Judgment day for J.P. Morgan

There won’t be an email on Monday and Tuesday of next week, 18/19 March 2012.

Today, the London Whale Senate hearing starts in DC, led by John McCain and including testimony from former CIO Ina Drew who left the firm in May 2012. The allegations include a failure to appropriately report on the $6bn trading losses, misleading regulators and investors. read article

Following the Fed stress test, Bank of America is set to buy back $5bn of shares and $5.5bn of preferred stock, while J.P. Morgan will buy back $6bn in common stock. Goldman Sachs will also be allowed to repurchase shares, but overall the Fed seems worried about J.P. Morgan‘s and Goldman‘s capital structures: the banks will have to submit revised capital plans by September. read article

The British Parliamentary Commission on Banking Standards (PCBS) stated that the UK didn’t need a ban on proprietary trading, mirrored from the American Volcker rule. The Commission suggested capital requirements as alternative tools and cited the difficulty of defining proprietary trading appropriately. Future BoE Governor Mark Carney agrees as well. read article

After months of investigations and grounded fleets, Boeing’s Dreamliners could be back in the air “within weeks”. The spontaneously igniting batteries have been replaced and “only” need approval from the Federal Aviation Administration to be ready for take-off. Japanese authorities remain skeptical and declined to put a date on when the Dreamliners could fly again. Either way, Boeing doesn’t have the capacity to replace batteries in all 50 active planes simultaneously. read article

While the EU-US trade agreement is in the works, Japan has entered negotiations for a similar deal for Pacific nations. read article

Meanwhile, Greece, or rather the Hellenic Republic Asset Development Fund, is selling gas and gambling companies as part of its privatization campaign. Get in there while it’s cheap. read article

Last night, Samsung launched its latest smart phone in the Radio City Music Hall in New York. A review from All Things D, here.

Weekend reading:

– the America we used to know, read article

– the US is more energy self-sufficient, except China wants to own all their natural gas fueling stations, read article

– when hedge funds get personal: the Herbalife background story, read article

 Have a good weekend.

Filed under: news brief, aviation, Bank of America, banking reform, Boeing, China, commodities, companies, Dodd-Frank, equities, EU, Federal Reserve, Goldman Sachs, Greece, hedge funds, Herbalife, Ina Drew, investment banking, JP Morgan, Mark Carney, privatization, proprietary trading, regulation, Samsung, trade, UK, US, Volcker rule, weekend reading

Italian elections: the morning after the morning after

As expected, center-left Pier Luigi Bersani is looking to form a minority government to lead Italy out of its post-election stalemate misery. A minority government with whom, you wonder? Well, Bersani asked for everyone’s support to curb austerity and promote job creation. Meanwhile, Mario Monti, who definitely lost the election, is considering leaving a €3.9bn bailout of Banca Monte dei Paschi di Siena be until the new administration is in place. Someone’s had enough. read article

Unfortunately for Italy, the country will try to sell €6.5bn worth of debt today.

Over in Brussels, nervous voices get louder with regard to the ECB, formerly known to do whatever it takes to save the euro for the Europeans through its OMT program. With Italy so obviously against austerity measures, future budget cuts that could be conditional for help from the ECB seem out of the question. read article

When addressing the Senate Banking Committee yesterday, Ben Bernanke advocated the Fed’s current course on monetary policy, saying the risks were clearly outweighed and investors should be encouraged by fair values and high corporate earnings. read article

J.P. Morgan is planning to fire up to 17,000 people, 6.5% of its staff, over the next two years in an effort to reduce costs by $1bn.annually. Most cuts will take place in 2014 in the bank’s mortgage group. read article

In other news, Visa and Samsung have struck a deal to advance mobile payments through Visa’s payWave software, and Chuck Hagel‘s nomination to US Secretary of Defense has been passed by the Senate. read article

So long.

Filed under: news brief, bailout, Ben Bernanke, debt, ECB, EU, Italian election 2013, Italy, JP Morgan, Mario Monti, monetary policy, Samsung, technology, unemployment, US, Visa

Morals = money: financial incentives for whistle-blowing

Apple’s earnings missed forecasts, posting slightly higher sales but lower EPS. Apple reportedly sold 26.9 million iPhones and 14 million iPads last quarter. Key rival Samsung sold 53.6 million phones, which makes for a market share of almost a third worldwide. Samsung’s earnings were better than expected, but South Korea posted GDP growth of 1.6% in Q3, the slowest rate since 2009. That dragged Asian shares, including Samsung, which is the heaviest weighted stock in the MSCI Asia-Pacific index, down to a seven-week low. read article

The European Parliament is working on a new directive to financially incentivize whistle-blowing, says the Handelsblatt Morning Briefing. Of course, much of this aimed at the financial services sector, especially considering recent scandals regarding insider trading and interest rate fixing. What may have been claimed to be the moral high-ground will therefore soon become a way of cashing in. It seems like something Greg Smith would enjoy.

On that note, Societe Generale, Royal Bank of Canada, Bank of America, Credit Suisse, Bank of Tokyo Mitsubishi UFJ, Norinchukin Bank, Rabobank, Lloyd’s and West LB have also been subpoenaed in regard to the Libor scandal. Maybe it’s time to accept that everybody was involved and move on. read article

One of the last firms with a clean slate in this case is BNP Paribas, France’ largest bank, which was downgraded from AA- to A+. The ratings for Credit Agricole and Societe Generale were confirmed with negative outlook. France’s president Francois Hollande has meanwhile hit the lowest voter satisfaction ratings since his inauguration, reaching only 36% in a recent poll by Le Figaro, versus the highest rating of 55%. The poor rating is most likely due to the country’s terrible economic performance that has forgotten what growth even looks like by now. In September, the unemployment rate hit a 13-year high; Hollande expects to take another 12-14 months to see any effects in the jobless numbers. But let’s not forget that Monsieur le president is convinced that the worst is lying behind us, and Europe will flourish again in no time. read article

And in the background, Greece has run out of money again. Officials said that the country requires an additional €30bn to make it through 2016. Greece will also fail to meet the 120% debt (of GDP) target in 2020; officials say it will be more like 136%. Have fun negotiating that with the Germans. If this was last year and anybody would have heard about additional billions that far down the line, Greece would have been kicked out of the EMU faster than they can put on a general strike. read article

Weekend reading

– Why the color of your parachute doesn’t matter if you don’t know where it’s taking you, read article

– the five lies Mario Drahgi told ze Germans about the OMT program, read article

– the Harvard comparison: Obama vs Romney, read article

– an economist at the US treasury found the transcript of the 1944 Button Woods negotiations, read article

Have a good one.

Filed under: news brief, Apple, Bank of America, Bank of Tokya Mitsubishi, Barack Obama, BNP Paribas, Credit Agricole, Credit Suisse, earnings, equities, EU, eurozone, France, GDP, Greece, growth, Libor, Lloyds, Mario Draghi, Mitt Romney, Rabobank, regulation, Royal Bank of Canada, Samsung, Societe Generale, South Korea, unemployment, weekend reading, whistle-blowing

Eric Schneiderman’s war on finance

Today seems to be a wild day for financial regulation and banking scandals…

In New York, Attorney General Eric Schneiderman hit again, entangling J.P. Morgan in a lawsuit over mortgage-backed securities underwritten by Bear Sterns, which was acquired by J.P. Morgan in 2008 for about $5. According to Schneiderman’s office, Bear Sterns has “committed multiple fraudulent and deceptive acts in promoting and selling” mortgage-backed securities. As evil as that sounds, it is really much more a claim about Bear Sterns being bad at its job, saying that poor evaluation of loans led to the $22.5bn of losses for investors. Schneiderman wants the unidentified profits of those MBS sales to be handed over by J.P. Morgan. The bank, of course, is outraged at being held accountable for historic actions of an acquired subsidiary. This case is not part of the SEC’s roundhouse-kick against i-banks involved in the subprime mortgage crisis that was announced in February and could involve Wells Fargo and Goldman Sachs besides J.P. Morgan. Schneiderman’s charges are the result of a presidential investigation into mortgage fraud. read FT read WSJ

The SEC on the other hand, is meeting with unnamed companies today to discuss the future of high-frequency trading regulation, after the industry had called for more defined rules in response to Knight Capital’s $440m loss in August. read article

But back to mortgages, which have been in the news a lot in general lately. Europe has seen its first commercial mortgage bond issuance since 2007 yesterday, the lion share of which has been bought by no other bank than J.P. Morgan for €565m. In the UK, a new lender, Castle Trust, with an alternative approach to profit and cost sharing has emerged out of the collaboration of various former and current FSA advisors and the US private equity form J.C. Flowers.

Schneiderman is also fighting the good fight on behalf of Barack Obama’s election campaign. A recent investigation is looking into tax avoidance by a number of big American private equity houses, including Romney’s Bain Capital, KKR and Apollo Group. A very candid comment from an anaymous tax avoider:

“This is shamelessly political, but it’s to be expected and I’m surprised it hasn’t happened sooner,” said one private equity executive. “You have a right to privacy, but you don’t have a right to be president. If Bain and Mr Romney saved themselves tens of millions of dollars in taxes, then you would expect that to be examined.”

Meanwhile, the Liikanen report has arrived in Brussels, where it is entirely supported by Michel Head-Overregulator Barnier. The report advises that retail operations should be shielded from other bank activities, capital reserves should be higher and bonuses should be paid out as debt to redistribute risks of possible losses. read article

In more commercial legal news, Samsung filed a lawsuit against Apple over patent infringement in the iPhone 5. Here we go again. read article

So long.

Filed under: news brief, Apple, Bain Capital, Bear Sterns, Eric Schneiderman, Erkki Liikanen, EU, Goldman Sachs, IP, JP Morgan, KKR, legal, MBS, mortgages, patents, private equity, real estate, regulation, Samsung, UK, US, US presidential election 2012, Wells Fargo

Indicators point down, ECB discovers liberal tendencies

 

 

Back in the office from the long weekend, the week starts mixed (bad news + no news).

Spain confirmed its Q2 recession with 0.4% negative growth, Japan is seeing its economy deteriorate further and the German Ifo business climate index fell for the fourth time in a row, with expectations as low as ever.

And otherwise, well, there’s not that much going on. I assume this to be the final strides of the calm before the storm of people returning to their offices after the summer.

Apple has won a major battle against Samsung, forcing a ban on eight Samsung mobile devices that are already on the market in addition to a £1.05bn payment in damages for patent violations. Yes that’s right, Samsung-user, you may hate Apple, but it’s still the same technology you got. Not similar, THE SAME. The case is not over though, an injunction hearing will follow on 20 September. read article

In the background, RyanAir is seeking regulatory approval for its take-over bid for Aer Lingus in their mission to make the air travel to Ireland the most painful experience possible. The approval has to come from the European Commission, which will start an investigation into RyanAir’s intentions tomorrow. The June bid would value the deal at almost €700m, which Aer Lingus shareholders find ridiculous or at least not enough. read article

Meanwhile, the European Central Bank is counteracting is innate need as a European authority to support [over-] regulation and has spoken out AGAINST the strict Basel III regulation. These rules set out by the Basel committee on banking supervision concern, among other things, the liquidity coverage ratio of banks. That is, in less fancy words, how much money is to be put aside for all investments made, because you never know, the world economy might blow up. Right. That happened. So even people sceptical of regulation like myself can kind of see the point that the Basel III accords are trying to make. But the ECB, in its desperate effort to keep Europe together, is now speaking out against them, due to their impact on lending. Bizarrely enough, the Bank of France agrees (?).  read article

Also, it’s one of those weeks where we’re awaiting US GDP data again (preliminary annualized GDP growth), leaving us just about 24 hours to speculate about the markets’ reaction, Bernanke’s reaction and the impact on the presidential election.

So long.

 

 

Filed under: news brief, Apple, Basel III, ECB, EU, GDP, growth, I'm bored of the news, indicator, Japan, legal, recession, regulation, ryanair, Samsung, Spain, US

Greece, the “bottomless pit”

So Greece approved the bailout package. Meanwhile, between 10 and 45 buildings were set on fire by the discontent Greek people. One of them was a bank in Athens that had already been in flames in May 2010 during protests against the first international bailout measures… They/we just don’t learn.

Germany’s finance Minister Wolfgang Schaeuble said Greece remains to be “a bottomless pit“, that the problem isn’t solved because of a lack of trust and that either way, Portugal is next.

Antonis Samaras, who is assumed to be the next [conservative] prime minister, said compliance with the painful austerity measures demanded by the IMF and the EU should be renegotiated after the April elections. Thanks for raining on everyone’s parade… read article

Otherwise, the OECD lead economic indicator is rising [slightly] and shows that things [in a larger sense] are improving, mostly driven by India, Russia, Japan and the US. China, Brazil and the eurozone are still declining. read article

Meanwhile, Apple is suing everything and everyone around, extended the Samsung patent war, fought in Germany, and starting a new law suit against Motorola Mobility in California (after Motorola’s suit against Apple was rejected by the German regional court of Mannheim on Friday). That’s interesting because Google acquired Motorola Mobility for $12.5bn and the deal will probably receive approval from US and EU authorities this week. So really, Apple is suing Google: clash of the titans, round 1. read article

The New York Times did a portrait of Betsy Stevenson and Justin Wolfers, both economists, who devote most of their time to the economics of marriage, child education and divorce. Efficiency all around. read article

Executive pay has been a touchy subject all along and it’s not unreasonable to propose it should be in proportion to a company’s performance… Graphic detail put in a chart who is/was most over- and underpaid CEO according to this principle. view chart

So long.

Filed under: news brief, Apple, blaming Brussels, debt, EU, eurozone, Germany, Google, Greece, IMF, indicator, infographic, Motorola, OECD, patents, Samsung