Bank Profits Depend on Debt-Writedown `Abomination' (Bloomberg)
In the first quarter, the four biggest U.S. lenders -- Bank of America, JPMorgan Chase, Citigroup and Wells Fargo -- produced combined profit of $13.5 billion, the most since the second quarter of 2007. That figure probably fell by 28 percent in the second quarter, based on a Bloomberg survey of analysts’ estimates. The banks are scheduled to announce results over the next two weeks, led by JPMorgan on July 15. The second-quarter results may include gains taken under a U.S. accounting rule known as Statement 159, adopted by the Financial Accounting Standards Board in 2007, which allows banks to book profits when the value of their bonds falls from par. The rule expanded the daily marking of banks’ trading assets to their liabilities, under the theory that a profit would be realized if the debt were bought back at a discount. In practice, it’s an accounting “abomination” because fluctuations in the value of the debt don’t change the amount the banks owe, said Chris Kotowski, an analyst at Oppenheimer & Co. in New York.
Octopus Outshines Investment Banks as Spain Wins (CNBC)
Paul the Octopus proved correct once more as Spain indeed won the World Cup against the Netherlands, as he predicted. Paul, who now has his own Facebook page, was flawless in his picks, contrasting sharply with predictions made by banks ahead of the tournament.
Money Managers Express Cautious Optimism (WSJ)
"The majority of people certainly understand that for the foreseeable future we're going to be in a subpar environment," said Marc Harris, co-head of global research at RBC Capital Markets. That translates into what is being seen in the stock market, he said. "At the first sign of economic numbers being a little disappointing, it's really taken the market down by a significant degree."U.S. markets will improve in the year ahead, 66% of respondents indicated. Just 19% indicated they expect U.S. markets will move lower. Still, 57% indicated they believe that the risks associated with stocks in general is higher this year than last.
Wall St. Hiring in Anticipation of an Economic Recovery (NYT)
Goldman Sachs added 600 jobs worldwide in the first quarter, while JPMorgan’s investment bank has hired slightly more than 2,000 people globally since the beginning of the year. Credit Suisse’s investment bank, based in New York, filled 600 positions in the first quarter, with a significant portion in New York. Deutsche Bank has hired 414 people in New York, including 98 directors and managing directors since the start of the year. Hiring is also picking up at boutique firms and at smaller foreign banks seeking a beachhead in New York. Nomura’s New York-based securities unit has increased its staff to more than 1,700, from 1,000 in March 2009, and the bank says it will hire 300 more workers by March 2011. Macquarie has also rapidly expanded, even taking over new floors in its Midtown Manhattan headquarters to accommodate new trading operations.
Republican Senator Sees Wall Street Bill Passing (Reuters)
"It's a question of when," Republican Senator Judd Gregg said on CNBC. Democrats need to secure 60 votes in the Senate in order to clear a procedural hurdle. So far, they can count on 57 votes for the bill, which would create new rules for the financial services industry and shine light on the over-the-counter derivatives market.
Diversifying A Portfolio With Timber (NYT)
Jeremy Grantham, co-founder and chief investment strategist at GMO, the asset manager based in Boston, calls timber “a perfect investment” for someone with a time horizon of, say, 20 years or more. “Timber is safer than stocks but not quite as safe as Treasury inflation-protected bonds,” he said. “And as long as the sun shines and the rain rains, trees grow.” Timber also acts as an inflation hedge. “If you look at commodities, you find a pattern that all of them, except timber, had a declining real price up until 10 years ago,” Mr. Grantham said. “But standing timber has a long-term record of modestly rising prices.”
Playboy Says Hefner Proposes To Take Company Private (Bloomberg)
Playboy said Hefner, who founded the company in 1953, is concerned about the company’s brand and Playboy magazine’s editorial direction and isn’t interested in a merger or sale to a third party. Playboy has combined units and slashed jobs to cope with a circulation plunge caused by Internet competition.
The 100 Most Powerful People in European Financial Markets (FN)
10. Xavier Rolet, chief executive, London Stock Exchange
9. Alan Howard, co-founder, Brevan Howard Asset Management
8. John Varley, chief executive, Barclays
7. Oswald Grübel, chief executive, UBS
6. Josef Ackermann, chief executive, Deutsche Bank
5. Mervyn King, governor, Bank of England
4. Keith Skeoch, chief executive, Standard Life Investments
3. Brady Dougan, chief executive, Credit Suisse
2. Mario Draghi, governor of the Bank of Italy, chairman of the Financial Stability Board
1. Anshu Jain, head of corporate and investment banking, Deutsche Bank
Blackstone To Manage BofA Fund (WSJ)
Blackstone is set to take over management of Bank of America Corp.'s Asian real-estate fund, a person familiar with the situation said. Merrill Lynch & Co. raised $2.65 billion before it was bought by Bank of America Corp. in January 2009 and invested all of it in Asian property deals. This is BofA ML's only property fund in Asia. The Charlotte, N.C., lender will keep its one-third stake in the portfolio of assets called the Asia Opportunities Fund.
BP Mulls Selling Off Billions In Assets (WSJ)
The company is in talks with U.S. independent oil and gas producer Apache Corp. on a deal worth as much as $10 billion that could include stakes in BP's vast Alaska operations, according to people familiar with the matter.
Russian Oligarchs Mull Succession (Bloomberg)
For Alexander Lebedev, hardly a week goes by without a call from a crooked security-services agent or cop angling for a chunk of his $3.4 billion fortune. It’s not a lifestyle he wishes for his son, Evgeny. “Business in our country is like wrestling with bears,” Lebedev said in an interview with Bloomberg Businessweek for its July 12 issue. “I’m not sure you’d want to pass that on to your son -- would you?”