Bank of America Merrill Lynch strategist Michael Hartnett has offered a call to arms to thematic thinkers everywhere.
Invoking Dr Seuss he, well, judge for yourself:
In the next 40 years, the world will run out of oil. In the next 10 years, a laptop will communicate faster than a human brain. In the next 10 days, 112,000 people will retire in the US, Japan and Europe. Today, 56% of the world economy has zero interest rate policies. Tomorrow, there will be over 3.3 billion searches on Google. And in the next 10 seconds, the US national debt will rise by $322,000. Cyclical and secular trends are transforming at a fast and meaningful pace.
Via @karlwhelan, here’s Merrill’s ever so slightly off estimate of the cost of Ireland’s bank bailout. Do click through for the full thing:
No, we hadn’t heard of this remuneration consultant either. But Sarah Butcher over at eFinancial Careers alerts us to the fact that Cook & Co advised on designated “risk takers” at Citibank Global Markets trousering an average basic salary of £507k in 2012.
Stock and cash bonuses took average total remuneration for these staff to £2.34m in this particular Citi division. Read more
A delightful piece of strategy lands from BoAML man Michael Harntett, assessing both what the bulls are saying and, just as important, what remains unsaid.
We note that nobody seems to ask about commodities and few seem to ask about China, the old leadership. And, nobody seems to talk about the “Tails” of inflation and deflation. We believe contrarians should at least consider hedges.
From Michael Hartnett and team on Friday…
The Thundering Word Bubble, bubble, toil & trouble
Bank of America is shaking up the leadership of its investment bank as it looks to find its footing in a difficult market environment, says Reuters, citing a memo sent to employees on Sunday by co-chief operating officer Tom Montag. Christian Meissner will become head of global corporate investment banking, while two former co-heads of the unit will take on new roles, according to the memo. Mr Meissner will report to Mr Montag, the former Merrill Lynch and Goldman Sachs executive who runs global banking and markets operations for Bank of America. Paul Donofrio will become head of global corporate banking credit and transaction banking with responsibility for global treasury services, loan products and other services. Michael Rubinoff will become chairman of GCIB, where he will be charged with deepening client relationships. Both executives will also report to Mr Montag.
UK regulators are seeking to fine a former Bank of America Merrill Lynch broker about £350,000 for his role in hedge fund manager David Einhorn’s improper trading ahead of the 2009 equity raising by Punch Taverns, reports the FT. Andrew Osborne, who resigned from the bank late last year, is considering whether to appeal against the fine to a tribunal. The reports cites people familiar with his views as saying Mr Osborne, who served as corporate broker for the UK pubs company, consulted lawyers throughout his June 2009 interactions with Mr Einhorn and does not believe he gave the hedge fund executive inside information. The case highlights a gulf between US and UK regulators on insider trading, says the FT separately. The WSJ says corporate broking in the UK is coming under increased regulatory scrutiny.
Investor worries over the ability of European banks to raise much-needed equity mounted on Thursday after UniCredit suffered a steep share price fall for the second day, rattling the group’s planned €7.5bn rights issue, reports the FT. UniCredit’s share price dropped 17 per cent, compounding a 14 per cent slump on Wednesday, as the bank published details of its deeply discounted share price offering. Analysts blamed continued investor nervousness about Italy and banks in general. The newspaper says one unnamed source close to Unicredit said Consob was poised to investigate allegations that UK hedge funds had been bypassing short-selling ban to drive down Unicredit shares. The WSJ says the two lead outside underwriters, Bank of America Merrill Lynch and Mediobanca, agreed to buy 10 per cent of the offering, or €750m, should it fail completely, citing people familiar with the matter.
Investors have dumped Bank of America, driving its share price to a near three-year low of $4.99 and raising fresh worries over the state of the second-largest US bank by assets, reports the FT. The bank’s shares are trading at about 38 per cent of tangible book value, meaning investors either do not believe the value of BofA’s assets or fear the company is understating its liabilities, analysts said. The stock has plummeted 63 per cent this year, more than rivals JPMorgan Chase, Citigroup and Wells Fargo, as concerns over falling US home prices and unknown mortgage liabilities from the bank’s purchase of Countrywide Financial continue to haunt BofA more than two years after the recession officially ended.
Bank of America became the latest US bank to scrap plans for a debit card fee, acting after worries that customers of the second-largest US bank by deposits would move their accounts. BofA said its U-turn was a “response to customer feedback and the changing competitive marketplace”, the FT reports. Analysts had worried that BofA could see deposits shift to other banks, denying it a source of liquidity strength. The $5-a-month fee was proposed last month in response to new financial regulations that cap the amount retailers are charged for processing transactions. Banks have said the new rules, part of last year’s Dodd-Frank financial reforms, will cost them hundreds of millions of dollars and will end up benefiting retailers but not consumers. The rule, which was set by the US Federal Reserve and came into force last month, caps the so-called “interchange fee” at about 24 cents for an average debit card transaction, a significant decline from previous charges. According to the Wall Street Journal four other big lenders, led by JP Morgan Chase, dropped their own debit-card fee plans over the past week. Collectively the banks hold more than $3,100bn of deposits, representing almost a third of those handled by US banks.
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: Read more
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): Read more
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. The warrants were priced at $7.14, though they do remain valid for a super long 10 years. Read more
The holding company of Vincent Tchenguiz’s property management arm was forced into administration by its board on Monday, less than a week after the billionaire property tycoon and his brother Robert were arrested by the Serious Fraud Office, reports the FT. Last week, Peverel, the UK’s largest property management company, failed to meet a demand by Bank of America Merrill Lynch to repay corporate debt of about £125m ($202m). Meanwhile, the Telegraph quotes Robert Tchenquiz calling the SFO raids were “a publicity stunt”.
FT Alphaville was all set to work through the early morning examining the release of allegedly damning documents relating to the actions of Bank of America Merrill Lynch or its subsidiaries in the ongoing struggle to provide settlements in the foreclosure crisis.
In the end, the midnight EST release of internal emails from November 2010 via the hacker group Anonymous by a former employee of Balboa Insurance proved far less interesting than some feared and others hoped. A BofA spokesperson on Monday said “we are confident that his extravagant assertions are untrue,” reports Reuters. Read more
Bank of America Merrill Lynch is out with a whopper of an oil note on Monday.
Amongst other things, it makes a number of bold predictions, least of all this: Read more
Bank of America Merrill Lynch has sold loans it made to UK real estate firm Foxtons at the peak of the London property bubble to Haymarket Financial, a corporate lender launched last year, reports the FT. The deal severs all lending links between BofA and Foxtons, as the US bank is also selling its share of Foxtons’ mezzanine loans. Foxtons, best-known for its aggressive selling tactics, was bought for £360m by private equity group BC Partners in May 2007 using about £270m of debt from BofA and Japan’s Mizuho. A debt restructuring last December reduced the company’s debt from £270m to £130m. HayFin is paying less than 90p in the pound for the senior loans.
Bank of America Merrill Lynch has joined the passengers on the good ship QE2 and expects to set sail some time early in New Year.
From strategist David Bianco on Wednesday: Read more
Tuesday’s six-notch rating downgrade of BP by Fitch to BBB, appears to have spooked some of the firm’s oil trading counterparties, reports FT Alphaville. According to Reuters, Bank of America Merrill Lynch supposedly told traders to stop entering any new oil trades with BP that extend beyond June 2011. Read more
AIG is eyeing a sale of its consumer finance unit American General Finance in its continuing effort to repay US bailout funds and divest a struggling non-core business, reports the FT. AIG – 80% US government-owned – has hired Bank of America Merrill Lynch to restructure and sell AGF, said people close to the situation. AIG declined to comment on Wednesday but has said it is looking at strategic alternatives for AGF.
Bank of America Merrill Lynch will on Thursday announce the sale of its $1.9bn portfolio of investments in private equity funds to Axa Private Equity, reported the FT. The move comes amid growing regulatory pressure on banks to dispose of their buy-out interests. The deal is one of the biggest since the financial crisis for the secondary private equity market, in which second-hand interests in buy-out and venture capital funds are traded by investors, often at a discount to their face value.
Alberto Cribiore is said to have blocked Merrill Lynch’s sale for $100bn a year before the investment bank was sold to Bank of American for $50bn. Trouble is, he doesn’t remember it like that. Read more
It was only a matter of time. California — following in the footsteps of Ireland and Iceland, Greece, Spain, and politicians of all stripes and nationalities — has called for an examination of credit default swaps sold against its bonds.
As Reuters reported: Read more
So why accept it, you might ask?
Unlike the cheery countenance portrayed in his stock pic, Judge Jed Rakoff has been all scowls since the day he picked up the case of SEC v Bank of America Merrill Lynch. Read more
Bank of America aims to return Merrill Lynch’s “thundering herd” of retail brokers to full strength by adding as many as 2,000 people to its global wealth management division over the next year. The US bank plans largely to train rookie brokers in its drive rather than launching a costly price war for experienced talent. The decision underlines BofA’s desire to keep pay expenses in check. But the move could also make it more difficult to service wealthy investors.
Harley Bassman, a veteran strategist on the US rates trading desk at BoA Merrill Lynch, is hanging up his boots after more than 25 years on Wall Street. Or at least his widely read RateLab strategy note is going on “indefinite hiatus.”
Here is his final dispatch: Read more
This is the second amended SEC complain in the ongoing rumpus over whether Bank of America adequately informed investors over the size of losses at soon-to-be-acquired Merrill Lynch, along with the fact that Merrill executives were about to trouser $5.8bn in bonuses.
A 2009 perennial question – how long will the rally in global equities last? The answer is right through next year, if you believe the consensus view from the latest Bank 0f America Merrill Lynch fund manager’s survey.
Optimism about the economy strengthened this month. A net 80 percent of respondents expect the world economy to grow over the next 12 months, compared with a net 69 percent in November. Two thirds of investors expect equity markets to return to traditional growth levels or better. Read more