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’[Something for the weekend] Let’s have the FTUK index (and the T-shirt)
Goodhart’s Law, as refined, states that when a measure becomes a target, it ceases to be a good measure. Charles Goodhart coined it (the law, rather than anything else) at the Bank of England. At the time the Bank was targetting M3,
Papandreou plunge… or Corzine crash?
Then again, it is 1.11.11, or 11.1.11 for our American friends.
Financials taking a battering on Tuesday morning in New York (S&P 500 down 2.46 per cent at pixel time):
Merrill Lynch’s derivatives set sail for safe harbors
Over the last week, news outlets and bloggers have discussed Bank of America’s move to shift derivatives exposures from its Merrill Lynch unit to its deposit-taking, FDIC-insured bank.
A Bloomberg article kicked the whole thing off:
The continuing mystery of US banks’ European exposure
Europe may or may not be saved but Q3 earnings releases by US banks suggest they’re content with their exposure to the continent.
We looked at the methodology behind exposure disclosure in this post.
Bank of America reports, confuses, wins and loses
Listening to Bank of America’s Q3 earnings call reminded us of this sweary scene (5:46 onward) from BBC comedy the Thick of It:
“What we do is we overcomplicate…stats, percentages, international comparisons,
Bank of America results: DOA or DVA? [updated]
Alright, Bank of America, you win. FT Alphaville thought Citi was the worst when it came to being obtrusive about taking gains on the deterioration of their own creditworthiness. Citi’s DVA of $1.9bn was “Liabilities at Fair Value Option”.
It’s going to be a miserable third quarter for banks, say banks
US bank reporting season is almost upon us and we’re looking forward to investigating the mysteries surrounding the performance of the bulge bracket since the turn of the year.
To give you a sense of how bad it’s been for the 1 per cent,
Snap news
Breaking pre-market news on Monday,
- Belgian and French finance ministers to discuss ways to shore up Dexia — report.
- Barclays and BofA looking to sell stake in Archstone — report.
- Numis Corporation says H2 revenues up 6 per cent — statement.
Le Spleen de Morgan Stanley
All is not well in the kingdom of Stanley. The CDS spreads have blown out and the market is concerned. Very, very concerned. Moody’s Analytics is here to tell us all about why that is.
The first [concern] is the exposure of MS to European institutions and the second is the level of trading revenues in the third quarter.
A genuinely stressful stress test
Wouldn’t it be nice if bank stress tests were, well, stressful?
Too often they look like they’re done by him:
When they should be done by her:
Fortunately Arbuthnot’s Mr. Banks, James Ferguson,
“This is really getting nuts”
A fair summary of recent Bank of America events, from Gary Lynch, the bank’s top attorney.
The quote is from this week’s Bloomberg Businessweek cover story, which asks whether Brian Moynihan can stop the rot at the troubled bank (click below to read the piece):
Kickback and relax with the mortgage reinsurance scandal
Jeff Horwitz has a cracking story in Tuesday ‘s American Banker on a previously undisclosed report by the Inspector General of the Department for Housing and Urban Development (HUD) into allegations that US banks took lucrative kickbacks from mortgage insurers.
The Bank of America “de-layering” bloodbath
Well, this is one way of trying to show that you’re in control and that Merrill Lynch is absolutely, totally, honestly, really, not going anywhere.
Here’s the top of the statement released by BofA on Tuesday evening:
What price the banks’ FHFA lawsuit losses?
The lawsuits filed on Friday by the Federal Housing Finance Agency against 17 global banks involved nearly $200bn of mortgage-backed securities but the regulator refused to put a figure on the total losses it was seeking to recover.
Fannie and Freddie’s revenge — the details [updated]
– By John McDermott and Cardiff Garcia
The details of the US government’s attempted bank raid are coming in on Friday afternoon.
The Federal Housing Finance Agency has filed 17 lawsuits against banks operating in the US.
BofA’s Merrill Lynch ETF
Warren Buffett’s Bank of America warrants are perilously close to out-of-the-money territory on Friday.
Shares in everyone’s favourite lawsuit piñata were trading at $7.22 (down 8.72 per cent) at pixel time.
US government attempts bank raid
Friday promises to be an ugly day for US financials:
Stories in the New York Times the Wall Street Journal on Friday suggest that a grand mortgage settlement is farther away than ever and that banks — or at least one bank (guess which!) — are coming under increasing pressure to prepare for the worst.
Buffett’s $1bn day at the office [updated]
Don’t call it a bail-out.
Our apologies for another BofA post but analyst reaction has been coming in and though most it can be summed as “confidence boost that changes little”, we think there’s a couple of extra points worth mentioning.
Buffett’s bargain BofA deal
By John McDermott, Cardiff Garcia, and Joseph Cotterill
BofA’s Buffett bounce was at 13 per cent at pixel time, paring gains from a 20 per cent high earlier on Thursday. Part of this may be due to a reverse torpedo-like situation, according to the experts at Data Explorers.
Woah, BAC up
Well, Warren Buffett did say he wanted to pay higher taxes, and we suppose his investment into Bank of America resembles something like a boon to Treasury, even if it’s just a sense of relief.
A quick market reaction while we get a grip on this:
This is not a Bank of America capital increase
Compare:
CHARLOTTE, N.C.–(BUSINESS WIRE)–Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway,
Bank of America – not Citi and not being bought by JPM
Turns out that some banks don’t need sovereigns to create their own funding loop problems.
Not for the first time, Bank of America is in a league of its own.
It’s a quick point made by Marc Ostwald of Monument Securities on Tuesday,
JPMorgan says BofA may need a capital raise
No, not that it’s about to buy the bank in an earthquake-causing deal.
But in a short note published on Tuesday, JPMorgan did upgrade BofA from underweight to neutral, explaining that the pressures on the bank “may actually increase the chances of a credit-positive development,
Bank of America, inverted
Chart courtesy of Otis Casey at Markit:
Usual caveats about illiquid one year CDS markets, et cetera. BofA was trading at $6.25, down 2.5 per cent, at pixel time.
The Bank of America explanation game
Who wants to play our Bank of America game?
Be your very own markets reporter by filling in the blank in the mock lede below. Bonus points for use of the words “swoon”, “pare”, “checked”, “fears” and “rumours”.
Snap news
Breaking pre-market news on Friday,
- Autonomy recommends £25.50 a share offer from Hewlett Packard — statement.
- Competition Commission finds a lack of competition in pay TV movies; BSkyB says no regulatory intervention needed — statement and statement.
Paulson’s BofA-Citi-Wells switcheroo
John Paulson’s quarterly 13F filing was released late on Monday and the headlines make for interesting reading. We may go through it in more detail later but we thought this portfolio change-up was worth noting right away:
Flat BAC
Seems the only way to describe Bank of America’s CDS curve after Monday’s (margin?) disaster. Citi appended for contrast:
One-year BAC CDS jumped from 99bps to 285bps, according to Markit data. Well.
Goldman: this is not 2008
US financials are melting on Monday:
As at pixel time, we’re facing a broad-based sell-off but the banks are among the hardest hit.
However, Goldman Sachs, appropriately enough, reckons this will be a short-term soft patch.
Will the last person to sue BofA please turn out the lights
Everyone’s favourite bank was again the S&P 500′s worst performer at pixel time:
AIG (and thus the taxpayer) are trying to recover $10bn, reports Reuters.