere The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees The final size of the IPO could be different Reporting By Sudarshan Varadhan Editing by Joyjeet Das and Diane Craft |
MS | Effect Of Minimum Wage Hikes Could Take Years | By
Millions of workers around the country will be getting a raise in 2015 after lawmakers in 20 states approved minimum wage hikes These range from a 12 cent increase in Florida bringing its wage to 8 05 to a 1 25 spike in South Dakota lifting that state s minimum to 8 50 Collectively the increases will account for a 1 6 billion increase in worker wages around the country according to the Economic Policy Institute a left leaning think tank based in Washington D C While the move is a boon for millions of low wage retail and fast food workers who have been protesting low pay for two years experts say the American minimum wage still has a long way to go to make an economic impact and recent increases aren t likely to have an immediate impact on the country s economy According to one study if the federal minimum wage had kept pace with worker productivity over the last four decades it would have hit 21 72 per hour by 2012 Obviously for workers it s a good thing they ll have more money in their pockets Peter Cardillo chief economist at Rockwell Global Capital said But this has been long overdue We re not talking about a substantial increase Some of the lowest paid jobs in the country are in sectors such as retail sales and food preparation and feature median wages as low as 8 81 an hour Though this is slightly above the federal minimum wage of 7 25 it s nowhere near the 15 hourly target requested by protest movements such as Fight for 15 Advocates for minimum wage increases have long cited the fact that the American minimum wage has not kept up with inflation in recent decades In 1938 the minimum hourly wage was set at 25 cents and has been raised 22 times hitting 7 25 in July 2009 But these increases haven t kept up with economic growth Further the real value or purchasing power of the minimum wage has actually decreased substantially over time Since 2009 it has lost 5 8 percent of its purchasing power compared to inflation according to the PEW Research Center As the legislated adjustments to the minimum wage standard have occurred at irregular intervals sometimes increasing annually other times not for several years while prices have generally risen each year the purchasing power of the minimum wage has varied considerably since its enactment reads a 2014 Congressional Research Service report At the same time many of America s jobs have changed from high paying to low paying sectors As the U S economy has shifted away from being an economy led by manufacturing to one increasingly reliant on services lower wage paying jobs have come to dominate the labor market wrote Morgan Stanley economists Ellen Zentner and Paula Campbell in a September research note The result is a consistent slowdown in inflation adjusted wage growth since the 1940s But the recent attention on this issue is spurring legislation around the country with Arizona Colorado Florida Missouri Montana New Jersey Ohio Oregon and Washington tying their wage hikes to inflation so wages will rise with consumer prices and of the 11 states that passed laws in 2014 five have included similar indexing measures It is common sense economics Rich Trumka ALF CIO president said in a Wednesday statement Consumer spending accounts for 70 percent of the U S economy and as workers wages increase their spending increases too lending support to our communities and local economies Democratic lawmakers are pushing for legislation that will raise the federal rate to 10 10 an hour and tie it to the consumer price index More dramatic changes are being made at the city level with some localities raising rates above the federal minimum San Francisco and Seattle both approved a gradual increase in rates to 15 per hour while Chicago approved a boost to 13 by 2019 Los Angeles Mayor Eric Garcetti recently proposed a hike to 13 25 by 2017 while officials in Washington D C voted to raise the minimum hourly wage from 8 25 to 11 50 We ll continue to see more action at the state level and at the local level Ken Jacobs chairman of the Center for Labor Research and Education at the University of California at Berkeley told Bloomberg It is a very politically popular measure and so we would expect in 2016 that we should see more minimum wage ballot initiatives |
MS | All eyes on Berlin as ECB readies bond buying scheme | By Noah Barkin BERLIN Reuters In August 2012 during a visit to Canada German Chancellor Angela Merkel swept aside doubts about her support for Mario Draghi and his promise weeks before to do whatever it takes to preserve the euro The pledge by the Italian president of the European Central Bank met a storm of criticism in Germany Yet Merkel told reporters gathered in the Canadian parliament in Ottawa that Draghi s remarks were completely in line with her own approach to the crisis Her comments helped convince markets that Draghi had the political support to back up his bold words with action calming fears of a catastrophic euro breakup Two and a half years on the crisis in Europe s single currency bloc has shifted from acute to chronic and once again it has fallen to Draghi to come to the rescue As Europe stumbles into 2015 dogged by weak growth and the prospect of deflation Draghi is on the verge of launching mass purchases of government bonds with new money also known as quantitative easing QE in the hopes of jolting Europe s economy into life But this time it is unclear whether he can count on the same clear support from Berlin Without it the effectiveness of any QE program could be undermined More fundamentally a rift between Germany and the ECB would herald a dangerous new phase for Europe in which the bloc s two most important shapers of policy are at odds In a rare four page interview with German daily Handelsblatt on Friday Draghi appeared to go out of his way to reach out and avert such a clash saying the risk of the ECB failing to preserve price stability had risen and it may need to act to meet its mandate Germany s position on the QE program is arguably the single most important issue for the ECB right now said Marcel Fratzscher head of the DIW economic institute in Berlin and a former official at the ECB Support from both Merkel and Finance Minister Wolfgang Schaeuble will be absolutely vital FIERCE REACTION What has changed since 2012 For one thing fears of a euro breakup have subsided That has made it easier for German officials to push back against policies they disagree with The worry in Berlin is QE will reduce pressure on struggling southern euro countries to reform Some think pumping new money into the system would sow the seeds of a future crisis If the ECB isn t careful about how it does QE the reaction in Germany will be fierce said a senior German official who requested anonymity due to sensitivities over ECB independence If QE does happen as it certainly looks like it will it should happen in a way that doesn t see it undermined by German politicians Draghi needs to know what the red lines are Complicating the debate is the rise of the Alternative for Germany AfD a eurosceptic party that didn t exist back in 2012 After sweeping into three regional parliaments in eastern Germany last year the AfD will try to win its first seats in a western assembly when Hamburg votes in mid February A QE program which the markets expect to be unveiled as soon as the ECB s next policy meeting on Jan 22 could play into the AfD s hands Uncertainty surrounding a Jan 25 election in Greece which could vault the left wing Syriza party into power has muddied the waters further by raising the risk of a sovereign default and severe losses for the ECB on any Greek bonds it holds Should the ECB unveil a QE program that includes Greece before the political outcome in Athens is clear it would be impossible for the German government to remain silent several officials said The Greek situation makes it much more difficult to announce a QE program where the risks are shared out said Christian Odendahl chief economist at the Centre for European Reform in London COURT CHALLENGE The other cloud hanging over QE is the risk of a legal challenge in Germany s Constitutional Court In February last year the court in Karlsruhe expressed concerns that the OMT bond buying scheme Draghi unveiled in the months after his 2012 whatever it takes speech which has never been used violated a ban on funding governments It referred the case to the European Court of Justice ECJ in Strasbourg whose adviser is due to give a preliminary assessment on Jan 14 and a final ruling in mid 2015 That could have big implications for how the ECB approaches QE The consensus view in the market is that the ECJ won t find anything wrong with the bond buying scheme but there is a risk said Elga Bartsch chief European economist at Morgan Stanley Berlin is clearly worried about the implications of the ECJ ruling for the German Constitutional Court And the ECB is also taking it very seriously otherwise they could have moved in December The ECB may feel the need to tread carefully pending a final ruling increasing the chances of a QE program in which the credit risks tied to purchased bonds remain with national central banks an idea floated by Bundesbank President Jens Weidmann last month This is a solution that could work for Germany said the senior German official If the ECB goes down this path Merkel could feel more comfortable endorsing it but by limiting the scope of the program it may underwhelm financial markets and fail to revive the euro economy If you limit this along national lines it would clearly be a disappointment because it would show quite starkly that the ECB is running up against its limits Odendahl said Draghi knows that the announcement itself will be the most important thing I hope he is bold
If he is the silence from Merkel may be deafening Editing by Mike Peacock |
MS | Morgan Stanley says wealth management employee stole client data | By Lauren Tara LaCapra and Tanya Agrawal Reuters Morgan Stanley N MS said on Monday it had fired a financial adviser who allegedly stole account information from about 350 000 of its wealth management clients and posted some of it online There is no evidence that clients lost money as a result of the latest breach of customer information at a financial firm Morgan Stanley said in a statement A person familiar with the matter identified the former employee as Galen Marsh a 30 year old financial adviser from one of Morgan Stanley s New York branches Marsh appeared to be looking to sell the data which pertained to about 10 percent of Morgan Stanley s 3 5 million clients the person said He published information on about 900 accounts as an apparent advertisement the person said Robert Gottlieb who is representing Marsh with the law firm Gottlieb Gordon denied that his client posted the information online or tried to sell it He also said Marsh is devastated by what has occurred and is extremely sorry for his conduct This is an employment matter between Mr Marsh and Morgan Stanley Gottlieb said He has acknowledged that he should not have obtained the account information and he has been cooperating fully with Morgan Stanley to protect the firm and its customers The bank discovered the post as part of a routine Internet sweep on Dec 27 and quickly got the information taken down said the person who was not authorized to speak publicly about the matter Marsh did not immediately return phone calls or messages seeking comment He joined Morgan Stanley in April 2008 as a sales assistant entered its trainee program in 2010 and became a financial adviser in March 2014 The leaked information included clients names and account numbers but not passwords or Social Security numbers The account numbers have since been changed and Morgan Stanley has been notifying affected clients Morgan Stanley s investigation into the matter is ongoing It has referred the matter to regulators and law enforcement authorities who are conducting separate investigations Another person with knowledge of the matter said the FBI was looking into the alleged theft A spokeswoman for FINRA confirmed in an email that they were looking into the matter The U S Securities and Exchange Commission did not immediately respond to requests for comment The Manhattan District Attorney s Office and U S Department of Justice declined to comment Shortly after Morgan Stanley announced the breach in a press release Gregory Fleming president of the wealth management business issued a memo that said the bank is offering affected clients additional monitoring and fraud protection services at no charge
It was not immediately clear how Marsh was able to allegedly breach compliance protocol to steal client information and post it on the Web The person familiar with the matter said Marsh used an external application to post the data online Morgan Stanley has since restricted employee access to that application Morgan Stanley shares fell 3 1 percent to close at 37 50 on Monday |
MS | Morgan Stanley raises 1 billion for second credit fund | By Lauren Tara LaCapra NEW YORK Reuters Morgan Stanley NYSE MS said it has raised about 1 billion for a new credit fund the latest in a series of private equity type vehicles it is raising despite a new regulation that limits the bank s own participation in such funds The new fund called Morgan Stanley Credit Partners II LP is the second of its kind housed in the Wall Street bank s merchant banking and real estate business The first fund which closed in 2011 was the same size Morgan Stanley began raising the new fund 15 months ago as its predecessor was approaching its four to five year investment time frame said Hank D Alessandro head of Morgan Stanley Credit Partners The strategy of both funds is the same making new loans and buying existing debt of companies in North America and Western Europe that have earnings of 15 million or more before interest taxes depreciation and amortization There s a core need in the middle market where companies can t access junior capital in the liquid markets and need a private market alternative and that s what we provide said D Alessandro who oversees a team of 11 The new fund has already invested 144 million in four companies Investments typically range from 20 million to 65 million in size After buying Smith Barney from Citigroup Inc Morgan Stanley has a much larger base of wealthy individual clients but does not seem to have relied on them more heavily for fund raising More than twice as much institutional money was raised for the latest fund in dollar terms compared to the first D Alessandro would not disclose the split between institutional and individual investor money in percentage terms Morgan Stanley s wealth and investment management businesses operate separately and its financial advisers are not allowed to advocate investments in Morgan Stanley funds over others The credit fund is the latest sign of Morgan Stanley building out its fund businesses despite a new regulatory restriction called the Volcker rule which limits how much money the bank and its own employees can invest in such funds The capital commitment in the new fund from Morgan Stanley and affiliates is 3 percent which is the Volcker rule s limit Morgan Stanley s strategy is unusual compared to rivals who have either exited private equity or are investing outside of fund structures
Morgan Stanley has also been raising a 4 billion global infrastructure fund a 2 5 billion global real estate fund and a global private equity fund of unknown size It closed a 1 7 billion Asia focused private equity fund last year |
JPM | What Dimon got wrong about bitcoin and tulips Aaron Brown | Asking a bank CEO what he thinks of bitcoin is like asking the head of the post office what he thinks about email writes Aaron Brown at Bloomberg
Instead of acknowledging why folks use cryptocurrencies and explaining how JPMorgan NYSE JPM is working to safely provide customers with their advantages Dimon instead denounced innovation as fraud and threatened to fire any employee who trades in bitcoin
Yes bitcoin values could collapse the way tulip futures did but the issues cryptocurrencies address won t go anywhere Brown People will continue to pursue technological innovations to improve financial services The eventual winners may be traditional financial institutions that innovate or new entrants
Related OTCQB BTCS OTCPK BTSC OTCQX GBTC OTC ARSC OTCPK GAHC
Previously Dimon Bitcoin a fraud Sept 12
Now read |
JPM | Swiss shut down fake E Coin in latest cryptocurrency crackdown | By Joshua Franklin ZURICH Reuters Switzerland s financial watchdog has closed down what it said was the provider of a fake cryptocurrency and is investigating around a dozen other possible fraud cases in the latest clamp down on the risks involving virtual money The move by the FINMA watchdog comes on the heels of Chinese authorities ordering Beijing based cryptocurrency exchanges to stop trading and immediately notify users of their closure Virtual currencies such as Bitcoin which are issued and usually controlled by their developers and not backed by a central bank are hailed by their supporters as a fast and efficient way of managing money But regulators and traditional banks are increasingly concerned about the risks of fraud in the burgeoning online cryptocurrency underworld JPMorgan NYSE JPM Chief Executive Jamie Dimon last week said Bitcoin the original and still the biggest cryptocurrency is a fraud and will eventually blow up The QUID PRO QUO Association shut down by FINMA had provided so called E Coins for more than a year and had amassed funds of at least 4 million Swiss francs 4 2 million from several hundred users FINMA said in a statement on Tuesday This activity is similar to the deposit taking business of a bank and is illegal unless the company in question holds the relevant financial market license FINMA Switzerland s Financial Market Supervisory Authority said E Coin was not like real cryptocurrencies FINMA said because it was not stored on distributed networks using blockchain technology but was instead kept locally on QUID PRO QUO s servers Reuters was not immediately able to reach Zurich based QUID PRO QUO for comment FINMA said it had three other companies on its warning list due to suspicious activity in cryptocurrencies and was conducting 11 investigations into other possible fake virtual currencies The Swiss finance industry has been looking for new avenues of growth following a weakening of its bank secrecy rules during a global crackdown on tax evasion The small Swiss canton of Zug famed for low taxes that have drawn multinational companies has been trying to turn itself into a hub for virtual currency firms But the QUID PRO QUO case is an example of the pitfall of investing in the booming but still murky cryptocurrency world Of the money users had invested FINMA said it had so far seized and blocked assets worth around 2 million francs Initial coin offerings or ICOs have fueled a rapid ascent in the value of all cryptocurrencies from about 17 billion at the start of the year to a record high close to 180 billion at the beginning of September
An ICO is the practice of creating and selling digital currencies or tokens to investors to finance start up projects |
JPM | People thought they caught JPMorgan buying bitcoin after Jamie Dimon called it a fraud but that s not what happened | But like most outrage on the internet it was unwarranted The screenshot which was retweeted over 2 000 times shows JPMorgan NYSE JPM was among one of the largest buyers of a bitcoin exchange traded note trading on Nasdaq s Stockholm exchange Here s the tweet Tweet Embed We see you Immediately Twitter erupted lambasting JPMorgan CEO Jamie Dimon who recently called as a hypocrite Some questioned whether Dimon whose comments purposely bashed the cryptocurrency so JPMorgan could buy low Tweet Embed Quoted you in my article exposing and his is a Fraud endgame Others wondered if Dimon would follow through on his promise to fire employees of the bank who traded the cryptocurrency Here s one tweet Tweet Embed Can someone ask Dimon if he s honouring his word and fire these people Dimon probably won t be firing anyone but not because he s behind some sort of bitcoin related conspiracy He won t be firing anyone at the bank because the orders weren t placed by JPMorgan employees They are not JPMorgan orders a spokesman said in an email to Business Insider These are clients purchasing third party products directly In other words JPMorgan asset managers weren t buying this product for their clients Rather the bank s clients were using JPMorgan s pipes to buy it themselves |
JPM | Cryptos Bitcoin Prices Slump Back Below 4000 As Relief Rally Ebbs | Investing com Bitcoin prices fell back below the key 4 000 level on Tuesday as an impressive relief rally from last week s heavy losses appeared to ebb
Bitcoin was last down about 125 or around 3 at 3 959 60 by 9 40AM ET 1340GMT
It rallied by more than 11 on Monday in an impressive bounce back from last week s heavy losses
The digital currency lost more than 1 000 in value last week and dropped below 3 000 per coin for the first time in over a month with the sell off driven in large part by fears of China cracking down on the market as well as a warning from JPMorgan NYSE JPM CEO Jamie Dimon that bitcoin was a fraud
Despite the recent fall the digital currency is still enjoying a remarkable year with prices up almost 350 since the start of the year beating just about every other asset class
Ethereum Bitcoin s closest rival in terms of market cap shed 3 3 or 9 90 to 286 92
Other prominent cryptocurrencies such as Bitcoin Cash Ripple and Litecoin also traded lower
The total value of all publicly traded cryptocurrencies was approximately 136 billion |
C | Citigroup raises share buyback program by up to 1 75 billion | Reuters Citigroup Inc N C said on Monday that it would increase its common stock repurchase program by up to 1 75 billion The amount is in addition to the 10 4 billion in planned capital actions announced earlier this year Citigroup said in a statement Citigroup sad it had reduced the number of its outstanding common shares by 180 million or 6 percent in the past two years
The company s shares were up 0 7 percent in premarket trading |
C | Venezuela s Maduro threatens legal action against JPMorgan | By Corina Pons CARACAS Reuters Venezuelan President Nicolas Maduro on Tuesday ordered state oil company PDVSA to look into legal action against JPMorgan Chase Co N JPM after the U S investment bank reported delays in 404 million in bond interest payments PDVSA said on Monday it was using a 30 day grace period for coupon payments on its 2035 bond but that reports of other payment delays were wrong It suggested paying agent Citibank was creating a backlog that had spooked markets JPMorgan s attitude is of a criminal nature Maduro said during a salsa music program he broadcasts from the presidential palace He said local and foreign opponents were conspiring to give a false impression that Venezuela is on the verge of a debt default Maduro accused JPMorgan of falsely reporting that PDVSA was in default In fact the report in question said payments on three bonds were not made on time and that the company had a 30 day grace period to make payments on the coupons before the situation becomes an event of default Maduro said he had asked PDVSA head Eulogio Del Pino to study legal options The least JPMorgan can do is apologize to the Venezuelan people Maduro said Maduro also said the U S Treasury Department was behind a campaign against PDVSA JPMorgan Citibank and the Treasury Department did not immediately respond to requests for comment PDVSA said it had punctually paid this month s obligations for 2021 2024 and 2026 paper but had activated the grace period for the 2035 bond For years investors have been concerned that PDVSA might ultimately be unable to meet its hefty debt obligations during a severe recession at home and a fall in oil prices I d tell the bondholders to call Citibank and ask why they are delaying payment of money that is already in their accounts Del Pino said on state television late on Monday night Del Pino suggested Citibank was participating in attacks on Venezuela s socialist government and implied that it had reneged on its contract but later said the bank confirmed it was making payments The Citigroup Inc N C unit told bondholders in a letter in July that PDVSA would need to name a new paying agent for seven outstanding dollar denominated bonds Citigroup will stay on as paying agent until PDVSA finds a new one said the letter which Reuters saw |
C | Export credit enlisted to keep Gulf mega projects funded sources | By Davide Barbuscia and Tom Arnold
DUBAI Reuters Gulf governments are increasingly turning to export credit agencies ECAs to finance billions of dollars of infrastructure projects as low oil prices squeeze liquidity in the region
Bankers say that since oil prices fell more than two years ago eroding state revenues and drying up funding from local and international banks borrowers are considering ECA finance for everything from airports to oil refinery expansion
The extent of its use in the future is difficult to predict but at least a portion of the estimated 2 trillion of projects planned in the Gulf Cooperation Council are likely to require ECA involvement
As the credit environment tightened so did the ability of banks to take large tickets without the benefit of credit risk mitigation As a result the drivers of infrastructure spends such as sovereigns and large public sector entities are evaluating alternate modes of financing including ECA financing said Yusuf Ali Khan managing director and trade head Middle East North Africa Pakistan and Turkey at Citigroup NYSE C
ECA backed financing structures enable the export and supply of domestic goods or contractors through loan guarantees or in some cases even direct lending from the agencies to an overseas borrower
ECA funding is not only a matter of credit risk mitigation it also enables projects to access a much larger pool of liquidity said Alarik d Ornhjelm head of structured trade and export finance Middle East and Africa at Deutsche Bank DE DBKGn
Projects in Dubai such as expanding Al Maktoum International Airport destined to be the world s largest when complete or the expansion of the red line metro to the World Expo 2020 site will both require debt funding backed by guarantees from international ECAs
Also in Dubai the government is expected to need roughly 7 billion for projects linked to the Expo 2020 and ECA backed financing is likely to represent a large part of this
Marco Ferioli head of UAE and MENA at the Italian export credit agency SACE confirmed to Reuters that ECA financing will have a role in projects related to Expo 2020 and that SACE will be available to support Italian firms involved SACE has also expressed interest in providing a credit line worth 1 billion euros 1 1 billion to support Italian firms involved in expanding the Al Maktoum airport he said
Beyond the UAE a clean fuels project promoted by the Kuwait National Petroleum Company will require an ECA backed loan of over 5 billion and in Saudi Arabia the development of a six line Riyadh metro system expected to cost more than 20 billion will also use ECA backed debt |
C | MTN discussed share sale of Nigerian unit with local regulator SEC | LAGOS Reuters South Africa s telecom group MTN J MTNJ has met with Nigeria s Securities and Exchange Commission SEC to discuss a possible initial public offering and how it wanted to structure the share sale the head of Nigeria s SEC told Reuters SEC director general Mounir Gwarzo said MTN had discussed the possibility of issuing various classes of shares to targeted investor groups He said the telecom firm was looking at three different classes which would be new in Nigeria Gwarzo said the commission was willing to support the share sale as long as it was within local laws and advised the telecom firm to ensure retail investors were protected MTN is the largest mobile phone operator in Nigeria with 57 million subscribers and the country accounts for about a third of its revenue Africa s biggest mobile phone operator MTN Group has said it aims to listing its Nigerian unit during 2017 subject to market conditions part of an agreement with the Nigerian government In June the telecom firm said it would list its local unit on the Nigerian Stock Exchange after agreeing to pay a reduced fine of 1 7 billion in a settlement with the Nigerian government over unregistered SIM cards Gwarzo said the company was yet to submit a formal application for the share sale he told Reuters
MTN Nigeria has appointed Stanbic IBTC Capital Standard Bank of South Africa and Standard Advisory London and Citigroup NYSE C Global Markets as joint transaction advisors and global coordinators with Stanbic acting as lead issuer |
C | Citi s C Ratings Outlook Upgraded By Moody s To Positive | Moody s Investors Service a rating arm of Moody s Corporation NYSE C upgraded the ratings outlook of Citigroup Inc NYSE C and its subsidiaries to positive from stable However the firm affirmed all the ratings The Wall Street biggie s senior debt rating has been maintained at Baa1 Additionally long term deposit rating issuer and senior debt ratings for its subsidiary Citibank N A has been retained at A1 short term deposit rating at Prime 1 and baseline credit assessment at baa2 with counterparty risk assessment of A1 cr P 1 cr Reason for the Upgrade in OutlookThe completion of Citigroup s restructuring to focus on core operations resulting in strong asset risk profile and stability in earnings along with strengthened capital market operations propelled Moody s for the upgrade Per the rating firm the company s streamlining efforts have concentrated its geographic footprint and helped Citigroup in making its business more durable and increased focus on institutional client and consumer customer base Why are the Ratings Affirmed Per Moody s Citigroup faces tremendous competition in various key businesses including retail banking and credit cards in the U S as well as capital markets worldwide The bank is striving hard to improve returns for its shareholders Among others management aims to return capital over earnings along with the capital released by DTA utilization only after recording Common Equity Tier One ratio at 11 5 down from the current ratio of 13 The company believes this would help drive profitability and achieve its target of return on tangible common equity of 11 by 2020 Additionally Citigroup has been putting in efforts to improvise profits in its lines of business including the credit card and retail bank unit in the United States as well as the CitiBanamex franchise in Mexico All these objectives aim at recording return on assets ROA in the range of 90 110 basis points However affirming ratings Moody s views intense competition to act as headwind in accomplishing such targets Notably on the cost front Citigroup has reduced costs since 2014 reporting drop in the cost income ratio to 57 in the first nine months of 2017 from 71 recorded in 2014 Overall according to Moody s Citigroup is well placed among competitors with its strategic streamlining efforts and the unique global consumer strategy which targets high profile clients worldwide resulting in steady earnings and huge deposits base Citigroup currently carries a Zacks Rank 3 Hold The company s stock has outperformed 7 2 growth registered by the over the past six months gaining 16 5
Stocks to ConsiderEnterprise Financial Services Corporation NYSE C has been witnessing upward estimate revisions for the last 30 days Additionally the stock jumped more than 14 over the past year It currently carries a Zacks Rank of 2 Buy You can see First Financial Bancorp NYSE C has been witnessing upward estimate revisions for the last 30 days Also the company s shares have risen nearly 5 6 over the past year It holds a Zacks Rank of 2 at present The Hottest Tech Mega Trend of AllLast year it generated 8 billion in global revenues By 2020 it s predicted to blast through the roof to 47 billion Famed investor Mark Cuban says it will produce the world s first trillionaires but that should still leave plenty of money for regular investors who make the right trades early |
JPM | Yellen Testifies Time To Buy Sell The Dollar | Kathy Lien Managing Director of FX Strategy for BK Asset Management
Yellen Testifies Tuesday Buy or Sell the Dollar
GBP Next 24 Hours is Key
EUR Draghi Says QE Falls into ECB Mandate
AUD What to Expect from the RBA Minutes
NZD Service Sector Activity Accelerates
USD CAD Retreats after Strong Gains on Friday
JPY No Action Expected from BoJ
Yellen Testifies Tuesday Buy or Sell the Dollar
Lets start by establishing the facts Here s what we know going into Yellen s speech
U S Economy is improving but at a painstakingly slow pace labor up activity down
Inflation is bottoming
Quantitative Easing will end in October
Yields are extremely low with the market underpricing 2015 tightening vs Fed s forecasts
Fed doesn t expect to raise interest rates until mid 2015
What does this mean
Fed tightening is still a year away
We are looking at another 8 to 12 months of ZIRP
Yellen will look to distinguish the difference between tapering and tightening
Don t Expect any New Signals on Monetary Policy from the Fed until September Positive Carry
Janet Yellen s semi annual testimony on Capitol Hill Tuesday is the most highly anticipated event risk this week In the most ideal scenario traders are hoping for 2 outcomes an increase in volatility that widens ranges for currencies and clarification on when the central bank will raise interest rates Unfortunately sharing this information won t create the best outcome for the Fed While policymakers around the world are worried that low volatility is creating complacency in the financial markets they do not want monetary policy signals to cause unneeded volatility especially at critical points in their recovery Even though yields moved higher ahead of Yellen s testimony in all likelihood her comments will fail to satisfy dollar bulls and the market in general In other words we see more downside than upside opportunity for the dollar Tuesday but the smarter move may be to wait for Yellen to speak before taking action because only a surprise will provide us with a tradable move in currencies Traders should look to buy dollars if Yellen acknowledges the recent improvements in the economy and says that rates could rise early next year However if she goes out of her way to distinguish the difference between the end of tapering and the beginning of tightening and refuses to specify when rates will rise the dollar should decline which could provide an opportunity to sell the greenback but the opportunity is less attractive since we believe the downside in the dollar is limited JP Morgan NYSE JPM published an interesting study over the weekend that found that since 2009 volatility in Treasuries increased in the week prior to the semi annual testimony and compressed on the day of which is an argument in favor of a benign reaction to the testimony U S retail sales and corporate earnings are also scheduled for release Tuesday and we wouldn t be surprised if they end up having a bigger impact on the dollar Instead the best trade is to be long carry going into and on the back of Yellen s testimony
GBP Next 24 Hours is Key
For the British pound the next 24 hours is extremely important Not only is the consumer price report scheduled for release but the Bank of England s Carney Kohn Taylor and Bailey will be testifying to the Treasury Committee on the June Financial Stability Report If you recall investors were unimpressed by the central bank s announcements in June and they will now be looking for hints of more action from the central bank Recent U K data has been disappointing but overall the economy is doing well and the housing market remains strong keeping pressure on policymakers to take additional action However housing is the only part of the economy experiencing inflation Consumer prices are expected to remain muted after the decline in shop prices last month and until there are signs of significant wage growth the Bank of England won t be in a rush to raise rates We will get a better look at wage pressure later this week GBP USD dropped to a fresh month to date low this morning ahead of the testimony and CPI report If inflationary pressures pick up and policymakers suggest that rates could rise this year GBP USD could head back to its 5 year high but if inflation slows and the BoE downplays the need for tightening 1 7000 will be the target for the currency
EUR Draghi Says QE Falls into ECB Mandate
Dovish comments from ECB President Draghi and a decline in Eurozone industrial production did not stop the euro from trading slightly higher against the U S dollar Monday In his testimony before the European Parliament Mario Draghi said domestic demand has been the main source of growth and he expects demand to continue to support the recovery However with unemployment still high and capacity underutilized he believes that the risks are to the downside Inflation is expected to remain low for the coming months and as a result the central bank is intensifying preparations for an Asset Backed Securities purchase program Unlike members of the EU who raised concerns about the ECB s mandate the central bank President believes that Quantitative Easing falls squarely within their mandate With these comments Mario Draghi is making it clear that the ECB remains dovish and ready to take additional action if necessary but based on the price action of EUR USD investors are rightfully skeptical of the central bank s conviction We continue to believe that the ECB won t increase stimulus in the next 2 months
AUD What to Expect from the RBA Minutes
The Australian dollar had a quiet start to a busy week but volatility should pick up starting with the release of the minutes from the last Reserve Bank of Australia monetary policy meeting Over the weekend RBA Governor Glenn Stevens attempted to talk down the currency but the market paid very little attention to the jawboning He said the AUD s value is too high and warned that investors are underestimating the possibility of a decline Without a clear threat to intervene criticism can only bring AUD down so far whereas dovish minutes could ease upside pressure on the currency At the last meeting the Reserve Bank of Australia left monetary policy unchanged and contrary to everyone s belief at the time the statement did not reiterate the dovishness seen in last month s RBA minutes The central bank stuck to script and even sounded a bit upbeat on the outlook for China However we ve seen this happen before where the currency sells off when the minutes contain a more cautious tone than the statement Going into the July meeting the market anticipated concerns about mining investment commodity prices the strong currency and fiscal tightening While none of this appeared in the statement it could surface in the minutes especially after the country s trade deficit ballooned to it largest level ever in 18 months Meanwhile the New Zealand dollar failed to receive much support from stronger service sector activity For NZD USD 0 8842 is significant resistance and a very firm report will be needed to drive the currency pair above this level No economic data was released from Canada but after Friday s sharp rise USD CAD retreated slightly in quiet trade
JPY No Action Expected from BoJ
The Bank of Japan was widely expected to leave monetary policy unchanged Monday evening The recovery in U S yields Monday helped to stem the slide in USD JPY How the currency pair and the yen crosses trade from here will be determined by the monetary policies of the Fed and not the Bank of Japan In the coming week there are no shortages of event risks that will affect USD JPY but at the end of the day we continue to believe the 100 75 to 103 range for the currency pair will remain intact Given recent data improvements the only possible surprise from Yellen would be in the form of a clear signal of when rates will rise a development that would be positive for USD JPY On the downside the main risk is a deep sell off in equities that is driven by major disappointments in earnings and or another unexpected shock like Portugal s banking troubles The lowest level that 10 year yields dropped to this year was 2 44 on May 28 and even if Yellen fails to satisfy the market we do not expect this level to be tested Given the correlation between USD JPY and Treasury yields this should translate into only limited weakness for USD JPY |
JPM | What Happens To Bank Deposits When QE Ends | During bank earnings calls this quarter analysts have been touching on a question that is worth highlighting That question is will banks see large deposit outflows when QE ends
The main reason analysts are asking the question is that J P Morgan NYSE JPM warned at a banking conference in June that the system could see up to 1 Trillion in deposit outflows in the second half of 2015 JP Morgan alone is bracing for 100 billion dollars in outflows
we estimate that we could experience during that same short time period potentially in the second half of 2015 deposit outflows of up to 100 billion JPM June 2014
More Insulated
Other banks have not shared JP Morgan s concern though Wells Fargo NYSE WFC stressed that maybe deposit growth will slow but deposits probably wont shrink It also thinks it is more insulated than others because it has a higher quality deposit base and strong relationships with its customers
We found over time as you suggest early that deposit generally grow And it might not grow as fast as but I am very confident about how all our deposit franchise will perform in a rising rate environment I think we are going our deposit franchise will always outperform competitors because of the nature of the kind of deposits we have and the amount of core deposits that essentially amount of retail core and I think there is going to be surprise I think we will surprise ourselves and how well it s going to do WFC 2Q Earnings Call
Citigroup NYSE C echoed Wells sentiment
when you think about the potential impact of the FED s actions on deposits one we re probably less exposed than others on this don t forget we ve got of our 968 billion of deposits it s just a little over 400 billion are domestic deposits So it s not the biggest part of our book And we as I mentioned in response to one other question we ve really been managing our deposit base very carefully over the last few years And so I think the other thing you need to consider is the quality of an institutions deposit base And I think that what we ve been able to achieve is an improvement in our quality of deposits both internationally but specifically domestically over the course of the last several years C 2Q Earnings Call
The Fed Sucks
Still in JP Morgan s most recent conference call Jamie Dimon reiterated JP Morgan s outlook for deposit outflows and argued that mechanically it s going to have to happen because the Fed is going to suck liquidity out of the system
the Fed whether they use repo or just sell securities that will reduce deposits It s a factor with an absolute formula The question is who s deposits what kind of deposits and when they might do something like that I assume they will be very careful I think what we re simply were saying that some of the deposits will come out of non operating wholesale deposits already have HQA some won t some will come out of retail and just people will need to be prepared for it if we are right about the liquidity drain in QE you will see a bunch of deposits flow out essentially in the second half of next year and you see some of that will reverse JPM 2Q Earnings Call
Whatever happens it s worth keeping an eye on this issue because 1 Trillion of deposits is a big number nearly 10 of the total US deposit base It also doesn t make me comfortable that JP Morgan which managed the 08 crisis much better than its peers is pointing out a potential systemic vulnerability that its peers are downplaying
It s also important to note that most banks probably feel like their deposit base is very high quality right now because it is Most banks took the opportunity created by large deposit inflows to rework the liability side of their balance sheet and let time deposits lower quality higher cost deposits roll off of their balance sheet and replace those with customer demand deposits So far balance sheets have been pretty stable so it s been a straight liability swap If those demand deposits end up being less sticky than management teams thought though there could be some dislocation especially if they are not preparing now
Liquidity Upside
On the other hand this concern may be mitigated by the fact that loan to deposit ratios are at extremely low levels so banks have plenty of liquidity on the asset side to deal with deposit outflows Time will tell but keep an eye on this
Source Fed H 8 Data |
MS | Online lender On Deck Capital s IPO priced at 20 00 per share | Reuters On Deck Capital Inc an online small business lender said its initial public offering was priced at 20 per share above the expected range of 16 18 The IPO of 10 million shares raised 200 million and all of the shares are being offered by On Deck Capital At the offer price the company s market value is about 1 32 billion The shares are expected to begin trading on Wednesday on the New York Stock Exchange under the symbol ONDK The New York based company which offers loans of up to 250 000 counts First Round Capital Google Ventures Institutional Venture Partners Tiger Global Private Investment Partner and SAP Ventures among its stockholders Morgan Stanley Merrill Lynch JP Morgan Securities and Deutsche Bank Securities were among underwriters to the IPO On Deck offers loans to small businesses like hair salons and doctor s offices particularly in California Florida and New Jersey The company s interest income more than doubled to about 63 million for 2013 Net loss attributable to common stockholders widened to 37 1 million from 20 2 million Reporting by Luke Koshi and Neha Dimri in Bengaluru Editing by Gopakumar Warrier |
MS | Wells to raise minimum stock commission size for FAs | By Jed Horowitz Reuters When the almost 11 000 financial advisers in Wells Fargo Co s branch brokerage system get their 2015 compensation plan on Wednesday they may grimace at one change that could hit their pay or cost their customers a little more Wells is raising the minimum commission size on which it will allow brokers to be paid on a stock trade to 125 from 95 according to people familiar with the plan Wells brokers who receive 50 percent of most of the commissions they charge risk customer backlash for the higher charge A 30 rise in the so called ticket charge may not sound egregious but transactions can quickly add up For example a broker closing out a 400 000 managed account portfolio of a deceased client or rebalancing positions could easily execute 50 transactions costing an extra 1 500 said one of the sources Brokers at Wells and other full service firms still have leeway to offer discounts to selected clients from published rates but all firms are putting constraints on behaviors that they say erode profitability Morgan Stanley the largest U S brokerage firm with more than 16 000 advisers for example does not credit brokers for purchases or sales of securities that trade below 1 a share or on products other than options that have commissions under 100 a trade according to its 2015 compensation plan Wells is the last of the four big U S brokerage firms to issue its annual compensation plan a document that can run dozens of pages and is scrutinized internally and at competitors to see where the most attractive deals lie and what sales behaviors are being encouraged or discouraged Morgan Stanley Bank of America s Merrill Lynch Wealth Management and UBS Wealth Management Americas distributed plans in the past month that offer inducements for working on teams and penalties for discounting fees and commissions and for working with small accounts In addition to raising its compensable trading ticket size the new Wells plan will make it more remunerative for lower producing brokers to work on teams the sources said Some Wells brokers have complained that the firm was constraining their ability to manage their teams Full service firms are promoting teams as a superior way to handle the sophisticated needs of wealthy clients with the added benefit of making it harder for teams to bolt en masse to competitors
This version of the story has corrected the headline to say Wells Fargo is not changing commission rates but raising minimum commission size for broker payouts Reporting by Jed Horowitz in New York editing by Andrew Hay |
MS | Online lender OnDeck Capital s shares soar in debut | By Neha Dimri Reuters Shares of OnDeck Capital Inc rose as much as 40 percent in their market debut underscoring investor appetite for startups using technology to disrupt traditional banking The online lender s shares touched a high of 28 amid heavy trading on Wednesday valuing the company at about 1 85 billion The company s successful debut follows that of online loan marketplace LendingClub Corp whose shares rose as much 67 percent in their debut last week Investors wanted to bet on the disruption that is happening in financial services OnDeck Chief Executive Noah Breslow told Reuters Companies such as OnDeck and LendingClub are cashing in on the demand created by the reluctance of cash strapped traditional banks to lend to small businesses The business has become red hot because of its ability to grow revenue at a lower cost compared to traditional banks attracting robust funding The companies have gained enough critical mass and are going public to accelerate their growth said Catherine Wood Chief Executive of ARK Investment Management ARK Investment is an investor in LendingClub OnDeck makes loans using its own pool of funds to small businesses such as hair salons and doctor s offices unlike LendingClub which connects borrowers with lenders on its peer to peer network OnDeck has lent more than 1 7 billion to small businesses and collected more than 4 4 million payments since its launch in 2007 Loans typically range between 5 000 and 250 000 The company charges a fee of 2 5 percent per loan plus interest for loans of 6 24 months There is a potential 80 billion 120 billion in unmet demand for small business lines of credit OnDeck Capital had said in its IPO filing citing a report by Oliver Wyman a unit of Marsh McLennan Co OnDeck s investors include First Round Capital Google Ventures Institutional Venture Partners Tiger Global Private Investment Partner and SAP Ventures OnDeck raised 200 million after its initial public offering was priced at 20 per share well above the expected range of 16 18 Morgan Stanley Merrill Lynch Pierce Fenner Smith JP Morgan Securities and Deutsche Bank Securities are among underwriters to the IPO OnDeck s shares were up 38 percent at 27 60 in afternoon trading on the New York Stock Exchange More than 3 5 million shares changed hands making them among the top traded stocks on the exchange Reporting by Neha Dimri in Bengaluru Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila |
MS | Xiaomi raising over 1 billion from investors including GIC source | SINGAPORE SHANGHAI Reuters China s Xiaomi XTC UL is raising over 1 billion from investors including Singapore sovereign wealth fund GIC that would value the smartphone maker at over 45 billion a person familiar with the deal said The fund raising was first reported by the Wall Street Journal which also said this round was led by tech fund All Stars Investment and included Russian tech fund DST Global and Yunfeng Capital a private equity firm affiliated with Alibaba Group Holding Ltd Executive Chairman Jack Ma All Stars Investment is led by former Morgan Stanley analyst Richard Ji GIC s investment in Xiaomi comes after Singapore state investor Temasek Holdings Pte Ltd TEM UL bought a small stake in the smartphone maker during an earlier funding exercise a second person said The people were not authorized to speak to media on the matter and so declined to be identified Xiaomi and GIC declined to comment Ji could not be reached for comment Xiaomi brands itself as an Internet company that eschews traditional marketing and sells hardware at low prices as a distribution channel for its real money maker software and services It has been investing heavily in other manufacturers with the aim of building an ecosystem of Internet connected devices and appliances to extend its reach beyond smartphones Nomura analysts said in a report earlier this month that Xiaomi and founder Lei Jun had invested in 43 companies across China s mobile Internet eco system including smart device makers network infrastructure firms smartphone platform developers and providers of various mobile internet services Xiaomi s investment partners include Shunwei VC Temasek and Kingsoft the Nomura analysts said
This story was refiled to remove superfluous a from first paragraph Reporting by Saeed Azhar and Gerry Shih Editing by Christopher Cushing |
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