Posts from Friday May 11 2012

JPMorgan, a Fitch ratings harpooning [update: now S&P]

Fitch Ratings-New York-11 May 2012: Fitch Ratings has downgraded JPMorgan Chase & Co.’s (JPM) Long-term Issuer Default Rating (IDR) to ‘A+’ from ‘AA-‘ and its Short-term IDR to ‘F1’ from ‘F1+’. Fitch has placed all parent and subsidiary long-term ratings on Rating Watch Negative.

Fitch has also downgraded JPM’s viability rating (VR) to ‘a+’ from ‘aa-‘ and placed it on Rating Watch Negative. In addition, Fitch affirmed JPM’s ‘1’ support rating and ‘A’ support rating floor. A full list of rating actions follows at the end of this release. Read more

This wasn’t Chesapeake’s week, really

As part of our asset monetization planning and capital expenditure budgeting process, we closely monitor the resulting effects on the amounts and timing of our sources and uses of funds, particularly as they affect our ability to maintain compliance with the financial covenants of our corporate revolving bank credit facility. While asset monetizations enhance our liquidity, sales of producing natural gas and oil properties adversely affect the amount of cash flow we generate and reduce the amount and value of collateral available to secure our obligations, both of which are exacerbated by low natural gas prices. Thus the assets we select and schedule for monetization, our budgeted capital expenditures and our commodity price forecasts are carefully considered as we project our future ability to comply with the requirements of our corporate credit facility. As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance. Continued compliance, however, is subject to all the risks that may impact our business strategy.

From the not-there but then miraculously there, latest 10-Q. Read more

Wuthering UK master trust assets

Aire Valley is in what’s called Brontë Country in the UK’s Pennine hills, home to the towns of Bradford and Bingley.

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Cypriot banks and some sneaky ELA [updated with Portugal]

FT Alphaville has been very curious about the €18bn of mystery Emergency Liquidity Assistance which showed up in the ECB’s financial report at the end of April, but until now we weren’t sure where the cash had ended up.

We had a few guesses of course, but no proof. ELA is essentially a bank bailout by national authorities when things get really, really bad and it is typically lending (or a repo) against collateral the ECB itself won’t accept. Read more

Wilmot: ‘Buy the panic’

Get this. Jonathan Wilmot, chief global strategist at Credit Suisse, reckons that Europe is set to lead a rebound in global growth this year. He and his team are saying BUY Spanish and Italian bonds, and probably equities as well.

While a note dispatched to CS clients this week contains a few escape chutes, the core bullish argument is broadly as follows: Read more

US Markets Live transcript 11 May 2012

Live markets commentary from 

US Markets Live: 10am New York, 3pm London

Hmm… what to talk about…

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A mainly CoCo Spanish banks plan

Also a mandatory increase in real estate loan provisions to 45 per cent.

Selected flashes from Spanish economy minister’s press conference at pixel time… Read more

Too Big To Hedge

Throughout FT Alphaville’s coverage of the credit trades of JP Morgan’s Chief Investment Office, there were two thoughts that kept nagging us. We’d think about them whenever we wrote about the technicals the trades might be creating. One was: could this really happen under CEO Jamie Dimon’s watch? The other was: where the hell are the regulators in all of this?

We’ll get to these questions a bit later, as we would first like to review how the $2bn mark-to-market loss announced on Thursday may have happened… Read more

The unconventional hedge, redux

FT Alphaville’s resident credit expert Lisa Pollack is on the case regarding JP Morgan’s “egregious” loss announced on Thursday.

But, as we wait for her analysis, here’s a great little snippet from Kid Dynamite with regards to what counts as a viable hedge and what doesn’t in this crazy financial world of ours. Read more

Markets Live transcript 11 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


An inflated sense of optimism

So, about the inflation-led solution to eurozone imbalances that Germany has apparently signed up for…

From Der Spiegel (with our emphasis): Read more

Chesapeake’s prepay deals

Some good information is starting to come out about the nature of the liabilities Chesapeake’s CEO Aubrey McClendon managed to saddle the company with.

As the Wall Street Journal reported on Thursday (our emphasis), much of it was positioned off-balance sheet via a type of deal known as a volumetric production payment (VPP): Read more

Best in Show

The below was submitted by Satyajit Das.

In the mock-umentary Best in Show, Christopher Guest mercilessly portrays the world of dog shows, following five dogs and their owners in the competition for top honours at the Mayflower Kennel Club Show. Bankers have their equivalent – banking awards. There are many similarities – an overt self-absorption, ferocious competitive bitchiness and feigned good sportsmanship. Both are completely meaningless and very funny. Read more

Breaking down five million job losses, and the curious case of construction

A chart and table via CreditSights, click to enlarge:

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Further reading

Elsewhere on Friday,

– Breaking up four big banksRead more

Overnight markets: Down

Asian shares retreated as investors were spooked by JPMorgan’s $2bn trading losses, which overshadowed stronger-than-expected US employment data, says the FT. The MSCI Asia Pacific index declined 0.6 per cent with Japan’s Nikkei 225 Stock Average up 0.4 per cent, Australia’s S&P ASX 200 off 0.5 per cent and South Korea’s Kospi 1 per cent lower.

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The 6am Cut London

JP Morgan’s revelation about a $2bn loss on trades by its CIO office made waves in Asian markets, which are headed for the biggest weekly decline since November, says Bloomberg. The bank’s shock disclosure, made after the market closed, sent shares in the bank down by about 6 per cent and prompted renewed calls for tougher regulation. Here’s our take on the 10-q revelation and the excruciating conference call that followed.

China’s inflation was below the government’s target for a third month in April, giving more room to ease policy, says Bloomberg. Consumer prices rose 3.4% from a year earlier after a 3.6% gain in March. That matched the median estimate in a Bloomberg News survey of 35 economists but fell short of the government’s 4% annual goal. Read more