Quick Hits: Walking Away from Boats; Philadelphia Demands $300 Blogger License Fee; Birth Rate Lowest in Century; Tracks of Bizarre Robot Traders
by ilene - September 1st, 2010 6:44 pm
Quick Hits: Walking Away from Boats; Philadelphia Demands $300 Blogger License Fee; Birth Rate Lowest in Century; Tracks of Bizarre Robot Traders
Courtesy of Mish
I am traveling this morning will look at ISM and other data this afternoon. Meanwhile here a a few quick hits on propriety trading, bizarre charts of robo trader patterns, walking away from boats, Blogger fees in Philadelphia, birth rate demographics, and other potpourri.
JPMorgan to Shut Proprietary Trading Unit over Volcker Rule
Bloomberg Reports JPMorgan Said to Shut Proprietary Trading to Meet Volcker Rule
JPMorgan Chase & Co., the second- largest U.S. lender by assets, told traders who bet on commodities for the firm’s account that their unit will be closed as the company begins to shut down all its proprietary trading, according to a person briefed on the matter.
The bank eventually will end all proprietary trading to comply with new curbs on investment banks, said the person, who asked not to be identified because JPMorgan’s decision isn’t public. The New York-based bank will shut proprietary trading in fixed-income and equities later, the person said.
Closing the prop trading desk for commodities affects fewer than 20 traders, including one in the U.S. and the rest in the U.K., the person said.
This is a baby step in the right direction.
Developer Sells Zero of 141 Luxury Condos
The Press Enterprise reports Lack of sales spurs developer to lease
After two months of marketing his 141 luxury condos with not one sale, Mark Rubin said he has given up wooing buyers to the Raincross Promenade project in downtown Riverside that cost him $40 million to build.
Prospective buyers kept trying to beat down his prices, even after he shaved $30,000 off the initial list prices ranging from $240,000 for a one-bedroom, one-bath condominium to $475,000 for a two bedroom, 2 ½-bath townhouse. "There were no sales," Rubin said. "Everyone wants a bargain. They read about foreclosures and think they can buy for distress prices."
Rubin paid cash for the property and is now looking to lease units.
Walking Away From Boats
The USA Today reports Abandoned boats litter waters in tough economy
States across the USA are taking steps to deal with an armada of derelict boats abandoned by their owners in a tough economy:
In Massachusetts,Democratic Gov. Deval Patrick signed a bill this month that gave local governments the
by ilene - September 1st, 2010 1:58 am
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Breaking news from Bloomberg…
J. P. Morgan said today that they will be shutting down their proprietary commodity trading operations in reponse to the Volcker Rule in the Financial Reform legislation.
The JPM proprietary commodity trading group is headquartered in London with a few traders located in New York.
Within the past month trading head Blythe Masters had reassured her traders that things in the unit would continue on as they had been despite losses and layoffs.
Employees are being told that they may apply for other positions now.
Speculation is that this is also in response to position limits and other reforms in the Commodity Markets spearheaded by Commissioner Bart Chilton which will make it more difficult for large players to dominate the short term markets through sheer position size.
We will look for clarification from their official statement which has not yet been issued.
According to a person who has been briefed, JPM will eventually be shutting down ALL proprietary trading in all markets in response to financial reform. This will include fixed income and equities which are much larger departments at the bank.
JPM recently suffered heavy losses in their proprietary commodity trading provoking a high level review by top executives.
JPM may continue to deal in these markets for commercial and private customers. They will cease trading for their own book.
It will be interesting to see what JPM does with RBS Sempra, a commodities company which they acquired earlier this year.
JPMorgan Said to End Proprietary Trading to Meet Volcker Rule
By Dawn Kopecki and Chanyaporn Chanjaroen
Aug 31, 2010 4:45 PM ET
JPMorgan Chase & Co., the second- largest U.S. lender by assets, told traders who bet on commodities for the firm’s account that their unit will be closed as the company begins to shut down all of its proprietary trading, according to a person briefed on the matter.
The bank eventually will end all proprietary trading to comply with new U.S. curbs on investment banks, said the person, who asked not to be identified because
by ilene - July 3rd, 2010 3:25 pm
The following is an abridged version of an article that appears in the July 12, 2010, print and iPad editions of TIME.
Two weeks ago, along a marble corridor in the Rayburn House Office Building in Washington, I watched about 40 well-dressed men (and two women) delivering huge value for their employers. Except that we, the taxpayers, weren’t employing them. The nation’s banks, mortgage lenders, stockbrokers, private-equity funds and derivatives traders were.
They were lobbyists — the best bargain in Washington. Capitol Tax Partners, for example, is one of 1,900 firms that house more than 11,000 lobbyists registered to operate in Washington. Last year, according to the Center for Responsive Politics (CRP), firms like Capitol Tax were paid a total of $3.49 billion for unraveling the mysteries of the tax code for a variety of businesses. According to Capitol Tax co-founder Lindsay Hooper, his firm provided "input and technical advice on various tax matters" to such clients as Morgan Stanley, 3M, Goldman Sachs, Chanel, Ford and the Private Equity Council, which is a trade group trying to head off a plan to increase taxes on what’s called carried interest, a form of income enjoyed by the heavy hitters who run venture-capital and other types of private-equity funds. (Time Warner, the parent company of TIME magazine, is also a client of Capitol Tax Partners.)
Since 2009, the Private Equity Council has paid Capitol Tax, which has eight partners, a $30,000-a-month retainer to keep its members’ taxes low. Counting fees paid to four other firms and the cost of its in-house lobbying staff, the council reported spending $4.2 million on lobbying from the beginning of 2009 through March of this year. Now let’s assume it spent an additional $600,000 since the beginning of April, for a total of $4.8 million. With other groups lobbying on the same issue, the overall spending to protect the favorable carried-interest tax treatment was maybe $15 million. Which seems like a lot — except that this is a debate over how some $100 billion will be taxed, or not, over the next 10 years.
And what did the money managers get for their $15 million investment? While lawmakers did manage to boost the taxes of hedge-fund managers and other folks who collect carried interest as part of their work,…
by ilene - June 26th, 2010 5:20 am
Courtesy of Joshua M. Brown, The Reformed Broker
Just going through the details of the Senate and House’s merged Financial Reform Bill, also known as the Let’s Not Allow Our Largest Donors To Embarrass Us Again Act of 2010.
Wall Street wins this round. The "teeth" of the Volcker Rule have been kicked in and there are enough holes elsewhere for White & Case to exploit on behalf of their clientele til the cows come home. The Dems unanimously voted for it. Interestingly, Republicans all voted against it. They didn’t think the final version was strict enough or that it did enough to prevent Too Big To Fail.
Reading through the bill, I have to say, is a bit like watching Pulp Fiction or Goodfellas on TNT. The plot is intact but the movie is still somehow rendered meaningless minus the blood, guts and f-bombs. No, Ray Liotta didn’t just say ‘Fudge You’ and no, banks should not be taking deposits with one hand and rolling the dice with the other.
There will be some limitation to what large banks can do on a proprietary basis, but they will still be de facto giant hedge funds, albeit hedge funds with higher capital reserve requirements.
The ratings agency stuff in the bill was well done in my view – it adds liability into the mix, finally.
by ilene - May 26th, 2010 12:29 pm
Courtesy of James Kwak at Baseline Scenario
“Geithner’s team spent much of its time during the debate over the Senate bill helping Senate Banking Committee chair Chris Dodd kill off or modify amendments being offered by more-progressive Democrats. A good example was Bernie Sanders’s measure to audit the Fed, which the administration played a key role in getting the senator from Vermont to tone down. Another was the Brown-Kaufman Amendment, which became a cause célèbre among lefty reformers such as former IMF economist Simon Johnson. ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’”
That’s one passage from John Heileman’s juicy article in New York Magazine. It provides a lot of background support for what many of us have been thinking for a while: the administration is happy with the financial reform bill roughly as it turned out, and it got there by taking up an anti-Wall Street tone (e.g., the Volcker Rule), riding a wave of populist anger to the point where the bill was sure of passing, and then quietly pruning back its most far-reaching components. If anything, that’s a testament to the political skill of the White House and, yes, Tim Geithner as well.
There are two other things in the article I thought worth commenting on. Here’s one:
“Obama could be forgiven for expecting greater reciprocity from the bankers—something more than the equivalent of a Hallmark card and a box of penny candy. He had, after all, done more than saved their lives directly by continuing the bailout policies formulated by Paulson and Geithner. He and his team could credibly claim to have kept the world economy from falling off a cliff. Yet with the unemployment rate still near double digits, Obama had (and still has) received scant credit from the public for what was arguably his signal accomplishment. At the same time, the one thing that almost every slice of the electorate would have applauded wildly—the sight of the president landing a few haymakers on Wall Street’s collective jaw—was an opportunity that the president had largely forsworn.”
by ilene - May 20th, 2010 3:30 pm
Senator Jeff Merkley took to the Senate floor on Tuesday, complete with fist pounding, to air his frustration over the blockage of the Merkley-Levin amendment that would fortify the Volcker Rule. The rule restricts banks that have access to FDIC insurance from speculative trading. What he wanted to know: “Why is Wall Street winning and Main Street losing tonight in the US senate?” Watch his passionate speech:
See also: Merkley-Levin Amendment Can’t Get a Vote
by ilene - May 1st, 2010 4:36 pm
It’s a Saturday, but it certainly doesn’t feel like it, because there’s a heck of a lot going on.
Here’s what you need to be paying attention to this May Day.
- The Berkshire Hathaway (BRK) annual shareholders meeting is happening right now. Already the company has reported monster Q1 profits, and both Warren Buffett and Charlie Munger have taken turns defending Goldman Sachs (GS), which is one of their portfolio companies. [See also: From One Pigman To Another....]
- Obama is flying to the Gulf Coast on Sunday morning to inspect the damage and response to the Deepwater Horizon oil crisis. The sense right now is that we’re looking at an environmental tragedy on the scale of Exxon Valdez, maybe worse, since there’s no short-term prospect of plugging the massive leak in the ground that’s spewing oil. Current estimates suggest BP (BP) is on the hook for at least $3 billion.
- Greece/IMF/EU talks continue. According to Greek government officials, some kind of announcement may be made today. The market is hoping to hear something that’s orders of magnitude stronger than any bailout announcement we’ve gotten so far, or otherwise the feeling will be that it can and will fall through again.
- Of course, there are fresh violent, anti-austerity protests going on today in Athens. The fact that it’s May Day, a day for celebrating anti-capitalism only adds to the tension.
- New reports suggest the criminal probe into Goldman Sachs is not just a perfunctory follow-on to the SEC charges, but rather a truly separate thing that’s wider than Abacus, and that started before the SEC’s investigation. HUGE.
- The New York-based Economic Cycle Research Institute says the economy is already beginning to slow.
- With just five days before the election, UK’s The Guardian has endorsed the Liberal Democrats, the country’s biggest third party. Its leader, Nick Clegg, has surged thanks to a string of strong debate performances, Gordon Brown’s disastrous campaigning, and a lingering sense of unease with the conservatives.
- Korea has confirmed that a torpedo sank the Cheonan, though it still won’t blame North Korea directly.
by ilene - April 14th, 2010 11:51 pm
Courtesy of The Pragmatic Capitalist
Famed investor George Soros is calling for a break-up of the banking oligopoly in the United States. His recent comments were made in reference to the big four U.S. banks that have come to dominate the banking sector. CitiGroup, Bank of America, JP Morgan and Wells Fargo now dominate the overwhelming majority of the U.S. bank market.
As regular readers know, I believe this oligopoly is part of the problem and that Ben Bernanke has likely increased the potential risks in the U.S. economy by further consolidating the sector. Perhaps most important, however, is the risks these four banks (and all banks for that matter) are allowed to take. Soros is in favor of the Volcker Rule which would segregate deposits from a bank’s risk taking operations such as hedge funds and prop trading. This appears like a no-brainer after what we just experienced, but unfortunately, with consolidated banking came consolidated lobbyists and that’s a recipe for even further power over Congress. The likelihood of the Volcker Rule passing is close to nothing at this point.
Soros has made a career out of being right. I am guessing he’ll be right again about the U.S.
Read the full story at BusinessWeek.
Picture credit: Jr. Deputy Accountant
Are Pig Farmers Doing All The Trading? “The Top Five Prop Desks Are Buying And Selling Securities With Leverage … To Each Other!”
by ilene - March 29th, 2010 4:30 pm
Are Pig Farmers Doing All The Trading? "The Top Five Prop Desks Are Buying And Selling Securities With Leverage … To Each Other!"
A suitable follow up to our earlier post on domestic equity fund flows (which have been negative year to date), and our conclusion that Primary Dealers are merely taking advantage of the ZIRP carry trade, is Rosie’s observation that the only entities doing any relevant trading are the prop desks of the Big Five TBTFs. If that is indeed the case, the market, which Rosenberg concludes optimistically is 25% overvalued will certainly face a Black Monday-type correction as soon as the elusive "unpredictable" occurs and the Prop desks as always scurry for cover, with no volume consolidation to the upside.
It would be such a wonderful time to truly implement the Volcker Rule as the bank’s prop desks, if David is correct, are about to cause some major damage to the market… Of course, it is these very prop desks that are the staunchest opposition to the Volcker Rule and its negative implication on prop trading.
From David Rosenberg and Gluskin-Sheff:
Well, well, the theory that the stock market has turned in a double top may not have gone the way of the Dodo after all, following the reversals we saw in the last two trading days of last week. Negative reversals and distribution days in three of the last six sessions is something to be concerned about if you are long this market — and volume remains tepid at best.
The market is now overvalued by over 25% but is also extremely overbought having gone 24 sessions without a decline of 1% or more, and 89% of the stocks in the S&P 500 are now trading above their 50-day moving averages (see page M3 of Barron’s). The Dow has advanced in 17 of the past 21 days. I mean, even if you are bullish on the outlook, one would have to admit that such a parabolic move is vulnerable to at least a modest pullback… or more. I know what a broken record sounds like and this has been a confounding and confusing market — for both the bears and many (though not all) of the bulls.
by ilene - March 29th, 2010 1:31 pm
Courtesy of Simon Johnson at Baseline Scenario
When a company wants to fend off a hostile takeover, its board may seek to put in place so-called “poison pill” defenses – i.e., measures that will make the firm less desirable if purchased, but which ideally will not encumber its operations if it stays independent.
Large complex cross-border financial institutions run with exactly such a structure in place, but it has the effect of making it very expensive for the government to takeover or shut down such firms, i.e., to push them into any form of bankruptcy.
To understand this more clearly you can,
The Citigroup situation is simple. They would like to downsize slightly, and are under some pressure to do so. It is hard to sell assets at a decent price in this environment, so why don’t they just spin off companies – e.g., quickly create five companies in which each original shareholder gets a commensurate stake?
The answer is that Citi’s debt is generally cross-guaranteed across various parts of the company. US and foreign creditors have a claim on the whole thing, more or less (including the international parts), and you can’t break it apart without upsetting them. The cross-border dimensions make everything that much more knotty.
Senator Kaufman explains what this means – essentially the “resolution authority” proposed in the Dodd legislation is meaningless. How would any administration put a huge bank into any kind of “resolution” (a FDIC-type bank closure, scaled up to big banks) when it knows that doing so would trigger default across all the complex pieces of this multinational empire?
You could do it if you are willing to accept the costs – and if you understand there are big drawbacks to providing an unconditional bailout of the 2009 variety. But will a future administration be willing to take that decision? The Obama administration was not – and big finance will only become bigger and more complex as we move forward.
If you look into the eyes of the decision-makers from spring 2009, they honestly believe that taking over Citi or Bank of America would have caused greater financial trouble and a worse recession. You can argue about their true motivation all you want; this…