Posts from Wednesday Jan 16 2013

The Closer

ROUND-UP

Flat S&P 500, rising Goldman. Shares in the bank ended up 4.1 per cent and at their highest level since May 2011 after its earnings. The S&P 500 closed up 0.02 per cent at 1,472.63 (Reuters). Read more

Once you turn base money into short-term debt, can you go back?

Forget about the $1 trillion coin debate.

The most exciting wonky discussion being had right now is between Steve Randy Waldman and Paul Krugman over whether “base money” and short-term debt are perfectly substitutable or not, and what that may or may not mean for central bank policy.

We confess that we have a bit of a vested interest here because for a long time we’ve been arguing much the same point as Waldman.

That’s not to say that Krugman is necessarily wrong; he may just be taking Waldman slightly too literally. Read more

The CIO curve trade that never was

This one paragraph, describing the nature of the curve trade that JPMorgan’s Chief Investment Office had in the Markit CDX.NA.IG.9 index by the end of January, fills us with mixed emotions. There’s a bit of “oh, they did think they were doing that?” and a bit more of “‘but why?? WHY?”. Read more

A bit of post-Sohn naming and shaming

The 17th annual Sohn conference took place last May in New York and drew a star-studded panel of fund managers to offer (a few of) their best trade ideas.

Everyone was there, from David Einhorn to John Paulson and Bill Ackman. Topics as diverse as palladium, French CDS and Argentina’s sovereign debt were discussed.

But were the trade ideas any good? Read more

The Whale and the P&L (and the RWAs)

JPMorgan’s Whale report just keeps on giving: from the blow by blow account of internal P&L swings after the first articles were published about the CIO’s trades, to discussion on how achieve the firm-wide goal of reducing risk-weighted assets.

Let’s start with the former, shall we? Read more

Did the CIO have a Kodak moment? Like, literally?

JPMorgan’s Chief Investment Office was given an edict to try to reduce risk-weighted assets, as part of a firm-wide initiative in the face of regulatory changes, and also to shift the synthetic credit portfolio to be more in keeping with the more bullish view of the economy that senior management held. All confirmed by the bank’s own Task Force Report out on Wednesday.

It appears there was a key moment, when the bank was caught off guard by the default of a “significant corporate issuer” in mid-January. Did it change the course that the portfolio otherwise would have taken? Read more

GS earnings: we’re back, too

Add Goldman to the list of large US financial institutions to report expectations-beating earnings for Q4.

From the release:

NEW YORK, January 16, 2013 – The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $34.16 billion and net earnings of $7.48 billion for the year ended December 31, 2012.

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The London Whale, an oral history

It’s history, JPMorgan Task Force Report style. Or rather, it’s a mostly oral history, lacking in technical detail, and it’s not all independently verified. Oh, and heavily reliant on one guy. All of which is prominently outlined in this footnote… Read more

JPM task force stunningly arrives at same conclusion as JPM chairman and CEO

The Task Force’s views regarding Firm Chief Executive Officer Jamie Dimon are consistent with the conclusions he himself has reached…

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Markets Live: Wednesday, 16th January, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

Japan’s airlines ground Dreamliner fleets || Hardliners shift stance on US debt ceiling || Morgan Stanley defers bonuses for top staff || Silver Lake at centre of Dell deal talks || Facebook ramps up Google search fight || Alibaba Group reported to have hired Credit Suisse and Goldman for IPO || Apple rolls out China credit facility || White House questions Syrian weapons claim || Markets: mostly in the red Read more

Everyone’s exposure to everyone else

An IMF working paper by Serkan Arslanalp and Takahiro Tsuda published last month runs through just how big the exposure is of advanced economies to foreign official debt holders (governments, central banks and the like).

As the authors write, holdings of sovereign debt by the foreign official sector are important, because shifts in the sovereign investor base can affect government borrowing costs and refinancing risks. The composition of sovereign debt holdings can also reveal a vulnerability to bank-sovereign linkages.

So far, so familiar. But stay with us. Read more

When cash costs extra (9% extra)

How much would you pay for a bundle of 100 1-renminbi bills?

Is the answer Rmb109? Read more

Further reading

Elsewhere on Wednesday,

- Instead of a trillion-dollar platinum coin

- Today ‘would be a good day to authorize paying the bills’.

- So, if you have been following this debate, you are a dork. Read more

Coming soon to the LSE… YorkDale Bank Plc

What’s this? A new publicly listed bank?

And before you ask, we are not talking about Metro Bank or those RBS branches ear-marked for sale being rolled up into some Aim-listed shell vehicle. Read more

The 6am Cut London

Asian shares fall || Japanese 787 flights suspended after emergency landing || Rajoy calls for Germany to do more || Morgan Stanley to delay bonuses up to 3 years || World Bank cuts global growth forecast || Chinese officials defend export data Read more