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JPM | Strong euro leads big bond buyers into government debt rethink | By Abhinav Ramnarayan and Saikat Chatterjee LONDON Reuters The euro s double digit gains this year are prompting some of the world s biggest money managers to view European government debt more favourably just as the central bank is planning to withdraw its support from the bond market Euro zone government bond yields have risen steadily since September 2016 when speculation over a reduction in the European Central Bank s 2 trillion euro 2 35 trillion plus bond purchase programme began Investors worried a drop in official bond purchases would send yields soaring But some investors are considering another push into the market thanks to the currency s strength They say further euro gains EUR EBS could push back the ECB s plans to remove post crisis monetary stimulus and make government bonds more attractive due to a combination of currency gains and policy support Mainly because of the euro rebound we couldn t afford to be short duration in government bonds so we changed our stance in June said Patrick Barbe who heads the sovereign team at BNP Paribas PA BNPP Asset Management The fund manager with 566 billion euros of assets under management is one of the biggest investors in euro zone government debt and has shifted from a negative to a neutral stance on government bonds with longer duration Investors tend to buy longer dated bonds if they expect interest rates to trend lower or remain on hold for an extended period SCARCE INFLATION The euro has gained more than 12 percent this year against the dollar and is the best performing currency in developed markets with most of the gain coming in the last three months A strong euro reduces import prices and therefore keeps inflation lower in the bloc making it harder for the ECB to tighten monetary policy and encouraging bond investors Analysts say a 1 percent rise in the euro s trade weighted index shaves 0 3 to 0 5 percent off headline inflation While the ECB s target is to boost inflation to just below 2 percent data for July shows inflation at just 1 3 percent Yields on German 10 year debt DE10YT RR have fallen 20 basis points to 0 4 percent over the last four weeks as the euro s rally gained momentum The euro s strength against the dollar over the last couple of months since ECB chief Mario Draghi flagged a possible change to policy will bring down the underlying inflation forecasts said Brendan Lardner a portfolio manager at State Street Global Advisor Draghi opened the door to tweaks in the bank s aggressive stimulus policy in a speech in Sintra Portugal on June 27 fuelling expectations that the ECB will announce a reduction of stimulus this year In recent years euro zone government bond yields have been compressed by extraordinary measures deployed by the ECB to boost an economy crippled by debt crises in 2010 and 2011 including deep rate cuts and aggressive bond purchases The ECB has bought more than 2 trillion euros of mainly government bonds and is nearing self imposed limits in most bond markets Total outstanding euro zone government debt stands at 7 trillion euros But with the euro zone economy recovering and a looming shortage of government bonds for the ECB to buy expectations were for the central bank to begin winding down these measures Market expectations were for the bank to announce the end of its bond buying scheme in September and to hike rates twice in 2018 In this environment it looked like government debt especially longer dated bonds would be the last place investors would park their money MINUTES But the euro s rise has disrupted those expectations particularly after the latest policy minutes from the ECB s last meeting in July showed policymakers were worried about a possible overshoot in the currency If we see a rapid move up to 1 20 1 22 area against the dollar we would have more confidence in going tactically long duration most likely in the 10 year euro zone government bond space State Street s Lardner said Money market futures suggest investors anticipate roughly a 60 percent chance of one quarter point rate hike from the ECB by the end of 2018 That is down sharply from earlier this month when a rate hike was fully priced in and last month when investors were expecting one as early as next June ECBWATCH We are a little bit underweight Germany compared to the U S because of the spread between the two but that would change if the euro keeps strengthening particularly keeping in mind the pace of the move said Seamus Mac Gorain fixed income portfolio manager at JPMorgan NYSE JPM Asset Management which manages 1 7 trillion of assets He said that if the euro hits 1 25 it would make them more bullish on euro zone government bonds The effect could spread far beyond European shores as well Daniel Loughney of AllianceBernstein said he would consider buying the debt of other developed countries whose bonds often move in tandem if the euro strengthened further The correlation between U S and German bonds is so strong that you can express the view on gilts and U S Treasuries and pick up the extra spread or perhaps even Canada and Australia he said |
JPM | Brazil inflation hits fresh 18 year low fuels rate cut bets | By Bruno Federowski SAO PAULO Reuters A smaller than expected rise in Brazil s consumer prices in mid August pushed inflation to a new 18 year low keeping the central bank on track to cut interest rates aggressively The IPCA 15 consumer price index rose 2 68 percent in the 12 months through mid August below the 2 73 percent expected in a Reuters poll and down from 2 78 percent in mid July statistics agency IBGE said on Wednesday The reading is far below the bottom end of the central bank s annual target range of 4 5 percent plus or minus 1 5 percentage points supporting bets of a sharp rate cut at the central bank s September meeting Food and beverage prices slipped 0 7 percent extending a string of drops driven by a strong agricultural harvest and leading economists at JPMorgan NYSE JPM to cut their estimates for year end inflation to 3 5 percent from 3 9 percent But disinflation was widespread thanks to a slower than expected economic recovery and double digit unemployment So called core inflation which strips the price index of volatile food prices came in below the bottom end of the target range at 3 4 percent UBS economists revised their forecast and now expect the central bank in September to reduce rates by 100 basis points from 75 basis points previously aligning with the growing market consensus It would be the fourth 100 basis point cut that the bank has made Yields paid on interest rate futures 0 2DIJ fell Inflation will allow the BCB to keep the current Selic easing pace they wrote in a report Slowing inflation in Brazil parallels weakening price pressures in developed economies where tepid global economic growth has kept central banks on edge Brazilian consumer prices gained 0 35 percent in the month to mid August due to a one off increase in fuel taxes as well as a regulatory decision to raise power rates as scarcer rains sapped hydroelectric generation Economists expected a 0 40 percent monthly increase Below is the result for each price category monthly percent change Mid August Mid July Food and beverages 0 65 0 55 Housing 1 01 0 24 Household articles 0 21 0 55 Apparel 0 29 0 04 Transport 1 35 0 64 Health and personal care 0 73 0 14 Personal expenses 0 34 0 31 Education 0 19 0 08 Communication 0 32 0 00
IPCA 15 0 35 0 18 |
JPM | Risk of sharp currency moves drives investors into hedged ETFs | By Helen Reid Saikat Chatterjee and Trevor Hunnicutt LONDON NEW YORK Reuters Investors have been piling into currency hedged equity tracker funds seeking protection against big moves in foreign exchange rates Typically foreign investors buy un hedged equities since share prices are usually negatively correlated to currencies In fact they offer a partial hedge against sharp moves in foreign exchange But with most equity markets near record highs and major currencies notching up double digit gains or losses this year investors are taking no chances Exchange traded funds trade like stocks but track a wider range of securities more cheaply than buying the underlying assets With a currency hedged ETF an investor pays an additional cost for hedging the foreign exchange risk often using currency forwards or options ETFs are becoming a tool also to manage currency said Simone Rosti European head of passive and exchange traded fund sales at UBS Investors poured some 17 billion into currency hedged equity ETFs globally to the end of July a sharp turnaround from the 9 1 billion of outflows seen in the same period last year Currency hedged ETFs are relative newcomers and still just a drop in the ocean They make up just 127 billion of the 3 3 trillion assets under management in equity ETFs as a whole according to industry group ETFGI But their growing importance underlines the impact currency moves can have on portfolio returns The performance of an equity market relative to the global benchmark can be dominated by movements in the country s currency said Mark Richards of JPMorgan NYSE JPM Asset Management A U S investor holding an MSCI Europe tracker for example has enjoyed returns of 15 5 percent year to date in dollars while the index has gained just 3 2 percent in euro terms FX HEDGES ETF providers say flows into hedged products often increase just after a big swing in a currency or when market positioning shows a preponderance of investors betting a currency will move in one direction For example the euro has gained more than 12 percent so far this year and is the best performing G10 currency Flows into currency hedged ETFs tracking European equities in 2017 have far outpaced last year as brokers and investors have warned in recent weeks that the euro s rise could start to threaten the bright outlook for profits of European companies In the first seven months of this year investors poured 1 3 billion into these products compared with 9 2 billion of outflows in the same period last year We ve started to see many clients moving to euro hedged products We see this trend continuing in the next few months said UBS s Rosti ETFs hedged to the single currency saw a dramatic increase in inflows in April as concerns around the French election faded They drew in 638 million that month after managing just 6 million in March Similarly since the pound s dramatic slide on the day after Britain s Brexit vote in June 2016 the benchmark UK stock index has hit record highs as the British based companies with large global footprints benefited from favourable currency translation boosting earnings Sterling fell to its lowest against the euro in eight years this week barring a brief flash crash in October 2016 and analysts say investors are reaching for hedged ETFs to protect against a possible rebound in the pound Deutsche Asset Management ETF strategist Eric Wiegand said ETFs hedged against sterling are their best selling product so far this year TURNING FORTUNES While the cost of hedging foreign equity exposure can be substantial even for relatively low cost ETFs amounting to anything between 1 to 2 percent investors say these products can offer valuable savings especially when markets lean towards consensus views For example at the end of last year expectations that U S President Donald Trump s fiscal plans would fuel a strong dollar and prompt the Federal Reserve to raise interest rates multiple times were very popular But those expectations have been squashed in recent months and bets the greenback will weaken have multiplied Inflows into currency hedged ETFs exposed to the United States also ballooned this year drawing in 5 9 billion so far already ahead of the 5 3 billion net inflows for the full year 2016 Is this really the time now that the dollar has moved that you want to go unhedged I d really question that said Jeremy Schwartz director of research at WisdomTree Asset Management adding U S investors should consider protecting against a potential rise in the dollar DOUBLE HEDGING But some remain sceptical about the need for ETFs to hedge currency exposure when large multinational companies run sophisticated treasury operations that use a variety of instruments to protect themselves against currency swings Buying a hedged ETF hedges the currency exposure of companies that are already hedging wrote Vincent Deluard head of global macro strategy at INTL FCStone a brokerage in a note to clients Double hedging achieves nothing other than generate extra fees and commissions Though a hedge can drive outperformance during a currency shock in the medium to long term the performance differential between hedged and unhedged ETFs tracking the same index diminishes Then there are other asset classes such as fixed income where investors see more value of an FX hedged ETF to cushion the blows from a volatile currency on tiny but steady returns from coupon payments on bonds This version of the story adds title of Jeremy Schwartz
Right now if we look at our asset split the proportion of flows into currency hedged ETFs is larger in the fixed income space said Deutsche s Wiegand Some 37 percent of Deutsche Asset Management s year to date net inflows in fixed income ETFs went into hedged products while just 21 percent of their equity inflows were hedged |
JPM | U S goods trade deficit widens in July retail inventories fall | WASHINGTON Reuters The U S goods trade deficit increased in July as exports fell suggesting that trade would make a modest contribution to economic growth in the third quarter
The Commerce Department said on Monday the goods trade gap increased 1 7 percent to 65 1 billion last month Exports declined 1 3 percent weighed down by an 8 0 percent tumble in shipments of motor vehicles
There were also decreases in exports of consumer goods last month Capital goods exports rose 1 5 percent
Early on in the third quarter data cycle we think trade will be a slightly positive factor for growth during the quarter said Daniel Silver an economist at JPMorgan NYSE JPM in New York With the July data now in hand for capital goods shipments and related trade flows we think real equipment spending will be strong in the third quarter
Imports fell 0 3 percent reflecting a 2 8 percent drop in motor vehicle imports as well as a 1 7 percent decline in industrial supplies Capital goods imports rose 2 0 percent last months and imports of consumer goods dipped 0 1 percent
The readings on consumer and capital goods imports are consistent with our view of ongoing expansion in U S economic activity led by household and business spending said Michael Gapen chief economist at Barclays LON BARC Capital in New York
The government will publish its comprehensive trade report which includes services next week Trade added nearly two tenths of a percentage point to the economy s 2 6 percent annualized growth rate in the second quarter
The Commerce Department also reported on Monday that wholesale inventories increased 0 4 percent in July after rising 0 6 percent in June However retail inventories fell 0 2 percent after advancing 0 6 percent in June
Retail inventories excluding motor vehicles and parts the component that goes into the calculation of gross domestic product also fell 0 2 percent last month after rising 0 5 percent in June
Despite July s soft inventory data economists remained optimistic that inventory investment would contribute to growth in the third quarter Inventory investment had a neutral impact on second quarter GDP after slicing 1 46 percentage points from output in the first three months of the year |
C | Top 5 Things to Know In the Market on Friday | Here are the top five things you need to know in financial markets on Friday October 14
1 Yellen in the spotlight for clues on Fed rate hike
Federal Reserve Fed chair Janet Yellen could provide clues on her current stance for the future timing of the next rate hike later in the session
Yellen is scheduled to deliver a speech on Macroeconomic Research After the Crisis at the Federal Reserve Bank of Boston s Annual Research Conference on Friday at 1 30PM ET 17 30GMT according to the Federal Reserve s website the Boston Fed s agenda for the conference lists Yellen as giving a keynote address at 12 30PM ET
The speech comes after the minutes from the September 20 21 Fed meeting revealed that several voting members of the policy committee judged a rate hike would be warranted relatively soon if the U S economy continued to strengthen
Analysts widely expect the Fed to avoid making a move in November as the meeting comes less than a week ahead of the U S presidential elections
Fed fund futures currently price in the chance of a rate hike in November at just 9 3 according to Investing com s Fed Rate Monitor Tool
Most bets pointed to a December move with the odds at 69 9
2 Consumer data to be closely followed
U S retail sales data will also be in the spotlight Friday as investors attempt to gauge if the world s largest economy is strong enough to withstand an increase in borrowing costs before the end of the year
The Commerce Department will publish data on September retail sales at 8 30AM ET 12 30GMT Friday The consensus forecast is that the report will show retail sales rose 0 6 last month after falling 0 3 in August Core sales are forecast to inch up 0 4 after declining 0 1 a month earlier
Additionally at 10 00AM ET 14 00GMT market participants will also eye the preliminary release of the Michigan consumer sentiment for the month of October Consensus forecasts no change to September s reading of 82 7
3 JP Morgan kicks off banks Q3 earnings season
Though markets traditionally consider Alcoa s earnings out last Tuesday to be the unofficial start of the third quarter Q3 reporting season JPMorgan Chase Co NYSE JPM has the double duty of being the first major financial institution and the first component of the Dow Jones to release earnings on Friday
The world s largest bank smashed estimates in the second quarter which may imply that the market has set the bar high for the July to September period
Experts currently expect JP Morgan to report earnings per share EPS of 1 39 compared to 1 68 in the same period last year while revenue is expected to increase to 23 8 billion from last year s 23 5 billion
After JP Morgan s earnings release scheduled for 6 45AM ET 10 45GMT both Wells Fargo NYSE WFC and Citigroup NYSE C will step up to the plate at 8 00AM ET 12 00GMT
4 Chinese inflation data provides some relief
Just as China s trade data dampened investor sentiment a day earlier investors found some relief Friday from economic reports on prices that suggested that the world s second largest economy could see some renewed hopes for demand prospects
China reported that producer prices PPI rose 0 1 year on year compared to a decline of 0 3 expected That was the first positive growth since February 2012
Additionally the consumer price index CPI for September showed a gain of 0 7 month on month well above the 0 3 pace seen and led by food prices and a 1 9 increase year on year faster than the 1 6 rise expected
5 Global stocks mostly higher on China data
Global stocks moved higher on Friday erasing some losses from the previous day as the stronger than expected Chinese inflation data eased some concerns about the health of the world s second biggest economy
European stocks registered solid gains on Friday as the Chinese data lifted market sentiment At 5 55AM ET 9 55GMT the benchmark Euro Stoxx 50 traded up 1 81 while Germany s DAX rose 1 62 and London s FTSE 100 advanced 0 83
Asian stocks closed mostly higher with the Dow Jones Shanghai managing to recover from slight losses after the inflation data was released
U S futures pointed to a rebound from Thursday s slight losses while investors stateside awaited Yellen s appearance and economic data Specifically the blue chip Dow futures rose 0 35 by 5 56AM ET 9 56GMT S P 500 futures added 0 36 and the Nasdaq 100 futures gained 0 33 |
C | U S futures rise with bank earnings consumer data and Yellen in focus | Investing com Wall Street futures pointed to a higher open on Friday as upbeat price data out in China lifted investor sentiment and market participants reacted to JP Morgan s earnings report ahead of results from Wells Fargo and Citi and waited for economic data as well as an appearance from Federal Reserve Fed chair Janet Yellen later in the session
The blue chip Dow futures gained 92 points or 0 51 by 7 09AM ET 11 0954GMT the S P 500 futures rose 10 points or 0 47 while the tech heavy Nasdaq 100 futures traded up 21 points or 0 44
Just as China s trade data dampened investor sentiment a day earlier investors found some relief Friday from economic reports on prices that suggested that the world s second largest economy could see some renewed hopes for demand prospects
China reported that producer prices PPI rose 0 1 year on year compared to a decline of 0 3 expected That was the first positive growth since February 2012
Additionally the consumer price index CPI for September showed a gain of 0 7 month on month well above the 0 3 pace seen and led by food prices and a 1 9 increase year on year faster than the 1 6 rise expected
In the U S JPMorgan NYSE JPM helped market sentiment as the world s largest bank and Dow Jones component kicked off the third quarter bank reporting season with a beat on both the top and bottom line Shares were up nearly 2 in pre market trade
That was ahead of earnings reports from both Wells Fargo NYSE WFC and Citigroup NYSE C due at 8 00AM ET 12 00GMT
Outside of bank numbers the focus on Thursday will undoubtedly be on Fed chair Janet Yellen as market participants look for clues on her current stance for the future timing of the next rate hike
Yellen is scheduled to deliver a speech on Macroeconomic Research After the Crisis at the Federal Reserve Bank of Boston s Annual Research Conference on Friday at 1 30PM ET 17 30GMT according to the Federal Reserve s website the Boston Fed s agenda for the conference lists Yellen as giving a keynote address at 12 30PM ET
The speech comes after the minutes from the September 20 21 Fed meeting revealed that several voting members of the policy committee judged a rate hike would be warranted relatively soon if the U S economy continued to strengthen
Boston Fed president Eric Rosengren who was one of three policy makers that called for a rate hike back in September will also speak at the conference on Friday
Analysts widely expect the Fed to avoid making a move in November as the meeting comes less than a week ahead of the U S presidential elections
Fed fund futures currently price in the chance of a rate hike in November at just 9 3 according to Investing com s Fed Rate Monitor Tool Most bets pointed to a December move with the odds at 69 9
On the economic front U S retail sales data will also be in the spotlight Friday as investors attempt to gauge if the world s largest economy is strong enough to withstand an increase in borrowing costs before the end of the year
The Commerce Department will publish data on September retail sales at 8 30AM ET 12 30GMT Friday The consensus forecast is that the report will show retail sales rose 0 6 last month after falling 0 3 in August Core sales are forecast to inch up 0 4 after declining 0 1 a month earlier
Additionally at 10 00AM ET 14 00GMT market participants will also eye the preliminary release of the Michigan consumer sentiment for the month of October Consensus forecasts no change to September s reading of 82 7
Also on the Friday s economic calendar investors will digest producer prices for September and business inventories from August
Meanwhile oil prices continued to rally on Friday on the back of U S inventory released a day earlier
Experts explained that the massive build in crude inventories was outweighed by the larger than expected decline in gasoline and distillate stocks
U S crude futures traded up 1 19 to 51 04 by 7 11AM ET 11 11GMT while Brent oil gained 0 86 to 52 48 |
C | Citigroup revenue and profit fall less than expected in Q3 | Investing com Shares in Citigroup NYSE C in pre market trade on Friday after reporting third quarter earnings that were better than feared
Citigroup said earnings per share came in at 1 24 in the three months ended September 30 down from 1 31 a share a year earlier but above expectations for earnings of 1 16 a share
The bank s revenue totaled 17 76 billion in the third quarter a 4 0 decrease from the 18 69 billion reported in the same period in 2015 but above estimates for revenue of 17 27 billion
Traders will now turn their attention to the bank s conference call due to start at 11 30AM ET 17 30GMT
Following the release of the report shares in Citigroup rose 0 56 or 1 16 in pre market trade to 49 01 from Thursday s closing price of 48 45
Meanwhile U S equity markets pointed to a higher open The blue chip Dow futures advanced 82 points or 0 46 8 08AM ET 12 08GMT the S P 500 futures rose 8 points or 0 39 while the tech heavy Nasdaq 100 futures gained 17 points or 0 36 |
C | Citigroup Q3 EPS 1 24 vs estimate 1 16 | Investing com Citigroup NYSE C third quarter earnings beat estimates Citi on Friday report Q3 EPS of 1 24 vs estimate of 1 16 year earlier 1 35 Revenues 17 8 bn vs estimate of 17 27 bn year earlier 18 7 bn Citi shares up 1 16 at 49 01 in pre market trade |
JPM | Growth Rate Of Forward Estimates Highest Since January 2012 | Per ThomsonReuter s This Week in Earnings the forward 4 quarter S P 500 earnings estimate rose 0 11 this week to 117 81 versus the 117 70 from last week The P E ratio on the forward estimate is now 15 3 x The earnings yield is 6 5 The growth rate of the forward 4 quarter estimate rose to 7 78 the highest since January 20 2012 That is a big deal However if ThomsonReuter s current 2014 S P 500 earnings growth estimate of 11 is to be believed that forward 4 quarter growth rate must continue to trek higher Without getting into a rant or screed the financial media s coverage of S P 500 earnings still leaves a lot to be desired There is the bottom up estimates versus the top down estimates quarterly dollar estimates versus the annual dollar estimate for the S P 500 percentage growth estimates versus dollar estimates all of which allows for some fudging to make the data conform to your outlook To be frank I don t know that I understand it all I am trying to reconcile the Thomson data versus the Factset data to see where and how they differ and what accounts for the difference There is no question that Factset provides more detail on the quarterly data and in their weekly Factset Earnings Insight but Thomson s data and format tracks the relative and absolute changes better Factset s growth rates for the quarterly detail consistently come in lower than Thomson s and I m not sure why For example excluding the JP Morgan JPM charge for the litigation expense taken in Q3 13 and disclosed in the October 13 earnings release ThomsonReuters estimates Q3 13 S P 500 earnings growth at 8 4 while Factset excluding the same charge states that Q3 13 S P 500 earnings growth is 6 Is that a material difference It seems small but over the span of 4 quarters that is a notable difference 495 of the S P 500 have reported Q3 13 earnings per Thomson The 8 4 earnings growth rate is 3 8 higher or almost double than the 4 6 growth expected on October 1 Revenue growth of 3 3 for the Q3 13 is inline with the 3 expected on October 4th 2013 The expected Q4 14 earnings growth is currently projected at 7 8 that is pretty decent growth I ll bet we see our first 10 earnings growth in Q4 13 which doesn t start to be reported until another month from now Conclusion While this seems like a lot of nuanced navel gazing around the S P 500 earnings estimates the fact is S P 500 earnings growth is improving which bodes well for 2014 I fully expect Q4 13 to be the best year over year earnings growth for the S P 500 in 8 quarters Can S P 500 earnings growth make the next step from low to mid single digit earnings growth to high single digit and low teens growth The trend is improving no question The earnings and improving economic data continue to make a case for continued modest P E expansion for the stock market Note the forward 4 quarter growth rate the Q3 13 actual growth rate of 8 4 versus the October 1 estimate of 4 6 and the stability around the 2014 growth estimate of 11 S P 500 earnings are entering another phase of growth still without revenue growth though That is the one missing ingredient thus far Thanks for reading More to come this weekend |
JPM | JP Morgan Chase The Foreign Corrupt Practice Act And The Corruption Of | The Justice Department has just obtained showing that Wall Street s biggest bank has been hiring the children of China s ruling elite in order to secure existing and potential business opportunities from Chinese government run companies You all know I have always been a big believer of the Sons and Daughters program says one JP Morgan executive in an email because it almost has a linear relationship to winning assignments to advise Chinese companies The documents even include spreadsheets that list the bank s track record for converting hires into business deals It s a serious offense But let s get real How different is bribing China s princelings as they re called there from Wall Street s ongoing program of hiring departing U S Treasury officials presumably in order to grease the wheels of official Washington Timothy Geithner Obama s first Treasury Secretary is now president of the private equity firm Warburg Pincus Obama s budget director Peter Orszag is now a top executive at Citigroup Or for that matter how different is what JP Morgan did in China from Wall Street s habit of hiring the children of powerful American politicians I don t mean to suggest Chelsea Clinton got her hedge fund job at Avenue Capital LLC where she worked from 2006 to 2009 on the basis of anything other than her financial talents And how much worse is JP Morgan s putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians making the Street one of the major backers of Democrats as well as Republicans The under which JP Morgan could be indicted for the favors it has bestowed in China is quite strict It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of securing any improper advantage Hiring one of their children can certainly qualify as a gift even without any direct benefit to the official JP Morgan couldn t even defend itself by arguing it didn t make any particular deal or get any specific advantage as a result of the hires Under the Act the gift doesn t have to be linked to any particular benefit to the American firm as long as it s intended to generate an advantage its competitors don t enjoy Compared to this corruption of American officials is a breeze Consider for example s generous Friends of Angelo lending program named after its chief executive that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst No criminal or civil charges have ever been filed related to these loans Even before the Supreme Court s shameful 2010 Citizens United decision equating corporations with human beings under the First Amendment and thereby shielding much corporate political spending Republican appointees to the Court had done everything they could to blunt anti bribery laws in the United States In 1999 in Justice Scalia writing for the Court interpreted an anti bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies We don t even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians Last year around this time when the Securities and Exchange Commission released its 2013 to do list it signaled it might formally propose a rule to require corporations to disclose their political spending The idea had attracted more than 600 000 mostly favorable comments from the public a record response for the agency But the idea mysteriously slipped off the 2014 agenda released last week without explanation Could it have anything to do with the fact that soon after becoming SEC chair last April Mary Jo White was to abandon the idea which was fiercely opposed by business groups The Foreign Corrupt Practices Act is important and JP Morgan should be nailed for bribing Chinese officials But if you ll pardon me for asking why isn t there a Domestic Corrupt Practices Act Never before has so much U S corporate and Wall Street money poured into our nation s capital as well as into our state capitals Never before have so many Washington officials taken jobs in corporations lobbying firms trade associations and on the Street immediately after leaving office Our democracy is drowning in big money Corruption is corruption and bribery is bribery in whatever country or language it s transacted in |
JPM | Volcker Rule Will It Curb Banks Risk Taking Behavior | Yesterday the long awaited Volcker Rule one of the hottest section of Dodd Frank Act got the final votes from five regulators Federal Reserve the Federal Deposit Insurance Corp the Office of the Comptroller of the Currency SEC and the Commodity Futures Trading Commission Since many US banks have such a big financial supermarket structure and they are involved in wide array of financial activities the rule needs to be adopted by five U S agencies three bank watchdogs Federal Reserve the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency and two market regulators SEC and CFTC This regulation is aimed at curbing the risk taking behavior of investment banks Going forward the banks will not be able to make big trading bets with their own money It would give a big jolt to many banks whose revenue model to a significant extent is based on revenue from proprietary trading Though it is still to be seen how regulators would monitor the allowable trades hedged trades and trades done as market maker and non allowable trades speculative trades done for own profits Some of provision under the final version of the rule have been made more harsher compared to its previous draft and some have been left as is The 2012 revelation of a multibillion dollar trading loss at J P Morgan Chase Co JPM has dented the lobbying efforts of many banks to make the rule less stringent In many ways this rule is an attempt to modernize the Glass Steagall firewall between commercial and investment banks for the 21st century The aim here is regular banks should engage in the lending activities critical to a strong economy rather than gambling using their customers money Below are the important highlights of the rule
The rule applies only to those banks which have an access to the Federal Reserve s discount window or other government agencies Financial firms that do not have such access are not under purview of this rule
The deadline by which banks have to fully comply with this new regulations is July 2015 Though some legal challenges to this rule can further delay it
Banks can engage in market making and can take on positions to help clients trade but their inventories should not exceed the reasonably expected near term demands of customers
The speculative trades done under the veil of portfolio hedging will be penalized
Fat bonus culture would be passe now Traders would not be rewarded for taking on undue risk
Fortunately or unfortunately speculative activities on government bonds which will now be permitted for foreign sovereign fixed income instruments as well in addition to U S bonds are not prohibited
The rule will apply to proprietary trading and fund activities by U S banking organizations regardless of where the trading or activities are conducted However for non U S banking organizations the Volcker Rule would apply only to proprietary trading and fund activities in the U S or such activities outside the U S if they involve the offering of securities to any U S resident
The rule requires chief executives to attest every year to regulators that the bank has in place processes to establish maintain enforce review test and modify a program to monitor compliance with the rule
The approval on this rule comes at an unceremonious time for most of banks Banks are already frightened by talk of fed tapering and consequent increases in jumps in interest rate which would have a direct impact on their mortgage business Poor recovery in Euro zone countries and slowdown in Asian markets are on the other hand limiting the growth prospects for the banks Though the rule is aimed at strengthening the markets as a whole some of its provisions are still vulnerable It still allows those trades which had ruined some big banks such as
MF Global as it still allows repo to maturity Euro debt trade
LTCM High frequency arbitrage trading on non US government bond is still allowed
JP Morgan London whale s 6B loss Portfolio hedging is still allowed
This rule has potential to cause thousands of job cuts within the banks But the good news is it has given a another opportunity to the legal fraternity to make big bucks by helping banks comply with the rule and find the loopholes in it |
JPM | Volcker Rule May Cause Transparency In Precious Metals Market | If regulators strike the right balance in imposing the so called Volcker Rule that limits bank proprietary trading precious metals markets could see greater transparency according to one on Wednesday Large scale proprietary trades by major banks may have manipulated gold prices exerting significant downward pressure wrote gold strategist Jeffrey Nichols If the Volcker rule ends such supposed trades fundamentals in physical gold and silver markets should claw back some warranted traction he said Banks don t tend to confirm the details of their proprietary trading bets which involve taking positions on markets and prices using their own money and not clients JPMorgan Chase Co JPM declined to comment on any alleged precious metals proprietary trading to IBTimes Goldman Sachs Group Inc GS also didn t comment It may be well known that they do this type of trading in general but specifically with regard to gold and silver I don t think it s been widely discussed Nichols told IBTimes in a phone interview I believe it takes place nonetheless It would be extremely surprising if they weren t doing this More transparency to the now manipulated gold and silver marketsNichols blamed such speculative trading which seeks quick profits from price moves for exaggerating gold s price declines Gold has fallen more than 25 percent this year and is set to end the year lower than it began it for the first time in 12 years Trading on regulated futures markets is likely more significant than such bank trading on unregulated over the counter markets said Nichols The gold futures market is worth tens of billions with much inventory traded via the COMEX commodities exchange a division of the New York Mercantile Exchange NYMEX The intent is often manipulative with large strategically timed selling at key chart points intended to beget more selling and the opportunity for these players to close out positions soon thereafter with attractive trading profits wrote Nichols in his analysis He added that heavy trading in so called dark pools can significantly impact pricing despite being mostly opaque to the rest of the market Precious metal retailers also complained about the alleged practice but were skeptical the Volcker rule could do much to curb the large paper market for gold in which the yellow metal exchanges hands via contracts and exchange traded funds instead of in physical bullion form It s widely believed that gold and silver prices have been manipulated by large bullion banks who specialize in high frequency trading wrote Lear Capital CEO Scott Carter in an email to IBTimes These bullion banks bang the open or close in the paper gold market to influence the price to close out positions or influence the asset sentiment in the marketplace Carter estimated that for every physical ounce of gold traded there are 42 paper ounces traded He believes that distorts underlying physical demand for gold and consequent price trends The Volcker rule could bring more transparency to gold and silver markets said Carter But he added I m skeptical If the new rule had any teeth to it the banks wouldn t have agreed to the change It is easy to understand many gold and silver analysts concerns about the potential for price manipulation in the markets said bullion seller Anthem Vault Inc CEO Anthem Blanchard to IBTimes citing banks ability to leverage and view trade volumes The key will be how effective the regulatory agencies will be at distinguishing between prop trading and true hedging activities he continued Under the Volcker rule banks will have considerable breathing room to argue that certain bets are legitimately used to hedge risk across investment portfolios Regulators who include the CFTC the Securities and Exchange Commission and the Office of the Comptroller of the Currency will have to decide when that defense doesn t hold up But the final approval of the rule earlier this week by itself won t majorly impact gold and silver prices according to Nichols and Carlos Sanchez a CPM Group commodities trader I don t think the Volcker Rule will really have a significant impact on gold and silver trading Banks have known this was coming up for years said Sanchez I don t see any real impact on the market Other gold experts also on Thursday writing on industry sites like MineWeb Some say though that the global gold market is too large to be significantly influenced by a handful of U S banks and that markets are smart enough to outwit such simple manipulation strategies Gold opened at 1252 per ounce in New York on Thursday Emerging market demand for physical gold has bolstered the metal this year though that has been largely outweighed by from U S and European investors |
JPM | Betting Against S P 500 Earnings In 2014 Will Be The Wrong Bet | Per ThomsonReuter s This Week in Earnings the forward 4 quarter estimate for the S P 500 rose 0 03 this week to 117 84 from 117 81 The S P 500 P E ratio on the forward estimate is 15 x The PEG ratio S P 500 P E to growth ratio is now 1 88 x as of 12 13 13 the lowest PEG ratio since March 2012 The earnings yield on the S P 500 is 6 64 Think the 2 86 10 year Treasury yield and think Fed Model More importantly the forward 4 quarter growth rate rose to 8 02 from last week s 7 78 for the first tick over 8 since January 2012 Despite the bubble calling and the negativity the forward earnings growth rate is slowly ticking higher This is very helpful to the market in terms of P E expansion From a market opinion perspective I still think we need a good flush or correction of 5 10 in the S P 500 And yet Bespoke notes that AAII bullish market sentiment remains below 50 today and hasn t been above 50 since January 2013 despite a near 30 return on the S P 500 for calendar 2013 CNBC did a segment this week on Q4 13 earnings guidance based on the following ThomsonReuter s This Week in Earnings statement on guidance For Q4 13 there have been 105 negative EPS pre announcements issued by S P 500 corporations compared to 10 positive EPS pre announcements By dividing 105 by 10 one arrives at a N P ratio of 10 5 for the S P 500 index If this persists it will be the most negative guidance sentiment on record The flaw or catch so to speak is that a lowering of guidance by a few cents from a previous range constitutes one negative data point which may or may not cause analysts to change their consensus estimate The other element to this is that if I went back and quoted previous quarters statements you d hear or see something similar written by ThomsonReuters just not to the degree the 10 5 N P ratio suggests What CNBC or the segment didn t say I think is that expected Q4 13 S P 500 earnings growth of 7 8 is the strongest expected quarterly earnings growth in the last 2 years Retail investors don t realize that companies issue forward guidance pretty consistently and yet if you look at the ThomsonReuter s consensus for the same period the analyst consensus estimate is often different than the so called mid point of the management guidance simply because analysts know when managements are hedging and are being too bullish or bearish Thus there can be two different estimates for any company management s stated range or stated guidance and you average the range to find where management s true EPS estimate resides and then the sell side analysts adjust that range for their own beliefs and their own biases and arrive at their own consensus estimate which may or may not be the same to where management guides the quarter or year A painful lesson learned the hard way about management guidance and forward estimates is Cisco CSCO and John Chamber s guiding higher for the January 2001 quarter in November 2000 even though the stock price action and the estimates had begun to turn south CSCO s stock rallied for a few days and then rolled over When Cisco and Chamber s reported January quarter 2001 results in early February 2001 the CSCO team guided lower and the stock was done for good The November 2000 CSCO conference call was a hallmark event in my education around company earnings and guidance as was 2007 2008 It was a painful lesson learned The other element to this is that the N P ratio is simply stated lower guidance the change could be 0 01 per share which would constitute a negative data point although the dollar estimate wouldn t change very much So what s the point The point is watch the numbers i e the dollar estimate for the S P 500 and in particular watch the ThomsonReuter s forward 4 quarter dollar estimate for the S P 500 Even the more aggressive dollar estimate for 2014 is looking for just 120 in S P 500 EPS in 2014 which given the 109 50 current estimate for the S P 500 in 2013 which will likely end up over 110 when full year 2013 results are all reported by April 1 14 thus the strongest growth being projected for the S P 500 in 14 is just 10 Q3 13 Earnings are CompleteWant to see an interesting statistic With 499 of the S P 500 having reported their Q3 13 financial results excluding JP Morgan Chase s JPM litigation charge S P 500 have grown 8 5 year over year That is much better y y earnings growth than we ve seen since Q1 12 Jeff Miller and Josh Brown ReformedBroker have been publicly vetting the notion around S P 500 earnings that estimates start out too optimistic then just before earnings are reported analysts as a whole become too pessimistic and then actual results are better than expected which is why we see an upward drift to S P 500 earnings growth during reporting periods With Q3 13 ACTUAL earnings growth at 8 5 when did we last see this growth estimate when looking at back estimates for Q3 13 It was July 1 13 Here is the history of actual and expected Q3 13 S P 500 earnings growth 12 13 13 8 5 actual operating eps excludes JPM s litigation charge 10 1 13 4 6 est what is remarkable is that actual earnings have been stronger by almost 2 x the original 10 1 13 estimate that is a good sign 7 1 13 8 5 est 4 1 13 10 2 est 1 1 13 11 4 est 3 6 months out is a good indicator of forward earnings for the quarterly numbers Does that mean our forward 4 quarter estimate is too aggressive Could be but they are different data points I need to go back to prior quarters and look when actual EPS growth crossed the estimate and how far prior to the quarter that happened but this takes time and I want to hammer out the Weekend Earnings Update and enjoy the weekend However we will get to it at some point The problem with this series is that we won t know the full year 2013 actual EPS estimate for the S P 500 until 4 1 13 It does put a crimp in the forecasting ability in terms of certainty or probability around the forecast Q4 13 Shaping Up Positively Expected earnings growth for the S P 500 for Q4 13 is now 7 8 down from 11 as of 10 1 13 We re in the shaving period as we just proved with Q3 13 numbers but the key is we are entering Q4 13 at the highest level of expected growth 7 8 in about 8 quarters On 10 1 13 we were expecting 4 6 for Q3 13 and actual is 8 5 A 7 8 estimate with just two full weeks left in the year and in Q4 13 estimates mean that on January 1 and just prior to the release of Q4 13 earnings we will be facing the highest y y earnings growth estimates for the S P 500 since early 2012 This is why we think that we will see 10 operating EPS growth for the S P 500 in Q4 13 and the S P 500 has the ability to push higher from a total return perspective Even is the Q4 13 S P 500 y y growth estimate is cut to 5 for Q4 13 the fact that Q3 13 s actual EPS growth doubled from 10 10 13 to 12 13 13 tells me we could still get to 10 operating EPS for Q4 13 when the majority of S P 500 companies have reported Basically CNBC picked one data point in the ThomsonReuters This Week in Earnings missive and ran with it They missed the other 10 others positive aspects to the S P 500 earnings data Gotta love the media Finally PEG ratio History We noted near the opening paragraph that the S P 500 PEG ratio is now the lowest in 2 years As forward earnings begin to accelerate the market has now been flat on worries over taper etc Here is the recent history of PEG using the forward estimate going back 2 years 12 13 13 1 88 x 11 29 13 2 03 x 10 25 13 2 23 x 9 27 13 2 09 x 8 30 13 1 98 x 7 26 13 2 23 x 6 28 13 2 59 x 3 29 13 2 40 x 12 28 12 2 55 x 9 28 12 4 18 x 6 29 12 2 80 x 3 30 12 1 87 x To be fair and even handed about this data in March 2012 the S P 500 was on the cusp of an earnings slowdown in fact Q2 Q3 and Q4 12 were the slowest rates of y y earnings growth for the S P 500 since the March 09 market low But the S P 500 looked right through it and the benchmark surprised a lot of investors by returning 15 98 in calendar 2012 despite the slowdown in earnings Could the opposite happen in 2014 Could S P 500 earnings grow 10 on the year and the S P have a negative return It could like in 1994 when S P 500 earnings grew 19 but the S P 500 was flat on the year given the 6 rate hikes but I think we would need something else to happen i e an exogenous shock a heretofore unseen inflation scare that would shock or worry the Fed and result in an unanticipated raising of short term rates If we see more stable that would be a plus The recent Budget deal in Congress between Paul Ryan and Patty Murray was a plus In terms of past market periods I feel like we are in the 1991 1993 market period The Fed really caused a shock in 1994 by raising rates 6 times and I think that is the next shoe to drop but ultimately as 1994 proved the near term correction set the stage for a longer term rally The 1992 1993 period followed the banking crisis of the late 1980 s S L fiasco and the high yield liquidity crisis that took down Drexel 1991 1992 and 1993 was also the quiet period following the first Gulf War when the large caps were relatively subdued but the Russell 2000 outperformed Growth is good prosperity is good jobs are good Making money is good as long as it is done honestly ethically and legally Economically I think the US economy is on the cusp of a period of decent economic growth that could last several years Don t forget too 2014 is a mid term election year We covered a lot of ground with more to go This was a longer post than we wanted |
JPM | Secular Bull Markets Led By Earnings Growth P E Expansion | Per ThomsonReuter s This Week in Earnings the forward 4 quarter earnings estimate for the S P 500 fell slightly to 117 65 from 117 84 The forward P E ratio is now 15 5 x The PEG ratio rose slightly last week to 1 93 x from last week s 2013 low of 1 88 x The PEG range in 2013 has been 3 70 x in late May to last week s 1 88 x The earnings yield fell to 6 47 The year over year growth rate of the forward estimate remained stable at 8 02 versus last week s 8 02 and still at an annual high for the metric Q3 13 earnings will be finalized in the next 10 days and year over year growth ex JP Morgan s JPM litigation charge is 8 5 the strongest rate of growth since Q1 12 Q4 13 earnings reports start just after January 1 14 with the current growth rate expected at 7 5 which is the highest percentage growth expected at the start of a quarter in 2 years Perspective With full year 2013 s S P 500 earnings growth expected to come in at 7 8 when the full year 2013 is reported by March 31 14 the 30 return on the S P 500 is somewhat of a surprise to put it mildly as the P E ratio on the S P 500 expanded from 12 89 x as of 12 28 12 to this Friday s 15 5 x What is remarkable is how little P E expansion that really is when you look at the long run history of the S P 500 Trading at 15 x the forward estimate the S P 500 is just a tad above its 10 year average P E of 14 x per Factset In addition the long term earnings growth in 2013 which I expect to come in at 7 8 is also just in line with the post WW II average earnings growth rate of the S P 500 of 7 The point being that right now in terms of the S P 500 s valuation earnings growth and P E ratio today s market is JUST average in its metrics Still we are a bit more cautious about 2014 s expected return for the S P 500 given the 2013 return and the fact that the S P 500 hasn t had a 10 correction in well over a year Finally Ford F shocked everyone last week saying that while their 2014 unit sales for the industry should be 16 17 million cars the company was guiding to lower pre tax and auto margins That was quite a shock for both shareholders and the market as given the F 150 sales Ford looked to be ready to have a decent 2014 To quote Jim Cramer on Thursday 12 19 he was baffled by the guidance and I can t blame him Ford does have a history of being dire and guiding conservatively as they did in early 2013 about their European operations when they were expecting a 2 bl or 0 50 per share loss when in fact as of 9 30 13 Europe has lost just 1 bl or 0 25 per share in 2013 year to date is the detail on Ford s revenue and EPS estimates both pre the 2014 guidance and post the guidance We still think intrinsic value on the stock is between 22 25 per share although the 18 19 has been a point of rejection for the stock technically now for the last 2 years Ford currently sports a free cash flow yield of 10 4Q trailing free cash flow divided by market cap thus they have plenty of room on the dividend and even share buybacks currently none if they so desire They better be shareholder friendly given their guidance on Wednesday 12 18 although when 2014 is in the books my bet is that guidance was too conservative |
JPM | Weekend Links Of Some Gravitas | One of the best tweets of the week from Josh Brown naturally who linkedHarvard study noting that for individual investors returns are extrapolative Explained another way years ago by a fellow contributor to TheStreet com Gary Dvorchak individual or retail investors tend to be trend followers while institutional investors are mean reverters or probability players Josh s citation of the study confirms the trend following nature of the retail investor Granted I don t understand all the math and or the academic jargon of the article but the point seems clear as does the mutual fund flows now showing up in stock mutual funds To be honest we like to be utilize both styles for client accounts we like growth stocks which tend toward the trend following crowd and we like value stocks that are not correlated to current market action but in our view represent the next phase of the market which today would be global cyclical stocks which is a nice segue into our next bullet point The tough part of our style investing for clients is that our winners have to win by enough to compensate for our underperformers Not as easy as it sounds Norm Conley of JAG Capital Management out of St Louis the improvement in Basic Materials and is intrigued by the prospects for the sector in 2014 We are too but a narrower segment of the sector Chemicals is about 70 of Basic Materials and Basic Mat is just 3 of the SP 500 as a whole We are looking at the non Chemical part of the sector More will follow in a separate blog post With year end very close there is a lot of scrutiny now of 2013 s underperformers hoping to find the 2014 version of Best Buy BBY or Hewlett Packard HPQ Street pundits are starting tothe Financial s bandwagon when no one wanted to own them a year ago except our posts telling readers that Financial sector earnings revisions boded well for 2013 Schwab SCHW one of our rising rate plays as far back as Sept 12 is up 82 this year excluding the dividend and the FOMC just tapered slightly Our top Financial sector holdings exiting 2013 are SCHW Goldman Sachs GS Chicago Mercantile CME JP Morgan JPM and Wells Fargo WFC JPM is up just 31 in terms of its capital gains in 2013 slightly ahead of the market It has worried me for some time that the stock is universally loved SCHW GS CME JPM and WFC The tweet is from Ukarlewitz be sure and follow him He has so many good points Im growing a little less comfortable with our Financial overweight into 2014 Our overweight consists of Financials being 3 of our top 5 holdings and 4 of our top 10 positions as of October and November 13 month end Never been to Ireland don t really have any burning passion to visit but I was impressed how they took on the austerity program and the EU debt crisis and are the first country to the program Like the infamous Irish goodbye the exit is being done quietly efficiently and without the sturm and drang of the other EU participants Good job Ireland Kristen Bentz another professional contact from TheStreet com has a retail blog and is a frequent media interviewee She wouldn t like our buy of JC Penney JCP but we are going to give it more time JCP is another stock being eyed as a turnaround for 2014 as everyone wants to own the next BBY or HPQ The difference between JCP and those two stocks is that at this time last year BBY and HPQ were trading at 3 x cash flow ex cash and their dividends were safe JCP is operating cash flow negative according to our internal spreadsheets which is a MAJOR issue for the retailer I care less about JCP has to say about this quarter s earnings than I do about operating cash flow which I would like to see turn positive with the holiday quarter The key to JCP is NOT comp s or EPS but definitely sustainable cash flow from operations Long JCP Acrossthecurve com is another good tweeter of credit spread and yield curve info This is a December 18th which talks about credit spreads Both high yield and high grade credit spreads are at 2007 lows or tights which implies further good news for the equity market If there is a canary in the coalmine for the equity market one of the better ones is credit spreads and monitoring credit spreads Speaking of which Moody s Christine Padgett a Senior VP in their Credit Group published their December 13 Credit Outlook or Monitor this week and the headline was Speculative Grade Liquidity Outlook is Solid Heading into 2014 We have been trading the HYG and JNK high yield ETF s and are currently waiting for a pullback even though both were up on solid volume this week Credit spreads and default rates for 2014 are expected to remain a positive story although at 2007 tights I just don t think there is much upside in either the high grade or high yield corporate bond markets The May high for the HYG was 96 and it closed Friday at 93 and change If I had to pick between high grade and high yield right here today I d say overweight high yield but in terms of credit spread it is a relative value and not an absolute value game I keep hearing this Payden Reigel commercial that talks about 1 4 of all the goods and services produced in the history of the world how is that for hyperbole have been produced in the last 12 years No one has seemingly challenged the commercial and it keeps running on CNBC but I find that comment or fact to be one of the single most astounding pieces of information I ve ever heard It truly speaks to the technology economy we live in today It also bodes well for the future in my opinion but think of the volatility that creates if so much can be created so quickly Marketwatch looks at the various Strategist forecasts for 2014 The same info can be found on Bespoke more or less Most were too bearish in 2013 and most will likely be too bullish for 2014 to compensate but that is just a guess on my part Ryan Detrick of Schaeffer s has one of the better calls in 2013 after the first few days of trading I couldn t find the link but will try and get it for next weekend From what I understand how the market trades on the first trading of 14 and then the first few days of the year will be a good tell More next week Doug Kass and Bill Gross have gotten a lot of attention for their closed end fund splash and their municipal bond market call this past week including this weekend s Barrons We write about that including our buying of muni s for cross over or tax deferred accounts like IRA s and in early August 13 Actually Barron s has been on this topic for a while all summer in fact as municipal relative values were hurt by California and Illinois pension issues then Puerto Rico s looming downgrade to below investment grade The municipal bond market has been on shaky ground all year I think I need a better marketing department No one can explain to me in a reasonably coherent and simple way how QE3 has added to the stock market s 30 rise this year despite the constant cacophony of another bubble being created by Fed policy No one We re going to finish up with another by Josh Brown this one on mean reverting performance and persistence in investment ability Given this should I just shut down and give all the money back to clients I read on a CFA reading in the early 1990 s that persistent investment skill had very little to do with skill and more to do with luck It is an issue for a longer more thoughtful piece between now and year end but the bear markets of 2001 2002 and then 2008 were not what I would call personal highlights I struggled badly and lost assets clients and sometimes friends However we still have clients from the mid 1990 s and the numbers aren t bad performance isn t shoot the lights out but we have added value if only minimally but that performance trend is starting to improve again I think Josh Brown s tweets and blogs add value every day along with some other guys and women cited on this blog but from the clients we have kept over the years there are other things that matter This requires a longer subjective piece on the business Thanks for reading this weekend Still have more to write today |
JPM | Solta Medical Agrees To Be Acquired By Valeant Another Bid Might Emerge | On Monday December 16th Valeant Pharmaceuticals VRX submitted what for the time being is the winning bid to acquire Solta Medical Inc SLTM For some time now we have been predicting that Solta would be acquired before the end of this year Before that we successfully predicted that Obagi Medical devices would be acquired and in early 2013 it was again the winning bidder was Valeant Concerning the latest bid by Valeant to acquire Solta we are not so sure the story is said and done as we believe based on Solta s bid action ZELTIQ Aesthetics Inc ZLTQ might step up and submit a bid via a share swap to acquire Solta As I mentioned in a prior article Zeltiq cannot allow Valeant to acquire Solta and allow Valeant s top sales force to effectively lever Solta s products in a manner that could sink Zeltiq Zeltiq has but one asset it currently sells CoolScultping which will not be able to sustain its current revenue stream nor will Zeltiq succeed with just one asset it sells
Regardless of how the Solta situation turns out Valeant is not going anywhere so Solta is going to be acquired either by Valeant or a higher bidder
So what is the likeliness of another bid coming in for Solta here I think it s a rather good chance First off I have to ask myself why the bid has constantly been over the agreed buyout price of 2 92 a share and a stock price reaching as high as 2 97 last week It seems to me that there should be no hurry for Valeant to want to grab shares now at a higher price This leads me to strongly suspect that Zeltiq or another company might be ready to submit a substantially higher bid If the deal with Valeant is the last and best bid why the apparent hurry to bid higher for shares now
Zeltic was once again upgraded this past Friday by Canaccord from their original high target of 16 to an absurdly higher target of 22 This would represent a market cap of over 800M for company on track to do a maximum of 120M over the next year a long ways from being profitable and which does not take into account the potential damage Valeant can and will likely do to Zeltiq s revenue stream if its deal with Solta goes through This represents nearly a 10 to 1 ratio in price to sales a number unheard of in the aesthics device field yet alone for a single asset company like Zeltiq These kind of numbers are only justified in developmental biotechs not aesthetic device companies
On November 7th Zeltiq announced a public offering of 4 5M shares priced at 12 22 However the company is not offering the shares but rather certain private investors in the company The buyers of these shares are J P Morgan Chase Co JPM and Goldman Sachs Group Inc GS What is the purpose for this so called public offering It clearly seems to me that Zeltiq is positioning itself to make a strategic acquisition via a share for share swap deal This is the company s only play with 43M in cash on hand It does not have the leverage to offer a cash for shares deal unless any such deal would be for a small private company I have yet to identify such a company that Zeltiq might have its eyes on The recent big pop in Zeltiq s share price can be for one reason only a share for share swap for a company with a valuation of at least 250M
Since the offering was announced Zeltiq stock has soared touching over 17 in a matter of a few days and recently passing the 18 mark It s obvious to me Zeltiq s stock price is being held artificially high here Additionally because of its current market cap of over 650M for a single asset aesthetics company it does not make for a strong acquisition target for Valeant or anyone else at this time Any company paying this price would be grossly over paying especially with other companies out there with strong assets that can be purchased at considerably less than half the price as Valeant has done with Solta
After conferring with several experts in the aesthetics device field including David Callan the consensus on Zeltiq now is that it is grossly over valued and faces potentially tough times ahead if Valeant s deal to acquire Solta ends up going through At a recent conference Zeltiq had a hard time offering any solid guidance moving forward and its research and development while quite good is still over a year or so away from introducing any new products
How can a single asset company s business thrive with Valeant an industry giant now playing in their backyard with Solta s assets in hand
As mentioned we don t think they can thrive in this situation hence is why we believe they have to submit a bid to get Solta into their hands if for nothing else than a defensive move to protect their turf Valeant is a multi Billion giant with a sales forces seconds to none Zeltiq s chances of competing with them with its single asset is slim to none in my mind I have not sold a single share of my 150k plus position in Solta yet For one there is no reason to as any sale this year would count towards this year s taxes Another reason which I highlight in this article is a higher bid coming in here acts as icing on the cake for Solta shareholders
Could I be wrong here Sure I can but when considering each and every factor in this case I don t think so but time will tell how this story plays out stay tuned
I am long SLTM
Disclosure This article is intended for informational and entertainment use only and should not be construed as professional investment advice They are my opinions only Trading stocks is risky always be sure to know and understand your risk tolerance You can incur substantial financial losses in any trade or investment Always do your own due diligence before buying and selling any stock and or consult with a licensed financial adviser |
MS | European stocks sharply higher in subdued trade Dax rallies 1 25 | Investing com European stocks were sharply higher in subdued trade on Tuesday as investors were eyeing the release of U S economic reports later in the day During European morning trade the EURO STOXX 50 surged 1 34 France s CAC 40 gained 1 32 while Germany s DAX 30 rallied 1 25 Investors still remained cautious amid expectations that the Federal Reserve is moving closer to scaling back its USD85 billion a month asset purchase program Last week the minutes from the U S central bank s May meeting showed that a number of policymakers were prepared to taper bonds purchases as soon as June Financial stocks were broadly higher as French lenders BNP Paribas and Societe Generale surged 1 53 and 2 39 while Germany s Deutsche Bank jumped 1 30 Peripheral lenders added to gains Spanish banks BBVA and Banco Santander rallied 1 39 and 1 66 respectively while Italy s Intesa Sanpaolo an Unicredit gained 1 78 and 1 96 Elsewhere Basilea Pharmaceutica surged 2 73 after the U S Food and Drug Administration granted seven year market exclusivity for one of its treatments In London FTSE 100 jumped 1 66 as U K lenders tracked their European counterparts higher Shares in Lloyds Banking rallied 1 30 and the Royal Bank of Scotland gained 1 77 while HSBC Holdings and Barclays advanced 1 83 and 2 43 respectively Adding to gains Tui Travel saw shares soar 3 71 after Morgan Stanley held the stock s rating at equal weight Meanwhile mining stocks were mostly lower as Rio Tinto declined 0 48 and gold producer Rangold Resources retreated 0 82 while Eurasian Natural Resources plummeted 2 12 In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 65 gain S P 500 futures signaled a 0 74 increase while the Nasdaq 100 futures indicated a 0 97 jump Later in the day the U S was to release private sector data on house price inflation and a report on consumer confidence |
MS | European stocks remain sharply higher on ECB comments Dax up 1 14 | Investing com European stocks were sharply higher in subdued trade on Tuesday following comments by two European Central Bank officials while investors eyed the release of U S economic reports later in the day During European morning trade the EURO STOXX 50 rallied 1 36 France s CAC 40 surged 1 38 while Germany s DAX 30 jumped 1 14 Europeam stocks gained ground after ECB Executive Board member Peter Praet said the bank could still cut interest rates further to stimulate the economy if needed His remarks followed ECB Executive Board member Joerg Asmussen s comments on Monday that the central bank would stick to its expansive monetary policy for as long as necessary But investors still remained cautious amid expectations that the Federal Reserve is moving closer to scaling back its USD85 billion a month asset purchase program Financial stocks remained broadly higher as French lenders BNP Paribas and Societe Generale surged 2 95 and 3 59 while Germany s Deutsche Bank jumped 2 20 Peripheral lenders added to gains with Spanish banks BBVA and Banco Santander rallying 1 95 and 2 96 respectively while Italy s Unicredit and Intesa Sanpaolo gained 3 16 and 3 20 Elsewhere Basilea Pharmaceutica soared 6 05 extending earlier gains after the U S Food and Drug Administration granted seven year market exclusivity for one of its treatments In London FTSE 100 jumped 1 60 as U K lenders continued to track their European counterparts higher Shares in Lloyds Banking rallied 1 41 and the Royal Bank of Scotland gained 1 79 while HSBC Holdings and Barclays advanced 2 57 and 3 70 respectively Adding to gains Tui Travel saw shares surge 3 65 after Morgan Stanley held the stock s rating at equal weight Meanwhile mining stocks remained mostly lower as Rio Tinto dedged down 0 07 and Anglo American retreated 0 47 while Rangold Resources and Eurasian Natural Resources tumbled 1 67 and 2 35 In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 61 gain S P 500 futures signaled a 0 68 increase while the Nasdaq 100 futures indicated a 0 75 advance Later in the day the U S was to release private sector data on house price inflation and a report on consumer confidence |
MS | U S futures lower amid Fed fears Dow Jones down 0 51 | Investing com U S stock futures pointed to a lower open on Wednesday as the previous day s upbeat U S data added to speculation the Federal Reserve could soon scale back its stimulus program Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 51 drop S P 500 futures signaled a 0 58 decline while the Nasdaq 100 futures indicated a 0 46 slump Data on Tuesday showed that U S consumer confidence rose to the highest level since February 2008 in the current month The Conference Board said its index of consumer confidence rose to 76 2 in May from 69 0 in April and beating expectations for a reading of 71 0 A separate report showed that the Case Shiller U S home price index rose 10 9 in March from a year earlier the biggest increase since April 2006 The strong data boosted expectations that the Fed will wind down its USD85 billion a month asset purchase program later this year Financial stocks were expected to be active amid reports Morgan Stanley is trying to raise USD1 billion to USD3 billion for a new global real estate fund Shares in the U S lender dropped 0 89 in pre market trade Pharmaceutical companies were also likely to be in focus after AstraZeneca agreed on Tuesday to buy Omthera Pharmaceuticals for USD443 million In the tech sector Apple shares were down 0 26 in early trading even as the company s Chief Executive Officer Tim Cook said he expected the iPhone maker to release several more game changers hinting that wearable computers could be among them Across the Atlantic European stock markets were sharply lower The EURO STOXX 50 declined 0 88 France s CAC 40 tumbled 1 01 Germany s DAX plummeted 1 04 while Britain s FTSE 100 plunged 2 16 During the Asian trading session Hong Kong s Hang Seng Index dove 1 61 while Japan s Nikkei 225 Index retreated 0 86 |
MS | European stocks edge higher ahead of ECB BoE statements Dax up 0 01 | Investing com European stocks edged higher on Thursday as markets awaited the European Central Bank and the Bank of England s policy statements later in the day During European morning trade the EURO STOXX 50 added 0 12 France s CAC 40 rose 0 17 while Germany s DAX 30 inched up 0 01 The ECB was not widely expected to make any changes to monetary policy at its monthly meeting later Thursday but the bank s post policy meeting press conference with President Mario Draghi would be closely watched Stocks also found support after data on Wednesday showing that the U S private sector added far fewer than expected jobs in May dampened expectations that the Federal Reserve would start to unwind its asset purchase program this year Financial stocks were mixed In France BNP Paribas and Societe Generale were flat while Germany s Deutsche Bank gained 0 61 Among peripheral lenders Spanish banks BBVA and Banco Santander rose 0 28 and 0 72 respectively while Italy s Intesa Sanpaolo and Unicredit declined 0 29 and 0 56 In London FTSE 100 eased up 0 02 ahead of the Bank of England s monthly policy decision Johnson Matthey led gains surging 7 58 as the U K platinum refiner and producer of auto catalysts posted underlying pretax profit that slipped to GBP389 2 million in the full year ending in March still beating the GBP379 1 million estimate Meanwhile mining giants Rio Tinto and BHP Billiton were on the downside declined 0 83 and 0 58 respectively while Anglo American dropped 0 67 Financial stocks were also mostly lower as shares in Lloyds Banking slid 0 71 and the Royal Bank of Scotland retreated 0 76 while Barclays plummeted 1 98 HSBC Holdings tumbled 1 09 Bloomberg reported earlier that Nomura Holdingsis selling 84 5 million shares in Barclays on behalf of an investor at 308 5 pence a share to market price Elsewhere RSA which insures cars homes and ships in the U K Scandinavia and emerging markets jumped 1 59 after Morgan Stanley raised its rating on the stock to overweight from underweight In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 21 rise S P 500 futures signaled a 0 31 increase while the Nasdaq 100 futures indicated a 0 20 gain Later in the day the U S was to release the weekly report on initial jobless claims |
MS | European stocks hold gains eyes on ECB Dax up 0 18 | Investing com European stocks held gains on Thursday despite disappointing German data as markets awaited the European Central Bank and the Bank of England s policy statements later in the day During European afternoon trade the EURO STOXX 50 climbed 0 43 France s CAC 40 gained 0 40 while Germany s DAX 30 added 0 18 Official data showed that German factory orders fell 2 3 in April more than the expected 1 decline after a 2 3 increase the previous month The ECB was not widely expected to make any changes to monetary policy at its monthly meeting later Thursday but the bank s post policy meeting press conference with President Mario Draghi would be closely watched Stocks also found support after data on Wednesday showing that the U S private sector added far fewer than expected jobs in May dampened expectations that the Federal Reserve would start to unwind its asset purchase program this year Financial stocks remained mixed In France BNP Paribas and Societe Generale declined 0 20 and 0 53 while Germany s Deutsche Bank edged up 0 06 Among peripheral lenders Spanish banks BBVA and Banco Santander rose 0 28 and 0 54 respectively while Italy s Unicredit and Intesa Sanpaolo tumbled 0 93 and 1 05 In London FTSE 100 eased up 0 05 he Bank of England kept its benchmark interest rate unchanged for the 51st consecutive month in June and announced no change to its asset purchase facility program Johnson Matthey continued to lead gains surging 6 77 as the U K platinum refiner and producer of auto catalysts posted underlying pretax profit that slipped to GBP389 2 million in the full year ending in March still beating the GBP379 1 million estimate Meanwhile mining giants BHP Billiton and Rio Tinto were on the downside retreating 0 19 and 0 84 respectively Financial stocks were also broadly lower as shares in HSBC Holdings dropped 0 50 and Lloyds Banking tumbled 1 while the Royal Bank of Scotland and Barclays plunged 2 10 and 2 38 Bloomberg reported earlier that Nomura Holdings is selling 84 5 million shares in Barclays on behalf of an investor at 308 5 pence a share to market price Elsewhere RSA which insures cars homes and ships in the U K Scandinavia and emerging markets rallied 2 56 after Morgan Stanley raised its rating on the stock to overweight from underweight In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 25 rise S P 500 futures signaled a 0 34 increase while the Nasdaq 100 futures indicated a 0 22 gain Later in the day the U S was to release the weekly report on initial jobless claims |
JPM | SEC drops case against ex JPMorgan traders over London Whale | By Jonathan Stempel NEW YORK Reuters The top U S securities regulator on Friday dropped its civil lawsuit accusing two former JPMorgan Chase Co N JPM traders of trying to hide some of the bank s 6 2 billion of losses tied to the 2012 London Whale scandal The decision by the U S Securities and Exchange Commission to dismiss charges against Javier Martin Artajo and Julien Grout came four weeks after the U S Department of Justice abandoned its criminal case against both men who have denied wrongdoing Prosecutors said their case ran into trouble after testimony from Bruno Iksil a cooperating witness who had been dubbed the London Whale proved unreliable Iksil has publicly shifted blame for the losses toward upper JPMorgan management including Chief Executive Officer Jamie Dimon who at first called the matter a tempest in a teapot JPMorgan ultimately paid more than 1 billion and admitted wrongdoing to settle related U S and British probes No one was convicted or pleaded guilty over the losses although Iksil had agreed to cooperate with prosecutors against Martin Artajo his supervisor and Grout who worked under him The men had worked for JPMorgan in London Martin Artajo is a Spanish national while Iksil and Grout are French nationals The government has done the right thing Bill Leone a lawyer for Martin Artajo said in a phone interview The evidence in the case has been pretty overwhelming for some time that our client didn t mislead anyone or do anything wrong Edward Little a lawyer for Grout said in a phone interview At the end of the day there was no evidence that justified these cases
The SEC dropped its case despite having a lower burden of proof than the Justice Department to show wrongdoing It did not immediately respond to requests for comment |
JPM | JPMorgan pledges up to 2 million to fight racism support human rights | By David Henry NEW YORK Reuters JPMorgan Chase Co N JPM said on Monday it will contribute up to 2 million to fight racism and support human rights in light of a white nationalist rally in Charlottesville Virginia that led to violence and the death of a protester The sum includes 500 000 each to the Southern Poverty Law Center and the Anti Defamation League to further their work in tracking exposing and fighting hate groups and other extremist organizations Peter Scher head of corporate responsibility wrote in a memo to employees that was provided to Reuters by the company As much as 1 million more will be contributed in two for one matches of donations by employees to a wide range of human and civil rights organizations according to the memo The bank is also contributing 50 000 to the Charlottesville Area Community Foundation Racial conflict in Charlottesville earlier this month was followed by intense political controversy over remarks by President Donald Trump Jamie Dimon chief executive officer of JPMorgan said he strongly disagreed with Trump as he and other CEOs moved to disband an advisory panel to the president
JPMorgan has reacted to a wide range of traumatic events in the past with contributions and matches of employee donations The events have included the recent Grenfell Tower apartment fire in London the 2016 Orlando Florida gay nightclub mass shooting earthquakes and tropical storms |
C | Citi sells Argentinian consumer unit a day after Brazil sale | Reuters Citigroup N C agreed to sell its consumer business in Argentina to Banco Santander Rio BA RIO for an undisclosed amount a day after it sold some of its Brazilian retail banking assets to Ita Unibanco Holding SA SA ITUB4 The U S bank had said earlier in the year that it plans to exit retail banking and credit card operations in Brazil Argentina and Colombia to cut costs and boost profitability Citi said on Sunday that the sale would include about 1 4 billion of its assets including credit card personal loans and retail brokerage business in Argentina Citi also agreed to sell its Brazilian assets to Ita Unibanco Holding SA for 710 million reais 220 43 million on Saturday four days after it had announced that it will invest another 1 billion in its Mexican bank Citibanamex
1 3 2210 reais |
C | Citi s UK chief says timing of Brexit contingency plans now key dilemma | LONDON Reuters The UK head of U S bank Citi N C said on Tuesday that the main question facing the finance industry now is when to enact contingency planning after Britain voted to leave the European Union The big question now is timing James Bardrick UK Country Officer for Citi which has 9 000 UK employees told delegates at a conference in London How do we and when do we start making decisions knowing the plan is ready to go it could be in the first quarter of 2017 British Prime Minister Theresa May has said she would trigger the process to leave the EU by the end of March the first indication of when negotiations might start The future of London as Europe s financial center will be a major negotiating point in the talks with banks keen to retain the passporting rights which allow them to sell financial services across the EU from London
Last week Bardrick said that jobs in London s financial sector would move to countries inside the European Union after Britain leaves the bloc regardless of what deal is struck on access to the EU financial services market |
C | Wells Fargo faces costly overhaul of bankrupt sales culture | By Dan Freed and E Scott Reckard
Reuters Embroiled in a scandal over unauthorized customer accounts Wells Fargo Co N WFC faces a steep challenge in overhauling its hard charging sales culture without gutting profits
Until recently Wells staffers labored under ambitious quotas while executives boasted to Wall Street about cross selling each customer multiple accounts
That system collapsed with revelations that thousands of employees opened as many as 2 million accounts without customer permission leading to a 185 million fine in September But the problems ahead extend far beyond regulatory penalties investigations and lawsuits
Executives will have to dismantle and rebuild systems of sales incentives and performance management that date back two decades said retail banking experts including two consultants who have worked for Wells Fargo That will require heavy spending on hiring training and installing safeguards against abuses
They have to retrain their entire sales culture going back years said Paul Miller an analyst at FBR Capital markets It s a huge job
Wells Fargo spokesman Oscar Suris declined to comment for this story
On Monday bank CEO John Stumpf and President Tim Sloan led a conference call with 500 executives to lay out responses to the scandal including the addition of 2 000 risk management employees and a series of branch tours by the new head of retail banking according to the Wall Street Journal
Management said the bank had lost some retail banking business and could lose more
It s going to be harder for awhile and we get that Sloan said according to the Journal
Dan Kleinman a San Francisco based consultant who has worked with Wells Fargo on and off since the 1970s predicted it would take the bank 3 5 years to rebuild its sales and management structures which he called a Herculean task
Retraining could involve as many as 100 000 staffers at more than 6 000 locations Some other potential costs are less obvious such as recruiting and retaining the necessary talent
The question is whether the type of folks you want as employees will even work for the bank Kleinman said Its reputation is soiled
SLASHED PROFIT FORECASTS
Most stock analysts covering Wells Fargo have cut profit forecasts citing fallout from the scandal Fitch Ratings also cut the bank s credit rating outlook to negative citing potential profit erosion
The bank ditched its sales quotas on Oct 1 amid political pressure Stumpf has said he still loves cross selling but he used the word sparingly while fielding withering questions from the Senate Banking Committee Stumpf explained that it was shorthand for deepening relationships
Some industry experts agree that the bank s failures stem more from poor management than from the mere idea of selling customers multiple accounts which isn t unique to Wells
Citigroup Inc N C predecessor Citicorp was one of the first companies to encourage cross selling in banking in the late 1970s under former CEO Walter Wriston according to financial journalist and author Philip Zweig whose biography of Wriston was published in 1996
There s nothing inherently wrong with cross selling Zweig said The Wells Fargo scandal is the result of greed perverse incentives lack of controls and just plain bad management
SHORT SIGHTED STRATEGY
Wells Fargo embraced cross selling about two decades ago as supermarket banking gained popularity as a business model By 1999 Wells Fargo s annual report referred to stores rather than branches
Kleinman a sales compensation expert who worked at Wells Fargo in the 1970s and 1980s saw the shift in corporate culture taking hold by 2003 when he returned as a consultant
Retail operations were headed at the time by Stumpf then executive vice president of community banking and Carrie Tolstedt then regional banking executive vice president Kleinman recalled being summoned to a big meeting with large audio visual displays on sales strategy
I walked into basically a corporate sales event pumping people up very different than the culture I had seen before he said
Now Stumpf is battling to survive as CEO Tolstedt retired as head of community banking in July amid investigations into the bank s high pressure sale culture Her 125 million severance package has since sparked widespread criticism The two executives forfeited 41 million and 19 million in unvested stock respectively in response to the blowback
Michael Moebs a Wells Fargo executive in the 1970s and later a consultant to the bank for two decades said the bank s quota system would have been more appropriate for selling cars than car loans
Because retail banks sell ongoing services measuring long term customer service and satisfaction is far more important than short term sales figures said Moebs now a banking consultant based in Lake Bluff Ill
You re not just selling a product but establishing a relationship he said
A CRUCIAL PIVOT
Since Wells agreed to a regulatory settlement with the Consumer Financial Protection Bureau on Sept 8 executives have denied that the bank s sales quotas and culture caused the widespread abuses Chief Financial Officer John Shrewsberry has said Wells Fargo s customers were still happy and its employees were productive
I think we can make this pivot in a way that protects our business model he said at an investor conference last month
Wells has tried before to curtail gaming of sales quotas In 2014 the bank monitored certain statistics as indicators of unauthorized account openings one former Los Angeles area branch manager told Reuters
In a quality sales report card the bank set limits on the number of accounts that went unused but the limits were so high as to undercut any serious reform said the former manager who declined to be identified because he now works for a Wells competitor
The bank directed managers for instance to ensure that no more than 45 percent of debit cards went without activation and no more than 27 5 percent of new accounts went unfunded the former manager said The report cards were also cited in a 2015 federal lawsuit filed in San Francisco by employees alleging unauthorized account openings
Suris the Wells Fargo spokesman declined to comment on the bank s efforts to track unused accounts
Moebs the consultant said any effective reform effort would include more sophisticated employee incentives such as bonuses that vest over several years with sustained growth in sales and customer satisfaction
The cost of such efforts would cut into short term profits he said but with the ultimate payoff of customer and employee loyalty
Like the rebuilding of any sports team Moebs said it takes time money and talent |
C | Oil Set To Rebound | The Oil price has finally settled in today s trading after a week of heavy losses on the back of profit taking and some say that the price may once again head higher
Following a solid month of gains investors decided to cash in on the higher prices which has driven the oil price down almost 10 percent
After the steep rally of recent weeks it seems quite logical that the market runs into some resistance triggering waves of profit taking said Hans van Cleef senior energy economist at ABN Amro Bank NV in Amsterdam
Although the oil price has pulled back sharply over the past week some predict that the overall direction is still bullish and now may be a good time to get back in as oil resumes its uptrend which should continue until the end of the year
We think it s for real we re in the middle of a bit of a sell off maybe even testing the 50 level for WTI but the sell off is profit taking more than anything else and the momentum in the physical markets joined by the momentum in the financial markets really point to a higher price between now and the end of the year Said Ed Morse from Citigroup NYSE C
A proposed extension of production cuts by Opec members is also expected to keep the oil price well supported |
JPM | Gold And Silver Vaults Are Booming In Asia | Gold and Silver Vaults are Booming in Asia For the better part of the last century Switzerland has been a sanctuary for high net worth capital Today however the rich are choosing a different destination to stash their wealth Asia Gold silver and collectibles are pouring into Singapore Hong Kong and Shanghai jurisdictions that now offer some of the most exclusive gold and silver vault options in the world With the recent wealth explosion in Asia these clients are preferring to keep their collectibles and bullion close at hand Recently published trade data supports our presumption that a significant amount of physical gold from ETF liquidations was indeed heading East But where to exactly once it arrived Several transactions have taken place this month which confirm the new Asian facilities as the final destination for the physical gold that has been transferred out of London and Swiss vaults This week Malca Amit Global Ltd a global powerhouse in vaulting and secure transportation opened a private vault in Shanghai with storage capacity for 2 000 metric tonnes of gold However besides being one of the largest vaults in Asia it has even greater strategic value It is located in the Shanghai Free Trade Zone a testing ground for new policies that opened in late September Identified as a reform hub for the 21st century the sequestered area outside of Shanghai is an experimental zone for Chinese capitalism in a similar category as Hong Kong Joshua Rotbart precious metals general manager at Malca Amit stated that This place can be used as a trade hub basically so foreign banks can trade with domestic banks within this facility saving costs and time Given the large quantities of gold being traded with China a facility like the Malca Amit Global vault provides to the banks trading gold in Asia The company has already opened vaults in several Asian trading locales and this latest facility increases its storage space significantly Last September the firm opened Hong Kong s largest gold storage facility located on the ground floor of a building within the international airport compound with the capacity for 1 000 metric tonnes of gold Special facilities were also opened for up to 200 tonnes of silver in Singapore that 30 percent booked These investments in Shanghai s new free trade zone Singapore and Hong Kong reflect the shift in world bullion demand away from the U S and Europe toward Asia The big banks are getting involved too A facility built a few years ago in Singapore provides ANZ JPMorgan Chase Co UBS AG and Deutsche Bank AG with gold storage services in Singapore as the city hopes to take advantage of the bullion trade in the region The new facility is sited at the Singapore FreePort and can of metal In a stunning transaction announced in October a Chinese conglomerate purchased the headquarters of Chase Manhattan bank JP Morgan Chase and its underground facilities that include the world s Chase Manhattan Plaza was sold to Fosun International Ltd the investment arm of China s biggest closely held industrial group for 725 million Fosun a conglomerate which invests in properties pharmaceuticals and steel is buying the 60 storey 2 2 million square foot lower Manhattan tower according to a statement it filed with Hong Kong s stock exchange The news that a Chinese company is to buy the largest commercial gold vault in the US is yet another reflection of China s enthusiasm for stockpiling gold Vault space was limited around the world last year as most bullion dealing banks doubled their vaulting fees These new facilities in Asia further reflect the enormous increase in the physical precious metals trade and a requirement for With these new vaults located in Asia or now owned by Asians it would appear the massive amounts of gold being shipped East will not see the inside of a London or Swiss vault ever again |
JPM | Why CME Waited 5 Years To Apply A Disclaimer To The Comex Report | The information in this report is taken from sources believed to be reliable however the Commodity Exchange Inc disclaims all liability whatsoever with regard to its accuracy or completeness This report is produced for information purposes only CME legal disclaimer placed on the Comex daily gold and silver warehouse stock reportsI wanted to elaborate on Friday s post to make it crystal clear to everyone WHY the CME suddenly slapped that disclaimer on the Comex gold silver warehouse inventory reports It seemed to me that the CME might be liable for legal claims when the Comex ultimately defaults which seek damages based on the argument that the Plaintiff relied on the CME reports in making a decision to invest in a gold silver futures contract prior to the date that the disclaimer first appeared What I m really trying to ferret out here is exactly why the CME waited five years after acquiring the Comex before applying the disclaimer to the inventory report My assessment is that per my article Friday given the extreme decline in gold inventory on the Comex the beginning of the year the CME by invoking the disclaimer is worried about the reliability of the gold silver inventory reports Recall that the reports are generated based on paper reports submitted by banks who operate the Comex vaults In other words the CME is relying on the reliability of these reports without actually verifying that the content of the reports is based on a provable fact i e that the inventory reported by the banks exists as reported without doing an independent physical audit to verify that the reports are legally valid As it turns out based on Federal Rules of Civil Procedure FRCP even though the CME waited 5 years before invoking and applying the disclaimer on the inventory reports the CME has for all intents and purposes legally insulated itself for any legal claims that may arise from publishing the inventory when the Comex defaults and has shifted the burden to the individual vault operators who submit the data that the reports are based on I called on a friend and colleague who is one of the sharpest attorneys I have ever met to give his assessment of the timing of the CME s application of the inventory report disclaimer The disclaimer language at issue appears to be tailored specifically not only to forestall ALL fraud cases based on that element but to do so at the pleading stage of the case i e BEFORE THERE IS ANY DISCOVERY OF THE DEFENDANT S DOCUMENTS AND INFORMATION by way of a dismissal under Federal Civil Rules of Procedure 12 b 6 or the State court equivalent One of the trickier elements in a civil fraud case criminal is slightly different on this point is proving that you reasonably relied on the misrepresentation at issue meaning you did in fact rely on it and that your reliance was reasonable an objective standard to winnow out idiotic plaintiffs The intent behind the disclaimer is to provide a legal override of such facts like a trump card Federal Civil Rules of Procedure 12 b 6 allows a defendant to ask a judge to dismiss the lawsuit before any real litigation takes place based on a failure to state a claim even accepting all facts stated in plaintiff s complaint as true In order to compel a judge to deny the Defendant s motion to dismiss under this Rule the Plaintiff must show that it s possible for him to prove a set of facts in court that shows he is legally entitled to the relief damages from investing in this situation requested in the legal claim because he bought Comex futures in reliance on the truthfulness of the CME Comex inventory reports at the time he made the investment As my friend states the intent behind the disclaimer is to provide a legal override of such facts like a trump card which leads to the Defendant s argument that the Plaintiff failed to state a claim As applied to the CME situation the Plaintiff will fail in its pursuit in damages against the CME Think about what FRCP 12 b 6 requires if someone were to go after the CME because they bought a gold futures contract in May 2013 before the disclaimer was slapped on the Comex gold inventory report expecting to stand for delivery of the gold at contract expiry The Comex defaults The Plaintiff person who bought the contract files a claim against the CME for fraudulent misrepresentation because the Plaintiff relied on the Comex gold inventory report published by the CME in making his decision to get long the contract on the basis that the Comex had enough gold to make on the delivery of the gold You see the problem here in satisfying the requirement under FRCP or State equivalent 12 b 6 The Plaintiff has to produce evidence showing several things including some kind of proof that shows beyond reasonable doubt that his decision the claim was made specifically with reliance on the CME Comex report before the disclaimer was slapped on it In order to satisfy that a bona fide claim has been stated under the Rules of Evidence requirement it would minimally have to be something like a dated journal entry with a date stamp on it and a witness affidavit that testifies that the witness watched the plaintiff make the journal entry on the date as shown Even that would be questionable The only thing I can think of that would satisfy this would be to write yourself a memo and mail it to yourself in order to get a postal stamp on the envelope and leave the envelope sealed Anyone ever go to this length before executing a trade It is clear to me and to my friend who is an attorney that the CME s lawyers determined it was necessary at this point in time to invoke the disclaimer because the risk of fraud is clear and present with regard to the reports being submitted by JP Morgan JPM HSBC Holdings Plc HSBC and Bank of Nova Scotia The BNS in relation to the extreme and unprecedented rate of decline in the reported Comex gold and silver inventory And this particular disclaimer gives the CME a shield of legal protection that extends all the way back to its date of acquisition The bottom line here is that it is highly probable that the real inventory that is sitting in the gold and silver vaults of JP Morgan HSBC and Scotia is quite a bit less than the inventory being reported in the daily stock reports This conclusion of course is consistent with the type of fraudulent behavior for which these banks have already been successfully prosecuted and or forced to settle What it implies is that the Comex may indeed be closer to default than any of us can possibly understand In this context and notwithstanding Ted Butler s dismissal of this matter it is clear that CME is concerned enough about this possibility and was compelled to invoke a powerful legal shield from liability in order to evade the potential legal liability to which its member banks will be exposed It is also clear that business entities that rely on the Comex as a source of safekeeping and of deliverable physical gold are taking an increasingly large amount risk in relying on the Comex for this purpose |
JPM | JP Morgan Confirms 4 5bn Mortgage Settlements | A further major settlement has been confirmed by JP Morgan JPM which is continuing to settle up with investors and other companies in the wake of the mortgage securities scandal The US bank has announced it is now going to pay 4 5 billion 2 8 billion to the investors who lost money as a result JP Morgan spokeswoman Jennifer Zuccarelli revealed in a statement that the mortgages involved were sold between 2005 and 2008 This settlement is another important step in JP Morgan s efforts to resolve legacy related matters stemming from mortgage related securities she said in a statement Fannie Mae and Freddie Mac have already received payments from JP Morgan in the last few weeks as a result of the mortgage securities crisis JP Morgan s share price held firm on Friday November 15th when the news of the latest payout was confirmed Its stocks will trade at around 54 87 when the New York Stock Exchange opens Disclosure FX Solutions assumes no responsibility for errors inaccuracies or omissions in these materials FX Solutions does not warrant the accuracy or completeness of the information text graphics links or other items contained within these materials FX Solutions shall not be liable for any special indirect incidental or consequential damages including without limitation losses lost revenues or lost profits that may result from these materials The products offered by FX Solutions are leveraged products which carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors Ensure you fully understand the risks involved and seek independent advice if necessary |
JPM | Record Settlement For JP Morgan | JP Morgan JPM has announced it is set to pay a record settlement to regulators in the US after it misled investors during the housing crisis The bank stated that it will pay 13 billion 8 billion which is the biggest ever settlement between a corporation and the government We are pleased to have concluded this extensive agreement said JP Morgan boss Jamie Dimon 4 billion of the settlement will go to homeowners hurt by JP Morgan s practices the bank said Federal and state civil claims will make up a further 7 billion of the total amount with the remaining 2 billion being paid directly to the government in the form of a fine The conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown said Attorney General Eric Holder in a statement Earlier in the week JP Morgan confirmed that it is paying 4 5 billion in settlements over the mortgage securities scandal Disclosure FX Solutions assumes no responsibility for errors inaccuracies or omissions in these materials FX Solutions does not warrant the accuracy or completeness of the information text graphics links or other items contained within these materials FX Solutions shall not be liable for any special indirect incidental or consequential damages including without limitation losses lost revenues or lost profits that may result from these materials The products offered by FX Solutions are leveraged products which carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors Ensure you fully understand the risks involved and seek independent advice if necessary |
JPM | Hard To Believe But Gold s Still In A Bull Market | In case anyone is wondering the long term bull for gold remains intact However it sure doesn t feel like it The daily trend is down the weekly trend is down and the monthly trend is down So how can the long term bull remain intact It is based on the long term uptrend line from the 2001 lows near 250 Thus far the steep correction that got underway in September 2011 has not broken the uptrend line But it is testing it How d We Miss It The long and steep correction in gold since September 2011 has been strange to say the least Eric Sprott the founder of Sprott Asset Management LP and a well known gold investor was asked recently How did we miss the top of the market in 2011 Why wasn t someone pounding the table to sell precious metals and precious metals equities Eric s response was With the benefit of hindsight anyone can say that we all should have been selling in 11 But we stayed in because the facts at the time seemed indicative of more growth not a peak and subsequent decline I held a similar view at the time and continued to hold that view through the next 15 months of a back and forth correction that ranged roughly from 1 550 to 1 800 The Fed ended QE2 in June 2011 The stock market reacted by going into a bit of a free fall in August 2011 Gold did not fall at least initially Gold kept going up even as the stock market fell Gold made a top on August 23 2011 then put in a mini plunge before rebounding back to make a secondary slightly higher top on September 6 2011 What followed was a nasty plunge into October 2011 QE3 was announced on September 13 2011 shortly after gold topped But gold still fell Many of us believed another round of QE was bullish for gold and that after a correction gold would resume its upward path Gold put in a strong run up towards 1 800 into February 2012 then following another pullback another strong run up towards 1 800 was seen into October 2012 Gold did not return to the highs of August September 2011 but appeared up until that time to be forming a classic ABCDE type of symmetrical triangle correction In hindsight was something more at play Hasn t Recovered SinceThen came April 12 2013 and someone offered 400 tonnes some say 500 tonnes of June gold futures at the open of trading It was paper gold not physical but it didn t matter the market panicked The market has not recovered since Some have suggested that it was the request for the return of gold held at various central banks that triggered the sell off The first request was made on August 24 2011 by Venezuela for its gold back from the Bank of England as well as smaller amounts held in Canada and the US In total it was roughly 200 tonnes of gold The gold was apparently delivered The request for the return of the Venezuelan gold coincided with the top in gold seen on August 23 2011 At the time it was not clear that the two events might have been connected The second request came from Germany in January 2013 when they asked for 300 tonnes of their gold back that was being held primarily at the NY Fed The Germans were told it would take seven years to deliver the gold The gold market was stunned How could it take seven years if it is held primarily in the vaults of the NY Fed At best it is couple of jumbo jets Unless the gold is not there This should have been quite bullish for gold Gold initially drifted Then came April 12 2013 Yellen s TakeJanet Yellen at her recent Congressional hearings was asked her views on the price of gold Her response was rather odd She believed that no one had a good model of what the fundamental value of gold is or should be but that certainly it is an asset that people want to hold when they re very fearful about potential financial market catastrophe or economic troubles When there is financial market turbulence often we see gold prices rise I say that was an odd response given that most every central bank in the world including the Federal Reserve holds gold as a reserve asset right alongside US Treasuries and other sovereign securities The US still holds the world s largest reserves of gold While some central banks especially European ones reduced their gold holdings in the 1990 s and in the early years of the current century more recently central banks had once again become net buyers of gold Russia and China have been the leaders but many others especially some Asian countries have been adding to their gold reserves What was different during the 1990 s and has continued to date is that a number of central banks leased gold held in their vaults to the bullion banks It is generally believed that the leased central bank gold was subsequently sold into the market and the proceeds invested in higher yielding securities This became known as the gold carry trade Gold silver and platinum are all headed for their first annual loss since the precious metals made their final lows in 2001 Not even 2008 the year of the financial crash saw precious metals decline One of the prime reasons given for the decline has been the constant rattling that the Fed will taper QE3 by reducing its monthly purchase program currently at 85 billion a month The FOMC October minutes released this week once again suggested that the Fed could scale back its purchase program at one of its next few meetings provided this was warranted by economic growth The reaction in the markets was probably predictable as the stock market fell precious metals fell and interest rates rose That is hardly what the Fed wants to see It was a strange reaction given that most economists do not expect the Fed to act until after the budget and debt ceiling negotiations are completed in January February As well incoming Fed Chairman Janet Yellen is a well known dove who has sometimes hinted that the QE program should be expanded Current Fed Chairman Bernanke is on record saying interest rates the official Fed rate should be kept near zero until well after unemployment falls under 6 5 None of this squares with today s response in the markets As well it is only prudent that the Fed might mention that if conditions warranted it that they may taper The belief here is however that the Fed is caught in a trap of its own making and it is going to be very difficult to end QE3 Some believe that the real reason for QE3 is to continue to allow the banks to bail themselves out of the problems that caused the financial crash of 2008 It is believed that the banks continue to carry billions of dollars of underwater debt in mortgages other securitized debt instruments and derivatives Accounting regulations allow them to carry the debt on their books at original values giving the appearance that the banks could be in better financial shape than they really are The Broad Market Barrels OnThe broader stock market has been on a bull run The Dow Jones Industrials DJI Dow Jones Transportations DJT S P 500 and NASDAQ have all made new all time highs nominal The TSX Composite remains well off its all time highs primarily due to the yearlong weakness in Golds Metals and Materials Other sectors such as the Consumers Financials and Industrials have made ongoing 52 week highs The sharp contrast in the markets has resulted in a huge outflow from the material groups and into the broader stock market in 2013 In a classic sense that is the public leaving the weak market at a possible bottom and jumping into the rising market at a possible top The collapse in gold prices has seen a huge outflow from world wide gold backed ETP holdings as tracked by Bloomberg It is estimated that some 24 6 million ounces have exited ETF products in 2013 On the other side there has been record inflows and purchases in Hong Kong and Shanghai Many believe there has been a huge transfer of wealth from the West to the East in 2013 Gold related funds have also seen large withdrawals in 2013 These funds have instead been redeployed in other equity and bond funds Fund companies in the gold and commodity business have shed staff and curtailed operations as a result of the outflow of funds Falling InventoriesCOMEX gold stockpiles have seen a huge drop in 2013 Registered gold stocks that are eligible for delivery have fallen from a peak of 3 million ounces to 590 thousand ounces thus far in 2013 It is unknown as to where the gold stockpiles have gone Even eligible gold stocks that are not available for delivery have fallen in 2013 from a peak of 9 million ounces to 6 6 million ounces Some believe that given the precipitous drop in registered gold stocks available for delivery that a default could happen at the COMEX The huge drop in gold prices in 2013 has made numerous gold mining operations marginal It is estimated that average costs for numerous gold miners is in the 1 200 to 1 300 range Many producing gold mining companies have seen their stocks fall to a level that gives very little value to their gold reserves Some junior mining exploration companies have curtailed operations in order to preserve cash Few companies are raising the necessary capital required to enhance and expand drilling programs Some junior exploration companies have closed their doors Statistics indicate that gold mining production could actually fall in 2014 and with fewer new mines coming on stream this suggests the potential for a supply squeeze at some point in the future JP Morgan Chase JPM recently settled claims with the US government over its troubled mortgages in paying a record 13 billion fine The Justice Department noted that this settlement did not absolve JP Morgan or its employees from facing possible criminal charges The settlement of the troubled mortgages is the latest in a long line of settlements major international banks have made over the past few years with regard to market manipulation in LIBOR currencies energy and metals Still A MysteryThere is currently an investigation into numerous large banking institutions including JP Morgan and Goldman Sachs GS for currency market manipulation Yet when one raises questions about manipulation in the gold market gold market participants are accused of being conspiracy theorists As noted 400 tonnes of gold futures worth roughly 20 billion at the time was offered into the market at the open of trading on April 12 2013 The reason for the huge unprecedented short sale and who was behind it remains a mystery Some believe the Fed itself may have been behind the sale while others suspect a bullion bank There have been rumours that a bullion bank and maybe more than one was in trouble at the highs of September 2011 because of short positions in physical gold The repatriation of the Venezuelan gold may have triggered a panic amongst the bullion banks particularly if they were short physical gold As a result they may have been unable to deliver on leases with central banks who could have asked for their leased gold back to deliver to countries such as Venezuela By pushing the price of gold down with a huge short sale would allow the bullion banks to replace their short physical gold position at considerably lower prices Gold appears to be in a huge rare bullhorn pattern since 2001 The labeling ABCD comes from the Aden Sisters The market appears to still be in the D wave decline that could still see gold fall to new lows closer to 1 100 It is also possible that the wave up from the June 2013 lows was the A wave and this is the B wave of a new series of ABCD A break to new lows under 1 183 would however end any thought of that pattern and shift the focus to the potential completion of the D wave down Bull Up If the bullhorn pattern is correct however then once this current correction is over gold could embark on a new bull up move The reasons for holding gold have never changed The debt levels of the western economies continue to grow and all the major western economies the US the euro zone and Japan appear to be committed to QE in an attempt to reflate their economies Their efforts thus far have at best resulted in lethargic slow growing economies leaving them vulnerable to future economic shocks Unemployment remains high particularly in the euro zone Talk of the taper is just that talk The reality is there has been little in the economic numbers to encourage an easing of the current program of QE It has been a long difficult year for those in the gold and materials market High negative sentiment suggests that the market could soon be at a turning point As well the proximity to major long term support also suggests that the market could well be close to a turning point This may not prevent the market from falling further in the short term Potential objectives could be nearby at 1 225 but gold could also fall to 1 150 and even near 1 100 in a worst case scenario Short term a close above 1 280 would be positive but close above 1 350 may suggest that the final low is in The long term fundamentals remain positive while the bullhorn chart is suggesting that low could soon be at hand Copyright 2013 All rights reserved David Chapman |
JPM | Three Signs To Look For Before Buying Gold ETF s Again | Almost every trading day someone asks me if they should buy gold Personally I own physical gold and silver bullion since 2004 But if you are trading gold ETF s you may want to wait before jumping on board at this time As you all know gold topped out in September 2011 at 1923 70 an ounce Ironically the same week that gold topped out it was upgraded by J P Morgan Chase JPM to 2500 00 an ounce Either J P Morgan Chase is just terrible at spotting tops or they were looking to sell to the amateurs who always buy the peak My suspicion is the latter as most large firms have an agenda behind their upgrades and downgrades when equities are at extreme highs and lows Just think about it Goldman Sachs GS upgraded oil to 250 00 a barrel when it was trading at 145 00 a barrel in July 2008 As you probably know oil peaked at 147 00 a barrel a week after that upgrade Again the amateurs who followed that upgrade were decimated when oil was bought at that high Oil dropped to 30 00 over the next year Now gold has turned into one of the most hated commodities out there by Wall Street Currently gold is coming under pressure due a potential tightening of the Federal Reserve s 85 billion QE 3 program Let us be clear the Federal Reserve has not begun to tapper yet they are only floating rumors of a tapering This can be seen by the recent rise in yields in the 10 year U S Treasury Note yield
So enough with that here are three signs to look for that will tell us we should buy gold ETF s again 1 If the recent low in gold futures GC from June 28 2013 is briefly broken to the downside and then reverses back to the upside on volume If this occurs it will signal institutional sponsorship and will most likely be a solid low in place This could also lead to a W bottom pattern on the larger time frame which often signals huge upside potential 2 Next watch for a major downgrade from Goldman Sachs J P Morgan Chase Co or another major firm Remember when these giant firms downgrade stocks at lows it is often a sign that they now want to own that equity Just look their past track records of upgrading and downgrading stocks at extreme highs and lows 3 Gold is a currency this is why central banks around the world own it and this includes the Federal Reserve So when you start to notice that asset prices are falling despite the easy money policies money printing by the central banks around the globe it is a good time to get on board and own some gold After all gold cannot be printed out of thin air or by a click of a keyboard like the fiat monetary system that we have today Why do you think Bitcoin is becoming so popular right now Bitcoin only has a certain amount available for use unlike fiat currency which can be printed infinitely |
JPM | A Bull Bear Outline For The Unilife Debate | In our previous article on Unilife UNIS published on November 27th 2013 we predicted that UNIS would probably break 100 in YTD gains After the company announced on December 2nd that a clinical supply agreement had been reached with Novartis NVS a huge rally occurred in UNIS common stock and it was more than sufficient to meet our bullish expectation for 2013 Currently there is a very heated debate over the worth of the most recent Novartis contract and its long term implications on the company pipeline and financial situation There is also a prolonged debate between the major shareholders of the company the bulls and the holders of massive short positions against the company the bears Bulls Bulls are pointing to the Novartis deal as a recent sign of company growth via big pharma contracts They are not expecting the company to generate impressive revenues in the next few quarters and investors are taking a longer term perspective that takes peak sales of all confirmed Unilife products into account Top holders of UNIS include some big names like Frontier Capital Management Company 8 9 M shares JP Morgan Chase 8 0 M shares BlackRock Fund Advisors 2 7 M shares and Schroder Investment Management Group 2 0 M shares A string of other deals made prior to the Novartis deal like the deals made with Hikma and Sanofi have also helped the stock achieve impressive 114 returns YTD at time of writing It is because of these high profile deals and because of other big pharma supply contracts that have yet to be finalized that Jefferies remains bullish on the company with a 6 price target We believe that the company may announce an additional 3 4 contracts before the end of the year which could increase this figure This can also be considered a pivotal time for the company since the last few years were spent primarily on R D and creation of the manufacturing facility With supply contracts in place with Sanofi Hikma and Novartis the company can now focus on the path to profitability Bears A 19 6 short interest 17 6 M shares is indicative of a fairly strong bearish interest in the stock This short interest has been growing throughout the year although it has tapered off a bit since August 2013 Our sources indicate that the short interest is being held by a small circle of people who expect the stock to lose the gains made after May 2013 if not more The most convincing aspect of the bearish argument may be the short term financial outlook for the company which is exposes investors to both financial and also event risk in 2014 While the company expects to gain significant traction in 2014 with the Hikma and Novartis contracts it may also be tough for the company to streamline its production in the early stages despite preparations This along with the company s aggressive R D strategy may strain the balance sheet It was recently reported that the company has 7 4 M in cash although this does not include upfront payments made from recently closed contracts with Hikma Novartis We believe that this can bring the company far into 2014 although it is possible that the company may need to raise more money before reaching profitability Rebuttal to Street Sweeper Those who follow Unilife have probably come across a 10 point case against the company published on The Street Sweeper 4 of these points were built on personal attacks against UNIS CEO Alan Shortall or speculation over lawsuits being filed by ex employee Talbot Smith We believe that the due diligence already performed by the multiple large pharmaceutical companies already in business with Unilife removes most if not all of the negativity regarding the CEO and Mr Smith s lawsuits There are also glaring factual errors that have not been addressed For instance we look at point 2 2 Even if the Novartis clinical trials pass with flying colors and get FDA approval the company could easily decide to order syringes instead from safety syringe gorilla Becton Dickinson controlling an estimated 70 percent of the syringe market Besides a whistle blower lawsuit suggests UNIS lacks the protocol and safety procedures to pull off production of what sounds to be a more complicated syringe for Novartis This point suggests that Novartis may decide to switch to another drug delivery supplier after FDA approval although this makes very little sense for Novartis given the development process and the nature of the arrangement with Unilife Note that the Unilife drug delivery system and the early stage Novartis drug will be clinically developed as one product which means that the clinical trial data will be tied to that specific product It would make no sense for Novartis to switch manufacturers after FDA approval for that combined product since it would void the previously collected data Notes from our side We believe that there are arguments to be made on both sides of the trade although we believe that a number of aspects about the company are widely misunderstood Many people seem to think that Unilife is a generic injectable drug company that is selling a commodity like product but they are missing the main purpose of the special supply contracts that are being made between Unilife and big pharma companies Using the deal with Sanofi as an example we point out that the Unifill syringes are being sold with LOVENOX which differentiates the product from an empty auto injecting syringe that must be filled manually prior to administration In estimating the market potential of this combined product investors should really be comparing the increased cost of this product against the increased safety utility that it provides relative to conventional syringes and competing automatic syringes that must be filled Sanofi and Unilife are clearly optimistic about the potential for this product to dominate its market In its corporate strategy we suggest that Unilife behave as if it were the Amazon com of the injectable drug world The company is willing to sacrifice short term financial performance to achieve larger goals We believe that this kind of strategy creates a disconnect between fundamental investors looking for tangible financial performance and growth investors looking for high potential ideas Perhaps this explains why UNIS traders have become so polarized Risks Unilife is a small healthcare company that is pursuing an aggressive growth strategy We think investors may also see continued volatility in the stock in 2014 as speculation continues We believe that UNIS is a high risk high reward investment that should only be considered by investors who are comfortable with this type of investment As always we encourage investors to do their own due diligence as well |
MS | Morgan Stanley Q1 adjusted EPS USD0 61 beats expectations | Investing com Wall Street investment bank Morgan Stanley reported better than expected first quarter earnings ahead of Thursday s opening bell sending its shares higher in pre market trade Earlier in the day in its first quarter earnings report Morgan Stanley said adjusted earnings per share came in at USD0 61 above expectations for USD0 56 The bank s first quarter adjusted revenue totaled USD8 48 billion beating expectations for revenue of USD8 35 billion The primary adjustments that were made were the negative revenue related to changes in Morgan Stanley s debt related credit spreads and other credit factors Immediately after the earnings announcement Morgan Stanley shares jumped 2 in trading prior to the opening bell Meanwhile the outlook for U S equity markets was upbeat The Dow Jones Industrial Average futures indicated a gain of 0 4 at the open S P 500 futures pointed to a rise of 0 4 and Nasdaq 100 futures indicated an increase of 0 4 |
MS | Silver futures plunge 3 after China PMI Morgan Stanley downgrade | Investing com Silver futures fell sharply during European morning hours on Tuesday re approaching a 30 month low after data showed that manufacturing activity in China expanded at a slower rate in April underlining concerns over a slowdown in industrial demand for the metal Silver prices also struggled due to a stronger U S dollar which makes dollar priced commodities more expensive to investors holding other currencies The dollar index was up 0 4 to trade at 88 13 the strongest level since April 4 On the Comex division of the New York Mercantile Exchange silver futures for May delivery traded at USD22 67 a troy ounce during European morning trade down 2 8 on the day Comex silver prices fell by as much as 3 3 earlier in the session to hit a daily low of USD22 55 a troy ounce Prices fell to a 30 month low of USD22 01 a troy ounce on April 16 Silver prices were likely to find support at USD22 03 a troy ounce the low from April 16 and near term resistance at USD23 69 the previous session s high China s HSBC Flash Purchasing Managers Index the earliest indicator of the country s industrial activity fell to a two month low of 50 5 in April from a final reading of 51 6 in March China is a major metals consumer and manufacturing numbers are often used as indicators for future demand growth Prices came under additional pressure after Wall Street investment bank Morgan Stanley cut its 2013 silver price forecast by 19 and its 2014 outlook by 15 Silver futures have lost nearly 18 or almost USD5 per ounce since April 12 as investors exited the market after prices broke below key support levels Prices of the silver metal are down nearly 55 since hitting an all time high of USD49 81 an ounce in April 2011 Market analysts have warned that a drop below the USD22 00 level can lead to further losses in the near term Elsewhere on the Comex gold for June delivery rose 1 9 to trade at USD1 422 45 a troy ounce while copper for May delivery dropped 1 4 to trade at USD3 105 a pound |
MS | Silver futures trim gains after dismal German IFO data | Investing com Silver futures trimmed gains during European morning hours on Wednesday coming off the highest levels of the session after data showed that German business confidence in April weakened to a four month low On the Comex division of the New York Mercantile Exchange silver futures for May delivery traded at USD22 94 a troy ounce during European morning trade up 0 6 on the day Comex silver prices rose by as much as 2 1 earlier in the session to hit a daily high of USD23 31 a troy ounce Silver prices were likely to find support at USD22 47 a troy ounce the low from April 18 and near term resistance at USD23 69 the high from April 22 Futures trimmed gains as the euro fell sharply against the U S dollar after weak German business confidence data fuelled expectations for a rate cut by the European Central Bank The Ifo index of German business climate fell to a four month low of 104 4 in April from 106 7 in March Analysts had expected the index to ease down to 106 2 in April The Current Assessment Index declined to 107 2 from 109 9 compared to expectations for a modest decline to 109 5 The Business Expectations Index which measures attitudes toward business prospects over the next six months declined to 101 6 in April from 103 6 missing expectations for a reading of 103 0Silver prices were up more than 2 earlier in the session as investors returned to the market to seek cheap valuations following the previous session s sharp decline Prices fell 1 5 to hit a low of USD22 55 a troy ounce on Tuesday after data showed that manufacturing activity in China expanded at a slower rate in April China s HSBC Flash Purchasing Managers Index the earliest indicator of the country s industrial activity fell to a two month low of 50 5 in April from a final reading of 51 6 in March China is a major metals consumer and manufacturing numbers are often used as indicators for future demand growth Prices came under additional pressure after Wall Street investment bank Morgan Stanley cut its 2013 silver price forecast by 19 and its 2014 outlook by 15 Silver futures have lost nearly 18 or almost USD5 per ounce since April 12 as investors exited the market after prices broke below key support levels Prices of the silver metal are down nearly 55 since hitting an all time high of USD49 81 an ounce in April 2011 Market analysts have warned that a drop below the USD22 00 level can lead to further losses in the near term Elsewhere on the Comex gold for June delivery rose 1 to trade at USD1 423 35 a troy ounce while copper for May delivery rallied 1 9 to trade at USD3 154 a pound |
JPM | Corvex warns of proxy fight with Energen after raising stake | By Michael Flaherty and Yashaswini Swamynathan Reuters Corvex Management threatened a proxy battle against Energen Corp if the U S oil and gas producer did not agree to add the activist investor s nominees to its board Corvex already the biggest shareholder in Energen said in a filing disclosed on Monday that it raised its stake to 10 1 percent eclipsing a threshold that allows shareholders of Alabama domiciled companies to call a special meeting Corvex said in its filing that if private discussions with the company fail to result in new board members the hedge fund intends to call a special meeting where shareholders will vote to expand the board to 15 members from nine and to fill the vacancies with Corvex s nominees The 5 5 billion fund run by activist investor Keith Meister has often used proxy fights to press for changes at companies Corvex s latest battle was nominating an entire slate of directors at Williams Companies Inc NYSE WMB last fall a contest the fund later dropped after the oil and gas producer added new members to its board In a 2014 proxy fight Corvex was among the investors that ousted the entire board of CommonWealth REIT Energen a 4 5 billion energy company whose assets are concentrated in the Permian Basin in Texas was not immediately available for comment The company is based in Birmingham Alabama Corvex first targeted Energen on May 31 calling on it to explore a sale of the entire company Energen announced a few weeks later that after reviewing Corvex s proposal and other strategic alternatives it was sticking to its own business plan The company said it hired investment bank JPMorgan Chase Co NYSE JPM to advise it on the review
Energen shares were up 0 7 percent to 49 56 in afternoon trading on Monday The stock has fallen nearly 14 percent since Corvex s first move in May |
JPM | JPMorgan launches new algo driven dark pool for stocks | By John McCrank NEW YORK Reuters JPMorgan Chase Co NYSE JPM has begun trading on a new private stock trading venue or dark pool that lets its clients use the bank s algorithms to buy or sell stocks at a benchmark price reached over a period of time Trading in the new dark pool known as JPBX began the week of July 17 according to data from the Financial Industry Regulatory Authority The move comes at a time of increased regulatory scrutiny of dark pools that has led to a number of trading venues being shuttered and highlights JPMorgan s efforts to expand its equities business JPMorgan s securities unit also runs JPMX a dark pool that matches shares in a more traditional manner within the spread of the best bid and offer prices shown on public stock exchanges like those run by Nasdaq Inc or Intercontinental Exchange Inc s New York Stock Exchange Brokers looking to get benchmark pricing for their orders can access the new dark pool through JPMorgan s algorithms For instance a broker might have an order for 5 000 shares to buy while another broker has an order for 2 000 shares of the same stock and wants to get the volume weighted average price JPBX will lock up the 2 000 shares on both sides for say two minutes and then execute at the average price of the stock over the previous two minutes The bank hopes to have the dark pool fully launched by the end of the month said a person with knowledge of the matter who did not have permission to be quoted in the media JPMorgan spokeswoman Jessica Francisco declined to comment Nearly every major bank has a dark pool a trading venue that does not have to provide information such as trade sizes or prices to the public prior to trades taking place with the aim of getting large orders done with minimal price movement Dark pools have historically been lightly regulated when compared with public exchanges but in recent years have come under increased scrutiny driving up legal compliance and technology costs for the firms that run them Over the past several years the number of dark pools has dwindled to around 30 according to FINRA from around 50
For the week of July 24 417 289 shares were crossed on 3 636 orders in JPBX up from 2 220 shares on 16 orders the previous week according to FINRA |
C | Supreme Court to weigh reach of insider trading law | By Nate Raymond NEW YORK Reuters The U S Supreme Court is set to consider this week a closely watched insider trading case that could limit the ability of prosecutors to pursue such charges against hedge fund managers and other traders The eight justices who open their 2016 17 term on Monday will hear arguments on Wednesday in the case of an Illinois man Bassam Salman who prosecutors said made nearly 1 2 million trading on inside information about mergers involving clients of Citigroup Inc N C where his brother in law worked It is the first time in two decades that the Supreme Court has taken up a case involving insider trading a crime that the U S Congress has never defined and has left the courts and the Securities and Exchange Commission to shape Salman was convicted of conspiracy and securities fraud charges arising from insider trading and sentenced in 2014 to three years in prison At issue in Salman s appeal is whether the government in insider trading cases must prove that an alleged source of corporate secrets like the brother in law received a tangible benefit like cash in exchange for any tips Lawyers and prosecutors say that requiring such proof would make it harder for authorities to pursue insider trading cases potentially preventing prosecutions in which corporate executives tip friends or relatives without any tangible quid pro quo This will be a court decision that could have significant ramifications on if tipping cases can continue to be brought with the fervor they have been brought in the last decade said David Miller a defense lawyer at the law firm Morgan Lewis Bockius The appeal follows ramped up efforts by U S authorities to crack down on insider trading with the SEC announcing charges against more than 550 people in the past six years A wave of insider trading cases brought by Manhattan federal prosecutors meanwhile resulted in Galleon Group founder Raj Rajaratnam s conviction in 2011 and a 1 8 billion settlement and plea deal in 2013 with hedge fund SAC Capital Advisors LP But in December 2014 a federal appeals court in New York dealt prosecutors a major blow by overturning the conviction of two hedge fund managers Todd Newman and Anthony Chiasson and narrowing authorities ability to pursue such cases The New York based 2nd U S Circuit Court of Appeals held that to be convicted a trader must know that the source received a benefit in exchange and that such a benefit was at least a potential gain of a pecuniary or similarly valuable nature DROPPING CHARGES The ruling forced prosecutors under Manhattan U S Attorney Preet Bharara to drop charges against 12 other defendants out of 107 people charged under his watch since 2009 While the Supreme Court in October 2015 declined to review the case the justices in January agreed to review a similar one Salman s case in which a federal appeals court in California had issued a potentially conflicting ruling Salman argued that his trading was not illegal as no proof existed that his brother in law in tipping a family member who in turn tipped Salman received anything beneficial in exchange The San Francisco based 9th U S Circuit Court of Appeals rejected that argument saying that requiring a tangible benefit in such a circumstance would allow insiders to tip their relatives so long as they got nothing in exchange Prosecutors are hoping the Supreme Court adopts the 9th Circuit s view and rejects the 2nd Circuit s narrow interpretation which authorities said could result in some people avoiding charges and could affect investigations For example hedge fund investor Leon Cooperman who the SEC sued last month for insider trading has said that federal prosecutors in New Jersey have informed him that they are holding off on pursuing criminal charges until the Supreme Court rules Many defense lawyers say that what Wall Street is looking for is a ruling clearly defining what conduct violates the law I do think clarity is particularly important in this context and right now there is a lack of clarity said Stephen Ascher a lawyer at Jenner Block who backs a broad definition The Supreme Court has the opportunity now to clean that up |
C | Deutsche Bank races against time to reach U S settlement | By Georgina Prodhan Kathrin Jones and Lawrence Delevingne FRANKFURT Reuters Deutsche Bank DE DBKGn is throwing its energies into reaching a settlement before next month s presidential election with U S authorities demanding a fine of up to 14 billion for mis selling mortgage backed securities The threat of such a large fine has pushed Deutsche shares to record lows and a cut price settlement is urgently needed to reverse the trend and help to restore confidence in Germany s largest lender A media report late on Friday that Deutsche and the U S Department of Justice were close to agreeing on a settlement of 5 4 billion lifted the stock 6 percent higher but that report has not been confirmed The Wall Street Journal reported on Sunday that the bank s talks with the DOJ were continuing Details are in flux with no deal yet presented to senior decision makers for approval on either side the paper said citing people familiar with the matter Clearly so long as a fine of this order of magnitude 14 billion is an even remote possibility markets worry UniCredit Chief Economist Erik F Nielsen wrote in a note on Sunday Deutsche is much smaller than Wall Street rivals such as JPMorgan N JPM and Citigroup N C But it has significant trading relationships with all of the world s largest finance houses and the International Monetary Fund this year identified it as a bigger potential risk to the wider financial system than any other global bank Deutsche Chief Executive John Cryan will be in Washington this week for the annual meeting of the IMF and the Frankfurter Allgemeine Zeitung reported that other executives would join him to try to negotiate a settlement with the U S authorities Like fellow large European banks also under investigation for mis selling mortgage backed securities Credit Suisse S CSGN and Barclays L BARC Deutsche will want to get a deal done with the current administration still in power A new administration to be installed after the Nov 8 election will bring unknown risks and likely delays At home Deutsche Bank is fighting a rearguard action seeking to shore up confidence among the public politicians and regulators who say the bank brought many of its problems upon itself by overreaching itself and then reacting too slowly to the 2008 financial crisis It suffered a further blow to its image this weekend with a third IT outage in the space of a few months on Saturday that prevented some customers getting access to their money for a short time INDUSTRY SUPPORT German business leaders from companies including BASF DE BASFn Daimler DE DAIGn E ON DE EONGn RWE DE RWEG and Siemens DE SIEGn lined up to defend the bank in a front page article in the Frankfurter Allgemeine Sonntagszeitung German industry needs a Deutsche Bank to accompany us out into the world BASF Chairman Juergen Hambrecht said A spokesman for a blue chip company that did not feature in the article told Reuters he had been asked by Deutsche for an executive to provide a similar supportive comment Deutsche Bank and the government in Berlin have had to play a delicate balancing act emphasizing the substance and importance of the bank without implying any need for state aid or willingness to supply it The bank has a market capitalization of only around 15 9 billion euros 17 9 billion and would almost certainly have to raise fresh cash to pay the full DOJ demand Both the bank and Berlin this week denied reports that the government was preparing a rescue plan The Bild am Sonntag newspaper wrote on Sunday that Deutsche s chairman had informed Berlin just before it disclosed the potential 14 billion fine but had not asked for help The same newspaper quoted the president of the Bavarian Finance Centre Wolfgang Gerke as saying the German government should step in and buy a 20 percent stake in the bank before its value fell any further The group represents financial services companies in the southern German state
Fundamentally I m against state interventions he told the newspaper but added that in this case a government stake would be a signal that could turn the whole market |
C | U S election rate outlook to curb Wall Street gains this year Reuters poll | By Caroline Valetkevitch NEW YORK Reuters Uncertainty surrounding the U S presidential election expectations for higher interest rates and weak corporate earnings will keep U S stocks from advancing much in the fourth quarter according to strategists in a Reuters poll The benchmark S P 500 index SPX will end the year at 2 173 according to the median forecast of 40 strategists polled by Reuters over the past week That would be up slightly from Monday s finish of 2 161 2 and a gain of about 6 percent for 2016 Between July and August the index hit a series of all time highs with the record close now standing at 2 190 15 But strategists expect the S P to surpass that in 2017 notching up a yearly gain of about 6 percent to 2 310 Strategists were more optimistic than they were in July shortly after Britain s vote to leave the European Union But the race for the White House between Democrat Hillary Clinton and Republican Donald Trump will take on greater importance as the Nov 8 vote approaches and should cause more volatility especially in sectors like health insurance pharmaceuticals and energy strategists said In the poll respondents overwhelmingly viewed a Clinton victory as more positive than a Trump win for U S stocks at least until year end Indeed a perceived win by Clinton in the first presidential debate of the season on Sept 26 helped support U S equities the following day One of the principal factors holding stocks back is policy uncertainty said Brad McMillan chief investment officer for Commonwealth Financial in Waltham Massachusetts Should Mrs Clinton win for better or worse markets think they know what she will do More strategists than not see a high likelihood of a 10 percent or more correction in the U S market over the next 12 months and they view continued weak earnings and more Federal Reserve rate hikes than expected as among the biggest risks to global stocks over the coming year History says the first one or two Fed rate hikes do not blow up markets said Tobias Levkovich chief U S equity strategist at Citigroup NYSE C in New York Then you get people who say this time is different The Fed has held off on raising rates so far this year after doing so in December for the first time since 2006 Traders see a greater than 60 percent chance of another hike this December Companies earnings will also weigh on the market with forecasts continuing to weaken Analysts expect third quarter reports which are set for release in the coming weeks to show an average earnings decline of 0 5 percent from a year earlier according to Thomson Reuters data This would extend the S P 500 s profit recession to the fifth straight quarter The Dow Jones industrial average will end 2016 at 18 455 showing gains of 6 percent from 2015 s close and 1 percent from Monday s finish the Reuters poll showed Poll data
Other stories from the Reuters global stock markets poll Additional polling and reporting by Chuck Mikolajczak Sinead Carew Noel Randewich Lewis Krauskopf Purnita Deb and Hari Kishan Editing by Rodrigo Campos and Lisa Von Ahn |
C | Citi to invest more than 1 billion in Mexico unit | Reuters Citigroup Inc N C said on Tuesday it would invest more than 1 billion in its Mexico unit Banco Nacional De M xico which will be known as Citibanamex
The investments which will be completed by 2020 are in addition to the more than 1 5 billion Citi committed to invest in the bank in September 2014 |
C | U S top court leans toward making insider trading prosecutions easier | By Nate Raymond WASHINGTON Reuters U S Supreme Court justices hearing a closely watched insider trading case indicated on Wednesday they were likely to make it easier for prosecutors to pursue such charges against traders but questioned where to draw the line The appeal by Bassam Salman an Illinois man convicted after making nearly 1 2 million trading on information that came from his brother in law was the first insider trading case to come before the justices in two decades Because Congress never defined what constitutes insider trading courts and regulators have been forced to supply the answer Several justices appeared skeptical about Salman s stance that he could not be convicted and later sentenced to three years in prison for trading on information about deals involving clients of Citigroup Inc N C where the brother in law worked Alexandra Shapiro Salman s lawyer contended prosecutors in insider trading cases must prove that an alleged source of corporate secrets like the brother in law received a tangible benefit like cash in exchange for any tips A majority of the justices appeared ready to uphold Salman s 2013 conviction on conspiracy and securities fraud charges asking why someone providing inside information as a no charge gift to a family member could not be found to have benefited You certainly benefit from giving to your family Justice Anthony Kennedy said It ennobles you and in a sense it helps you financially because you make them more secure Justice Elena Kagan suggested that adopting the position advocated by Salman 57 would overturn decades of legal principle that had helped protect the markets integrity You re asking us essentially to change the rules in a way that threatens that integrity Kagan said Prosecutors contend requiring proof of a tangible benefit would make pursuing insider trading cases tougher potentially preventing charges against executives who tip friends or relatives without getting anything in return Despite appearing unlikely to back Salman s appeal some justices suggested a line should be drawn clarifying when people can be prosecuted for disclosing corporate secrets I m not worried so much about this case Justice Stephen Breyer said I am worried about line drawing A ruling is due by June The appeal follows U S efforts to crack down on insider trading resulting in Galleon Group founder Raj Rajaratnam s conviction in 2011 and a 1 8 billion settlement and plea deal in 2013 with hedge fund SAC Capital Advisors LP Prosecutors said Maher Kara a Citigroup investment banker who was Salman s brother in law provided tips about deals involving Citi clients to his brother who in turn tipped Salman The Supreme Court in January agreed to hear Salman s appeal amid competing rulings by federal appeals courts in San Francisco where his case was heard and New York where a wave of insider trading prosecutions has been pursued recently The New York based 2nd U S Circuit Court of Appeals in 2014 overturned the conviction of two hedge fund managers Todd Newman and Anthony Chiasson and narrowed prosecutors ability to pursue such cases in the process That court held that to be convicted a trader must know the source received a benefit representing at least a potential gain of a pecuniary monetary or similarly valuable nature The ruling forced prosecutors under Manhattan U S Attorney Preet Bharara to drop charges against 12 other defendants out of 107 people charged since 2009 Bharara attended Wednesday s arguments Salman argued in light of that ruling he could not be convicted because no proof existed his brother in law received anything beneficial in return The San Francisco based 9th U S Circuit Court of Appeals rejected that argument saying requiring such proof would allow insiders to tip relatives so long as they got nothing in exchange |
JPM | Another Settlement For JP Morgan | JP Morgan has confirmed it has agreed to pay the largest ever settlement by a US bank The company will pay the Federal Housing Finance Agency FHFA 5 1 billion 3 2 billion after it was charged with misleading firms such as Fannie Mae and Freddie Mac during the housing boom in the US before the recession struck Deals have already been done between JP Morgan and those two organisations with the bank now agreeing to pay the FHFA the 5 1 billion settlement This is a significant step to address outstanding mortgage related issues the FHFA said in a statement released to announce the news J P Morgan Chase Co JPM has also confirmed that the agreement with the body means that the biggest case against the firm relating to mortgage backed securities has now been settled When the New York Stock Exchange opens later today October 28th stocks in JP Morgan will start trading at around the 52 77 mark close to the firm s 52 week high share price Find up to date information on the FTSE 100 and spread betting strategies at City Index Disclosure FX Solutions assumes no responsibility for errors inaccuracies or omissions in these materials FX Solutions does not warrant the accuracy or completeness of the information text graphics links or other items contained within these materials FX Solutions shall not be liable for any special indirect incidental or consequential damages including without limitation losses lost revenues or lost profits that may result from these materials The products offered by FX Solutions are leveraged products which carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors Ensure you fully understand the risks involved and seek independent advice if necessary |
JPM | REIT Industry Review And Stock Picks October November 2013 | REIT as an Asset Class A Real Estate Investment Trust REIT is a company that owns and manages income producing real estate such as apartments offices hotels industrial or other facilities Such companies also invest in mortgages or mortgage backed securities attached with properties REIT shareholders enjoy ownership benefits of the real estate without actually becoming landlords This hybrid asset class offers capital appreciation along with yield thereby adding diversity to ones equity portfolio and assuring competitive long term returns It also provides a hedge against inflation Industry Performance So Far This Year The U S REIT industry has been on a roller coaster so far this year After a remarkable run in the first four months the sector nosedived in May as rising interest rates and skepticism about the Fed s Quantitative Easing QE program spread caution in the market The apprehensions spilled over to August But around mid September the REIT stage was again set for action with the Fed s no taper decision and lower GDP projections for 2013 and 2014 which indicated a continued low interest rate environment in the near term As a result the REIT stocks rallied the most and outperformed the S P 500 On a total return basis the broadest U S REIT Index FTSE NAREIT All REIT Index gained 3 55 outpacing 3 14 growth for the S P 500 in September Further in October as of 24th of the month FTSE NAREIT All REIT Index return gained pace and came in at 6 13 compared to 4 31 growth for the S P 500 However over the first nine months of 2013 REITs have underperformed the broad market Total return of the FTSE NAREIT All REITs Index was up only 2 89 compared to the increase of 19 79 for the S P 500 Notably the FTSE NAREIT All Equity REITs Index moved north 3 03 while the FTSE NAREIT Mortgage REITs Index dropped 2 11 Though the third quarter 2013 earnings picture has improved in the most recent week we notice that the guidance still remains on the weak side leading to negative estimate revisions at a majority of the companies Amid such an environment and along with disappointing government job reports we hope that the Fed s QE program will continue for a period more than previously anticipated This should keep the demand for high dividend paying REIT stocks alive Dividends Are Key Attraction The U S law requires REITs to distribute 90 of their annual taxable income in the form of dividends to shareholders Yield hungry investors thus have a large appetite for such stocks This has enabled the industry to stand out and gain a footing over the last 15 20 years As of September 30 2013 the dividend yield of the FTSE NAREIT All REITs Index was 4 34 The yield of the FTSE NAREIT All Equity REITs Index was 3 68 while the FTSE NAREIT Mortgage REITs Index delivered a dividend yield of 11 33 Clearly the REITs continued to offer solid yields and outpaced the 2 14 dividend yield offered by the S P 500 as of Sep 30 Capital Access Accessibility to capital is a prime factor in the REIT industry After raising 51 3 billion capital in 2011 and a total of 73 3 billion in 2012 REITs raised 60 6 billion in the first nine months of 2013 A solid IPO market in 2013 primarily made it happen In the first three quarters REITs raised 3 08 billion through 14 IPOs that comfortably surpassed the 1 82 billion capital infusion through 8 IPOs in 2012 The third quarter has been the most active one with around 1 25 billion raised from 4 IPO offerings During the latest downturn REITs were able to acquire premium properties from highly leveraged investors at heavy discounts Furthermore REITs typically have a large unencumbered pool of assets which could provide an additional avenue to raise cash during crisis These assets in turn have provided the requisite wherewithal to the REIT industry to grow through strategic acquisitions over time Moreover the financing for sound properties is currently abundant as willing commercial real estate lenders continue to extend lending Zacks Industry Rank Within the Zacks Industry classification REITs are broadly grouped into the Finance sector one of 16 Zacks sectors and further sub divided into four industries at the expanded level REIT Equity Trust RETAIL REIT Equity Trust Residential REIT Equity Trust Other and REIT Mortgage Trust As a point of reference the outlook for industries with Zacks Industry Rank 88 and lower is Positive between 89 and 176 is Neutral and 177 and higher is Negative The Zacks Industry Rank for REIT Equity Trust Other is 81 REIT Equity Trust Retail is 104 REIT Mortgage Trust is 105 and REIT Equity Trust Residential is 177 Analyzing the Zacks Industry Rank for different REIT segments it is obvious that while the outlook for REIT equity trust other remain at the low end of the positive range the rest of the industries mortgage trusts residential equity trusts and retail equity trusts are in the neutral zone Earnings Trends Currently we are into the heart of third quarter 2013 earnings season with results from nearly half of the S P 500 companies already declared The broader Finance sector of which REITs are part has been less of a growth contributor this quarter Results by industry behemoths like JPMorgan Chase Co JPM and The Goldman Sachs Group Inc GS were not impressive and the growth momentum has slowed over the quarters But the majority of S P 500 REITs are yet to report their earnings Among the finance companies that have already reported the earnings beat ratio percentage of companies with positive surprises was 56 4 while the revenue beat ratio was 43 6 Total earnings for this sector were up 13 0 year over year moderating from the 36 0 growth in the second quarter Total revenue moved south 1 0 verses 8 9 growth in the prior quarter Looking at the consensus earnings expectations for the rest of the year we are encouraged by the estimated 12 2 growth for the third quarter and 32 8 for the fourth implying full year 2013 growth of 13 3 For a detailed look at the earnings outlook for this sector and others please read our Earnings Trend report OPPORTUNITIESREIT Equity Trust Other This is a diversified group of REIT companies and notable segments in it are as follows Industrial Storage REITs With a larger customer base rise in e Commerce application and supply chain consolidation the demand for logistics infrastructure and efficient distribution networks has grown Hence these REITs that own or manage properties for industrial needs such as bulk warehouses self storage facilities distribution facilities and light industrial facilities are enjoying a favorable trend in U S industrial absorption As such stocks like CubeSmart CUBE Extra Space Storage Inc EXR Public Storage PSA and Sovran Self Storage Inc SSS look promising Lodging Resorts REITs With improving U S business and strong international travel and tourism volumes the lodging sector is expected to remain in the recovery path Pricing in this industry is anticipated to rise on limited supply and rising demands Stocks worth a look include Sotherly Hotels Inc SOHO LaSalle Hotel Properties LHO and Sunstone Hotel Investors Inc SHO Healthcare REIT These REITs are likely to benefit from the projected 7 4 rise in national health expenditures in 2014 according to Centers for Medicare and Medicaid Services Also the federal agency projects health expenditures to see compounded annual growth rate of 6 2 over 2015 through 2021 Though the forthcoming wave of retiring baby boomers is often cited as a threat to the U S economy this is a boon for the healthcare sector as senior citizens spend 200 more than the average population Moreover the Affordable Care Act would substantially raise new insured individuals thereby raising the demand not just for healthcare facilities but also for properties offered by healthcare REITs In particular the demand for medical office buildings is expected to get a boost We foresee Healthcare REITs like HCP Inc HCP and Ventas Inc VTR capitalizing on this trend However in the near to mid term increasing supply in senior housing would lower the growth in rent and occupancy to some extent Moreover the skilled nursing facilities category would continue to bear the risk associated with government reimbursements REIT Mortgage Trust In the past couple of years with low short term rates and QE policies mortgage REITs commonly known as mREITs have benefited from lower borrowing costs leading to higher yields Notably mortgage REITs invest in mortgage backed securities and use short term debt for financing their purchases to make money from the spread Amid increasing yields on the U S Treasury 10 year note and apprehensions of the Fed s pulling out its QE program mREITs stocks tumbled in May But in September the no taper announcement curtailed growth projections by the Fed and a lackluster employment scenario implied a continued low interest rate environment which would support the mREITs We believe this favorable environment will continue in the near term and support stocks like AG Mortgage Investment Trust Inc MITT Apollo Commercial Real Estate Finance Inc ARI CYS Investments Inc CYS Snapshot Report and ZAIS Financial Corp ZFC However we are somewhat skeptical about the long term prospects of their business REIT Equity Trust Residential The demographic growth continues to be strong in the young adult age cohort or those under age 35 who have a higher propensity to rent In fact with the lack of stability in the job market and mounting student debt home ownership in the under 35 age cohort continues to decline Moreover with stringent mortgage underwriting standards amid new banking regulations renting has emerged as the only viable option for those who cannot avail of mortgage loans This makes us positive on stocks like Post Properties Inc PPS American Residential Properties Inc ARPI and BRE Properties Inc BRE But with a considerable number of projects nearing completion we expect supply to increase in the near term This could slow down rent growth as more companies seek occupancy However new starts are likely to be pushed back amid rising construction costs and interest expenses WEAKNESSES Continued low interest rate environment amid protracted economic recovery is good news for the REIT sector But we believe that the current macroeconomic environment is problematic for the following segments REIT Equity Trust Retail Since the start of the third quarter the Retail sector suffered substantial negative estimate revision We predict thwarted tenant sales in the near term due to tepid economic recovery with weak consumer confidence and a soft job market Despite this economic uneasiness we believe retail properties such as strip centers housing stores selling grocery items drugs and other necessary stuff for regular use by the local neighborhood will perform better than the regional malls in the near term In fact during times of economic slump the grocery anchored shopping centers have earned the reputation of putting up a consistent performance and therefore we are bullish on stocks like Cedar Realty Trust Inc CDR and Regency Centers Corporation REG Analyst Report that have exposure to these properties Barring these we would rather avoid other mall based REITs like Glimcher Realty Trust GRT Snapshot Report and Taubman Centers Inc TCO Analyst Report in the near term Though improvements have been noticed in some of the office markets of late we still find the U S economy weighed down by sluggish growth with uninspiring employment data and soft demand for office properties Conditions remain choppy for the Washington D C office market with slow leasing activities and weak rental rate Also we note that companies like Mack Cali Realty Corp CLI have started to trim their office properties and diversify into the relatively stable multifamily apartment sector Conclusion Macroeconomic issues and political drama have created tension in the market Yet we foresee improved rents and occupancies as the economic recovery gains momentum In fact we believe that rising interest rates should not always be seen as a headwind to REIT stocks Notably interest rates move north when the economy gains strength and this in general drives demand for properties offered by REITs Also we note that during the 40 year period from 1972 to 2012 average annual total returns for REITs were 8 09 while the average annual market return was 13 72 In addition total returns of equity REITs have consistently provided a hedge against inflation According to the data from Jan 1978 to Mar 2013 total returns of equity REITs have either equaled or exceeded the inflation rate in 67 of high inflation six month periods Data on average annual total returns from 1972 through 2012 illustrate the benefit of REITs steady income returns While REIT stocks have exhibited clear potential for strong price appreciation price returns can fluctuate from year to year In contrast REITs have yielded a consistent annual income component of 8 09 percent during that period representing approximately 60 percent of the industry s average annual total return of approximately 13 72 percent So an opportunistic investment in REITs should not disappoint over the long run |
JPM | Will The Zombie Apocalypse End The Real Estate Recovery | We covered the investment wisdom of phantoms yesterday Today we re moving on to vampires and zombies And no this isn t some spoof in honor of Halloween It s totally legit Well respected financial research firms swear that a legion of zombies and vampires a couple hundred thousand strong threaten to suck the life out of the housing market according to RealtyTrac s Vice President Daren Blomquist One of the more prescient market forecasters in recent years is even predicting a downright apocalyptic turn of events with a 20 decline in home prices in the next 12 months Mind you such dire outlooks stand in stark contrast to prevailing market conditions Case in point According to the latest reading of the S P Case Shiller Home Price Index released this past Tuesday home prices rose 12 82 over the last year So which is it Will the real estate recovery continue or is a spooky turn of events truly threatening to gore it to death It s time to find out and invest accordingly Different Name Same Scare Tactic The two monsters supposedly poised to unleash terror in the real estate market are none other than vampire REOs and zombie foreclosures Vampires are homes that were foreclosed on But they re still occupied by the previous owner who isn t paying a penny to live there anymore Whereas zombies are homes that have been vacated but are languishing in the foreclosure process which can take up to 1 000 days in states like New Jersey According to RealtyTrac s latest calculations roughly one in five of the homes in foreclosure are zombies That works out to more than 150 000 As for the vampires there are about 120 000 lurking in the shadows The concern with these homes is that they are inevitable inventory that had been delayed from hitting the market says Blomquist And once they do which we re supposed to fear could happen any day now the excess inventory promises to torpedo prices It s just basic economic principles of supply and demand at work Puh lease This is nothing more than a perversion of the whole shadow inventory scare tactic that s been trumpeted ever since the real estate recovery started For years we ve been told to fear a flood of over two million homes comprised of 1 homes that banks already foreclosed on but are holding back 2 homes that are in the foreclosure process and 3 homes that owners are delaying putting on the market until prices improve Well I m still waiting The latest figures from the Department of Numbers Housing Tracker survey for the week ending October 28 reveal that inventory increased a scant 0 3 in the last year Some flood huh I know I know It s coming Just wait for it Whatever Here s why we could be waiting for the flood longer than Noah did i e forever Reason 1 Banks Don t Believe in Floods Unless a government regulation gets passed that forces banks to liquidate all their real estate holdings immediately it makes no sense for them to flood the market with inventory Why Because in most cases banks are sitting on losses Selling entails realizing those losses And just like individual investors that s not something institutions like to do either So forget floods Banks believe in trickles or slowly releasing inventory to the market That way they can actually benefit from an uptick in market prices over time instead of collapsing prices with their actions Reason 2 Bargains Don t Last When banks do decide to put properties on the market they don t last long As noted by Emmett Laffey CEO of Laffey Fine Homes International foreclosure and bank owned properties get scooped up very quickly Typically these types of properties are sold well within 30 days of listing Why Because the median price for a distressed property is 41 less than the median price for a non distressed property Admittedly Wall Street has been the largest buyer of these bargain properties For months now institutional investors including The Blackstone Group BX American Homes 4 Rent AMH American Residential Properties Inc ARPI and Silver Bay Realty Trust Corp SBY have been paying cash for distressed properties and turning them into rentals It doesn t matter who s buying though Either way the quick purchases prevent the vampires and zombies from weighing on prices for very long Or as JP Morgan JPM economist Daniel Silver says Limited inventory and few distressed sales are helping to keep upward pressure on house prices Reason 3 No Multiplication Here Foreclosure activity is down significantly in the largest markets as well as across the entire country In California for example the number of homeowners entering the foreclosure process fell last quarter to the second lowest level in seven and a half years according to DataQuick Fewer homeowners are behind on payments too The latest data on Fannie Mae and Freddie Mac backed mortgages reveals that loans behind by at least two payments have dropped to the lowest level since 2008 Mortgage modification programs and a much longer foreclosure process thanks to the robo signing scandal in 2010 obviously contribute to the declines we re witnessing Regardless the end result is the same Foreclosure activity is slowing down That means the number of zombies and vampires won t be multiplying out of control anytime soon In turn the two monsters threatening the housing recovery as RealtyTrac puts it aren t really that scary at all Bottom line I ll concede that the brisk pace of real estate price increases can t continue unabated We ll save that discussion for another day though For right now the most important thing is that we don t let the housing market bogeymen spook us out of our real estate investments Stay the course because there are more profits coming |
JPM | Time To Buy This Precious Metal ETF | The precious metal space has been under pressure for much of 2013 as safe haven assets were shunned in favor of high growth products Hopes of Fed tapering had further put pressure on precious metals as the dollar continued to gain strength However the Fed decision of No Taper for now once again bought life back to precious metals While gold and silver bounced back to trade higher one metal which may have been overlooked by investors during this trend towards a reversal is palladium Metal in Focus Palladium is one of the most popular niche commodities and can be considered an extremely lucrative investment avenue Last year the metal lost its momentum somewhat attributable to a weak automobile sector and sluggish demand for jewelry However with some new trends in the space there is plenty of hope for a return to glory for this metal in the very near future Primary Driver The primary driver behind this strength in the metal is the Automobile sector The automotive industry is a big driver of demand in the palladium market specifically in catalytic converters to manage vehicle emissions With a rebound in the auto industry the demand for the metal remains steady Investors should note that auto sales in the U S are holding steady at over 15 million units annual rate This keeps the streak of months with the rate of sales above 15 million alive and suggest that the automobile market is quite strong Additionally the Fed s decision to keep interest rates low will further provide a boost to the sector as customers will be offered cheap financing thereby increasing the demand for cars This will eventually result in increase in demand for palladium metal Also with car sales picking up in Europe and China emerging as the strong market for vehicles the demand for the metal will shoot up leading to further upside in the metal ETF in Focus With the auto industry expected to remain robust globally going forward and demand for the metal and consequently its price on the rise investors may be able to take advantage of palladium For those who are willing to go long in palladium the following ETF option is available ETF Securities Physical Palladium Shares PALL For a bullion backed approach to palladium ETF investing investors can look to ETFS Physical Palladium Shares or PALL PALL is an ETF which is backed by physical metal and holds the metal in the form of bullion or ingots The metal is securely stored in London and Z rich on behalf of the custodian JP Morgan Chase Bank Investing in PALL represents a cost effective and suitable mode for investors The transaction costs for buying and selling the shares will be much lower than purchasing storing and insuring physical palladium for most investors This ETF is designed to track the spot price of palladium bullion PALL is the most liquid option available in palladium ETF space trading with volumes of 78 000 shares a day and it has 510 million in assets under management The expense ratio of 60 basis points also appears to be on par with other ETFs in the precious metals space although it is obviously higher than what we see in the much more popular gold market The fund delivered a return of 20 5 over a period of one year Bottom Line Palladium will continue to see strong demand as the auto industry continues to grow Also auto sales in China are expected to improve if the government renews some of its policy incentives that helped the country overtake the U S as the biggest auto market According to the Chinese government total vehicle sales in China are expected to rise 7 8 to 20 8 million vehicles in 2013 from 19 3 million last year led by strong demand for passenger vehicles and economic recovery So in all palladium represents a good investment opportunity in the precious metals space |
JPM | Stockholm Syndrome And The Precious Metals Price Discovery | The level of fraud in the financial system with utter lack of prosecution or accountability combined with the ongoing love affair between the largest offenders and collective mainstream results in financial media being a victim of the so called Stockholm syndrome From Wikipedia Stockholm syndrome can be seen as a form of traumatic bonding which does not necessarily require a hostage scenario but which describes strong emotional ties that develop between two persons where one person intermittently harasses beats threatens abuses or intimidates the other Targeting JPMorganThe financial mainstream media has an ongoing love affair with JP Morgan and Chase Corporation CCF Many point to the near perfect trading record of the investment banks without considering how it was accomplished According to critics JPMorgan is being deliberately targeted due to CEO Jamie Dimon s critique of the Obama administration s economic policies before the 2012 election It s the latest in bad news for J P Morgan Chase Co JPM which agreed to pay a record breaking 5 1 billion to the Federal Housing Finance Authority FHFA last week over toxic mortgage securities sold before the financial crisis An additional 9 billion settlement over the same securities is in the works with the Department of Justice This situation puts the bank on the hook for an astounding 14 1 billion in penalties But although JPMorgan has been relentlessly targeted by federal investigators its behavior isn t much different from other American megabanks including Goldman Sachs which was largely spared by regulators They are now at the center of a dizzying array of financial fraud prosecutions and have set aside the equivalent of the entire silver market in legal budget The Big Silver ShortAs identified by Ted Butler years ago JPM inherited the very profitable and illegal silver corner when it took over Bear Sterns in the aftermath of the 2008 financial crisis If any one issue reveals the likelihood that this is indeed a politically motivated witch hunt this would be it If a regulator really wanted to punish JPMorgan they could very easily target the obvious presence in the precious metals futures First the silver market clearly has no political constituency Ironically silver is not only a monetary asset with a price that has been contained for decades it is a commodity that practically everyone carries or has indirect contact with on a daily basis Such contact comes in forms ranging from medicine and personal electronics to plastics and household appliances Regardless opening up that issue would risk breaking the market and opening the floodgates of inflation Bart Chilton Steps DownAnother example of the Stockholm Syndrome in effect is the bewildering role of CFTC commissioner Bart Chilton Chilton captured the trust and admiration of the silver investor in 2008 through his personal campaign in support of commodity position limits He was also the voice of the CFTC when it came to the recently ended 5 year investigation of the silver market Many in the precious metals community are quick to offer praise for his tenure but ultimately his role may be better served outside the system as whistleblower What might have been While Chilton stepped down this week perhaps limited by a budget restraints and political pressure it is worth examining what might have been had he been successful in terms of implementing Dodd Frank But it is especially worth the effort to scrutinize the ending of the ongoing downward manipulation of silver prices which is decades long Most likely the inflationary warnings putting pressure on the dollar would have lifted all commodity prices further crushing any chance of real growth and the payment of sovereign debt We would have seen the worst of the crisis come and go no doubt with a violent cleansing Yet we would see in the aftermath the clearing of capital restrictions allowing wealth to flow where it is needed the most Instead we remain prisoners the majority captured and comforted by the unsustainable walls constructed around And we celebrate the captors while symbolically raising benign protest from time to ineffective time Indeed the entire dollar forced legal tender complex has kept captive multiple generations to the point where today most people have no idea the identity of the kidnappers At some point in the near future the prisoners will be released into a wilderness all too unfamiliar |
JPM | For Once U S Traders Focus On Economy Not The Fed | Stocks turned back initial declines that followed a better than expected jobs report for October that some view as increasing the odds of a Fed taper Investors instead embraced another batch of strong earnings as good news lifting the U S markets to a higher close Nearly all industry sectors in the S P 500 ended in the black led by shares of financial and materials companies Both the S P and the Dow Jones Industrials indices were higher for the week although the Nasdaq Composite finished lower for the second week in a row Nearly Twice EstimatesNonfarm payrolls jumped 204 000 in October nearly twice what was expected while the jobless rate inched 0 1 higher to 7 3 reflecting the influx of furloughed federal employees from the government shutdown The surprise strength in the labor market initially spooked investors reigniting worries that positive economic news will finally spur the Federal Reserve to start winding down its stimulus efforts But as the session progressed the market appeared to find enough anomolies in the data including a record 83 response rate from employers possibly resulting in positively skewed results to support those who believe the Fed won t begin tapering its bond purchases before 2014 U S Consumer SentimentThe preliminary reading for consumer sentiment as measured by the Reuters University of Michigan index fell to a near two year low of 72 0 this month down from a final 73 2 score in October likely mirror public worries following the 16 day government shutdown and budget fight last night on consumer attitudes Expert opinion had the consumer confident index rising this month to a 75 0 reading CommoditiesCrude oil for December delivery settled 34 cents higher at 94 58 per barrel while December natural gas added 4 cents to finish at 3 56 per 1 million BTU December gold slid 24 10 to 1 284 60 per ounce while December silver fell 34 cents to end at 21 32 per ounce December copper was unchanged at 3 25 per pound Here s Where The U S Markets Stood At Day s EndDow Jones Industrial Average up 167 80 1 1 to 15 761 78S P 500 up 23 46 1 3 to 1 770 61Nasdaq Composite Index up 61 90 1 6 to 3 919 23GLOBAL SENTIMENTHang Seng Index down 0 60 Shanghai China Composite Index down 1 09 FTSE 100 Index up 0 10 UPSIDE MOVERS OLED Reports a surprise 0 12 per share Q3 profit easily beating analyst expectations for a break even quarter for the maker of light emitting diodes Revenue also tops estimates and the company raised its full year guidance In Other Sector News UBNT Reports fiscal Q1 earnings of 0 46 per share topping the analyst consensus by 0 06 Revenues rise 110 9 to 129 7 mln beating Street view by 9 9 mln Q2 EPS guidance exceeds estimates by at least 0 02 revenue by 6 93 million SNTS Agrees to a 2 6 bln acquisition by Salix Pharmaceuticals SLXP accepting 32 per share SLXP also finished sharply higher saying the deal will lead to significant accretion in 2014 and greater EPS accretion in 2015 DOWNSIDE MOVERS AVG Q4 earnings guidance trails expectations by at least 0 05 per share while projected revenue lags Street view by as much as 18 6 Q3 EPS of 0 52 beats by 0 05 Revenue climbs 5 year over year rise to 100 1 mln but still misses by 2 9 mln TRMR Posts Q3 revenue and adjusted EPS that missed Wall Street expectations It also provided downside guidance for Q4 and FY13 forecasting revenue trailing analyst estimates by at least 8 05 mln and 10 01 mln respectively AREX Q3 earnings of 0 07 per share beat by 0 01 The oil and gas company also hires Sergei Krylov currently a managing director at J P Morgan JPM Securities LLC as its new chief financial officer After Hours Stock News From Copyright 2013 MT Newswires a Division of MidnightTrader Inc |
JPM | The Fed And Rising Interest Rates | Charts created using Omega TradeStation 2000i Chart data supplied by Dial Data
What is one to make of the fact that in the US the Ten year Treasury note has gone from 1 40 in July 2012 to 2 76 today That is an increase of just under 100 in a little over a year The Government of Canada 10 year benchmark bond has not been immune from the rise in interest rates They hit their low in July 2012 as well at 1 58 and today are at 2 60 a slightly lower rise of 65
All of this has occurred against the backdrop of the most aggressive bond purchasing program ever seen in the US QE3 was announced on September 13 2012 initially as a 40 billion per month open ended bond purchasing program of mortgage backed securities MBS On December 12 2012 the Fed announced that they would purchase an additional 45 billion per month of open ended purchases of US Treasury notes and bonds The program is open ended earning it the popular nickname of QE to infinity
Since the program got underway the Fed has purchased upwards of 500 billion of US Treasury notes and bonds and over 500 billion of MBS In some respects that is not a lot The US Bond market trades over 2 trillion every day Since September 2012 US Federal debt has grown by roughly 1 trillion
One would think that with an aggressive bond buying program plus the Fed rate being held officially at 0 0 25 reality is that they are at 0 that even long interest rates would stay low They haven t QE3 was supposed to be a program that would help grease the economy by hopefully providing easy credit to those who want it It has not Banks have not been lending at levels seen in the past Foreign holders of US debt have wanted to unload their debt or at least slow their purchases Since September 2012 foreign holdings of US debt has gone up by 116 billion to the end of August 2013 That s not a lot considering foreigners hold roughly 32 of all US debt Over the past year they have purchased a bit over 10 of the net new debt That is low when compared to earlier periods China remains the largest foreign holder of US debt with 1 268 billion as of August 2013 Their holdings peaked in April 2013 at 1 291 billion
A few things that have happened since QE3 got underway is the Fed s balance sheet has grown the monetary base has grown and the US stock market appears to have been the major beneficiary of QE3 Both the Fed s balance sheet and the monetary base have increased by over 1 trillion since QE3 got underway The stock market was wobbling in 2012 before the announcement of QE3 Since then the S P 500 is up 20
What hasn t happened The banks have not been lending to any great extent Household debt has actually declined primarily due to a decline in mortgage debt Falling mortgage debt appears to be running counter to what many term a strong housing market A deeper examination of the housing market has revealed that pools of money and financial institutions have been significant buyers of distressed housing This puts the entire housing market recovery under a cloud On the other hand credit card debt has gone up Non financial corporate debt has also gone up but the financial sector debt has fallen
The growth in US Treasuries and MBS held by the Fed is shown below
The problem with the rapidly growing balance sheet of the Fed is that the MBS portfolio is most likely illiquid MBS holdings have grown from virtually none in 2008 2009 to over 1 2 trillion today Holdings of US Treasuries are also growing up from not much over 400 billion in 2008 2009 to 2 trillion today That is about 12 of all US Government debt While the Fed is a long way from owning a majority of US debt and other debt the significance of this large and growing balance sheet should be viewed with concern What does a rising interest rate environment say for this large portfolio A half a percent interest rate increase in on the portfolio would on paper at least cause a loss estimated to be upwards of 100 billion The capital of the Federal Reserve estimated to be about 64 billion according to the H 4 1 Factors Affecting Reserve Balances released on November 7 2013
With the Federal Reserve balance sheet currently at 3 8 trillion bond purchases between now and year end should put it closer to 4 trillion The rise in the Fed s balance sheet has largely mirrored the rise in the US stock market At the current growth rate of the Fed s balance sheet the S P 500 could rise to 1 800 by year end Talk of the taper is just that talk If the Fed were to taper it could cause the stock market to fall and interest rates to rise further Amongst many of the economic concerns of the Fed has to be the declining labour force participation rate The declining participation has played an important role in lowering the unemployment rate If the participation rate had been maintained at levels seen back at the beginning of 2008 the US unemployment rate would be closer to 11 rather than 7 3
The Fed is no ordinary bank It is private bank with its stock held by its shareholders The US government is not a shareholder Amongst its shareholders are some of the world s most powerful banks including JP Morgan Chase JPM Citibank C and Goldman Sachs GS Ultimately however the ownership of the Federal Reserve is largely a secret An interesting article on the Fed can be found at The Fed was founded 100 years ago by the banks so that it could provide them unlimited access to cheap liquidity It was oddly sold to the public as method of providing them with greater protection Given that the purchasing power of the US Dollar has fallen some 97 since then it is questionable as to how much protection it has actually provided
QE3 is a bond purchase program where the bonds are purchased mostly by the same banks that are shareholders This is in keeping with the Fed providing an unlimited source of cheap liquidity to the banking system The funds appear to be finding their way into the stock market or they are placed back with the Federal Reserve as reserves The Fed pays interest on those reserves at a rate is higher than rates on US Treasury bills out one year
The purpose of QE3 and the earlier QE programs was to help drive down interest costs to assist households and businesses Evidence suggests that the funds are not reaching down to the households and businesses If it were so household and business debt would most likely be rising The numbers suggest that is not the case Worse interest rates are now rising which puts upward pressure on a host of consumer and business interest rates That would appear to work against the purpose of QE3
Some have called QE3 the greatest backdoor Wall Street bailout of all time It has been suggested that the large money center banks still have billions of dollars of bad debt on their books Acceptable accounting practices have allowed them to effectively paper over those losses These banks are still considered too big to fail The largest US banks make up only about 0 2 of all banks but control some 70 of all assets In 2008 the program initially known as the Troubled Asset Relief Program TARP was a bail out Since then legislation has been passed in the US as well as the Euro Zone and Canada that would allow for a bail in if large banks were to fail again This model was applied to Cypriot banks when they failed during the Cyprus collapse Depositors funds would now be risk rather than tax payer funds
The US economy is growing at low levels The average growth rate over the past decade is the second lowest on record Only the 1930 s was lower Odd considering that the market is now in its 5thyear of artificially low interest rates and the most aggressive bond purchase programs ever seen Contrary to popular opinion the Fed cannot expand the money supply by itself It needs the banks to do that While the monetary base has soared money growth M2 has been tepid M3 that is no longer reported by the Fed actually shrunk through late 2008 and into 2010 Since its growth has also been tepid Without strong monetary growth the economy is not likely to grow much Trouble is the growth would have been fueled by debt and except for government debt debt growth has also been tepid
With interest rates rising it puts upward pressure on all sorts of rates especially mortgages that are priced off the government bond yield curve The ten year US Treasury broke out of what appears as a huge head and shoulders bottom pattern The projection on the large H S pattern was from the ten year Treasury note to rise to 3 as a minimum The ten year Treasury note did hit about 3 in early September Since then it has rallied yields fell prices rose but has now started to see yields rise once again prices fall There are potentially secondary objectives that could be as high as 3 60 if the ten year were to take out the 3 objective If that happened one would have to consider what that might do to an economy that is at best stagnant
On the other hand if this has been a correction to a long decline in interest rates it is possible that the current back up in interest rates could fail and rates would once again fall prices rise In that case minimum objectives would be a return to the neckline of the H S pattern That is currently near 1 90
It is counter intuitive that longer term interest rates have been rising in the face of the most aggressive bond purchasing program ever seen and the Fed holding interest rates artificially low at 0 But when you have become the world s largest debtor and your economy is sputtering then it is possible that many would prefer not to be holding US Treasuries or at least buying more And that is a problem for the world s number one economy
Copyright 2013 All rights reserved David Chapman
General disclosures
The information and opinions contained in this report were prepared by MGI Securities MGI Securities is owned by Jovian Capital Corporation Jovian and its employees Jovian is a TSX Exchange listed company and as such MGI Securities is an affiliate of Jovian The opinions estimates and projections contained in this report are those of MGI Securities as of the date of this report and are subject to change without notice MGI Securities endeavours to ensure that the contents have been compiled or derived from sources that we believe to be reliable and contain information and opinions that are accurate and complete However MGI Securities makes no representations or warranty express or implied in respect thereof takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this report or its contents Information may be available to MGI Securities that is not reflected in this report This report is not to be construed as an offer or solicitation to buy or sell any security The reader should not rely solely on this report in evaluating whether or not to buy or sell securities of the subject company |
MS | European stocks decline after data Fitch downgrade Dax down 0 15 | Investing com European stocks declined on Monday as market sentiment weakened after the release of disappointing data from France and Germany and after Fitch ratings agency downgraded Italy s credit rating During European morning trade the EURO STOXX 50 retreated 0 49 France s CAC 40 shed 0 33 while Germany s DAX 30 slipped 0 15 Official data showed that industrial production in France dropped 1 2 in January compared to expectations for a 0 1 rise after a 0 1 fall the previous month The report came after official data showed that Germany s trade surplus declined to EUR15 7 billion in January from a revised 16 9 billion the previous month Sentiment was also hit after Fitch lowered Italy s government bond rating to BBB from A with a negative outlook Financial stocks were broadly lower as shares in French lenders BNP Paribas and Societe Generale retreated 0 69 and 1 62 while Germany s Deutsche Bank and Commerzbank declined 1 42 and 0 41 respectively Peripheral lenders added to losses with Italian banks Intesa Sanpaolo and Unicredit plummeting 1 90 and 2 07 while Spain s BBVA and Banco Santander tumbling 0 91 and 1 34 On the upside Nordex surged 7 46 after the company reported earnings before interest and taxes of EUR14 million euros beating analysts estimates In London FTSE 100 eased 0 01 as U K lenders tracked their European counterparts lower Shares in HSBC Holdings dropped 0 79 and Barclays tumbled 1 55 while the Royal Bank of Scotland and Lloyds Banking plunged 1 67 and 1 74 respectively Meanwhile mining stocks were mostly lower with Rio Tinto sliding 0 31 and copper producers Xstrata and Kazakhmys declining 0 06 and 0 85 Elsewhere Sage Group plummeted 4 31 after the stock s equal weight rating reiterated at Morgan Stanley In the U S equity markets pointed to a lower open The Dow Jones Industrial Average futures pointed to a 0 10 fall S P 500 futures signaled a 0 15 decline while the Nasdaq 100 futures indicated a 0 19 loss Also Monday concerns over a possible slowdown in the world s second largest economy weighed after data over the weekend showed that inflation in China hit a 10 month high in February while industrial output and retail sales slowed |
MS | European stocks mixed to lower after data Fitch Dax down 0 26 | Investing com European stocks were mixed to lower on Monday as market sentiment weakened after the release of disappointing data from France and Germany and after Fitch ratings agency downgraded Italy s credit rating During European afternoon trade the EURO STOXX 50 retreated 0 71 France s CAC 40 shed 0 41 while Germany s DAX 30 slipped 0 26 Official data showed that industrial production in France dropped 1 2 in January compared to expectations for a 0 1 rise after a 0 1 fall the previous month The report came after official data showed that Germany s trade surplus declined to EUR15 7 billion in January from a revised 16 9 billion the previous month Sentiment was also hit after Fitch lowered Italy s government bond rating to BBB from A with a negative outlook Financial stocks remained broadly lower as shares in French lenders Societe Generale and BNP Paribas dropped 0 88 and 0 99 while Germany s Deutsche Bank and Commerzbank declined 2 28 and 0 69 respectively Peripheral lenders added to losses with Italian banks Intesa Sanpaolo and Unicredit plummeting 1 90 and 2 58 while Spain s BBVA and Banco Santander tumbling 1 30 and 2 18 On the upside Nordex soared 12 69 after the company reported earnings before interest and taxes of EUR14 million euros beating analysts estimates In London FTSE 100 added 0 19 although U K lenders continued to track their European counterparts lower Shares in HSBC Holdings dropped 0 76 and Lloyds Banking tumbled 1 60 while Barclays and the Royal Bank of Scotland plunged 2 53 and 2 82 respectively Meanwhile mining stocks were mostly lower with Rio Tinto sliding 0 38 and copper producers Xstrata and Kazakhmys declining 0 09 and 2 60 Elsewhere Sage Group plummeted 3 28 after the stock s equal weight rating reiterated at Morgan Stanley In the U S equity markets pointed to a lower open The Dow Jones Industrial Average futures pointed to a 0 09 fall S P 500 futures signaled a 0 18 decline while the Nasdaq 100 futures indicated a 0 23 loss Also Monday concerns over a possible slowdown in the world s second largest economy weighed after data over the weekend showed that inflation in China hit a 10 month high in February while industrial output and retail sales slowed |
JPM | LGI Homes beats by 0 13 beats on revenue | LGI Homes NASDAQ LGIH Q2 EPS of 1 39 beats by 0 13 Revenue of 324 18M 45 6 Y Y beats by 6 54M Press ReleaseNow read |
JPM | U S job openings at record high labor market tightening | By Lucia Mutikani WASHINGTON Reuters U S job openings jumped to a record high in June outpacing hiring the latest indication that companies are having trouble finding qualified workers The monthly Job Openings and Labor Turnover Survey or JOLTS released by the Labor Department on Tuesday also underscored labor market strength that will likely encourage the Federal Reserve to continue tightening monetary policy despite benign inflation and concerns about consumer spending Companies are running out of workers to hire to do the job or even train to do the work and this is a ticking time bomb for economic growth said Chris Rupkey chief economist at MUFG in New York Today s JOLTS data bring a September meeting balance sheet unwind announcement a little closer to reality JOLTS is one of the job market metrics on Fed Chair Janet Yellen s so called dashboard Economists expect the U S central bank will announce a plan to start reducing its 4 2 trillion portfolio of Treasury bonds and mortgage backed securities at its next policy meeting in September Tame inflation and worries about consumer spending amid tepid wage growth and faltering motor vehicle sales however suggest the Fed will delay raising interest rates again until December It has increased borrowing costs twice this year Job openings a measure of labor demand increased by 461 000 to a seasonally adjusted 6 2 million That was the highest level since the data series started in December 2000 and pushed the job openings rate up two tenths of a percentage point to a near one year high of 4 0 percent The monthly increase in job openings was the largest since July 2015 The surge in job openings was almost broad based There were 179 000 additional vacancies in the professional and business services industries The health care and social assistance sector had 125 000 more job openings and construction companies had an additional 62 000 unfilled positions In June job openings were concentrated in the Midwest and West regions SKILLS MISMATCH The ratio of job openings to unemployment hit a 16 year high Hiring was little changed at 5 4 million in June leaving the hiring rate steady at 3 7 percent The gap between job openings and hiring points to a skills mismatch which was also corroborated by a separate report on Tuesday from the National Federation of Independent Business The NFIB survey showed job openings at a 16 year high in July Small businesses cited a lack of skills as the main reason for the vacancies Others also blamed unreasonable wage expectations attitude appearance as well as drug addiction for disqualification of job seekers Economists are optimistic that tightening labor market conditions will spur faster wage growth Annual wage growth has struggled to break above 2 5 percent contributing to inflation persistently running below the Fed s 2 percent target The JOLTS report continues what has been a reasonably strong run for the labor market data and we expect continued improvement in the job market to keep upward pressure on wages said Daniel Silver an economist at JPMorgan NYSE JPM in New York Other details of the JOLTS report were mixed About 3 1 million Americans voluntarily quit their jobs in June down from 3 2 million in May As a result the quits rate which the Fed looks at as a measure of job market confidence dipped to 2 1 percent from 2 2 percent in May Layoffs rose 28 000 to 1 7 million in June lifting the layoffs rate one tenth of a percentage point to 1 2 percent
Layoff rates are historically low But the recent increase may be worth watching said Jed Kolko chief economist for job site Indeed in San Francisco |
JPM | U S drops charges in another high profile Wall Street case | By Jonathan Stempel NEW YORK Reuters U S prosecutors on Tuesday dropped their criminal case accusing Benjamin Wey of running a fraudulent stock manipulation scheme after a federal judge threw out much of the evidence they hoped to use against the financier The dismissal was the government s second surrender in three weeks in a high profile Wall Street case It followed prosecutors July 21 decision to drop charges against two former JPMorgan Chase Co N JPM traders in the London Whale trading scandal The government had accused Wey in September 2015 of making tens of millions of dollars by secretly controlling large blocks of shares through reverse mergers between Chinese companies and U S shell companies and selling his shares at artificially high levels But the case collapsed when U S District Judge Alison Nathan on June 13 ordered the blanket suppression of a huge cache of materials seized from Wey s home and offices saying the broad search warrants violated the New York Global Group founder s constitutional rights Nathan said the seizure of items such as children s school records family photos and X rays at minimum reflected grossly negligent or reckless disregard of the Fourth Amendment The judge agreed on Tuesday to let prosecutors drop the Wey case after they said it had been based in significant part on the seized materials and that the government can no longer rely on that evidence at trial A spokesman for Acting U S Attorney Joon Kim in Manhattan whose office handled the Wey and London Whale cases declined to comment Wey has long maintained his innocence including on his website where he says t he American spirit is about fighting back against tyranny Never give in He said in a statement provided by his law firm Haynes and Boone that fabricated allegations and false statements underlay the government s case and the ordeal devastated employees and families We are thankful that this judgment will help clear my name and hopeful that it protects other innocent citizens from the intrusion that we have endured Wey said Wey was also in the news in June 2015 when a federal jury ordered him to pay 18 million to a former employee in a sexual harassment case A judge reduced it to 5 65 million Wey has appealed and denied wrongdoing In the JPMorgan case prosecutors dropped charges against Javier Martin Artajo and Julien Grout because testimony from Bruno Iksil a cooperating witness dubbed the London Whale was no longer considered reliable The charges had stemmed from JPMorgan s 6 2 billion trading loss in 2012
The case is U S v Wey U S District Court Southern District of New York No 15 cr 00611 |
JPM | U S productivity rises in second quarter keeps labor costs in check | By Lucia Mutikani WASHINGTON Reuters U S productivity grew more than expected in the second quarter as hours worked rose at their fastest pace in 1 1 2 years leading to a modest increase in labor costs that could keep inflation muted in the near term The trend in productivity however remains weak suggesting robust economic growth will be hard to achieve President Donald Trump has vowed to boost annual growth to 3 percent through tax cuts infrastructure spending and regulatory rollbacks The economy is aging and the growth rate for this eight year expansion may have maxed out unless all the king s horses and all the king s men on Trump s economics team can get some of its tax reforms tax cuts and untangled regulatory reforms through a moribund Congress said Chris Rupkey chief economist at MUFG in New York The Labor Department said on Wednesday that nonfarm productivity which measures hourly output per worker rose at a 0 9 percent annualized rate in the April June period First quarter productivity was revised to show it edging up at a 0 1 percent pace instead of being unchanged as previously reported Compared to the second quarter of 2016 productivity increased at a 1 2 percent rate the strongest performance in two years Economists had forecast productivity increasing at a 0 7 percent pace in the second quarter With productivity rising unit labor costs the price of labor per single unit of output increased at only a 0 6 percent pace in the second quarter after jumping at a 5 4 percent rate in the January March period Compared to the second quarter of 2016 unit labor costs fell at a 0 2 percent rate Coming on the heels of a recent moderation in inflation the retreat in unit labor costs may worry Federal Reserve officials as they contemplate further monetary policy tightening This recent softness in the data means that there could be less pressure for firms to pass higher costs on to consumers through price increases said Daniel Silver an economist at JPMorgan NYSE JPM in New York U S financial markets were little moved by the data as investors focused on rising tensions between the United States and North Korea Prices for U S Treasuries rose in a move to safe haven assets while stocks on Wall Street fell The dollar DXY was slightly weaker against a basket of currencies The government also revised productivity data going back to 2014 in line with recent revisions to gross domestic product figures Those revisions showed productivity falling 0 1 percent in 2016 the first drop since 1982 WORKER SHORTAGE Productivity increased at an average annual rate of 1 2 percent from 2007 to 2016 below its long term rate of 2 1 percent from 1947 to 2016 indicating the economy s potential growth rate has declined To reattain 3 percent real GDP growth with the demographics the U S is facing productivity growth will have to exceed its long run average growth rate of 2 1 percent and we are far short of attaining such a pace said John Ryding chief economist at RDQ Economics in New York Economists blame soft productivity on a shortage of workers as well as the impact of rampant drug addiction in some parts of the country A report on Tuesday showed job openings surged to a record 6 2 million in June The International Monetary Fund in June cut its growth forecasts for the U S economy to 2 1 percent for both 2017 and 2018 The IMF said the Trump administration was unlikely to achieve its 3 percent growth goal over a sustained period partly because the labor market is at full employment Other economists also argue that low capital expenditure which they say has resulted in a sharp drop in the capital to labor ratio is holding down productivity There is also a perception that productivity is being inaccurately measured especially on the information technology side Annual economic growth has not surpassed 3 percent or more since 2005 Gross domestic product expanded at a 2 6 percent annualized rate in the second quarter Low productivity is constraining wage growth even as companies boost hiring to maintain output Hours worked rose at a rate of 2 5 percent in the April June period the quickest pace since the fourth quarter of 2015 and followed a 1 6 percent rate of increase in the first quarter
As a result output per worker surged at a 3 4 percent rate the fastest since the first quarter of 2015 after rising at a 1 8 percent pace at the start of the year |
C | Ukraine reform push would pave way to support from new U S president Pritzker | By Matthias Williams KIEV Reuters Ukraine should ramp up economic and anti corruption reforms to pave the way for continued support from whoever wins the U S presidential election U S Secretary of Commerce Penny Pritzker said on a visit to Kiev on Thursday While acknowledging the progress Kiev s Western backed leadership has made since taking power after a 2014 uprising Pritzker said there was more work to be done and that the former Soviet republic had a limited window to implement reforms Ukraine s international backers have propped up its economy with a 40 billion bailout package after Russia s annexation of Crimea in 2014 and the outbreak of a pro Russian separatist insurgency that has killed more than 9 600 people The International Monetary Fund in September released a further tranche of aid as part of that package which was swiftly followed by a 1 billion loan guarantee from Washington Ukraine s new government under Prime Minister Volodymyr Groysman has taken some politically sensitive decisions including hiking gas prices but overall progress on reforms and tackling entrenched graft has been patchy Companies such as Citigroup NYSE C want to expand in Ukraine but are waiting for Kiev to tackle issues such as strengthening intellectual property rights and reforming the country s tax and customs services Pritzker said There s good news but there s more work to do And part of our message to the government is the intensity and urgency needs to continue and be ramped up because this isn t going to be an opportunity for ever Pritzker said in an interview The prospect of Donald Trump who has praised Russian President Vladimir Putin as a strong leader taking over in the White House has stirred fears in Ukraine that U S policy could pivot away from supporting Kiev Pritzker a wealthy businesswoman who was the national finance chair for President Barack Obama in 2008 and his campaign co chair in 2012 declined to comment on the U S presidential race directly but said The point to make to the Ukrainian government is show progress because that will be something that a new administration will want to latch on to Ukraine has urged European leaders to keep economic sanctions on Moscow which were imposed two years ago over the Ukraine conflict while some European Union member states have been pushing for them to be lifted I think there currently is support but I think the onus is on the Ukrainian government to continue to show why that support should be sustained Pritzker said when asked whether there was still a weight of international support for Ukraine It s never forever so they need to do the hard work
Pritzker was also in Kiev to attend the commemoration of the victims of Babyn Yar one of the biggest single massacres during the Nazi Holocaust It has personal resonance for Pritzker whose own family fled anti Jewish pogroms in Ukraine in the 1880s |
C | Citi equities executive Bitton leaves firm | By Olivia Oran Reuters Michael Bitton the global head of delta one and head of North American prime finance at Citigroup Inc N C has left the firm according to a person familiar with the matter Bitton who joined Citi in 2012 from UniCredit departed Citi in June the person said A spokesman for Citi declined to comment
Citi has been looking to strengthen its equities franchise by hiring talent from other banks and building up its prime brokerage and bespoke equity derivatives businesses to cater more to hedge fund clients Equities trading chief Derek Bandeen who had been helping to spearhead Citi s equities push retired from the bank in April |
C | Deutsche lifted by CEO letter settlement report | By Andreas Kr ner and Maiya Keidan FRANKFURT LONDON Reuters A report that Deutsche Bank DE DBKGn was close to a cut price settlement with U S authorities over the sale of toxic mortgage bonds helped to fuel a recovery in its shares on Friday after its chief executive said the group remained stable Deutsche which is Germany s largest bank and employs around 100 000 people has been engulfed by crisis after being handed the demand for up to 14 billion earlier in September by the Department of Justice DOJ for misselling mortgage backed securities before the financial crisis Deutsche shares which hit a record low earlier on Friday extended their recovery after the AFP news agency said the bank was near to a settlement for 5 4 billion Deutsche and the German finance ministry declined to comment on the report The bank is fighting the fine but would have to turn to investors for more money if it is imposed in full The German government this week denied a newspaper report that it was working on a rescue plan for the bank Worries over a major bank in Europe s largest economy and talk of a government rescue have stirred painful memories of the 2007 2009 financial crisis and sent tremors through global markets Chief Executive John Cryan had tried to rally staff with a letter addressing reports of the departure of a few hedge fund clients hitting out at forces that wanted to weaken trust in the bank People familiar with the matter had earlier told Reuters that one large hedge fund in Asia had pulled out collateral from Deutsche amounting to 50 million in the last two days while other sources said this had happened elsewhere albeit on a small scale Cryan sought to put the moves into perspective We should look at the complete picture Cryan said in the letter to the bank s workers adding that Deutsche had more than 20 million customers and reserves of more than 215 billion euros We are and remain a strong Deutsche Bank SHARES SEESAW Deutsche shares were volatile again initially falling around 8 percent in Frankfurt to a record low below 10 euros before bouncing back to close six percent higher at 11 57 The bank s U S listed shares N DB were up 13 7 percent at 13 05 in heavy midday trading in New York The shares have lost half their value this year and the bank s market capitalization has fallen to around 15 billion euros 16 8 billion Trading volume in Deutsche s debt has more than doubled this week and soared 15 fold in a month as investors rushed to offload the troubled German lender s bonds Deutsche is much smaller than Wall Street rivals such as JPMorgan N JPM and Citigroup N C But it has significant trading relationships with all of the world s largest finance houses and the International Monetary Fund this year identified it as a bigger potential risk to the wider financial system than any other global bank Following the financial crisis banks are now required to have plans showing how they would respond to a major market shock with improved controls on liquidity Regulators also draw up plans on how lenders could be smoothly closed down in the event of impending failure Italy whose banks have their own troubles caused by soured loans called for swift action on Deutsche Just like the problem of bad bank loans must be solved within a reasonable time frame so it should be for Deutsche Bank s problems Economy Minister Pier Carlo Padoan told Italian daily La Stampa With Germany facing elections next year there is little political appetite for helping a group disliked by many Germans because of its pursuit of investment banking abroad that resulted in billions of euros of penalties for wrongdoing However the German government faces a delicate balancing act with a deeper crisis for Deutsche Bank potentially spilling over into its economy The problems of Deutsche once Germany s flagship on Wall Street are awkward for Berlin which has berated many euro zone peers for economic mismanagement and pushed for countries such as Ireland and Greece to cope with their banking problems alone Dutch finance minister Jeroen Dijsselbloem who chairs meetings of euro zone finance ministers said on Friday that Deutsche Bank must survive on its own without assistance from the German state German banks have found their profits squeezed by the European Central Bank s ultra low interest rates and Commerzbank DE CBKG the country s second largest lender is cutting almost 10 000 jobs |
C | Citigroup s Bullish Breakout | Since its 2007 high Citigroup NYSE C is much lower in price But now the stock is trying to breakout from a bullish pattern
During the past few months Citi appears to have created another bullish ascending triangle which more often than not results in an upside breakout As mentioned Citi looks to have formed a bullish ascending triangle pattern at 1 where we applied a measured move calculation
This week Citi is trying to break out of the top of the pattern at 2 The measured move suggests that Citi could reach 77 if it is able to break out
Full disclosure Premium and Sectors members have been long this stock for months and should the breakout take place to continue holding this stock |
JPM | Investors Flock To The Yen As A Safe Haven | With the October 17 deadline only days away investors looked to the yen for a safety net Asian stocks fell and US share index futures dropped on Monday morning following failed budget negotiations over the weekend Democrats and Republicans in Washington have reopened discussions about the automatic spending cuts set to take effect in early 2014 which put negotiations on rocky grounds Now the two sides will need to agree on whether or not to do away with the across the board spending cuts and replace them with a broader plan In other news around the markets German Chancellor Angela Merkel has been working hard to cross party lines and form a grand coalition after losing the absolute majority in the lower house of parliament Merkel is set to meet with the Social Democrats on Monday and the Greens on Tuesday to discuss the possibility of a partnership German Finance Minister Wolfgang Schaeuble has said he expects the new government to be in place by mid November Chinese inflation increased to 3 1 percent in September after bad weather increased the price of food Although the figure is still below China s official target of 3 5 percent analysts are expecting to see CPI rise further in the fourth quarter possibly overtaking the 3 5 percent goal and forcing the People s Bank of China to consider policy tightening India suffered its strongest cyclone in 14 years over the weekend but the death toll stood at just 15 people due to the nation s massive preparation and evacuation efforts The cyclone left a trail of destruction in its wake with millions of people forced to crowd into shelters The Red Cross has warned that more aid will be needed over the coming days as nearly one million people have been uprooted Talks between the West and Iran over Tehran s nuclear program may have reached a setback over the weekend after Iranian Deputy Foreign Minister Abbas Araqchi declined to send nuclear material out of the country With talks about the country s uranium enrichment program set to continue on Tuesday Iranian officials have indicated that they are willing to be flexible in other areas but will not consider sending materials out of the country Asian markets were mixed as investors waited for a US budget deal The Japanese NIKKEI was up 1 48 percent the Shanghai composite was up 0 54 percent and the Shenzhen composite was up 0 97percent The South Korean KOSPI was down 0 04 percent and New Zealand s NZ 50 lost 0 14 percent European Markets European markets were quiet on Monday morning the UK s FTSE was up 0 88 percent and the eurozone s STOXX 600 was unchanged Italy s MIB was up 0 24 percent and the German DAX and Spanish IBEX were flat Energy futures were lower with Brent futures down 0 07 percent and WTI futures down 0 16 percent Gold gained 0 27 percent and silver was down 0 37 percent Industrial metals were mostly higher with Zinc posting the largest gains up 1 16 percent The dollar lost out on Monday the euro gained 0 19 percent against the American currency and the pound was up 0 21 percent against the greenback Investors flocked to the yen which rose 0 30 percent against the dollar Earnings Notable earnings released on Friday included Infosys Limited NASDAQ reported EPS of 0 73 on revenue of 2 07 billion compared to last year s loss of 0 75 per share on revenue of 1 80 billion Webster Financial Corporation NYSE reported EPS of 0 49 compared to last year s EPS of 0 48 on revenue of 144 89 million Wells Fargo Company NYSE reported EPS of 0 99 on revenue of 20 50 billion compared to last year s EPS of 0 88 on revenue of 21 21 billion J P Morgan Chase Co NYSE reported EPS of 1 42 on revenue of 23 10 billion compared to last year s EPS of 1 40 on revenue of 25 86 billion Stocks moving in the pre market included CenturyLink Inc NYSE gained 1 08 percent in pre market trade adding to last week s 6 47 percent increaseGeneral Motors Co NYSE lost 0 96 percent in pre market trade after gaining 1 43 percent on FridayHewlett Packard Co NYSE lost 0 66 percent in pre market trade after rising more than 8 percent on WednesdayAmerican International Group NYSE fell 0 56 percent in pre market trade after gaining nearly 1 percent last week Earnings reports expected on Monday include Stanley Furniture Company NASDAQ is expected to report a third quarter loss of 0 11 per share on revenue of 25 32 million compared to last year s loss of 0 14 per share on revenue of 23 98 million Wintrust Financial Corporation NASDAQ is expected to report third quarter EPS of 0 65 on revenue of 195 50 million compared to last year s EPS of 0 66 on revenue of 195 52 million Economics Monday s economic calendar is relatively quiet with releases including eurozone industrial production and Swiss PPI Below you may find the video |
JPM | Why JP Morgan Gladly Gave The Government 13 Billion | I was trained to think macro Not in the sense of investing from a macro perspective but to think about how the world works from a macro perspective instead of focusing on the disturbances amongst the trend You re going to see a lot of headlines this week about all of the horrible things J P Morgan Chase Co JPM did to deserve paying the government 13 billion dollars to make it all go away but you ll be focusing on the wrong thing What I ll be focusing on is why JPM is paying up for its sins now In 2008 the government sat around the table with the banks and made a grand deal The government would save the banks by injecting a ton of capital lowering interest rates to zero allow them to suspend accounting rules and break the law left and right They did this in order to prevent the next great depression because if those banks went down the whole economic order would go down with them The goal was to repair the balance sheet of the banks not just save them So for the past 5 years that s what has been taking place Until now Now that the banks are on stable footing and have locked away years of extremely high profits the government is going to crack the whip and take back more than its fair share of cash by punishing the banks for exactly those things they said they would look the other way on Don t be mad at the government the banks knew exactly the game here this was put in motion 5 years ago The 13 billion that JPM is paying to the government is just another leg in the bailout deal and they will most likely continue to pay for a while longer as will others While the government will never have the ability to do real reform due to regulatory and political capture the revolving door between Washington and Wall Street they will extract multiple pounds of flesh as retribution for what the banks caused It is a consolation for the American people though it will always fall short of the real reform that is needed I would not want to be an investor in these stocks for the foreseeable future as this may go on for a while as it should Full Disclosure Nothing on this site should ever be considered to be advice research or an invitation to buy or sell any securities please see the Disclaimer page for a full disclaimer |
MS | European stocks remain lower as growth worries persist Dax down 0 33 | Investing com European stocks remained lower on Wednesday as concerns over the worsening of the euro zone s debt crisis and over the outlook for global economic growth continued to dampened market sentiment During European afternoon trade the EURO STOXX 50 dropped 0 54 France s CAC 40 fell 0 29 while Germany s DAX 30 slid 0 33 Sentiment weakened after Jean Claude Juncker the head of the euro group of finance ministers said the euro value was dangerously high and posed a threat to the region s economic recovery Separately the World Bank sharply revised on Tuesday its 2013 outlook for the world economy to 2 4 from its last forecast of 3 in June saying an unexpectedly sluggish recovery in developed countries was to blame for slow global growth Financial stocks were broadly lower as shares in French lenders BNP Paribas and Societe Generale plummeted 1 51 and 4 06 while Germany s Deutsche Bank and Commerzbank tumbled 1 47 and 1 44 respectively Peripheral lenders also posted sharp losses with Spanish banks BBVA and Banco Santander dropping 0 39 and 0 78 while Italy s Unicredit and Intesa Sanpaolo plunged 3 06 and 3 07 Elsewhere Barry Callebaut retreated 1 19 after reporting lower than expected first quarter sales of CHF1 25 billion In London FTSE 100 declined 0 63 as U K lenders tracked their European counterparts sharply lower HSBC Holdings slipped 0 13 and Barclays plummeted 2 17 while the Royal Bank of Scotland and Lloyds Banking plunged 2 75 and 3 77 Meanwhile oil and gas major Anglo American remained sharply lower diving 2 78 after workers at South Africa s Rustenburg operations refused to go underground in a protest at company plans to close mines Rival BP dropped 0 56 Also on the downside mining giants BHP Billiton and Rio Tinto tumbled 0 74 and 1 27 while copper producers Xstrata and Kazakhmys plunged 3 19 and 2 68 respectively Separately ARM Holdings whose chips power Apple s iPhones remained in negative territory for the second consecutive session sliding 1 31 after Sanford C Bernstein Co cut its rating on the stock to underperform from market perform saying the company s current share price reflects an unrealistic assessment of its potential to penetrate markets and its capacity to increase royalty rates On Tuesday the stock was cut to equal weight at Morgan Stanley In the U S equity markets pointed to a moderately lower open The Dow Jones Industrial Average futures pointed to a 0 35 drop S P 500 futures signaled a 0 23 fall while the Nasdaq 100 futures indicated a 0 08 loss Also Wednesday official data showed that consumer price inflation in the euro zone remained unchanged in December at an annualized rate of 2 2 in line with expectations Core consumer price inflation which excludes food energy alcohol and tobacco ticked up to 1 5 last month from 1 4 in November as anticipated |
JPM | U S orders JPMorgan Chase to pay 4 6 million over checking account reports | By Lisa Lambert WASHINGTON Reuters The U S Consumer Financial Protection Bureau said on Wednesday it had ordered JPMorgan Chase Co NYSE JPM to pay 4 6 million for allegedly failing to make sure it reported accurate information for checking account screening reports Similar to credit reports the screenings provided by companies such as Certegy Check Services ChexSystems and Early Warning Services help institutions decide if a person can open an account Chase did not have proper procedures to ensure information it gave the companies was true according to the CFPB That could have led customers with clean histories to be turned down for bank accounts or those with negative pasts such as suspected fraud to be allowed to open ones The CFPB said the bank did not admit or deny the agency s findings Since identifying the issue three years ago we ve significantly improved our procedures for sharing information with agencies said bank spokeswoman Anne Pace When the bank s merger was completed in 2005 it created procedures for reporting account information the CFPB described as insufficient Its revised guidance in 2014 still did not provide workers with detailed steps for furnishing accurate information on millions of consumer accounts The CFPB a relatively new agency scorned by many banks and Republican political leaders also said thousands of consumers between July 2010 and December 2014 disputed information Chase provided to the services but never heard the results of investigations into their disputes Meanwhile between October 2014 and February 2015 Chase denied checking accounts to 17 500 people due to adverse information it received in a screening report but did not identify who had provided that information according to the CFPB The consent order said the bank later sent out corrected notices that included identification
As part of the consent order signed by CFPB Director Richard Cordray the bank agreed to create reasonable procedures for checking accuracy to tell customers results of dispute investigations and to give people denied accounts contact details of the company that provided their screening report |
JPM | Hertz Avis stock soar as JPMorgan initiates coverage | Investing com Hertz Global Holdings Inc NYSE HTZ and Avis Budget Group Inc NASDAQ CAR two companies whose share values have been deteriorating experienced some welcome upside Friday afternoon as JPMorgan initiated coverage of the sector
In initiating coverage JPMorgan NYSE JPM analysts said the headwinds have been over appreciated by investors Coverage of Avis Budget Group Inc commenced with an overweight rating and stock price target of 39 well above current levels Hertz Global Holdings Inc was started at neutral with a 15 stock price target
Hertz shares were up 10 at 14 09 on the news closing in on the JPMorgan price target Friday s advance meant year to date losses were trimmed to 34 Avis Budget s shares were up 4 2 at 32 20 They trimmed their year to date losses to 12 |
C | Column Can insider trading case at SCOTUS help Leon Cooperman | By Alison Frankel NEW YORK Reuters On Oct 5 the U S Supreme Court will hear oral arguments on a question that has created considerable confusion in lower courts When the government claims a corporate outsider has profited from trading illegally on inside information what must it prove about the motive of the insider who supplied the tip The Securities and Exchange Commission meanwhile just brought its biggest insider trading case in years against hedge fund manager Leon Cooperman of Omega Advisors The SEC s complaint filed in federal district court in Philadelphia accuses the legendary investor of earning about 4 million in illicit profits from trading in Atlas Pipeline Partners after a corporate insider gave him confidential information about a big divestiture Cooperman has declared his innocence Wednesday in a five page letter to investors and a widely reported conference call The SEC has framed its case as I ll explain to avoid the question at the Supreme Court But I think there is a way Cooperman s lawyers at Paul Weiss Rifkind Wharton Garrison can take advantage of the case before the justices My theory takes a bit of explaining so first some background ALL IN THE FAMILY In the case at the Supreme Court Salman v U S Bassam Salman was convicted of trading illegally on the basis of information that originated with a Citigroup NYSE C investment banker The banker talked to his brother about companies in play His brother in turn passed tips to Salman who matched his trades to those of the banker s brother Insider trading law is quirky Congress has never defined insider trading in a statute so the law has been shaped by judges watching over federal prosecutors and Securities and Exchange Commission regulators asserting violations of securities fraud statutes As the law has developed most notably in the 1983 Supreme Court case Dirks v SEC to prove insider trading by a corporate outsider the government must show that the insider who leaked confidential information benefited from supplying the tip Otherwise courts have held there s no fraud In the Salman case the justices have been asked to decide how tangible the tipster s benefit must be The 9th U S Circuit Court of Appeals which affirmed Salman s conviction held the close family relationship between the Citi banker and the brother he tipped is enough to establish the banker s personal benefit The 2nd Circuit suggested in a landmark 2014 decision U S v Newman that the government must prove tipsters received a benefit that is objective consequential and represents at least a potential gain of a pecuniary or similarly valuable nature The justices will have to reconcile the two circuit court standards MISAPPROPRIATION THEORY The SEC contends its suit against Cooperman case falls into a different category than tipster cases Cooperman according to the commission was the beneficial owner of more than 9 percent of Atlas Pipeline in 2010 As such he had much easier access to top corporate officials than ordinary shareholders the SEC alleges Through the first half of 2010 that access apparently did not give him much confidence in the company Cooperman dumped holdings worth millions of dollars and allegedly told an Omega consultant that Atlas was a shitty business In July 2010 however an Atlas executive allegedly told Cooperman that the company planned to sell an important operating facility for more than 700 million The SEC claims that the unnamed Atlas official believed Cooperman had an obligation not to use the information to trade Atlas securities According to its complaint Cooperman explicitly agreed that he could not and would not use the confidential information to trade The SEC of course alleges that Cooperman did in fact trade on his advance word of the divestiture reaping about 4 million in profits in various Omega funds The SEC claims Cooperman committed securities fraud by misappropriating information given to him in confidence by an insider who trusted him not to use the information for his own trading The U S Supreme Court gave its blessing to the government s so called misappropriation theory of insider trading in the 1997 case U S v O Hagan when the justices upheld the conviction of a Dorsey Whitney lawyer who traded options in a firm client that was about to place a tender offer In broad strokes the misappropriation theory presumes that corporate insiders are disclosing confidential information only to those with a duty to protect the corporation s secrets In those cases insiders are victims of fraudulent misappropriation so their personal benefit for supplying confidential information doesn t come into play The government s burden is to show the alleged fraudster violated the trust of the corporate insider not the trust of the company The O Hagan case of course involved a lawyer who breached a fiduciary duty when he traded a client s securities based on inside information The SEC and the Justice Department have also brought misappropriation cases against defendants with no fiduciary duty to the insider who disclosed confidential information The SEC s case against billionaire Mark Cuban for instance alleged circumstances very similar to those described in the Cooperman complaint Cuban received advance word of a private placement by an Internet search company in which he held a large stake Despite supposedly telling the company he wouldn t reveal the confidential information Cuban sold shares before the offering was announced to avoid losses when his ownership stake was diluted Cuban persuaded the trial judge in his case that he never agreed not to trade on the basis of the advance tip he received The case was dismissed then revived by the 5th Circuit which said that Cuban obtained additional inside information about the private placement after telling the company he wasn t going to sell his shares Ultimately a federal jury in Dallas cleared Cuban of wrongdoing In the 3rd Circuit where the SEC filed its case against Cooperman the appeals court recently upheld the SEC s expansive view of who can be liable under the misappropriation theory A defendant named Timothy McGee found out about an impending corporate deal from a buddy he d befriended at Alcoholics Anonymous who confided in McGee when the stress of the deal led him to start drinking again McGee said he owed no duty of confidentiality to his friend but the 3rd Circuit affirmed his conviction DID ATLAS WANT TO INFLUENCE COOPERMAN Believe it or not all of the preceding is necessary background for how the Salman case may be useful to Cooperman We know from the McGee and Cuban cases that courts if not juries are open to the idea that the government need not show a fiduciary relationship between a corporate insider and an alleged fraudster who misappropriates inside information That s bad news for Cooperman But what if the insider at Atlas tipped Cooperman about the divestiture to influence the hedge fund manager s trading in the company Remember Cooperman was dumping shares until he heard about the planned sale of the facility and I m sure Atlas executives were not thrilled about a sell off by the owner of a nearly 10 percent stake in the company It s not unreasonable to wonder if Atlas was hoping news of the big deal would change Cooperman s mind about his stake Interestingly holding onto shares because you ve gotten a tip they will rise in value is not securities fraud which requires buying or selling securities To be sure the SEC complaint explicitly said Atlas gave Cooperman inside information under the proviso that he not use it to trade I suspect Cooperman s lawyers are going to probe exactly what was said in the conversations between the hedge fund manager and Atlas insiders And if they can show Atlas tipped Cooperman to influence his trading decisions then this case could turn on whether the tipper received a personal benefit from supplying information the issue before the Supreme Court in Salman If the justices come up with a very restrictive definition of what constitutes a personal benefit for a tipster that could help Cooperman
I know this hypothetical depends on a big pile of ifs but it s worth thinking about It s also worth a reminder that insider trading law would be a lot clearer if Congress enacted a statute |
C | U S judge tells CFTC he won t rubber stamp Deutsche Bank deal | By Nate Raymond NEW YORK Reuters A federal judge has ordered the U S Commodity Futures Trading Commission to justify why a settlement with Deutsche Bank AG DE DBKGn in a case over the bank s handling of swap reporting is fair and in the public interest U S District Judge William Pauley in Manhattan said in an order on Thursday that while regulatory agencies like the CFTC should be afforded deference in settling cases a judge has a duty to not simply rubber stamp agreements Pauley said the CFTC s request for approval of a deal requiring a monitor s appointment to ensure that the bank reports swaps data properly was bereft of any details showing it was fair reasonable adequate and in the public interest The judge ordered the CFTC to provide reasons by Sept 30 to justify the settlement and to also include at least three recommendations for the appointment of an independent monitor He scheduled a hearing for Oct 6 Deutsche Bank on Friday declined to comment on the order A CFTC spokesman had no immediate comment The CFTC announced the proposed settlement on Aug 18 the same day it filed a lawsuit against Deutsche Bank over its handling of an April 16 system outage that had not yet been fully addressed The CFTC said the bank was unable to report swaps data for multiple asset classes for five days after the outage and that its efforts to restore the services exacerbated existing problems and created new ones At the time the lawsuit was filed the CFTC said some of these problems persist affecting market data made available to the public and impeding the CFTC s ability to evaluate systemic risk in swaps markets The German bank s shortfalls reflected its failure to have adequate business continuity and disaster recovery plans in place and violated a September 2015 CFTC order intended to prevent such shortfalls the regulator added Deutsche Bank has said it is committed to meeting all regulatory requirements The ability of federal judges to block regulatory settlements was narrowed in 2014 when an appeals court voided a judge s rejection of a 285 million accord between the U S Securities and Exchange Commission and Citigroup Inc NYSE C This is not the first time since then that Pauley has demanded more information before approving a settlement Last year Pauley demanded more details about the fairness of a proposed 50 million settlement between the Consumer Financial Protection Bureau and Sprint Corp Pauley later approved the deal
The case is U S Commodity Futures Trading Commission v Deutsche Bank AG U S District Court Southern District of New York No 16 06544 |
JPM | Tuesday s Stocks In Review | Stocks were mixed again Tuesday as the S P 500 fell for the fourth straight session What looked like a promising intraday reversal petered out in the last hour as stocks sold off quite sharply erasing decent gains The S P 500 fell 0 26 while the NASDAQ gained 0 08 Financials continue to be an issue as the Wall Street Journal reported that JPMorgan has offered to pay 3 billion to the Justice Department to settle a number of pending probes including a case relating to the sale of residential mortgage backed securities from 2005 to 2007 This weighed on the sector In economic news The Conference Board s consumer confidence index for September declined to 79 7 from a revised reading of 81 8 in August versus expectations of 79 8 The S P Case Shiller 20 city home price index for July rose 12 4 from year earlier levels in line with expectations of a 12 5 increase Nothing horrible here in the indexes that said the NASDAQ is the better looked one and with the S P 500 we want to see a recapture of those early August highs The NASDAQ continues to bounce of its 10 day moving average nicely Here is a chart of the financial sector it continues to be a wart Oil is also a wart while there are conditions for this pullback namely less international conflict over Syria you usually want to see oil rallying with the market as a sign of global economic strength We ll start with JPMorgan which is acting quite poorly Facebook FB roared higher yet again this time to the 50 area but right now is extremely overbought so some caution is warranted It also closed near its lows which is not a near term positive A report in the South China Morning Post said the Chinese government plans to lift an Internet access ban within the Shanghai free trade zone which could clear citizens to visit social media sites like Facebook Also Citigroup upgraded Facebook to buy from neutral saying factors that drove sharper growth in the second quarter appeared sustainable Other interesting names are who else Tesla TSLA old school name Yahoo YHOO energy company Continental Resources CLR and Angie s List ANGI which until late last week had a very poor technical outlook But in the past few sessions it has surged as this is yet another fast growing internet company |
JPM | JPM s Head And Shoulders Should Scare You | JPMorgan Chase Co JPM has a wicked head and shoulder pattern on the daily And while it has not yet triggered you should be very scared if and when it does And So It GoesJPMorgan is and has been a leading indicator for the market regardless of the lawsuits it s been dealing with Throughout history where JPMorgan has gone so too has the broader market If this head and shoulder pattern triggers on a daily close below 50 a downside move could end up at 43 a mega move for the stock which could precipitate a major move in the market Watch ItSo keep your eye on this trend line If you re smart you can make quite a bit of money from it or at least spare your portfolio the loss Gareth SolowayChief Market Strategistwww InTheMoneyStocks com |
JPM | US Fed CFTC to Make Goldman Sachs Give Up Physical Commodities | Banker bashing it seems is still very much in political vogue Not that we would be defenders of ex merchant banks activities in the metals markets we have no reservations in holding our position that the build up of massive LME aluminum inventory in the stock and finance trade has distorted the market to the detriment of consumers everywhere However it s also true that the banks are not solely to blame even though they have been major players that much is clear But we will come back to that shortly In the meantime what have our lawmakers been up to as of late Well according to Reuters officials from the U S Federal Reserve and the Commodity Futures Trading Commission CFTC are expected to testify on Oct 8 before a Senate Banking Committee panel led by Senator Sherrod Brown a vocal critic of large banks It is the second such hearing by the committee and although it is unlikely indeed unable to herald any big policy announcements it will allow critics to heap pressure on the banks on the Fed and help to form public and political opinion for regulatory action The main although not the only banks in question are JPMorgan JPM Goldman Sachs GS and Morgan Stanley MS all of which were merchant or investment banks prior to the financial crisis but migrated to commercial bank status to benefit from government protection Once a Merch Bank Always a Merch Bank You can change the legal status it seems relatively easily it s much harder to change the culture as the banks in question continued to seek out profitable activities in much the same fashion as they had before they changed status All banks have been able to take possession of the physical raw materials that underpin derivative markets such as cargoes of gasoline ingots of aluminum and the infrastructure to store and transport those commodities but in July the Fed signaled that it is reviewing the wisdom of that decade old permission and the above trio in particular were taking the latitude in making such plays to an unprecedented level compared to traditional commercial banks It s also unlikely those banks would liquidate their positions Why by Stuart Burns |
JPM | Bad Week For JP Morgan And Friends | Ongoing travails for JP Morgan JPM and other members of the financial sector yield opportunities for investors There was no shortage of speculation concerning the matters discussed in a secret meeting held on Thursday morning between United States Attorney General Eric Holder and JP Morgan Chase CEO Jamie Dimon Because no specific details of the matters discussed at the 50 minute meeting were disclosed on the record a wide range of theories emerged The more cynical among us assumed that Holder was simply interviewing for a job with the megabank in the hope of landing a more comfortable and lucrative position in the private sector Another theory focused on the notion that Dimon was negotiating with the shareholders money in attempt to buy his way out of serving time in prison While being confronted by reporters about the substance of the meeting Dimon became impatient with a reporter who raised a question on the subject of prison time The reluctance of the federal government to actually prosecute any of the Wall Street bankers for the malfeasance which led to the financial crisis has been a favorite subject of William Black a professor of Law and Economics at the University of Missouri Kansas City On December 28 2011 as de facto decriminalization of elite financial fraud This isn t just about revenge Bruce Judson of the Roosevelt Institute wrote an essay last year entitled Judson emphasized that when the law is enforced in an unequal manner by failing to prosecute executives of Wall Street financial firms for committing financial fraud while perp walking small time accountants and bookkeepers who embezzle money from small businesses some participants in the capitalist system are given a competitive advantage over others Start up businesses never develop because they are attempting to compete on a playing field which is not level The consensus of opinion concerning what the Justice Department is currently negotiating with Jamie Dimon and JP Morgan centers on several issues It is believed that the government is attempting to force JP Morgan Chase to pay at least 11 billion in penalties for fraudulently packaging high quality mortgages with dubious quality subprime mortgages in collateralized debt obligations CDOs which were sold to JPM s clients as high quality investments The spin to this story involves the suggestion that JPM s liability for such transactions would result solely from its corporate successor status as the company which was forced by the federal government to take over the failed Bear Stearns the true culprit Actually many analysts and regulators believe that JPM itself was involved in the toxic CDO trade regardless of its status as corporate successor to Bear Stearns Federal prosecutors from New Jersey Pennsylvania and California are after JPM for toxic CDOs packaged and sold by the bank before the 2008 financial crisis going back to 2005 In fact the potential legal exposure arising from JPMs ownership of Bear Stearns is limited to the action being pursued by New York Attorney General Eric Schneiderman as well as the lawsuit brought by the Federal Housing Finance Authority FHFA on behalf of Fannie Mae and Freddie Mac concerning the sale of toxic CDOs to those GSEs by Bear Stearns and Washington Mutual JPMorgan is also a corporate successor to WaMu No matter what happens the bottom line on this is that an 11 billion fine isn t small change even for a behemoth like JP Morgan and the chart clearly indicates Wall Street s displeasure with the situation as the company s stock is down more than 10 since early August Joining Dimon in the fun are Goldman Sachs GS and Lloyd Blanfein and Wells Fargo WFC is also expected to find itself in the Justice Department s cross hairs for its widely criticized mortgage practices which helped fuel the explosion of the housing bubble Meanwhile investors are concerned about how to benefit from whatever develops from the legal wrangling An impressive gauntlet run by Jamie Dimon could boost the entire banking sector because he will have established a template for other bankers to follow If such a scenario unfolds two ETFs you may want to consider would include Financial Select Sector SPDR ETF XLF This ETF is designed to track the performance of the Financial Select Sector Index which includes companies from the following industries diversified financial services insurance commercial banks capital markets REITs consumer finance thrifts mortgage finance and real estate management development ProShares Ultra Financials ETF UYG This is a leveraged ETF which is designed to obtain investment results corresponding to twice 2x the daily performance of the Dow Jones U S Financials Index by investing in securities and derivatives which ProShares Advisors believes in combination should have similar daily return characteristics as two times 2x the daily return of the index Investors who are expecting the crackdown by the Justice Department to wreak havoc on the profitability of the banking sector may want to consider these two ETFs ProShares Short Financials ETF SEF This ETF is designed to obtain investment results corresponding to the inverse 1x of the daily performance of the Dow Jones U S Financials Index ProShares Short Financials ETF SKF This is a leveraged ETF which is designed to obtain investment results corresponding to twice the inverse 2x of the daily performance of the Dow Jones U S Financials Index by investing in derivatives which ProShares Advisors believes in combination should have similar daily return characteristics as two times the inverse 2x of the daily return of the index Bottom line We live in a time of rapid change and great upheaval and these conditions are ripe for great fortunes to be made or lost over short periods of time The financial sector is more than 230 above its 2009 lows certainly an impressive run and now new opportunities await those who can be on the right side of the current travails of JP Morgan and its friends Disclosure John Nyaradi holds a position in SEF Disclaimer The content included herein is for educational and informational purposes only and readers agree to Wall Street Sector Selector s and before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group LLC |
JPM | JPM s Faltering Head And Shoulders Pattern | Couple of things to note on the JP Morgan JPM chart HUGE head and shoulders pattern in place but needs to clear 49 70 to confirm Downward ascending trend line is broken off of the July highs Could negate the H S pattern Right now the head and shoulders pattern may be compromised especially if price can get over 54 It has already broken the downtrend which I consider to be troublesome for the bears Here s the JPM technical analysis |
JPM | Expect More Stock Market Declines | I predict more stock market declines on Monday considering the current state of affairs in Congress Stock markets will likely decline on Monday due to the current political impasse in Congress Stock markets last week were a mixed bag with the S P 500 SPY losing 07 the Dow Jones Industrial Average DIA losing 1 22 and the NASDAQ 100 QQQ gaining 1 22 Last week was a roller coaster for stock markets as Congress whipsawed investors over the US Government shutdown and the debt ceiling debates With new lines now drawn in the sand both sides appear to be completely unwilling to compromise on their positions to raise the debt ceiling and we only have 11 days left before the United States begins running out of cash Since both sides will not likely concede tomorrow over how the debt ceiling will be raised if it will be raised at all I predict stock market declines as investors become more and more nervous We are also again at the beginning of a new earnings season starting with the all important bellwether earnings report from Alcoa AA The aluminum provider is expected to have a negative report according to JP Morgan JPM and I believe this quarter s earnings reports will be a mixed bag as well Tomorrow we are also due for a new Consumer Credit Report which will likely also be in the red due to sluggish retail markets Internationally European stock markets died on a vine last week and Asian markets are down at the time of this writing It appears that the closer we get to October 17th the more jittery investors are becoming US futures markets are also deep in the red at the time of this writing further emphasizing my prediction that stock markets will decline Monday Go ahead blame Congress The VIX Index or the fear index as it is known to many investors finished up over 8 last week suggesting that investors are indeed full of fear and more political brinkmanship this week will likely not soothe anyone Will the VIX break its average of 20 points Could be possible From a technical perspective the S P 500 SPY has bounced along its 50 day moving average this past week suggesting that investors are still waiting to see what the final Congressional decision will provide The 50 day moving average has provided a strong level of support for the S P 500 SPY and it will likely take more political volatility to break it open Still I think we have plenty of political volatility in the near future so I could easily see a break through the 50 day moving average for the S P 500 SPY if a compromise is not made soon Lastly my fun fact for the day is actually a trick question If pro is the opposite of con then what is the opposite of progress You guessed it Congress Bottom line I predict stock market declines Monday due to the fact that Congress is stuck in the mud With just 11 days left to find a solution investors appear to be getting jittery Disclaimer The content included herein is for educational and informational purposes only and readers agree to Wall Street Sector Selector s and before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group LLC |
JPM | Greg McCoach Keep The Best Dump The Rest | Greg McCoach publisher of Mining Speculator newsletter is not ashamed to admit he has taken a big hit in juniors in the last couple of years What he has done in response is what he advises all investors to do in this interview with The Gold Report Get rid of the also rans and keep and build positions in those companies that have what it takes to gain in multiples when the market recovers And he suggests six companies that could do just that The Gold Report You wrote recently The 2008 crisis will pale in comparison to what is now on the horizon Given that the 2008 crisis nearly destroyed the world economy how bad will the next crisis be Greg McCoach The derivative issues were never fixed after the last crisis In essence the laws were changed so that the banks didn t have to keep derivative liabilities on their books That way bank stocks could soar again But the banks have acted even more recklessly since 2008 and are now in bigger trouble The recent White House meeting with all the big financial players should be a warning to investors that something big is about to hit The media touted this as a meeting to discuss the debt ceiling but I would say it was about the crisis that is about to envelope the big banks again Barack Obama didn t run that meeting JP Morgan Chase ran the meeting and told everyone what was coming The banks don t have the capital to cover their interest rate derivative problems that are as big as the Pacific Ocean I would tell investors to expect ten times worse conditions from what we saw in 2008 TGR I ve read that even if only 4 of the derivatives held by the banks are at risk and only 10 of that goes south it would completely wipe out the net worth of the top five banks GM At this point the acceleration of what I consider tyrannical measures on the part of the U S government has reached such a degree it s obvious that something is coming Why would it buy billions of rounds of hollow point ammunition Why is it buying millions of ready to eat meals Why would it take all these extra security measures Obviously the U S government knows more than the general public does and it reveals something is wrong and the government is worried about it TGR We had this situation after the scandal with HSBC Holdings Plc HSBA LSS HK5 HKG where the U S Department of Justice admitted that criminal acts were probably committed but prosecution would be unthinkable because the big banks cannot be allowed to fail GM Well that pretty much tells the story right there The bureaucrats Rebooblicans and Dumocrats as Jim Willie says don t represent the people of America anymore They represent themselves and their elitist banker puppeteers They re trying to control the message and all the outcomes It s a train wreck in process but you have to tip your hat to them they have been able to keep it together for so long We could have experienced the end game at multiple occasions in the past 12 years but it now seems to me that the limits of their good fortune are quickly coming to a close If you re just watching CNN and FOX News you re oblivious to what s really going on But if you re a thinking person you should start getting together food storage and get your investments in line for the major problems ahead I can t tell you when it s going to happen because I don t have a crystal ball but it s not a matter of if this is going to happen it s just a matter of when TGR What will be the warning signs of the next crisis GM The warning signs are all around us right now and have been for the last six months The big meeting at the White House with all the financial people I already mentioned was a huge sign The erratic behavior lately of the U S government with the Middle East particularly Syria is also a sign In recent weeks we have heard about a worldwide currency reset that is to take place in the very near future This is telling those who have ears to listen that the Keynesian fraud of creating monies out of this air has reached a limit so they need to reset All of this means that we ll wake up one morning and life will be very different You ll see markets performing erratically You ll see civil unrest Most people think it will have something to do with another banking crisis a derivatives situation It could be a new war I think things could happen quickly and take us down a very dark path All we can do is prepare for ourselves and our families You have got to own physical gold and silver that is in your possession TGR The macroeconomic indicators suggest that the prices of gold and silver should be much higher than at present Why do you think that 2013 looks to be the year that the bull markets in these metals ended GM I don t think the secular precious metals bull market has ended I think we re just taking a pause I liken this to the move that happened in the 1970s when we made the U S dollar the official reserve currency of the world and people could again own physical gold and silver Gold went from 35 ounce 35 oz all the way up to 195 oz Then it collapsed to 105 oz A lot of people thought that was it for gold But then it ran to 855 oz Since then we ve hit 1 950 oz which was then corrected back to the 1 200 1 300 oz level We ve been bouncing around 1 200 1 400 oz and I believe this is just setting us up for the foundation of the next big move in gold which will take us to much much higher levels I m thinking 3 500 5 000 oz It will be associated with collapsing currencies the devaluing dollar problems in the banking sector etc TGR What will be China s role in this GM China is the world s biggest producer of gold and now it is becoming the biggest holder of gold It is dumping U S Treasury bills and buying anything it can get its hands on TGR Is there no question in your mind that gold and silver are bargains now GM Absolutely People should be lining up to buy on this dip This is a great opportunity Nothing has fundamentally changed Has the government started to become fiscally responsible I laughed out loud when I heard about this taper of quantitative easing What a complete joke This should show thinking people the gig is up for the financial fraud being perpetrated at the Federal Reserve TGR Many people argue that interest rates can t go up because then the U S won t be able to pay its debt and the whole derivatives market will be threatened GM If interest rates go up they are damned If interest rates go down they are damned Either way the Fed is screwed because of the derivative situation with their largest banks I would expect interest rates to move in the direction that allows their banks and the U S government to survive the longest but there is no way out of this that I can see TGR What do you think of the argument made by the Gold Anti Trust Action Committee that the big banks and the central bankers are suppressing the prices of gold and silver GM The government doesn t like rising gold and silver prices because it tells the public that something is wrong Now does the government come into our market and play games Absolutely but I don t really pay too much attention because ultimately I believe free markets will dictate the course of the metals prices It s yet another sign on just how out of control the powers that be are when they seek to control the outcome of everything They think they are God but they re about to find out otherwise TGR You wrote on Sept 20 2013 that you ve lost confidence in a recovery this fall in our overall junior mining stock market If you are right doesn t this mean that many juniors won t survive And if this occurs will it make the survivors stronger GM Absolutely This is an unfortunate chain of events but in many regards it needed to happen There were just too many junior mining companies There are only so many talented teams of professionals in the industry that know how to make the discoveries that can be developed into producing mines When you look at the monies that have been raised in this sector in the last 5 10 years we have very little to show for it All the low hanging fruit has already been discovered So this wipeout as I m referring to it has been very difficult on investors people employed by mining companies and newsletter writers like myself I was hoping we would have a recovery this fall The early signs in July and August seemed to indicate one because the strongest companies started to move and in many cases doubled from their lows in late June early July That is usually a sign that things are going to float again but it all fell apart in September TGR You have recommended that investors reduce their portfolios to just a few of the highest quality stocks as we await the recovery What are the criteria that determine the highest quality stocks GM Companies with plenty of cash on hand that don t need to raise money right now It is almost impossible to raise money in this sector at this juncture Look for companies that are producing from high grade projects with low costs companies that will make money even if gold and silver go down further from current levels Even with companies like these there is always something making things more difficult There are a lot of great companies I like in Mexico where the politicians are trying to change the laws to charge more taxes Politicians have an insatiable appetite for other people s money It will affect companies in Mexico with low grade projects to the point it may force them out of business TGR When do you think the market will turn around GM Things are not going to get better at least until 2014 and in the meantime a lot of juniors hanging by their fingernails are going to go out of business That will solidify the market for the survivors Maybe that is as it should be I do believe that monies we ve lost in this sector in the last two years can quickly be made up if investors maintain a position or build positions during these low times in the highest quality companies Because when the market does recover it is going to be a screamer TGR Can we talk about some of your favorite companies GM SilverCrest Mines Inc SVLC is probably the top company I d like to talk about It has more than 40 million 40M in cash and growing The company is making money whether gold or silver prices go up or down because it is mining higher grade rather than lower grade ounces SilverCrest keeps finding more ounces as the Santa Elena mine grows and it has made another discovery that is moving along quite nicely in another area of Mexico The market is so bad currently that SilverCrest is not performing as it should It s holding its own but is at a great discount to where it will be This is a great situation to play because at current prices I see at least a four or five multiple when the market fully recovers TGR SilverCrest was down to about 1 50 share in August and then the price soared to over 2 20 share But now it is back down to 1 73 share GM And it could go lower I would say that even the best companies will move lower Tax loss selling is going to come up People need to clean out their portfolios Everybody s situation is different I ve never experienced losses like this before and I ve been doing this for a long time But once it s cleaned out it will have to recover If the world wants to have iPhones computers and high tech cars it takes base metals precious metals and rare earths to build these things TGR You wrote that after Canadian Zinc Corp CZN had been given a water license for its Prairie Creek mine in the Northwest Territories which is silver zinc copper and lead the market did not get too excited about what should have been an exciting event GM That was shocking to me like a dagger to my heart Here is a property that was discovered and developed by the Hunt brothers in the 1970s Canadian Zinc got control of it in the 1990s and has been trying to develop it ever since Unfortunately the key water permit necessary for production was not renewed when it should have been and it was a long struggle to get it back Canadian Zinc traded over 1 50 share many times without the permit even being close to being approved The permit is a big deal also because it attracts buyouts from larger companies that need to replenish their reserves And this is a unique polymetallic deposit of size What has been drilled is already big and holes drilled a kilometer away from known mineralization have hit This resource has a huge signature that attracts big players in the industry When Canadian Zinc got the permit the market did nothing I think it went up 0 04 share that day and has since sold off from its high of 0 70 share I was really counting on getting at least 1 50 share Well when the market does recover I would expect Canadian Zinc will be trading at a multiple of where it is right now So it is one to hold for the long term because it s essentially been derisked TGR Let s talk about some other companies you have given a buy rating GM Colorado Resources Ltd CXO is in a unique situation I can t recommend most exploration companies now because they have very little in the way of funds and they can t raise money But Colorado had 8M in the till Then with a key copper gold drill hole at its North ROK property in British Columbia its stock ran all the way up in this market to 1 70 share from 0 16 share Since then further drilling hasn t confirmed the first high grade discovery hole although it is building a nice resource very quickly with every successful drill hole In my opinion it actually may have better potential than a nearby mine that s already slated for production in late 2014 or 2015 TGR Is that Imperial Metals Corp s III Red Chris mine GM Yes Red Chris is only 15 kilometers away and has a very similar signature to the discovery at North ROK Colorado is drilling at 100 meters 100m 200m 300m 400m 500m away from the discovery hole and the company is hitting average grade or better than Red Chris Based on my back of the envelope calculations not NI 43 101 compliant Colorado has already put together 100 million tons 100 Mt of ore that s economic and closer to the surface than Red Chris Red Chris has 300 Mt so Colorado is already one third of the way there with only 12 drill holes And Colorado is closer to the main road This is an incredible story And yet once again the market doesn t seem to care What s encouraging to me is that Colorado has the money in the treasury to finish all the work for 2013 and 2014 without raising new funds I think North ROK will become a resource that is taken out by a bigger player as the company gets to the 300 Mt of ore level And because it is trading in the low to mid 0 20 range I think this is a good bet to make some serious money when the market recovers TGR Let s talk about Buy recommendations in Mexico GM Excellon Resources Inc EXN is also in a good situation The company has money in the treasury Excellon is paying for the drilling with profits from production at its La Platosa project in north central Mexico right in the main silver belt I ve always believed that Excellon is in control of its own destiny The company just has to keep doing what it has been doing in hopes of hitting the source of all the known mineralization it has already uncovered The big play the big blue sky upside potential in Excellon is that it is paying for all the exploration work with its own funds without further dilution of current shareholders It doesn t matter how bad the market gets this is a very high grade situation Even if silver prices go to 5 oz Excellon could still probably make money at that level That s because it has negative cash costs when you consider the high grade lead and zinc that goes along with the silver TGR Now Orex Minerals Inc REX has projects in Mexico but also in Sweden and Canada right GM Orex is a very good company with an extremely talented management group I ve been involved with this group before and made money but at this point I have to be honest and say Orex is in a tough situation It finds itself with little cash The company has got to do something with its burn rate and just try and survive right now Unlike Colorado Orex does not have a major discovery in play it can fund with current monies Orex will probably need to raise money but this would probably be too dilutive even if it could raise it TGR Is there anything you like in Peru TGR Tinka Resources Ltd TK is another company that s on to a potentially very large discovery of merit at Colquipucro and Ayawilca It started out as a silver resource that the company was trying to build to 30 50 million ounces 30 50 Moz and then possibly 100 Moz As Tinka was doing the boots on the ground work as I like to call it it uncovered some large anomalies deeper in the system and hit with drilling what looks to be some very high grade zinc and lead The more drill holes Tinka can put into these anomalies to define how big this is the more exciting it will become Tinka however is caught because it needs to raise money again But this is one of the very few companies that may be able to actually raise money currently I don t know how much it would want to raise at current levels but it may be able to pull it off and keep things going Otherwise I would say Tinka may be in a situation where it has to slow things down and just wait for the recovery If a company has the right people and the right share structure it can make it Tinka has cut everything as low as it can and has had to let go of employees The company has cut salaries It has enough money to cover itself for a couple of years at that reduced level so it will probably be just fine TGR Many long time investors in the junior space have been so battered over the last couple of years that they ve given up What is the best reason for people to stay invested in juniors GM I can t blame people for getting so frustrated They ve taken horrendous losses we all have Some of the sharpest people I know in this business have been hammered And when you suffer a lot you tend to say Hey I don t want to do this anymore Those who can gut it out however those who have the fortitude and the understanding have to dump the garbage Just take the pain and get it over with Realign portfolios to the highest quality and build positions in companies that can make up for a lot of lost ground when the market recovers TGR Greg thank you for your time and your insights Greg McCoach is an entrepreneur who has successfully started and run several businesses in the past 30 years For the last 14 years he has been involved with the precious metals industry as a bullion dealer investor and newsletter writer Mining Speculator and The Insider Alert McCoach is also the president of AmeriGold a gold bullion dealer He writes a weekly column for Gold World DISCLOSURE 1 Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an employee He or his family own shares of the following companies mentioned in this interview None 2 The following companies mentioned in the interview are sponsors of The Gold Report SilverCrest Mines Inc Colorado Resources Ltd Excellon Resources Inc and Tinka Resources Ltd Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment 3 Greg McCoach I am actively buying and selling stocks and at any time may own stocks discussed I was not paid by Streetwise Reports for participating in this interview Comments and opinions expressed are my own comments and opinions I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview 4 Interviews are edited for clarity Streetwise Reports does not make editorial comments or change experts statements without their consent 5 The interview does not constitute investment advice Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility By opening this page each reader accepts and agrees to Streetwise Reports terms of use and full legal 6 From time to time Streetwise Reports LLC and its directors officers employees or members of their families as well as persons interviewed for articles and interviews on the site may have a long or short position in securities mentioned and may make purchases and or sales of those securities in the open market or otherwise |
JPM | JP Morgan Confirms Q3 Loss | JP Morgan Chase JPM has confirmed it made a loss in the third quarter in its latest financial data The bank revealed that it lost 380 million 273 million during the quarter which is compared with a profit of 5 7 billion in the same period last year It was noted that one of the reasons for the loss was the 920 million it was told to pay to settle charges related to a trading scandal Last month JP Morgan confirmed it will be paying 200 million to the US Securities and Exchange Commission and 138 million to the UK s Financial Conduct Authority Commenting on the results chief executive Jamie Dimon said We continuously evaluate our legal reserves but in this highly charged and unpredictable environment with escalating demands and penalties from multiple government agencies we thought it was prudent to significantly strengthen them However it was stressed by Mr Dimon that the underlying business of the bank is still strong Disclosure FX Solutions assumes no responsibility for errors inaccuracies or omissions in these materials FX Solutions does not warrant the accuracy or completeness of the information text graphics links or other items contained within these materials FX Solutions shall not be liable for any special indirect incidental or consequential damages including without limitation losses lost revenues or lost profits that may result from these materials The products offered by FX Solutions are leveraged products which carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors Ensure you fully understand the risks involved and seek independent advice if necessary |
MS | Natural gas futures Weekly outlook October 15 19 | Investing com Natural gas futures ended Friday s session largely unchanged near the highest level since December 2011 as market players continued to monitor weather forecasts to gauge the strength of early Autumn heating demand On the New York Mercantile Exchange natural gas futures for delivery in November settled at USD3 602 per million British thermal units by close of trade Friday easing down 0 1 on the day Earlier in the session prices rose to a daily high of USD3 635 per million British thermal units the strongest level since December 2 2011 On the week front month natural gas prices surged 5 95 the third consecutive weekly gain Gas futures rallied almost 4 Thursday after the U S Energy Information Administration said in its weekly supply report published Thursday that natural gas storage in the U S rose by 72 billion cubic feet last week below market expectations for an increase of 77 billion cubic feet Last year stocks rose by 108 billion cubic feet while the average rise in the week over the previous five years was 84 billion cubic feet Total U S gas supplies stood at 3 725 trillion cubic feet 6 8 above last year s level and nearly 8 above the five year average level for the week In its monthly short term energy demand outlook published Wednesday the EIA projected that natural gas stocks are expected to reach a record high of 3 903 trillion cubic feet on October 31 U S natural gas inventories peaked at a record 3 852 trillion cubic feet in November of last year Early injection estimates for this week s storage data range from 30 billion cubic feet to 60 billion cubic feet compared to last year s build of 106 billion cubic feet The five year average change for the week is an increase of 71 billion cubic feet Meanwhile market players continued to monitor updated weather forecasts to gauge the strength of early Autumn heating demand The U S National Weather Service s six to 10 day outlook issued on Friday called for above normal temperatures in the Northeast and Southwest and mostly normal readings elsewhere across the nation Meanwhile the Commodity Weather Group said temperatures in the next 16 to 20 days will be cool to very cold in the Midwest East and South but will turn warmer in the first two weeks of November Natural gas futures often reach a seasonal low in October when mild weather reduces demand before recovering in the winter when heating fuel use peaks Wall Street investment bank Morgan Stanley said in a report Thursday that the stage is set for stronger gas prices in the coming months They expect natural gas to average USD4 20 per million British thermal units between November and March and said gas futures could climb to as high as USD5 00 a level not seen since June 2010 as winter temperatures return o normal after exceptionally warm temperatures last winter Elsewhere in the energy complex light sweet crude oil futures for December delivery traded at USD92 06 a barrel by close of trade on Friday gaining 2 3 on the week Heating oil for November delivery added 2 over the week to settle at USD3 219 per gallon by close of trade Friday |
MS | Softs futures Coffee sugar gain on technical buying | Investing com U S soft futures were mostly higher during U S morning trade on Monday with coffee and sugar prices climbing on the back of a bout of technical buying amid speculation prices may have bottomed Some fund related buying also provided support Wall Street investment bank Morgan Stanley said in a report earlier that index funds probably will buy 11 148 lots of Arabica coffee and 31 451 contracts of raw sugar as the Standard Poor s GSCI and Dow Jones UBS Commodity Index re balance Morgan Stanley added that market players will probably add 4 690 contracts of cotton Changes to weightings start today On the ICE Futures U S Exchange Arabica coffee for March delivery traded at USD1 4853 a pound up 1 2 on the day The March contract rose by as much as 1 3 earlier in the day to hit a session high of USD1 4872 a pound Arabica futures rallied to a three week high of USD1 5182 a pound on January 3 Coffee prices tumbled to USD1 4127 on December 31 the lowest level since June 2010 amid concerns global supplies of the bean are more than ample to meet demand Bullish speculators are now closing out bets on lower prices after Arabica fell nearly 37 last year the most in 12 years making it one of the worst performing commodities of 2012 Meanwhile sugar futures for March delivery traded at USD0 1902 a pound gaining 0 8 on the day The March contract rose by as much as 0 9 earlier to hit a daily high of USD0 1904 a pound Sugar futures touched a four week high of USD0 1974 a pound on January 3 March sugar prices have rallied nearly 4 since hitting a two and a half year low of USD0 1830 a pound on December 13 as market players closed out bets that prices would fall further after futures moved into oversold territory Elsewhere cotton futures for March delivery traded at USD0 7478 a pound down 0 4 on the day The March contract fell by as much as 0 6 earlier in the session to hit a daily low of USD0 7465 a pound Cotton futures fell to a three week low on Friday after China s National Development and Reform Commission said it planned to release cotton in its state reserves to meet demand from the domestic textile industry However the NDRC didn t give any details as to how much cotton would be released or when Releasing cotton from its reserves could mean fewer imports and less demand for U S cotton China is both the world s largest producer and consumer of the fiber |
JPM | Iraq in market to raise 1 billion first standalone bond in over decade | By Davide Barbuscia
DUBAI Reuters Iraq started marketing a 1 billion bond on Wednesday its first international debt issuance as a standalone credit since 2006 and an attempt to put decades of turmoil behind it
With huge oil reserves behind it the bond was seeking to tempt emerging market investors with alluring profits necessary to offset concerns over a history of war and the recent rise of militant group Islamic State
Iraq issued 1 billion in bonds last January but that offering was 100 percent guaranteed by the U S government This time it is alone
A document issued by one of the banks leading the deal showed an initial price guidance for the bond with a maturity of five and a half years in the low 7 percent area
That level would be considered attractive by some fund managers It is a yield comparable with that of Ukraine another conflict troubled emerging market
The transaction is expected to gather significant demand from U S and European investors looking at emerging markets for yield they cannot get elsewhere
Pension funds fund managers and sovereign wealth funds are likely to take a good share of the paper fund managers said
Iraq needs external financing to plug a widening budget deficit which lower oil prices since 2014 and the slow pace of much needed fiscal reforms have inflated to approximately 25 trillion Iraqi dinars 21 44 billion for 2017 according to the bond prospectus
Out of a deficit of 25 trillion Iraqi dinars 23 3 trillion will be raised through domestic and international borrowing according to Iraq s 2017 supplementary budget
Commercial banks bond investors and international lenders including multilateral institutions such as the International Monetary Fund World Bank and the Organisation for Economic Cooperation and Development are estimated to contribute approximately 11 5 trillion dinars
The support Iraq gets from development finance institutions is a form of an implicit guarantee for investors
ELECTIONS AHEAD
When compared with similarly rated countries across emerging markets such as Ukraine and Ghana Iraq has the advantage of not having any immediate solvency concerns and sizable commitments of donors for reconstruction purposes
It is less of a credit risk than some of its peers but upcoming parliamentary elections in spring 2018 and potentially ensuing political instability are all risks that will be factored in the final pricing fund managers said
Iraq s bond could also benefit from extra liquidity coming from yield hungry investors exiting riskier assets
People potentially exiting distressed high yield names in the emerging markets space would look to participate in a new high yield issue given that they would get liquidity in the primary market rather than in the secondary said Max Wolman senior portfolio manager at Aberdeen Asset Management
Country representatives met fixed income investors in the United States earlier this week ending last Tuesday a roadshow which stopped in London Boston and New York Citi Deutsche Bank DE DBKGn and JPMorgan NYSE JPM are the joint lead managers Iraq is rated B stable by S P and Fitch |
C | Solid U S consumer spending boosts prospect of Fed rate hike | By Lucia Mutikani WASHINGTON Reuters U S consumer spending increased for a fourth straight month in July amid strong demand for automobiles pointing to a pickup in economic growth that could pave the way for the Federal Reserve to raise interest rates this year Monday s report from the Commerce Department came several days after Fed Chair Janet Yellen said the case for raising rates had strengthened in recent months Low inflation however suggests the U S central bank could wait until its December policy meeting before raising borrowing costs This report is a mixed bag for the Fed While the consumer sector is continuing to advance solidly progress towards the Fed s inflation mandate has stalled said Michelle Girard chief economist at RBS LON RBS in Stamford Connecticut It strengthens the case for an increase in interest rates but does not suggest an urgency for policymakers to act in September The Commerce Department said that consumer spending which accounts for more than two thirds of U S economic activity rose 0 3 percent last month after a 0 5 percent gain in June July s increase was in line with economists expectations When adjusted for inflation consumer spending also rose 0 3 percent in July after advancing 0 4 percent in June That suggests consumer spending retained much of its momentum from the second quarter when it grew at a 4 4 percent annual rate the fastest pace in nearly two years The jump helped to mitigate some of the impact of a sharp inventory drop and prolonged business investment downturn The economy grew at a lackluster 1 1 percent annual rate in the second quarter July s upbeat consumer spending data lifted the dollar DXY against a basket of currencies Wall Street rose boosted by gains in financial stocks U S Treasuries were trading higher Yellen told a gathering of global central bankers last week that solid performance of the labor market and our outlook for economic activity and inflation had bolstered the argument for raising interest rates in recent months The Fed hiked interest rates at the end of last year for the first time in nearly a decade but has held them steady this year amid concerns over persistently low inflation TAME INFLATION Financial markets are currently pricing in a 30 percent chance of a rate increase at the Fed s Sept 20 21 policy meeting and a 57 2 percent probability at the December meeting according to CME Group s FedWatch tool Last month s consumer spending report added to data on the goods trade deficit industrial production durable goods orders and residential construction that have pointed to an acceleration in economic growth early in the third quarter The Atlanta Fed is currently estimating the economy to grow at an annual pace of 3 5 percent in the third quarter Consumer spending is being driven by a tightening labor market which is steadily lifting wages Rising home values and stock prices which are boosting household wealth are also supporting consumption Last month there was little sign of inflation even as consumer spending firmed The personal consumption expenditures PCE price index excluding the volatile food and energy components edged up 0 1 percent after a similar gain in June In the 12 months through July the core PCE increased 1 6 percent It has risen by the same margin every month since March The core PCE is the Fed s preferred inflation measure and is running below its 2 percent target We remain of the view that services inflation will continue to be firm but some of its strength will likely be offset by the other components of the PCE basket leading overall inflation to increase at a moderate pace said Blerina Uruci an economist at Barclays LON BARC in Washington Consumer spending last month was lifted by a 1 6 percent surge in purchases of long lasting manufactured goods such as automobiles Spending on services rose 0 4 percent but outlays on non durable goods slipped 0 5 percent Personal income increased 0 4 percent in July after rising 0 3 percent in June Wages and salaries advanced 0 5 percent Savings rose to 794 7 billion from 776 2 billion in June
We would look at today s higher savings as creating room for spending to run a bit hotter than income in future months said Andrew Hollenhorst an economist at Citigroup NYSE C in New York |
C | India s economy seen losing steam in June quarter | By Manoj Kumar NEW DELHI Reuters India will release data later on Wednesday that is expected to show economic growth slowed in the June quarter and despite having one of the world s fastest growth rates it means millions of unemployed Indians will face an even longer line for a job Having got up to 7 9 percent in the March quarter gross domestic product growth in the June quarter is forecast at around 7 6 percent largely due to weak domestic and external demand according to economists polled by Reuters That is still good enough to make India a bright spot in the gloomy global environment and explain why foreign investors are buying shares in Indian firms the benchmark National Stock Exchange index NSEI has added 8 percent this year But the impressive headline figure masks weaknesses that raise doubts about the sustainability of the recovery in growth that Prime Minister Narendra Modi s pro business government has overseen since sweeping to power two years ago The nature of the economic recovery still remains fragile analysts at Citigroup NYSE C said in a note Already going faster than China and Philippines India needs growth consistently over 8 percent if it is to generate jobs Modi promised for millions of Indians joining the workforce each year Economists will pore over the latest GDP data for any sign of a pickup in private investment or upturn in the farm and construction sectors two of the country s biggest employers after the hard times they endured during two years of drought CONSUMPTION HOPES Entering the tail end of the monsoon season which runs from June through September rains have been far kinder this year to the country s 263 million farmers Normal rainfall this summer can lift rural consumption by 80 billion in the year to end March 2017 according to Citibank s estimates A hefty hike in wages for nearly 10 million federal government employees and pensioners will also fuel spending countering some of the caution that has spread among urban consumers due to low wage growth There has been signs of pick up in consumption as reflected in car sales We see further improvement over the next 12 months said Shilan Shah economist at Capital Economics consultancy in Singapore But investment remains weak mainly due to delay in monetary transmission into lending rates he added referring to commercial banks failure to fully match reductions in official interest rates Some economists still harbor doubts about how well the new GDP series introduced last year reflects the state of the economy as it captures value addition rather than production volumes that the old series used But having inherited an economy expanding at its slowest in a decade Modi clearly has got growth moving again by implementing reforms and boosting government spending to offset a lack of private sector investment In the June quarter the government ramped up public spending by 19 percent from a year earlier to 75 9 billion It is unlikely to fully compensate for slower growth in financial trade and transportation services analysts said The government is trying to followthrough with more reforms putting together a fiscal package for the textile sector Industry is lobbying for piece meal packages to boost merchandise exports and real estate sector that could help sectors like steel and cement But the real near term hopes for a rebound in growth lie in stronger consumer demand which Citigroup economists say should emerge at the back end of 2016 17
If those hopes are borne out it could push GDP growth to 8 1 percent for this fiscal year up from a provisional 7 6 percent in the previous year according to analysts at YES Bank |
C | Deutsche Bank calls for reform of global financial messaging system SWIFT | FRANKFURT Reuters Deutsche Bank DE DBKGn is calling for a reform of SWIFT the global financial messaging system which has faced criticism since February s 81 million heist at Bangladesh Bank Germany s flagship lender which the International Monetary Fund has branded as the world s systemically most risky bank for its numerous links to other lenders is one of the biggest users of SWIFT It is one of the first large banks to publicly urge changes SWIFT is only as strong as its weakest member Deutsche Bank s Chief Information Security Officer Hinrich Voelcker said on Wednesday adding the bank was in discussions with SWIFT about the consequences of the Bangladesh heist If trust in this system breaks down we all have a problem he said without saying which specific reforms he believes are needed SWIFT is a member owned cooperative dominated by large Western banks including lenders such as Citi N C JP Morgan N JPM and BNP Paribas PA BNPP which built the network decades ago It now connects more than 10 000 different financial firms and industry experts have said all of its users should have to meet a minimum security standard to continue accessing it Since the 1990s many smaller banks in emerging markets have joined SWIFT which stands for Society of Worldwide Interbank Financial Telecommunication Current and former board members of SWIFT have told Reuters that for years the organization suspected there were weaknesses in the way smaller banks used its messaging terminals In the Bangladesh heist hackers broke into a computer interface called Alliance Access a piece of software sold by SWIFT for accessing its central network It is still unclear exactly how the thieves gained entry Bank Bangladesh the country s central bank has alleged a botched upgrade of its system left vulnerabilities in it SWIFT has rejected any responsibility for the way Bangladesh Bank upgraded its systems
Since the Bangladesh incident many banks have added security features Deutsche Bank s Voelcker said adding rapid alert systems helped banks exchange information on hack attempts and patterns |
C | Citi sees Russia business pick up as crisis abates | By Alexander Winning and Katya Golubkova MOSCOW Reuters U S bank Citi N C is seeing business pick up in Russia as the country s economic crisis abates and is staying as engaged as it can given Western sanctions its Russia head said Marc Luet who is also Citi s head for Ukraine and Kazakhstan said his bank has become busier with Russian mergers and acquisitions M A and that there is growing interest in corporate debt issuance We re seeing a pick up in debt capital markets DCM Part of it is liability management part of it is new issuance Luet said in an interview at the Reuters Russia Investment Summit Russian debt issuance slowed to a trickle after the United States and European Union imposed sanctions on Russia in 2014 over the Ukraine conflict The sanctions limited access to international capital for large Russian banks and certain other businesses scaring away investors and spooking compliance departments at top banks I don t think we re going to quite return to the 2013 level but we re going to see more issuance than this year And this year was better than last year Luet said adding Citi had arranged Russian DCM deals worth more than 15 billion in 2013 Better pricing conditions an economic stabilisation and the maturity profile of outstanding debt are all encouraging greater issuance Luet said A restraining factor is that many Russian companies have cut capital expenditure since the economy entered a deep slump when global oil prices tanked in 2014 A halting economic recovery this year has yet to spur any great increase in investment plans Luet said that investors had become accustomed to the sanctions and that banks had established which deals they could handle and which they should leave alone We re going to stay as engaged as we can and take advantage of any opportunities that arise he said Like many other global banks Citi did not help the Russian state with this year s privatization program including a stake sale in diamond miner Alrosa MM ALRS Alrosa is not under Western sanctions but the deal was handled by a Russian investment bank We didn t stay away from the Russian government s privatization program per se Luet said Every case is different every transaction is different It s not a blanket approach We look at what s coming up Citi s Russian operation earned about 14 55 billion roubles 225 million in profit last year roughly double what it made in 2014 and better than many domestic Russian banks Luet said that Citi had stuck to its tactic of serving multinationals and large Russian blue chip companies as well as affluent retail clients We haven t changed our strategy because of the crisis he said Follow Reuters Summits on Twitter Reuters Summits |
C | August is Record Month for Chinese Aluminum Trading | This morning in metals news August has been a record month for aluminum trading in China Japanese steelmakers shares are down and Chinese steel showed signs of recovery Thursday
Big Month For Aluminum Trading In China
According to Bloomberg even with time to spare August has already been the heaviest month of aluminum trading ever in China
China has undergone a series of supply side reforms aimed at reducing oversupply reducing pollution and alleviating pressure from abroad particularly the U S which has pending Section 232 steel and aluminum investigations
The Bloomberg report notes China is shutting down unlicensed aluminum production capacity estimated by Citigroup Inc NYSE C to be about 4 million metric tons a year
Japan Steel Shares Down
Meanwhile shares for Japanese steelmakers are down according to a Reuters report
The shares backtracked because the country s biggest producer of steel Nippon Steel OTC NSSMY agreed on price cuts for the six months through September with Toyota Motor
Chinese Steel Futures Looking Bright
According to a Reuters report Chinese steel futures bounced back Thursday based on domestic demand spurring positive investor sentiment
A dip in the temperature is expected to yield more construction and thus greater steel demand the report says
Rebar futures have surged this year by 50 according to Reuters |
C | 3 Reasons To Dump Small Cap ETFs Now | U S small cap stocks have persistently underperformed the large caps this year and finally ended up registering their biggest weekly drop in a year and a half in the week ended August 11 2017 as per an article published on From a year to date look small cap fund iShares Russell 2000 ETF is up about 0 9 this year as of August 23 2017 while the S P 500 based fund SPY NYSE SPY has gained about 9 4
Let s take a look which factors are bothering pint sized stocks and ETFs this year see all here
Weak Earnings
About 76 5 of the S P 500 companies are already out with their earnings Total earnings for the small cap index are down 14 1 from the year ago period despite 6 higher revenues with 61 1 beating EPS estimates and 62 2 beating revenue estimates as per the latest
Negative earnings growth for the small cap index has been noticed for the third time in the last four quarters Not only this the earnings growth momentum and the share of positive EPS surprises for Q2 is trending below other recent quarters The growth picture is surely expected to recover in the ongoing and following quarters but that is probably because of easy comparisons read
This clearly explains why SPDR S P 600 Small Cap NYSE SLY ETF and Vanguard S P Small Cap 600 ETF are off 1 8 and 1 4 in the last three months respectively as of August 23 2017
The Russell 2000 has seen earnings per share growth of just 0 1 in the second quarter according to data from Factset quoted at in mid August This is in stark contrast to the large cap Russell 1000 s more than 10 growth in earnings for the quarter as per the source
Ebbing Prospects of Trump Bump
Several pro growth promises of President Trump now look uncertain Major proposed reforms like the health care bill and defense budget increase are still way behind enactment Though this confusion has raised chances of materialization of the proposed tax cut plan as Republicans apprehend losing the 2018 election analysts now see chances of slight tax cuts rather than a full ledged tax overhaul
According to a Citigroup NYSE C analyst as quoted on instead of a corporate tax rate in the range of 15 or 20 as proposed by the President and House Republicans the rate might be around 25 from 35 at present
Since the prospects of fiscal stimulus have ebbed materially from the time when Trump was elected small caps have reasons to underperform
Weakness in Greenback
The U S dollar ETF Powershares DB US Dollar Index Bullish Fund is down about 8 8 so far this year as of August 23 2017 If the Fed remains slow thanks to still subdued inflation and Trump favors a low dollar environment the greenback is likely to stay calm in the coming days This has increased the scope of outperformance for those companies that operate aggressively in foreign lands meaning large caps read
And investors should note that though not altogether extinct global growth worries are not as appalling as they used to be a few quarters back In fact things are looking up in the emerging markets and Euro zone lately All these make the case for small cap ETF investing weak
Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
C | Speculators Just Love The Aluminum Story | The abrupt rise in the aluminum price this month has caught many by surprise
Aluminum had been trading sideways for much of this year Although the market was rife with rumors that China intended to close smelter capacity that was not carrying the required permits and approvals most treated the prospect that such curtailments would be pursued with any rigor with some skepticism
Past attempts to curtail excess production capacity among China s manufacturing industry have been poorly pursued and often frustrated by local State governments keen on maintaining employment and tax revenues
This time does genuinely seem to be different
That realization finally set in when China Hongqiao the world s largest aluminum maker confirmed it would cut annual capacity of 2 68 million metric tons about 30 of its total this month
Following restrictions last month that the Shanghai Futures Exchange SHFE put on the trading of iron or steel futures by raising margins speculators were looking for new investment opportunities just as concerns about aluminum supply became widespread The rapid rise in the aluminum price leading the Shanghai Futures Exchange to a six year high is now recent history
According to the Financial Times JP Morgan is forecasting that prices in the fourth quarter despite aluminum inventories in China more than quadrupling so far this year
Although Beijing is following its policy of closing un permitted production with considerable vigor the resulting high prices are encouraging every smelter that has approvals to operate at 100 capacity As a result production has never been so high with much of the surplus metal going into store
Trade unions at producers outside of China who have been suffering by the flood of semi finished Chinese aluminum exports called earlier this year for a global forum to address the issue But before such a forum can be gathered it seems likely that China s high SHFE aluminum price may curtail exports as domestic mills struggle to compete internationally based on high priced domestic primary aluminum
Citigroup NYSE C estimates China s unlicensed aluminum production capacity to be in the region of 4 million tons a year more than 10 of China s total 2016 output
The price rises have undoubtedly been exacerbated by speculator activity as hot money has flowed into aluminum and zinc The aluminium price is up 27 in Shanghai and 23 on the LME with the zinc price rise not far off at 24 in Shanghai driven by the same fundamental concerns over shrinking supply Some skepticism remains about how vigorously Beijing will pursue its policy of closing polluting industries in the northern provinces during the winter heating period But following the miscalculation of how robustly environmental enforcement would be pursued this summer the market is rapidly reassessing the prospects of significant closures during the November March period
In reality China is not short of primary aluminum stocks are considerable and although demand is rising supply is adequate The narrative of supply shortages is a strong one that speculators seem intent to run with for as long as they can
Under the circumstances Citi may well be right that the current firm trend has some way to run and we can expect higher prices in Q4 and H1 of next year |
C | Dividend Growth Portfolio August 2017 Performance And Outlook | August was an unusual month We had escalating nuclear tensions with North Korea and a storm Hurricane Harvey that will likely go down in history as the costliest natural disaster in U S history once the damages are tallied
Yet perhaps shockingly the stock market remained surprisingly quiet Volatility ticked up modestly from its summer doldrums but the S P 500 managed to finish the month flat up 0 1
The portfolio finished the month down slightly giving up 0 28 after fees and expenses Year to date the Dividend Growth portfolio was up 6 7 compared to 10 4 for the S P 500 Note All returns data calculated by as of 8 31 2017 past performance no guarantee of future results
I made several portfolio moves in August to better position the portfolio for the remainder of 2017
To start I took partial profits in oil and gas tanker operator Teekay Corporation NYSE TK Teekay s stock price has been volatile in 2017 along with energy prices and I have been adding to the position when it reaches the lower end of its wide trading range and taking partial profits when it reaches the upper end of that range While I expect Teekay to go much higher from current levels I also intend to continue opportunistically trading the shares as conditions allow
Following the announcement of a major dividend hike I added shares of Citigroup NYSE C in August The financial sector stands to benefit from several very favorable trends in the coming years To start while I don t expect the Federal Reserve to be particularly aggressive in raising short term interest rates I do expect rates to go at least modestly higher All else equal higher interest rates and stronger economic growth mean higher profits for banks
But beyond this the large banks are one of the few true remaining pockets of value in a market that seems to get more expensive by the day Citi trades for just 90 of book value and at a modest 11 times expected 2017 earnings
Citi doubled its dividend last month after passing the Fed s stress test But even after the hike Citi only pays out about 25 of its profits as dividends so there is plenty of room to grow the dividend further
Additionally I sold three positions Prospect Capital Corporation NASDAQ PSEC Main Street Capital Corporation NYSE MAIN and GameStop Corp NYSE GME and have decided to keep the proceeds in cash for now While I do not believe a major stock market correction is imminent we are entering the September October window when the market tends to be a little more volatile and I felt it prudent to keep a little more cash on hand than usual Assuming no unexpected developments I will look to redeploy the capital within the next two months
Prospect Capital s performance has been below expectations for the past two quarters and expecting a dividend cut I decided it made sense to sell the shares Prospect Capital did ultimately cut its dividend vindicating my decision to sell
After the post dividend cut selling Prospect now sits at a very attractive 28 discount to book value meaning the company is worth more dead than alive I m evaluating Prospect for re entry and expect to make a decision in the coming weeks
My decision to sell Main Street was based less on fear and more on opportunity cost Main Street trades at a large premium to its peers in the business development company space and at current prices I don t see a lot of upside left in Main Street so it made since to sell and keep a little extra cash on hand to take advantage of any buying opportunities in September and October
And finally I believe that GameStop s recent subpar performance is mostly due to negative sentiment towards brick and mortar retailers negative sentiment that I consider extreme and overdone Nevertheless I see no immediate catalyst to send the stock higher So for now I m comfortable selling the stock and reevaluating it a few months from now
That s going to wrap it up for this month
Thanks as always for trusting me with your hard earned capital
Disclosures Long TK C
Disclaimer This material is provided for informational purposes only as of the date hereof and is subject to change without notice This material may not be suitable for all investors and is not intended to be an offer or the solicitation of any offer to buy or sell any securities nor is it intended to be investment advice You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material There is risk in any investment in traded securities and all investment strategies discussed in this material have the possibility of loss Past performance is no guarantee of future results The author of the material or a related party will often have an interest in the securities discussed Please see for a full disclaimer |
JPM | The Difference Between Risk And Fear | Understanding risk is the most important part of investing Distinguishing risk from fear is a crucial to this knowledge In my regular commentary I emphasize the difference in time frames between traders and investors The trader is making a short term forecast booking gains and losses on an hourly daily or weekly basis The trader is trying to anticipate the next market move The investor is more interested in the fundamental value of a company a long term forecast of value and price Because of the difference in time frames it is quite possible for traders and investors to be on opposite sides of a trade and both might be right Edge and the Long Run A crucial concept in evaluating a market system relates to how long it takes to get into the long run If you have only a small edge you need many trades to reach the long run The top trading banks report almost no days on which they have losses This means that they have thousands of small arb style trades or deals with clients on both sides They are locking in profits and not taking overnight positions The HFT firms do not have losses in time periods measured in hours not even a full day Once again they take a small profit and lock it in It is similar to a Vegas casino with hundreds of tables of blackjack and roulette A small edge is enough The average trader or investor cannot do this volume nor profit from such a small edge You need to start with more edge and also have more patience in reaching the long run This is the single most important concept to understand the interplay among your edge your timing and your expectations Let s take a look at the current market for an informative example Traders In last week s WTWA article I highlighted the market vulnerability for this week fear leading to more fear It is a thin week for volume with many big players on vacation It would be easy for a relatively small market move to get a big play leading to a cascade of selling There are many market participants who profit from a decline and I provided a roster There hopes were fulfilled when Sec Kerry discussed a possible attack on Syria I actually thought this was one of my better entries in the WTWA series but it had a smaller than normal following Too bad I highlighted Syria as the big risk and also mentioned that any move might be exaggerated Investors While I always highlight short term issues I also try to emphasize fundamental analysis I understand that every investor would like to dart in and out of the market to catch every 5 move What happens much more often is that you get out and never get back in The long term investor is better served by careful attention to fundamentals including the following Attractive valuation based on future expectations for corporate earnings I have frequent posts on this theme but check out the following for the most recent themes here and here Little risk of recession Corporate earnings forecasts are solid unless there is a recession Small financial risk documented by the excellent SLFSI weekly analysis These are the real measures of risk We respect actual documented risk and you should as well FearBy contrast there is a current avalanche of crash style predictions Most of these come from various omens or syndromes This happens when pundits start with a conclusion and mine data until causes are found I am chipping away at this misleading information but I can only do so much There is another group of pundits who are selling books seminars or page views If you could have a personal chat with Mr Buffett he would explain to you why you should be ignoring them all focusing on the value of the businesses and the price currently offered by Mr Market Since Mr B is not available you may request my report Understanding Risk by writing to Feray at main at newarc dot com Meanwhile investors should chill out and do some shopping There are many attractive stocks especially in cyclicals CAT FCX financials JPM and technology ORCL MSFT INTC and AAPL Looking AheadI certainly cannot promise that tomorrow s prices will be the bottom but I do find them attractive Just suppose that some attack is made on Syria on Thursday quite possible The investment A teams are on vacation but will come back on Tuesday Everyone will start looking at stocks based upon 2014 earnings expectations The world will look a little better The average investor should not be trying to time these market events and should not believe those who claim this power It is much better to have a list of stocks with solid buy targets acting when opportunities present |
JPM | Trade Idea For The Week Of September 9 2013 JPM | Here is your Bonus Idea with links to the full Top Ten JP Morgan Ticker JPMJP Morgan JPM completed a bearish Shark Harmonic and retraced the full move before bouncing Now back at the 100 day Simple Moving Average SMA it has support for more upside from a rising Relative Strength Index RSI and Moving Average Convergence Divergence indicator MACD that has crossed positive It would be more solid if the RSI was over 50 though There is resistance higher at 53 and 54 15 followed by 54 85 and 55 75 before 56 93 Support lower comes at 51 60 and 50 10 followed by 48 80 and 47 50 before 46 Trade Idea 1 Buy the stock on a move over 52 80 with a stop at 51 70 Trade Idea 2 Buy the September 52 50 Calls offered at 88 cents on the same trigger Trade Idea 3 Buy the September 50 52 5 bull Risk Reversal 70 cents Trade Idea 4 Buy the October 50 55 bull Risk Reversal 27 cent credit After reviewing over 1 000 charts I have found some good setups for the week These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which back to a full week after the holidays sees Gold looking to continue lower in the short term uptrend while Crude Oil marches higher The US Dollar Index is biased higher in the long consolidation while US Treasuries are poised to continue lower The Shanghai Composite looks to continue higher while Emerging Markets join it after a strong reversal Volatility looks to remain subdued keeping the bias higher for the equity index ETF s SPY IWM and QQQ The charts themselves show that the QQQ is very strong looking for new highs while the IWM is next and the SPY the weakest of the bunch Use this information as you prepare for the coming week and trad em well 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 | Will Australian Resource Firms Be The Big Winners From China s Rebound | Goldman Sachs GS recently raised its outlook for the People s Republic of China due to its improving international trade posture As a result financial markets around the world rose Rebounding strongly was the natural resouces sector in Australia with BHP Billiton BHP and Alumina AWC both up almost 5 for the week Other firms doing business in the Australian resources group also have a bullish future with China moving forward again Wishbone Gold WSBN has substantial gold and silver holdings in Australia Like other commodities gold GLD and silver SLV have been down in market action since last November This should all change with the Chinese economic growth engine beginning to hit on all cylinders again China is the world s largest consumer of many commodoties ranging from copper JCC to coal KOL For some industrial commodities China consumes almost half of the world s production It is the same with gold too China is the second largest consumer of gold in the world barely trailing India The central bank of China has also been a net buyer of gold As China is the world s second largest economy with the most people it is likely to supplant India as the biggest buyer of gold in the world now that growth is surging again Research from the Peterson Institute for International Economics already has China as the world s largest economy by personal consumption That is very bullish for Wishbone Gold PLC and others operating in Australia China and Australia have a very close trading relationship Obviously the gold fields of Queensland are much nearer than those of South Africa In addition the Australians have always been more welcoming of business from China than many other nations This commerical activity is sure to involve greater purchases of gold due to higher inflation in China as a result of stimulus packages from Beijing In addition the quantitative easing measures of global central bankers has also debased fiat currencies which will inevitably increase the purchases of gold There is also a distrust of the government in China which has many moving wealth into gold as a traditional safe haven asset for flight capital For Chinese consumers and companies natural resoures entities operating in Austrailia are the logical supplier for much of the needs Logistics and established relationships are the most obvious reasons The proven ability of Alumina Wishbone Gold PLC BHP Billiton and others to meet the commodity demands of China are other important reasons for the positive future for these firms The analyst community agrees with the bullish outlook for the Austrailian natural resources sector Beaufort Securities just reaffirmed its speculative buy rating for Wishbone Gold PLC in early September BHP Billiton was recently upgraded in August by Zacks s Research In July JP Morgan JPM raised its outlook for Alumina |
JPM | JPMorgan Moves Into Resistance Stock To Fall Back | JPMorgan Chase JPM has risen substantially in the past week The stock has pushed higher from approximately 50 to 54 in just the past seven trading days While many are starting to hop on the bullish bandwagon once again warnings signs are everywhere Note the chart below The stock is into major resistance and could very likely see a pullback |
JPM | Trillion Dollar Student Loan Fiasco to Force Our Next Debt Crisis | Last week I wrote about how auto loans have reached their highest level since the third quarter of 2007 and how easy access to these loans was pushing car sales higher Yes ballooning auto loans are a problem but there is a bigger ticking debt time bomb Student debt in the U S economy is taking the shape of a bubble The U S government has effectively become the biggest creditor to students It has gotten to a point where it is forcing the big banks to move away from issuing student debt Take JPMorgan Chase Company JPM for example This bank has decided that it will stop accepting student loans applications on October 21of this year Richard Hunt President of the Consumer Bankers Association said that the government giving student debt is creating less competition in the marketplace Source JPMorgan to stop making student loans company memo Reuters September 5 2013 Sure on the surface it s a good idea The government issuing student debt promotes education But there s a problem Student debt in the U S economy has increased significantly It currently sits around the 1 0 trillion mark with a majority of that student debt guaranteed by the U S government If we see defaults on this student debt we will see the U S government rapidly increasing its national debt as it deals with the student debt fiasco We are already seeing a sharp increase in the delinquency rate on student debt According to the Federal Reserve Bank of New York in the second quarter of 2013 the 90 day plus delinquency rate on student debt was almost 11 Source Federal Reserve Bank of New York August 2013 We all know the jobs market in the U S economy is dismal Considering this I ask one question will graduates from colleges be able to pay off the debt they have incurred if they will most likely only be able to find a job in a low wage paying sector I can see the delinquency rate on student debt skyrocketing Too few are concerned about the student debt crisis in the U S Sure politicians think it s a great idea students getting an education with the government s help just like the politicians thought making mortgage lending easier was a great idea during the early to mid 2000s As it stands now our national debt is just under 17 0 trillion and the government is expected to use the entire line of credit available to it by October We are going through the same motions again the Secretary of the Treasury has asked Congress to increase the national debt limit or the U S government will face default The student debt crisis is only one of many costs the government will need to make good on What to do about the cities and states in the U S economy facing bankruptcy has not been dealt with Nor do we know the real costs of Obamacare With U S gross domestic product GDP running at 16 6 trillion and the U S national debt headed towards 20 0 trillion over the next five years we are already projecting a debt to GDP multiple of 120 for the U S economy that is if nothing goes wrong like the student debt time bomb blowing up in our faces an unexpected war or a natural catastrophe But have no fear the price of gold is telling us all is well Yah right Michael s Personal Notes It has been very well documented in these pages how the demand from India and China for gold bullion is increasing We have also seen central banks buying the precious metal to protect their reserves But when I look at other side of the equation the supply side the case for higher gold bullion prices becomes even stronger The biggest sources of gold bullion are obviously the gold producers the companies that actually do the dirty work digging the ground and extracting gold bullion When the price of gold bullion declines it gives them less incentive to produce at higher cost mines as profitability is at stake In April of this year and then later in June we saw gold bullion prices decline significantly in value in the face of strong demand for the precious metal That price action caused a new trend to start among gold producers they ve started to cut their exploration budgets Graham Ehm Executive Vice President of South African based AngloGold Ashanti Limited AU one of the biggest gold producers in the global economy stated the company is looking to save 500 million over the next 18 months as capital expenditures will only be going towards their highest quality assets Source Mining Weekly August 5 2013 In its second quarter corporate earnings report Newmont Mining Corporation NEM another massive gold producer said the company reduced its exploration spending by 362 million from the same period in 2012 Source Newmont Mining Corporation July 25 2013 How does this all come into play with the gold bullion prices When gold producers invest less in exploring for new projects the overarching effect is less future production which leads to less supply We ve heard from senior gold producers about cutting costs just imagine how severe the pain is for gold producers who have significantly higher costs If the prices of gold bullion remain suppressed we could potentially see many gold producers shut down mines that produce the precious metal above the spot price the end result of which will be an even smaller supply of gold bullion Where do I think gold bullion prices are going next The technical damage done to gold bullion price charts in April and June was very significant It can take some time for gold bullion prices to recover especially as price manipulation continues but if we continue to see supply decrease and demand increase regression to the mean may happen a lot quicker than most expect What He Said Over the past few weeks I ve written about subprime lenders and how their demise will hurt the U S housing market the economy and the stock market There s no escaping the carnage headed our way because the housing market and subprime business are falling apart The worst of our problems because of the easy money made available to borrowers which fueled the housing boom that peaked in 2005 have yet to arrive Michael Lombardi in Profit Confidential March 22 2007 At the same time Michael wrote this former Fed Chief Alan Greenspan was quoted as saying the worst is over for the U S housing market and there will be no economic spillover effects from the poor housing market Disclaimer There is no magic formula to getting rich Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis The opinions in this e newsletter are just that opinions of the authors Information contained herein while believed to be correct is not guaranteed as accurate Warning Investing often involves high risks and you can lose a lot of money Please do not invest with money you cannot afford to lose |
MS | European stocks mixed eyes on German ruling DAX up 0 25 | Investing com European stocks were mixed on Wednesday as markets were jittery ahead of a highly anticipated German court ruling later in the day while hopes for imminent easing measures by the Federal Reserve continued to support sentiment During European morning trade the EURO STOXX 50 added 0 27 France s CAC 40 dipped 0 01 while Germany s DAX 30 rose 0 25 Investors were cautious although Germany s constitutional court was expected back the euro zone s bailout fund the European Stability Mechanism in a ruling later in the day Meanwhile markets eyed the outcome of the Fed s policy meeting on Thursday after disappointing U S employment data last week fueled fresh expectations for the central bank to add stimulus On Tuesday Moody s said that it could downgrade the U S s triple A rating if budget negotiations for 2013 do not result in policy measures which will reduce the country s debt Financial stocks were mostly lower as shares in Germany s Deutsche Bank dropped 0 94 while French lenders Societe Generale and BNP Paribas declined 0 36 and 0 10 respectively Deutsche Bank on Tuesday announced plans to cut costs by EUR4 5 billion to boost profitability in the face of higher capital requirements and the euro zone s sovereign debt crisis Italian lender Unicredit outperformed its counterparts however with shares surging 1 34 as did Spain s Banco Santander climbing 0 73 after Morgan Stanley raised its recommendation for bank to overweight from equalweight Meanwhile Iberdrola gained 1 10 after Chairman Galan said in an interview that the company will reduce debt by as much as 20 by cutting costs In London commodity heavy FTSE 100 fell 0 09 weighed by losses in mining and oil stocks Mining giants Rio Tinto and BHP Billiton retreated 0 59 and 0 39 while copper producers Xstrata and Kazakhmys lost 0 32 and 0 18 respectively Also on the downside oil and gas major Anglo American slumped 2 47 while BP saw shares drop 0 40 Financial stocks were mixed as shares in the Royal Bank of Scotland rallied 1 28 and Barclays advanced 1 08 while Lloyds Banking gained 1 and HSBC Holdings edged down 0 14 Elsewhere Kingfisher jumped 1 07 even as the home improvement retailer said first half earnings slumped as concern about the euro zone debt crisis and wet weather deterred spending In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 24 rise S P 500 futures signaled a 0 19 increase while the Nasdaq 100 futures indicated a 0 19 gain Also Wednesday Spain s Prime Minister Mariano Rajoy indicated that the country is considering getting assistance from the ECB s bond purchasing program but outruled a full blown sovereign bailout Later in the day the U S was to release official data on import prices followed by a government report on crude oil stockpiles |
JPM | Wall Street braces for end of Snap share lockup | By Noel Randewich SAN FRANCISCO Reuters A flood of Snap Inc NYSE SNAP shares held back since the Snapchat owner s initial public offering could start to trade freely next week pressuring a stock that has already plunged far below its debut price Starting on Monday and extending into August early investors employees and other insiders at the Snapchat owner can sell shares for the first time since its 3 4 billion March IPO the third largest ever for a U S tech company That means the supply of stock on the public market could mushroom in a matter of weeks by hundreds of millions of shares from fewer than 200 million shares Demand for Snap shares among investors is already meager after the stock hit five straight record lows this week It has sunk nearly 20 percent below its 17 IPO price and is down roughly 50 percent from a record high reached shortly after its debut dragged lower by investor concerns about user growth and waning confidence in its ability to eventually turn a profit You don t want to be caught in this wave of transactions that will impact the stock in some way said Philippe Collard founder of Yabusame Partners a management consulting firm specializing in the technology industry There is one corner of the market that does have use for the stock as bets against Snap have become so popular that shares available for short selling are hard to come by Any shares sold by Snap insiders and employees would add to the supply and could fuel more short selling Snap also reports quarterly results on Aug 10 another potential source of pressure Its disappointing debut earnings in May prompted a 20 percent one day nosedive in the stock There s likely to be a lot of caution and concern related to what the company will report and communicate said CFRA analyst Scott Kessler The company is taking some hits starting to take on water Snapchat is wildly popular with users under 30 but many on Wall Street are critical of its slowing growth Snap has warned it may never be profitable and Facebook Inc s Instagram has been rolling out features that copy Snapchat SELLING PRESSURE On July 31 early investors including Lightspeed Venture Partners will be able to sell up to 400 million shares with employees owning another 782 million allowed to start selling on Aug 14 four days after Snap reports results JPMorgan NYSE JPM analyst Doug Anmuth said in a recent note Those shares include more than 400 million shares owned by Chief Executive Evan Spiegel and co founder Robert Murphy They and other senior executives are subject to additional rules restricting how many shares they can sell each quarter Apart from those limits 97 percent of Snap will be potentially available on the stock market by the end of August up from just 13 percent now according to Anmuth S3 Partners a financial analytics firm believes early investors could sell up to 120 million shares starting on July 31 increasing the supply for short sellers who are currently paying annualized interest rates of more than 60 percent to borrow the stock The stock borrow rates will plummet very quickly said Ihor Dusaniwsky S3 Partners head of research You ve got a lot of short sellers that didn t like the trade at a 50 percent fee but love it at a 5 percent fee To be sure the expiry of insider trading restrictions does not always hurt share prices in the short term Twitter Inc shares dropped 18 percent on the day of a key lockup expiry in May 2014 In November 2012 Facebook Inc NASDAQ FB jumped 13 percent the day of a lockup expiry after its IPO But experts said lockup expiries tend to hurt companies already on weak footing Following its recent share price decline Snap is valued at 16 times expected revenue still expensive compared to Facebook at 12 times revenue according to Thomson Reuters data The AdvisorShares Ranger Equity Bear exchange traded fund shorted Snap after its IPO and portfolio manager Brad Lamensdorf said he may to do it again if an increased share supply makes borrowing the stock cheaper
If it s a really weak story and it s going down the lockup is going to provide a catalyst for it to go down faster Lamensdorf said |
JPM | Investors stick with macro funds hope for volatility comeback | By Maiya Keidan
LONDON Reuters Lack of volatility in financial markets that has hit macro hedge funds in the first half of the year has not stopped some investors from betting that things could get bumpier in the second half
Money poured into many macro hedge funds in 2016 and early 2017 hoping to profit from market ructions caused by rising interest rates tighter central bank policies and U S President Donald Trump s policy agenda
All these events had the potential to create increased divergence between financial markets but this has largely failed to materialize
The CBOE Volatility Index a gauge of near term stock market volatility which moves lower during periods of calm has only closed below 10 on 21 days over the last 20 years but 13 of these were in the past two months data from JPMorgan NYSE JPM showed
The unusually calm market backdrop has weighed on the average performance of macro funds which bet on macroeconomic events across asset classes This is down 0 73 percent to end June industry tracker Hedge Fund Research HFR data showed It also hit investment banks with Barclays LON BARC on Friday joining U S rivals in seeing trade revenues hit by lower market volatility
But investors have stayed the course investing another 5 2 billion into macro funds in the second quarter the largest cash injection when compared to other strategies according to HFR data
In contrast equities hedge funds received 3 8 billion from investors while strategies that trade off mergers and acquisitions lost 3 8 billion over the same time period
The low volatility is a puzzle for many investors JPMorgan said but high leverage rising rates and reduction of central bank balance sheets should see it rise the U S bank said
Stephen Coltman a senior investment manager at Aberdeen Asset Management said I think if you do start to see some inflation picking up then that would be a big catalyst for volatility to increase in the market and that s something to watch over the next few months
Among those that could benefit from increased volatility are Caxton Associates whose Global Fund lost 10 9 percent in the year to July 25 data compiled by HSBC showed Another is Moore Capital Management s 4 5 billion Macro Managers Fund down 2 02 percent to July 20 according to a source close to the firm
In London Brevan Howard s main fund is down 5 2 percent a source with first hand knowledge of the matter said while another fund Markham Rae lost 10 percent both in the first six months of 2017 Scottish manager Hugh Hendry s Eclectica meanwhile lost 2 6 percent in the year to July 14 the HSBC data showed
Aberdeen s Coltman said while low volatility was not helpful he had seen a very wide range of performance from managers as some had managed to find trends to take advantage of
Among them was Israeli hedge fund Adar Capital Partners which said it made gains of 13 9 percent in its macro fund in the first half of the year mainly driven by emerging markets
London based Silver Ridge Asset Management meanwhile is up 9 1 percent in the year to June 30 a source close to the firm said noting this was because it went against the consensus Trump trade shorting the U S dollar and buying fixed income
Even those who believe market conditions should become more favourable for macro funds are wary of over hyping the second half of 2017 given macro s weak performance in the past few years
The average macro hedge fund made 1 03 percent in 2016 after losing 1 26 percent in 2015 making gains of 5 58 percent in 2014 and losses of 0 44 percent in 2013 HFR data showed
Statistically volatility is unlikely to remain so low forever and there are changes underway on interest rates quantitative easing high levels of debt record highs in some markets Trump Brexit and North Korea a British hedge fund investor said
That said lots of money poured into macro funds last year for many of the same reasons
Cedric Fontanille director and head of strategies at investment manager Unigestion which invests 3 6 billion in alternative strategies is remaining cautious
Increased volatility could be beneficial for macro hedge funds for sure he said but added volatility could still stay low for a long time |
JPM | U S pending home sales rise Midwest factory activity slows | By Lucia Mutikani WASHINGTON Reuters Contracts to buy previously owned U S homes rebounded in June after three straight monthly declines but the housing market remained constrained by a shortage of properties available for sale Other data on Monday showed that factory activity in the Midwest slowed this month after hitting a three year high in June with manufacturers reporting declining orders The National Association of Realtors said its Pending Home Sales Index based on contracts signed last month jumped 1 5 percent more than double economists expectations for a 0 7 percent increase The rise however only partially unwound the prior three months declines Pending home contracts become sales after a month or two The NAR reported last week that existing home sales which generally have been running ahead of the signed contracts fell 1 8 percent in June In the very near term the June increase in pending sales suggests that existing home sales will likely increase soon said Daniel Silver an economist at JPMorgan NYSE JPM in New York But the June increase for the index undid only a portion of the decline reported over the prior few months Silver said he still expected the housing market recovery to continue over time despite recent weakness in some of the data including homebuilder sentiment The housing market has been stymied by a dearth of properties which has pushed up prices and sidelined first time homebuyers Housing contracted in the second quarter at its fastest pace in nearly seven years and was a drag on economic growth Homebuilders have been unable to bridge the housing inventory gap citing rising lumber costs and shortages of land and labor REGIONAL MANUFACTURING COOLING Pending home sales increased 0 5 percent from a year ago In June contracts rose 0 7 percent in the Northeast and advanced 2 1 percent in the South They shot up 2 9 percent in the West but fell 0 5 percent Midwest The PHLX housing index HGX fell slightly after the data and the U S dollar DXY hit a session low against a basket of currencies U S stocks were trading mixed and prices of U S Treasuries were lower In a separate report on Monday the Institute for Supply Management Chicago said its MNI Chicago Business barometer fell to a three month low of 58 9 in July from a reading of 65 7 in June A reading above 50 indicates expansion in manufacturing in the Chicago area The report mirrored other regional manufacturing surveys that have shown softening in activity Some of the moderation reflects the fading boost from the energy sector after a recent drop in crude oil prices The Institute for Supply Management will publish its July survey of U S manufacturing on Tuesday Regional manufacturing surveys suggest that activity in the factory sector remained solid in July but growth moderated said John Ryding chief economist at RDQ Economics in New York We look for a similar message in tomorrow s national ISM manufacturing survey The drop in sentiment in the ISM Chicago survey was broad based this month The survey s measure of new orders received by factories fell 11 6 points to a reading of 60 3 the lowest since February The production index fell 6 9 points to 60 8 A measure of order backlogs fell 4 9 points from June s 23 year high to a reading of 57 9 in July Suppliers took slightly less time to deliver key inputs In response to a special question on wages over 70 percent of manufacturers said they had increased their workers salaries over the past year
A quarter of them said they had kept wages unchanged while 3 percent said they had cut their workers paychecks |
JPM | Snap ends down slightly in brisk trade on lockup expiry | By Sinead Carew NEW YORK Reuters Shares of Snap Inc N SNAP owner of the Snapchat messaging app had their busiest trading day in two and a half months in a volatile session on Monday as early investors could sell their shares for the first time since its March market debut The stock pared losses to close down 1 percent at 13 67 after falling as much as 5 1 percent and hitting a fresh record low following the expiration of a trading lockup Trading volume was 2 9 times the company s 10 day moving average with more than 48 8 million shares changing hands after a trading restriction was lifted for early shareholders Employees will have to wait two more weeks before selling their shares in Snap whose 3 4 billion IPO was the third largest for a U S technology company The shares swung between positive and negative territory Monday hitting a high of 13 98 and a low of 13 10 It ended the day about 54 percent below its March 3 intraday peak as investors have fled on concerns about its growth prospects Many investors positioned themselves ahead of the expiration at least partly explaining Snap s 23 percent drop for the month of July according to traders and analysts If people are placing negative bets or were trying to liquidate in both cases you d want to have done it before today said Andrew Frankel co president of Stuart Frankel Co in New York It s down certainly because the lockup has expired It s not down 5 percent because it s not new news Monday s move likely showed bargain hunting and continued hope from early investors said Morningstar analyst Ali Mogharabi who rates the stock which debuted at 17 as neutral and sees a 16 per share price as a fair valuation Snap has been popular among short sellers and the roughly 66 million shares sold short on Friday was largely unchanged on Monday according to research firm S3 Partners As of Monday investors including Lightspeed Venture Partners could sell up to 400 million shares with employees owning another 782 million that can start selling on Aug 14 four days after Snap reports results JPMorgan NYSE JPM analyst Doug Anmuth said in a recent note Lockups can prompt dramatic price moves For example Twitter Inc N TWTR shares fell 18 percent after a key lockup expiry in 2014 and in 2012 Facebook Inc O FB rose 13 percent on its lockup expiry
Snap did not respond to a request for comment |
JPM | JPMorgan upgrades pair of airline stocks | JPMorgan NYSE JPM tackles a pair of airline stocks in a new note posted this morning
The firm upgrades Spirit Airlines to Overweight from Neutral after watching shares fall sharply in what it sees as an exaggerated move The new price target on SAVE is 45
JP upgrades American Airlines Group NASDAQ AAL to Overweight from Neutral and sets a price target of 61 Analyst Jamie Baker thinks AAL will improve its labor productivity
SAVE 2 70 premarket to 39 90 AAL 1 80 to 51 35
Now read |
C | Dollar edges off lows after Fed s Dudley raises bets on rate hike | By Sam Forgione NEW YORK Reuters The U S dollar hit its lowest levels in more than seven weeks against the euro yen and Swiss franc on Tuesday a day after dovish comments from a top Federal Reserve official but pared losses after remarks from the head of the New York Fed raised expectations for a rate hike this year The dollar hit its lowest levels against those three currencies since June 24 or the day after Britain voted to exit the European Union which caused tumult in global markets The euro rose more than one percent against the dollar to a session high of 1 1322 while the dollar fell more than 1 5 percent against the yen to 99 56 yen and more than 1 percent against the Swiss franc to 0 9589 franc The dollar index DXY which measures the greenback against a basket of six major currencies also fell more than 1 percent to its lowest in more than seven weeks at 94 426 Analysts attributed the dollar s weakness to comments from San Francisco Fed President John Williams on Monday afternoon Williams said the Fed should consider setting higher inflation targets The Fed currently targets a 2 percent inflation goal Data showing U S consumer prices were unchanged in July marking the weakest reading since February also reinforced skepticism that the Fed would hike rates by December The net takeaway is that the Fed may be so concerned about the long term robustness of the economy and therefore rate hikes are going to be slow said Steven Englander global head of foreign exchange strategy at Citigroup NYSE C in New York The dollar pared losses immediately following the CPI data however after New York Fed President William Dudley told Fox Business Network that the U S central bank could possibly raise rates as soon as September After Dudley s comments Federal funds futures prices suggested traders saw a 55 percent chance the Fed would raise rates at its December meeting compared with an implied 42 percent probability on Monday according to CME Group s FedWatch program Many still believe the Fed has a chance to hike later in the year said Richard Scalone co head of foreign exchange at TJM Brokerage in Chicago Dudley said that later in the day and that s what gave us a little bit of a reversal
The euro was last up 0 72 percent against the dollar at 1 1263 while the dollar was last down 0 80 percent against the yen at 100 43 yen |
C | Special Report Not so SWIFT Bank messaging system slow to address weak points | By Tom Bergin LA HULPE Belgium Reuters More than a dozen current and former board directors and senior managers of SWIFT the bank messaging system that helps transmit billions of dollars around the world every day have told Reuters the organization for years suspected there were weaknesses in the way smaller banks used its messaging terminals but did not address such vulnerabilities The sources said that until February when hackers tried to steal nearly 1 billion dollars by breaking into the messaging system at Bangladesh s central bank SWIFT had not regarded the security of customer terminals as a priority Top executives either did not receive information from member banks about specific attempts to hack the messaging network or failed to spot those attempts themselves the managers said In SWIFT s annual reports and strategy plans from the past 17 years Reuters could find only one reference to SWIFT helping its users to secure their systems That reference to helping our community to strengthen their own infrastructure was in the 2015 annual report published in June this year months after the Bangladesh heist in which the fraudsters ended up making off with 81 million The board took their eye off the ball said Leonard Schrank who was chief executive of SWIFT from 1992 to 2007 They were focusing on other things and not about the fundamental sacred role of SWIFT which is the security and reliability of the system Schrank said he was broadly aware that users terminals were a weak link in SWIFT s overall security but paid too little attention to it So I am partially responsible he said The messaging business failed to act in part because the risks were not properly appreciated the former directors and managers said SWIFT did not comprehensively track security incidents or monitor the extent of sloppy security practices among users It saw smaller banks as a potential but not immediate threat to the security of the network according to the former managers and directors SWIFT never acted former board member Arthur Cousins said because the organization believed bank regulators rather than SWIFT were responsible for ensuring smaller banks security procedures were robust enough to repel hackers A spokeswoman for SWIFT a cooperative owned by banks defended the organization SWIFT and its Board have prioritized security continually monitoring the landscape and responding by adapting the specific security focuses as threats have evolved Today s security threats are not the same threats the industry faced five or ten years ago or even a year ago and like any other responsible organization we adapt as the threat changes SWIFT was and still is dominated by large Western banks including Citibank JP MORGAN Deutsche Bank DE DBKGn and BNP Paribas PA BNPP that built the network decades ago That contributed to the lack of concern over security said the former directors because the larger banks tend to have sufficient defenses to prevent criminals from hacking into their SWIFT systems But since the 1990s many smaller banks in emerging markets have joined SWIFT and some may have weaker computer security In all more than 10 000 institutions are now connected to SWIFT Gottfried Leibbrandt CEO since 2012 said it was only with the benefit of hindsight that one could see that SWIFT needed to put more focus on security at customer terminals Hindsight is always a wonderful thing he said Sometimes it takes a crisis to change things RISE IN SMALL USERS In the Bangaldesh heist hackers broke into a computer interface called Alliance Access a piece of software sold by SWIFT for accessing its central network It is still unclear exactly how the thieves gained entry Bank Bangladesh has alleged that a botched upgrade of its system left vulnerabilities in it SWIFT has rejected any responsibility for the way Bangladesh Bank upgraded its systems Whatever specific weakness the thieves in the Bangladesh case exploited former SWIFT directors and managers said the system became more vulnerable as it got bigger Alessandro Lanteri a former executive with Italian bank Unicredit MI CRDI who served on SWIFT s board between 1995 and 2000 said security challenges increased when smaller banks in emerging markets joined the SWIFT network The difficulty is always to keep the security system very effective when you deal with little banks and emerging countries he said There it is very difficult to be sure that all the procedures of security are managed in the correct way The number of countries and territories covered by SWIFT swelled from 126 in 1994 to 200 in 2003 and 212 now Bigger western banks considered SWIFT more cost effective and secure than alternative means of communication Cousins said and encouraged smaller banks to become members But despite the rise in the number of smaller institutions as members the big banks continued to dominate SWIFT The organization s revenues which hit 710 million euros last year are driven by a concentrated number of large western correspondent banks like Citigroup NYSE C and HSBC former SWIFT staff said Traditionally 90 percent of messaging revenue comes from banks in just 25 countries almost all developed nations data in the decade to 2011 the last year for which SWIFT published a breakdown shows Some people working at the coalface spotted evidence of deteriorating security well before this year s Bangladesh case Two years ago Martin Ullman a Prague based SWIFT consultant was browsing a LinkedIn NYSE LNKD forum for SWIFT users when he saw a posting from a recently appointed technician at the Central Bank of Solomon Islands CBSI The technician needed to install an upgrade to the bank s SWIFT messaging system but didn t know how He wanted advice Ullman emailed the man and told him that raising such issues in a public forum could endanger security and advised him to seek expert help The technician said the bank couldn t afford it and said he finally managed to install the system himself CBSI declined to comment Reuters was unable to contact the technician to confirm the incident Yet security was vital Six former directors of SWIFT said any breach of the broader system could put the bedrock of SWIFT the willingness of banks to accept messages at face value at risk TRAIL OF INCIDENTS Hugh Cumberland a former SWIFT executive who now advises banks on payments technologies said he first saw security risks in 1993 He told Reuters that when he was working as a technology contractor with BZW an arm of BARCLAYS in London Cumberland arrived for work one day to be met by policemen carrying Heckler Koch submachine guns Two staff members had been arrested for attempting to use their access to a SWIFT terminal to send 10 million pounds of unnamed client money to accounts controlled by them Cumberland did not know the outcome of the case Both SWIFT and Barclays LON BARC declined to comment Another incident occurred in 1995 when officials at Dubai Islamic Bank DIB began sending fraudulent payment instructions to Citibank telling it to pay money from DIB s account at the U S bank into the account of a fraudster according to a lawsuit DIB filed against Citibank in New York in 1999 More than 150 million was allegedly stolen by DIB executives in collaboration with Foutanga Dit Babani Sissoko a West African businessman previously jailed for trying to bribe U S customs officials Sissoko was deported from the United State before the DIB allegations were made in court Reuters could not contact him A lawyer involved in the case confirmed the messages were sent via SWIFT which has a near monopoly on such international payment instructions The court dismissed the claim of negligence against Citibank The banks declined to comment on the case Swift was not involved in the legal proceedings More recently thieves exploiting SWIFT systems stole 250 000 from Bangladesh s Sonali bank in 2013 and more than 12 million from Ecuador s Banco del Austro in 2015 Later in 2015 Vietnam s Tien Phong Bank foiled an attempt to steal money via SWIFT which was reported by Reuters in May SWIFT officials said the banks involved in these three cases did not immediately inform it of the incidents though the banks did confirm them later The senior management at SWIFT appears to have been unaware of the events Leibbrandt told Reuters in May that before the Bangladesh heist in February he had not been told of any successful or unsuccessful attempt to steal money using SWIFT Asked why SWIFT had not logged the incidents described above a spokeswoman said SWIFT has always maintained an uncompromising focus on security as evidenced by our track record CHANGING ATTITUDES Some former SWIFT executives and directors said the failure to spot the security risks around user terminals reflects weaknesses in SWIFT s board Schrank the chief executive from 1992 to 2007 said some directors lacked the experience needed to help steer such a big and important enterprise Generally the SWIFT board with very few exceptions are back office payments people middle to senior management he said Of 48 current and former non executive SWIFT directors for whom Reuters could find career histories only two sat on their employer s management board Only one sat on the board of a listed company other than their employer Fritz Klein a former Credit Suisse banker who served on SWIFT s board from 1998 to 2002 said an even greater concern was the length of tenure of some members which he said did not encourage fresh thinking At any time a third of members had been there for very long perhaps too long he said A spokeswoman for SWIFT said SWIFT s large and diverse group of Board members have decades of experience in operations management IT risk assessment and various other disciplines SWIFT s Board composition includes long standing members with a deep understanding of how SWIFT works as well as newer members who contribute with a fresh outside view The board is dominated by larger banks the six countries which have the greatest messaging volume have the right to appoint two directors each The next 10 largest user countries can appoint one each Lanteri the former Unicredit banker who used to be a SWIFT director said When I was on the board I had no direct contact with the little countries Board members came from all over the world he said but from the most important banks The Bangladesh heist has changed attitudes In May SWIFT published a new customer security plan promising to strengthen security on software tools such as Alliance Access to develop new tools to spot when an account has been compromised and when a payment instruction deviates from normal patterns and to allow banks to issue stop payment orders quickly
In July SWIFT announced the creation of a Forensics and Customer Security Intelligence team in conjunction with cyber security firms BAE Systems1 and Fox IT2 The team will gather information on any attempts to commit thefts through SWIFT analyze the risks these attacks highlight and share the lessons with the wider SWIFT community |
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