September, 2011
Snap news
Breaking pre-market news on Friday,
- Moody’s places UBS on review for downgrade; rogue trade calls into question investment banking turnaround plan — report.
- Manchester United get OK for Singapore IPO — report.
So long, Global Alpha
The WSJ has got hold of a letter from Goldman Sachs to its clients and reports the news that the bank plans to shutter its famed quant fund because of investor redemptions:
Goldman Sachs Group Inc. will close its Global Alpha Fund hedge fund by the end of October,
Further further reading
For the commute home,
- WSJ reporting that Goldman is closing its Global Alpha quant fund. Reuters reported earlier that the fund was down 12 per cent year-to-date.
- The economist as hero (of a novel).
Some friendly advice from Goldman Sachs
Oswald Grübel — shrink your investment bank!
UBS’s investment bank produced outsized losses in 2008 and 2009; consequential perception of UBS’s riskiness substantially impacted its private banking business,
Geithner’s bright idea for Europe
Here’s a scoop from Reuters on the transmogrified European resurrection of an idea we thought we’d seen the last of (and which will be sure to raise the hackles of hawkish central banking types):
U.S.
Origin of the Specie – Evolution edition
The Sunday papers had some fun with Alex Snow, the former rugby player who runs takeover target Evolution Group.
From the Sunday Telegraph:
Shareholders in Evolution Group have queried options awarded to the chief executive,
Albert Edwards and the killer wave
Not sure what to make of this.
Über bear Albert Edwards has abandoned his empirical approach for (shock horror) the mystical world of technical analysis.
Behold the killer wave.
For those of you not familiar with the Coppock indicator here’s a quick primer,
Dollar funding — central banks intervene
*ECB ANNOUNCES DOLLAR LIQUIDITY MEASURES IN COOPERATION WITH FED
Full ECB statement:
The Governing Council of the European Central Bank (ECB) has decided, in coordination with the Federal Reserve, the Bank of England,
The curse of Delta one strikes UBS
This is a snapshot of the Linkedin page of UBS equity trader Kweku Adoboli, the man the FT understands was arrested in connection to the €2bn unauthorised UBS trade, as seen through FT Alphaville reporter Izabella Kaminska’s Linkedin profile:
Markets Live transcript 15 Sep 2011
Markets Live chat transcript for the chat ending at 11:51 on 15 Sep 2011. Participants in this chat were: Bryce Elder/FT Neil Hume, FT tshiret Izabella Kaminska BEGood morning everyone.
UBS rogue trader – Grübel memo
Dear colleagues,
We regret to inform you that yesterday we uncovered a case of unauthorized trading by a trader in the Investment Bank. We have reported it to the markets in line with regulatory disclosure obligations.
UBS rogue trade – call the cops
*UBS SAYS ARREST IN LONDON RELATED TO TRADING LOSS
*LONDON POLICE SAYS MAN ARRESTED ON SUSPICION OF FRAUD
*LONDON POLICE SAY HAVE ARRESTED 31-YEAR OLD MAN IN LONDON ON SUSPICION OF FRAUD
* ARREST WAS MADE AT 0230 GMT IN CENTRAL LONDON – CITY OF LONDON POLICE,
UBS rogue trade – the wider costs
RBC’s highly rated banks team have already taken a stab at estimating the impact of UBS’s rogue trade.
Loss in context of numbers
Assuming the loss is not revised at CHF1.7bn this is 3.4% of tangible book value end Q2 2011 and CHF0.35ps.
SNB: There is no inflation risk!
You may have stumbled across this Bloomberg story on Wednesday:
Swiss 1970s Inflation Specter Seen in SNB’s Unlimited Sales
Swiss central bank President Philipp Hildebrand’s pledge to protect the economy with unlimited currency purchases may come at a higher cost than billions of francs:
UBS rogue trader alert
RTRS-UBS SAYS A TRADER OF INVESTMENT BANK HAS CAUSED LOSS ESTIMATED AT $2 BLN
RTRS-UBS SAYS POSSIBLE THAT BANK WILL THEREFORE POST Q3 LOSS
RTRS-UBS SAYS LOSS DOES NOT INVOLVE CLIENT POSITION
RTRS-UBS SHARES 8.5 PCT LOWER AFTER SAYS COULD POST Q3 LOSS AFTER UNAUTHORISED TRADING BY A TRADER
Further details as we get them.
Further reading
Elsewhere on Thursday,
- When Cramer met Geithner.
- Soros contemplates a euro-less future.
- The ECB’s damaged legitimacy.
- Energy limits to Keynesianism.
- A fondly-remembered Thatcherism.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: The conflict of interest in free news
What did Tim Armstrong, AOL’s chief executive, expect from Mike Arrington, whose company AOL bought last year for $30m,
Snap news
Breaking pre-market news on Thursday,
- Jardine Matheson to acquire 10 per cent of Jardine Lloyd Thompson at 765p a share — statement.
- Kesa Electricals says Comet same store sales down 22 per cent;
Further further reading
For the commute home,
- “Following the August decline in equities, the yield on the entire S&P 500 actually surpassed the yield on the 10-Year US Treasury.”
- Visualizing the US/China trade.
A meagre yield appetite
Were we wrong to say on Tuesday that the performance of US investment grade bonds this year was only “impressive” because they were just following Treasuries down the yield rabbit hole?
SocGen’s big Q4 preview would seem to suggest as much — or at least it would suggest that although we might have been right until very recently,
Treasuries are the new gold
We’ve talked a lot about how US Treasuries have arguably become a *type* of Giffen, Veblen, choke-price resistant good/asset (pick one) since about mid-August this year.
A date which happens to coincide with the return of over-riding deflation fears,
Merkozy & Papandreou talk, repeat earlier promises
A part of the joint statement (apparently only handed out to Athens-based reporters) via Reuters:
“Putting into place commitments of the (bailout) programme is essential for the Greek economy to return to a path of lasting and balanced growth,”
Ashmore: Hey Brics, keep away, or at least get yours
Freshly arrived in our inbox and for those curious to know what an unabashed EM partisan thinks of the speculation that the Brics might buy EU sovereign debt….
A blood-sniffing take from the ubiquitous (in the pages of the FT,
What price, Greek default recoveries?
Greece has been less a ‘when does it default?’ and more a ‘what’s the recovery on the debt?’ sovereign for a while now. At least round these parts.
Obviously in the last few days it’s really become about the recoveries as brinkmanship/risks of official creditor defection spiralled.
The market for honesty: Gold at $10,000
To those who think inflation is not a problem SocGen’s deep-thinking strategist Dylan Grice has two charts for you:
And what connects the first with the second is the fundamentally dishonest practice of printing money.
Rise of the Pawn Swan
Hat tip to International Financing Review’s Christopher Whittall for directing us to this rather interesting article by Gareth Gore at IFR about the rise of collateral-swap type deals between European institutions and US investment banks,
Why gold forward rate inversion is important
Here’s a crazy situation to consider.
The gold lease rate (which can also be understood as gold Libor, the gold interest rate or the cost of shorting gold) is becoming increasingly negative at the short end.
Marking to Greek myth
August 2: BNP Paribas marks Greek bonds down to model by 21 per cent, citing swap values and the disappearance of underlying market.
September 14: Market magically reappears long enough for BNP Paribas to say that even if they did follow its implied 55 per cent write-down,
Markets Live transcript 14 Sep 2011
Markets Live chat transcript for the chat ending at 11:39 on 14 Sep 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT pastit2 NHBonjour rabble NHHola NHand welcome to Markets Live
Monetarists and IOER
We’ve just explained RBC Capital Markets’ thinking as to why cutting IOER might be worse than ineffective. That it could instead encourage systemic risk by increasing the incentive to fail to deliver securities for settlement,