James Surowiecki, in a column on the reasons that banks require young analysts and associates to work long hours, notes the role of culture in addition to the simple economics of hiring fewer people:
Habit, too, is powerful: things are done a certain way because that’s how they’ve been done before, and because that’s the way the people in charge were trained. When new regulations limited medical residents’ working hours to eighty a week, many doctors complained of declining standards and mollycoddling, and said that it would have a disastrous effect on training, even though residents in Europe work many fewer hours, without harming the quality of medical care. “I went through it, so you should” is a difficult impulse to resist. 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
Arguing over which city is the world’s premier financial hub is so pre-crisis. For years now the debate has been Who is the Most To Blame For This Godawful Mess? And how? But that got boring and no-one went to jail.
So now it’s time for Who’s Got the Worst Regulators? Read more
A chart from Pew’s big new Trends in American Values: 1987-2012 report (page 64):
New York City’s securities industry could lose nearly 10,000 jobs by the end of 2012 due to lower industry profits, New York state’s comptroller predicted, the Wall Street Journal reported on Tuesday. In a report set to be released Tuesday, Comptroller Thomas P. DiNapoli said bonuses were also likely to shrink this year. Since January 2008, the securities industry in New York has seen 22,000 jobs evaporate. If Mr. DiNapoli’s prediction of 10,000 more jobs losses between August 2011 and year-end 2012 comes true, the paper says that would represent a decline of 17 per cent. About 4,100 jobs have already been eliminated since April, but deeper cuts are widely seen as inevitable given a recent flurry of corporate expense-trimming announcements. Goldman Sachs said it may cut 1,000 jobs or more, while Credit Suisse and Barclays have also announced layoffs. In addition, Bank of America has said it plans to lay off 30,000 workers. It isn’t clear how many of the banks’ cuts will come in New York or how many will be in the securities operations, says the WSJ.
Tuesday 21.30 BST. Wall Street has averted entering an official bear market with a stunning late rally of more than 4 per cent in the S&P 500, after the FT reported that European Union finance ministers are examining ways of co-ordinating recapitalisations of financial institutions. In the final 45 minutes of trading, the S&P rebounded from a loss of 1.8 per cent to close up 2.3 per cent at 1,123.94. Bank stocks led the rebound with the S&P financials index rising 4.1 per cent and reversing an early drop of 2.9 per cent. That helped the S&P avoid closing down more than 20 per cent from its April high, which is the threshold for a bear market. “Positive European headlines have been few and far between, and, ultimately, today’s rally was spurred by a headline and not the actual implementation of a policy decision,” said Dan Greenhaus, chief global strategist at BTIG. Such doubt is echoed across other markets, as the dollar and Treasury bonds were hit by late selling pressure as stocks surged. However, many strategists were sceptical that a turning point had been reached, especially as the surge in optimism drowned out other worrying news, namely a three-notch downgrade of Italy’s sovereign credit rating to Aa2.
The arrest of more than 700 protesters on Saturday has drawn worldwide attention to Occupy Wall Street, a fledgling protest movement modelled on the Arab spring, protests in Greece, and demonstrations in the state of Wisconsin earlier this year, the FT reports. The protesters were arrested while crossing a roadway of Brooklyn Bridge, stopping traffic. Protesters claimed that police had entrapped them by leading them on to the vehicle section of the bridge. The police said the demonstrators ignored warnings of arrest. Competing videos by the demonstrators and police were posted to YouTube. In one posted by police, officers can be seen warning protesters that they risked arrest by entering the roadway. A video posted by demonstrators shows police walking in front of protesters – and filming them with hand-held recorders – as they marched on to the road without attempting to stop them.
Protests targeting the financial sector escalated on Saturday as more than 90 people were arrested as they marched through Manhattan, the FT reports. The so-called “Occupy Wall Street” movement has entered its second week and has drawn hundreds of activists to protest in front of the New York Stock Exchange and other commercial centres of the city. On Saturday, skirmishes with the police erupted as a group of several hundred attempted to march to the UN building without a permit. Protest organisers said at least 96 people were arrested, with at least five being sprayed with mace by police. Scenes of the protests posted on YouTube showed hundreds of people swarming the streets near Union Square as police worked to move protesters back onto the sidewalk. Some videos captured police shoving protesters to the ground, fencing them off and using pepper spray on a group of women.
Wall Street lost steam ahead of the close on Tuesday, failing to match the rebound in Europe as traders navigated uncertainty about the eurozone, global growth and the next move by the Federal Reserve, the FT reports. The S&P fell 0.2 per cent, while the FTSE All-World equity index rose 0.4 per cent and the FTSE Eurofirst 300 advanced 2 per cent. Commodities were mixed, with Brent crude up 1 per cent to $110.28 a barrel. Throughout much of the day, markets were upbeat, notwithstanding yet another series of eurozone potholes. News that Standard & Poor’s had cut Italy’s credit rating initially revived fears that Europe’s deepening debt problems could spread to the region’s bigger economies. Investors were wary as they awaited confirmation that Greece will receive an $8bn bail-out tranche and as evidence emerges of just how much confidence in the European banking system has been affected by the fiscal crisis. But early mild selling in European shares was replaced with sustained buying, helped by a sense that Monday’s tumble, in which raw materials were hammered and global stocks lost 1.9 per cent, was overdone, and a view that S&P’s move on Italy had largely been discounted by the market.
New York City police may limit access to Wall Street for a third day on Monday, Bloomberg reports, requiring workers and residents to show identification, after protests targeting financial firms over the weekend. About 300 to 400 people demonstrated near Chase Manhattan Plaza on Sunday, down from 1,000 on the previous day, as part of a protest dubbed “#OccupyWallStreet.” The demonstration aims to get President Barack Obama to establish a commission to end “the influence money has over our representatives in Washington,” according to the website of Adbusters, a group promoting the demonstration. A police spokesman said arrangements for Monday would be re-assessed.
This came via the SEC home page. You can see the Nyse’s recent announcements here. Sifma has also recommended that bond trading resume Monday. Read more
A sign that China’s manufacturing base was still trundling along at a good lick was helping to ease global growth fears somewhat and encouraging risk asset bulls tempted by cheaper valuations following the August wobble, the FT reports. However, an indicator of underlying market nerves continued to flash in the precious metals space, as gold recorded yet another fresh high by breaking decisively through $1,900 for the first time. S&P 500 futures heralded a 1.5 per cent pop for Wall Street later in the day, while the FTSE Eurofirst 300 had started its session with a gain of 1.2 per cent as miners and banks rallied. The dominant tone was mildly “risk on”, with perceived havens such as the US dollar slightly weaker – off 0.2 on a trade-weighted basis – core bond yields inching higher and commodities advancing.
European bourses joined Asian markets in welcoming Wall Street’s overnight surge after the US Federal Reserve’s promise to freeze interest rates until 2013 – and possibly introduce more quantitative easing –- provided a firebreak to recent turbulent risk asset selling, the FT reports. Confidence remained shaky, however, with the Fed’s downbeat assessment of the US economy reminding investors that the global growth concerns –- coupled with lingering US and eurozone fiscal deficit worries –- that caused the market turmoil still weighed on sentiment. The FTSE All-World equity index was up 1 per cent as Asia rallied 2 per cent. The FTSE Eurofirst 300 was sporting a gain of 0.5 per cent, boosted by miners and energy groups as Brent crude led commodities higher with a 2.8 per cent rise to $105.43 a barrel. The more bullish tone came after Wall Street capped an incredibly volatile 24 hours by rallying strongly into the close on Tuesday. The S&P 500 added 4.7 per cent, its biggest one-day jump since March 2009. That pared much of a 6.7 per cent decline on Monday, its worst drop since the financial crisis, but still leaves the benchmark down 14 per cent from its cyclical peak hit at the end of April and lower by 12.8 per cent over just the last 12 sessions.
Wall Street’s refusal to buckle when faced with the risk-averse session presented by Asian and European peers has provided stability to many market sectors, the FT reports. But despite strength in selected risk assets, there remains a tangible sense of wariness regarding the eurozone sovereign debt crisis. An early strong bounce in the dollar forced a retreat for some commodities and suggests that anxiety about decelerating economic activity in the US and China may also be keeping a lid on any exuberance. A sharp pullback in US durable goods orders for April has only heightened those concerns. However, the buck’s strength has faded somewhat and this has allowed certain assets to gain. WTI crude is up 1.6 per cent to $101.16 a barrel, although copper is sharply outperforming with a 2.2 per cent gain to $4.10 a pound as a buy recommendation by Goldman Sachs continues to reverberate. The FTSE All-World equity index is up 0.2 per cent, having at one point shed 0.5 per cent to hit a two-month low, when it was 6 per cent off the cyclical high touched at the start of May. Core bonds have been in and out of positive territory, tracking the vacillating broad shifts in risk appetite. The yield on US 10-year paper is up 1 basis point at 3.12 per cent, still flirting with six-month lows. A Treasury auction $35bn of five-year notes saw the strongest demand, as measured by the bid-to-cover ratio, since 1994. The yields at auction were the lowest since November, at 1.81 per cent. Wall Street’s S&P 500 opened with a loss, but is up 0.3 per cent, led by firmness in tech stocks. The FTSE Eurofirst 300 is up 0.7 per cent, helped by “bargain hunting” in banks, while Asia fell 0.6 per cent.
A well-received earnings report from computer group Dell appeared to spark a risk rally after several dour sessions, though low Treasury yields suggested underlying caution about US growth remains, the FT’s global market overview reports. The FTSE All-World equity index was up 0.5 per cent, bouncing off a four-week low, while commodities were mostly firmer and the dollar weaker – a classic “risk-on” sweep for traders. S&P 500 futures were pointing to a 0.3 per cent gain for Wall Street at the open, with the FTSE Eurofirst 300 was up 0.6 per cent following a 1.1 per cent advance for the Asia region.
New York’s attorney-general has opened an investigation into the way mortgages are securitised and sold to investors, and has requested meetings with at least three US banks to discuss the industry’s practices, the FT reports. Eric Schneiderman, who succeeded Andrew Cuomo as the state’s top lawyer earlier this year, has sought to meet executives from Bank of America, Goldman Sachs and Morgan Stanley, people familiar with the matter said. A full-blown inquiry would mark Mr Schneiderman’s debut as Wall Street enforcer, a role at times relished by his predecessors, Eliot Spitzer and Mr Cuomo. It may also emerge as yet another headache for large banks already facing numerous legal and regulatory skirmishes stemming from their mortgage units’ actions before and during the financial crisis.
Rising concerns about contamination from the Fukushima nuclear accident and little sign that allied bombing has reduced Colonel Gaddafi’s resolve pushed the FTSE All-World index lower for the first time in five days, the FT’s global market overview reports. The global benchmark was down 0.2 per cent as the rally from last week’s Japan quake/Libya-inspired rout fades. This continues an easing trend seen overnight on Wall Street, when the S&P 500 lost 0.4 per cent as traders stepped back from the market in an attempt to draw breath after a several days of extreme volatility. News that the US had stopped food imports from the area and that Tokyo authorities have warned young children not to drink tapwater further spooked Japanese stocks, pushing an already soft Nikkei 225 to close down by 1.6 per cent, and nudging US stock futures lower. Wall Street was currently predicted to open with a loss of about 0.3 per cent on Wednesday.
Total compensation and benefits at publicly traded Wall Street banks and securities firms for 2010 hit a record of $135bn, reports the WSJ, citing its own analysis. The total marked a 5.7% increase from $128bn in combined compensation and benefits by the same companies in 2009. The rise was driven by a revenue rebound as the financial crisis receded, the report notes. At 25 large firms that reported full-year results, revenue rose to $417bn, another record, even though last year’s 1% increase was a fraction of the industry’s revenue jolt in 2008-09. Buried in the numbers, however, are signs that pressure from regulators and shareholders led to deferred compensation, which made up as much as half of total pay in 2010, up from about a third previously, according to US pay consultants.
Traders were tackling a long-anticipated correction in risk assets on Thursday, the FT report. The FTSE All-World index was down 0.5 per cent, commodities were weaker and the dollar stronger. Disappointing results from Goldman Sachs and a lack of follow-through from barnstorming Apple earnings had battered the banking and tech sectors on Wall Street on Wednesday. This precipitated a widespread bout of selling as investors locked in profits following moves in commodities and stocks to some record and cyclical highs. The sense of vertigo was exacerbated by strong growth and inflation data out of China on Thursday that has once again raised fears that Beijing will need to tread forcefully on the monetary brake – a strategy that could damage traction in the world’s second biggest economy. Shanghai slumped 3 per cent.
Citigroup on Tuesday reported fourth-quarter earnings that disappointed investors and sent its shares sharply lower, despite its first full-year profit since 2007, the FT reports. Citi’s poor performance in the last quarter of 2010 overshadowed its full-year profit of $1.31bn and its claims of regaining ground lost in the financial crisis, Citi shares were down by more than 6% to $4.78 on Tuesday in New York after it reported 4Q earnings per share of $0.04, well below analysts’ expectations of $0.08, despite a $2.2bn reduction in loan loss provisions. Unusually active trading in Citi stock weighed on the overall market and on shares of peers such as BofA and Wells Fargo, which report results this week. DealJournal notes a further disappointment for Citi’s investors was Tuesday’s confirmation that dividends will have to wait until next year.
Wall Street’s fourth-quarter results are likely to suffer from sluggish trading activity as Europe’s sovereign debt crisis and rising competition deprived banks such as Goldman Sachs and Morgan Stanley of a key source of profits, reports the FT, citing the views of executives and analysts. Lacklustre earnings in fixed income trading in the past two quarters of 2010 after a robust first half will put pressure on banks to pay smaller bonuses to traders after last year’s big rewards for star traders in the bond, forex and commodities markets. Concern over earnings in fixed income, currency and commodity (FICC) trading has led several analysts to cut their fourth-quarter profit forecasts for Goldman and Morgan Stanley, both set to report results shortly.
Hopes for a reduction in eurozone angst following news out of Brussels of a planned bail-out system to combat future crises has boosted the euro and freed investors to embrace improving global economic signals, the FT’s global market overview reports. The FTSE All-World index was up 0.3 per cent, commodities were rallying and the dollar falling as risk appetite increases. US stock futures suggest Wall Street will open flat but at the 2-year highs reached on Thursday following better than expected reports on housing, jobs and factory activity in the mid-Atlantic region. A sharp downgrade of Ireland’s credit rating by Moody’s has been waved away as old news. The FTSE Asia Pacific index was up 0.4 per cent, with South Korea’s Kospi Composite up 0.9 per cent to a 3-year high and Taiwan up 0.4 per cent. However, Japan’s Nikkei 225 lost 0.1 per cent, with investors cautious as the benchmark index has gained nearly 13 per cent since early November on the back of improved corporate earnings. The FTSE Eurofirst banking index was down 0.5 per cent and this has ensured the broader FTSE Eurofirst 300 is down 0.2 per cent. London’s FTSE 100 was up 0.1 per cent, supported by resources groups. The euro is displaying some early vigour on the news out of Brussels, rising 0.5 per cent versus the dollar to $1.3297 and up 0.4 per cent to the yen at Y111.62. The dollar index was down 0.3 per cent at 79.79 as the pull back in Treasury yields and the more upbeat broader mood reduces “haven” flows.
Wall Street’s sentiment towards Goldman Sachs and Morgan Stanley has turned sharply bearish over the past month with analysts’ estimates for their third-quarter earnings plunging amid a slump in trading activities, reports the FT. The poor performance of the banks’ trading operations will intensify questions over their business models and fears of job cuts across the financial industry. Analysts have slashed forecasts for Morgan Stanley’s 3Q results by more than 73% in the past 30 days, according to Thomson Reuters’ StarMine, while Goldman is now forecasting the lowest quarterly earnings per share, excluding exceptional items, since November 2008.
The US Securities and Exchange Commission has vowed to bring more high-profile enforcement actions against Wall Street over the financial crisis, following last month’s $550m settlement with Goldman Sachs, reports the FT. US regulators told the Financial Times the SEC’s contentious civil fraud case against the bank over the sale of mortgage-backed securities was an example of the type of high-profile action its revamped enforcement division was working on.
Stocks were almost flat after investors, cheered earlier by the continuing upswing in bidding activity, were increasingly cautious as the day wore on only hesitantly embracing risk amid political uncertainty, especially after Australia’s election, reports the FT. The FTSE All-World index is down a fraction as a negative close on Wall Street outweighed gains in the European markets, which were sparked by economic data and further M&A activity – including a report of new bidders for Potash to rival BHP Billiton’s $39bn approach. The S&P 500 index closed down 0.4 per cent, after rising at the open when Hewlett-Packard said it was bidding $1.6bn for 3Par – which rival Dell has been after for $1.15bn. The Nasdaq Composite index fell further as HP and other tech shares slid.
With congressional elections approaching and the middling pace of economic recovery, it’s reasonable to expect the political temperament in the US will worsen before it improves.
On Tuesday the Center for Responsive Politics, which tracks donations to political campaigns, revealed the following chart, which shows how the money given by the financial sector is allocated between Republicans and Democrats: Read more
US banks with Wall Street operations are bracing for a slump in trading profits this year after a poor start to the third quarter amid a slowdown in market activity in July, reports the FT. Executives said volumes and profitability last month were even lower than in the sluggish second quarter, with hedge funds particularly reluctant to take big bets on equities and debt. Trading activity picked up after the recent release of European banks’ “stress tests” but some banks, taking a pessimistic view, are considering laying off traders.
The US Senate finally passed a landmark reform of Wall Street on Thursday, delivering President Barack Obama’s second big legislative victory and ushering in a raft of restrictions on banks, the FT reports. Mr Obama will next week sign into law the Dodd-Frank Act, bringing to a close a year-long effort to overhaul the US financial system and its regulators. There’s a summary of the 2,300-page legislation available here.
The New York Times’ Deal Professor finds eight “good things” in the final bill, though he notes that the document is “years of regulation in the making” with potential hidden provisions that may yet bring substantial change. However, the Becker-Posner blog lambastes the bill for being “disorderly” and “not well thought out.” Meanwhile, FT Alphaville just wants to know what to call the darn thing.
Wall Street failed to hold on to earlier gains on Wednesday, and shares slipped in the last hour of trading. The Dow closed below 10,000 for the first time since Feb 8. And in an era-ending move, Apple overtook Microsoft to become the world’s most valuable tech company with a market cap of nearly $223bn vs $219bn for the Windows maker. That leaves Apple second-ranked only to Exxon Mobile, which had a market cap of $282bn at the close.