John Kemp, columnist at Reuters, admits there is no easy way of identifying how much money the major banks make from prop trading.
However, he points out there is a way to breakdown which banks depend most heavily on trading income rather than investment or commercial banking activities. Read more
First, the Volcker rule was going to be good for banks like Goldman Sachs.
Now, it’s going to cause an almighty market crash. Read more
A note on Nassim Nicholas Taleb’s website, www.fooledbyrandomness.com, mentions a coming addition to his seminal Black Swan:
PLEASE NOTE THAT I AM ON MEDIA HIATUS Nov 2009 to May 2010 with the 2nd edition of The Black Swan (and perhaps, hopefully, permanently, if the book publishers give me a break). Read more
Teun Draaisma’s latest is a veritable treatise of tightening threats.
In it, Morgan Stanley’s chief European strategist warns of the impending switch from stimulus-overload to stimulus-withdrawal — something he’s mentioned before but, we guess, is imminently more imminent this time around: Read more
Back in December, when the Copenhagen Summit failed to produce a binding global agreement on tackling climate change, the European carbon market slumped.
On Monday, analysts at Bank of America Merrill Lynch point out that Phase II of the European Trading scheme may be facing greater challenges still. Read more
The Baltic Dry Index, a measure for the price of shipping bulk commodities, has made a wavering comeback since plunging like a stone in the fourth quarter of 2008:
On FT Alphaville Monday morning,
- The bank problem in a single chart.
Courtesy of Deutsche Bank’s fixed income team, a reminder of the extent to which risk is being priced into Greek government debt, as measured by the spread between Hellenic Republic bonds and German bunds:
Live markets commentary from FT.com
Because background briefings for the media are fun, and interesting, and something that the public don’t often get to see, here’s the transcript of the press rundown for the Volcker rule unveiled last week.
Things to watch out for — “senior administration officials” dodging any outright mention of Goldman Sachs, and the explicit statement that this is about “constraining future growth” of the financial sector. Read more
Jingle Mail : A situation where a homeowner mails his or her house keys to a mortgage lender due to an inability to meet mortgage payment obligations and a lack of equity in the property. If a homeowner is upside-down in a mortgage and feels the entire loan is a lost cause, he or she may choose to walk away from the property altogether and relinquish it to the original lender instead of going though the foreclosure process.
That’s from Investopedia. Read more
“Corporate markets head for indigestion”, was the headline last week for a bleak prognosis:
After the busiest start to any year for sovereign emerging-market debt, it’s corporate bond investors around the world who now seem to be heading for a massive case of indigestion, as ShortView noted last week.
The idea that bank capital regulations will be a ‘game changer’ for the sector is gathering momentum.
Last week, we heard that Barclays might need to find an extra £17bn under Basel III and that Lloyds Banking Group and HSBC might see their equity Tier 1 capital reduced to 4.4 per cent and 6 per cent respectively. Read more
In the wake of Obama’s dramatic financial reform proposals, released last week and aimed at breaking up the biggest banks, Deutsche Bank strategist Jim Reid is reprinting an updated version of one of his most controversial charts:
When a car full of boy-racers overtakes an older, sputtering jalopy, onlookers give the slower vehicle barely a glance, though the racers themselves “might offer a finger-related gesture”, writes Bill Emmott, former editor of The Economist and long-time Japan pundit, in The Times on Monday.
Given that today’s boy-racers happen to be China, and that their super-charged economy has defied the global recession and is about to surpass Japan as the world’s second-biggest, the focus on the overtakers may be understandable, notes Emmott. Read more
Elsewhere on Monday,
- Quantastic: The minds behind the meltdown. Read more
Comment, analysis and other offerings from Monday’s FT,
Clive Crook: How Obama can reset his presidency
The Obama presidency is not dead yet, says the FT’s Crook. The midterm elections are 10 months away, and a lot can happen. If the economy revives, voters will come round. Barack Obama can still recover – but he must show he understands what has gone wrong. Early signs are that he does not Read more
Breaking pre-market news on Monday,
-Ferrero confirms does not intend to make an offer for Cadbury – statement. Read more
Asian stocks fell on Monday for a sixth straight trading day, led by financials amid continuing concerns about the impact of US President Barack Obama’s plan to curb banks’ activities, reports Bloomberg.
Asian markets (Mon)
Nikkei 225 down -44.25 (-0.42%) at 10,546
Topix down -3.88 (-0.41%s) at 937.06
Hang Seng down -183.76 (-0.89%) at 20,542 Read more
The chief executive of Blackstone has confirmed the possibility that the US buyout group will back the launch of a UK retail bank Stephen Schwarzman told reporters at a conference in Saudi Arabia that Blackstone was “looking at one potential situation” in the UK banking market. It emerged last week that Blackstone is considering launching a company called Home and Savings Bank with the wealthy Pears family and investment firm Cambridge Place. The new bank has applied for a UK banking licence.
Top Wall Street bankers attending the World Economic Forum this week in the Swiss town of Davos will use the meeting to lobby regulators against Barack Obama’s plan to curb banks’ size and trading activity and break-up big institutions. Executives said they would push their case quietly to avoid giving the US president the “fight” he promised last week. Alistair Darling, UK chancellor, at the weekend rejected the US idea of limiting banks’ size and activities. But billionaire financier George Soros welcomed the plan.
The US Federal Deposit Insurance Corporation is working on plans to package billions of dollars of assets from failed banks into securities, a move aimed at boosting still-dysfunctional markets for mortgage-backed bonds. If the FDIC proceeds, it could help rid the banking system of troubled assets. The FDIC has more than $36bn in assets on its books from failed institutions seized in the financial crisis.
The Obama administration’s proposed bank levy is threatening the $3,800bn repurchase market, analysts have warned. The potential impact of the $90bn, 10-year levy on the repo market could also hinder the Fed’s efforts to drain liquidity it injected into the financial system during the crisis. Banks say the proposed levy, which would charge banks a 15-basis point fee on their liabilities minus insured deposits, will prompt them to cut repo exposure to reduce short-term liabilities.
Saab Automobile is set to win a stay of execution from General Motors as the US carmaker nears a deal to sell its Swedish unit to Spyker Cars of the Netherlands. A provisional agreement could come as soon as Monday, halting preparations by GM to close one of Sweden’s most iconic brands. A deal would come as a relief to the company’s 3,400-strong workforce in Sweden and fans everywhere of Saab’s quirky design and innovative technology.
The 100 top employees at Goldman Sachs in London will have their total pay capped at £1m when the bank reveals its 2009 bonuses this week, reports The Times. Less senior UK employees who received more than £1m last year will have 60% of any amount over £1m paid in deferred stock. Meanwhile, the FT reported on Saturday that Barclays plans to defer up to 100% of bonuses for its top staff.
A leading Chinese financial group is in advanced preparations to launch a Dubai-focused investment fund, highlighting global interest in a rebound in Gulf economies. Dubai said last November it would call a standstill on billions of dollars in debt, prompting a second bail-out loan of $10bn from oil-rich Abu Dhabi to prevent a default as the city’s $100bn-plus debt pile capped a year of deep recession.
US pension funds are poised to pour almost $100bn into emerging market debt in the next five years, according to JPMorgan. The impending buying spree will be augmented by strong flows from central banks desperate to diversify out of the dollar, say industry figures, bolstering the ongoing rally in emerging market bonds and potentially pushing yields relative to US Treasuries to a record low.
CPA Global, the patent and legal services group, is set to complete on Thursday a management buy-out financed by private equity investor Intermediate Capital Group. The £440m deal will be structured as a scheme of arrangement in a Jersey court. ICG is best known as a provider of mezzanine finance for buy-out deals but since 2007, its minority partners team has also invested equity directly in MBOs.
Land Securities is preparing to invest in property-based derivative instruments that could help hedge exposure to its largest developments. In a move by the UK’s largest property company beyond buying and building physical real estate, Land Securities has appointed RBS and JPMorgan to act for it in trading property derivatives. Some say the move will lend more credibility to a fledgling investment class.