Boom times for bank trading have gone, and may never come back (Reuters)
Even though it’s taken Western economies several years to regain pre-crisis national output levels, many doubt banks will ever revisit the pre-crisis high watermark of their trading activities. Revenues from fixed income, currencies and commodities – the so-called ‘FICC’ universe – continued to tumble for most major U.S. and European banks during the first quarter of 2014, increasing the pressure on them to rethink business models…FICC income at Goldman Sachs last year was 72 percent of the bank’s overall revenue, compared with 82 percent in 2010. Morgan Stanley’s FICC revenue was 70 percent of its total, well down from 82 percent in 2003.
Tracking Brain Waves to Boost Investment Returns (BusinessWeek)
In a quest to improve its trading methods, hedge fund Sang Lucci Partners Capital sent a crew of traders from New York to Los Angeles last month to have their brains tested. As the traders bought and sold options and stocks on a simulated system, computers recorded their brains’ electrical activity. “These guys, their whole profit and loss statement is being determined by their mind, and yet they have no way to analyze it,” says Charlie Bathgate, a Sang Lucci partner who organized the test. “There’s this big gap there. So we’re trying to fill that a little bit.”
Tech Stocks Are Still ‘Too Silly’ for Some (WSJ)
Tesla trades at 89 times next year’s earnings, according to FactSet. That is down from a price-to-earnings multiple of 117 in March, but still about six times more expensive than the S&P 500. Daily-deals site Groupon trades at 35 times next year’s earnings. “We’ve gone from three times silly to two times silly,” said Mitch Rubin, chief investment officer at RiverPark Funds, which has $3.1 billion under management. As investors start focusing more on the fundamentals of these stocks, they could easily fall further, he said. “When the facts start to matter for these stocks, the bottom is a long way off.”
Race for AIG’s Top Job Has Two Favorites (WSJ)
In their search for the next chief executive at AIG, the insurer’s directors have narrowed the field of internal candidates to two executives, Peter Hancock and Jay Wintrob, who work on opposite ends of the U.S. and have different specialties, according to people familiar with the matter. The board hopes to make a selection as soon as September, according to one person with knowledge of the company.
Atherton mansion madness: Homes of the rich and (tech) famous (CNBC)
High-end homes in Atherton are selling like hotcakes, and often over the asking price, and frequently for all cash. That’s saying something when you are talking about $10 million-plus estates… Location is a big reason why Atherton is the perfect place for the super-rich. The town is 45 minutes south of San Francisco, and less than 20 minutes to the headquarters of Facebook, Google and most of the major tech companies in Silicon Valley…investors from China will often pay for a mansion sight unseen.
Brits do enough cocaine to contaminate their water (NYP)
Experts from the Drinking Water Inspectorate experts found traces of the party drug, in a form that has been passed through the body, in treated tap water — despite intensive water purification treatments. Steve Rolles, from the drug policy think tank Transform, told The Sunday Times that the findings reveal how widely used cocaine is. “We have the near highest level of cocaine use in western Europe,” he said. “It has also been getting cheaper and cheaper at the same time as its use has been going up.” […] health officials stressed that the traces of drugs found in the water supply were very low and unlikely to represent a danger to the public. “Estimated exposures for most of the detected compounds are at least thousands of times below doses seen to produce adverse effects in animals and hundreds of thousands below human therapeutic doses,” the report said.
J.P. Morgan Is Reviewing U.S. Correspondent-Bank Relationships (WSJ)
The bank has been examining its relationships with so-called domestic correspondent banks, for which it clears payments and processes other transactions, the people said. The industrywide review started in January and comes as J.P. Morgan tries to shore up controls in a period of heightened regulatory scrutiny and record fines. As part of the review, J.P. Morgan stopped soliciting new business from its few hundred domestic correspondent-banking clients. The bank, the largest in the U.S. by assets, also stopped accepting new clients while the review of internal controls and clients continues, the people added.
UK fraud office steps up probe into Barclays over Qatar: FT (Reuters)
Bob Diamond and John Varley, both former chief executives of the bank, and other senior members of Barclays’ former management are set to be questioned under caution by the UK’s Serious Fraud Office, the article said.
Fed Official Seeks Radical Change in Bank Regulation (BusinessWeek)
The Swiss city of Basel is to central bankers what the Vatican is to Roman Catholics. But that didn’t stop Federal Reserve Governor Daniel Tarullo from slamming the Basel approach to bank regulation in a speech last week in Chicago. According to prepared remarks released by the Fed, Tarullo said the standard designed by the Basel Committee on Banking Supervision creates “manifold risks of gaming, mistake, and monitoring difficulty.” The Basel standard, he said, “contributes little to market understanding of large banks’ balance sheets and thus fails to strengthen market discipline.” He even said its “relatively short, backward-looking basis for generating risk weights makes the resulting capital standards likely to be excessively pro-cyclical and insufficiently sensitive to tail risk.”
SAC’s Steinberg faces sentencing with faint hopes (NYP)
Late last week, Steinberg’s lawyer Barry Berke argued in a memo that Steinberg should get no more than two years in prison because he “is a man of many admirable individual characteristics,” in a letter to US District Judge Richard Sullivan. “More than that, he is a giver and a doer, someone whose contributions to the happiness, success and well-being of his family, friends, and many others are second to none,” Berke wrote. Unfortunately for Steinberg, JudgeSullivan has a record of being tough on white-collar criminals. Prosecutors argue that Steinberg should serve as long as 6 1/2 years in prison, according to a sentencing memo filed late Friday.
Sterling: ‘Am I entitled to one mistake?’ (NYP)
“If I said anything wrong, I’m sorry,” Sterling told “Anderson Cooper 360″ in a segment set to air Monday night…“Am I entitled to one mistake, am I after 35 years? I mean, I love my league, I love my partners. Am I entitled to one mistake? It’s a terrible mistake, and I’ll never do it again,” Sterling said…Last week, a new tape surfaced in which Sterling told a pal that he made the racist comments because he was trying to get Stiviano into bed. “I’m talking to a girl. I’m trying to have sex with her,” Sterling said in the recent conversation, a tape of which was obtained by Radar Online. “I’m trying to play with her. If you were trying to have sex with a girl and you’re talking to her privately and you don’t think anybody’s there, you may say anything in the world!”