Posts from Wednesday Jun 13 2012

The Closer

ROUND-UP

US markets ended down after a late, eurozone-related, sell-off. The S&P 500 closed down 0.7 per cent at 1,314.88. The Nasdaq fell 0.86 per cent, closing at 2,818.61 (Reuters). Read more

Moody’s cuts Spain to one notch above junk

UPDATE: Cyprus downgraded too — see below.

Just last Friday, Moody’s warnedRead more

Copula culture

OK – Lisa’s the modelling maven and she’s promised a longer post on this paper tomorrow…

“‘The Formula That Killed Wall Street’? The Gaussian Copula and the Material Cultures of Modelling” is a recommended read (H/T Tracy Alloway). It’s not really about anything killing Wall Street — more a combination of economic sociology and an oral history stretching back to January 2007. The authors even got in touch with David X. LiRead more

Meine Damen und Herren – the government guarantees

Chart from a new OECD report estimating the value of implicit sovereign guarantees for reducing the cost of bank debt…

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A lengthening Treasury stock

Ultra-low rates, plenty of demand… why on earth wouldn’t you lock that in? The chart below shows the US Treasury is adopting just such an approach with the average maturity of its debt stock now at a decade-high and not all that far off the all time top:

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Xstrata, un-pricing Glencore…

That’s Xstrata, down 6 per cent at 910p at pixel. It was sitting at the top of the Footsie “losers” board towards the end of Wednesday’s session, just above would-be merger partner Glencore International, which had itself fallen 4.5 per cent to 350p. (Both prices subsequently rallied as the market closed.) Read more

Jamie was up… [updated]

…And we’re on. Watch on C-Span here and follow along on ML here NOW. Update: session’s closed, but check the transcript. Was this a victory for Jamie? Mostly soft questions from the Senators we thought, but Jamie seemed to tie himself up in knots re the Volcker Rule…

US Markets Live transcript 13 Jun 2012

Live markets commentary from FT.com 

Albert weighs in

On the back of the glorious victory in yesterday’s Thomson Reuters Extel survey, Societe Generale’s Albert Edwards has a note out on Spanish banks (his emphasis):

The Spanish banking sector is a victim of deflationary policies enacted at the behest of German economic orthodoxy. A bailout will solve nothing. Read more

A V-shape for Sir Martin

Nearly 60 per cent of shareholders voted against a 60 per cent increase in Sir Martin Sorrell’s pay for 2011. Here’s his earlier defence in the FT – and here’s WPP’s AGM trading update (including a bit on return of shareholder cash…)

How NOT to argue that derivatives are the devil’s spawn

Every now and then, The New York Times takes a big ol’ swipe at derivatives for being evil and whatnot. That’s fine and well — and sometimes obligatory, particularly when it comes to certain structured products for which it’s hard to discern the benefit to anyone outside of a bank.

But it can all go awry when someone starts arguing against derivatives and just gets it wrong. It makes us do a sad, frowny face and then get incredibly frustratedRead more

Markets Live transcript 13 Jun 2012

Live markets commentary from FT.com 

Jamie Dimon’s CIO hindsight – Live!

In hindsight, CIO’s traders did not have the requisite understanding of the risks they took…

JPMorgan’s chief executive Jamie Dimon is up before the US Senate Committee on Banking, Housing and Urban Affairs on Wednesday, to discuss “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?”. (Here’s the testimony Jamie prepared earlier.) Read more

The (early) Lunch Wrap

Good morning, New York…

Note:  Join FT Alphaville for a special session of US Markets Live on Wednesday — we’ll be covering the hearing from its opening at 10am New York time, 3pm London time, offering a blow-by-blow account of the London Whale circus in room SD-G50 of the Dirksen Senate Office Building. Read more

A glimpse of an economy post this crisis

Iceland, of course. Kitchen-sinked and cleaned-up, the Icelandic central bank has just decided to push up rates by 25 basis points to combat signs of inflation amidst “robust” domestic demand.

StatementRead more

That Italian bond auction…

Nerves a-jangle in Milan on Wednesday, we guess.

Results from the auction of €6.5bn of 1 year Italian paper: sold at 3.972 per cent. Cover was 1.732 times Read more

Why Saudi Arabia wants to bathe the world in affordable oil

Thursday’s Opec meeting is expected to be a cracker. Supply is relatively abundant right now, but Saudi Arabia wants the quota raised. Iran, Venezuela, and a bunch of other Opec members fearful for their export receipts definitely do not want that.

The FT’s Guy Chazan writes that it’s expected to be a tussle that Saudi and its Gulf state allies will lose, despite their considerable power within the cartel. The point, some industry watchers maintain, is just to send a message that Saudi’s got this: that is, it won’t let high oil prices worsen the risk of a global slowdown. A message it probably sees as very necessary as the Iranian sanction deadline draws nearer, and the world economy looks more fragile. Read more

While we wait for Opec

Remember back in March, when oil prices were high and Ali Naimi, Saudi Arabia’s oil minister, penned a letter to the FT suggesting prices were too high because there was no lack of supply and inventories were full?

Well, prices have come down since then. A quick recap from SocGen: Read more

Stelios flies again (updated)

Sir Stelios Haji-Ioannou, easyJet founder and on-going thorn-in-the-side of the existing board, is developing a new airline — across Africa.

In what promises to be a colourful business combination, he’s joining forces with David Lenigas of Lonrho to launch “Fastjet,” a low cost carrier that is promising to operate across the African continent. Read more

Further reading

Elsewhere on Wednesday,

- Dear Europe — you’re doing it wrong. Read more

The 6am Cut London

Japan’s machinery orders jumped 5.7% in April, compared to 1.5% consensus forecasts, reports the WSJ.

Jamie Dimon will tell lawmakers that the bank’s CIO unit “should have gotten more scrutiny” on Wednesday, the FT reports. His full prepared statement is hereRead more

Overnight markets: Mixed

Asian equities put in a mixed performance after a strong session in US and Europe, with the mood generally subdued amid uncertainty about the future of the eurozone ahead of Greek elections this weekend, says the FT.

The Nikkei was up 0.3 per cent in Tokyo, while Hong Kong’s Hang Seng was flat and China’s Shanghai Composite was down 0.1 per cent, having bobbed in and out of positive territory. In Australia, the S&P/ASX 200 was down 0.3 per cent while South Korea’s Kospi was off 0.2 per cent. Read more

“Hypothetical, illustrative example of the orderly liquidation of JPMorgan Chase”

The FT’s Tom Braithwaite has the goods:

In March, Gregory Baer, deputy general counsel, presented a plan to policymakers and bankers to show the results of a hypothetical $50bn loss. It showed the bank would fail, shareholders would be wiped out and Jamie Dimon, chief executive, would be fired. … Read more