July, 2010
The Big Fume
Why is Barry Ritholtz, round at The Big Picture, so bad tempered when it comes to writing about the Goldman Abacus case?
As the uber-blogger fumed on Friday:
Amongst the regular complaints I have about the financial media is the lack of accountability of alleged experts.
A flashing red light from the ECRI
This will have bears like David Rosenberg and Albert Edwards licking their lips.
The Bloomberg chart below — which you can click to enlarge — shows the Economic Cycle Research Institute’s (ECRI) weekly indicator:
Another Ocado analyst who doesn’t get it
Even we are starting to get “really bored” with this, but another City analyst has published a damning note on Webvan 2.0.
This time the man who “doesn’t get it because he’s used to assessing the prospects of traditional high street retailers rather than new online business models such as Ocado”,
A counter-cyclical Basel banking proposal
This looked bracing from the Basel Committee for Banking Supervision on Friday: proposals for a counter-cyclical capital buffer for banks.
But there’s a bit less than meets the eye.
Here’s some Basel jargon introducing the buffer,
‘The stage might well be set for a deflationary process’
Brian Yelvington, fixed income strategist at Knight Research, is concerned about the potential for deflation in the US. As he put it in a note published on Friday:
Data observations and central bank concerns have led us to believe that we might not just be in a deleveraging process,
Citigroup Q2 net income $2.73bn
Citigroup’s second quarter results are through and the bank, it seems, continues in the tradition of Bank of America and JP Morgan before it.
Net income for the quarter came in at $2.73bn, down from $4.39bn the year before,
Fed’s asset purchase aftermaths aren’t all-American
Or, more evidence that the Federal Reserve’s unconventional monetary policy affects everything.
In a new St Louis Fed working paper, Christopher J. Neely makes a case for the international effects of the Fed’s large-scale asset purchases (LSAPs).
Bank of America beats with EPS of $0.27
And the beat goes on in US earnings season. Bank of America announced Q2 earnings of $3.1bn on Friday, translating to an EPS of 27 cents a share versus estimates of 23 cents.
More flashes, via Reuters:
Zen and the art of flogging UK banks
We live in a new era of Austerity Britain.
One must make cutbacks and maximise value where one can.
So, then. Not just when — but how– should the UK government sell off its stakes in Lloyds and RBS,
EMU break-up risks UK depression worse than 1930s, says ING
ING recently spelt out what a eurozone break-up would mean for the global economy — seemingly much to the delight of commentators like the Telegraph’s Ambrose Evans-Pritchard.
From the July 7 edition of the British paper:
Markets Live transcript 16 Jul 2010
Markets Live chat transcript for the chat ending at 11:36 on 16 Jul 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHHola NHit’s 11.03am NHand time for the final Markets Live of the week
Correlated returns, high-yield edition
It seems equities, commodities and currencies are not the only asset classes running increasingly correlated returns.
Jerry Tempelman, a director in the capital markets research group at Moody’s Analytics,
Credit distortion de crise
It’s been (relatively) good to be a bank creditor. But for how long?
As the FT’s Gillian Tett notes in her Friday column, one of the doubts still lingering — even with the passage of the US financial reform bill — is how to avoid taxpayers funding future bail-outs.
Found – Ocado investor [updated]
Call off the search.
Finally someone has said they are backing the flotation of Webvan 2.0.
Unsurprisingly it is one of those overseas investors who apparently gave the company such a totally, like, AMAZING reception in recent meetings.
US financial reform – ‘How could rational people do this?’
If you’re looking for some exceedingly harsh criticism of the just-passed US financial reform bill, look no further.
Richard ‘I ♥ banks’ Bove is here to serve, with this snappily-titled note:
How Could Rational People Do This?
A caveat first — Bove has had some cringe-worthy bank calls in the past (particularly this one — on the bank whose name shall not be spoken).
Further reading
Elsewhere on Friday,
- Why the market is overvalued.
- How supermodels are like toxic assets.
- Tail risk, smooth returns and investor democracy.
- The folly of common currencies.
- What does correlation mean for the market?
- Goldman sachs pushes gold-hedging.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Gillian Tett: ‘Bail-in’ will save the taxpayer from the bail-out
As the US passes financial reform, what is still unclear is whether this system will be robust enough to really prevent more big bank failures,
Snap news
Breaking pre-market news on Friday,
- Macondo well integrity test could last 48 hours, BP says — statement.
- National Lottery Commission to reject Camelot’s plan to offer ancillary activities — statement.
Goldman wins SEC fight
Well, this is a MAJOR result for Goldman Sachs. Charges associated with the Abacus affair are being settled with a payment of just $550m – $250m of which will go to allegedly harmed investors and the remaining $300m going to the US Treasury.
UPDATE: Goldman has settled with SEC (The soaring price of squid)
Just slamming an update in here…
According to Henny Sender and Francesco Guerrera in the FT’s NY office, Goldman has definitely reached a settlement with the SEC covering the Abacus affair and a string of other mortgage-related matters.
What’s the US financial reform legislation actually called?
We’re confused. Is it HR4173 or the Wall Street Reform Act? Or the American Financial Stability Act of 2010? Or the Dodd-Frank Wall Street Reform and Consumer Protection Act?
Anyway, it’s been passed..
Summer reading from SocGen’s Dylan Grice
Need some beach reading? SocGen strategist Dylan Grice on Thursday shared five books he’s read recently that he rather enjoyed.
Here are Grice’s picks and brief commentary:
- “The Drunkard’s Walk” by Leonard Mlodinow isn’t just a book about how deceptive randomness can be;
The BSkyB is the limit
When Nomura slapped a £10 target price on satellite broadcaster BSkyB earlier this week our reaction was to scoff. However, it looks like we are wrong. Sky really could be worth that sort of money.
That at least is the view Crispin Odey of Odey Asset Management reckons shareholders would be mad to sell out for anything like Rupert Murdoch is offering.
Now, about that Citi muddle…
Some confusion in the market for C. on Thursday, after this story was published on Bloomberg:
July 15 (Bloomberg) — Citigroup Inc. said it misclassified as much as $9.2 billion of repurchase agreements and $1.9 billion of securities lending transactions as sales during the past three years.
Turbo-Drachmarks
Push over Lazarus, there was a new comeback kid in town on Thursday:
A reminder, though, that this dead cat bounce rally was born with the new quarter. Not to mention a dollar increasingly hammered on double-dip fears.
The end of diversification, natgas edition
What happens when you get a weekly inventory natgas weekly figure that’s roughly in line with expectations?
This, apparently (H/T Sean Corrigan):
Some market participants say this could have something to do with an oil versus natgas position dominating the market.
You cannot be Sirius
So this is what it means to be given the ‘cold shoulder’ in the City of London.
From RNS:
Sirius Real Estate Limited
(“Sirius” or “the Company”)
Director Resignation
Following the publication of a statement on 14 July 2010 by the Panel on Takeovers and Mergers regarding Brian Myerson and others,
Is ‘cash for commodity’ the biggest trade in town?
FT Alphaville has speculated before about the chances that the financial credit crunch led a number of commodity players to turn to the term-structure of their markets to access an alternative type of funding.
This time it’s different
Compare and contrast, Ocado version.
From the Silicon Valley Insider, July 2000:
[Spokesman] Grebey says some analysts don’t understand how popular the service is with users, particularly the fact that Webvan drivers bring the groceries right into each customer’s kitchen,
Spotted outside Ofcom HQ
So, is Richard Desmond close to getting his hands on Channel Five?
Well… seen parked outside Ofcom on a blustery Thursday afternoon in London:
That’s the Bentley Rolls Royce of, er, one Richard Desmond — with personalised numberplate: