Euromoney reports on Wednesday that Citigroup is attempting to revive “leveraged super seniors,” a type of synthetic CDO not seen seen the financial crisis. We take a (no doubt unhealthy) interest in all things LSS, given our previous experience helping out on this series of Financial Times stories. The stories involved three former Deutsche Bank staff who blew the whistle on the way the German bank was allegedly valuing so-called “gap risk” on $130bn worth of LSS of trades. Read more
Alternate title – Did Goldman Sachs lose $1.3bn in currency trades in the third quarter, or not? Read more
And enjoy sub-par returns for the next 12 months.
No, this is not FT Alphaville’s marketing department shooting itself in the foot. This is the conclusion of a recent paper examining the effect of advertising on hedge funds’ inflows and returns. Read more
Midnight Madness, that Goldman Sachs-led all-night lavish scavenger hunt/puzzle-solving competition/performance art so wonderfully described by Quartz earlier this year, is back and expanding. This year the charitable event will include Citigroup, Credit Suisse, BlueMountain, and Secor Asset Management all fielding teams to compete against Goldman.
Below you can see the pitchbook that was sent to potential participants (in typical banking style) earlier this year: Read more
What you don’t hear very often (and we are as guilty of this as anyone) is that the Fed data of “corporate securities held by primary dealers” is tainted with some assets that don’t look very much like corporate bonds. Those would be private-label residential mortgage-backed securities (RMBS), commercial MBS (CMBS) and commercial paper (CP).
The Fed, perhaps in an effort to better examine the inventory issue, began breaking out the data by security type in the spring of this year. Read more
They are billed as a quick and easy way for investors to gain access to higher-yielding assets while still providing some protection if interest rates start to rise. They are ETFs which track portfolios of (floating-rate) bank loans.
And they are on fire. Read more
How much would you pay to make Goldman Sachs feel slightly uncomfortable?
The City of Oakland, California plans to dish out $226,378. Read more
That’s a SEC filing for the Winklevoss twins’ brand-new Bitcoin exchange-traded fund. For realz. Read more
The world is becoming intimately acquainted with the technical ins-and-outs of the Bloomberg LP empire.
There is Bloomberg’s bread-and-butter business of selling sophisticated data terminals to thousands of banking, hedge fund and regulatory authorities around the world. There is also the well-respected news wire run by Matt Winkler. Read more
Here’s a moderately informative activity for a Friday afternoon.
Log on to your Bloomberg terminal. Type UUID <GO> Read more
Eurobank recently lowered the over-collateralisation (OC) of its second covered bond programme to the bare minimum allowed by Greece’s covered bond law. Avid covered bond-watchers (there must be a handful of you out there) will know of course, that specially designed legal frameworks are one of the big perks of the covered bond structure – along with juicy benefits like an overstuffing of assets and the dual recourse nature of the centuries-old debt instruments. Read more
Are you a bank agonising over whether to keep your triple A-rated covered bonds as part of your liquidity buffer or send them to the European Central Bank? Not sure what to do with your AA-rated non-financial euro corporate debt?
Then you need this handy table from BofAML’s structured finance guru, Alexander Batchvarov. Read more
GOLDMAN SACHS HAS A SECRET PROPRIETARY-TRADING UNIT THAT IS RISKING THE BANK’S OWN CAPITAL BY MAKING INVESTMENTS AND CEO LLOYD BLANKFEIN SAID GOLDMAN WASN’T PROP-TRADING ANYMORE AND THAT IS WRONG AND HE LIED AND HE SHOULD BE HOG-TIED WITH HIS OWN BLACKBERRY CHARGER.
That’s a typical reaction to this Bloomberg piece on Goldman’s “secret” prop-trading team for you. Read more
Buried in Morgan Stanley’s decent third-quarter results (excluding the absurdity that is DVA of course) is this intriguing footnote:
Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $63 million compared with $76 million in second quarter of 2012 and $99 million in the third quarter of the prior year. The Firm modified its VaR model this quarter to make it more responsive to recent market conditions.
Oh, those international accounting standard-setters. Such drama queens.
On Wednesday, the International Accounting Standards Board (IASB) and its US counterpart, the Financial Accounting Standards Board (FASB), held a joint meeting to discuss impairment. Read more
When the godfather of mortgage securitisation speaks, you listen.
This week Lewis Ranieri devoted a not insignificant amount of time from his Milken conference panelist discussion to Harp 2.0 — the US government’s refinancing programme for underwater mortgages. Read more
What’s this? Something you haven’t seen before in Goldman Sachs’ results?
Net revenues in Investing & Lending were $2.14 billion for 2011. Results for 2011 included a loss of $517 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and net gains of $1.12 billion from other investments in equities, primarily in private equity positions, partially offset by losses from public equities. In addition, Investing & Lending included net revenues of $96 million from debt securities and loans. This amount includes approximately $1 billion of unrealized losses related to relationship lending activities, including the effect of hedges, offset by net interest income and net gains from other debt securities and loans. Results for 2011 also included other net revenues of $1.44 billion, principally related to the firm’s consolidated entities held for investment purposes. Read more
For today’s edition of history rhyming, have a look at this (seminal) piece of research from Citigroup’s Matt King.
On September 5 2008 — just weeks before Lehman Brothers collapsed — the Citi credit strategist sent out a research note carrying the provocative title of “Are the brokers broken?” The thesis was simple: America’s broker-banks were funding nearly half their own assets through repo transactions. Read more
Or, Allianz talking out of its… ah, never mind.
The German insurer has recently taken to touting a proposal for the EFSF to insure sovereign debt. Read more
Elizabeth Duke, a Federal Reserve governor, called for fresh government action to help troubled homeowners on Thursday as the number of distressed borrowers entering the administration’s primary foreclosure-prevention scheme fell to a two-year low, the FT reports in its rolling global market overview. Germany’s Dax index was the worst performer in initial trading, falling 1.7 per cent. Italy’s FTSE MIB index was down 1.3 per cent, followed by Spain’s Ibex and France’s CAC gauges, which both shed 1.2 per cent. The FTSE 100 fell 0.9 per cent on opening. Financial institutions came under particular pressure.
A US judge has overturned a $1.3bn jury award won earlier this year by Oracle against rival software company SAP and laid the ground for a new trial in the copyright infringement case, the FT reports. Based on evidence presented at the trial, Oracle should have been entitled to collect damages of no more than $272m, according to the ruling by Judge Phyllis Hamilton in federal court in Oakland. Bloomberg says the initial $1.3bn verdict led SAP to make a provision of €933m euros for the fourth quarter. An SAP spokesman said today the company is reviewing provisions on a quarterly basis.
The Federal Trade Commission weighed into the intensifying debate in Washington about oil-market speculation, saying supply-and-demand forces drive gasoline prices, not speculative oil traders, the WSJ reports. The FTC didn’t investigate speculation independently, but reviewed the available research and found it inconclusive. The agency also looked at competition in the oil industry and whether it affected gasoline prices from 2005 to early 2011 in the report published on Thursday. The commission also said that gas prices rise faster than they fall, a phenomenon known as “asymmetric pricing” or “rockets and feathers,” an ABC consumer report adds.
US regulators have pushed Bank of America to show what measures it could take if conditions worsen for the lender, the Wall Street Journal reports, citing people familiar with the situation. Executives of the bank reportedly responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit. But CEO Brian Moynihan isn’t expected to pull the trigger soon, if ever, on the creation of a so-called Merrill Lynch tracking stock.
The US 2011 deficit is forecast to fall substantially below previous estimates, the White House budget office has reported, through a combination of spending cuts agreed this year and higher-than-expected revenues, the FT says. In the new estimate, the White House said that the federal budget deficit would shrink to $1,320bn in 2011, down from the $1,640bn estimated in the Obama administration’s fiscal 2012 budget, MarketWatch adds. However, unemployment is expected to stay stubbornly high at more than 8 per cent into the 2012 presidential election year.
The global manufacturing recovery appeared to have come to a grinding halt in August, activity surveys suggested on Thursday, undermining hopes of a vigorous economic recovery in the second half of the year, the FT says. The global purchasing managers’ index, compiled by JPMorgan, fell to 50.1 in August from 50.7 in July, indicating the manufacturing sector was again struggling to increase output, having been growing strongly at the start of the year. Manufacturing numbers in the US, however, were better than feared. The ISM’s survey of purchasing managers reported an index down to 50.6 in August from 50.9 in July. Readings above 50 signal expansion.
The Federal Housing Finance Agency is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation, the New York Times reports. The FHFA, which oversees Fannie Mae and Freddie Mac, is expected to file the suits in the coming days. They’re expected to be aimed at Bank of America, JPMorgan, Goldman Sachs and Deutsche Bank, among others. The FT says the move is deeply controversial within the Obama administration, which is looking to ensure that the economy avoids a double-dip recession and that the banking system remains on an even keel. Bloomberg adds that BofA slumped the most in three weeks in Tokyo trading after the NYT report.