Friday, June 28, 2013

White House Makes Shortlist for Bernanke’s job

From WSJ: The Obama administration is assembling a shortlist of candidates to lead the Federal Reserve, in the expectation that chairman Ben Bernanke won't seek reappointment when his second term at the central bank ends in January, according to people familiar with the matter.

The search is in the early stages and there is no front-runner, according to these people, who wouldn't divulge any names on the shortlist. A selection might not be announced until early fall, they said. Treasury Secretary Jacob Lew is putting together the list, working with senior White House officials.

Oops! BlackBerry Shares Plunge After Touch-Screen Model Flops

From Bloomberg:  BlackBerry (BBRY)’s shares tumbled the most since 2001 after the company reported a surprise loss and weak sales of a new touch-screen model, underscoring its challenges in competing directly with the iPhone and Android devices.

The company shipped 6.8 million smartphones last quarter, including about 2.7 million new BlackBerry 10 models -- primarily its flagship Z10 touch-screen phone. Analysts had estimated total shipments of 7.5 million, with about 3.6 million BlackBerry 10 units. The Waterloo, Ontario-based company also blamed Venezuela’s currency controls for a portion of its quarterly loss because they hurt Latin American revenue.

BlackBerry is struggling to break out of its strength in keyboard phones, which are still popular among some lawyers and professionals but not as sought-after as the iPhone or smartphones based on Google Inc.Android. Today’s stock tumble more than wiped out its gains for the year, signaling that investors may have been too optimistic about BlackBerry’s ability to wage a comeback fight against touch-screen rivals.

Holy Crap! Vatican priest arrested for plot to smuggle $26 million

From the AP: A Vatican official has been arrested by Italian police for allegedly trying to illegally bring $26 million in cash into the country from Switzerland with a private jet.  Prosecutor Nello Rossi says Monsignor Nunzio Scarano is accused of corruption and slander stemming from the plot and was being held at a Rome prison.

He was allegedly asked by friends to bring back the money that had been given to financier Giovanni Carenzio in Switzerland. Scarano is supposed to have asked Giovanni Zito, a military official, to bring the money back by jet, avoiding customs....

Thursday, June 27, 2013

The Not-So-Good, The Bad And The Very Ugly: Erdogan’s Paranoia and Turkey’s Economy

According to Bloomberg the protests roiling Istanbul, which started in May and have already begun to dwindle, were never an Arab-style spring. The Turkish government, however, now risks turning them into a very real political and economic winter. A hunt has begun for the culprits in a supposed international conspiracy, including banks and news media, which the government claims to have orchestrated the protests. Depending on how far this Orwellian investigation goes, it may have a bigger impact on Turkey’s future than the unrest itself.

The head of Turkey’s Capital Markets Board confirmed June 26 that his staff had begun an investigation into stock-market volatility during the protests. According to traders in Istanbul, the demands to hand over all e-mail traffic with foreigners, among other records, are unprecedented. The board’s assurances that such investigations are routine might be easier to accept if Prime Minister Recep Tayyip Erdogan hadn’t promised to “choke” those he believes to have engineered the protests in order to cause a stock-market collapse….

Goldman Sends Employees on $270,000 Scavenger Hunt

NYMagazine’s Kevin Roose reports: It's always been presumed (by me) that when Goldman Sachs employees are in the running to be named partners at the firm, they're sent on a brutal, globe-spanning Amazing Race–style test of physical abilities, where they face challenges like scaling Kilimanjaro wearing only a fur-lined Zegna suit and traversing the Gobi Desert with a summer intern strapped to their backs.
So it's a bit of a relief that the actual test Goldman employees took on last fall — an epic fifteen-hour scavenger hunt that involved 180 of the firm's employees — was more cerebral than physically grueling.

Quartz's Euny Hong embedded with a team from the Goldman commodities desk during "Midnight Madness," a massive all-night hunt that took twenty teams around New York City for a series of complex brain-teaser challenges. (The name is an homage to a bad 1980 Disney movie.) The hunt cost $270,000 in total and was financed by Goldman Sachs Gives, the firm's partner-led charity….

Commodity 'Super-Cycle' Suspended, Not Ending

From Kitco News: Another tough day at the office for metals continues to fuel questions about whether or not the “commodity super-cycle” over the last decade is coming to an end.  Driven largely by Chinese appetite for commodities, the 2000s saw a commodities boom with both precious and base metals prices rising to record highs.  With sharp drops across the metals board in the last three months, some analysts have begun to believe this commodities boom, dubbed the “commodities super-cycle,” is at an end….

Paula Deen Dumped By Home Depot, Novo Nordisk; Target, Sears, QVC Next

One day you’re queen of the kitchen, the next you’re roadkill….Forbes reports that as Wal-Mart goes, so goes the nation. Or, at least, so go two more lucrative Paula Deen business partnerships.  The world’s largest retail chain cut ties with Deen on Wednesday, as did casino giant Caesars Entertainment CZR +3.25%, which operates four Deen-themed restaurants.

….Novo Nordisk is the sixth company to end their Deen endorsement deal. A company spokesperson told Forbes they’d consider getting back into business with her once she’s regained the trust of her audience. “It does leave us with an option,” said Novo Nordisk’s Ken Inchausti, “but she needs to focus on rebuilding her relationship with the public.”

SEC Gets Set to Test Policy for Guilt Admissions

Securities and Exchange Commission enforcement chiefs have drawn up a hit list of impending cases where officials intend to test their new policy of requiring admissions of wrongdoing when settling civil charges, according to people close to the agency.

The handful of likely target cases include a planned enforcement action against a company alleged to have made illicit profits by charging investors undisclosed markups on top of commissions, one of the people said….

Wednesday, June 26, 2013

The huge trade deal you've probably never heard of

It's called the Trans-Pacific Partnership. And it could be the biggest trade deal since the World Trade Organization formed in 1995. The thing is, most people don't know much about it.

That's even though deal could eventually have an impact on food safety and prices for medicines among other things in our everyday lives….

Dimon Joins Goldman Praising Court on Gay Marriage

JPMorgan Chase and Goldman Sachs Group Inc. praised the U.S. Supreme Court after a ruling today that struck down a federal law that denies benefits to same-sex married couples, Bloomberg reports.

“This is good for our company and clients, but more importantly, it’s the right thing to do,” JPMorgan Chief Executive Officer Jamie Dimon said in a statement from the New York-based bank, the largest in the U.S. by assets. “The rights of all people are important and must be protected.”

Some of the biggest financial firms have criticized prohibitions of same-sex marriage, saying the measures could make it harder to recruit staff. Insurer Chubb Corp., which highlights the benefits it offers to domestic partners, said in 2011 that DOMA “imposes burdens” on businesses…

Rushing to the Exit: Gold's Decline Is Feeding on Itself

From CNBC: Gold prices, now at a three-year low, could continue to get hammered as investors reshape their views of the precious metal.  Forecasts for $1,000 an ounce gold sound much less far-fetched than they did before the metal breached $1,300 on June 20..

When gold fell through $1,300 last week, it broke below the 50 percent retracement level from its 2011 high, prompting more selling. The SPDR Gold Shares ETF, the largest physical gold ETF, was down more than 3.5 percent Wednesday, as was iShares Gold Trust ETF IAU. Both were trading at August 2010 lows. The GLD ETF fell $667 million Tuesday, putting its assets under management below $39 billion, according to Index Universe. It started the year at $72 billion…

Wait...wait...there's more at

Stop! Top Firm Gains by Putting the Brakes on Traders

According to Dealbook the spoils on Wall Street generally go to the firm that is the fastest and most opaque. But one upstart contender is trying a distinctly counterintuitive approach.

In the financial equivalent of the Tortoise and the Hare, Royal Bank of Canada has risen up the ranks of the biggest stock trading firms in the United States by embracing a rather Canadian restraint and prudence.  At the center of the efforts by the bank’s New York trading desk is a technology that actually slows its customers’ orders so as to evade high frequency traders. And unlike nearly every other large bank in New York, it has elected not to open its own dark pool, where banks privately carry out customer trades away from the public exchanges…...

US in Decline? Americans' View of Economy Hits Post-Recession High

CNBC's Steve Liesman reveals the results of a CNBC survey which shows Americans are upbeat on key economic measures but are changing the way they think about certain parts of the economy and how it effects their lives. Americans' views on the economy are the best they've been since the recession began, but the recent improvement tallied in June's CNBC All-America Economic Survey masks a long-run negative shift in the public's satisfaction with their standard of living.

The survey of 810 Americans across the country from all income groups, occupations and regions, finds more people think their home values will go up and fewer judge the current state of the economy as poor than at any time since the recession began. Forty-one percent of Americans expect their wages will increase over the next 12 months, the largest percentage since 2008…..

What The Rich Really Want: Wealth Advisers Turn to Hedged Mutual Funds

From WSJ:  Wealth managers are putting more client money into mutual funds that use hedge-fund strategies. The funds work well for clients who can't meet hedge funds' large minimum investment requirements or who want the transparency and liquidity that come with a mutual fund.
Wealth managers are putting more client money into mutual funds that use hedge-fund strategies, seeing a potential shelter in a storm.

Often called hedged mutual funds, these instruments use some of the complex investment styles and tactics found in hedge funds, such as short-selling, employing leverage and trading in derivatives such as options. But unlike hedge funds, they offer greater transparency and can be traded daily…..

Pimco Flagship Fund Loses Bigtime

Pimco's flagship Total Return Bond Fund took a hefty hit in June, due to the sharp rise in bond yields that was sparked by fears the U.S. Federal Reserve will scale back its asset-purchasing program.
The Pimco fund, which is the world's largest bond fund, with over $285 billion asset under management, has shed 3.79 percent from its net asset value since the start of June. This makes it the 12th-worst performer out of 177 similar funds tracked by data firm Lipper, according to the Wall Street Journal….

Read all about it at

Irony in Action: China tries to teach U.S. free-market capitalism

MarketWatch’s Todd Harrison writes: “China, the world’s second-largest economy, is often cited as globalization’s raison d’ĂȘtre. With the Shanghai Composite in bear-market territory, investors would be wise to pay attention.

“Despite the putrid price action of late, the Chinese government is standing firm on its policy agenda. They’re trying to administer the medicine necessary to cure the debt disease rather than provide drugs that mask the symptoms, like so many other central banks around the world have done. Only time will tell how they’ll fare but extending the analogy, we’re seeing signs of withdrawal that can be at quite violent at times…..

“ I read an article last night that brought me back to 2007, which is the period this juncture most reminds me of.  It spoke of how the cash crunch in China has, among other things, put the Chinese gross-domestic-product goal in jeopardy for the first time since 1998. I traded through the Asian Contagion, and let me tell you, it wasn’t fun.   Liu Li-Gang, formerly of the World Bank, offered, “If they (China) fail to achieve 7.5% (GDP target), they will lose credibility with the markets, provincial leadership and financial institutions ... that means that in the future, whenever they say something, the market may interpret it differently, and the credibility issue is something very critical for them to consider.”

Flash back to August 2007 when it was clear to anyone who paid attention that the wheels were falling off the stateside financial wagon. ….

If You Accidentally Took $1.2 Million From A Swiss Air Flight, Please Return It To JFK Immediately

$1.2 Million In Cash On Airplane Bound For The Federal Reserve Has Been Stolen
Someone swiped $1.2 million in 100 bills from a Swiss Air flight, according to multiple reports.
The cash was part of a routine financial transaction between an unnamed American bank and its Swiss satellite office……

Read more:

Even The Best Performing Hedge Fund Of 2012 Is Getting Hammered In This Market

From BI: One of last year's top-performing hedge fund managers, Deepak Narula, is suffering a reversal of fortune as the mortgage bonds that steered him to the top of the industry in 2012 are now delivering losses.  His Metacapital Management's roughly $1.5 billion flagship fund was down 5.66 percent for the year through June 14, according to an investor with knowledge of the numbers….

Google Inches Closer To The $1,000 Per Share Stock Price Club

From BuzzFeed: JP Morgan issued a new research note this morning that boosted its price target on Google shares to more than $1,000, making it the tenth bank to feature a stock price target benchmark of more than $1,000 per share. JP Morgan cited better results from Google’s search engine marketing, optimism about the future of YouTube taking marketing spend from TV, and the potential that Motorola-built devices have for the company as reasons for raising its target price.

That doesn’t necessarily mean that Google is a more valuable company than some other tech companies that have lower stock prices , however. For example, Apple shares trade around $400, but it has a total worth of nearly $400 billion, making it one of the most valuable companies on the market. Google’s market capitalization, by comparison is nearly $300 billion. But it is hard to deny the rapid growth of Google’s share price as it charges toward the $1,000 per share threshold….

Traders Worry That The S&P Has Been Living A Dream For Months

Traders are starting to wonder whether the S&P 500's breakout above 1575 (its 2007 high) was just a drill — a "false breakout."  The S&P hit the high in April, and there was talk of a false breakout then, but the index just kept climbing, and everyone forgot to be scared in the middle of the party.

Then, last Thursday the S&P started its dramatic descent back toward 1575. Now, in this morning's market culling, the index is at 1561.

"It was all a dream ..."

Dr. Doom? Marc Faber Sees Stock Buying Opportunity

The dean of doom, Marc Faber, told CNBC on Tuesday that a variety of asset classes—including equities—may be worth buying for short-term gains.  In the midst of market volatility on concerns over Federal Reserve tapering, he said, "Treasury bonds, gold and equity markets are oversold in the near-term and they can rebound for the next 10 days or even the next month."

"The best course of action is to actually not buy anything, but rather to reduce positions on a rebound," Faber said.  The S&P 500 could "rebound to around 1,630-1,640" in the short-term, Faber added, but warned the index could drop 20 to 30 percent from its all-time intraday high on May 22 of 1,687….

Read all about it at

Tuesday, June 25, 2013

U.S. Civil Charges Against Corzine Are Near

Forget the symbolic fines etc.  According to Dealbook federal regulators are poised to sue Jon S. Corzine over the collapse of MF Global and the brokerage firm’s misuse of customer money during its final days, a blowup that rattled Wall Street and cast a spotlight on Mr. Corzine, the former New Jersey governor who ran the firm until its bankruptcy in 2011.

Without directly linking Mr. Corzine to the disappearance of more than $1 billion in customer money, the trading commission will probably blame the chief executive for failing to prevent the breach at a lower rung of the firm, the law enforcement officials said. If found liable, he could face millions of dollars in fines and possibly a ban from trading commodities, jeopardizing his future on Wall Street…

Sad: A big Bridgewater fund is under the weather

From Reuters: A $70 billion portfolio managed by hedge fund titan Ray Dalio's Bridgewater Associates and widely held by many pension funds to survive stormy markets is emerging as a big loser in the recent selloff in global markets.  The Bridgewater All Weather Fund is down roughly 6 percent through this month and down 8 percent for the year, said two people familiar with the fund's performance.

The All Weather Fund is one of two big portfolios managed by Bridgewater and uses a so-called "risk parity" strategy that is supposed to make money for investors if bonds or stocks sell off, though not simultaneously…..

Hedge Funds: The Poor, Misunderstood Asset Class

Seriously folks....As hedge funds have matured as an alternative asset class they have been increasingly embraced by institutional investors of all sizes, as well as high net worth investors. Their very success or perceived non success may also be creating confusion for some investors.

Over many years and now decades, we believe that hedge funds have been a misunderstood asset class due to investors and advisors alike grouping hedge funds into a single melting pot and believing any hedge fund should be able to accomplish what the client needs. We will attempt to clear up some of these misconceptions about hedge funds, by first identifying what are some of the primary factors affecting hedging risks and returns, and by providing guidance as to the hedge fund strategies that would best match the particular investment objectives for different investors…..

It's Getting Harder And Harder To Deny The Power Of The Index Fund

From BI:  A new white paper by Portfolio Solutions and Betterment, "The Case For Index Fund Portfolios,"pretty much solidifies all we've ever known or guessed about low-cost, passively managed index funds  –– they can rarely be beaten.

Looking at advanced portfolios holding 10 asset classes between 1997 and 2012, researchers found index fund portfolios outperformed comparable actively managed portfolios a staggering 82% to 90% of the time. And the longer investors held those investments, the better shot they had at outperforming active funds over time. ….

Still not convinced? Even lowering the cost of actively managed fund portfolios couldn't offer a boost significant enough to outperform index funds, the researchers found.

Read more:

Bond Market Exodus Is Turning Into a Stampede

From the NYT Dealbook:  Wall Street never thought it would be this bad. Over the last two months, and particularly over the last two weeks, investors have been exiting their bond investments with unexpected ferocity, moves that continued through Monday.

A bond sell-off has been anticipated for years, given the long run of popularity that corporate and government bonds have enjoyed. But most strategists expected that investors would slowly transfer out of bonds, allowing interest rates to slowly drift up.  Instead, since the Fed chairman, Ben S. Bernanke, recently suggested that the strength of the economic recovery might allow the Fed to slow down its bond-buying program, waves of selling have convulsed the markets.

Monday, June 24, 2013

Harvard Grad Swaps Morgan Stanley for Sheikhdom as Deals Dry

Bloomberg writes: After a decade of dealmaking at Morgan Stanley in the Middle East, Peter Fort swapped Dubai’s International Financial Centre for a career promoting investment into one of the United Arab Emirates’ lesser-known sheikhdoms.

Fort, 40, is among a rising number of Persian Gulf expat bankers starting second careers with U.A.E. firms as lenders based in London, New York and Zurich scale back under pressure to boost capital buffers and profit margins. The 10 biggest investment banks, including JPMorgan Chase, Deutsche Bank AG and Citi  have lost about 11,000 front-office staff in the past two years, analytics firm Coalition said last month….

BUSTED: Bankers Caught On Tape, Joking About Bailout, And How They'd Never Pay It Back

From BI: Once again, we have more embarrassing conversations between bankers ...
The Irish Independent, a Dublin-based newspaper, has uncovered tapes of an internal phone conversation from September 2008 between two executives at Anglo Irish Bank during its bailout deal and they sound pretty scandalous.  The Irish Independent points out that the recordings show they misled the Central Bank.

The execs from the recording have been identified as John Bowe (head of the bank's capital markets) and Peter Fitzgerald (director of retail banking).  However, Bowe "categorically denied" that he misled the Central Bank and Fitzgerald, who wasn't involved in discussions with regulators, said he was unaware of any intention to mislead, the report said…..

Raj’s Insider Conviction Appeal Nixed

From Bloomberg: Raj Rajaratnam’s conviction for insider trading was upheld by a federal appeals court in New York, which rejected a challenge to the use of government wiretaps in his trial. The U.S. Court of Appeals in Manhattan, in a decision filed today, affirmed the 2011 conviction of the co-founder of Galleon Group LLC for conspiracy and securities fraud.

This comes as former Goldman Sachs Group Inc. director Rajat Gupta waits to hear from the same appeals court in his bid to overturn his insider-trading conviction. Gupta argued that prosecutors shouldn’t have been allowed at his trial to use secretly wiretapped calls in which he wasn’t a participant….

What Cash crunch? China's crunch time is yet to come

What Inquiring Minds Want to Know: How can a largely state-owned banking system experience a credit crunch?

The Chinese central bank has been reining back credit for some time now as it has sought to control housing prices. But, when the cheap money from the rest of the world began reversing due to the Fed signalling an end date for the era of cheap money, funds leaving emerging economies like China have made the situation more apparent.

Last week, the overnight lending rate between banks jumped to exceed 25% as banks became reluctant to lend to each other. But the lending rates fell again when the state-owned banks fell into line and resumed lending to each other.  Now, the Chinese central bank says that liquidity is "ample" and essentially indicated that it will not inject more cash, holding firm on the line of controlling credit growth in the economy….

Need to know more?  Turn to

Citi Is Positioning Itself At The Center Of What Could Be A $2 Trillion Economy

Talk about an emerging market. Citigroup will open an office in Baghdad, becoming the first U.S. bank to expand into Iraq and dive into the country's oil-rich — but politically uncertain — future, the Financial Times reports.

From the FT:  In the past decade, the bank has been catering to investors and large companies operating in Iraq, offering products such as trade finance, cash management and investment banking services through its regional hub in Dubai, its Iraq-desk in Amman and via London.

Citi’s move to establish a physical foothold in the market comes as major international oil groups as well as industrial and construction companies are looking to invest in Iraq.  Citigroup estimates that Iraq will turn into a $2 trillion economy by 2050, according to the report.

Sunday, June 23, 2013

Goldman Sachs Goes Social : You've A Come A Long Way Lloyd Baby

From HuffPo: There was a time when reading through a public company's annual report was mostly for those with problems sleeping. While arguably the most critical opportunity for companies to "strut their stuff" before the public and their investors, most annual reports were "yawn-worthy" glossy books with pages of boring text and pictures of lighthouses, compasses and yachts, in addition to piles of numbers and charts.

Until now...Thankfully, and at long last, 2013 has rung the death knell for the static, boring, sleep-inducing, hard-cover bug-swatting paperweight annual report. For all the annual report hoarders out there who still love getting hefty packages in the mail, not to worry: the movement is only just beginning. But like the move from radio to television, what is starting to emerge are more colorful, digital, interactive, engaging and entertaining packages that resonate - especially with the younger generation which has next to zero interest in reading anything on paper, and wants to be told what's going on - not dig for it.
Interactive charts and graphics; video snippets from the CEO and other senior execs; links to research, materials, blogs and other information….

Man vs. machine: Wall St. is culling high price talent

Forget the semi-annual flash crashes.  According to the NY Post:    Wall Street firms are cleaning out their desks — institutional-equity desks, that is.  Large and midsize firms are giving the boot to hundreds of high-priced trading staff in widespread layoffs and deep cost-cutting, replacing flesh-and-blood staff with cold steel computers and high-frequency trading algorithms.

The wholesale bloodbath is not painful to Wall Street’s profits, which are reaching historic highs. (New York Stock Exchange member firms’ profits tripled last year, to $24 billion, up from $7.7 billion in 2011. And this year opened with an outsize financial flourish. )

But with equity and other trading in the doldrums, Dodd-Frank regulations casting a dark shadow, and, notably, advanced trading technology eliminating manual intervention, the Street is swinging the ax.  Many traders are now seen as “expenses” as the Street faces an uncertain and volatile future…..

Fasten Your Seatbelts: After The Fed Shock, Markets Are Set For More Turmoil

From Reuters UK:  If that was the message Ben Bernanke was trying to deliver when he said the Federal Reserve could soon start scaling back its massive stimulus program for the U.S. economy, it's safe to say investors received it loud and clear.  In fact, the sell-off in stocks, bonds and commodities that rippled around the globe after Bernanke's remarks looks to some like the dawn of a new period of volatile, disorderly trade - a stark change from the calm that prevailed since the Fed began its most recent bond-buying program last autumn.

"When market regimes shift, they rarely do so in an orderly fashion - look at equity prices collapsing at the end of the dot-com bubble or the height of the financial crisis," said Stephen Sachs, head of capital markets at exchange-traded fund issuer ProShares in Bethesda, Maryland. "It usually gets violent. We're going to face that in interest rates now….."

Saturday, June 22, 2013

Why Is It So Hard to Hire Great People?

From The Atlantic: This week, Google admitted that its infamous brainteasers -- e.g.: "How much should you charge to wash all the windows in Seattle?" -- are awful at predicting who will be a good employee.

Your reaction might be: um, FINALLY. And, sure, thinking about windows-per-housing-unit isn't the most direct way to assess engineering skill or creativity. But Google's flawed strategy was the answer to another brainteaser: What's the best way to hire great employees, anyway? People are complicated, organizations are complicated, matching people and organizations is complicated, and it's extremely difficult to predict who will be brilliant and who will be a bust.

"Years ago, we did a study to determine whether anyone at Google is particularly good at hiring," Laszlo Bock, Google's senior vice president for people operations, told LinkedIn. "We looked at tens of thousands of interviews, and everyone who had done the interviews and what they scored the candidate, and how that person ultimately performed in their job. We found zero relationship. It's a complete random mess...."

Weird’s Deep Thoughts (Weekend Insight Edition): Who’s to Blame for Rising Inequality?

In a recent defense of the 1 percent, Harvard economist Greg Mankiw admitted it might be bad if the rich got richer by sucking cash from the economy without giving any value back. A new study suggests many of the rich -- especially bankers and CEOs -- are doing just that. …” the 1 percent are just richer than you, and getting even richer all the time, because they are better than you, they deserve it and more….”

Josh Bivens and Lawrence Mishel, economists at the Economic Policy Institute, a left-leaning think tank, argue in a study responding to Mankiw that most of the rise in income inequality over the past few decades is due to the soaring pay of CEOs and Wall Street bankers who are milking money from the markets rather than generating much in the way of economic production.

"A substantial part of the extraordinary rise of top 1 percent incomes is not a result of well-functioning markets allocating pay according to value generated, but instead resulted from shifting institutional arrangements leading to shifting of rents to those at the very top," Bivens and Mishel write.

Ex-Enron CEO Jeff Skilling's Sentence Cut

From CNBC:  One of the country's most notorious financial scandals came to a protracted legal conclusion Friday as ex-Enron Corp. CEO Jeffrey Skilling — already in prison for his role in the once-mighty energy giant's collapse — was resentenced to 14 years as part of a court-ordered reduction and a separate agreement with prosecutors.

Skilling's sentence was reduced by 10 years, and his attorneys say it's likely that with time off for good behavior and other factors he will be released in 2017….

Friday, June 21, 2013

The Last Mystery of the Financial Crisis Solved

Rolling Stone’s Matt Taibbi writes: What about the ratings agencies?  That's what "they" always say about the financial crisis and the teeming rat's nest of corruption it left behind. Everybody else got plenty of blame: the greed-fattened banks, the sleeping regulators, the unscrupulous mortgage hucksters like spray-tanned Countrywide ex-CEO Angelo Mozilo.

But what about the ratings agencies? Isn't it true that almost none of the fraud that's swallowed Wall Street in the past decade could have taken place without companies like Moody's and Standard & Poor's rubber-stamping it? Aren't they guilty, too?   Man, are they ever. And a lot more than even the least generous of us suspected.  Thanks to a mountain of evidence gathered for a pair of major lawsuits by the San Diego-based law firm Robbins Geller Rudman & Dowd, documents that for the most part have never been seen by the general public, we now know that the nation's two top ratings companies, Moody's and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash……

Is the Drop in Financial Markets an Overreaction or an Early Innings of a Sell-off?

From CNBC:  Stunned investors are now wondering whether the markets' big selloff was an overreaction or a sign of more volatility to come.  Global financial markets plunged Thursday after the Federal Reserve roiled Wall Street by saying it could reduce its aggressive economic stimulus program later this year. Concerns about China's economy heightened worries.

The global selling spree began in Asia and quickly spread to Europe and then the U.S., where the Dow Jones Industrial Average fell 353 points, wiping out six weeks of gains.  But the damage wasn't just in stocks. Bond prices fell, and the yield on the benchmark 10-year Treasury note rose to 2.42 percent, its highest level since August 2011, although still low by historical standards. Oil and gold also slid….

You've lived it, now read all about it at

Money Honey: Morgan Stanley to buy final 35% of Smith Barney/ Wealth Mgmt

 According to MarketWatch: Morgan Stanley MS -2.11%  announced on Friday it has received regulatory approval to buy the final part of the Morgan Stanley Smith Barney Holdings LLC from Citigroup Inc. C -2.94%  . The purchase of the final 35% will be completed this month, fulfilling a key strategic priority, said the firm in a statement. Morgan Stanley will notify Citigroup of its intent to buy the remaining share for the established price of $4.7 billion in cash and the closing is expected to be around or on June 28, 2013. The firm will record a negative adjustment to capital of approximately $200 million to reflect the difference between the purchase price and its carrying value, negatively impacting diluted earnings per share in the second quarter. MSSBH will redeem Class A preferred interests owned by Citigroup for $2.03 billion at the time of the transaction. Morgan Stanley shares were up 0.5% in premarket trading.

Gold Now at Levels Worse Than April's Big Selloff

From CNBC:  “….Gold, which has declined more than 30 percent since its peak of around $1900 in 2011, has fallen victim to a heavy bout of selling since April. The benign global inflationary environment has lessened the appeal of the metal as a hedge against rising prices. In addition, prospects for a scaling back of liquidity in the world's largest economy, alongside a stronger U.S. dollar, have also weighed on the precious metal.

“Jim Iuorio, managing director at TJM Institutional Services, says he has seen a shift in sentiment among investors towards gold, which doesn't bode well for prices.

"Something has changed materially in the sentiment in the gold market and that's become evident to me. Even today when the stocks were taking on the chin and people flocked to bonds, they didn't touch gold," said Iuorio…..”

The ETF Market Kind Of Broke Yesterday

Yesterday's big selloff exposed a weakness in one of Wall Street's darling products, Exchange Traded Funds (ETFs), the FT reports, and no one really saw it coming.

ETFs are a baskets of goods that can be traded like a single asset. They've become really popular on the Street over the last decade to the point where you can buy an ETF of almost anything — gold, kinds of companies, groups of countries (like emerging markets)... the list goes on.  And just like everything else, they got killed yesterday.

The problem wasn't just that ETFs got swept up in the general panic of the moment. It was that as traders sold off and ETFs got cheaper, the discount between the price of the ETF and the assets that made it up widened.  Suddenly, everyone wanted to redeem those underlying assets from banks like Citi and State Street.

Now you can imagine what happened next……..

There's A Sect Of Successful Traders Who Couldn't Care Less What Bernanke Says, Or About News

According to BI: Naturally, when markets go up or down, people look for cause and effect.  We went up because of X, or we went down because of Y.  The market “liked” this or it did not “like” that. But in many cases (and I would argue, in most cases), PRICE is the cause.  More transactions occur because the price changed than because the news changed.  We can rationalize and reason and assess all we want.  When we actually push buy or sell, we care most about PRICE.  Because whatever our reasoning, at the end of the day, month, or year, the only reason we are successful is because of PRICE.  Not because of the reasoning.  Not because of the news.  Not because of Ben Bernanke, or Mario Draghi, or Shinzo Abe.  Because of PRICE.

That’s why there are successful traders who don’t even pay attention to the news.  They don’t care about the why of PRICE.  They only care about PRICE.  And they react accordingly….

Libor Case Dragnet More: J.P. Morgan, Deutsche and Others Tried to Fix Rates

From the WSJ: Tom Hayes, a former UBS and Citigroup trader, has been charged with eight counts of fraud as part of the U.K. investigation into the alleged manipulation of the London interbank offered rate. WSJ’s David Enrich looks at the charges as the whole probe into the rate scandal spreads globally.

The U.K.'s Serious Fraud Office this week charged former UBS AG and Citigroup Inc. trader Tom Hayes with eight counts of "conspiring to defraud" in an alleged attempt to manipulate the London interbank offered rate, or Libor. Mr. Hayes appeared in a London court Thursday, where prosecutors for the first time detailed their allegations against him, including a list of institutions whose employees Mr. Hayes allegedly conspired with.

Dr. Doom and Gloom Sees Further Downside

China's factory output weakened to a 9-month low today, and financials saw a huge sell-off today, with the FM traders; and The Gloom, Boom and Doom Report's Marc Faber, shares his economic outlook.
There's plenty of room for the stock market to decline, noted bear Marc Faber said Thursday on CNBC.

"Yes, I see further downside," said the editor of "The Gloom Boom & Doom Report."

However, Faber said that there were plenty of reasons for stocks to head lower other than what the Federal Reserve was doing in terms of quantitative easing.  Faber noted that interest rates have been rising for a year, pointing to the 30-year U.S. Treasury bond and the 10-year U.S. Treasury note bottoming out in July.

But that wasn't the whole bear case.  "The Chinese economy is much weaker than the official statistics suggest," Faber said. "My view would be that at the present time, the Chinese economy is growing at something like 4 percent per annum, and without huge credit expansion there would probably be no growth at all….”

Grab a fresh hankie and

Thursday, June 20, 2013

Weirdest Market Indicator Yet: Using Hershey Chocolate to Predict the Market

From CNBC:  Life may be like a box of chocolates, but how about the stock market? Brian Stutland of the Stutland Volatility Group believes that chocolate sales can tell us a great deal about where the market will go next.

"Your basic thing that everybody loves is chocolate," Stutland said. "If chocolate sales are falling—if you hate chocolate—you definitely hate real estate or whatever big-ticket purchases you want to make."

So to get a jump on the market's next move, Stutland zeros in on one particular company: Hershey.  In addition to capturing chocolate sales, "Hershey usually trades at a pretty low multiple," said Stutland, who is an "Options Action" contributor. "If the multiple starts to get overextended, and investors start to take the multiple down, that is probably going to happen across the marketplace. So the market will follow the mean trend" that is first set by Hershey…..

 Read all about it at

Several of John Paulson’s stocks are getting creamed

According to BI gold prices are in meltdown mode today and gold stocks are also getting crushed.  The precious metal fell below $1,300 an ounce, the lowest level in two years.

Let's do a quick scoreboard check of closely-followed billionaire hedge fund manager John Paulson, who has been long a bunch of gold stocks.   Here's a rundown of his gold stock holdings based on the most recent securities filing for the first quarter ended March 31.  Keep in mind, it is possible that he could have pared back some of his stakes in these stocks.  

Allied Nevada Gold (1,502,184 shares in Q1): The stock was last trading down at $6.52 per share or down about 8.68%.  The stock hit a 52-week low of $6.51 today.

Anglogold Ashanti (31,290,050 shares in Q1):  The stock was last trading down at about $14.59 per share or down about 3.81%. The stock hit a 52-week low of $14.35 today.

Barrick Gold (360,000 shares in Q1):  The stock was last trading down at about $17.00 per share or down about 5.63%. It hit a 52-week low of $16.45 today.

There’s more….read all about it at

Hedge fund Grandmaster sees stock market crash in China

Holy Hannah!  Former chess grandmaster-turned hedge fund manager Patrick Wolff is betting on a stock market crash in China, where he told Reuters corruption and bad debts have spiraled to dangerous levels.

Speaking to Reuters on the sidelines of the GAIM conference in Monaco this week, Wolff said investors were too focused on trying to work out when easy money policies will taper off in the United States and ignoring a looming correction in China.

"People are talking way too much about the Federal Reserve and not enough about China," he said. "We've been saying that the U.S. is the safest place to invest, while China is a crash waiting to happen."
"China's centrally-planned economy inevitably means massive corruption and a massive misallocation of capital," he added, pointing to increasing funding problems for Chinese companies.

Wednesday, June 19, 2013

Federal Reserve Eyes End of Bond Buying

Fed Reserve Chairman Ben Bernanke told WSJ that the central bank could start winding down its $85 billion-a-month bond-buying program later this year and end it altogether by mid-2014, setting up a high-stakes test to see if the economy and financial markets can begin to stand on their own.

Financial markets—which have been enlivened by the fuel of the Fed's easy-money policies—didn't take the news happily. The Dow Jones Industrial Average finished the day down 206.04, or 1.35%, at 15112.19. Yields on 10-year Treasury notes jumped 0.126 percentage point to 2.308%, the highest level since March 2012. The dollar strengthened. Behind the Fed's strategy for unwinding its bond-buying program were its optimistic new economic forecasts for next year, including a projection that the jobless rate, which was 7.6% in May, will fall to between 6.5% and 6.8% by the end of 2014.

Weak Bond Trading at Jefferies Prompts Wider Concern

From NY Times’ Dealbook: Jefferies’s second-quarter fixed-income revenue fell 27 percent.
The recent turbulence in the markets has already taken its toll on one Wall Street firm.  Now, investors and analysts are trying to gauge whether other investment banks have been hurt by turmoil in the bond markets.

Though Jefferies is not as large as Goldman Sachs or JPMorgan Chase, it is an experienced bond-trading firm that weathered the severe storms that have buffeted markets since the financial crisis of 2008. It was no surprise, then, that Wall Street shuddered a little after Jefferies reported second-quarter fixed-income revenue that was down 27 percent from a year earlier.

The Robots Are Coming! Five Ways To Protect Your Job

Watch any old sci-fi movie, and the future is invariably depicted as a place full of helpful, hard-working robots, busying themselves with the household chores, while the humans sit around mixing cocktails and enjoying themselves. Funny, it never seemed to materialize. If anything, we all seem to be working harder than ever, tied to our smartphones and e-mail.

Finally, however, the advances in artificial intelligence are so rapid and so significant that robots may finally make their way in everyday life. Such as? Google is working hard on its driverless car. Samsung has launched a robotic vacuum. At the same time, robots and machines are quickly learning how to perform simple surgical operations, process basic legal documents, teach people how to speak a foreign language, and even write articles (although not as well as humans, I hasten to add).

In a new book called “Robot Futures,” Illah Reza Nourbakhsh, the professor of robotics at Carnegie Mellon University, imagines a near future where whole swathes of traditional jobs are taken over by machines.  And a report this month by the McKinsey Global Institute argued that automation of knowledge work and advanced robotics were among the key disruptive technologies transforming the global economy…

News You Can Use: Working From Home? Boss May Be Spying on You

Even if you are thousands of miles away from the office and wearing your pajamas, your boss could still be watching you just as closely as if you were sitting in the next cubicle over.  Some companies are monitoring employees' every keystroke no matter where they are working, and that's leading to more than just sniffing out who is stealing company secrets. It's also giving some employers a pretty good idea of whether their remote workers are keeping as busy as the ones who are sitting in the cubicle farm….

The growing ability to watch workers' every move comes as some companies appear to be growing more accepting of telecommuting, both as a way to keep employees happy and as a way to keep office costs down. About 13.4 million people, or about 9.5 percent of workers, were working from home at least some of the time in 2010. That's up from about 9.2 million workers in 1997, according to the Census Bureau…

Erdogan Casts Bankers as Villain of Turkish Protests

From Bloomberg:  As Turkey’s government seeks to rally support by identifying culprits behind the unprecedented explosion of anger that erupted in recent weeks, one group has featured on almost every list: bankers.

Prime Minister Recep Tayyip Erdogan began blaming a so-called “interest-rates lobby” in the first week after anti-government protests spread nationwide on May 31. Economy Minister Zafer Caglayan said “blood-sucking” financiers, seeking to push Turkey’s interest rates back up, helped provoke the movement that ignited over a police crackdown against people opposed to development plans.

The rhetoric resonates in a majority Muslim country where many remember skyrocketing borrowing costs that undermined the economy in the pre-Erdogan decade. In 2001, the year before his party came to power, the government spent more on interest payments than it earned in tax income. In the last two years the Islamist-rooted Erdogan, 59, and his ministers have frequently accused a rates lobby of working to undermine the economy....

Read al about it at

THE ONION: Financial Sector Thinks It’s About Ready To Ruin World Again

Claiming that enough time had surely passed since they last caused a global economic meltdown, top executives from the U.S. financial sector told reporters Monday that they are just about ready to completely destroy the world again.

Representatives from all major banking and investment institutions cited recent increases in consumer spending, rebounding home prices, and a stabilizing unemployment rate as confirmation that the time had once again come to inflict another round of catastrophic financial losses on individuals and businesses worldwide.

“It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come….”

Think that’s about as perfect as the Onion gets?  Wait…wait…there’s more at,32865/

Hedge Fund Managers Didn’t Know They Were Paying For Their Inside Information

Dealbreaker’s Matt Levine reports: You’re only guilty of criminal insider trading, in America,1 if: you trade on information that is material and nonpublic, and some other stuff.  The other stuff is mostly stuff that only a lawyer could love, but man do they love it. It consists most importantly of the rule that the person who gives you the material nonpublic information needs to have done so in breach of some duty to keep the information secret and in order to get some personal benefit for himself. If a stranger just wanders up to you and says “I’m the CEO of Smerbafife and it’s a giant fraud, gotta go,” and you trade on that: you’re probably good.

This doesn’t help very often, though, since the personal benefit for the tipper doesn’t have to be an explicit bribe, or an explicit anything; just a desire to spice up your friendship with some material nonpublic information can qualify. It might help Anthony Chiasson and Todd Newman though….

Speedy Traders in Talks on Tie-Up

From WSJ: Two of the largest independent U.S. high-frequency-trading firms are in early merger discussions, as a downturn in trading opportunities has spurred cutbacks and tie-up talks among rivals.

RGM Advisors LLC and Allston Trading LLC have discussed a deal that would combine their respective strengths in automated stock trading and futures markets, according to people close to the talks…..

Roubini, Bremmer: the Fed policy that’s going to implode

 “Be sure your seatbelt is fastened, because nothing has really come to rest. We have entered the New Abnormal, a period in which every market assumption must be questioned and the wise investor is prepared to be surprised.”

And that’s how famed economist Nouriel Roubini and Ian Bremmer, the president of Eurasia Group, launch into an eight-screen Institutional Investor assault on all that’s going wrong with the global economy right now and on how new crises are most certainly headed our way….

Tuesday, June 18, 2013

Is High-Frequency Trading Bad For Profits, Including High-Speed Traders?

From HuffPo:  High-frequency trading is bad for everybody, including high-frequency traders, according to new research from a university that produces economic reports that are sold early to high-frequency traders.

The study, by the University of Michigan's engineering department, focuses on one particular tactic of high-speed trading, known as "latency arbitrage."  This is the practice of gaming the split-second lags between the time trades are made and the time those trades are crunched by a central clearing house called the Security Information Processor into a price quote called the National Best Bid And Offer. Traders with super-fast computers can calculate the NBBO faster than the Security Information Processor can do it, and they take advantage of the tiny gaps between the old NBBO and the new NBBO.

The researchers say this trade somehow reduces the total amount of profits in the system -- in other words, it not only hurts regular, slowpoke investors, but also other high-speed traders. Whatever profit each individual robot makes on a latency arbitrage trade is less than the amount of profit that is destroyed by the practice, according to the report. This is just more evidence that zapping thousands of trades per second does nothing for society….

Dr. Doom: Fed Exit Strategy Will Be 'Treacherous'

From Yahoo Finance:  As the Federal Reserve's Open Market Committee begins a two-day meeting , economist Nouriel Roubini and political scientist Ian Bremmer warned that the Fed's monetary easing exit strategy would be "treacherous" and would lead to financial instability.

"We know how the movie ended, and we may be poised for a sequel. The weak real economy and job market , together with high debt ratios, suggest the need to exit monetary stimulus slowly. But a slow exit risks creating a credit and asset bubble as large as the previous one, if not larger," they wrote in a report published in Institutional Investor magazine.

In the report, they warned that market complacency among politicians, investors and central banks was leading us into a "New Abnormal" era - a "period in which every market assumption must be questioned and the wise investor is prepared to be surprised…."

Google settles investor lawsuit over stock split

From Bloomberg:  Google Inc., operator of the world’s largest Internet search engine, settled a lawsuit on the brink of trial over a plan for a stock split that shareholders claimed would unfairly allow founders Larry Page and Sergey Brin to strengthen their corporate control.

Lawyers for a Massachusetts pension fund and other investors were scheduled to begin presenting testimony Tuesday in a Delaware court about a stock reclassification that would create a new class of nonvoting shares, court filings show.  The settlement, which must be approved by a judge, clears the way for the split, which had been on hold while the Delaware case was being litigated. The accord provides enhanced board scrutiny of Page’s and Brin’s requests to amend restrictions on their sales of new Class C shares and on company acquisitions funded by more than 10 million shares of the new stock, according to court filings…

Obama: Bernanke Has Been at Fed ‘Longer Than He Wanted’

From Bloomberg:  President Barack Obama said Federal Reserve Chairman Ben S. Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the central bank chief will leave when his current term expires next year.

 “Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose that aired yesterday, when asked about nominating him for another term subject to Senate approval. “He’s already stayed a lot longer than he wanted or he was supposed to.”  Obama likened Bernanke’s tenure to that of outgoing Federal Bureau of Investigation Director Robert Mueller, who stayed on for two years after his term expired in 2011 and is leaving his post in September. Bernanke’s second four-year stint at the central bank ends Jan. 31.