Posts from Thursday Mar 21 2013

The Closer

The S&P 500, slipping. The index closed at 1,545.8, a 0.8 per cent decline. Shares in Oracle fell 9.7 after yesterday’s earnings disappointment (Bloomberg).

Blackstone is considering a bid for Dell. Friday marks the end of a 45-day window to make counter-offers to Michael Dell’s proposal to take the company private for $24.4bn. Blackstone is considering “several different scenarios” for buying all or some of Dell, including negotiating with Southeastern Asset Management, a large Dell shareholder, to roll over its stake in a possible deal (Financial Times). The private equity has also talked with GE Capital about a bid for Dell’s financial services unit (Wall Street Journal). Read more

Taxi for Laiki

That’s Panicos Demetriades, Cypriot central bank governor, on national TV just a few moments ago. And there’s a Laiki banker next to him. He looks a bit unwell. Demetriades announced a “banking reform” bill that will guarantee deposits up to €100k, and put Laiki into resolution. Otherwise this bank’s a goner. Update – the only way this works, surely, is if uninsured large depositors are shoved to the bad bank and are left to try their luck on asset recovery.

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This is the CIO! Take your silly market-making prices and [redacted] — Part 1

Time to start tackling the big question: how were such huge credit derivatives positions allowed to be put on by JPMorgan’s chief investment office (CIO) in a matter of mere months back at the start of 2012? Someone, or several someones, should have noticed that the synthetic credit portfolio (SCP) was headed for a disaster of epic proportions.

Weren’t there risk limits? Despite being a top of the range tool for crisis aversion, and being breached several times, the warning signs around these weren’t effectively responded to. Even worse, they were simply accommodated for. We’ll discuss that in future posts. Here, we want to talk about another tool that could have averted disaster: the marks on the book. The marks should have shown increasingly frightening losses, leading people to ask what the hell was going on. Read more

Some backing for the UBS bonus model

René Stulz and other academics members of the avowedly non-partisan Squam Lake Group have come out with an update of their well-received 2010 paper on fixing finance, post the crisis. Click below to read their fresh thoughts on banker pay and the knotty problem of properly aligning incentives.

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Bankers on how to save money (assuming you too are a banker)

The stetson is tipped to Kevin Roose for the link to eFinancialCareers.

One reason you might be having trouble saving money is that you’re too damn generous:  Read more

Of credible threats and plans

We compared the Eurogroup to an EM crisis talking shop earlier. Well, selected quotes from Eurogroup Working Group conference call notes, from Reuters:

“The (Cypriot) parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us”

“We have never seen this”

“Markets believe that we will find a solution and that we will provide more money and this might not be the case”

Sorry to EM crisis talking shops. Read more

Relaxed about REITs

The chart above from Lewis Alexander’s note shows the startling recent asset growth in real estate investment trusts — driven mainly by mortgage REITs buying agency MBS, and funding these purchases in repo markets.

This carry trade is a logical consequence of quantitative easing in the aftermath of a crisis. Consider the simple variables involved: Read more

Bernanke’s employment dashboard

I would say that we will be looking for sustained improvement in a range of key labor market indicators, including obviously, payrolls, unemployment rate, but also others like the hiring rate, claims for unemployment insurance, quit rates, wage rates and so on, looking for sustained improvement across a range of indicators, and in a way that is taking place throughout the economy.

– Ben Bernanke, during Wednesday’s presser, when asked which indicators he would consider when deciding when it was time to end or slow the pace of asset purchases. Read more

Markets Live: Thursday, 21st March, 2013

Live markets commentary from FT.com 

Sir John Peace: ‘We were criminals’

Lest the StanChart board end up breaking rocks in the hot sun or similar… a toe-curling statement out on Thursday…

LONDON, 21 March 2013: On 5 March 2013, I, together with Chief Executive Officer Peter Sands and Group Finance Director Richard Meddings, representing Standard Chartered Bank (the “Group”), held a press conference where certain questions were asked concerning individual employee conduct and compensation in light of the deferred prosecution agreements made with the US Department of Justice and the New York County District Attorney’s Office in December 2012. During that press conference, which took place via phone, I made certain statements that I very much regret and that were at best inaccurate.

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The (early) Lunch Wrap

ECB hands down deadline on Cyprus || A Buchheit bat-signal || China PMIs beat expectations || Banks in Cyprus to remain shut until Tuesday || JPMorgan directors set to back leadership structure || YouTube hits one billion mark || US immigration reform attracts more than 3,000 lobbyists || Accel raises $475 tech fun || Market update Read more

The Buchheit bat-signal, a few days on

OK, Felix already posted on this earlier. But in case you haven’t read Lee Buchheit and Mitu Gulati’s 3-page paper on Cyprus yet, we’d recommend reading it, or going back to it, given the likelihood of uninsured depositor flight whatever plan is now adopted.

We’re waiting for Plan B on Thursday. Meanwhile, various, erratic Hail Marys — Hail Vladimirs — were not looking good as Plan Bs as Wednesday closed. Read more

ECB starts egg timer on Cyprus ELA

From the ECB on Thursday morning:

PRESS RELEASE

GOVERNING COUNCIL DECISION ON EMERGENCY LIQUIDITY ASSISTANCE REQUESTED BY THE CENTRAL BANK OF CYPRUS

The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013.

Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.

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Further reading

Elsewhere on Thursday,

- Synthetic CDO ghost spotted.

- Non-agency RMBS too, featuring Fitch and Kroll.

- Cyprus round-up from Spiegel OnlineRead more

China PMIs back to bullish

The China flash manufacturing PMIs have beaten expectations this month, coming in at 51.7 compared to 50.4 in February, and above the forecast consensus of 50.8. Here’s the table of component directions:

China flash PMI March 2013 table  Read more

The 6am Cut London

Asian markets rise on Bernanke comments || Russia takes tough line on Cyprus, EU || China flash PMIs beat || Japan trade deficit shrinks || Kuroda to speak today || US Senate averts shutdown next week || Foxtons’ owners in IPO talks || UK Budget measures far from enough  Read more