As you may have heard, the last 6 to 12 to 36 months months have been somewhat trying for UBS investment bank chief Carsten Kengeter. Profits haven’t been exactly what he’d hoped for, the people of Stamford have (more or less) vowed to beat him with a sack of reeds should the Swiss so much as entertain the idea of leaving Connecticut, employees won’t stop jumping down his throat for one second about getting paid, there was the somewhat unfortunate matter of a $2 billion fraud coming to light, no one will give his team credit for their legitimate months and, to top it all off, it looks like he might not get that promotion he’s been gunning for and was hinted he was in the running for in his last annual review. Most recently, he’s been tasked with firing a whole bunch of employees, a sore point for those not thrilled about potentially loosing their jobs or seeing their colleagues let go. And so, despite all the stress he’s been going through, despite the higher-ups in Zurich riding him like Zorro, and despite things really not going his way, Kengeter dug deep and summoned the troops for a morale boosting session, the message of which he thought would’ve been a big hit. Continue reading »
Archive for November 2011
October performance. Continue reading »
Italy’s Focus Shifts To Forming New Government (Bloomberg)
Berlusconi said today that he favored early elections and that Angelino Alfano, head of his People of Liberty party, might be the candidate. Berlusconi last night said he’d step down as soon as parliament passed cost-cutting steps pledged to European Union allies in a bid to convince investors Italy can curb record borrowing costs. Parliament is due to vote on the measures in the coming weeks.
Exit From Italian Debt Spurs Fears (WSJ)
Italy has long relied on the fact that its debt level, although high at 120% of gross domestic product, isn’t rising much, thanks to Rome’s relatively small budget deficit. But the country still needs to borrow hundreds of billions of euros a year to repay its debts falling due. Next year, Italy must borrow enough money to repay more than €300 billion in maturing debts and cover a targeted budget deficit of up to €25 billion. If investors aren’t willing to lend Italy such sums, Europe will have to prop up the country with all the money it can muster—with help from the IMF—or risk a global financial crash.
Goldman Sachs Traders Lost Money on 21 Days in Third Quarter (Bloomberg)
Goldman, which relied on trading for 62 percent of revenue so far this year, recorded losses from that business on 21 days in the third quarter, the most since the fourth quarter of 2008. The firm’s traders lost more than $100 million on one of the days, according to the New York-based company’s quarterly filing with the Securities and Exchange Commission. They produced more than $100 million on nine days out of 64 total days in the quarter that ended Sept. 30, the filing showed.
HSBC Hurt By Bad Loans (WSJ)
HSBC on Wednesday said revenue slipped in the third quarter as investment-banking clients sat on the sidelines, its Hong Kong business weakened and bad loans rose in the U.S. Adjusted pretax profit, which strips out a series of one-time factors and is closely watched by analysts, dropped 36% to $2.96 billion, from $4.60 billion. After factoring in a hefty, $4.11 billion accounting gain on the value of HSBC’s own debt, net profit in the three months to Sept. 30 was $5.22 billion, up 66% from $3.15 billion in the third quarter of 2010 and better than the second quarter’s $5.06 billion.
Yelp Eyes $2 Billion IPO (WSJ)
Like Groupon, which is currently valued at $15.9 billion, Yelp also rebuffed an earlier offer from Google, in Yelp’s case for approximately $500 million about two years ago, people familiar with the matter said. In January 2010, Yelp received a $25 million investment from private-equity firm Elevation Partners, which also bought shares from employees and earlier investors for a total investment of $100 million, people familiar with the matter said. That investment valued the company at about $500 million, the people said.
MF Global Clients May Have To Share Cash (Bloomberg)
“Distribution of the assets will be pro rata, if there’s insufficient there to fulfill all obligations,” said Stephen Harbeck, president of the Securities Investor Protection Corp., or SIPC. About $593 million in commodity customer funds are unaccounted for, according to a person with knowledge of regulatory probes into the failure of the New York-based firm.
Jim Rogers: Gold Will Hit $2,400 Bubble (CNBC)
“It will easily go to $2,000 but it will reach $2,400 over the course of the bull run, which has years to run,” said Rogers, the CEO and chairman of Rogers Holdings. ”It will end in a bubble when this is over. The way bull markets work is they go up and up and then by the end they turn into a bubble and that will happen to gold. He said, however, that such a bubble is still years from happening. “That could be five years, 18 years or six years,” he said. “I hope I am smart enough to sell but when that happens it will probably double.” He said that currently he would buy silver instead of gold because it’s cheaper on a historic basis. “I own both, I’m not selling either but if I had to buy one today I would buy silver,” he said.
JPM Analyst: UBS, Credit Suisse Should Pool Securities Units (Reuters)
UBS and Credit Suisse should focus solely on private banking and pool their investment banks if plans for curbing the latter’s risk-taking activities fail to appease shareholders, JPMorgan analyst Kian Abouhossein said. “If returns are still not adequate to shareholders, this is an alternative,” Abouhossein said, commenting on a research note published on Tuesday. Continue reading »
Maybe This Time Citi Actually Will Stop Violating Securities Laws, But Don’t Hold Your Breath
By Matt Levine
Let’s say there are two models of how to run a financial system: make it transparent and give participants the tools they need to evaluate counterparties, or leave it opaque and trust regulators to keep things safe. There are good arguments for both sides – perfect transparency would be a competitive nightmare, and wouldn’t help those too stupid to use it; perfect opacity concentrates a whole lot of risk in the hands of regulators with doubtful incentives and skills – and so we have sort of a mix, for good or ill.
This might make you ill:
When Citigroup agreed last month to pay $285 million to settle civil charges that it had defrauded customers during the housing bubble, the Securities and Exchange Commission wrested a typical pledge from the company: Citigroup would never violate one of the main antifraud provisions of the nation’s securities laws.
To an outsider, the vow may seem unusual. Citigroup, after all, was merely promising not to do something that the law already forbids. But that is the way the commission usually does business. It also was not the first time the firm was making that promise.
Citigroup’s main brokerage subsidiary, its predecessors or its parent company agreed not to violate the very same antifraud statute in July 2010. And in May 2006. Also as far as back as March 2005 and April 2000.
The incredulity continues throughout, and the article includes a handy infographic where you can see how many times each bank pulled the “I’ll be good, I’ll be good, I’ll be good!” move in the past.
Continue reading »
Chaz has been taking a look at the recently departed MF Global chief’s books and there may be less money there than people had previously thought, if people didn’t know: 1) that JSC spent a lot of Corzine Coins running for senator and governor of New Jersey, 2) that divorces are expensive, and 3) that he was never worth $1 billion dollars in the first place. Continue reading »
Italian Prime Minister Silvio Berlusconi has told President Giorgio Napolitano that he will resign after the new budget law currently making its way through parliament is approved, the head of state’s office said in a statement on Tuesday. The budget law is expected to be passed by the end of this month, but its passage might now be accelerated. Napolitano said Berlusconi was aware of the consequences of a vote in parliament on Tuesday in which his centre-right coalition failed to secure a majority in the lower house. It said he had noted the urgent necessity of seeing the new budget law approved in parliament. [Reuters]
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David Einhorn Is Flattered By The Gesture But You’re Going To Have To Do A Lot Better Than That
By Bess Levin
In related news, cat got your tongue? Continue reading »
Earlier today, we discussed the upcoming bonus season and the fact that, for those who are employed by banks, it’s looking to be something of a disappointment. Numbers are estimated to be down 20-30 percent on average from last year, with fixed-income being hit the hardest. For many, it’s cause for some preemptive JO&C’ing at the desk this morning and some curling up into the fetal position this afternoon. According to Black Swan author Nassim Nicholas Taleb, however, you drying those eyes, picking yourself up off the floor and thanking your lucky stars you’re getting anything ’cause if he were in charge? You’d get no-thing. Continue reading »
Here’s a trade. I’ve got these bonds, see? I will sell them to you. You will pay me $100 and get $100 face amount of bonds (if you like, you can get $80 or $120 face value of bonds, depending on where the bonds are trading – but let’s make them par bonds, to keep things simple).
But we’re not done. I will also write a contract under which, if these bonds default prior to maturity, you can hand them back to me, and I will give you back your $100. My loss will be the $100, minus whatever I can get from the defaulted bonds. In exchange for this commitment from me, you will pay me a running payment. That payment will be equal to (1) the coupon payment on the bonds (remember, they’re par bonds, for simplicity), minus (2) a risk-free rate of equal maturity, plus or minus (3) a basis driven by the cost of funding and differences in relative demand for different sorts of payments. Let’s say the bonds pay 6%, the relevant risk-free rate is 2%, and our funding costs are 50bps. Then you pay me 350bps running. The payments, and the contract, expire at maturity of the underlying bond.
Ah, but you have an objection. You’re paying me this running payment in exchange for my promise to cash you out if the bonds default – but how do you know I’m good for it? Fair. Why don’t we do this. I will collateralize that promise. At first my collateral will be quite small, since default is unlikely so the expected value of my promise is small, but it will go up if the bonds decline in value and/or my credit deteriorates.
Okay, fine, now we’ve got a deal. So … what is our deal? I’ve sold you bonds in a spot sale – that much seems clear – and we’ve got … this other thing, this contract. What do we call that contract?
Continue reading »
Comment Of The Day: 11.08.11
By DealbreakerAlt_EST on Silvio Berlusconi To Wrap It Up In The Next Few Weeks: Continue reading »
Tags: Comment of the Day